eUnitsTM 2 YEAR U.S. MARKET
PARTICIPATION TRUST II:
UPSIDE TO CAP / BUFFERED DOWNSIDE
INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT effective as of the 29th day of May,
2012 between Xxxxx Xxxxx Management (the
"Adviser"), and Parametric Risk Advisors LLC (the
"Sub-Adviser").
WHEREAS, eUnitsTM 2 Year U.S. Market
Participation Trust II: Upside to Cap / Buffered
Downside (the "Trust") is registered under the
Investment Company Act of 1940, as amended (the
"1940 Act"), as a closed-end, management
investment company;
WHEREAS, the Adviser has entered into an
Investment Advisory and Administrative Agreement,
effective as of the 29th day of May, 2012 (the
"Advisory Agreement"), with the Trust, relating to the
provision of advisory and management services; and
WHEREAS, pursuant to authority granted to the
Adviser in the Advisory Agreement, the Adviser
wishes to retain the Sub-Adviser to furnish
investment advisory services to the Trust related to
the Trust's options strategy, and the Sub-Adviser is
willing to furnish such services to the Trust and the
Adviser.
NOW, THEREFORE, in consideration of the mutual
covenants and agreements set forth herein, the
Adviser and the Sub-Adviser agree as follows:
1. Appointment. The Adviser hereby
appoints the Sub-Adviser to act as the investment
adviser for and to manage the investment and
reinvestment of the assets of the Trust related to the
Trust's option strategy on the terms set forth in this
Agreement. The Sub-Adviser accepts such
appointment and agrees to furnish the services set
forth herein for the compensation herein provided.
The Sub-Adviser shall not be responsible for aspects
of the Trust's investment program other than its
options strategy, including without limitation
purchases and sales of securities other than options,
selection of brokers to conduct such purchases and
sales of securities other than options, compliance
with investment policies and restrictions other than
those concerning options, or proxy voting.
2. Sub-Adviser Duties. Subject to the
supervision of the Trust's Board of Trustees (the
"Board") and the Adviser, the Sub-Adviser will
provide a continuous investment program relating to
the Trust's purchase or sale of options for the Trust's
portfolio. Subject to approval of the Trust's Board
and notice to the Sub-Adviser, the Adviser retains
complete authority immediately to assume direct
responsibility for any function delegated to the Sub-
Adviser under this Agreement. Subject to the
foregoing, the Sub-Adviser will provide options
investment research and conduct a continuous
program of options evaluation, investment, sales, and
reinvestment of the Trust's assets by determining the
options strategy that the Trust shall pursue, including
which options shall be purchased, entered into, sold,
closed, or exchanged for the Trust, when these
transactions should be executed, and what portion of
the assets of the Trust shall have options written
against them. The Sub-Adviser will provide the
services under this Agreement in accordance with the
Trust's investment objective or objectives, policies,
and restrictions as stated in the Trust's Registration
Statement filed with the Securities and Exchange
Commission ("SEC"), as amended (the "Registration
Statement"), copies of which shall be sent to the Sub-
Adviser by the Adviser prior to the commencement
of this Agreement and promptly following any such
amendment. The Adviser and the Sub-Adviser
further agree as follows:
a. Each of the Adviser and the Sub-
Adviser will conform materially with the 1940 Act
and all rules and regulations thereunder, all other
applicable federal and state laws and regulations,
with materially any applicable procedures adopted by
the Trust's Board of which the Sub-Adviser has been
sent a copy, and the provisions of the Registration
Statement, of which the Sub-Adviser has received a
copy and with the Sub-Adviser's portfolio manager
operating policies and procedures as are approved by
the Adviser. Each of the Adviser and the Sub-
Adviser shall exercise reasonable care in the
performance of its duties under the Agreement.
b. In connection with any purchase
and sale of securities for the Trust related to the
implementation of the options strategy developed by
the Sub-Adviser, the Sub-Adviser will arrange for the
transmission to the custodian for the Trust (the
"Custodian") on a daily basis such confirmation,
trade tickets, and other documents and information,
including, but not limited to, Cusip, Cedel, or other
numbers that identify options to be purchased or sold
on behalf of the Trust, as may be reasonably
necessary to enable the Custodian to perform its
administrative and recordkeeping responsibilities with
respect to the Trust. With respect to options to be
settled through the Trust's Custodian, the Sub-
Adviser will arrange for the prompt transmission of
the confirmation of such options trades to the Trust's
Custodian.
c. The Sub-Adviser will assist the
Custodian in determining or confirming, consistent
with the procedures and policies stated in the
Registration Statement or adopted by the Board, the
value of any options or other assets of the Trust for
which the Sub-Adviser is responsible and for which
the Custodian seeks assistance from or identifies for
review by the Sub-Adviser; provided that the Sub-
Adviser shall be responsible for determining in good
faith, consistent with the procedures and policies
stated in the Registration Statement or adopted by the
Board, the fair value of the Trust's portfolio of
options for which the Sub-Adviser is responsible and
shall obtain at its own expense pricing services for
the Trust's portfolio of options from Interactive Data
("IDS"), Bloomberg, or another pricing service to be
mutually agreed. In addition to the foregoing, on
each day the Trust strikes a net asset value per unit,
the Sub-Adviser will independently test and verify
the valuation (as reported by the Custodian) of all
options or other assets of the Trust for which the
Sub-Adviser is responsible. The Sub-Adviser will
immediately notify the Adviser and the Custodian of
any differences between the valuations as determined
by the Custodian and by the Sub-Adviser, and will
assist the Custodian in resolving any such
differences. The parties acknowledge that the Sub-
Adviser is not a custodian of the Trust's assets and
will not take possession or custody of such assets.
d. Following the end of the Trust's
semi-annual period and fiscal year, the Sub-Adviser
will assist the Adviser in preparing a letter to
shareholders containing a discussion of relevant
investment factors in respect of both the prior quarter
and the fiscal year to date.
e. The Sub-Adviser will complete and
deliver to the Adviser for each quarter by the 5th
business day of the following quarter a written
compliance checklist in a form provided by the
Adviser relating to the performances of the Sub-
Adviser under this Agreement.
f. The Sub-Adviser will make
available to the Trust and the Adviser, promptly upon
request, any of the Trust's investment records and
ledgers maintained by the Sub-Adviser (which shall
not include the records and ledgers maintained by the
Custodian or portfolio accounting agent for the Trust)
as are necessary to assist the Trust and the Adviser to
comply with requirements of the 1940 Act and the
Investment Advisers Act of 1940, as amended (the
"Advisers Act"), and the rules under each, as well as
other applicable laws. The Sub-Adviser will furnish
to regulatory authorities having the requisite authority
any information or reports in connection with such
services in respect to the Trust which may be
requested by such authorities in order to ascertain
whether the operations of the Trust are being
conducted in a manner consistent with applicable
laws and regulations.
g. The Sub-Adviser will provide
reports to the Board for consideration at meetings of
the Board on the options portion of the investment
program for the Trust and the options purchased and
sold for the Trust's portfolio, and will furnish the
Board with such periodic and special reports as the
Board and the Adviser may reasonably request.
h. The Adviser shall assure that the
Trust complies with its investment policies and
restrictions as set forth in the Registration Statement,
except for policies and restrictions concerning
implementation of the Trust's options strategy, and
the Adviser acknowledges that the Sub-Adviser shall
not be responsible for the Trust's compliance with its
investment policies and restrictions other than those
concerning implementation of the Trust's options
strategy.
i. The Adviser acknowledges that the
Sub-Adviser shall not be responsible for meeting or
monitoring compliance with the income and asset
diversification requirements of Section 851 of the
Internal Revenue Code, and the Adviser
acknowledges that the Adviser is responsible for the
same.
j. The Sub-Adviser will monitor the
credit quality of each counterparty to which the Trust
has exposure with respect to its options strategy on a
regular basis. The Sub-Adviser will notify the
Adviser immediately (but in no event more than 1
business day later) in the event of any decline in the
Sub-Adviser's assessment of the credit quality of any
counterparty or any downgrade in the rating of such
counterparty by a nationally recognized rating
agency.
3. Broker-Dealer Selection. The Sub-
Adviser is authorized to make decisions to buy and
sell options for the Trust's portfolio, and to select
broker-dealers and to negotiate brokerage
commission rates in effecting an option transaction.
The Sub-Adviser's primary consideration in effecting
an option transaction will be to obtain the best
execution for the Trust, taking into account the
factors specified in the prospectus and/or statement
of additional information for the Trust, and
determined in consultation with the Adviser, which
include price (including the applicable brokerage
commission or dollar spread), the size of the order,
the nature of the market for the option, the timing of
the transaction, the reputation, experience and
financial stability of the broker-dealer involved, the
quality of the service, the difficulty of execution, and
the execution capabilities and operational facilities of
the firm involved, and the firm's risk in positioning a
block of options. Accordingly, the price to the Trust
in any transaction may be less favorable than that
available from another broker-dealer if the difference
is reasonably justified, in the judgment of the Sub-
Adviser in the exercise of its fiduciary obligations to
the Trust, by other aspects of the portfolio execution
services offered. The Sub-Adviser shall not receive
any research service from any broker-dealer or from
any third party that is paid by such broker-dealer in
return for placing trades through such broker-dealer
on behalf of the Trust. The Sub-Adviser will consult
with the Adviser to ensure that portfolio transactions
on behalf of the Trust are directed to broker-dealers
on the basis of criteria reasonably considered
appropriate by the Adviser. To the extent consistent
with these standards, the Sub-Adviser is further
authorized to allocate the orders placed by it on
behalf of the Trust to an affiliated broker-dealer.
Such allocation shall be in such amounts and
proportions as the Sub-Adviser shall determine
consistent with the above standards, and the Sub-
Adviser will report on said allocation regularly to the
Trust's Board indicating the broker-dealers to which
such allocations have been made and the basis
therefore.
4. Compensation of the Sub-Adviser. For
the services, payments and facilities to be furnished
hereunder by the Sub-Adviser, the Sub-Adviser shall
be entitled to receive from the Adviser compensation
in an amount equal to an annual rate of one third
(1/3) of the management fee actually received by the
Adviser pursuant to the Advisory Agreement after
deduction of all costs incurred by the Adviser
including, but not limited to, operating expenses of
the Trust, organizational and offering expenses,
revenue sharing and distribution expenses.
Such compensation shall be payable monthly in
arrears. In case of initiation or termination of the
Agreement during any month with respect to the
Trust, the fee for that month shall be based on the
number of calendar days during which it is in effect.
5. Allocation of Charges and Expenses. It is
understood that, pursuant to the Advisory Agreement,
Xxxxx Xxxxx shall pay directly all ordinary operating
expenses incurred by the Trust, including but not
limited to custody, transfer agent, audit, and printing
and postage expenses. The Trust shall be responsible
for and will pay all extraordinary expenses incurred
by the Trust, including, but not limited to attorneys'
fees and other costs in connection with any litigation
or regulatory action . During the term of this
Agreement, the Sub-Adviser will pay all expenses
incurred by it and its staff and for their activities in
connection with its duties under this Agreement
including, but not limited to, rental and overhead
expenses, expenses of the Sub-Adviser's personnel,
pricing services in accordance with Section 2,
insurance of the Sub-Adviser and its personnel,
research services and taxes of the Sub-Adviser.
6. Other Interests. It is understood that
Trustees and officers of the Trust and shareholders
of the Trust are or may be or become interested in the
Sub-Adviser as partners, officers, employees,
interestholders or otherwise and that partners,
officers, employees and interestholders of the Sub-
Adviser are or may be or become similarly interested
in the Trust, and that the Sub-Adviser may be or
become interested in the Trust as a shareholder or
otherwise. It is also understood that partners,
officers, employees and interestholders of the Sub-
Adviser may be or become interested (as directors,
trustees, officers, employees, shareholders or
otherwise) in other companies or entities (including,
without limitation, other investment companies) that
the Sub-Adviser may organize, sponsor, or acquire,
or with which it may merge or consolidate, and which
may include the words "Parametric" or any
combination thereof as part of their name, and that
the Sub-Adviser or its affiliates may enter into
advisory or management agreements or other
contracts or relationships with such other companies
or entities.
7. Limitation of Liability of the Sub-
Adviser. The services of the Sub-Adviser to the
Adviser for the benefit of the Trust are not to be
deemed to be exclusive, the Sub-Adviser being free
to render services to others and engage in other
business activities. In the absence of willful
misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties hereunder on the
part of the Sub-Adviser, the Sub-Adviser shall not be
subject to liability to the Adviser or the Trust or any
shareholder in the Trust for any act or omission in the
course of, or connected with, rendering services
hereunder or for any losses that may be sustained in
the acquisition, holding, or disposition of any
security or other investment.
8. Duration and Termination.
a. This Agreement shall become
effective upon the date of its execution, and unless
terminated as provided herein, shall remain in full
force and effect through and including the second
anniversary of the execution of this Agreement and
shall continue in full force and effect thereafter until
the Termination Date (as such term is defined in the
Registration Statement) and winding down of the
affairs of the Trust, but only so long as such
continuance after such date is specifically approved
at least annually by (a) the Board, or by the vote of a
majority of the outstanding voting securities of the
Trust, and (b) the vote of a majority of those Trustees
who are not interested persons of the Sub-Adviser,
the Adviser, or the Trust cast in person at a meeting
called for the purpose of voting on such approval.
b. Notwithstanding the foregoing,
this Agreement may be terminated: (a) by the Adviser
at any time without payment of any penalty, upon 60
days' prior written notice to the Sub-Adviser and the
Trust; (b) at any time without payment of any penalty
by the Trust, by the Trust's Board or a majority of the
outstanding voting securities of the Trust, upon 60
days' prior written notice to the Adviser and the Sub-
Adviser, or (c) by the Sub-Adviser upon 3 months'
prior written notice unless the Trust or the Adviser
requests additional time to find a replacement for the
Sub-Adviser, in which case the Sub-Adviser shall
allow the additional time requested by the Trust or
Adviser not to exceed 3 additional months beyond
the initial three-month notice period; provided,
however, that the Sub-Adviser may terminate this
Agreement at any time without penalty, effective
upon written notice to the Adviser and the Trust, in
the event either the Sub-Adviser (acting in good faith)
or the Adviser ceases to be registered as an
investment adviser under the Advisers Act or
otherwise becomes legally incapable of providing
investment management services pursuant to its
respective contract with the Trust.
9. Notices. Any notice must be in writing
and shall be sufficiently given (1) when delivered in
person, (2) when dispatched by electronic mail or
electronic facsimile transfer (confirmed in writing by
postage prepaid first class air mail simultaneously
dispatched), (3) when sent by internationally
recognized overnight courier service (with receipt
confirmed by such overnight courier service), or (4)
when sent by registered or certified mail, to the other
party at the address of such party set forth below or
at such other address as such party may from time to
time specify in writing to the other party.
If to the Trust:
eUnitsTM 2 Year U.S. Market
Participation Trust II:
Upside to Cap / Buffered Downside
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Chief Legal Officer
If to the Adviser:
Xxxxx Xxxxx Management
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Chief Legal Officer
If to the Sub-Adviser:
Parametric Risk Advisors LLC
000 Xxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxx Xxxxxxxx
10. Amendments. No provision of this
Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in
writing signed by the party against which
enforcement of the change, waiver, discharge or
termination is sought, and no material amendment of
this Agreement shall be effective until approved as
required by applicable law. The Sub-Adviser shall
furnish to the Board such information as may be
reasonably necessary in order for the Board to
evaluate this Agreement or any proposed
amendments thereto for the purposes of casting a
vote pursuant to Section 15 or this Section 17 of this
Agreement.
11. Limitation of Liability. The Sub-Adviser
expressly acknowledges the provision in the
Declarations of Trust of the Trust and of the Adviser
limiting the personal liability of trustees, officers, and
shareholders of the Trust and the Adviser,
respectively, and the Sub-Adviser hereby agrees that
it shall have recourse to the Trust or the Adviser,
respectively, for payment of claims or obligations as
between the Trust or the Adviser, respectively, and
the Sub-Adviser arising out of this Agreement and
shall not seek satisfaction from the trustees, officers,
or shareholders of the Trust or the Adviser.
12. Certain Definitions. The terms
"assignment" and "interested persons" when used
herein shall have the respective meanings specified in
the 1940 Act, as now in effect or as hereafter
amended subject, however, to such exemptions as
may be granted by the Securities and Exchange
Commission by any rule, regulation or order. The
term "vote of a majority of the outstanding voting
securities" shall mean the vote, at a meeting of
shareholders, of the lesser of (a) 67 per centum or
more of shares of the Trust present or represented by
proxy at the meeting if the holders of more than 50
per centum of the outstanding shares of the Trust are
present or represented by proxy at the meeting, or (b)
more than 50 per centum of the outstanding shares of
the Trust.
13. Miscellaneous.
a. This Agreement shall be governed
by and interpreted in accordance with the laws of the
Commonwealth of Massachusetts.
b. The captions of this Agreement
are included for convenience only and in no way
define or limit any of the provisions hereof or
otherwise affect their construction or effect.
c. If any provision of this Agreement
or the application thereof to any person or
circumstance is held to be invalid or unenforceable to
any extent, the remainder of this Agreement or the
application of such provision to other persons or
circumstances shall not be affected thereby and shall
be enforced to the fullest extent permitted by law.
d. This Agreement may be executed
in any number of counterparts, and all of said
counterparts shall be deemed to constitute one and
the same instrument.
[Signature page follows.]
IN WITNESS WHEREOF, the parties hereto
have caused this instrument to be executed as of the
day and year first above written.
XXXXX XXXXX
MANAGEMENT
By:
__________________________
Name:
Xxxxxxxxx X. Marius
Vice
President, and not individually
PARAMETRIC
RISK ADVISORS
LLC
By:
__________________________
Name: Xxxx
Xxxxxxxx
Managing Director, and not individually
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