INVESTMENT MANAGEMENT AGREEMENT
INVESTMENT MANAGEMENT AGREEMENT, dated July 27, 1998, between DLJ
High Yield Bond Fund (the "Trust"), a Delaware business trust, and DLJ
Investment Management Corp. (the "Adviser"), a Delaware corporation.
In consideration of the mutual promises and agreements herein
contained and other good and valuable consideration, the receipt of which is
hereby acknowledged, it is agreed by and between the parties hereto as follows:
1. In General
The Adviser agrees, all as more fully set forth herein, to act as
investment manager to the Trust with respect to the investment of the Trust's
assets and to supervise and arrange the purchase of securities and other assets
and the sale of securities and other assets held in the investment portfolio of
the Trust in accordance with the Trust's objectives and policies as in effect
from time to time.
2. Duties and obligations of the Adviser with respect to
investments of assets of the Trust
(a) Subject to the succeeding provisions of this section and
subject to the direction and control of the Trust's Board of Trustees, the
Adviser shall (i) act as investment manager for and supervise and manage the
investment and reinvestment of the Trust's assets in accordance with the Trust's
objectives and policies as in effect from time to time and in connection
therewith have complete discretion in purchasing and selling securities and all
other assets for the Trust and in voting, exercising consents and exercising all
other rights appertaining to such securities and other assets on behalf of the
Trust in accordance with the Agreement and Declaration of Trust of the Trust,
(ii) supervise continuously the investment program of the Trust and the
composition of its investment portfolio and (iii) arrange, subject to the
provisions of Section 3 hereof, for the purchase and sale of securities and all
other assets held in the investment portfolio of the Trust.
(b) In the performance of its duties under this Agreement, the
Adviser shall at all times conform to, and act in accordance with, any
requirements imposed by (i) the provisions of the Investment Company Act of
1940, as amended (the "Act"), and of any rules or regulations in force
thereunder, (ii) any other applicable provision of law, (iii) the provisions of
the Agreement and Declaration of Trust and By-Laws of the Trust,
as such documents are amended from time to time, (iv) the investment objective
and policies of the Trust as in effect from time to time and (v) any policies
and determinations of the Board of Trustees of the Trust.
(c) The Adviser shall bear all costs and expenses of its
officers, directors and employees and any overhead incurred in connection with
its duties hereunder and shall bear the costs of any salaries or trustees fees
of any officers or trustees of the Trust who are affiliated persons (as defined
in the Act) of the Adviser except that the Board of Trustees of the Trust may
approve reimbursement to the Adviser of the pro rata portion of the salaries,
bonuses, health insurance, retirement benefits and all similar employment costs
for the time spent on Trust operations (other than the provision of investment
advice) of all personnel employed by the Adviser who devote substantial time to
Trust operations.
(d) The Adviser shall give the Trust the benefit of its best
judgment and effort in rendering services hereunder, but the Adviser shall not
be liable for any act or omission or for any loss sustained by the Trust in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of its reckless disregard of its
obligations and duties under this Agreement.
(e) Nothing in this Agreement shall prevent the Adviser or any
director, officer, employee or other affiliate thereof from acting as investment
adviser for any other person, firm or corporation, or from engaging in any other
lawful activity, and shall not in any way limit or restrict the Adviser or any
of its directors, officers, employees or agents from buying, selling or trading
any securities for its or their own accounts or for the accounts of others for
whom it or they may be acting, provided, however that the Adviser will undertake
no activities which, in its judgment, will adversely affect the performance of
its obligations under this Agreement.
3. Portfolio Transactions and Brokerage
The Adviser is authorized, for the purchase and sale of the Trust's
portfolio securities, to employ such securities brokers and dealers (including
those which may be affiliated with the Adviser) as may, in the judgment of the
Adviser, implement the policy of the Trust to obtain the best net results taking
into account such factors as price, including commission or dealer spread, the
size, type and difficulty of the transaction involved, the firm's general
execution and operational facilities and the firm's risk in positioning the
securities involved. Consistent with this policy, the Adviser is authorized to
direct the execution of the Trust's portfolio transactions to dealers and
brokers furnishing statistical information or research deemed by the Adviser to
be useful or valuable to the
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performance of its investment advisory functions for the Trust in accordance
with the requirements of Section 28(e) of the Securities Exchange Act of 1934,
as amended.
4. Agency Cross Transactions.
From time to time, the Adviser or brokers or dealers affiliated with
it may find themselves in a position to buy for certain of their brokerage
clients (each an "Account") securities which the Adviser's investment advisory
clients wish to sell, and to sell for certain of their brokerage clients
securities which advisory clients wish to buy. Where one of the parties is an
advisory client, the Adviser or the affiliated broker or dealer cannot
participate in this type of transaction (known as a cross transaction) on behalf
of an advisory client and retain commissions from both parties to the
transaction without the advisory client's consent. This is because in a
situation where the Adviser is making the investment decision (as opposed to a
brokerage client who makes his own investment decisions), and the Adviser or an
affiliate is receiving commissions from one or both sides of the transaction,
there is a potential conflicting division of loyalties and responsibilities on
the Adviser's part regarding the advisory client. The Securities and Exchange
Commission has adopted a rule under the Investment Advisers Act of 1940, as
amended which permits the Adviser or its affiliates to participate on behalf of
an Account in agency cross transactions if the advisory client has given written
consent in advance. By execution of this Agreement, the Trust authorizes the
Adviser or its affiliates to participate in agency cross transactions involving
an Account. The Trust may revoke its consent at any time by written notice to
the Adviser.
5. Compensation of the Adviser
(a) The Trust agrees to pay to the Adviser and the Adviser
agrees to accept as full compensation for all services rendered by the Adviser
as such, a monthly fee in arrears at an annual rate equal to 1% of the average
weekly value of the Trust's Managed Assets. Managed Assets means the Trust's
total assets minus the sum of accrued liabilities (other than the aggregate
indebtedness constituting leverage). For any period of less than a month during
which this Agreement is in effect, the fee shall be prorated according to the
proportion which such period bears to a full month of 28, 29, 30 or 31 days, as
the case may be.
(b) For purposes of this Agreement, the net assets of the
Trust shall be calculated pursuant to the procedures for calculating the net
asset value of the Trust's shares adopted by resolutions of the Trustees of the
Trust.
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6. Indemnity
(a) The Trust hereby agrees to indemnify the Adviser and each
of the Adviser's directors, officers, employees, agents, associates and
controlling persons and the partners, directors, officers, employees, members
and agents thereof (including any individual who serves at the Adviser's request
as director, officer, partner, trustee or the like of another entity) (each such
person being an "Indemnitee") against any liabilities and expenses, including
amounts paid in satisfaction of judgments, in compromise or as fines and
penalties, and counsel fees (all as provided in accordance with applicable
corporate law) reasonably incurred by such Indemnitee in connection with the
defense or disposition of any action, suit or other proceeding, whether civil or
criminal, before any court or administrative or investigative body in which such
Indemnitee may be or may have been involved as a party or otherwise or with
which such Indemnitee may be or may have been threatened, while acting in any
capacity set forth herein or thereafter by reason of such Indemnitee having
acted in any such capacity, except with respect to any matter as to which such
Indemnitee shall have been adjudicated not to have acted in good faith in the
reasonable belief that such Indemnitee action was in the best interest of the
Trust and furthermore, in the case of any criminal proceeding, so long as such
Indemnitee had no reasonable cause to believe that the conduct was unlawful,
provided, however, that (1) no Indemnitee shall be indemnified hereunder against
any liability to the Trust or its shareholders or any expense of such Indemnitee
arising by reason of (i) willful misfeasance, (ii) bad faith, (iii) gross
negligence or (iv) reckless disregard of the duties involved in the conduct of
such Indemnitee's position (the conduct referred to in such clauses (i) through
(iv) being sometimes referred to herein as "disabling conduct"), (2) as to any
matter disposed of by settlement or a compromise payment by such Indemnitee,
pursuant to a consent decree or otherwise, no indemnification either for said
payment or for any other expenses shall be provided unless there has been a
determination that such settlement or compromise is in the best interests of the
Trust and that such Indemnitee appears to have acted in good faith in the
reasonable belief that such Indemnitee's action was in the best interest of the
Trust and did not involve disabling conduct by such Indemnitee and (3) with
respect to any action, suit or other proceeding voluntarily prosecuted by any
Indemnitee as plaintiff, indemnification shall be mandatory only if the
prosecution of such action, suit or other proceeding by such Indemnitee was
authorized by a majority of the full Board of Trustees of the Trust.
(b) The Trust shall make advance payments in connection with
the expenses of defending any action with respect to which indemnification might
be sought hereunder if the Trust receives a written affirmation of the
Indemnitee's good faith belief that the standard of conduct necessary for
indemnification has been met and a written undertaking to reimburse the Trust
unless it is subsequently determined that such
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Indemnitee is entitled to such indemnification and if the trustees of the Trust
determine that the facts then known to them would not preclude indemnification.
In addition, at least one of the following conditions must be met: (A) the
Indemnitee shall provide a security for such Indemnitee's undertaking, (B) the
Trust shall be insured against losses arising by reason of any lawful advances,
or (C) a majority of a quorum consisting of trustees of the Trust who are
neither "interested persons" of the Trust (as defined in Section 2(a)(19) of the
Act) nor parties to the proceeding ("Disinterested Non-Party Trustees") or an
independent legal counsel in a written opinion, shall determine, based on a
review of readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the Indemnitee ultimately will be found
entitled to indemnification.
(c) All determinations with respect to indemnification
hereunder shall be made (1) by a final decision on the merits by a court or
other body before whom the proceeding was brought that such Indemnitee is not
liable by reason of disabling conduct or, (2) in the absence of such a decision,
by (i) a majority vote of a quorum of the Disinterested Non-Party Trustees of
the Trust, or (ii) if such a quorum is not obtainable or even, if obtainable, if
a majority vote of such quorum so directs, independent legal counsel in a
written opinion. All determinations that advance payments in connection with the
expense of defending any proceeding shall be authorized shall be made in
accordance with the immediately preceding clause (2) above.
The rights accruing to any Indemnitee under these provisions
shall not exclude any other right to which such Indemnitee may be lawfully
entitled.
7. Duration and Termination
This Agreement shall become effective on the date it is approved by
the shareholders of the Trust and shall continue in effect for a period of two
years and thereafter from year to year, but only so long as such continuation is
specifically approved at least annually in accordance with the requirements of
the Act.
This Agreement may be terminated by the Adviser at any time without
penalty upon giving the Trust ninety days' written notice (which notice may be
waived by the Trust) or may be terminated by the Trust at any time without
penalty upon giving the Adviser sixty days' notice (which notice may be waived
by the Adviser), provided that such termination by the Trust shall be directed
or approved by the vote of a majority of the Trustees of the Trust in office at
the time or by the vote of the holders of a "majority" (as defined in the Act)
of the voting securities of the Trust at the time outstanding and entitled to
vote. This Agreement shall terminate automatically in the event of its
assignment (as assignment is defined in the Act).
8. Notices
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Any notice under this Agreement shall be in writing to the other
party at such address as the other party may designate from time to time for the
receipt of such notice and shall be deemed to be received on the earlier of the
date actually received or on the fourth day after the postmark if such notice is
mailed first class postage prepaid.
9. Governing Law
This Agreement shall be construed in accordance with the laws of the
State of New York for contracts to be performed entirely therein without
reference to choice of law principles thereof and in accordance with the
applicable provisions of the Act.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by their duly authorized officers, all as of the day
and the year first above written.
DLJ HIGH YIELD BOND FUND
By
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Name: Xxxxxx Xxxxx
Title: Vice President
DLJ INVESTMENT
MANAGEMENT CORP.
By
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Name: Xxxxxx Xxxxx
Title: Chief Operating Officer
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