SUB-ADVISORY AGREEMENT
SUB-ADVISORY AGREEMENT (the "Agreement") made as of this 8(th) day of
September, 2015 by and between Xxxxxx Associates Inc., a California corporation
with its principal place of business at 000 Xxxxxxxxxx Xxxxxx, Xxxxx 000, Xxx
Xxxxxxxxx, XX 00000-0000 (the "Adviser"), and AQR Capital Management, LLC a
Delaware limited liability company with its principal place of business at Xxx
Xxxxxxxxx Xxxxx, Xxxxxxxxx, XX 00000 (the "Sub-Adviser" or "AQR").
W I T N E S S E T H
WHEREAS, pursuant to authority granted to the Adviser by the Board of
Trustees (the "Board") of THE KP FUNDS (the "Trust") on behalf of the series
set forth on Schedule A to this Agreement (the "Fund") and pursuant to the
provisions of the Investment Advisory Agreement dated as of December 18, 2013
between the Adviser and the Fund (the "Management Agreement"), the Adviser has
selected the Sub-Adviser to act as sub-investment adviser of the Fund and to
provide certain related services, as more fully set forth below, and to perform
such services under the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and benefits
set forth herein, the Adviser and the Sub-Adviser do hereby agree as follows:
1. THE SUB-ADVISER'S SERVICES.
(a) DISCRETIONARY INVESTMENT MANAGEMENT SERVICES. The Sub-Adviser
shall act as sub-investment adviser with respect to the Fund. In such capacity,
the Sub-Adviser shall, subject to the supervision of the Adviser and the Board,
regularly provide the Fund with investment research, advice and supervision and
shall furnish continuously an investment program for such Fund assets as may be
allocated by the Adviser to the Sub-Adviser (the "Assets"), consistent with the
investment objectives and policies of the Fund, as disclosed in the Fund's
Registration Statement (as defined below), and any investment guidelines
established and modified from time to time by the Adviser and communicated in
writing to, and approved by, the Sub-Adviser. The Sub-Adviser shall determine,
from time to time, what investments and/or instruments shall be purchased for
the Fund and what such investments and/or instruments shall be held or sold by
the Fund, subject always to the provisions of the Trust's Agreement and
Declaration of Trust, ByLaws and its registration statement on Form N-1A (the
"Registration Statement") under the Investment Company Act of 1940, as amended
(the "1940 Act"), and under the Securities Act of 1933, as amended (the "1933
Act"), covering Fund shares, as filed with the Securities and Exchange
Commission (the "Commission"), and to the investment objectives, policies and
restrictions of the Fund, as each of the same shall be from time to time in
effect as disclosed in the Fund's Registration Statement, and to any investment
guidelines established by the Adviser as referred to above and provided to the
Sub-Adviser in writing (collectively, "Fund Documentation and Policies"). To
carry out such obligations, the Sub-Adviser shall exercise full discretion and
act for the Fund in the
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same manner and with the same force and effect as the Fund itself might or
could do with respect to purchases, sales or other transactions, as well as
with respect to all other such things necessary or incidental to the
furtherance or conduct of such purchases, sales or other transactions,
including the authority to negotiate and execute with brokers, dealers, futures
commission merchants ("FCM"), banks or other agents or counterparties (each, a
"Broker"), in the name and on behalf of the Fund all agreements, instruments
and other documents and to take all such other action which the Sub-Adviser
considers necessary or advisable to carry out its duties hereunder..
Notwithstanding the foregoing, the Sub-Adviser shall, upon written instructions
from the Adviser, effect such portfolio transactions for the Fund as the
Adviser may from time to time direct; provided however, that the Sub-Adviser
shall not be responsible or liable for any such portfolio transactions effected
upon written instructions from the Adviser. No reference in this Agreement to
the Sub-Adviser having full discretionary authority over the Fund's investments
shall in any way limit the right of the Adviser, in its sole discretion, to
establish or revise policies in connection with the management of the Fund's
assets or to otherwise exercise its right to control the overall management of
the Fund's assets. Notwithstanding the foregoing or anything else contained in
this Agreement, Sub-Adviser shall not be required to comply with any policy,
guideline, procedures or instruction of the Trust or Adviser nor any amendment
to, or any new policies, procedures or guidelines of the Trust or Adviser,
until the Sub-Adviser has been notified of such in writing (which may include
by email).
In order to meet margin or collateral requirements and pledge collateral in
connection with futures, forwards and other derivative instruments, the
Sub-Adviser may direct payments of cash, cash equivalents, and securities and
other property into segregated accounts or FCM accounts established hereunder
as the Sub-Adviser deems desirable or appropriate, provided that the
Sub-Adviser's actions are in accordance with the terms of this Agreement, the
1940 Act and the rules and regulations thereunder. Such Brokers are authorized
to act on instructions from the Sub-Adviser, including, but not limited to
instructions with respect to transferring money, securities or other property
between accounts held by such Broker or elsewhere on behalf of the Fund and to
instruct the receipt or delivery of securities or property on behalf of the
Fund. This power-of-attorney is a continuing power-of-attorney and shall
remain in full force and effect until revoked by the Adviser or the Trust in
writing, but any such revocation shall not affect any transaction initiated
prior to receipt by the Sub-Adviser of such notice.
(b) COMPLIANCE. The Sub-Adviser agrees to comply with the
requirements of the 1940 Act, the Investment Advisers Act of 1940, as amended
(the "Advisers Act"), the 1933 Act, the Securities Exchange Act of 1934, as
amended (the "1934 Act"), the Commodity Exchange Act and the respective rules
and regulations thereunder, as applicable, as well as with all other applicable
federal and state laws, rules, regulations and case law that relate to the
services and relationships described hereunder and to the conduct of its
business as a registered investment adviser. With respect to the Fund Assets
as defined in Section 1(a) herein, the Sub-Adviser also agrees to comply with
the objectives, policies and restrictions set forth in the Registration
Statement, as amended or supplemented, of the Fund, and with any policies,
guidelines, instructions and procedures
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approved by the Board or the Adviser and provided to the Sub-Adviser. In
selecting the Fund's portfolio securities and performing the Sub-Adviser's
obligations hereunder, the Sub-Adviser shall cause the Fund to comply with the
diversification and source of income requirements of Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"), for qualification as a
regulated investment company. The Sub-Adviser shall maintain compliance
procedures that it reasonably believes are adequate to ensure the compliance
with the foregoing. No supervisory activity undertaken by the Adviser shall
limit the Sub-Adviser's full responsibility for any of the foregoing, subject
to the terms and conditions of this Agreement. The Adviser acknowledges that
the Sub-Adviser's responsibilities under this Agreement are limited to those
related to the management of the Assets, and that the Sub-Adviser is not
responsible for compliance, qualification or other matters under this Agreement
related to those portions of the Fund which are not subject to this Agreement.
The Adviser hereby agrees to promptly provide Sub-Adviser with the Fund
Documentation and Policies, guidelines, policies and procedures of the Fund,
Trust or Adviser applicable to the Sub-Adviser's duties and responsibilities
hereunder, including any supplements or amendments thereto, prior to the
implementation thereof.
(c) PROXY VOTING. Pursuant to Board authority, the Adviser has the
authority to determine how proxies with respect to securities that are held by
the Fund shall be voted, and the Adviser may delegate the authority and
responsibility to vote proxies for the Fund's securities to the Sub-Adviser. So
long as proxy voting authority for the Fund has been delegated to the
Sub-Adviser, the Adviser shall provide such assistance to the Sub-Adviser with
respect to the voting of proxies for the Fund as the Sub-Adviser may from time
to time reasonably request, and the Adviser shall promptly forward to the
Sub-Adviser any information or documents necessary for the Sub-Adviser to
exercise its proxy voting responsibilities. The Sub-Adviser shall carry out
such responsibility at all times in a manner consistent with Rule 206(4)-6
under the Advisers Act and its fiduciary responsibilities to the Trust, in
accordance with written policies and procedures adopted by the Sub-Adviser,
subject to the ultimate authority of the Board or the Adviser to direct the
Sub-Adviser with respect to voting a particular way on a particular proxy. Upon
request, the Sub-Adviser shall provide the Adviser with a copy of its written
proxy voting policies and procedures and as such may be amended from time to
time. The Sub-Adviser shall provide periodic reports and keep such records
relating to proxy voting as the Adviser and the Board may reasonably request or
as may be necessary for the Fund to comply with the 1940 Act and other
applicable law. Any such delegation of proxy voting responsibility to the
Sub-Adviser may be revoked or modified by the Board or the Adviser at any
time.
Unless and until otherwise directed by the Adviser or the Board the Sub-Adviser
shall be responsible for voting the Fund's proxies and exercising all other
applicable rights of the Fund as a security holder in connection with corporate
actions or other transactions relating to the Fund's portfolio holdings. The
Sub-Adviser is authorized to instruct the Fund's custodian and/or broker(s) to
forward promptly to the Sub-Adviser or designated service provider copies of
all proxies and shareholder communications relating to
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securities held in the portfolio of a Fund (other than materials relating to
legal proceedings against the Fund). The Sub-Adviser may also instruct the
Fund's custodian and/or broker(s) to provide reports of holdings in the
portfolio of the Fund. The Sub-Adviser has the authority to engage a service
provider to assist with administrative functions related to voting Fund
proxies. The Trust shall direct the Fund's custodian and/or broker(s) to
provide any assistance requested by the Sub-Adviser in facilitating the use of
a service provider. In no event shall the Sub-Adviser have any responsibility
to vote proxies that are not received on a timely basis. The Trust
acknowledges that the Sub-Adviser, consistent with the Sub-Adviser's written
proxy voting policies and procedures, may refrain from voting a proxy if, in
the Sub-Adviser's discretion, refraining from voting would be in the best
interests of the Fund and its shareholders.
(d) RECORDKEEPING. The Sub-Adviser shall not be responsible for the
provision of administrative, bookkeeping or accounting services to the Fund,
except as otherwise provided herein or as may be necessary for the Sub-Adviser
to supply to the Adviser, the Trust or its Board the information required to be
supplied under this Agreement.
The Sub-Adviser shall maintain separate books and detailed records of
all matters pertaining to the Fund's assets advised by the Sub-Adviser required
by Rule 31a-1 under the 1940 Act (other than those records being maintained by
the Adviser, or any administrator custodian or transfer agent appointed by the
Fund) relating to its responsibilities provided hereunder with respect to the
Fund, and shall preserve such records for the periods and in a manner
prescribed therefore by Rule 31a-2 under the 1940 Act (the "Fund Books and
Records"). The Fund Books and Records shall be available to the Adviser and
the Board at any time upon reasonable request and shall be delivered to the
Trust in a form agreed to by the Adviser and the Sub-Adviser, which may include
an electronic format, upon the termination of this Agreement (provided that
Sub-Adviser may maintain copies of the books and records for regulatory
purposes) and shall be available without unreasonable delay during any day the
Sub-Adviser is open for business.
(e) HOLDINGS INFORMATION AND PRICING. The Sub-Adviser shall upon
reasonable request provide reports regarding the Fund's holdings, and may, on
its own initiative, furnish the Adviser, the Trust and its Board from time to
time with whatever information the Sub-Adviser believes is appropriate for this
purpose. The Sub-Adviser agrees to notify the Adviser promptly if the
Sub-Adviser reasonably believes that the value of any security held by a Fund
requires a review to determine if a fair valuation is necessary pursuant to the
policies and procedures of the Sub-Adviser used to determine the value of
portfolio holdings. The Sub-Adviser agrees to provide upon reasonable request
any pricing information of which the Sub-Adviser is aware to the Adviser,
Trust, its Board and/or any Fund pricing agent to assist in the determination
of the fair value of any Fund holdings for which market quotations are not
readily available or as otherwise required in accordance with the 1940 Act or
the Fund valuation procedures for the
4
purpose of calculating the Fund's net asset value in accordance with procedures
and methods established by the Board.
(f) COOPERATION WITH AGENTS OF THE ADVISER AND THE TRUST. The
Sub-Adviser agrees to cooperate with and provide reasonable assistance to the
Adviser, the Trust and any Trust custodian or foreign sub-custodians, any Trust
pricing agents and all other agents and representatives of the Adviser and the
Trust with respect to such information regarding the Fund as such entities may
reasonably request from time to time in the performance of their obligations,
provide prompt responses to reasonable requests made by such persons and
establish appropriate interfaces with each so as to promote the efficient
exchange of information and compliance with applicable laws and regulations.
The Sub-Adviser shall make its officers and employees available to the Adviser
from time to time and upon reasonable request to review any current or proposed
investment guidelines for the Fund and to consult with the Adviser with respect
to the Fund's investment matters.
(g) CONSULTATION WITH OTHER SUB-ADVISERS. In performance of its
duties and obligations under this Agreement, the Sub-Adviser shall not consult
with any other sub-adviser to the Fund or a sub-adviser to a portfolio that is
under common control with the Fund concerning transactions for the Fund, except
as permitted by the policies and procedures of the Fund. The Sub-Adviser shall
not provide investment advice to any assets of the Fund other than the assets
managed by the Sub-Adviser.
2. CODE OF ETHICS. The Sub-Adviser has adopted a written code of
ethics that it reasonably believes complies with the requirements of Rule 17j-1
under the 1940 Act, which it has provided to the Adviser and the Trust. The
Sub-Adviser shall require that its Access Persons (as defined in the
Sub-Adviser's Code of Ethics) comply in all material respects with the
Sub-Adviser's Code of Ethics, as in effect from time to time. Upon request, the
Sub-Adviser shall provide the Trust with (i) a copy of the Sub-Adviser's
current Code of Ethics, as in effect from time to time, and (ii) a
certification that it has adopted procedures reasonably necessary to prevent
Access Persons from engaging in any conduct prohibited by the Sub-Adviser's
Code of Ethics. Annually, the Sub-Adviser shall furnish a written report, which
complies with the requirements of Rule 17j-1, concerning the Sub-Adviser's Code
of Ethics to the Adviser and the Trust's Board. The Sub-Adviser shall respond
to reasonable requests for information from the Adviser and the Trust as to
material violations of the Code by Access Persons (with non-public personal
identification information redacted) and the sanctions imposed by the
Sub-Adviser. The Sub-Adviser shall as soon as reasonably practicable notify the
Adviser of any material violation of the Code, whether or not such violation
relates to a security held by any Fund.
3. INFORMATION AND REPORTING. The Sub-Adviser shall provide the
Adviser, the Trust, and their respective officers with such reasonable periodic
reports concerning the obligations the Sub-Adviser has assumed under this
Agreement with respect to the Fund as the Adviser and the Trust may from time
to time reasonably request.
(a) NOTIFICATION OF BREACH OR SIGNIFICANT CHANGES / COMPLIANCE
REPORTS. The Sub-Adviser shall notify the Trust's Chief Compliance Officer and
Adviser as soon as
5
reasonably practicable upon detection of (i) any material failure to manage any
Fund in accordance with its investment objectives and policies, as set forth in
the Fund's Registration Statement, or any applicable law; or (ii) any material
breach of any of the Fund's or the Adviser's policies, guidelines or procedures
that directly relate to management of Fund Assets or to the sub-advisory
services provided by the Sub-Adviser to the Fund hereunder. The Sub-Adviser
shall notify the Adviser as soon as reasonably practicable, but before
implementation of (i) any material changes in its investment strategy, asset
allocation or other matters affecting its management of the Fund's assets; or
(ii) any other circumstances that would reasonably be expected to materially
effect its management of the Fund or have a materially adverse effect on the
Sub-Adviser's performance of its obligations hereunder. The Sub-Adviser shall
also notify the Adviser as soon as reasonably practicable of any significant
change in staff members of the Sub-Adviser's organization as such term is
hereinafter defined. For these purposes, a "staff member" will be the Chief
Executive Officer, Chief Financial Officer or Chief Operating Officer of the
Sub-Adviser and any portfolio manager named in the Fund's registration
statement. In addition, upon request the Sub-Adviser shall provide a quarterly
report regarding the Fund's compliance with its investment objectives and
policies, applicable law, including, but not limited to the 1940 Act and
Subchapter M of the Code, and the Fund's and the Adviser's policies, guidelines
or procedures as applicable to the Sub-Adviser's obligations under this
Agreement. The Sub-Adviser acknowledges and agrees that the Adviser may, in its
discretion, provide such quarterly compliance certifications to the Board. The
Sub-Adviser agrees to correct any such failure as soon as reasonably
practicable and to take any action that the Board and/or the Adviser may
reasonably request in connection with any such breach, provided that such
action does not cause Sub-Adviser to breach any legal, tax or regulatory
requirement applicable to Sub-Adviser or the Fund. Upon reasonable request, the
Sub-Adviser shall also provide the officers of the Trust with supporting
certifications in connection with such certifications of Fund financial
statements (which shall be limited to those financial statements or portions
thereof of which the Sub-Adviser has direct knowledge as a result of the
services provided hereunder) and disclosure controls pursuant to the
Xxxxxxxx-Xxxxx Act, provided that the content of such certifications relates
only to the duties and obligations of the Sub-Adviser provided hereunder. The
Sub-Adviser will as soon as reasonably practicable, but in no event sooner than
it is legally able to do so, notify the Trust in the event (i) the Sub-Adviser
is served or otherwise receives notice of any action, suit, proceeding, inquiry
or investigation, at law or in equity, before or by any court, public board, or
body, involving the affairs of the Trust (excluding class action suits in which
a Fund is a member of the plaintiff class by reason of the Fund's ownership of
shares in the defendant) (ii) the Sub-Adviser is served or otherwise receives
notice from a court or regulatory agency regarding the Sub-Adviser's violation
of the federal or state securities laws or (iii) an actual change in control of
the Sub-Adviser resulting in an "assignment" (as defined in the 1940 Act) has
occurred or is otherwise proposed to occur.
(b) INSPECTION. Upon reasonable request, the Sub-Adviser agrees to
make its records and premises (including the availability of the Sub-Adviser's
employees for interviews), to the extent that they relate to the conduct of
services provided to the Fund
6
or the Sub-Adviser's conduct of its business as an investment adviser
reasonably available for compliance audits by the Adviser or the Trust's
officers, employees, accountants or counsel; in this regard, the Trust and the
Adviser acknowledge that the Sub-Adviser shall have no obligation to make
available proprietary information unrelated to the services provided to the
Fund or any information related to other clients of the Sub-Adviser.
(c) BOARD AND FILINGS INFORMATION. The Sub-Adviser will also provide
the Adviser and Trust with any information reasonably requested regarding its
management of the Fund required for any meeting of the Board, or for any
shareholder report required by the 1940 Act, 1933 Act or 1934 Act, Form N-CSR,
Form N-Q, Form N-PX, Form N-SAR, amended registration statement, proxy
statement, or prospectus supplement to be filed by the Trust with the
Commission. The Sub-Adviser will make its officers and employees available to
meet with the Board from time to time on due notice to review its investment
management services to the Fund in light of current and prospective economic
and market conditions and shall furnish to the Board such information as may
reasonably be necessary in order for the Board to evaluate this Agreement or
any proposed amendments thereto. Sub-Adviser shall not be responsible for the
preparation or filing of any regulatory filings and/or reports required of the
Trust, any Fund or the Adviser by any governmental or regulatory agency
(including self-regulatory organizations) except as expressly agreed in writing
by the Sub-Adviser.
(d) TRANSACTION INFORMATION. Upon reasonable request, the Sub-Adviser
shall furnish to the Adviser and the Trust such information concerning
portfolio transactions (other than those records being maintained by the
Adviser, or any administrator custodian or transfer agent appointed by the
Fund) as may be necessary to enable the Adviser, Trust or their designated
agents to perform such compliance testing on the Fund and the Sub-Adviser's
services as the Adviser and the Trust may, in their sole discretion, determine
to be appropriate. The provision of such information by the Sub-Adviser to the
Adviser, Trust or their designated agents in no way relieves the Sub-Adviser of
its own responsibilities under this Agreement.
(e) Notwithstanding any provision to the contrary contained in this
Agreement, the Sub-Adviser shall not be required to fulfill any request made by
the Adviser, Fund, Board or Trust for reports (including the format thereof) or
information regarding the Fund, Sub-Adviser and/or services provided under this
Agreement unless Sub-Adviser has been given a reasonable amount of time to
compile such requested report or information (as applicable) and providing such
information or reporting will not cause (i) the Sub-Adviser to breach any
legal, tax or regulatory requirement applicable to it; and/or (ii) any loss,
damage, liability or competitive disadvantage to any other fund or account
managed by Sub-Adviser with a similar investment strategy.
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4. BROKERAGE.
(a) PRINCIPAL TRANSACTIONS. In connection with purchases or sales of
securities for the account of a Fund, neither the Sub-Adviser nor any of its
directors, officers or employees will act as a principal or agent or receive any
commission except as permitted by the 1940 Act.
(b) PLACEMENT OF ORDERS. The Sub-Adviser shall arrange for the
placing of all orders for the purchase and sale of securities or instruments
for a Fund's account with brokers or dealers selected by the Sub-Adviser. In
the selection of such brokers or dealers and the placing of such orders, the
Sub-Adviser is directed at all times to seek for a Fund best execution pursuant
to the Sub-Adviser's best execution policy, which has been provided to the
Adviser. It is expected that the Sub-Adviser will seek competitive commission
rates generally although it is understood that the Sub-Adviser will not
necessarily pay the lowest commission rate available on each transaction. It
is also understood that it may be desirable for the Fund that the Sub-Adviser
have access to brokerage and research services provided by brokers who may
execute brokerage transactions at a higher cost to the Fund than may result
when allocating brokerage to other brokers, consistent with section 28(e) of
the 1934 Act and any Commission staff interpretations thereof. Therefore, the
Sub-Adviser is authorized to place orders for the purchase and sale of
securities for the Fund with such brokers if the Sub-Adviser determines, in
good faith, that such amount of commissions is reasonable in relation to the
value of such brokerage or research services provided in terms of a particular
Fund transaction or the Sub-Adviser's overall responsibilities to the Fund and
its other clients, and that the total commissions paid by the Fund will be
reasonable in relation to the benefits to the Fund over the long-term. This
practice is subject to review by the Adviser and the Board from time to time
with respect to the extent and continuation of this practice. It is understood
that the services provided by such brokers may be useful to the Sub-Adviser in
connection with its or its affiliates' services to other clients.
(c) AGGREGATED TRANSACTIONS. On occasions when the Sub-Adviser deems
the purchase or sale of a security or instrument to be in the best interest of
a Fund as well as other clients of the Sub-Adviser, the Sub-Adviser may, to the
extent permitted by applicable law and regulations, aggregate the order for
securities or instruments to be sold or purchased. In such event, the
Sub-Adviser will allocate securities or instruments so purchased or sold, as
well as the expenses incurred in the transaction, in the manner the Sub-Adviser
reasonably considers to be equitable and consistent with its fiduciary
obligations to a Fund and to such other clients under the circumstances.
(d) AFFILIATED BROKERS. The Sub-Adviser or any of its affiliates may
act as broker in connection with the purchase or sale of securities or other
investments for a Fund, subject to: (a) the requirement that the Sub-Adviser
seek to obtain best execution as described in Section 4(b) above; (b) the
provisions of the 1940 Act; (c) the provisions of the Advisers Act; (d) the
provisions of the 1934 Act; and (e) other provisions of applicable law. These
brokerage services are not within the scope of the duties of the Sub-Adviser
under this Agreement. Subject to the requirements of applicable law and
8
any procedures adopted by the Board, the Sub-Adviser or its affiliates may
receive brokerage commissions, fees or other remuneration from a Fund for these
services in addition to the Sub-Adviser's fees for services under this
Agreement.
5. CUSTODY. Nothing in this Agreement shall permit the Sub-Adviser
to take or receive physical possession of cash, securities or other investments
of a Fund. The Sub-Adviser is authorized, as agent of the Fund, to give
instructions to the custodian with respect to the Fund in order to carry out
its duties under this Agreement, including with respect to delivery of
securities and other investments and payments of cash for the account of the
Fundo. The Sub-Adviser shall have no liability for the acts or omissions of any
custodian of the Fund's assets.
6. ALLOCATION OF CHARGES AND EXPENSES. The Sub-Adviser will bear its
own costs of providing services hereunder. Other than as herein specifically
indicated, the Sub-Adviser shall not be responsible for a Fund's, the Trust's
or the Adviser's expenses, including, without limitation: (i) brokerage and
other expenses incurred in placing orders for the purchase and sale of
securities and other investment instruments; (ii) interest and taxes; and (iii)
custodian fees and expenses.
7. REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) PROPERLY REGISTERED. The Sub-Adviser is registered as an
investment adviser under the Advisers Act, and will remain so registered for the
duration of this Agreement. The Sub-Adviser is not prohibited by the Advisers
Act or the 1940 Act from performing the services contemplated by this Agreement,
and to the best knowledge of the Sub-Adviser, there is no proceeding or
investigation that is reasonably likely to result in the Sub-Adviser being
prohibited from performing the services contemplated by this Agreement. The
Sub-Adviser agrees to promptly notify the Trust of the occurrence of any event
that would disqualify the Sub-Adviser from serving as an investment adviser to
an investment company. The Sub-Adviser is in compliance in all material respects
with all applicable federal and state law in connection with its investment
management operations.
(b) ADV DISCLOSURE. The Sub-Adviser has provided the Adviser, Trust
and Fund with a copy of Part I of its Form ADV as most recently filed with the
Commission and its Part II as most recently updated and will, promptly after
filing any material amendment to Part IIA of its Form ADV with the Commission,
furnish a copy of such amendment to the Adviser. The information contained in
the Sub-Adviser's Form ADV as of the date of filing is accurate and complete in
all material respects and does not omit to state any material fact necessary in
order to make the statements made, in light of the circumstances under which
they were made, not misleading.
(c) FUND DISCLOSURE DOCUMENTS. Upon reasonable request of the
Adviser, the Sub-Adviser will review and provide comments on portions of the
following Fund documents related solely to descriptions of the Sub-Adviser and
the investment strategy or strategies the Sub-Adviser provides to the Assets
hereunder ("AQR Disclosures"): (i) Registration Statement (including summary
prospectus, prospectus and statement of
9
additional information), (ii) annual and semi-annual shareholder reports to
shareholders, as filed on Form N-CSR, and (iii) other reports and schedules
filed with the Commission (including any amendment, supplement or sticker to
any of the foregoing) and (iv) advertising and sales material relating to the
Fund (collectively the "Disclosure Documents"). The Sub-Adviser represents and
warrants that the AQR Disclosures contain or will contain no untrue statement
of any material fact and do not and will not omit any statement of material
fact required to be stated therein or necessary to make the statements therein
not misleading, provided such statement or omission was made in reliance upon
information furnished by Sub-Adviser, Sub-Adviser was given a reasonable amount
of time to review the AQR Disclosures prior to its filing, dissemination or
use, and any material comments to the AQR Disclosures provided by Sub-Adviser
to Adviser, the Trust or the Fund were included in the AQR Disclosures
verbatim. For the avoidance of doubt, Sub-Adviser shall not be liable for any
failure of Fund Documents to comply with FINRA regulations.
(d) USE OF THE NAMES "KP" AND "XXXXXX." The Sub-Adviser has the right
to use the names "KP" and "Xxxxxx" solely in connection with its services to
the Trust (including, but not limited to, the use of such names and/or logos
which merely refer in accurate terms to the appointment of Sub-Adviser
hereunder or which are required by any state or local regulatory or
governmental agency or body, including, without limitation, the Commission, the
Commodity Futures Trading Commission ("CFTC"), National Futures Association
("NFA") or any other self-regulatory organization of which Sub-Adviser is a
member). The Trust and the Adviser have the right to use the name "AQR" solely
for the purpose of identifying AQR as sub-adviser to a Fund in the Registration
Statement or other marketing or promotional materials of a Fund, and only for
so long as this Agreement is in effect. Neither party, as of the date hereof,
is aware of any threatened or existing actions, claims, litigation or
proceedings that would adversely affect or prejudice the rights of the other
party to use its name as described and allowed for herein.
(e) INSURANCE. The Sub-Adviser maintains errors and omissions
insurance coverage in an appropriate amount and shall provide written notice to
the Adviser as soon as reasonably practicable (i) of any material decreases in
amounts of insurance coverage; or (ii) of any material claims made on its
insurance policies. Furthermore, the Sub-Adviser shall, upon reasonable
request, provide the Trust with any information it may reasonably require
concerning the amount of or scope of such insurance.
(f) NO DETRIMENTAL AGREEMENT. The Sub-Adviser represents and warrants
that it has no arrangement or understanding with any party, other than the
Trust, that would influence the decision of the Sub-Adviser with respect to its
selection of securities for the Fund, and that all selections shall be done in
accordance with the Sub-Adviser's fiduciary duties under applicable law.
(g) CONFLICTS. The Sub-Adviser shall act honestly, in good faith and
in accordance with the Sub-Adviser's fiduciary duties under applicable law
including requiring any of its personnel with knowledge of Fund activities to
place the interest of
10
the Fund first, ahead of their own interests, in all personal trading scenarios
that may involve a conflict of interest with the Fund. The services of the
Sub-Adviser hereunder are not to be deemed exclusive and nothing in this
Agreement shall limit or restrict the right of Sub-Adviser or any of its
affiliates, partners, officers, or employees to engage in any other business or
to devote his or her time and attention to the management or other aspects of
any business, whether of a similar or a dissimilar nature, or limit or restrict
Sub-Adviser's right to engage in any other business or to render services of
any kind to any other fund, account (including proprietary accounts),
corporation, firm, individual, or association. Sub-Adviser acts as adviser to
other clients and may, subject to compliance with its fiduciary obligations,
give advice, and take action, with respect to any of those which may differ
from the advice given, or the timing or nature of action taken, with respect to
the Fund. Subject to its fiduciary obligation to the Fund, Sub-Adviser shall
have no obligation to purchase or sell for the Fund, or to recommend for
purchase or sale by the Fund, any security which Sub-Adviser, its principals,
affiliates or employees may purchase or sell for themselves or for any other
clients.
(h) REPRESENTATIONS. The representations and warranties in this
Section 7 shall be deemed to be made on the date this Agreement is executed and
at the time of delivery of the quarterly compliance report required by Section
3(a), whether or not specifically referenced in such report.
8. SUB-ADVISER'S COMPENSATION. The Adviser shall cause the Fund to
pay the Sub-Adviser, as compensation for the Sub-Adviser's services hereunder,
a fee, determined as described in Schedule A that is attached hereto and made a
part hereof. Such fee shall be computed daily and paid not less than monthly
in arrears by the Fund. The Adviser hereby represents that it has been
delegated authority by the Fund to cause the Fund to make proper payments to
the Sub-Adviser as required under this Agreement.
The Sub-Adviser will be compensated based on the portion of Fund
assets allocated to the Sub-Adviser by the Adviser. The method for determining
net assets of the Fund for purposes hereof shall be the same as the method for
determining net assets for purposes of establishing the offering and redemption
prices of Fund shares as described in the Fund's prospectus. In the event of
termination of this Agreement, the fee provided in this Section shall be
computed on the basis of the period ending on the last business day on which
this Agreement is in effect subject to a pro rata adjustment based on the
number of days elapsed in the current month as a percentage of the total number
of days in such month.
9. INDEPENDENT CONTRACTOR. In the performance of its duties
hereunder, the Sub-Adviser is and shall be an independent contractor and,
unless otherwise expressly provided herein or otherwise authorized in writing,
shall have no authority to act for or represent the Fund, the Trust or the
Adviser in any way or otherwise be deemed to be an agent of the Fund, the Trust
or the Adviser. If any occasion should arise in which the Sub-Adviser gives any
advice to its clients concerning the shares of a Fund, the Sub-Adviser will act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.
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10. ASSIGNMENT AND AMENDMENTS. This Agreement shall automatically
terminate, without the payment of any penalty, (i) in the event of its
assignment (as defined in section 2(a)(4) of the 0000 Xxx) or (ii) in the event
of the termination of the Management Agreement; provided that such termination
shall not relieve the Adviser or the Sub-Adviser of any liability incurred
hereunder.
This Agreement may not be added to or changed orally and may not be
modified or rescinded except by a writing signed by the parties hereto and in
accordance with the 1940 Act, when applicable.
11. DURATION AND TERMINATION.
This Agreement shall become effective as of the date executed and shall remain
in full force and effect continually thereafter, subject to renewal as provided
in Section 11(d) and unless terminated automatically as set forth in Section 10
hereof or until terminated as follows:
(a) The Trust may cause this Agreement to terminate either (i) by
vote of its Board or (ii) with respect to the Fund, upon the affirmative vote
of a majority of the outstanding voting securities of the Fund; or
(b) The Adviser may at any time terminate this Agreement by not more
than sixty (60) days' nor less than thirty (30) days' written notice delivered
or mailed by registered mail, postage prepaid, to the Sub-Adviser; or
(c) The Sub-Adviser may at any time terminate this Agreement by not
more than sixty (60) days' nor less than thirty (30) days' written notice
delivered or mailed by registered mail, postage prepaid, to the Adviser; or
(d) This Agreement shall automatically terminate two years from the
date of its execution unless its renewal is specifically approved at least
annually thereafter by (i) a majority vote of the Trustees, including a
majority vote of such Trustees who are not interested persons of the Trust, the
Adviser or the Sub-Adviser, at a meeting called for the purpose of voting on
such approval; or (ii) the vote of a majority of the outstanding voting
securities of the Fund; provided, however, that if the continuance of this
Agreement is submitted to the shareholders of the Fund for their approval and
such shareholders fail to approve such continuance of this Agreement as
provided herein, the Sub-Adviser may continue to serve hereunder as to the Fund
in a manner consistent with the 1940 Act and the rules and regulations
thereunder; and
(e) Termination of this Agreement pursuant to this Section shall be
without payment of any penalty.
In the event of termination of this Agreement for any reason, the Sub-Adviser
shall, immediately upon notice of termination or on such later date as may be
specified in such notice, cease all activity on behalf of the Fund and with
respect to any of its assets, except
12
as expressly directed by the Adviser or as otherwise required by any fiduciary
duties of the Sub-Adviser under applicable law. In addition, the Sub-Adviser
shall deliver the Fund's Books and Records to the Adviser by such means and in
accordance with such schedule as the Adviser shall reasonably direct and shall
otherwise cooperate, as reasonably directed by the Adviser, in the transition
of portfolio asset management to any successor of the Sub-Adviser, including
the Adviser.
12. CERTAIN DEFINITIONS. FOR THE PURPOSES OF THIS AGREEMENT:
(a) "Affirmative vote of a majority of the outstanding voting
securities of the Fund" shall have the meaning as set forth in the 1940 Act,
subject, however, to such exemptions as may be granted by the Commission under
the 1940 Act or any interpretations of the Commission staff.
(b) "Interested persons" and "Assignment" shall have their respective
meanings as set forth in the 1940 Act, subject, however, to such exemptions as
may be granted by the Commission under the 1940 Act or any interpretations of
the Commission staff.
13. LIABILITY OF THE SUB-ADVISER.
(a) The Sub-Adviser shall be liable to the Fund for any loss
(including transaction costs) incurred by the Fund as a result of any direct
investment made by the Sub-Adviser in contravention of: (i) any investment
policy, guideline or restriction set forth in the Registration Statement or as
approved by the Board from time to time and provided to the Sub-Adviser
("Investment Guidelines); or (ii) applicable law, including but not limited to
the 1940 Act and the Code (including but not limited to the Fund's failure to
satisfy the diversification or source of income requirements of Subchapter M of
the Code) (the investments described in this subsection (b) collectively are
referred to as "Improper Investments").
(c) The Sub-Adviser shall indemnify and hold harmless the Trust,
each affiliated person of the Trust within the meaning of Section 2(a)(3) of
the 1940 Act, and each person who controls the Trust within the meaning of
Section 15 of the 1933 Act (any such person, an "Indemnified Party") against
any and all losses, claims, damages, expenses or liabilities (including the
reasonable cost of investigating and defending any alleged loss, claim, damage,
expense or liability and reasonable counsel fees incurred in connection
therewith) to which any such person may become subject under the 1933 Act, the
1934 Act, the 1940 Act or other federal or state statutory law or regulation,
at common law or otherwise, insofar as such losses, claims, damages, expenses
or liabilities (or actions in respect thereof) arise out of or are based upon:
(i) a material breach by the Sub-Adviser of this Agreement or of the
representations and warranties made by the Sub-Adviser herein; (ii) any
Improper Investment; (iii) any untrue statement or alleged untrue statement of
a material fact applicable to the Sub-Adviser contained in an AQR Disclosure or
the omission or alleged omission from an AQR Disclosure of a material fact
applicable to the Sub-Adviser required to be stated therein or necessary to
make the
13
statements therein not misleading, provided such statement or omission was made
in reliance upon information furnished by Sub-Adviser, Sub-Adviser was given a
reasonable amount of time to review the AQR Disclosure prior to its filing,
dissemination or use, and any material comments to such AQR Disclosure provided
by Sub-Adviser to Adviser, the Trust or the Fund were included in such AQR
Disclosure verbatim, or (iv) material non-performance of its duties hereunder;
provided, however, that nothing herein shall be deemed to protect any
Indemnified Party against any liability to the Trust or to its shareholders to
which such Indemnified Party would otherwise be subject by reason or willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such person's office with the Trust.
(e) The Adviser shall indemnify and hold harmless the Sub-Adviser,
each affiliated person of the Sub-Adviser within the meaning of Section 2(a)(3)
of the 1940 Act, and each person who controls the Sub-Adviser within the
meaning of Section 15 of the 1933 Act (any such person, a "Sub-Adviser
Indemnified Party") against any and all losses, claims, damages, expenses or
liabilities (including the reasonable cost of investigating and defending any
alleged loss, claim, damage, expense or liability and reasonable counsel fees
incurred in connection therewith) to which any such person may become subject
under the 1933 Act, the 1934 Act, the 1940 Act or other federal or state
statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, damages, expenses or liabilities (or actions in respect
thereof) arise out of or are based upon: (i) a material breach by the Adviser
of this Agreement or the representations and warranties made by the Adviser
herein; (ii) a violation of applicable law by the Adviser; (iii) any action or
omission taken by any other sub-adviser to the Fund; (iv) any action or
omission taken by Sub-Adviser in accordance with an instruction or direction
provided by Adviser; and (v) any willful misfeasance, bad faith, or gross
negligence in the performance or non-performance of its obligations and duties
under this Agreement by the Adviser or any of the Adviser's officers,
directors, employees, or agents; provided, however, that the Adviser's
obligations hereunder shall be reduced to the extent that the claims against,
or the losses, damages or liabilities experienced by the Sub-Adviser
Indemnified Party, are caused by or are otherwise directly or indirectly
related to the Sub-Adviser Indemnified Party's, or any officer, director,
employee, agent, representative or service provider of any of the Sub-Adviser
Indemnified Party's, own willful misfeasance, bad faith or gross negligence, or
to the reckless disregard of its duties under this Agreement.
14. ENFORCEABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms or provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
15. LIMITATION OF LIABILITY. The parties to this Agreement
acknowledge and agree that all litigation arising hereunder, whether direct or
indirect, and of any and every nature whatsoever shall be satisfied solely out
of the assets of the affected Fund and that no Trustee,
14
officer or holder of shares of beneficial interest of the Fund shall be
personally liable for any of the foregoing liabilities, except as permitted
under applicable laws or as permitted under the Trust's Certificate of Trust
and Agreement and Declaration of Trust. The Trust's Certificate of Trust, as
amended from time to time, is on file in the Office of the Secretary of State
of the Commonwealth of Massachusetts. Such Certificate of Trust and the
Trust's Agreement and Declaration of Trust describe in detail the respective
responsibilities and limitations on liability of the Trustees, officers, and
holders of shares of beneficial interest.
The parties hereby agree that the duties, responsibilities and obligations of
the Sub-Adviser hereunder only relate to the Assets and the Sub-Adviser shall
not be responsible or liable with respect to any other assets of the Fund or
Trust.
16. CHANGE IN THE ADVISER'S OWNERSHIP. To the extent permitted by
applicable law and regulations, the Sub-Adviser agrees that it shall notify the
Trust of any anticipated or otherwise reasonably foreseeable change in control
of the Sub-Adviser resulting in an "assignment" (as defined in the 1940 Act)
within a reasonable time prior to such change being effected.
17. CONFIDENTIAL RELATIONSHIP. Any information and advice furnished
by any party to this Agreement to the other party or parties shall be treated
as confidential and shall not be disclosed to third parties without the consent
of the other party hereto except (i) as required by law, rule or regulation or
(ii) with respect to disclosure to a party's officers, directors, employees,
professional advisers or service providers ("Representatives") that need to
know such information solely in connection with the performance of such party's
duties and obligations under this Agreement. The foregoing shall not apply to
any information that is public when provided or thereafter becomes public,
unless the party receiving the information knows or reasonably should have
known that the information became public as a result of a wrongful or illegal
act. All information disclosed as required by law, rule or regulation shall
nonetheless continue to be deemed confidential. The Sub-Adviser retains all
rights in and to any of its proprietary investment models, strategies and
approaches used by or on behalf of the Fund and any models, strategies or
approaches based upon or derived from them.
18. JURISDICTION. This Agreement shall be governed by and construed
in accordance with the substantive laws of the Commonwealth of Massachusetts
and the Sub-Adviser consents to the jurisdiction of courts, both state or
federal, in Massachusetts, with respect to any dispute under this Agreement.
19. PARAGRAPH HEADINGS. The headings of paragraphs contained in this
Agreement are provided for convenience only, form no part of this Agreement and
shall not affect its construction.
20. COUNTERPARTS. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
15
21. NOTICES. All notices hereunder shall be given in writing (and
shall be deemed to have been duly given) by delivery in person, by facsimile or
by electronic means (with corresponding personal, facsimile or electronic
receipt of such delivery), or by registered or certified mail (with return
receipt requested), or by reputable overnight delivery service (with evidence
of receipt to the parties), at the address of each as set forth below (or at
such other address, number or electronic address for a party as shall be
specified by like notice):
If to the Sub-Adviser, to:
AQR Capital Management, LLC Two Xxxxxxxxx Xxxxx Xxxxxxxxx, XX 00000
Attention: Xxxxxx XxxXxxx, Senior Counsel & Head of Registered Products
Facsimile: 000-000-0000 Email: xxxxxx.xxxxxxx@xxx.xxx Telephone: 000-000-0000
If to the Adviser, to:
Xxxxxx Associates Inc.
0000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx, Vice President, Trust Advisory Group
Facsimile: 303.832.8230
Email: XXXX@XXXXXX.XXX
Telephone: 000.000.0000
16
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be signed
on their behalf by their duly authorized officers as of the date first above
written.
XXXXXX ASSOCIATES INC.
By: /s/ Xxxxxxx X. Xxxxx
--------------------
Name: Xxxxxxx X. Xxxxx
Title: President and Director of Research
AQR CAPITAL MANAGEMENT, LLC
By: /s/ Xxxxxx Xxxxxxx
------------------
Name: Xxxxxx XxxXxxx
Title: Senior Counsel & Head of Registered Products
17
SCHEDULE A
TO THE
SUB-ADVISORY AGREEMENT
DATED SEPTEMBER 8, 2015 BETWEEN
XXXXXX ASSOCIATES INC.
AND
AQR CAPITAL MANAGEMENT, LLC
Each Fund will pay to the Sub-Adviser as compensation for the Sub-Adviser's
services rendered, a fee, computed daily at the annual rate below based on the
average daily net assets of the respective portion of the Fund (or "Assets" as
defined in this Agreement) as may be allocated by the Adviser to the
Sub-Adviser from time to time under the following fee schedule:
FUND RATE
KP Large Cap Equity Fund -- Active Broad [REDACTED]
Strategy I
18
