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INVESTMENT SUB-ADVISORY AGREEMENT
February 14, 1996
Xxx Xxxxxx American Capital Management Inc.
Xxx Xxxxxxxx Xxxxx
Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000
Dear Sirs:
Sierra Prime Income Fund (the "Trust"), an unincorporated business
trust organized under the laws of the Commonwealth of Massachusetts, and Sierra
Investment Advisors Corporation ("Sierra Advisors"), a corporation organized
under the laws of the State of California, hereby agree with Xxx Xxxxxx
American Management Inc. (the "Sub-advisor"), a corporation organized under the
laws of the State of Delaware, as follows:
1. Investment Description; Appointment
The Trust desires to employ the capital of the Trust by investing and
reinvesting in investments of the kind and in accordance with the limitations
specified in its Agreement and Declaration of Trust, as amended ("Declaration
of Trust"), and in its Prospectus and Statement of Additional Information
relating to the Trust as in effect and which may be amended from time to time,
and in such manner and to such extent as may from time to time be approved by
the Board of Trustees of the Trust. Copies of the Trust's Prospectus and
Statement of Additional Information and the Trust's Declaration of Trust, as
amended or restated, have been or will be submitted to the Sub-advisor. The
Trust agrees to provide copies of all amendments to or restatements of the
Trust's Prospectus and Statement of Additional Information and the Trust's
Declaration of Trust to the Sub-advisor on a timely and on-going basis but in
all events prior to such time as said amendments or restatements become
effective. The Sub-advisor will be entitled to rely on all such documents
furnished to it by the Trust or Sierra Advisors. The Trust desires to employ
and hereby appoints the Sub-advisor to act as investment sub-advisor to the
Trust. The Sub-advisor accepts the appointment and agrees to furnish the
services described herein for the compensation set forth below.
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2. Services as Investment Sub-advisor
Subject to the supervision of the Board of Trustees of the Trust and
of Sierra Advisors, the Trust's investment advisor, the Sub- advisor will (a)
act in conformity with the Trust's Declaration of Trust, the Investment Company
Act of 1940, the Investment Advisers Act of 1940 and the Internal Revenue Code
of 1986, as the same may from time to time be amended, (b) make investment
decisions for the Trust in accordance with the Trust's investment objectives
and policies as stated in the Trust's Prospectus(es) and Statement of
Additional Information as in effect and, after timely notice to the
Sub-advisor, which may be amended from time to time, (c) place purchase and
sale orders on behalf of the Trust to effectuate the investment decisions made,
(d) maintain books and records with respect to the securities transactions of
the Trust and will furnish the Trust's Board of Trustees such periodic, regular
and special reports as the Board may reasonably request; and (e) treat
confidentially and as proprietary information of the Trust, all records and
other information specifically relative to the Trust and prior, present or
potential shareholders; and will not use such records and information for any
purpose other than performance of its responsibilities and duties hereunder,
except after prior notification to and approval in writing by the Trust, which
approval shall not be unreasonably withheld or delayed and such records may not
be withheld where the Sub-advisor is subject to audit by the U.S. Securities
and Exchange Commission or other regulatory, administrative or judicial
proceeding or audit or hwere the Sub-advisor may be exposed to civil or
criminal contempt proceedings for failure to comply, when requested to divulge
such information by duly constituted authorities, or when so requested by the
Trust. In providing those services, the Sub-advisor will supervise the Trust's
investments and conduct a continual program of investment, evaluation and, if
appropriate, sale and reinvestment of the Trust's assets. In addition, the
Sub-advisor will furnish the Trust or Sierra Advisors with whatever statistical
information the Trust or Sierra Advisors may reasonably request with respect to
the instruments that the Trust may hold or contemplate purchasing.
3. Brokerage
In executing transactions for the Trust and selecting banks,
syndicated loan agents, brokers or dealers (hereinafter referred to as "brokers
or dealers"), the Sub-advisor will use its best efforts to seek the best
overall terms available and shall execute or direct the execution of all such
transactions in a manner permitted by law and in a manner that is in the best
interest of the Trust and its shareholders. In assessing the best overall
terms available for any Trust transaction, with respect to the lenders from
whom the Trust will purchase assignments and participations in Senior Loans the
Sub-advisor will consider all factors it deems relevant including, but not
limited to their professional ability, level of service, relationship with the
borrower, financial condition, credit standards and quality of management.
With respect to investments other than Senior Loans, the Sub-advisor will
consider all factors it deems relevant including, but not limited to, breadth
of the market in the security, the price of the security, the financial
condition and execution capability of the broker or dealer and the
reasonableness of any commission for the
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specific transaction and on a continuing basis. Pursuant to its investment
determinations for the Trust, in placing orders with brokers or dealers, the
Sub-advisor will attempt to obtain the best net price and the most favorable
execution of its orders. Consistent with this obligation, when the execution
and price offered by two or more brokers or dealers are comparable, the
Sub-advisor may, in its discretion, purchase and sell portfolio securities to
and from brokers or dealers who provide the Trust with research advice and
other services.
4. Information Provided to the Trust
The Sub-advisor will keep the Trust and Sierra Advisors informed of
developments materially affecting the Trust, and will on its own initiative,
furnish the Trust and Sierra Advisors on at least a quarterly basis with
whatever information the Sub-advisor reasonably believes is appropriate for
this purpose.
5. Standard of Care
The Sub-advisor shall exercise its reasonable best judgment in
rendering the services described in Paragraphs 2 and 3 above. The Sub- advisor
shall not be liable for any error of judgment or mistake of law or for any loss
suffered by the Trust or the Advisor in connection with the matters to which
this Agreement relates, except (a) a loss resulting from a breach of fiduciary
duty with respect to the receipt of compensation for services (in which case
any award of damages shall be limited to the period and the amount set forth in
Section 36(b)(3) of the Investment Company Act of 1940, as amended) or (b) a
loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement (each such breach, act or omission
described in (a) or (b) shall be referred to as "Disqualifying Conduct").
6. Compensation
In consideration of the services rendered pursuant to this Agreement,
Sierra Advisors will pay the Sub-advisor on the first business day of each
month a fee for the previous month at an annual rate of .475% of the Trust's
average daily net assets. The Sub-advisor shall have no right to obtain
compensation directly from the Trust or the Trust for services provided
hereunder and agrees to look solely to Sierra Advisors for payment of fees due.
Upon any termination of this Agreement before the end of a month, the fee for
such part of that month shall be prorated according to the proportion that such
period bears to the full monthly period and shall be payable upon the date of
termination of this Agreement. For the purpose of determining fees payable to
the Sub-advisor, the value of the Trust's net assets shall be computed at the
times and in the manner specified in the Trust's Prospectus and/or Statement of
Additional Information relating to the Trust as from time to time in effect.
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7. Expenses
The Sub-advisor will bear all expenses in connection with the
performance of its services under this Agreement, which expenses shall not
include brokerage fees or commissions in connection with the effectuation of
securities transactions. The Trust (or Sierra Advisors) will bear certain
other expenses to be incurred in its operation, including but not limited to:
organizational expenses, taxes, interest, brokerage fees and commissions, if
any; fees of Trustees of the Trust who are not officers, directors or employees
of the Sub-advisor, Sierra Advisors, the Trust's sub-administrator or any of
their affiliates; Securities and Exchange Commission fees and state Blue Sky
qualification fees; out- of-pocket expenses of custodians, transfer and
dividend disbursing agents and the Trust's sub-administrator and transaction
charges of custodians; insurance premiums; outside auditing and legal expenses;
costs of maintenance of the Trust's existence; costs attributable to investor
services, including without limitation, telephone and personnel expenses; costs
of preparing and printing prospectuses and statements of additional information
for regulatory purposes and for distribution to existing shareholders; costs of
shareholders' reports and meetings of the shareholders of the Trust and of the
officers or Board of Trustees of the Trust; and any extraordinary expenses.
8. Services to Other Companies or Accounts
The Trust understands that the Sub-advisor now acts, will continue to
act and may act in the future as investment adviser to fiduciary and other
managed accounts and as investment advisor or sub-investment advisor to one or
more other investment companies or series of investment companies, and the
Trust has no objection to the Sub-advisor so acting, provided that whenever the
Trust and one or more other accounts or investment companies advised by the
Sub-advisor have available funds for investment, investments suitable and
appropriate for each will be allocated in accordance with procedures believed
to be equitable to each entity. Similarly, opportunities to sell securities
will be allocated in an equitable manner. The Trust recognizes that in some
cases this procedure may limit the size of the position that may be acquired or
disposed of for the Trust. In addition, the Trust understands that the persons
employed by the Sub-advisor to assist in the performance of the Sub-advisor's
duties hereunder will not devote their full time to such service and nothing
contained herein shall be deemed to limit or restrict the right of the
Sub-advisor or any affiliate of the Sub-advisor to engage in and devote time
and attention to other business or to render services of whatever kind or
nature.
9. Term of Agreement
This Agreement shall become effective as of the date first written
above, shall continue in effect for a period of two years thereafter, and shall
continue in effect for a period of
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more than two years thereafter only so long as such continuance is specifically
approved at least annually by (i) the Board of Trustees of the Trust or (ii) a
vote of a "majority" (as defined in the Investment Company Act of 1940, as
amended) of the Trust's outstanding voting securities, provided that in either
event the continuance is also approved by a majority of the Board of Trustees
who are not "interested persons" (as defined in said Act) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of voting
on such approval. This Agreement is terminable, without penalty, on 30 days'
written notice, by Sierra Advisors, the Board of Trustees of the Trust or by
vote of holders of a majority of the Trust's shares, or upon 90 days' written
notice, by the Sub-advisor and, will terminate automatically upon any
termination of the advisory agreement between the Trust and Sierra Advisors.
In addition, this Agreement will also terminate automatically in the event of
its assignment (as defined in said Act). The Sub-advisor agrees to notify the
Trust of any circumstances that might result in this Agreement being deemed to
be assigned.
10. Representations of the Trust and the Sub-advisor
The Trust represents that (i) a copy of its Agreement and Declaration
of Trust, dated October 4, 1995, and Amended Agreement and Declaration of Trust
dated January 18, 1996, together with all amendments thereto, is on file in the
office of the Secretary of the Commonwealth of Massachusetts, (ii) the
appointment of Sierra Advisors has been duly authorized, (ii) the appointment
of the Sub-advisor has been duly authorized, and (iv) it has acted and will
continue to act in conformity with the Investment Company Act of 1940, as
amended, and other applicable laws.
Sierra Advisors represents that (i) it is authorized to perform the
services herein, (ii) the appointment of the Sub-advisor has been duly
authorized, and (iii) it will act in conformity with the Investment Company Act
of 1940, as amended, and other applicable laws.
The Sub-advisor represents that it is authorized to perform the
services described herein.
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11. Indemnification
Sierra Advisors shall indemnify and hold harmless the Sub-advisor, its
officers, directors, employee control persons and affiliated persons (as
defined in the Investment Company Act of 1940, as amended) from and against any
and all claims, losses, liabilities or damages (including reasonable attorneys'
fees and other related expenses), arising from or in connection with this
Agreement or the performance by the Sub-advisor of its duties hereunder;
provided, however, that nothing contained herein shall require that the
Sub-advisor be indemnified for Disqualifying Conduct.
12. Amendment of this Agreement
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. No amendment of this Agreement shall be effective with
respect to the Trust until approved by vote of a majority of the outstanding
voting securities.
13. Limitation of Liability
This Agreement has been executed on behalf of the Trust by the
undersigned officer of the Trust in his capacity as an officer of the Trust.
The obligations of this Agreement shall be binding upon the assets and property
of the Trust only and shall not be binding upon any Trustee, officer or
shareholder of the Trust individually.
14. Entire Agreement
This Agreement constitutes the entire agreement between the
parties hereto.
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15. Governing Law
This Agreement shall be governed in accordance with the laws
of the Commonwealth of Massachusetts.
16. Counterparts
This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but such counterparts shall
together, constitute only one instrument.
If the foregoing accurately sets forth our agreement, kindly indicate
your acceptance hereof by signing and returning the enclosed copy hereof.
Very truly yours,
SIERRA PRIME INCOME FUND
By /s/ Xxxxx X. Xxxxx
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Name: Xxxxx X. Xxxxx
Title: Executive Vice President & Treasurer
SIERRA INVESTMENT ADVISORS
CORPORATION
By /s/ Xxxxxxx X. Goth
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Name: Xxxxxxx X. Goth
Title: Chief Operating Officer
Accepted:
XXX XXXXXX AMERICAN CAPITAL MANAGEMENT INC.
By /s/ Xxxxxx X. XxXxxxxxx
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Name: Xxxxxx X. XxXxxxxxx
Title: President and Chief Operating Officer
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