SUB-ADVISORY AGREEMENT
THIS
AGREEMENT is made and entered into as of this ___ day of _________,
2007, by and among Alternative Investment Partners, LLC, a Delaware limited
liability company (the “Advisor”), Osage Energy Partners, L.P., a Delaware
limited partnership (the “Sub-Advisor”), and the Underlying Funds Trust, a
Delaware statutory trust (the “Trust”) on behalf of its series, Energy and
Natural Resources – 1 (the “Fund”).
WHEREAS,
the Trust and each series comprising the Trust, including the Fund
(collectively, the “Funds”), have been formed for the purpose of creating a
fund-of-funds structure with their affiliate, AIP Alternative Strategies Funds,
a Delaware statutory trust (“AIP Funds”), in which each series of AIP Funds,
including any future series of AIP Funds, invests 100% of its assets in certain
or all of the Funds; and
WHEREAS,
by virtue of the fund-of-funds structure, the Sub-Advisor will indirectly serve
as a sub-advisor to any series of AIP Funds which invests in the Fund;
and
WHEREAS,
the Trust, and therefore the Fund, is registered as an open-end, management
investment company under the Investment Company Act of 1940, as amended (the
“1940 Act”); and
WHEREAS,
the Advisor has been appointed investment advisor to the Fund, pursuant to
an
Investment Advisory Agreement dated April 28, 2006, which has been approved
by
the Fund’s Board of Trustees (the “Advisory Agreement”); and
WHEREAS,
the Advisor has the authority to determine, in its sole discretion, the
percentage of the Trust’s net assets (i) to be contributed into or subtracted
from the Fund and (ii) to be advised by the Sub-Advisor; and
WHEREAS,
the Advisor and the Trust desire to retain the Sub-Advisor to assist the Advisor
in providing a continuous investment program for a portion of the Fund’s assets
(designated herein as a “Separate Account”) and the Sub-Advisor is willing to do
so; and
WHEREAS,
the Board of Trustees of the Trust (the “Board of Trustees”) has approved this
Agreement, and the Sub-Advisor is willing to furnish such services upon the
terms and conditions herein set forth.
NOW,
THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. Appointment.
The Advisor and the Trust hereby appoint the Sub-Advisor to serve as sub-advisor
to the Advisor with respect to the Separate Account. Intending to be legally
bound, the Sub-Advisor accepts such appointment and agrees to render the
services herein set forth for the compensation herein provided.
2. Advisory
Services. Subject to the supervision of the Board of Trustees and the
Advisor, the Sub-Advisor will assist the Advisor in providing a continuous
investment program for the Separate Account, including investment research
and
management with respect to the securities and investments and cash equivalents
comprising the Separate Account. The Sub-Advisor will provide services under
this Agreement in accordance with the Fund’s investment objective, policies and
restrictions as set forth in the Fund’s (i) registration statement filed
with the Securities and Exchange Commission in effect on the date hereof and
as
amended or supplemented during the term of this Agreement and
(ii) resolutions of the Trust’s Board of Trustees applicable to the
Fund. The Fund shall provide the Sub-Advisor with written notice of
any changes to such objective, policies and restrictions no less than 60 days
prior to the effectiveness of any such change.
Without
limiting the generality of the foregoing, the Sub-Advisor further agrees that
it:
(a) will
assist in determining from time to time what securities and other investments
will be purchased, retained or sold for the Separate Account;
(b) will
manage, in consultation with the Advisor, the Separate Account’s temporary
investments in securities, cash and cash equivalents;
(c) will
place orders pursuant to its investment determinations for the Separate Account
either directly with the issuer or with any broker or dealer;
(d) will
consult with the Advisor on a continuous basis as to the Fund’s total assets
which shall be invested in the Separate Account;
(e) will
attend regular business and investment-related meetings with the Board of
Trustees and the Advisor, as requested by the Trust, the Advisor or both;
and
(f) will
maintain books and records with respect to the securities transactions for
the
Separate Account, furnish to the Advisor and the Board of Trustees such periodic
and special reports as they may reasonably request with respect to the Separate
Account, and provide in advance to the Advisor all reports to the Board of
Trustees for examination and review within a reasonable time prior to the Board
of Trustees’ meetings.
3. Covenants
by the Sub-Advisor. The Sub-Advisor agrees with respect to the services
provided to the Fund that it:
(a) as
part of its retention as a Sub-Advisor with respect to the investment of the
Separate Account, a portion of the assets held by the Fund, as determined by
the
Advisor, is authorized by its governing documents to enter into this Agreement
and the terms of this Agreement do not violate any obligation by which the
Sub-Advisor is bound, whether arising by contract, operation of law or
otherwise;
(b) will
maintain its status as a Registered Investment Advisor with the Securities
and
Exchange Commission;
(c) will
conform with all Rules and Regulations of the Securities and Exchange
Commission;
(d) will
telecopy trade information to the Fund’s designated Fund Accountant no later
than the first business day following the day of the trade and cause broker
confirmations to be sent directly to the Fund’s designated Fund Accountant and
adopt such other trade reporting, settlement and clearance procedures with
respect to the Fund as shall be in accordance with the Fund’s existing
procedures and as mutually agreed by the parties hereto;
(e) will
treat confidentially and as proprietary information of the Fund all records
and
other information relative to the Fund 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
i)
after prior written
notification to the Trust, to respond to requests that are a part of
routine regulatory audits or inspections or ii) after prior notification to
and
approval in writing by the Trust, which approval shall not be unreasonably
withheld, and may not be withheld and will be deemed granted where 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);
(f) will
maintain its own Code of Ethics and report to the Advisor’s Compliance Officer
any violation of such Code that pertains to the management of the Fund, via
a
periodic compliance certification;
(g) will
maintain its own compliance program or manual, pursuant to Rule 206(4) -7
of the
Investment Advisors Act. The Sub-Advisor will provide either the
manual or a summary thereof, including updates thereto, to the Advisor’s
Compliance Officer; and
(h) provide
written notice to the Advisor and the Board of Trustees of any change to
the
amount contributed by any officer, director, manager, owner or other key
individual of the Sub-Advisor to the accounts or funds managed by the
Sub-Advisor, as compared to the amount which has been previously represented
to
the Advisor or the Board of Trustees, promptly, but in no case later than
three
business days from the date of such change.
4. Covenants
by the Advisor and the Trust. The Advisor and the Trust agree with respect
to the services provided to the Fund:
(a) that
the retention of the Sub-Advisor as investment advisor with respect to the
Separate Account, is authorized by the governing documents relating to the
Fund,
and the terms of this Agreement do not violate any obligation by which the
Fund
is bound, whether arising by contract, operation of law or
otherwise;
(b) that
the Sub-Advisor may use the Fund’s name on a representative client
list.
5. Services
Not Exclusive. The services furnished by the Sub-Advisor hereunder are
deemed not to be exclusive, and nothing in this Agreement shall (i) prevent
the
Sub-Advisor or any affiliated person (as defined in the 0000 Xxx) of the
Sub-Advisor or any employee, agent, manager or affiliated person of such person
from acting as investment advisor or manager for any other person or persons,
including other management investment companies or investment vehicles or
accounts of any type with investment objectives and policies the same as or
similar to those of the Fund or (ii) limit or restrict the Sub-Advisor or any
such employee, agent, manager or affiliated person from buying, selling or
trading any securities or other investments (including any securities or other
investments which the Fund is eligible to buy) for its or their own accounts
or
for the accounts of others for whom it or they may be acting; provided,
however, that the Sub-Advisor agrees that it will not undertake any
activities which, in its reasonable judgment, will adversely affect the
performance of its obligations under this Agreement.
6. Separate
Account Transactions. Investment decisions for the Separate Account shall be
made by the Sub-Advisor independently from those for any other investment
companies and accounts advised or managed by the Sub-Advisor. The Separate
Account and such investment companies and accounts may, however, invest in
the
same securities. When the Sub-Advisor seeks to purchase or sell the
same security at substantially the same time on behalf of the Separate Account
and/or another investment company or account, the Sub-Advisor shall, to the
extent permitted by law and to the extent reasonably practicable, aggregate
such
orders or otherwise effect such transaction on an average price basis, and
available investments will be allocated as to amount in a manner which the
Sub-Advisor believes to be equitable to the Fund and such other investment
company or account. In some instances, this investment procedure may adversely
affect the price paid or received by the Fund or the size of the position
obtained or sold by the Fund. To the extent permitted by law, the Sub-Advisor
may aggregate the securities to be sold or purchased for the Separate Account
with those to be sold or purchased for other investment companies or accounts
in
order to obtain best execution on an overall basis for all the Sub-Advisor’s
clients.
The
Sub-Advisor shall place orders for the purchase and sale of portfolio
securities
for
the
Separate Account and will solicit broker-dealers to execute transactions in
accordance with the Fund’s policies and restrictions regarding brokerage
allocations. If applicable, the Sub-Advisor shall place orders pursuant to
its
investment determinations for the Separate Account either directly with the
issuer or with any broker or dealer. If it executes portfolio transactions
and
selects brokers or dealers, the Sub-Advisor shall use its reasonable best
efforts to seek the most favorable execution of orders, after taking into
account all factors the Sub-Advisor deems relevant, including the 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 the
commission, if any, both for the specific transaction and on a continuing basis.
Consistent with this obligation, the Sub-Advisor may, to the extent permitted
by
law, purchase and sell portfolio securities to and from brokers and dealers
who
provide brokerage and/or research services (within the meaning of Section 28(e)
of the Securities Exchange Act of 1934) to or for the benefit of the Separate
Account and/or other accounts over which the Sub-Advisor or any of its
affiliates exercises investment discretion. The Sub-Advisor is authorized to
pay
to a broker or dealer who provides such brokerage and/or research services
a
commission for executing a portfolio transaction for the Separate Account which
is in excess of the amount of commission another broker or dealer would have
charged for effecting that transaction if the Sub-Advisor determines in good
faith that such commission was reasonable in relation to the value of the
brokerage and/or research services provided by such broker or dealer, viewed
in
terms of either that particular transaction or the Sub-Advisor’s overall
responsibilities to the Fund. In no instance will portfolio securities be
purchased from or sold to the Advisor or the Sub-Advisor or any affiliated
person of either thereof; except as permitted by Rules and Regulations of the
Securities and Exchange Commission.
7. Covenants
by the Advisor. The Advisor agrees with respect to the services provided to
the Advisor hereunder that the Advisor will conform to the applicable Rules
and
Regulations of the Securities and Exchange Commission.
8. Certain
Representations and Warranties. Each of the parties hereto represents and
warrants to the other that, as of the date hereof; this Agreement has been
duly
and validly authorized by all necessary action (corporate, limited liability
company or otherwise) on the part of such party, has been duly executed and
delivered by such party and constitutes the valid and legally binding obligation
of such party, enforceable against such party in accordance with its terms
and
conditions.
9. Books
and Records. In compliance with the requirements of Rule 31a-3 under the
1940 Act, the Sub-Advisor hereby agrees that all records which it maintains
for
the Fund are the property of the Trust and further agrees to surrender promptly
to the Trust any of such records upon the Trust’s request. The Sub-Advisor
further agrees to preserve for the periods prescribed by Rule 31a-2 under the
1940 Act the records required to be maintained by Rule 31a-1 under the 1940
Act
with respect to the services provided by the Sub-Advisor hereunder.
10. Expenses.
During the term of this Agreement, the Sub-Advisor will pay its own expenses
incurred in connection with the performance of its obligations under this
Agreement. Nothing herein, however, shall be deemed to require the Sub-Advisor
to pay any expenses of the Fund or the Advisor.
11. Compensation.
In consideration of the services rendered pursuant to this Agreement, during
the
term of this Agreement the Advisor will pay to the Sub-Advisor, as compensation
for the services provided by the Sub-Advisor under this Agreement, a monthly
fee
equal to 1.00% (on an annualized basis) of the average net assets of the
Separate Account, plus any leveraged amount applied to the Separate Account
by
the Advisor. The Advisor shall pay the Sub-Advisor as soon as practical after
the last day of each calendar month, but no later than five (5) business
days
after the end of each month. In case of termination or expiration of this
Agreement during any calendar month, the fee with respect to such month shall
be
reduced proportionately based upon the number of calendar days during which
it
is in effect and the fee shall be computed upon the average net assets of
the Separate Account
in accordance with the Fund’s prospectus.
12. Standard
of Care: Limitation of Liability: Limited Indemnity. The
Sub-Advisor shall exercise due care and diligence and use the same skill
and
care in providing its services hereunder as it uses in providing services
to
other investment companies, accounts and customers, but shall not be liable
for
any action taken or omitted by the Sub-Advisor in the absence of bad faith,
willful misconduct, gross negligence or reckless disregard of its duties.
The
Fund further agrees to indemnify, defend and hold the Sub-Advisor, and its
managers, officers, directors, equityholders, employees and agents (“Related
Persons”), harmless from and against all losses, claims, damages, liabilities,
costs and expenses arising by reason of being or having been Sub-Advisor
to the
Fund, or in connection with the past or present performance of services to
the
Fund in accordance with this Agreement, except to the extent that the loss,
claim, damage, liability, cost or expense was caused by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
on
the part of the Sub-Advisor in the performance of its duties and obligations
under this Agreement. These losses, claims, damages, liabilities, costs and
expenses include, but are not limited to, amounts paid in satisfaction of
judgments, in compromise, or as fines or penalties, and counsel fees and
expenses, incurred in connection with the defense or disposition of any action,
suit, investigation or other proceeding, whether civil or criminal, before
any
judicial, arbitral, administrative or legislative body, in which the 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 in office or thereafter.
Federal and various state securities laws may afford the Advisor and/or the
Fund
certain rights and remedies under certain circumstances, even in the absence
of
bad faith, willful misconduct, gross negligence or reckless disregard by
the
Sub-Advisor or its Related Persons, and nothing contained herein shall in
any
way constitute a waiver or limitation of any such rights and remedies that
the
Advisor, the Fund or both may have under any such federal or state securities
laws.
13. Reference
to the Sub-Advisor. Neither the Advisor nor any affiliate or agent of it
shall make reference to this Agreement or use the name of the Sub-Advisor or
any
of its affiliates except with respect to references in regulatory filings and
communications with shareholders concerning the identity of and services
provided by the Sub-Advisor to the Fund, which references shall not differ
in
substance from those typically included in a proxy statement or annual report
of
the Fund, or the Fund’s registration statement and any advertising
or
promotional materials, provided
such materials are NASD
compliant, without the prior approval of the Sub-Advisor.
14. Duration
and Termination. Unless sooner terminated, this Agreement shall be for an
initial period of one year, and thereafter shall continue automatically for
successive annual periods, provided such continuance is specifically approved
at
least annually by the Board of Trustees provided that its continuance also
is
approved by a majority of the members of the Board of Trustees who are not
“interested persons” (as defined in the 0000 Xxx) 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 at any time without penalty,
on
sixty (60) days’ written notice, by the Board of Trustees, by the Advisor or by
the Sub-Advisor or by vote of a majority of the outstanding voting securities
of
the Fund. This Agreement will terminate automatically in the event of its
assignment (as defined in the 1940 Act). Termination or expiration of this
Agreement, however caused, shall be without prejudice to any compensation
accrued to the date of termination or expiration and Sections 3(e), 9, 11,
12
and 13 shall survive any termination or expiration.
15. 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, and no amendment of this Agreement shall be effective
until approved by the Board of Trustees, including a majority of the members
of
the Board of Trustees who are not interested persons of the Advisor or the
Sub-Advisor, cast in person at a meeting called for the purpose of voting on
such approval.
16. Notice.
Any notice, advice or report to be given pursuant to this Agreement shall be
delivered or mailed:
To
the
Sub-Advisor at:
Osage
Energy Partners, L.P.
25227
Xxxxxx’x Xxxx Xxxx, Xxxxx 000
Xxx
Xxxxxxxxx, XX 00000
Facsimile:
(000) 000-0000
To
the Advisor
at:
Alternative
Investment Partners, LLC
000
Xxxxxxxxxxx Xxxxxx, Xxxxx 000x
Xxxxx
Xxxxxx, XX 00000
Facsimile: (000)
000-0000
To
the
Board of Trustees or the Fund at:
AIP
Alternative Strategies Funds
000
Xxxxxxxxxxx Xxxxxx, Xxxxx 000x
Xxxxx
Xxxxxx, XX 00000
Facsimile: (000)
000-0000
with
a
copy to:
Blank
Rome LLP
000
Xxxxxxxxxx Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
|
|
Attention:
|
Xxxxxx
X. Xxxxxx, Esq.
|
|
|
Facsimile:
(000) 000-0000
|
The
effective date of any notice shall be (i) the date such notice is sent if such
delivery is effected by hand or facsimile; (ii) one business day after the
date
such notice is sent if such delivery is effected by national overnight courier;
or (iii) the fifth (5th) business
day
after the date of the mailing thereof.
17. Proxy
Voting. The Sub-Advisor is authorized to vote proxies received on
securities held in the Separate Account. The Advisor and the Trust
represent that proxy voting authority is not expressly reserved to any other
party under the documents governing the Funds. All proxies will be voted in
accordance with the Advisor’s written policy in effect from time to time,
receipt of which the Sub-Advisor hereby acknowledges. The Advisor and
the Trust shall instruct the Fund’s custodian to forward promptly to the
Sub-Advisor receipt of such communications and to follow the Sub-Advisor’s
instructions concerning the same. The Sub-Advisor shall not be
responsible for voting proxies not timely received by the
Sub-Advisor.
18. Legal
Proceedings. The Sub-Advisor will not advise or act for the Advisor of the
Fund in any legal proceedings, including bankruptcies or class actions,
involving securities held or previously held in the Fund or the issuers of
these
securities, without the prior written consent of the Advisor.
19. Force
Majeure. In
addition, and without limiting any other provision of this Agreement, the
Sub-Advisor shall not be liable for (i) force majeure or other events beyond
the
control of the Sub-Advisor, including without limitation any failure, default
or
delay in performance resulting from computer or other electronic or mechanical
equipment failure, unauthorized access, theft, operator errors, government
restrictions, exchange or market rulings or suspension of trading, strikes,
failure of common carrier or utility systems, severe weather or breakdown in
communications not reasonably within the control of the Sub-Advisor or other
causes commonly known as “acts of god”, whether or not any such cause was
reasonably foreseeable, or (ii) general market conditions rather than a
violation of this Agreement by the Sub-Advisor.
20. Limits
on Obligations. Notwithstanding anything to the contrary in this
Agreement, in no event will the Sub-Advisor be obligated to effect any
transaction or instruction it believes (without verification or inquiry) would
violate any law, rule or regulation; the rules or regulations of any regulatory
or self-regulatory body; or the Sub-Advisor’s legal, regulatory, or operational
policies and procedures; provided, however, that the Sub-Advisor must provide
the Advisor written notice of its decision not to effect a transaction within
one business day of such decision.
21. Miscellaneous.
Neither the holders of shares of the Fund nor the members of the Board of
Trustees shall be personally liable hereunder. The captions in this Agreement
are included for convenience of reference only and in no way define or delimit
any of the provisions hereof or otherwise affect their construction or effect.
If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall
not
be affected thereby.
22. Entire
Agreement. This Agreement constitutes the entire agreement of the
parties with respect to the subject matter hereof and supersedes all prior
writings and understandings relating thereto.
23. Governing
Law. This Agreement constitutes the entire agreement of the parties, shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective successors and shall be governed by New York law in a manner not
in
conflict with the provisions of the 1940 Act.
24. Counterparts.
This Agreement may be executed 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.
IN
WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be duly executed by its authorized officer.
Osage
Energy Partners,
L.P.
By:
_/s/ Xxxx X. Werner________________
Name: Xxxx
X. Xxxxxx
Title: Director
of Operations
AIP
Alternative Investment Partners, LLC
By:
_/s/ Xxx Schultheis_________________
Name:
Xxx
Xxxxxxxxxx
Title: Chief
Executive Officer
By:
_/s/ Xxx Schultheis__________________
Name:
Xxx
Xxxxxxxxxx
Title: President
