Exhibit (g)(2)
SUB-ADVISORY AGREEMENT
AGREEMENT made this __th day of ____, 2007, by and between Xxx Xxxxxx Asset
Management, a Delaware statutory trust (the "Adviser"), and Avenue Europe
International Management, L.P., a Delaware limited partnership (the
"Sub-Adviser").
WHEREAS, the Adviser serves as investment adviser of the Xxx Xxxxxx Dynamic
Credit Opportunities Fund (the "Fund"), a closed-end registered management
investment company registered under the Investment Company Act of 1940, as
amended ( the "1940 Act"), pursuant to an investment advisory agreement dated
____, as amended from time to time (the "Advisory Agreement"); and
WHEREAS, the Adviser desires to avail itself of the services, information,
advice, assistance and facilities of an investment sub-adviser to assist the
Adviser in performing investment advisory services for the Fund; and
WHEREAS, the Sub-Adviser is registered under the Investment Advisers Act of
1940, as amended (the "Advisers Act"), and is engaged in the business of
rendering investment advisory services in connection with investments in
European issuers and Euro-denominated issues to private investment funds and
other institutional clients and desires to provide such services to the Adviser
and the Fund;
NOW, THEREFORE, in consideration of the terms and conditions hereinafter
set forth, it is agreed as follows:
1. Employment of the Sub-Adviser. The Adviser hereby employs the
Sub-Adviser to manage the investment and reinvestment of a portion of the assets
of the Fund, subject to the control and direction of the Adviser and the Fund's
Board of Trustees, for the period and on the terms hereinafter set forth. The
Sub-Adviser hereby accepts such employment and agrees during such period to
render the services and to assume the obligations herein set forth for the
compensation herein provided. The Sub-Adviser shall for all purposes herein be
deemed to be an independent contractor and shall, except as expressly provided
or authorized (whether herein or otherwise), have no authority to act for or
represent the Adviser or the Fund in any way. In such respect, and only for this
limited purpose, the Sub-Adviser shall act as the Adviser's and the Fund's agent
and attorney-in-fact.
Copies of the Fund's Registration Statement (the "Registration Statement"),
and the Fund's Declaration of Trust and Bylaws (collectively, the "Charter
Documents"), each as currently in effect, have been delivered to the
Sub-Adviser. The Adviser agrees, on an ongoing basis, to notify the Sub-Adviser
of each change in the fundamental and non-fundamental investment policies and
restrictions of the Fund no less than sixty (60) days before it is expected to
become effective and to provide to the Sub-Adviser as promptly as practicable
copies of all amendments and supplements to the Registration Statement before
filing with the Securities and Exchange Commission ("SEC") and amendments to the
Charter Documents. The Adviser will promptly provide the Sub-Adviser
with any procedures applicable to the Sub-Adviser adopted from time to time by
the Fund's Board of Trustees and agrees to promptly provide the Sub-Adviser
copies of all amendments thereto. The Adviser will not make any changes to
procedures impacting the Sub-Adviser or the assets it is responsible for
managing, without prior consultation with, and consent of the Sub-Adviser, to
such changes. Notwithstanding anything to the contrary in this paragraph, any
change that is required by law or initiated by the Trustees shall not require
prior consultation or consent of the Sub-Adviser but the Adviser shall use its
best efforts to give the Sub-Adviser as much advance notice as possible.
The Adviser shall provide the Sub-Adviser with a list of all the broker
affiliates of the Adviser. The Adviser shall be responsible for keeping the list
of its broker affiliates current and promptly notifying the Sub-Adviser of any
additions, deletions or modifications. The Adviser shall provide the Sub-Adviser
with copies of the Fund's policies and procedures applicable to the
Sub-Adviser's management of a portion of the Fund's assets.
The Adviser shall timely furnish the Sub-Adviser with such additional
information as may be reasonably necessary for or requested by the Sub-Adviser
to perform its responsibilities pursuant to this Agreement. The Adviser shall
cooperate with the Sub-Adviser in setting up and maintaining brokerage accounts
and other accounts the Sub-Adviser deems advisable to allow for the purchase or
sale of various forms of securities pursuant to this Agreement.
2. Obligations of and Services to be Provided by the Sub-Adviser. The
Sub-Adviser undertakes to provide the following services and to assume the
following obligations:
a. The Sub-Adviser shall have discretion to manage the investment and
reinvestment of a portion of the assets of the Fund, all without prior
consultation with the Adviser, subject to and in accordance with the
Avenue-Credit Thresholds (attached hereto as Appendix A), the investment
objectives and policies of the Fund set forth in the Fund's Registration
Statement, the Charter Documents and written compliance policies and procedures
provided by the Adviser, as such documents may be amended from time to time. The
Sub-Adviser shall manage the Fund in compliance with any additional written
instructions which the Adviser or the Fund's Board of Trustees may issue from
time-to-time in accordance with Clause 1 above. In pursuance of the foregoing,
the Sub-Adviser shall make all investment determinations with respect to the
portion of the Fund's assets under its management, including the purchase and
sale of portfolio securities and other financial instruments and shall take such
actions and enter into all agreements with broker-dealers and other
counterparties as necessary to implement the same.
b. To the extent provided in the Fund's Registration Statement, as
such Registration Statement may be amended from time to time, the Sub-Adviser
shall, in the name of the Fund, place orders for the execution of portfolio
transactions with or through such brokers, dealers or other financial
institutions as it may select including affiliates of the Adviser and
Sub-Adviser subject to its duty of best execution and the Fund's policies
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and procedures as provided in writing to the Sub-Adviser by the Adviser. The
Sub-Adviser may rely on the safeguards set forth in Section 28(e) of the
Securities Exchange Act of 1934.
c. The Sub-Adviser will keep the Fund and the Adviser promptly
informed of developments relating to its duties as sub-adviser of which the
Sub-Adviser has, or should have, knowledge that would materially affect the
management of the Fund, including but not limited to any changes in the senior
investment personnel assigned to the Fund's account. In this regard, the
Sub-Adviser will provide the Fund, the Adviser, and their respective officers
with such periodic reports as the Fund and the Adviser may from time to time
reasonably request. Additionally, prior to each quarterly Board meeting, the
Sub-Adviser will provide the Adviser and the Board with reports regarding the
Sub-Adviser's management of its portion of the Fund's assets during the most
recently completed quarter, which report will include written certifications
that the Sub-Adviser's management of the Fund's assets is in compliance with the
Fund's investment objectives and policies as listed in the Fund's Registration
Statement and with the policies, procedures and restrictions that the Adviser
has provided in writing to the Sub-Adviser and which the Sub-Adviser has
accepted. The Sub-Adviser also will certify quarterly to the Fund and the
Adviser that it and its "Advisory Persons" (as defined in Rule 17j-1 under the
0000 Xxx) have, with respect to the Fund, complied materially with the
requirements of the Sub-Adviser's Code of Ethics adopted under Rule 17j-1 during
the previous quarter or, if not, explain what the Sub-Adviser has done to seek
to ensure such compliance in the future. Annually, the Sub-Adviser will furnish
a written report, which complies with the requirements of Rule 17j-1 and Rule
38a-1 under the 1940 Act, concerning the Sub-Adviser's Code of Ethics and
compliance program, respectively, to the Fund and the Adviser. Upon written
request of the Fund or the Adviser with respect to violations of the Code of
Ethics directly affecting the Fund, the Sub-Adviser will permit representatives
of the Fund or the Adviser to examine reports (or summaries of the reports)
required to be made by Rule 17j-1(d)(1) relating to enforcement of the Code of
Ethics. The Sub-Adviser will notify and forward promptly to the Fund and the
Adviser any communications or information it may receive with respect to claims
against or involving the Fund or corporate actions relating to the Fund. The
Sub-Adviser will not be responsible for voting any of the Fund's proxies. The
Sub-Adviser will provide the Fund with any research or information in connection
with proxy voting as may be necessary upon request.
d. The Sub-Adviser shall create and maintain all necessary records in
accordance with the Advisers Act and the rules thereunder and , to the extent
such records are necessary or appropriate to record transactions with or for the
Fund, shall maintain such records for the time period specified in Rule 31a-2(e)
under the 1940 Act. In addition, in connection with the placement of orders for
the execution of the portfolio transactions of the Fund, the Sub-Adviser shall
create and maintain all necessary records pertaining to the purchase and sale of
securities by the Sub-Adviser on behalf of the Fund as required by Rules
31(a)-1(b)(5), (6), (7), (10), (11), (12) and (13) under the 1940 Act for the
period specified by Rule 31a-2(2) under the 1940 Act, as well as the additional
records specified in Rules 31a-2(2), (3) and (6) under the 1940 Act for the
periods
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specified therein. Any micrographic or electronic records shall be maintained in
the manner specified in Rule 31a-2(f) under the 0000 Xxx. All such records shall
be the property of the Fund and shall be available for inspection and use by the
SEC, the Fund, the Adviser or any person retained by the Fund at all reasonable
times.
e. The Sub-Adviser shall bear its expenses of providing services
pursuant to this Agreement, but shall not be obligated to pay any expenses of
the Adviser or the Fund, including without limitation: (a) interest and taxes;
(b) brokerage commissions and other costs in connection with the purchase or
sale of securities or other investment instruments for the Fund; and (c)
custodian fees and expenses.
f. The Sub-Adviser shall be responsible for the preparation and filing
of Schedule 13G and Form 13F in connection with securities held by the Fund. The
Sub-Advisor shall not be responsible for filing Schedule 13G and Form 13F with
respect to any securities held by the Fund that are not managed by the
Sub-Adviser. The Sub-Adviser shall not be responsible for the preparation or
filing of any reports required of the Fund by any governmental or regulatory
agency, except as expressly agreed to in writing.
3. Compensation of the Sub-Adviser. In consideration of services rendered
pursuant to this Agreement, the Adviser will pay the Sub-Adviser a fee at the
annual rate of the value of the Fund's average daily managed assets set forth in
Schedule A hereto. Such fee shall be accrued daily and paid monthly as soon as
practicable but not more than 5 business days after the end of each month. If
the Sub-Adviser shall serve for less than the whole of any month, the foregoing
compensation shall be prorated. For the purpose of determining fees payable to
the Sub-Adviser, the value of the Fund's managed assets shall be computed at the
times and in the manner specified in the Fund's Registration Statement.
4. Activities of the Sub-Adviser. The services of the Sub-Adviser hereunder
are not to be deemed exclusive, and the Sub-Adviser shall be free to render
similar services to others and to engage in other activities. In addition, the
portfolio performance for the portion of the Fund's assets managed by the
Sub-Adviser may be referenced by the Sub-Adviser as part of any composite
information.
5. Use of Names.
a. The Sub-Adviser shall not use the name of the Fund, the Adviser or
any of their affiliates in any material relating to the Sub-Adviser in any
manner not approved prior thereto by the Adviser. The Adviser, however, hereby
approves all uses of its or the Fund's name which merely refer in accurate terms
to the appointment of the Sub-Adviser hereunder or which are required by the SEC
or a state securities commission.
b. The Adviser and the Fund shall not use the name or logo of the
Sub-Adviser or any of its affiliates in any material relating to the Adviser or
the Fund in any manner not approved prior thereto by the Sub-Adviser. The
Sub-Adviser, however, hereby approves all uses of its name which merely refer in
accurate terms to the
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appointment of the Sub-Adviser hereunder or which are required by the SEC or a
state securities commission.
6. Liability and Indemnification.
a. In the absence of willful misfeasance, bad faith, gross negligence
or reckless disregard of obligations or duties ("disabling conduct") hereunder,
on the part of the Sub-Adviser (and its officers, directors, partners, agents,
employees, controlling persons, shareholders and any other person or entity
affiliated with the Sub-Adviser), the Sub-Adviser shall not be subject to
liability to the Adviser, its officers, directors, agents, employees,
controlling persons or shareholders or to the Fund or to any shareholder of the
Fund for any act or omission in the course of, or connected with, rendering
services hereunder, including without limitation, any error of judgment or
mistake of law or for any loss suffered by any of them in connection with the
matters to which this Agreement relates. Except for such disabling conduct, the
Adviser shall indemnify the Sub-Adviser (and its officers, directors, partners,
agents, employees, controlling persons, shareholders and any other person or
entity affiliated with the Sub-Adviser) (collectively, the "Indemnified
Parties") from any and all losses, claims, damages, liabilities or litigation
(including reasonable legal and other expenses) arising from the Sub-Adviser's
providing services under this Agreement or the sale of securities of the Fund.
b. The Sub-Adviser agrees to indemnify and hold harmless the Fund, the
Adviser and their affiliates and each of their officers, directors, trustees,
agents, employees and each person who controls the Fund or the Adviser within
the meaning of Section 15 of the Securities Act of 1933 (the "1933 Act") against
any and all losses, claims, damages, liabilities or litigation (including
reasonable legal and other expenses), to which the Fund, the Adviser or their
affiliates or such officers, directors, trustees, agents, employees or
controlling persons may become subject under the 1933 Act, under other statutes,
at common law or otherwise, which are caused by the Sub-Adviser's disabling
conduct or any untrue statement of a material fact contained in the Registration
Statement, proxy materials, reports, advertisements, sales literature or other
materials pertaining to the Fund or the omission to state therein a material
fact known to the Sub-Adviser which was required to be stated therein or
necessary to make the statements therein not misleading. In no case is the
Sub-Adviser's indemnity in favor of any person deemed to protect such other
persons against any liability to which such person would otherwise be subject by
reasons of willful misfeasance, bad faith, or gross negligence in the
performance of his, her or its duties or by reason of his, her or its reckless
disregard of obligations or duties under this Agreement.
c. The Sub-Adviser shall not be liable to the Adviser, its officers,
directors, agents, employees, controlling persons or shareholders or to the Fund
or its shareholders for (i) any acts of the Adviser or any other sub-adviser to
the Fund with respect to the portion of the assets of the Fund not managed by
the Sub-Adviser; and (ii) acts of the Sub-Adviser which result from or are based
upon acts of the Adviser, including, but not limited to, a failure of the
Adviser to provide accurate and current information with respect to any records
maintained by the Adviser or any other sub-adviser
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to the Fund, which records are not also maintained by the Sub-Adviser. The
Adviser and Sub-Adviser each agree that the Sub-Adviser shall manage the portion
of the assets of the Fund allocated to it and shall comply with Section 2 of
this Agreement (including, but not limited to, the investment objectives,
policies and restrictions applicable to the Fund) only with respect to the
portion of assets of the Fund allocated to the Sub-Adviser. The Adviser shall
indemnify the Indemnified Parties from any and all losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses)
arising from the conduct of the Adviser, the Fund and any other sub-adviser with
respect to the portion of the Fund's assets not allocated to the Sub-Adviser.
7. Limitation of Fund's Liability. The Sub-Adviser acknowledges that it has
received notice of and accepts the limitations upon the Fund's liability set
forth in the Fund's Charter Documents. The Sub-Adviser agrees that any of the
Fund's obligations shall be limited to the assets of the Fund and that the
Sub-Adviser shall not seek satisfaction of any such obligation from the
shareholders of the Fund nor from any Fund officer, employee or agent of the
Fund (other than the Adviser).
8. Renewal, Termination and Amendment. This Agreement shall continue in
effect, unless sooner terminated as hereinafter provided, until __________, 2009
and shall continue in full force and effect for successive periods of one year
thereafter, but only so long as each such continuance as to the Fund is
specifically approved at least annually by vote of the holders of a majority of
the outstanding voting securities of the Fund or by vote of a majority of the
Fund's Board of Trustees; and further provided that such continuance is also
approved annually by the vote of a majority of the Trustees who are not parties
to this Agreement or interested persons of any such party. This Agreement may be
terminated as to the Fund at any time, without payment of any penalty, by the
Fund's Board of Trustees, by the Adviser, or by a vote of the majority of the
outstanding voting securities of the Fund upon 60 days' prior written notice to
the Sub-Adviser, or by the Sub-Adviser upon 60 days' prior written notice to the
Adviser, or upon such shorter notice as may be mutually agreed upon. This
Agreement shall terminate automatically and immediately upon termination of the
Advisory Agreement between the Adviser and the Fund. This Agreement shall
terminate automatically and immediately in the event of its assignment. The
terms "assignment" and "vote of a majority of the outstanding voting securities"
shall have the meaning set forth for such terms in the 1940 Act. The Adviser and
the Sub-Adviser agree that each will use its best efforts to provide the other
party to this Agreement with advance notice of such termination or assignment.
This Agreement may be amended at any time by the Sub-Adviser and the Adviser,
subject to approval by the Fund's Board of Trustees and, if required by
applicable SEC rules, regulations, or orders, a vote of a majority of the Fund's
outstanding voting securities.
9. 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 as required by law, rule, regulation or government
or regulatory body unless such information otherwise becomes generally available
to the public.
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10. Severability. 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.
11. Custodian. The Fund's assets shall be maintained in the custody of its
custodian. Any assets added to the Fund shall be delivered directly to such
custodian. The Sub-Adviser shall have no liability for the acts or omissions of
any custodian of the Fund's assets. The Sub-Adviser shall have no responsibility
for the segregation requirement of the 1940 Act or other applicable law.
12. Information. The Adviser hereby acknowledges that it and the Trustees
of the Fund have been provided with all information necessary in connection with
the services to be provided by the Sub-Adviser hereunder, including a copy of
Part II of the Sub-Adviser's Form ADV at least 48 hours prior to the Adviser's
execution of this Agreement, and any other information that the Adviser or the
Trustees deem necessary.
13. Notice Upon Change in Partners of the Sub-Adviser. The Sub-Adviser is a
limited partnership. Its general partner is Avenue Europe International
Management GenPar, LLC and its limited partner is Avenue GL Europe, LLC. The
Sub-Adviser will notify the Adviser of any change in the general partner or any
withdrawal or addition of a limited partner who owns 5% or more of the
partnership within a reasonable time after such change.
14. Notices. All notices shall be in writing and deemed properly given when
delivered or mailed by United States certified or registered mail, return
receipt requested, postage prepaid, addressed as follows:
Sub-Adviser: AVENUE EUROPE INTERNATIONAL MANAGEMENT, L.P.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxxx
Adviser: XXX XXXXXX ASSET MANAGEMENT
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxx
15. Miscellaneous. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof. Each
party agrees to perform such further actions and execute such further documents
as are necessary to effectuate the purposes hereof. This Agreement shall be
construed and enforced in accordance with and governed by the laws of the State
of Delaware and the applicable provisions of the 1940 Act, provided that in the
event of any inconsistency, the 1940 Act shall supersede. The captions in this
Agreement are included for convenience only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed in several counterparts, all of which together shall
for all purposes constitute one Agreement, binding on all the parties.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first written above.
XXX XXXXXX ASSET MANAGEMENT
BY:
--------------------------------------
Authorized Officer
AVENUE EUROPE INTERNATIONAL
MANAGEMENT, L.P.
BY: Avenue Europe International Management
GenPar, LLC, its general partner
BY:
--------------------------------------
Xxxxx Xxxxxxx, Member
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SCHEDULE A
For the services provided by the Sub-Adviser to the Xxx Xxxxxx Dynamic
Credit Opportunities Fund, pursuant to the attached Sub-Advisory Agreement, the
Adviser will pay the Sub-Adviser a fee of 1.25% of the portion of the average
daily managed assets of the Fund managed by the Sub-Adviser, provided that, to
the extent that the investment advisory fee payable to the Adviser by the Fund
is decreased, the sub-advisory fee will be proportionately decreased. For the
purposes of determining such fee, managed assets shall mean the average daily
gross asset value of the Fund minus the sum of accrued liabilities other than
any proceeds from the issuance of preferred shares and/or the aggregate amount
of any borrowings for investment purposes.
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APPENDIX A
Avenue-Credit Thresholds (excerpt from Avenue Trade Allocation Policy)
THE EUROPEAN STRATEGIES
The Firm's European Strategies are similar in that they both involve obligations
of European issuers.
The European Alternatives Strategy, however, will generally only invest in
obligations which, at the time of investment, have total yields in excess of the
following bench marks (the "AVENUE-CREDIT THRESHOLDS")(1):
- for floating rate investments, LIBOR plus 350 basis points, EUROLIBOR
plus 350 basis points, and Sterling LIBOR plus 350 basis points, as
applicable; and
- for fixed rate investments, current US Treasury plus 350 basis points,
Bundes Obligationen ("OBL") plus 000 xxxxx xxxxxx, Xxxxxx Xxxxxxxx
Deutschland ("DBR") plus 350 basis points, Bundes Schatzanweisungen
("BKO") plus 350 basis points and UK Gilt rates plus 350 basis points,
as applicable, depending upon the currency and term of the investment.
The European Alternatives Strategy will be able to sell short (including
entering into a credit default swap) investments below the Avenue-Credit
Thresholds for hedging and other purposes. In addition for purposes of covering
or closing a short position the European Alternatives Strategy will be able to
borrow or buy investments below the Avenue-Credit Thresholds.
The European Investment Company Strategy will only invest in obligations
(including short selling) which, at the time of investment, expect to have total
yields at the time of investment that are less than the Avenue-Credit
Thresholds. All allocations shall be made accordingly.
The Avenue-Credit Thresholds may change over time as market conditions change. A
committee will meet from time to time (when market conditions have changed) to
review the market conditions and to determine whether the allocation policy,
including the credit spread portion of the Avenue-Credit Thresholds, should be
changed. The Committee will not make changes to the Avenue-Credit Thresholds
with particular investments in mind. Rather, the Avenue-Credit Thresholds must
be determined before allocations are being considered for a particular
investment. The Committee shall consist of Xxxx Xxxxx, Xxxxx Xxxxxxx and Xxxx
Xxxxx. A change to the Avenue-Credit Thresholds shall require majority approval
of the members.
All European Investment Company Strategy and European Alternatives Strategy
Clients will be notified in writing of the initial Avenue-Credit Thresholds and
that the Avenue-Credit Thresholds may change from time to time. In addition,
European Strategies Clients shall be notified of any change in the Avenue-Credit
Thresholds. Clients that are registered investment companies shall be notified
in the next subsequent shareholder report (which will be issued on at least a
semi-annual basis) and all other Clients shall be notified in the next
subsequent quarterly letter.
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(1) From time to time, the European Alternatives Strategy will invest in cash
and other liquid investments that do not meet the Avenue-Credit Thresholds.
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