Exhibit g
H&Q HEALTHCARE INVESTORS
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT, dated as of July 1, 2002 between H&Q
Healthcare Investors, a Massachusetts business trust (the "Fund"), and Xxxxxxxxx
& Xxxxx Capital Management LLC, a Delaware limited liability company (the
"Investment Adviser"),
W I T N E S S E T H:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY THE INVESTMENT ADVISER TO THE FUND.
Subject to the supervision and direction of the Board of Trustees of the
Fund, the Investment Adviser will:
a. act in strict conformity with the Fund's Declaration of Trust,
the Investment Company Act of 1940 (the "1940 Act") and the Investment
Advisers Act of 1940, as the same may from time to time be amended;
b. manage the Fund's portfolio in accordance with the Fund's
investment objective and policies as stated in the Fund's Prospectus;
c. make investment decisions for the Fund;
d. place purchase and sale orders for portfolio transactions for the
Fund;
e. supply the Fund with office facilities (which may be in the
Investment Adviser's own offices), statistical and research data, data
processing services, clerical, internal executive and administrative
services, and stationery and office supplies;
f. supply or direct and supervise a third party administrator or
custodian in the provision to the Fund of accounting and bookkeeping
services, the calculation of the net asset value of shares of the Fund,
internal auditing services, and other clerical services in connection
therewith; and
g. prepare or supervise and direct a third party administrator or
custodian in the preparation of reports to shareholders of the Fund, tax
returns and reports to and filings with the Securities and Exchange
Commission ("SEC") and state Blue Sky authorities.
In providing these services, the Investment Adviser will provide investment
research and supervision of the Fund's investments and conduct a continual
program of investment, evaluation and, if appropriate, sale and reinvestment of
the Fund's assets. In addition, the Investment Adviser will furnish the Fund
with whatever statistical information the Fund may reasonably request with
respect to the securities that the Fund may hold or contemplate purchasing.
2. BROKERAGE.
In executing transactions for the portfolio and selecting brokers or
dealers (which brokers or dealers may include any affiliate of the Investment
Adviser to the extent permitted by the 0000 Xxx) the Investment Adviser will use
its best efforts to obtain the best price and execution for the Fund. In
assessing the best price and execution available for any portfolio transaction,
the Investment Adviser will consider all factors it deems relevant including,
but not limited to, price (including any applicable brokerage commission or
dealer spread), size of order, difficulty of execution, and operational
facilities of the firm involved and the firm's risk in positioning a block of
securities. In
selecting brokers or dealers to execute a particular transaction and in
evaluating the best price and execution available, the Investment Adviser may
consider the brokerage and research services (as those terms of are defined in
Section 28(e) of the Securities Exchange Act of 1934 (the "Exchange Act"))
provided to the Fund and/or other accounts over which the Investment Adviser
exercises investment discretion. It is understood that such services may be
useful to the Investment Adviser in connection with its services to other
clients.
On occasions when the Investment Adviser deems the purchase or sale of a
security to be in the best interest of the Fund as well as other clients, the
Investment Adviser, to the extent permitted by applicable laws and regulations,
may, but shall be under no obligation to, aggregate the securities to be sold or
purchased in order to obtain the most favorable price or lower brokerage
commissions and efficient execution. In such event, allocation of the securities
so purchased or sold, as well as the expenses incurred in the transaction, will
be made by the Investment Adviser in the manner it considers to be the most
equitable and consistent with its fiduciary obligations to the Fund and to such
other clients.
3. OTHER AGREEMENTS; USE OF NAME, ETC.
It is understood that any of the shareholders, Trustees, officers, agents
and employees of the Fund may be a shareholder, director, officer, agent or
employee of or be otherwise interested in the Investment Adviser and in any
affiliate thereof with the Investment Adviser and that the Investment Adviser
and any affiliate thereof with the Investment Adviser may have an interest in
the Fund. It is also understood that the Investment Adviser and persons
affiliated with the Investment Adviser have and may have advisory, management
service or other contracts with other organizations and persons, and may have
other interests and businesses and that the Fund shall have no interest in the
profits or opportunities derived from the same, that the Investment Adviser may
give advice and take action in the performance of its duties with respect to
such other clients that may differ from advice given on the timing or nature of
action taken with respect to the Fund. Nothing in this Agreement shall be deemed
to confer upon the Investment Adviser any obligation to acquire for the account
of the Fund a position in any security that the Investment Adviser or any
affiliate thereof may acquire for its own account or for the account of any
other client, if in the sole and absolute discretion of the Investment Adviser
it is not for any reason practical or desirable to acquire a position in such
security for the Fund's account.
The Investment Adviser shall authorize and permit any of its partners,
officers, directors and employees who may be elected as Trustees or officers of
the Fund to serve in the capacities in which they are elected. Services to be
furnished by the Investment Adviser under this Agreement may be furnished
through the medium of any of such partners, officers, directors or employees.
The Fund acknowledges that Investment Adviser's use of the term "H&Q" is
pursuant to a written license agreement (the "License Agreement"), a copy of
which the Investment Adviser has provided to the Fund. The Fund further
acknowledges that under the License Agreement the Investment Adviser may
sublicense the term "H&Q" to a fund for which it serves as investment adviser,
for use as part of the fund's name, pursuant to a written sublicense agreement
that (a) is at least as protective of the rights of the licensor under the
License Agreement as the License Agreement and (b) does not permit the fund to
sub-sublicense the term "H&Q". The Fund agrees that its right to use the term
"H&Q" is subject in all respects to the terms of the License Agreement. The Fund
further agrees that if the License Agreement terminates for any reason, or if
the Investment Adviser ceases to act as investment adviser to the Fund, the
Fund's sublicense to use the term "H&Q" as part of its name will terminate, at
which time the Fund will take all necessary action to change its name to a name
not including such term.
4. COMPENSATION.
The Fund will pay to the Investment Adviser as compensation for the
Investment Adviser's services rendered a fee, computed monthly, equal when
annualized to (1) 2.5% of the average net assets for such month of its venture
capital and other restricted securities constituting up to 25% of net assets and
(2) the percentage that corresponds to the fee table below of the average net
assets for such month of all other assets ("Other Assets"); PROVIDED that in no
event shall such monthly fee when annualized exceed 1.375% of the average net
assets of the Fund for such month.
Annualized
Value of Other Assets Fee Rate
--------------------- ----------
$250,000,000 or less 1.0%
$250,000,001 to $500,000,000 0.9%
$500,000,001 to $1,000,000,000 0.8%
In excess of $1,000,000,000 0.7%
For purposes of this section, "average net assets" for any month shall be
equal to the average of the net asset value of the appropriate assets at the
last business day of such month and the net asset value of the appropriate
assets at the last business day of the prior month. In determining average net
assets for purposes of clauses (1) and (2) above, liabilities and expenses of
the Fund shall be allocated pro rata based on the ratio that the assets referred
to in each clause bear to the total assets of the Fund. Such fee shall be
payable for each month within five business days after the end of the such
month.
For purposes of this Section 4, "venture capital and other restricted
securities" shall be securities of issuers for which no market quotations are
readily available and securities of companies for which market quotations are
readily available but which are subject to legal or contractual restrictions on
resale. Securities of companies for which public information is available but as
to the sale of which the safe harbor provided by Rule 144(k) is not available
shall be considered to be subject to legal or contractual restrictions on
resale.
In the event that expenses of the Fund for any fiscal year should exceed
the expense limitation on investment company expenses imposed by any statute or
regulatory authority of any jurisdiction in which shares of the Fund are
qualified for offer and sale, the compensation due the Investment Adviser for
such fiscal year shall be reduced by the amount of such excess by a reduction or
refund thereof. In the event that the expenses of the Fund exceed any expense
limitation which the Investment Adviser may, by written notice to the Fund,
voluntarily declare to be effective subject to such terms and conditions as the
Investment Adviser may prescribe in such notice, the compensation due the
Investment Adviser shall be reduced and if necessary the Investment Adviser
shall assume expenses of the Fund, to the extent required by such expense
limitation. In no event shall the provisions of this Section 4 require the
Investment Adviser to reduce its fee if not so required by an applicable statute
or regulatory authority.
If the Investment Adviser shall serve for less than the whole of a month,
the foregoing compensation shall be pro rated.
5. EXPENSES.
The Investment Adviser will bear all expenses in connection with the
performance of its services under this Agreement, including compensation of and
office space for officers and employees of the Fund connected with investment
and economic research, trading and investment management of the Fund, as well as
the fees of all Trustees of the Fund who are "affiliated persons" of the
Investment Adviser, as that term is defined in the 1940 Act, or any of its
"affiliated persons."
The Fund shall pay (or, in the event that such expenses are paid by the
Investment Adviser, shall reimburse the Investment Adviser for) all other
expenses incurred in the organization and operation of the Fund including, among
other things, expenses for legal and auditing services, costs of printing proxy
statements, prospectuses, stock certificates and shareholder reports, charges of
the custodian, any sub-custodian and transfer agent, expenses in connection with
the Dividend Reinvestment Plan, SEC and National Association of Securities
Dealers, Inc. fees, fees and expenses of the Trustees who are not "affiliated
persons" of the Investment Adviser or any of its "affiliated persons",
accounting and valuation costs, administrator's fees, membership fees in trade
associations, fidelity bond coverage for the Fund's officers and employees,
errors and omissions insurance coverage for Trustees and officers, interest,
brokerage costs, taxes, stock exchange listing fees and expenses, expenses of
qualifying the Fund's shares for sale in various states, expenses associated
with personnel performing exclusively shareholder servicing functions, certain
other organization expenses, litigation and other extraordinary or non-recurring
expenses, and other expenses properly payable by the Fund.
6. ASSIGNMENT TERMINATES THIS AGREEMENT; AMENDMENTS OF THIS AGREEMENT.
This Agreement shall automatically terminate, without the payment of any
penalty in the event of its assignment, and this Agreement shall not be amended
unless such amendment is approved at a meeting by the affirmative vote of a
majority of the outstanding shares of the Fund, and by the vote cast in person
at a meeting called for the purpose of voting on such approval, of a majority of
the Trustees of the Fund who are not interested persons of the Fund or of the
Investment Adviser.
7. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT.
This Agreement shall become effective upon its execution, and shall remain
in full force and effect continuously thereafter (unless terminated
automatically as set forth in Section 6) until terminated as follows:
a. Either party hereto may at any time terminate this Agreement by
not less than thirty (30) days' nor more than sixty (60) days' written
notice delivered or mailed by registered mail, postage prepaid, to the
other party; or
b. If (i) the Trustees of the Fund or the shareholders by the
affirmative vote of a majority of the outstanding shares of the Fund and
(ii) a majority of the Trustees of the Fund who are not interested persons
of the Fund or of the Investment Adviser, by vote cast in person at a
meeting called for the purpose of voting on such approval, do not
specifically approve at least annually the continuance of this Agreement,
then this Agreement shall automatically terminate at the close of business
on June 30, 2003 or the expiration of one year from the effective date of
the last such continuance, whichever is later.
Action by the Fund under (a) above may be taken either by (i) vote of a
majority of its Trustees, or (ii) by the affirmative vote of a majority of the
outstanding shares of the Fund.
Termination of this Agreement pursuant to this Section 7 shall be without
the payment of any penalty.
8. CERTAIN DEFINITIONS.
For the purposes of this Agreement, the "affirmative vote of a majority of
outstanding shares of the Fund" means the affirmative vote, at a duly called and
held meeting of shareholders of the Fund, (a) of the holders of 67% or more of
the shares of the Fund present (in person or by proxy) and entitled to vote at
such meeting, if the holders of more than 50% of the outstanding shares of the
Fund entitled to vote at such meeting are present in person or by proxy, or (b)
of the holders of more than 50% of the outstanding shares of the Fund entitled
to vote at such meeting, whichever is less.
For the purposes of this Agreement, the terms "affiliated person",
"control", "interested person" and "assignment" shall have their respective
meanings defined in the 1940 Act and the Rules and Regulations thereunder,
subject, however to such exemptions as may be granted by the SEC under said Act;
the term "specifically approve at least annually" shall be construed in a manner
consistent with the 1940 Act and the Rules and Regulations thereunder; and the
term "brokerage and research services" shall have the meaning given in the
Exchange Act and the Rules and Regulations thereunder.
9. NON-LIABILITY OF THE INVESTMENT ADVISER.
The Investment Adviser shall not be held responsible for any loss incurred
by any act or omission of any broker. The Investment Adviser also shall not be
liable to the Fund or to any shareholder of the Fund for any error or judgment
or for any loss suffered by the Fund in connection with rendering services
hereunder 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 0000 Xxx) or (b) a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the Investment Adviser, or reckless
disregard of its obligations and duties hereunder. Subject to the foregoing, the
Fund also shall indemnify the Investment Adviser, and any officer, director and
employee thereof to the maximum extent permitted by Article V of the Fund's
Declaration of Trust.
10. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Declaration of Trust of the Fund is on file with the
Secretary of the Commonwealth of
Massachusetts, and notice is hereby given that
this instrument is executed on behalf of the Trustees of the Fund as Trustees
and not individually and that the obligations of this instrument are not binding
upon any of the Trustees or shareholders individually but are binding only upon
the assets and property of the Fund.
11. FURNISHING OF MATERIALS.
During the term of this Agreement, the Fund agrees to furnish the
Investment Adviser at its principal executive office all prospectuses, proxy
statements, report to shareholders, sales literature, or other material prepared
for distribution to shareholders of the Fund or the public, which refer to the
Investment Adviser in any way, prior to use thereof and not to use such material
if the Investment Adviser reasonably objects in writing within five business
days (or such other time as may be mutually agreed) after receipt thereof. In
the event of termination of this Agreement, the Fund will continue to furnish to
the Investment Adviser copies of any of the above-mentioned materials which
refer in any way to the Investment Adviser. The Fund shall furnish or otherwise
make available to the Investment Adviser such other information relating to the
business affairs of the Fund as the Investment Adviser at any time, or from time
to time, reasonably requests in order to discharge its obligations hereunder.
12. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of
Massachusetts.
IN WITNESS WHEREOF, the Fund and the Investment Adviser have each caused
this instrument to be signed in duplicate in its behalf by its President or
other officer thereunto duly authorized, all as of the date first hereinabove
written.
H&Q HEALTHCARE INVESTORS
By: /s/ Xxxxxx X. Xxxxxxx
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Xxxxxx X. Xxxxxxx
President, H&Q Healthcare Investors
XXXXXXXXX & XXXXX CAPITAL MANAGEMENT LLC
By: /s/ Xxxxxx X. Xxxxxxx
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Xxxxxx X. Xxxxxxx
President, Xxxxxxxxx & Xxxxx Capital Management LLC
