Exhibit (g)(1)
INVESTMENT ADVISORY AGREEMENT
This INVESTMENT ADVISORY AGREEMENT ("Agreement") is made this
1st day of February, 2002, by and between Xxxxxxxxxx Partners Absolute Return
Fund, LLC, a Delaware limited liability company (the "Company"), and Xxxxxxxxxx
Asset Management, LLC, a Delaware limited liability company (the "Adviser").
W I T N E S S E T H:
WHEREAS, the Company intends to engage in business as a
closed-end, non-diversified, management investment company registered under the
Investment Company Act of 1940, as amended (the "Investment Company Act"); and
WHEREAS, the Adviser is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended (the "Advisers Act"), and
is engaged in the business of providing advice relating to investments in
securities; and
WHEREAS, the Adviser also serves as the managing member of the
Company (the "Managing Member");
NOW, THEREFORE, in consideration of the premises and the
mutual covenants hereinafter contained, the Company and the Adviser agree as
follows:
1. Appointment of Adviser. The Company hereby retains the
Adviser to serve as its investment adviser and, subject to the supervision and
control of the Board of Directors of the Company (the "Directors" and any one of
them, a "Director"), to manage the investment activities of the Company as
hereinafter set forth.
2. Duties of Adviser. Without limiting the generality of
Section 1 hereof, the Adviser shall obtain and evaluate such information and
advice relating to the economy, securities markets, and securities as it deems
necessary or useful to discharge its duties hereunder, including: (a) to
continuously manage the assets of the Company in a manner consistent with the
investment objective, policies and restrictions of the Company, as set forth in
the Private Placement Memorandum of the Company and as may be adopted from time
to time by the Board and applicable laws and regulations; (b) to determine the
securities to be purchased, sold or otherwise disposed of by the Company and the
timing of such purchases, sales and dispositions; (c) to supervise and evaluate
any sub-adviser retained by the Company; and (d) to take such further action,
including the placing of purchase and sale orders and the voting of securities
on behalf of the Company, as the Adviser shall deem necessary or appropriate.
The Adviser shall furnish the Company with such information, evaluations,
analyses and opinions formulated or obtained by the Adviser in the discharge of
its duties as the Company may, from time to time, reasonably request.
Without limiting the generality of the above paragraph of this
Section 2, the Adviser shall be authorized to take the following actions in
performing its obligations under this Agreement: (a) open, maintain and close
accounts in the name and on behalf of the Company with brokers and dealers as it
determines to be appropriate; (b) select and place orders with brokers, dealers
or other financial intermediaries for the execution, clearance or settlement of
any transactions on behalf of the Company on such terms as the Adviser considers
appropriate and which are consistent with the policies of the Company; and (c)
subject to any policies adopted by the Directors and provisions of applicable
law, agree to such commissions, fees and other charges on behalf of the Company
as the Adviser deems reasonable in the circumstances, taking into account all
such factors it considers to be relevant (including the quality of research and
other services made available to it even if such services are not for the
exclusive benefit of the Company and the cost of such services does not
represent the lowest cost available). The Adviser shall be under no obligation
to combine or arrange orders so as to obtain reduced charges unless otherwise
required under federal securities law. The Adviser may use, subject to such
procedures as may be adopted by the Directors, affiliates of the Adviser as
brokers to effect securities transactions for the Company, and the Company may
pay such commissions to such brokers in such amounts as are permissible under
applicable law.
3. Reports by Company to Adviser. The Company shall, from time
to time, furnish or otherwise make available to the Adviser such financial
reports, proxy statements, policies and procedures and other information
relating to the business and affairs of the Company as the Adviser may
reasonably require in order to discharge its duties and obligations hereunder.
4. Expenses.
a. The Adviser shall bear the cost of rendering the services
to be performed by it under this Agreement, including the costs relating to
maintaining such staff and employing or retaining such personnel and consulting
with such other persons (including its affiliates) as may be necessary to render
the services to be provided hereunder.
b. The Company shall assume and pay or cause to be paid all
expenses of the Company not expressly assumed by the Adviser under this
Agreement, including, without limitation: fees paid to sub-advisers; all
expenses directly related to portfolio transactions and positions taken for the
Company's account, which expenses may include (but not be limited to) brokerage
commissions, research fees, interest and commitment fees on loans and debit
balances, borrowing charges on securities sold short, dividends on securities
sold but not yet purchased, custodial fees, margin fees, transfer taxes and
premiums, taxes withheld on non-U.S. dividends and indirect expenses from
investments in investment funds; all costs and expenses associated with the
organization and registration of the Company, including certain offering costs
and the costs of complying with any applicable federal or state laws; attorneys'
fees and disbursements
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associated with updating the Company's Private Placement Memorandum and
subscription documents (the "Offering Materials"); the costs of printing the
Offering Materials; the costs of distributing the Offering Materials to
prospective investors; and attorneys' fees and disbursements associated with the
review of subscription documents executed and delivered to the Company in
connection with the offerings of interests in the Company; the costs and
expenses of holding any meetings of members of the Company; fees and
disbursements of any attorneys, accountants, auditors and other consultants and
professionals engaged on behalf of the Company; the fees of custodians and other
persons providing custodial, administrative, recordkeeping and other services to
the Company; the costs of a fidelity bond and any liability insurance obtained
on behalf of the Company; all expenses of computing the Company's net asset
value, including any equipment or services obtained for these purposes; and all
charges for equipment or services used in communicating information regarding
the Company's transactions among the Adviser and any sub-adviser, custodian or
other agent engaged by the Company; and any extraordinary expenses.
5. Investment Advisory Fees. As compensation for the services
provided to the Company and the expenses assumed by the Adviser under this
Agreement, the Adviser shall receive a fee specified on Appendix A to this
Agreement with respect to the capital account of each member of the Company, as
provided under the terms of the Limited Liability Company Agreement of the
Company (the "Limited Liability Company Agreement"). Fees paid to the Adviser
shall be prorated for any partial payment periods. The Adviser anticipates
making rebates, out of its resources and legitimate profits and in its sole
discretion, to certain institutional investors. The Adviser also anticipates
making rebates, out of its own resources and in its sole discretion, to certain
control persons, officers and employees of the Company, the Adviser, any
sub-advisers appointed by the Adviser, and their affiliates.
6. Standard of Care and Liability. The Adviser shall perform
its duties under this Agreement using its best judgment and efforts. In the
absence of willful misfeasance, bad faith, gross negligence, or reckless
disregard of obligations or duties under this Agreement, neither the Adviser nor
any of its owners, directors, officers or employees thereof, nor any of their
affiliates, executors, heirs, assigns, successors or other legal representatives
(collectively, the "Affiliates") shall be liable to the Company for any error of
judgment, mistake of law, or any act or omission by the Adviser and its
Affiliates relating to the services to be provided hereunder.
7. Indemnification.
a. The Company shall indemnify the Adviser, its members,
officers or employees and any of their Affiliates (each an "Indemnified Person")
against any and all costs, losses, claims, damages or liabilities, joint or
several, including, without limitation, reasonable attorneys' fees and
disbursements, resulting in any way from the performance or non-performance of
any Indemnified Person's duties in respect of the
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Company, except those resulting in an Indemnified Person's becoming liable under
Section 6 of this Agreement ("disabling conduct"). An Indemnified Person shall
be entitled to indemnification hereunder upon a determination made in the
following manner: (i) a final decision on the merits by a court or other body
before whom the proceeding was brought that the Indemnified Person was not
liable by reason of disabling conduct; or (ii) a reasonable determination, based
upon a review of the facts and reached by competent legal counsel selected by
the Directors and set forth in writing, that the Indemnified Person is entitled
to indemnification hereunder. The Company shall advance to an Indemnified Person
(to the extent the Company has funds available and without incurring borrowing
expenses for such purpose) reasonable attorneys' fees and other costs and
expenses incurred in connection with the defense of any action or proceeding
arising out of such performance or non-performance. The Adviser agrees, and each
other Indemnified Person shall agree as a condition of any such advance, to
reimburse the Company for such advance if it is determined, as provided in this
paragraph, that the Indemnified Person was not entitled to indemnification
hereunder.
b. Notwithstanding anything to the contrary set forth above,
the provisions of this Section 7 shall not be construed so as to relieve the
Indemnified Person of, or provide indemnification with respect to, any liability
(including liability under the federal securities laws) to the extent that such
liability may not be waived, limited or modified under applicable law or that
such indemnification would be in violation of applicable law. The provisions of
this Section 7, however, shall be construed to effectuate its purpose to the
fullest extent permitted by law.
8. Liabilities. The parties to this Agreement agree that the
obligations of the Company under this Agreement shall not be binding upon any of
the members of the Company or any officers, employees or agents, whether past,
present or future, of the Company, individually, but are binding only upon the
assets and property of the Company.
9. Independent Contractor. Nothing contained in this Agreement
shall prevent the Adviser or any affiliated person of the Adviser from acting as
investment adviser or manager for any other person, firm or corporation and,
except as required by applicable law (including Rule 17j-1 under the Investment
Company Act), shall not in any way bind or restrict the Adviser or any such
affiliated person from buying, selling or trading any securities or commodities
for their own accounts or for the account of others for whom they may be acting.
Nothing in this Agreement shall limit or restrict the right of any member,
officer or employee of the Adviser (or its affiliates) to engage in any other
business or to devote his or her time and attention in part to the management or
other aspects of any other business whether of a similar or dissimilar nature.
10. Term. This Agreement shall become effective on the date
that is the latest of (1) the execution of this Agreement, (2) the approval of
this Agreement by the Board of Directors of the Company and (3) the approval of
this Agreement by the
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members of the Company in a special meeting of members of the Company. This
Agreement shall remain in effect for a period of two (2) years, unless sooner
terminated as hereinafter provided. This Agreement shall continue in effect
thereafter for additional periods not exceeding one (l) year so long as such
continuation is approved for the Company at least annually by (i) the Directors
or by the vote of a majority of the outstanding voting securities of the Company
and (ii) the vote of a majority of the Directors of the Company who are not
parties to this Agreement nor interested persons thereof, cast in person at a
meeting called for the purpose of voting on such approval.
11. Termination. This Agreement may be terminated by the
Company at any time without payment of any penalty, by the Directors or by vote
of a majority of the outstanding voting securities of the Company, upon sixty
(60) days' written notice to the Adviser, and by the Adviser upon sixty (60)
days' written notice to the Company.
12. Termination by Assignment. This Agreement also shall
automatically terminate in the event of its assignment unless the assignment
would not constitute an assignment under Rule 2a-6 under the Investment Company
Act.
13. Transfer, Assignment. This Agreement may not be
transferred, assigned, sold or in any manner hypothecated or pledged without the
affirmative vote or written consent of the holders of a majority of the
outstanding voting securities of the Company.
14. Severability. If any provision of this Agreement shall be
held or made invalid by a court decision, statute or rule, or shall be otherwise
rendered invalid, the remainder of this Agreement shall not be affected thereby.
15. Definitions. The terms "majority of the outstanding voting
securities" and "interested persons" shall have the meanings as set forth in the
Investment Company Act.
16. Captions. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect.
17. Amendments. This Agreement may be amended only by the
written agreement of the parties.
18. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of California.
19. Notices. Any notice under this Agreement shall be given in
writing and shall be deemed to have been duly given when delivered by hand, on
the date indicated as the date of receipt on a return receipt, or at time of
receipt if sent to the other
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party at the principal office of such party by regular mail, commercial courier
service, telex or telecopier.
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IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement on the day and year first above written.
XXXXXXXXXX PARTNERS ABSOLUTE RETURN FUND, LLC
By: /s/ Xxxxxxx Xxxxxx
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Xxxxxxx Xxxxxx, Assistant Secretary
XXXXXXXXXX ASSET MANAGEMENT, LLC
By: /s/ Xxxx Xxxxxxx
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Xxxx Xxxxxxx, Chief Administrative Officer
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APPENDIX A
XXXXXXXXXX ASSET MANAGEMENT, LLC
MANAGEMENT FEE In consideration of the advisory and other
services provided by the Adviser to the Company,
the Company will pay the Adviser a monthly fee
of 1/12 of 1.0% (1.0% on an annualized basis) of
the Company's net assets (the "Management Fee").
The Management Fee will be an expense out of the
Company's assets. The Adviser will be
responsible for compensating the Subadviser.
PERFORMANCE FEE In addition to the Management Fee, the
Adviser will be entitled to receive a
Performance Fee for each calendar quarter equal
to 10% of the excess, if any, of the net profits
allocated to each Member's capital account for
the calendar quarter in excess of any net losses
so allocated for such calendar quarter.
The amount of any Performance Fee that may be
deducted from a Member's capital account for a
given calendar quarter will be adjusted with
respect to any contributions, transfers,
distributions and repurchases applicable to the
Member for that period. If at the end of any
calendar quarter net losses allocated to a
Member's capital account exceed net profits
allocated to that account, a "Loss Carryforward
Amount" in the amount of such excess will be
established for the capital account of that
Member. A Loss Carryforward Amount established
in respect of a particular calendar quarter is
aggregated with any still-existing Loss
Carryforward Amounts established in prior
calendar quarters, and no Performance Fee will
be deducted from a Member's capital account
until subsequent profits allocated to that
account reduce such Member's Loss Carryforward
Amount(s) to (but not below) zero.
