1
EXHIBIT 10.02
MANAGEMENT AGREEMENT
MANAGEMENT AGREEMENT, dated as of ___________________ __, 1997 by and
between Excelsior Private Equity Fund II, Inc., a Maryland corporation (the
"Company") and United States Trust Company of New York, a New York corporation
("U.S. Trust" or the "Managing Investment Adviser").
W I T N E S S E T H
WHEREAS, the Company has been organized as a Maryland corporation to
engage in the business of a closed-end management investment company registered
under the Securities Act of 1933, as amended, and has elected to be regulated as
a business development company under the Investment Company Act of 1940, as
amended; and
WHEREAS, the Company seeks to retain U.S. Trust to provide certain
investment advisory and administrative services; and
WHEREAS, U.S. Trust is willing to furnish such investment advisory and
administrative services to the Company on the terms and conditions hereinafter
set forth.
NOW, THEREFORE, in consideration of the mutual covenants and promises
herein contained and other good and valuable consideration, the Company and U.S.
Trust hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms have the
meanings set forth below:
(a) "Board of Directors" means the board of directors of the
Company;
(b) "Company" means Excelsior Private Equity Fund II, Inc.;
(c) "Director" means any member of the Board of Directors;
(d) "Disabling Conduct" means, on the part of the Managing
Investment Adviser, any bad faith, negligence, misconduct or any breach of
fiduciary duty owed to the Company;
(e) "Exchange Act" means the Securities Exchange Act of 1934, as
amended;
(f) "Investment Company Act" means the Investment Company Act of
1940, as amended;
2
(g) "Managing Investment Adviser" means United States Trust
Company of New York;
(h) "Portfolio Companies" means Later-Stage Venture Capital
Companies and Middle-Market Companies, each as defined in the Registration
Statement;
(i) "Private Funds" has the meaning set forth in the Registration
Statement;
(j) "Registration Statement" means the Registration Statement of the
Company which is effective under the Securities Act;
(k) "Securities Act" means the Securities Act of 1933, as amended;
(l) "Short-Term Investments" has the meaning set forth in the
Registration Statement;
(m) "U.S. Trust" means United States Trust Company of New York.
2. Appointment. The Company hereby appoints U.S. Trust to act as the
managing investment adviser and administrator to the Company for the period and
on the terms set forth in this Agreement. U.S. Trust accepts such appointment
and agrees to be responsible for finding, evaluating, structuring, and
monitoring the Company's investments in Portfolio Companies, Private Funds and
Short-Term Investments and performing the management and administrative services
necessary for the operation of the Company for the compensation provided by this
Agreement.
3. Duties of the Managing Investment Adviser. Subject to the direction
and control of the Board of Directors, the Managing Investment Adviser shall:
(a) prepare (or otherwise obtain) and evaluate on both a
macroeconomic and microeconomic level any pertinent research; statistical,
financial and economic data; and other information necessary or appropriate for
the performance of its duties under this Agreement;
(b) identify, evaluate, structure, monitor and dispose of the
Company's investments in Portfolio Companies, Private Funds and Short-Term
Investments;
(c) make available and, if requested by entities in which the
Company has invested or is proposing to invest, render managerial assistance to,
and exercise management rights in, such entities;
2
3
(d) determine the securities to be purchased by the Company, and
continuously monitor such securities and the issuers thereof to determine
whether and when to sell, exchange, or take any other action concerning such
securities including the making of follow-on investments in Portfolio Companies
when appropriate;
(e) determine whether and how to exercise warrants, voting rights,
or other rights with respect to the Company's portfolio securities;
(f) select broker-dealers to carry out the Company's securities
transactions, including broker-dealers who are affiliated with the Managing
Investment Adviser or the Company;
(g) provide valuations with respect to the securities held by the
Company as provided in the Registration Statement;
(h) provide, at its expense, office space, equipment, facilities and
supplies and clerical services necessary for the operation of the Company;
(i) keep and maintain the books and records of the Company;
(j) administer stockholders' accounts and handle communications and
correspondence with stockholders;
(k) prepare accounting, management and other reports;
(l) conduct relations with custodians, depositories, transfer
agents, accountants, attorneys, any selling agent, any escrow agent, insurers,
banks and such other persons in any such other capacity deemed necessary or
desirable for the operation of the Company;
(m) render regular reports to the Company's officers and the Board
of Directors concerning the investment performance of the Company, the Managing
Investment Adviser's discharge of its responsibilities under this Agreement, and
any other subject as the Company's officers or the Board of Directors reasonably
may request; and
(n) assist the Company's officers in connection with the operation
of the Company and perform any further acts that may be necessary to effectuate
the purposes of this Agreement or that may be requested by the Company.
4. Supervision and Compliance. The activities of the Managing
Investment Adviser shall be subject at all times to the direction and control of
the Board of Directors and shall comply
3
4
with: (a) the Articles of Incorporation of the Company and the By-Laws of the
Company, as such documents are amended from time to time; (b) the Registration
Statement, including the investment objective and policies set forth therein;
(c) the applicable provisions of the Investment Company Act and the applicable
regulations thereunder; (d) the Internal Revenue Code of 1986, as amended, and
the regulations thereunder applicable to regulated investment companies; (e) any
other applicable laws or regulations; and (f) such other limitations as the
Board of Directors may adopt.
5. Delegation. In performing its duties under this Agreement and
assuming the obligations set forth herein, the Managing Investment Adviser may,
at its own expense, employ certain of its affiliates or other entities; provided
that the Managing Investment Adviser understands and agrees that it shall remain
fully responsible for the performance of all the duties set forth in this
Agreement and that it shall supervise the activities of each such affiliate or
other entity. Any agreement between the Managing Investment Adviser and an
affiliate or other such entity shall be subject to the renewal, termination and
amendment provisions applicable to this Agreement.
6. Purchase and Sale of Securities. The Managing Investment Adviser
shall, at its own expense, place orders for the purchase, sale or loan of
securities by the Company either directly with the issuer or with any broker
and/or dealer who deals in such securities.
(a) In placing orders with brokers and/or dealers, the Managing
Investment Adviser shall use its best efforts to obtain the best net price and
the most favorable execution of its orders, after taking into account all
factors it 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 and/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 Managing Investment Adviser may, to the extent permitted by law,
purchase and sell portfolio securities to and from brokers who provide brokerage
and research services (within the meaning of Section 28(e) of the Exchange Act)
to or for the benefit of the Company and/or other accounts over which the
Managing Investment Adviser exercises investment discretion. The Managing
Investment Adviser is authorized to pay a broker who provides such brokerage and
research services a commission for effecting a securities transaction which is
in excess of the amount of commission another broker would have charged for
effecting that transaction, if the Managing Investment Adviser determines in
good faith that such commission was reasonable in relation to the value of
brokerage and research services provided by such broker. This determination may
be viewed in terms of either that particular transaction or of the overall
responsibilities
4
5
of the Managing Investment Adviser with respect to the accounts as to which it
exercises investment discretion.
(b) The Managing Investment Adviser may execute transactions through
itself and its affiliates on a securities exchange provided that the commissions
paid by the Company are "reasonable and fair" compared to commissions received
by other brokers having comparable execution capability and provided that the
transactions are effected pursuant to procedures established by the Board of
Directors. An affiliated broker may transmit, clear and settle transactions for
the Company that are executed on a securities exchange provided that the
affiliated broker arranges for unaffiliated brokers to execute the transactions.
(c) Notwithstanding the foregoing, the Board of Directors
periodically shall review the commissions paid by the Company and determine
whether those commissions were reasonable in relation to the brokerage and
research services received. In addition, the Board of Directors, in its
discretion, may instruct the Managing Investment Adviser to effect all or a
portion of its securities transactions with one or more brokers and/or dealers
selected by the Board of Directors, if it determines that the use of such
brokers and/or dealers is in the best interest of the Company.
(d) When the Managing Investment Adviser deems the purchase or sale
of a security to be in the best interest of the Company as well as other
customers, the Managing Investment Adviser, to the extent permitted by
applicable law, may aggregate the securities to be so sold or purchased in order
to obtain the best execution or lower brokerage commissions. The Managing
Investment Adviser also may purchase or sell a particular security for one or
more customers in different amounts. Allocation of the securities purchased or
sold in either manner, as well as the expenses incurred in the transactions,
will be made by the Managing Investment Adviser in a manner that is equitable
and consistent with applicable law and regulations, any guidelines adopted by
the Board of Directors and with its fiduciary obligations to the Company and to
such other customers.
7. Expenses.
(a) The Managing Investment Adviser shall furnish, at its own
expense, all office space, office facilities, equipment and personnel necessary
or appropriate to the performance of its duties under this Agreement. The
Managing Investment Adviser also shall pay the salaries and fees of all
personnel of the Company or the Managing Investment Adviser performing services
related to the Managing Investment Adviser's duties under this Agreement.
5
6
(b) It is understood that the Company will pay all of its expenses
and liabilities, including fees of the Directors; fees of the Managing
Investment Adviser; expenses of registering the Company's shares under federal
and state securities laws; interest; taxes; fees and expenses of the Company's
legal counsel and independent accountants; fees and expenses of the Transfer
Agent; expenses of printing and mailing share certificates, stockholder reports,
notices to stockholders and proxy statements; reports to regulatory bodies;
brokerage and other expenses in connection with the execution, recording and
settlement of portfolio security transactions; expenses in connection with the
acquisition and disposition of portfolio securities or the registration of
privately issued portfolio securities; costs of third party evaluations or
appraisals of the Company (or its assets) or its actual investments; expenses of
membership in investment company associations; expenses of fidelity bonding and
other insurance premiums; expenses of stockholders' meetings; Securities and
Exchange Commission and state blue sky registration fees; fees payable to the
National Association of Securities Dealers, Inc., if any, in connection with the
offering of the Company's shares; and the Company's other business and operating
expenses.
8. Compensation of the Managing Investment Adviser. In consideration
of the services to be rendered by the Managing Investment Adviser under this
Agreement, the Company shall pay the Managing Investment Adviser:
(a) quarterly and payable in arrears on the last day of each
calendar quarter, a management fee equal to 1.5% per annum of the net assets of
the Company, determined as of the end of each calendar quarter, that are
invested or committed to be invested in Portfolio Companies or Private Funds,
and equal to 0.5% of the net assets of the Company, determined as of the end of
each calendar quarter, that are invested in Short-Term Investments and are not
committed to Portfolio Companies or Private Funds; and
(b) an incentive fee in an amount equal to 20% of the realized
capital gains (net of realized capital losses and unrealized net capital
depreciation) on investments other than investments in Private Funds. If the
amount of the incentive fee in any year is a negative number, or cumulative net
realized capital gains less net unrealized capital depreciation at the end of
any year is less than such amount calculated at the end of the previous year,
the Managing Investment Adviser agrees to repay to the Company all or a portion
of the incentive fee previously paid.
9. Services to Others. The services of the Managing Investment
Adviser to the Company are not to be deemed exclusive, and the Managing
Investment Adviser is free to render services to others and to engage in other
activities; provided, however, that
6
7
those services and activities do not adversely affect the Managing Investment
Adviser's ability to perform its obligations under this Agreement.
10. Books, Records, and Information. The Managing Investment Adviser
shall provide the Company with all records concerning the Managing Investment
Adviser's activities that the Company is required by law to maintain. Any
records required to be maintained and preserved pursuant to the provisions of
Rule 31a-1 and Rule 31a-2 under the Investment Company Act which are prepared or
maintained by the Managing Investment Adviser on behalf of the Company are the
property of the Company and will be surrendered promptly to the Company on
request. The Company also shall comply with all reasonable requests for
information by the Company's officers or Board of Directors, including
information required for the Company's filings with the Securities and Exchange
Commission and state securities commissions.
11. Limitations on Liability.
(a) The Managing Investment Adviser hereby is notified expressly of
the limitation of directors' liability as set forth in the Articles of
Incorporation and the Bylaws of the Company and agrees that any obligation of
the Company arising in connection with this Agreement shall be limited in all
cases to the Company and its assets, and the Managing Investment Adviser shall
not seek satisfaction of any such obligation from any Director of the Company.
(b) The Managing Investment Adviser shall give the Company the
benefit of its best judgment and efforts in rendering services under this
Agreement. In the absence of Disabling Conduct, the Managing Investment Adviser
shall not be liable to the Company or to any shareholder for any act or omission
in the course of, or connected with, rendering services under this Agreement or
for any losses that may be sustained in the purchase, holding or sale of any
security.
12. Indemnification. The Company will indemnify the Managing Investment
Adviser against, and hold it harmless from, any and all losses, claims, damages,
liabilities or expenses (including reasonable counsel fees and expenses) not
resulting from Disabling Conduct by the Managing Investment Adviser.
Indemnification shall be made only following: (i) a final decision on the merits
by a court or other body before whom the proceeding was brought that the
Managing Investment Adviser was not liable by reason of Disabling Conduct or
(ii) in the absence of such a decision, a reasonable determination, based upon a
review of the facts, that the Managing Investment Adviser was not liable by
reason of Disabling Conduct by (a) the vote of a majority of a quorum of
Directors of the Company who are neither "interested persons" of the Company nor
parties to the proceeding ("disinterested non-party Directors") or (b)
independent legal
7
8
counsel in a written opinion. The Managing Investment Adviser shall be entitled
to advances from the Company for payment of the reasonable expenses incurred by
it in connection with the matter as to which it is seeking indemnification in
the manner and to the fullest extent permissible under the Maryland General
Corporation Law. The Managing Investment Adviser shall provide to the Company a
written affirmation of its good faith belief that the standard of conduct
necessary for indemnification by the Company has been met and a written
undertaking to repay any such advance if it should ultimately be determined that
the standard of conduct has not been met. In addition, at least one of the
following additional conditions shall be met: (a) the Managing Investment
Adviser shall provide security in form and amount acceptable to the Company for
its undertaking; (b) the Company is insured against losses arising by reason of
the advance; or (c) a majority of a quorum of disinterested non-party Directors,
or independent legal counsel, in a written opinion, shall have determined, based
on a review of facts readily available to the Company at the time the advance is
proposed to be made, that there is reason to believe that the Managing
Investment Adviser will ultimately be found to be entitled to indemnification.
No provision of this Agreement shall be construed to protect any
Director or officer of the Company or the Managing Investment Adviser from
liability in violation of Section 17(i) of the Investment Company Act.
13. Effective Date; Termination; Amendments.
(a) This Agreement shall be effective as of the date first above
written and, unless terminated sooner as provided herein, shall continue until
the second anniversary of the execution of this Agreement. Thereafter, unless
terminated sooner as provided herein, this Agreement shall continue in effect
for successive annual periods, provided that such continuance is specifically
approved at least annually by the vote of a majority of the Board of Directors
of the Company who are not parties to this Agreement or interested persons of
any such party, cast in person at a meeting called for the purpose of voting on
such continuance, and either: (i) the vote of a majority of the outstanding
voting securities of the Company; or (ii) the vote of a majority of the full
Board of Directors.
(b) This Agreement may be terminated at any time, without the
payment of any penalty, either by: (i) the Company, by action of the Board of
Directors or by vote of a majority of the outstanding voting securities of the
Company, on 60 days' written notice to the Managing Investment Adviser; or (ii)
the Managing Investment Adviser, on 90 days' written notice to the Company. This
Agreement shall terminate immediately in the event of its assignment.
8
9
(c) This Agreement may be amended only if such amendment is
approved, to the extent required by the Investment Company Act, by the vote of a
majority of the outstanding voting securities of the Company and by vote of a
majority of the Board of Directors who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting called for the
purpose of voting on such amendment.
(d) As used in this Agreement, the terms "specifically approved at
least annually," "majority of the outstanding voting securities," "interested
persons" and "assignment" shall have the same meanings as such terms have in the
Investment Company Act and the regulations thereunder.
14. Notices. All notices and other communications hereunder shall be in
writing or by confirm in telegram, cable, telex, or facsimile sending device.
Notices shall be addressed (a) if to U.S. Trust, at U.S. Trust's address, 000 X.
00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000; or (b) if to the Company, at the address
of the Company, Attn: Xxxxx X. Xxxx.
15. Governing Law. This Agreement shall be construed in accordance with
the laws of the State of New York without giving effect to the choice of law
provisions thereof, to the extent that such laws are consistent with the
provisions of the Investment Company Act and the regulations thereunder.
16. Miscellaneous. The captions in this Agreement are included for the
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. Should any
part of this Agreement be held or made invalid by a court decision, statute,
regulation, or otherwise, the remainder of this Agreement shall not be affected
thereby. This Agreement shall be binding and shall inure to the benefit of the
parties hereto and their respective successors, to the extent permitted by law.
9
10
IN WITNESS WHEREOF, the Company and the Managing Investment Adviser
have caused this Agreement to be executed and delivered in their names and on
their behalf by the undersigned, duly authorized officers, all as of the day
and year first above written.
EXCELSIOR PRIVATE EQUITY
FUND II, INC.
By:_____________________________
Name: Xxxxx X. Xxxx
Title: President
UNITED STATES TRUST COMPANY OF NEW YORK
By:_____________________________
Name:
Title:
10
