INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT is made the __ day of [ ],
2003, by and between Excelsior Absolute Return Fund of Funds Master Fund,
LLC, a Delaware limited liability company (the "Fund"), and U.S. Trust Hedge
Fund Management, Inc., a North Carolina corporation (the "Investment Adviser").
WHEREAS, the Fund is registered with the Securities and Exchange
Commission (the "Commission") under the Investment Company Act of 1940, as
amended (the "1940 Act"), as a closed-end, non-diversified management investment
company, and the Investment Adviser is an investment adviser registered as such
under with the Commission under the Investment Advisers Act of 1940; and
WHEREAS, the Fund desires to retain the Investment Adviser to
act as its investment adviser pursuant to this Agreement; and
WHEREAS, the Investment Adviser desires to be retained to act as
investment adviser to the Fund pursuant to this Agreement;
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed, by and between the parties, as follows:
1. The Fund hereby retains the Investment Adviser to:
(a) act as its investment adviser and, subject to
the supervision and control of the Board of Managers of the Fund (the "Board"),
manage the investment activities of the Fund as hereinafter set forth. Without
limiting the generality of the foregoing, the Investment 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; continuously manage the assets of the Fund in a manner consistent
with the investment objective, policies and restrictions of the Fund, as set
forth in the Confidential Memorandum of the Fund and as may be adopted from time
to time by the Board, and applicable laws and regulations; determine the
securities to be purchased, sold or otherwise disposed of by the Fund and the
timing of such purchases, sales and dispositions; invest discrete portions of
the Fund's assets (which may constitute, in the aggregate, all of the Fund's
assets) in unregistered investment funds or other investment vehicles and
registered investment companies ("Portfolio Funds"), which are managed by
investment managers ("Portfolio Managers"), including Portfolio Managers for
which separate investment vehicles have been created in which the Portfolio
Managers serve as general partners or managing members and the Fund is the sole
investor ("Portfolio Accounts") and Portfolio Managers who are retained to
manage the Fund's assets directly through separate managed accounts (Portfolio
Managers of Portfolio Accounts and of managed accounts are collectively referred
to as "Sub-Managers"), and take such further action, including the placing of
purchase and sale orders and the voting of securities on behalf of the Fund, as
the Investment Adviser shall deem necessary or appropriate. The Investment
Adviser shall furnish to or place at the disposal of the Fund such of the
information, evaluations, analyses and opinions formulated or obtained by the
Investment Adviser in the discharge of its duties as the Fund may, from time to
time, reasonably request; and
(b) provide, and the Investment Adviser hereby
agrees to provide, certain management, administrative and other services to the
Fund. Notwithstanding the appointment of the Investment Adviser to provide such
services hereunder, the Board shall remain responsible for supervising and
controlling the management, business and affairs of the Fund. The management,
administrative and other services to be provided by the Investment Adviser shall
include:
(i) providing office space, telephone and utilities;
(ii) providing administrative and secretarial,
clerical and other personnel as necessary to
provide the services required to be provided
under this Agreement;
(iii) supervising the entities which are retained by
the Fund to provide administration, custody and
other services to the Fund;
(iv) handling investor inquiries regarding the Fund
and providing investors with information
concerning their investments in the Fund and
capital account balances;
(v) monitoring relations and communications between
investors and the Fund;
(vi) assisting in the drafting and updating of
disclosure documents relating to the Fund and
assisting in the preparation of offering
materials;
(vii) maintaining and updating investor information,
such as change of address and employment;
(viii) assisting in the preparation and mailing of
investor subscription documents and confirming
the receipt of such documents and funds;
(ix) assisting in the preparation of regulatory
filings with the Securities and Exchange
Commission and state securities regulators and
other Federal and state regulatory authorities;
(x) preparing reports to and other informational
materials for members and assisting in the
preparation of proxy statements and other member
communications;
(xi) monitoring compliance with regulatory
requirements and with the Fund's investment
objective, policies and restrictions as
established by the Board;
(xii) reviewing accounting records and financial
reports of the Fund, assisting with the
preparation of the financial reports of the Fund
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and acting as liaison with the Fund's accounting
agent and independent auditors;
(xiii) assisting in the preparation and filing of tax
returns;
(xiv) coordinating and organizing meetings of the
Board and meetings of the members of the Fund,
in each case when called by such persons;
(xv) preparing materials and reports for use in
connection with meetings of the Board;
(xvi) maintaining and preserving those books and
records of the Fund not maintained by any
Sub-advisers (as defined in Paragraph 2 below)
of the Fund or the Fund's administrator,
accounting agent or custodian (which books and
records shall be the property of the Fund and
maintained and preserved as required by the 1940
Act and the rules thereunder and shall be
surrendered to the Fund promptly upon request);
(xvii) reviewing and arranging for payment of the
expenses of the Fund;
(xviii) assisting the Fund in conducting offers to
members of the Fund to repurchase member
interests;
(xix) reviewing and approving all regulatory filings
of the Fund required under applicable law;
(xx) reviewing investor qualifications and
subscription documentation and otherwise
assisting in administrative matters relating to
the processing of subscriptions for interests in
the Fund;
(xxi) providing the services of persons employed by
the Investment Adviser or its affiliates who may
be appointed as officers of the Fund by the
Board; and
(xxii) assisting the Fund in routine regulatory
examinations, and working closely with any
counsel retained to represent the members of the
Board who are not "interested persons," as
defined by the 1940 Act and the rules thereunder
(the "Independent Managers") of the Fund in
response to any litigation, investigations or
regulatory matters.
2. Provided that the Fund shall not be required to pay any
compensation for services other than as provided by the terms of this Agreement,
the Investment Adviser is authorized: (i) to obtain investment information,
research or assistance from any other person, firm or corporation to supplement,
update or otherwise improve its investment management services; and (ii) to
enter into investment sub-advisory agreements with any registered investment
adviser (a "Sub-Adviser"), subject to such approvals of the Board and members of
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the Fund ("Members") as may be required to comply with applicable provisions of
the 1940 Act, delegating any or all of the investment advisory services required
to be provided by the Investment Adviser under Paragraph 1(a) hereof, subject to
the supervision of the Investment Adviser.
3. Without limiting the generality of paragraph 1 hereof,
the Investment Adviser (and, if applicable, the Sub-Adviser) shall be authorized
to open, maintain and close accounts in the name and on behalf of the Fund with
brokers and dealers as it determines are appropriate; to select and place orders
with brokers, dealers or other financial intermediaries for the execution,
clearance or settlement of any transactions on behalf of the Fund on such terms
as the Investment Adviser (or the Sub-Adviser) considers appropriate and that
are consistent with the policies of the Fund; and, subject to any policies
adopted by the Board and to the provisions of applicable law, to agree to such
commissions, fees and other charges on behalf of the Fund as it shall deem
reasonable in the circumstances taking into account all such factors as it deems
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 Fund and the
cost of such services does not represent the lowest cost available) and shall be
under no obligation to combine or arrange orders so as to obtain reduced charges
unless otherwise required under the federal securities laws; to pursue and
implement the investment policies and strategies of the Fund using a
multi-manager strategy whereby some or all of the Fund's assets may be committed
from time to time by the Investment Adviser (or the Sub-Adviser) to the
discretionary management of one or more Sub-Managers, the selection of which
shall be subject to the approval of the Board of Managers in accordance with
requirements of the 1940 Act and the approval of a majority (as defined in the
0000 Xxx) of the Fund's outstanding voting securities, unless the Fund receives
an exemption from the provisions of the 1940 Act requiring such approval by
security holders; and to identify appropriate Sub-Managers, assess the most
appropriate investment vehicles (general or limited partnerships, separate
managed accounts or other investment vehicles (pooled or otherwise), and
determine the assets to be committed to each Sub-Manager. The Investment Adviser
(or the Sub-Adviser) may, subject to such procedures as may be adopted by the
Board, use affiliates of the Investment Adviser as brokers to effect the Fund's
securities transactions and the Fund may pay such commissions to such brokers in
such amounts as are permissible under applicable law.
4. Advisory Fee; Expenses
(a) In consideration for the provision by the
Investment Adviser of its services hereunder and the Investment Adviser's
bearing of certain expenses, the Fund will pay the Investment Adviser a
quarterly fee of 0.25% (1.00% on an annualized basis) of the Fund's "net assets"
(the "Advisory Fee"). "Net assets" shall equal the total value of all assets of
the Fund, less an amount equal to all accrued debts, liabilities and obligations
of the Fund calculated before giving effect to any repurchases of interests.
(b) The Advisory Fee will be computed based on the
net assets of the Fund as of the start of business on the first business day of
each calendar quarter, after adjustment for any subscriptions effective on such
date, and will be due and payable in arrears within five business days after the
end of such calendar quarter.
(c) The Investment Adviser is responsible for all
costs and expenses associated with the provision of its services hereunder
including, but not limited to: expenses
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relating to the selection and monitoring of Portfolio Managers; fees of
consultants or a Sub-Adviser retained by the Investment Adviser; and expenses
relating to qualifying potential investors and reviewing subscription documents.
The Investment Adviser shall, at its own expense, maintain such staff and employ
or retain such personnel and consult with such other persons as may be necessary
to render the services required to be provided by the Investment Adviser or
furnished to the Fund under this Agreement. Without limiting the generality of
the foregoing, the staff and personnel of the Investment Adviser shall be deemed
to include persons employed or otherwise retained by the Investment Adviser or
made available to the Investment Adviser.
5. The Fund will, from time to time, furnish or otherwise
make available to the Investment Adviser such financial reports, proxy
statements, policies and procedures and other information relating to the
business and affairs of the Fund as the Investment Adviser may reasonably
require in order to discharge its duties and obligations hereunder.
6. Except as provided herein or in another agreement
between the Fund and the Investment Adviser, the Fund shall bear all of its own
expenses, including: all investment related expenses (including, but not limited
to, fees paid directly or indirectly to Portfolio Managers, all costs and
expenses directly related to portfolio transactions and positions for the Fund's
account such as direct and indirect expenses associated with the Fund's
investments, including its investments in Portfolio Funds, transfer taxes and
premiums, taxes withheld on foreign dividends and, if applicable in the event
the Fund utilizes a Portfolio Account, brokerage commissions, interest and
commitment fees on loans and debit balances, borrowing charges on securities
sold short, dividends on securities sold but not yet purchased and margin fees);
all costs and expenses associated with the establishment of Portfolio Accounts;
any non-investment related interest expense; fees and disbursements of any
attorneys and accountants engaged by the Fund; audit and tax preparation fees
and expenses of the Fund; administrative expenses and fees; custody and escrow
fees and expenses; the costs of an errors and omissions/directors and officers
liability insurance policy and a fidelity bond; the fee payable to the
Investment Adviser; fees and travel-related expenses of members of the Board
(the "Managers") who are not employees of the Investment Adviser or any
affiliated person of the Investment Adviser; all costs and charges for equipment
or services used in communicating information regarding the Fund's transactions
among the Investment Adviser and any custodian or other agent engaged by the
Fund; any extraordinary expenses; and such other expenses as may be approved
from time to time by the Board.
7. The compensation provided to the Investment Adviser
pursuant to paragraph 4(a) hereof shall be the entire compensation for the
services provided to the Fund and the expenses assumed by the Investment Adviser
under this Agreement.
8. The Investment Adviser will use its best efforts in the
supervision and management of the investment activities of the Fund and in
providing services hereunder, but in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations hereunder, the
Investment Adviser, its directors, officers or employees and its affiliates,
successors or other legal representatives (collectively, the "Affiliates") shall
not be liable to the Fund for any error of judgment, for any mistake of law, for
any act or omission by the Investment Adviser or any of the Affiliates or by any
Sub-Adviser or Sub-Manager or for any loss suffered by the Fund.
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9. (a) The Fund shall indemnify the Investment Adviser and
its directors, officers or employees and their respective affiliates, executors,
heirs, assigns, successors or other legal representatives (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 with respect to the Fund, except those resulting
from the willful malfeasance, bad faith or gross negligence of an Indemnified
Person or the Indemnified Person's reckless disregard of such duties, and in the
case of criminal proceedings, unless such Indemnified Person had reasonable
cause to believe its actions unlawful (collectively, "disabling conduct").
Indemnification shall be made following: (i) a final decision on the merits by a
court or other body before which 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 (A) the vote of a
majority of the Managers who are not parties to the proceeding or (B) legal
counsel selected by a vote of a majority of the Board in a written advice, that
the Indemnified Person is entitled to indemnification hereunder. The Fund shall
advance to an Indemnified Person (to the extent that it has available assets and
need not borrow to do so) reasonable attorneys' fees and other costs and
expenses incurred in connection with defense of any action or proceeding arising
out of such performance or non-performance. The Investment Adviser agrees, and
each other Indemnified Person will agree as a condition to any such advance,
that in the event the Indemnified Person receives any such advance, the
Indemnified Person shall reimburse the Fund for such fees, costs and expenses to
the extent that it shall be determined that the Indemnified Person was not
entitled to indemnification under this paragraph 9.
(b) Notwithstanding any of the foregoing to the contrary,
the provisions of this paragraph 9 shall not be construed so as to relieve the
Indemnified Person of, or provide indemnification with respect to, any liability
(including liability under Federal Securities laws, which, under certain
circumstances, impose liability even on persons who act in good faith) to the
extent (but only 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, but shall be construed so as to effectuate the
provisions of this paragraph 9 to the fullest extent permitted by law.
10. Nothing contained in this Agreement shall prevent the
Investment Adviser or any affiliated person of the Investment 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 1940 Act), shall not in any way bind or restrict the Investment
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 Investment Adviser 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.
11. This Agreement will take effect on the date first set
forth above. Unless earlier terminated pursuant to this paragraph, this
Agreement shall remain in effect for a period of two (2) years from such date
and shall continue in effect from year to year thereafter, so long as such
continuance shall be approved at least annually by the vote of a "majority of
the
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outstanding voting securities of the Fund," as defined by the 1940 Act and
the rules thereunder, or by the Board; and provided that in either event such
continuance is also approved by a majority of the Independent Managers, by vote
cast in person at a meeting called for the purpose of voting on such approval.
The Fund may at any time, without payment of any penalty, terminate this
Agreement upon sixty days' prior written notice to the Investment Adviser,
either by majority vote of the Board or by the vote of a "majority of the
outstanding voting securities of the Fund," as defined by the 1940 Act and the
rules thereunder. The Investment Adviser may at any time, without payment of
penalty, terminate this Agreement upon sixty days' prior written notice to the
Fund. This Agreement shall automatically terminate in the event of its
"assignment," as defined by the 1940 Act and the rules thereunder.
12. Any notice under this Agreement shall be given in
writing and shall be deemed to have been duly given when delivered by hand or
facsimile or five days after mailed by certified mail, post-paid, by return
receipt requested to the other party at the principal office of such party.
13. This Agreement may be amended only by the written
agreement of the parties. Any amendment shall be required to be approved by the
Board and by a majority of the Independent Managers in accordance with the
provisions of Section 15(c) of the 1940 Act and the rules thereunder. If
required by the 1940 Act, any amendment shall also be required to be approved by
the vote of a "majority of the outstanding rating securities of the Fund," as
defined by the 1940 Act and the rules thereunder.
14. This Agreement shall be construed in accordance with the
laws of the State of New York and the applicable provisions of the 1940 Act. To
the extent the applicable law of the State of New York, or any of the provisions
herein, conflict with the applicable provisions of the 1940 Act, the latter
shall control.
15. The Fund represents that this Agreement has been duly
approved by the Board, including the vote of a majority of the Independent
Managers, and by the vote of a "majority of the outstanding voting securities of
the Fund," as defined by the 1940 Act and the rules thereunder.
16. The parties to this Agreement agree that the obligations
of the Fund under this Agreement shall not be binding upon any of the Managers,
members of the Fund or any officers, employees or agents, whether past, present
or future, of the Fund, individually, but are binding only upon the assets and
property of the Fund.
17. This Agreement embodies the entire understanding of the
parties.
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IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement on the day and year first above written.
EXCELSIOR ABSOLUTE RETURN FUND
OF FUNDS MASTER FUND, LLC
By:
----------------------------
Attest: Name: Xxxxxxx Xxxxxxxx
Title: Principal Manager
--------------------
U.S. TRUST HEDGE FUND MANAGEMENT,
INC.
By:
----------------------------
Attest: Name:
Title:
--------------------
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