INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT (the "Agreement"), dated as
of____ __, 2000 by and between Excelsior Venture Investors III, LLC, a
Delaware limited liability company (the "Company") and U.S. Trust Company,
a Connecticut state chartered bank and trust company (the "Investment
Adviser").
W I T N E S S E T H
WHEREAS, the Company has been organized as a Delaware limited
liability company to engage in the business of a closed-end management
investment company, and has registered as an investment company under the
Investment Company Act of 1940, as amended; and
WHEREAS, the Company seeks to retain U.S. Trust Company to
provide certain investment advisory and administrative services; and
WHEREAS, U.S. Trust Company 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 Company hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms
have the meanings set forth below:
(a) "Board of Managers" means the board of managers of
the Company;
(b) "Company" means Excelsior Venture Investors III, LLC;
(c) "Disabling Conduct" means, on the part of the
Investment Adviser, any willful misfeasance, bad faith, or gross negligence
in the performance of its duties owed to the Company, or reckless disregard
of its obligations and duties owed to the Company;
(d) "Disinterested Manager" has the meaning set forth in
Section 12 hereof;
(e) "Exchange Act" means the Securities Exchange Act of
1934, as amended;
(f) "Indemnified Person" has the meaning set forth in
Section 12 hereof;
(g) "Investment Adviser" means U.S. Trust Company;
(h) "Investment Company Act" means the Investment Company
Act of 1940, as amended;
(i) "Manager" means any member of the Board of Managers;
(j) "Operating Agreement" means the Limited Liability
Company Operating Agreement of the Company;
(k) "Portfolio" means Excelsior Venture Partners III,
LLC;
(l) "Registration Statement" means the Registration
Statement of the Company under the Securities Act and the Investment
Company Act (File No. 333-38550);
(m) "Securities Act" means the Securities Act of 1933, as
amended;
(n) "Unit" has the meaning set forth in the Operating
Agreement.
2. Appointment. The Company hereby appoints U.S. Trust Company
to act as the investment adviser to the Company for the period and on the
terms set forth in this Agreement. U.S. Trust Company accepts such
appointment and agrees to be responsible for finding, evaluating and
monitoring the Company's investments and assisting in the administration of
the Company's affairs, for the compensation provided by this Agreement.
Notwithstanding anything to the contrary in this Agreement, without the
approval of the Managers, the Investment Adviser may not cause the Company
to purchase any securities other than interests in the Portfolio and U.S.
Government securities.
The Investment Adviser may, in its discretion, provide such
services through its own employees or the employees of one or more
affiliated companies that are qualified to act as investment adviser to the
Company under applicable law and are under the common control of U.S. Trust
Corporation provided: (i) that all persons, when providing services
hereunder, are functioning as part of an organized group of persons; (ii)
the use of an affiliate's employees does not result in a change of actual
control or management of the investment adviser; and (iii) the use of an
affiliate's employees has been approved by the Board of Managers of the
Company.
3. Duties of the Investment Adviser. Subject to the direction
and control of the Board of Managers, the 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, monitor and dispose of the
Company's investments;
(c) RESERVED;
(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;
(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 Investment Adviser or the Company;
(g) provide valuations with respect to the securities
held by the Company consistent with the Company's valuation policies and
procedures as in effect from time to time;
(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 certain of the books and records of
the Company;
(j) assist in the administration of members' accounts and
in communications and correspondence with members;
(k) prepare or assist in the preparation of accounting,
management and other reports;
(l) conduct relations with distributors, 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 Managers concerning the investment performance of the Company,
the Investment Adviser's discharge of its responsibilities under this
Agreement and any other subject as the Company's officers or the Board of
Managers 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 Investment
Adviser shall be subject at all times to the direction and control of the
Board of Managers and shall comply with: (a) the Certificate of Formation
of the Company and the Operating Agreement, as such documents are amended
from time to time; (b) the investment objective and policies of the Company
as initially set forth in the Registration Statement as such objective and
policies may be amended from time to time with advance notice to the
Investment Adviser; (c) the applicable provisions of the Investment Company
Act and the applicable regulations thereunder; (d) any other applicable
laws or regulations; and (e) such other limitations as the Board of
Managers may adopt.
5. Delegation. In performing its duties under this Agreement
and assuming the obligations set forth herein, the Investment Adviser may,
at its own expense and subject to the requirements of the Investment
Company Act, employ certain of its affiliates or other entities; provided
that the 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 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 Investment Adviser
shall 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
Investment Adviser shall use its best efforts to obtain 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 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 Investment Adviser exercises investment
discretion. The 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
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 of
the Investment Adviser with respect to the accounts as to which it
exercises investment discretion.
(b) the 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 Managers. 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 Managers
periodically shall review the commissions paid by the Company to determine
whether those commissions were reasonable in relation to the brokerage and
research services received. In addition, the Board of Managers, in its
discretion, may instruct the 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 Managers, if it determines that the use of such
brokers and/or dealers is in the best interest of the Company.
(d) When the 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 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
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 Investment Adviser in a manner that is
equitable and consistent with applicable law and regulations, any
guidelines adopted by the Board of Managers and with its obligations to the
Company and to such other customers. The Investment Adviser shall not be
obligated to make any particular opportunity available to the Company, but
shall seek to allocate investment opportunities in a manner that it
believes to be equitable.
7. Expenses.
(a) The 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 Investment Adviser shall pay the salaries and fees of all
officers and employees of the Company performing services related to the
Investment Adviser's duties under this Agreement.
(b) It is understood that the Company will pay all of its
expenses and liabilities, including fees and expenses of the Managers; fees
and expenses of the Investment Adviser; fees and expenses of registering
the Company's Units 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 Company's administrator, transfer
agent and custodian; expenses of printing and mailing Unit certificates,
reports to members, notices to members 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 and other trade associations; expenses of fidelity bonding and
other insurance premiums; expenses of members' meetings; fees payable to
the National Association of Securities Dealers, Inc., if any, in connection
with the offering of the Company's Units; indemnification costs and
expenses; fees and expenses of counsel to the members of the Board of
Managers that are not interested persons of the Company (within the meaning
of the Investment Company Act) and the Company's other business and
operating expenses.
8. Compensation of the Investment Adviser. In consideration of
the services to be rendered by the Investment Adviser under this Agreement,
the Company shall pay the Investment Adviser a fee at the annual rate of
0.1% of the average quarterly net assets of the Company that are not
represented by interests in the Portfolio determined as of the end of each
fiscal quarter.
9. Services to Others. The services of the Investment Adviser
to the Company are not to be deemed exclusive and the Investment Adviser is
free to render services to others and to engage in other activities;
provided, however, that those services and activities do not adversely
affect the Investment Adviser's ability to perform its obligations under
this Agreement.
10. Books, Records, and Information. The Investment Adviser
shall provide the Company with all records concerning the 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 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 Managers,
including information required for the Company's filings with the
Securities and Exchange Commission and state securities commissions.
11. Limitations on Liability.
(a) The Investment Adviser hereby is notified expressly
of the limitation of Managers' liability as set forth in the Operating
Agreement 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 Investment Adviser shall not seek satisfaction of
any such obligation from any Manager of the Company.
(b) The 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 Investment Adviser
shall not be liable to the Company or to any member of the Company or any
other person 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 Investment
Adviser, its affiliates and each of their officers, directors, employees,
members and agents (each an "Indemnified Person") against, and hold each of
them harmless from, any and all losses, claims, damages, liabilities or
expenses (including reasonable counsel fees and expenses) incurred by any
of them in connection with or resulting from the actions or inactions of
any Indemnified Person in connection with the performance of or under this
Agreement not resulting from Disabling Conduct by the respective
Indemnified Person. 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 Indemnified Person 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
Indemnified Person was not liable by reason of Disabling Conduct by (a) the
vote of a majority of a quorum of Managers of the Company who are not
"interested persons" of the Investment Adviser ("Disinterested Managers")
or (b) independent legal counsel in a written opinion. The Indemnified
Person 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 Delaware Limited Liability Company Act. The
Indemnified Person 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 Indemnified Person
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 Managers, 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
Indemnified Person will ultimately be found to be entitled to
indemnification.
No provision of this Agreement shall be construed to protect
any Indemnified Person from liability in violation of Section 17(h) or (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 Managers 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 Managers.
(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 Managers or by vote of a majority of the outstanding voting
securities of the Company, on 60 days' written notice to the Investment
Adviser; or (ii) the Investment Adviser, on 90 days' written notice to the
Company. This Agreement shall terminate immediately in the event of its
assignment.
(c) An affiliate of the Investment Adviser may assume the
Investment Adviser's obligations under this Agreement provided that: (i)
the affiliate is qualified to act as an investment adviser to the Company
under applicable law; (ii) the assumption will not result in a change of
actual control or management of the investment adviser; and (iii) the
assumption of the Investment Adviser's obligations by the affiliate is
approved by the Board of Managers of the Company.
(d) 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 Managers 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.
(e) 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 the Investment
Adviser, to: U.S. Trust Company, 000 Xxxx Xxxxx Xxxx, Xxxxxxxx, Xxxxxxxxxxx
00000 or (b) if to the Company, to: Excelsior Venture Investors III, LLC,
000 X. 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, 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.
IN WITNESS WHEREOF, the Company and the 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 VENTURE INVESTORS III, LLC
By:
---------------------------------------------
Name: Xxxxx X. Xxxx
Title: President and Co-Chief Executive
Officer
U.S. TRUST COMPANY
By:
---------------------------------------------
Name:
Title:
