ADVISORY AGREEMENT
Exhibit A.
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ADVISORY AGREEMENT, dated as of this 14th day of October, 1993 (the
"Agreement"), by and between PHARMA/wHEALTH Management Company S.A., a company
incorporated under the laws of Grand Duchy of Luxembourg (the "Management
Company"), and M and I Investors, Inc., a Delaware corporation, which will make
available the services of Messrs. Mehta and Xxxxx and their whole professional
organisation and its resources (the "Advisor").
PHARMA/wHEALTH, organized under the laws of the Grand Duchy of
Luxembourg as a mutual investment fund (fond commun de placement) (the "Fund"),
has retained the Management Company to manage the Fund's assets and appoint such
advisors in so doing, and the Management Company desires to engage the Advisor
in rendering such services to the Fund.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and for other good and valuable consideration, the
parties hereto agree as follows:
1. Appointment. The Management Company hereby appoints the Advisor to
provide investment advice and other services to it on behalf of the Fund during
the period of this Agreement and on the terms and conditions contained herein,
and the Advisor hereby accepts such appointment.
2. Duties of the Advisor. The Management Company may at any time give
the Advisor guidelines and/or directions relating to the Advisor's duties
hereunder, both in regard to the general policy of the Fund and in regard to
specific matters and, subject to the foregoing:
(a) The Advisor shall manage, under the supervision and responsibility
of the Management Company, the investment and reinvestments of the Fund's assets
and sell, redeem or exchange the same, without any rights to custody or
possession of such assets, provided that the Advisor shall observe and comply
with the Management Regulations of the Fund, all investment policies and
restrictions and other limitations set out in the Prospectus of the Fund as
amended or supplemented from time to time (the "Prospectus") and all laws and
regulations applicable to the Fund and the public sale of its shares (the
"Shares");
(b) The Advisor may enter into such contracts in the name of the Fund as
may be necessary to carry out its duties hereunder. All records relating to the
Fund's portfolio transactions maintained by the Advisor shall be made available
for inspection or audit by the Fund and the Management Company, or by a
qualified public accountant acting on their behalf or a duly appointed
representative of the Fund, both before and after termination of the Agreement.
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(c) The Advisor shall, in the event the availability of any particular
security is limited and investment in that security is in keeping with the
investment policies, guidelines and objectives of the Fund and also with the
investment policies, guidelines and objectives of one or more other funds or
client accounts for which the Advisor is responsible, treat the Fund's
requirements on a fair and equitable basis.
3. Allocation of Charges and Expenses. Each party shall bear its own
costs and expenses (including the fees and disbursements of counsel and
accountants) incurred in connection with the negotiation, preparation and
execution of this Agreement, and all matters incident thereto.
4. Compensation of Advisor. For the services rendered by the Advisor,
the Management Company shall pay to the Advisor at the end of each quarter a fee
based upon the average of the net assets of the Fund on the Valuation Dates (as
defined in the Prospectus) of the relevant quarter, as determined and computed
in accordance with the description of the determination of the net asset value
contained in the Prospectus, at the annual rate of five-eighths of one percent
(the "Fixed Fee"). Such fee will be calculated on each Valuation Date of each
quarter.
The Advisor is also entitled to receive sixty-two and one-half percent
of the twenty percent annual performance fee (the "Performance Fee") received by
the Management Company if the Fund's performance is in excess of eight percent
in any year and the Advisor shall receive seventy percent of the portion of the
Performance Fee earned for performance in excess of twenty percent in any year
and the amount, if any, payable to the Advisor shall be paid no later than 7
days after receipt by the Management Company of its Performance Fee, which will
be paid after the end of each fiscal year of the Fund.
Moreover, the Performance Fee is only paid when and if the Net Asset
Value per Share reaches a new high compared to the previous high and only on the
new excess appreciation over the previous high for the Net Asset Value per
Share. The Net Asset Value per Share will also be adjusted to reflect dividends
and other distributions.
All matters relating to the Fixed Fee and Performance Fee shall be
determined in accordance with the Prospectus.
The Management Company and the Advisor intend to enter into a deferred
fee agreement pursuant to which the Advisor may elect to defer the receipt of
all or any portion of the Fixed Fee and Performance Fee that shall become
payable to it for any year pursuant to this Section (4). To the extent such fees
are not deferred, the Management Company shall pay the Advisor's Fixed Fee and
Performance Fee to a bank account as designated in writing by and in accordance
with the instructions of the Advisor. At the option of the Advisor, such payment
shall be made to a bank account outside of the U.S. in currency other than
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U.S. dollars. The first such payments may reflect partial periods, in which case
payments with respect thereto shall be calculated on a pro rata basis in
accordance with the number of Valuation Dates occurring therein.
If this Agreement is terminated prior to the end of a calendar quarter,
the Fixed Fee to which the Advisor shall be entitled in respect of such quarter
shall be calculated on a pro rata basis in accordance with the number of
Valuation Dates in the quarter during which the Agreement was in effect. The
Performance Fee to which the Advisor shall be entitled during any such period
shall be commensurate to the contribution, as calculated by the Management
Company in its absolute discretion, of the Advisor to the total Performance Fee
for the complete year, with the exception of termination caused by paragraph
11(d) below, in which case the Advisor shall be entitled to the Performance Fee
accrued at the last Valuation Date of this Agreement and such Performance Fee
shall be paid to the Advisor after the completion of the Fiscal Year during
which the termination occurred.
5. Use of Securities Broker. The Advisor may utilize the services of
whatever independent securities brokerage firm or firms it deems appropriate to
the extent that such firms are competitive with respect to price and timeliness
of execution.
6. Limitation on Liability of the Advisor. The Advisor shall not be
liable for any error of judgment or mistake of law or for any loss arising out
of any investment or for any act or omission in the management of the Fund,
except where such error or loss results from the Advisor's willful misfeasance,
bad faith or gross negligence in the performance of its duties, or by reason of
the reckless disregard of its obligations and duties hereunder.
7. Indemnities. The Advisor agrees to indemnify the Management Company
and the Fund, and their respective directors, officers, agents, employees and
affiliates and any person who controls such persons or entities from, and to
hold each of them harmless against, any and all losses, liabilities, claims,
damages or expenses incurred by any of them arising out of or by reason of any
investigation, litigation or other proceeding brought or threatened, relating to
any breach or alleged breach of the Advisor's obligations, duties,
representations and warranties as set forth in this Agreement; including,
without limitation, amounts paid in settlement, court costs, and reasonable fees
and disbursements of counsel incurred in connection with any such pending or
threatened investigation, litigation or other proceedings.
The Management Company agrees to indemnify the Advisor and its
directors, officers, agents, employees and affiliates and any person who
controls the Advisor from, and hold each of them harmless against, any and all
losses, liabilities, claims, damages or expenses incurred by any of them arising
out of or by reason of any investigation, litigation or other proceeding brought
or threatened, relating to the offering and distribution of shares
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of the Funds ("Shares") and the Advisor's obligations and duties set forth in
this Agreement with respect to such offering and distribution of Shares
(excluding any losses, liabilities, claims, damages or expenses incurred by
reason of the breach by the Advisor of its obligations, duties, representations
or warranties hereunder or the gross negligence, bad faith or willful misconduct
of the Advisor); including, without limitation, amounts paid in settlement,
court costs, and reasonable fees and disbursements of counsel incurred in
connection with any such pending or threatened investigation, litigation or
other proceedings.
8. Representations and Warranties. (a) The Management Company hereby
represents and warrants to the Advisor as follows: the Management Company is a
company duly organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation, has the power and authority under its
Articles of Incorporation to transact the business herein contemplated and is
duly qualified and in good standing under the laws of each jurisdiction where
the conduct of its business requires, or the performance of its obligations
under this Agreement would require, and has the power and authority to execute,
deliver and perform this Agreement and all obligations required of it hereunder.
No consent of any other person including, without limitation, creditors of the
Management Company, and no license, permit, approval or authorization of,
exemption by, notice or report to, or registration, filing or declaration with,
any governmental authority, is required by the Management Company in connection
with the execution, delivery, performance, validity or enforceability of this
Agreement. This Agreement constitutes, and each instrument or document required
hereunder when executed and delivered will constitute, the legal, valid and
binding obligation of the Management Company enforceable against the Management
Company in accordance with its terms.
(b) The Advisor hereby represents and warrants to the Management Company
as follows:
(i) The Advisor is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization,
has the power and authority under its Certificate of Incorporation to own
its assets and to transact the business in which it is presently engaged
and is duly registered or exempt from registration under applicable
securities laws and has all necessary qualifications to carry out its
duties hereunder, and the Advisor covenants to use its best efforts to
maintain the same at all times to the extent required for purposes of
carrying out its duties hereunder, and shall immediately notify the
Management Company if such registration and/or qualification should lapse
or terminate for any reason whatsoever; and the Advisor has the power and
authority under its Certificate of Incorporation to execute, deliver and
perform this Agreement and all obligations required of it hereunder. This
Agreement constitutes, and each instrument or document required hereunder
when executed and delivered will constitute, the legal, valid and binding
obligation of the Advisor enforceable against the Advisor in accordance
with its
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terms. No consent of any other person including, without limitation,
stockholders or creditors of the Advisor, and no license, permit, approval
or authorization of, exemption by, notice or report to, or registration,
filing or declaration with, any governmental authority, other than those
which have been obtained or will be obtained in connection with this
Agreement, is required by the Advisor in connection with the execution,
delivery, performance, validity or enforceability of this Agreement.
(ii) All of the information provided by the Advisor, including the
information provided by it for use in the Prospectus and related documents
in connection with the sale of Shares of the Fund, is and will continue to
be accurate in all material respects and does not and will not omit any
material facts necessary in order to make the statements made, in light of
the circumstances under which they were made or shall be made, not
misleading. The Advisor agrees to provide such of the foregoing information
as may be required from time to time by the Management Company, and all
such information shall also be subject to the foregoing representation and
warranty regarding the continuous accuracy of information provided by the
Advisor.
(iii) The execution, delivery and performance of this Agreement and
the documents or instruments required hereunder will not violate any
provision of any existing law or regulation binding on the Advisor, or any
order, judgment, award or decree of any court, arbitrator or governmental
authority binding on the Advisor or its Certificate of Incorporation or of
any mortgage, indenture, lease, contract or other agreement, instrument or
undertaking to which the Advisor is a party or by which the Advisor or any
of its assets are bound, the violations of which, taken as a whole, would
have a material adverse affect on the business operations, assets or
financial condition of the Advisor, and will not result in or require the
creation or imposition of any lien on any of its property, assets or
revenues pursuant to the provisions of any such mortgage, indenture, lease,
contract or other agreement, instrument or undertaking.
9. Exclusivity. Messrs. Xxxxx Xxxxx and Xxxxxx X. Xxxxx, the Advisor and
its affiliates, partners, associates, and employees (together, for purposes of
this Section 9, the "Advisor") do not presently and will not act as an
investment adviser, subadviser and/or portfolio manager to any European fund
other than the Fund until the later of (a) three full fiscal years of the Fund
following the date hereof or (b) for one full fiscal year of the Fund after the
date of termination hereof; provided, that (i) if the Management Company
terminates this Agreement at any time for any reason other than a beach by the
Advisor or its nonperformance of its duties and obligations hereunder, or (ii)
if the Management Company is unable to perform its duties under this Agreement
for any reason other than such a beach or nonperformance by the Advisor, the
terms of this Section 9 shall not limit the activities of the Advisor after the
effective date of such termination.
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Notwithstanding the foregoing, if after a period of 24 months from the
initial Valuation Date of the Fund (the "Period") (1) the Net Asset Value per
Share of the Fund has increased by more than (a) the percentage increase, if
any, of the Mehta and Xxxxx Pharma Index ("Index") during the Period plus (b) an
increase of 3% of the Net Asset Value per Share at the Fund at the end of the
Period compared to its Net Asset Value per Share at the commencement of the
Period and (2) the Fund has achieved an annualized performance in excess of 20%
above its initial Net Asset Value per Share, then the Management Company, upon
notification by the Advisor within 60 days after the end of the Period, shall be
given a period of 12 months to use its best efforts to raise an additional $50
million in assets for the Fund or an amount which would bring total assets of
the Fund to $150 million, whichever is less. If the Management Company is unable
for any reason to raise such additional assets within such 12-month period, the
terms of this Section 9 shall not preclude the Advisor from acting as an
investment adviser, subadviser and/or portfolio manager on behalf of any
European funds other than the Fund; provided that, until December 31, 1999, the
Advisor may so act on behalf of such other European funds only if the portion of
the combined assets thereof that is invested in companies with a capitalization
of under $500 million ("smaller capitalization companies"), when added to the
assets of the Fund that are invested in smaller capitalization companies, does
not exceed $150 million.
10. Assignment. This Agreement may not be assigned by the Advisor. The
Advisor shall not delegate in any manner whatsoever its responsibilities
hereunder not engage other investment counsel in connection therewith.
11. Term and Termination. This Agreement shall be in full force and
effect for two years from the date hereof and may not be terminated by either
party during such initial two year period, except that the Management Company
may terminate this Agreement at any time, without notice or upon such notice as
is reasonable in the circumstances (in the sole discretion of the Management
Company), in the event of:
(a) a breach by the Advisor of any of its representations and warranties
contained herein or the nonperformance of its duties and obligations hereunder;
or bad faith, gross negligence or willful misconduct, of the Advisor:
(b) with respect to either the Advisor [or Mehta and Xxxxx], its
bankruptcy or insolvency, the passing of a resolution for its dissolution or the
issuance of an order for dissolution, the making of a general assignment for the
benefit of its creditors, or the failure of either Messrs. Mehta or Xxxxx to
continue to be available and participate on substantially the same basis as
currently in the activities of each such entity;
(c) in the event the Advisor fails to obtain or maintain any necessary
registration or qualification in any jurisdiction required to effect the
purposes of this Agreement; or
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(d) the failure of the Advisor for any consecutive twenty-four month
period to cause the net asset value per share of the Fund to increase by more
than (a) the increase, if any, of the Index in that period plus (b) 3% of the
closing value of the Index at the end of the period, as indicated by the Fund's
performance as calculated net of dividends on a pre-tax basis.
After the expiration of the initial two year period, this Agreement may
be terminated at any time by either the Management Company or the Advisor by
giving the other party 60 days' prior written notice of termination. Upon
termination of this Agreement, the Advisor shall not be entitled to any further
fees except those which have accrued up to the date of such termination.
Notwithstanding any termination, (i) the Advisor shall up-date and reconcile all
books and records maintained by it and submit the same and all final financial
reports relating to the management and investment of the Fund's assets promptly
to the Management Company and (ii) the provisions of Section 9 shall remain in
effect.
12. Notice. Any notice contemplated hereunder shall be in writing and
may be given by personal delivery or by sending the same by electronic or
computer communication to the party for whom it is intended. Any notice so
delivered or sent shall be effective on the date of delivery or sending, as the
case may be. Any party may give written notice of change of address in the same
manner, in which event, any notice shall thereafter be given to it, as herein
provided, at such changed address. Until changed, the addresses for notice of
the parties shall be:
if to the Management Company, at: with a copy to:
PHARMA/wHEALTH Management Kramer, Levin, Naftalis, Nessen,
Company X.X. Xxxxx & Xxxxxxx
[Address] 000 Xxxxx Xxxxxx
Xxxxxxxxx: Xxx Xxxx, XX 00000
Fax No.: Attn: Xxxx X. Xxxxxxxxx
and
if to the Advisor, at: with a copy to:
[Name of Entity] [Name of Firm]
[Address] [Address]
Attention: Attention:
Fax No.: Fax No.:
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13. Miscellaneous.
(a) Governing Law This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the
principles of the conflicts of laws thereof.
(b) Entire Agreement/Amendments This Agreement contains the entire
understanding of the parties with respect to the retention of the Advisor by the
Management Company. This Agreement may not be altered, modified, or amended
except by written instrument signed by each of the parties hereto.
(c) No Waiver The failure of a party to insist upon strict adherence to
any term of this Agreement on any occasion shall not be considered a waiver of
such party's rights or deprive such party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement.
(d) Severability In the event that any one or more of the provisions of
this Agreement shall be or become invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
of this Agreement shall not be affected thereby.
(e) Arbitration: Choice of Forum Any dispute between the parties to this
Agreement arising from or relating to the terms of this Agreement or the
retention of the Advisor by the Management Company shall be submitted to
arbitration in the City of New York under the auspices of the American
Arbitration Association. Subject to the preceding sentence, the forum of any
legal action or proceeding arising from or relating to this Agreement or such
retention shall be the State of New York and, in the case of legal actions, the
United Stares federal district court for the Southern District of New York. Any
award rendered in any arbitration pursuant to this Section 13(e) may be enforced
in any such forum. By execution and delivery of this Agreement, each of the
parties to this Agreement accepts for himself or itself the non-exclusive
jurisdiction of the aforesaid courts, and irrevocably agrees to be bound by any
judgment rendered thereby in connection with this Agreement. The Advisor and the
Management Company, agree within 30 days of the date hereof, to appoint
irrevocably respective agents as their agents to receive service of process on
their behalf in any such proceeding in any such court in the State of New York.
The foregoing consents to jurisdiction and appointments of agents to receive
service of process shall not constitute general consents to service of process
in the State of New York for any purpose except as provided above and shall not
be deemed to confer rights on any person other than the respective parties to
this Agreement.
(f) Other Arrangements It is recognized by the parties hereto that the
Bank Xxx. Xxxxxxxxx jr. & Cie. Schweiz AG, the Advisor, Messrs. Mehta and Xxxxx,
Mr.
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Xxxx X. Xxxxxxx and their respective affiliates and employees have had and will
continue to have business relationships amongst themselves which may be expanded
in the future.
(g) Counterparts This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same instrument. This Agreement shall
be effective when each of the parties has executed and delivered at least one
counterpart thereof.
(h) Headings The headings of the paragraphs and subparagraphs of this
Agreement are inserted for convenience of reference only and shall not
constitute a part hereof and shall not affect the interpretation hereof.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
M AND I INVESTORS, INC. PHARMA/wHEALTH MANAGEMENT
COMPANY S.A.
By: /s/ Xxxxxx X. Xxxxx By: /s/ Xxxx X. Xxxxxxx
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Title: President Title: Director
ATTEST: ATTEST:
/s/ Xxxxxxx X. Xxxxxxx /s/ Xxxxxxx X. Xxxxxxx
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As to Section 9 only. As to Section 9 only.
/s/ Xxxxx Xxxxx /s/ Xxxxxx X. Xxxxx
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Xx. Xxxxx Xxxxx Xx. Xxxxxx X. Xxxxx
ATTEST: ATTEST:
/s/ Xxxxxxx X. Xxxxxxx /s/ Xxxxxxx X. Xxxxxxx
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