MANAGEMENT AGREEMENT
This MANAGEMENT AGREEMENT is made as of the ______ day of
______, 2000 by and between XXXXXXX GROWTH TRUST II, a Delaware business trust
(the "Trust"), and XXXXXXX XXXXXX & COMPANY PLANNING, INC., an Iowa corporation
(hereinafter referred to as the "Trust Advisor").
RECITALS
WHEREAS, the Trust is a business trust organized under The
Delaware Business Trust Act, as amended, and has made an election to be
regulated as a business development company under the Investment Company Act of
1940, as amended (hereinafter referred to as the "Investment Company Act"); and
WHEREAS, the Trust Advisor is an investment adviser under the
Investment Advisers Act of 1940, as amended; and
WHEREAS, the Trust desires to retain the Trust Advisor to
render management, administrative and certain investment advisory services to
the Trust in the manner and on the terms hereinafter set forth; and
WHEREAS, the Trust Advisor is willing to serve as the
investment adviser to the Trust and to provide management, administrative and
investment advisory services to the Trust on the terms and conditions
hereinafter set forth.
TERMS
NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained, the Trust and the Trust Advisor hereby agree as
follows:
1. DUTIES OF THE TRUST ADVISOR. The Trust hereby employs
the Trust Advisor to furnish, or arrange for affiliates of the Trust Advisor
to furnish, the management, administrative and investment advisory services
described below and as described in the Prospectus ("Prospectus") of the
Trust, subject to the general supervision and review of the Management Board
of the Trust for the period and on the terms and conditions set forth in this
Agreement. The Management Board consists of the Trust Advisor and the
Independent Trustees appointed pursuant to the terms and conditions of the
Declaration of Trust ("the Declaration") for the Trust, as amended. The Trust
Advisor hereby accepts such employment and agrees during such period, at its
own expense, to render, or arrange for the rendering of, such services and to
assume the obligations herein set forth for the compensation provided for
herein.
(a) MANAGEMENT SERVICES. The Trust Advisor shall
perform or arrange for the performance of the management and administrative
services necessary for the operation of the Trust, including providing
managerial assistance to portfolio companies of the Trust, as shall be
necessary for the operation of the Trust. The Trust Advisor shall also
perform services related to administering the accounts and handling relations
with all holders of beneficial interests in the Trust. The Trust Advisor
shall provide the Trust with office space, equipment and facilities and such
other services as the Trust Advisor shall from time to time determine to be
necessary or useful to perform its obligations under this Agreement. The
Trust Advisor shall also, on behalf of the Trust, conduct relations with
custodians, depositories, transfer agents, other shareholder service agents,
accountants, attorneys, underwriters, brokers and dealers, corporate
fiduciaries, insurers,
banks and such other persons in any such other capacity deemed to be necessary
or desirable. The Trust Advisor shall report to the Board as to its performance
of obligations hereunder and shall furnish advice and recommendations with
respect to such other aspects of the business and affairs of the Trust as the
Trust Advisor shall determine to be desirable.
(b) INVESTMENT ADVISORY SERVICES. Pursuant to the
Declaration, the Trust Advisor is responsible for providing investment
advisory services in connection with the Trust's investments (such
investments being referred to herein as the "Investments"). The Trust Advisor
shall also provide the Trust with such investment research, advice and
supervision as the latter may from time to time consider necessary for the
proper supervision of the Investments, and shall advise Management of the
investment program for the Investments and shall determine from time to time
which Investments shall be purchased, sold or exchanged and what portion of
the Trust's assets shall be held in various money market securities or cash,
subject always to any restrictions of the Declaration, as amended from time
to time, the provisions of the Investment Company Act and the Trust's
investment objectives, investment policies and investment restrictions as the
same are set forth in the reports filed by the Trust under the Securities
Exchange Act of 1934, as amended. The Trust Advisor shall also make
determinations with respect to the manner in which voting rights, rights to
consent to corporate action and any other rights pertaining to the Trust's
Investments shall be exercised. The Trust Advisor shall take, on behalf of
the Trust, all actions it deems necessary to implement its investment
policies. Subject to the provisions of the Investment Company Act and other
applicable provisions of law, the Trust Advisor may select brokers or dealers
with which it or the Trust is affiliated to effect the purchase or sale of
Investments. The Trust Advisor, in its sole discretion, may engage
professionals, consultants and other persons whose expertise or
qualifications may assist the Trust Advisor or the Trust in connection with
the Trust's business and, if such persons are not affiliated with the Trust
Advisor, may treat the costs and expenses so incurred as a Trust expense.
2. ALLOCATION OF CHARGES AND EXPENSES.
(a) THE TRUST ADVISOR. The Trust Advisor assumes
and shall pay those expenses specifically required to be paid by the Trust
Advisor, as set forth in the Prospectus.
(b) THE TRUST. The Trust assumes and shall pay or
cause to be paid (or, to the extent paid by the Trust Advisor, reimbursed)
all other expenses of the Trust not expressly required by the Prospectus to
be paid by the Trust Advisor.
3. COMPENSATION OF THE TRUST ADVISOR.
(a) MANAGEMENT FEE. For the services rendered, the
facilities furnished and the expenses assumed by the Trust Advisor, the Trust
shall pay to the Trust Advisor a Management Fee as set forth in the
Prospectus. Such fee is payable monthly in arrears. To the extent that the
Trust does not have cash or readily marketable securities in an amount
sufficient to pay the management fee, the Trust will accrue such fee as a
liability and pay the accrued fee at such time as it has sufficient cash
available to it. The accrued fee will be treated as a loan from the Trust
Advisor to the Trust, provided the terms of such loan, including the interest
to be paid, shall be no less favorable to the Trust that those that are
generally available from unaffiliated third parties, and such loan must be
approved by a majority of the Independent Trustees. The Management Fee
otherwise payable to the Trust Advisor shall be reduced by the amount of any
fees received by the Trust Advisor for the same period for services rendered
to a small business investment company subsidiary of the Trust.
2
(b) OTHER FEES. As set forth in the Prospectus, if
the Trust Advisor or an affiliate may legally perform brokerage services in
connection with the acquisition or disposition of Trust investments, the
entity providing those services will be entitled to up to the maximum legal
brokerage fee (currently up to 2% of the gross proceeds of the acquisition or
disposition).
(c) EXPENSE LIMITATIONS. If the operating expenses
of the Trust, including amounts payable to the Trust Advisor pursuant to
subsection (a) hereof, for any fiscal year ending on a date on which this
Agreement is in effect, exceed any expense limitations applicable to the
Trust imposed by applicable federal or state securities laws or regulations
thereunder, as such limitations may be raised or lowered from time to time,
the Trust Advisor shall reduce its Management Fee hereunder by the extent of
such excess and, if required pursuant to any such laws or regulations, will
reimburse the Trust in the amount of such excess; PROVIDED, however, to the
extent permitted by law, there shall be excluded from such expenses the
amount of any interest, taxes, portfolio transaction costs and extraordinary
expenses (including but not limited to legal claims and liabilities and
litigation costs and any indemnification related thereto) paid or payable by
the Trust. Whenever the expenses of the Trust exceed a pro rata portion of
the applicable annual expense limitations, the estimated amount of
reimbursement under such limitations shall be applicable as an offset against
the monthly payment of the fee due to the Trust Advisor. Should two or more
such expense limitations be applicable as at the end of the last business day
of the month, that expense limitation which results in the largest reduction
in the Trust Advisor's management fee shall be applicable. Notwithstanding
the foregoing, the expenses reimbursed to the Trust Advisor shall not exceed
the actual cost of providing such services, provided such actual cost shall
not exceed the cost that is competitive with that charged for comparable
administrative services in the same geographic area by unrelated third
parties.
4. TRUST ADVISOR'S INTEREST IN MANAGEMENT SHARE. The
Trust Advisor shall have the interest in the Management Share as is described
in the Prospectus and the Declaration.
5. LIMITATION OF LIABILITY OF THE TRUST ADVISOR.
(a) GOOD FAITH. The provisions of Section 3.6 of
the Declaration are hereby incorporated by reference into this Agreement. The
liability of the Trust Advisor and its officer, directors and employees to
the Trust shall be limited hereunder to the extent limited by Section 3.6 of
the Declaration.
(b) INDEMNIFICATION. The provisions of Section 3.7
of the Declaration are hereby incorporated by reference into this Agreement
and are expressly approved by the Management Board of the Trust. The Trust
Advisor shall be entitled to indemnification hereunder in each instance where
the Trust Advisor is entitled to indemnification under said Section 3.7.
3
6. ACTIVITIES OF THE TRUST ADVISOR. The services of the
Trust Advisor of the Trust to be performed under this Agreement are not
deemed to be exclusive, the Trust Advisor being free to render services to
others. It is understood that Trustees or affiliates of the Trust (other than
the Independent Trustees) and holders of beneficial interest of the Trust are
or may become interested in the Trust Advisor as directors, officers,
employees or shareholders of the Trust Advisor or otherwise and that the
Trust Advisor or its directors, officers, employees or shareholders are or
may become interested in the Trust as Trustees (other than as an Independent
Trustee), holders of beneficial interests or otherwise.
7. DURATION AND TERMINATION OF THIS CONTRACT. This
Agreement shall become effective as of the date first above written and shall
remain in force until December 31, 2011, and thereafter will continue in
effect from year to year, but only so long as such continuance is
specifically approved at least annually by (i) the Management Board of the
Trust or the vote of a majority of the outstanding voting securities of the
Trust and (ii) a majority of those Trustees of the Trust who are not parties
to this Agreement or interested persons of any such party, by a vote cast in
person at a meeting called for the purpose of voting on such approval.
Subject to the provisions of the Declaration, including
without limitation the provisions of paragraph 12.11 thereof, this Agreement
may be terminated at any time, without the payment of any penalty, by the
Management Board of the Trust or by vote of a majority of the outstanding
voting securities of the Trust, or by the Trust Advisor, on sixty days'
written notice to the other party. This Agreement shall automatically
terminate in the event of its assignment.
8. AMENDMENTS OF THIS AGREEMENT. This Agreement may be
amended by the parties only if such amendment is specifically approved by (i)
the Management Board of the Trust or the vote of a majority of the holders of
outstanding voting securities of the Trust and (ii) a majority of those
Trustees of the Trust who are not parties to this Agreement or interested
persons of any such party, by a vote cast in person at a meeting called for
the purpose of voting on such approval.
9. DEFINITIONS OF CERTAIN TERMS. The terms used in this
Agreement shall have the respective meanings specified in the Investment
Company Act and the rules thereunder, the Declaration of Trust and the
Prospectus of the Trust.
10. GOVERNING LAW. This Agreement shall be construed in
accordance with the laws of the State of Iowa and the applicable provisions
of the Investment Company Act. To the extent that the applicable laws of the
State of Iowa, or any of the provisions herein, conflict with the applicable
provisions of the Investment Company Act, the latter shall control.
[REMAINDER OF PAGE LEFT BLANK.]
4
SIGNATURE PAGE FOR MANAGEMENT AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
XXXXXXX GROWTH TRUST II
By: XXXXXXX XXXXXX & COMPANY PLANNING, INC.
Trust Advisor
By
----------------------------------
XXXXX XXXXX, President
XXXXXXX XXXXXX & COMPANY PLANNING, INC.
Trust Advisor
By
-----------------------------------------
XXXXXX X. XXXXXXX, Chief
Executive Officer
5
