EXHIBIT A
MANAGEMENT AGREEMENT
MANAGEMENT AGREEMENT, dated as of _________, 2000 by and between
UST Private Equity Investors Fund, 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 UST Private Equity Investors Fund, 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;
(1)
(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. The Managing
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, and (ii) that such organized group
of persons is managed at all times by authorized officers of the Managing
Investment Adviser.
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;
(2)
(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;
(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
(3)
(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 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 of 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)
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.
(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
(5)
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 of 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 fiscal quarter, a management fee equal to 1.5% per annum of the net
assets of the Company, determined as of the end of each fiscal 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 fiscal 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 10% of the
realized capital gains (net of realized capital losses and unrealized net
capital depreciation) less the aggregate amount of incentive fee payments
in prior years. 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 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
(6)
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
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
(7)
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 the vote of a
majority of the Board of Directors who are not parties to this Agreement or
interested persons if any such party 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.
(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 affiliate is under the common control of U.S.
Trust Corporation; (iii) the assumption will not result in a change of
actual control or management of the Investment Adviser and (iv) the
assumption of the Investment Adviser's obligations by the affiliate is
approved by the Board of Directors 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 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.
(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.
(8)
14. Notices. All notices and other communications hereunder
shall be in writing or by confirm in telegraph, 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)
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.
UST PRIVATE EQUITY INVESTORS FUND, INC.
By: _____________________________________
Name:
Title: President
UNITED STATES TRUST COMPANY
OF NEW YORK
By: _____________________________________
Name:
Title:
