INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT, made as of the ___th day of [ ], 2003, by and between
THE BANK OF NEW YORK, on behalf of BNY INVESTMENT ADVISORS, a division of The
Bank of New York ("the Adviser"), and IVY ASSET MANAGEMENT CORP., a Delaware
corporation ("Ivy").
RECITAL
WHEREAS, Xxx Xxxx/Short Hedge Fund LLC, a Delaware limited
liability company (the "Fund"), is registered under the Investment Company Act
of 1940, as amended (the "Investment Company Act"), with the Securities and
Exchange Commission (the "Commission") as a closed- end management investment
company;
WHEREAS, the Adviser has entered into an Investment Management
Agreement with the Fund dated as of [ ], 2003 (the "Investment Management
Agreement"), pursuant to which the Adviser has been appointed to serve as the
investment adviser of the Fund and pursuant to which the Adviser is authorized
to retain investment subadvisers affiliated with the Adviser to provide any or
all of the services required to be provided by the Adviser under the Investment
Management Agreement, subject to the supervision of the Adviser;
WHEREAS, Ivy is an affiliate of the Adviser that is registered
under the Investment Advisers Act of 1940, as amended (the "Advisers Act"), as
an investment adviser and engages in the business of rendering investment
advice;
WHEREAS, the Adviser desires that Ivy shall act as the investment
subadviser to the Fund pursuant to this Agreement and Ivy desires to act in such
capacity;
NOW THEREFORE, in consideration of the mutual covenants
hereinafter set forth, it is agreed by and between the parties, as follows:
1. GENERAL PROVISIONS.
The Adviser hereby appoints Ivy to render to the Adviser, with
respect to the Fund, investment research and advisory services as set forth
below in Section 2, under the supervision of the Adviser and subject to the
approval and direction of the Fund's Board of Managers (the "Board"), and Ivy
hereby accepts such appointment, subject to the terms and conditions contained
herein. Ivy shall, for purposes of this Agreement, be deemed an independent
contractor and shall not have, except as expressly provided or authorized
herein, any authority to act for or represent the Adviser or the Fund in any way
or otherwise to serve as or to be deemed an agent of the Fund. Ivy shall, in all
matters, give to the Adviser, the Fund and the Board the benefit of its best
judgment, effort, advice and recommendations and shall at all times, conform to
and use its best efforts to enable the Adviser and the Fund to conform to (i)
the provisions of the Investment Company Act and any rules or regulations
thereunder; (ii) any other applicable provisions of state or Federal law; (iii)
the provisions of the limited liability company agreement of the Fund, as
amended from time to time (the "LLC Agreement"); (iv) policies and
determinations of the Board, (v) the investment policies and investment
restrictions of the Fund
as reflected in the registration statement of the Fund under the Investment
Company Act or as such policies may, from time to time, be amended; and (vi) the
prospectus and statement of additional information of the Fund in effect, as
they may be amended from time to time. The appropriate officers and employees of
Ivy shall be available upon reasonable notice for consultation with any members
of the Board or officers of the Fund or the Adviser with respect to any matters
dealing with the business and affairs of the Fund including, without limitation,
review of the general investment strategy of the Fund, economic considerations
and general conditions affecting the marketplace.
2. DUTIES OF IVY AND THE ADVISER.
(a) Duties of Ivy.
Ivy shall regularly provide investment advice with respect to the
Fund and shall, subject to the terms of this Agreement, continuously
supervise the investment and reinvestment of cash, securities and
instruments or other property comprising the assets of the Fund, and
in furtherance thereof, Ivy's duties and authority shall include:
(A) Selecting alternative asset managers ("Portfolio
Managers") with whom to invest the Fund's assets, either through
private investment partnerships and other investment vehicles
that they manage ("Portfolio Funds") or directly through separate
managed accounts or separate investment vehicles managed by a
Portfolio Manager and in which the Fund is the only investor
("Portfolio Accounts"), on the basis of various criteria relating
to their skills and ability to execute their investment programs,
consistent with the Fund's overall investment objective and
strategies; provided, however, that the Fund's participation in
Portfolio Accounts will be subject to approval at least annually
by the Board or by the holders of a "majority of the outstanding
voting securities of the Fund," as defined in the Investment
Company Act, subject in such case to the approval by the majority
of the Managers who are not parties to this Agreement or
"interested persons," as defined in the Investment Company Act
and the rules thereunder, of any such party, by vote cast in
person at a meeting called for the purpose of voting on such
approval;
(B) determining how the Fund's assets should be allocated
among the Portfolio Managers and regularly reporting on the
Fund's portfolio holdings to the Adviser and, at the request of
the Adviser, to the Board;
(C) obtaining and evaluating pertinent information about
significant developments and economic, statistical and financial
data, domestic, foreign or otherwise, whether affecting the
economy generally or the Fund, and whether concerning the
Portfolio Managers or the activities in which such Portfolio
Managers engage; and
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(D) taking such actions incident to implementation of the
Fund's investment program, or as otherwise directed by the
Adviser, including: (i) executing investment advisory,
subscription, and such other agreements in connection with
investing the Fund's assets in Portfolio Funds or Portfolio
Accounts; (ii) transmitting withdrawal requests to Portfolio
Funds and Portfolio Accounts, either at the request of the
Adviser in connection with periodic repurchases of member
interests in the Fund ("Interests") by the Fund or as part of
Ivy's investment program; and (iii) such other actions as Xxx
xxxxx necessary or appropriate in executing its duties under this
Agreement.
(E) Nothing in this Agreement shall prevent Ivy or any
affiliate thereof from acting as investment adviser for any other
person, firm, fund, corporation or other entity and shall not in
any way limit or restrict Ivy, or any of its affiliates, or their
respective directors, officers, stockholders or employees from
buying, selling or trading any securities or other investments
for its or their own account or for the account of others for
whom it or they may be acting, provided that such activities do
not adversely affect or otherwise impair the performance by Ivy
of its duties and obligations under this Agreement and under the
Advisers Act and further provided that such activities do not
violate any provisions of the code of ethics of Ivy governing
personal securities trading by persons who are "access persons"
or "covered persons," as defined by such code, of the Fund.
(b) Duties of the Adviser.
Without limiting the obligations of Ivy under this Agreement, the
Adviser shall monitor the investment program maintained by Ivy for the Fund to
ensure that the Fund's assets are invested in compliance with this Agreement and
consistent with the investment objective and investment policies of the Fund as
recited in its prospectus and statement of additional information, as each may
be amended from time to time.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) Representations, Warranties and Covenants of Ivy.
(A) Ivy is now, and will continue to be, a corporation duly
formed and validly existing under the laws of its jurisdiction of
formation, fully authorized to enter into this Agreement and carry out
its duties and obligations hereunder.
(B) Ivy is registered as an investment adviser with the
Commission under the Advisers Act. Ivy shall maintain such
registration in effect at all times during the term of this Agreement.
(C) Ivy at all times shall provide its best judgment and effort
to the Adviser and the Fund in carrying out its obligations hereunder.
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(b) Other Covenants. Ivy further agrees that:
(A) as required by applicable laws and regulations, it will
maintain books and records with respect to the Fund's securities
transactions and it will furnish to the Adviser and to the Board such
periodic and special reports as the Adviser or the Board may
reasonably request; and
(B) it will treat confidentially and as proprietary information
of the Fund all records and other information relative to the Fund,
and will not use records and information for any purpose other than
performance of its responsibilities and duties hereunder, except after
prior notification to and approval in writing by the Adviser or the
Fund or when so requested by the Adviser or the Fund, or required by
law or regulation.
(c) Representations, Warranties and Covenants of the Adviser.
(A) The Adviser is now, and will continue to be, duly organized
and in good standing under the laws of its state of incorporation,
fully authorized to enter into this Agreement and to carry out its
duties and obligations hereunder.
(B) The Adviser is registered as an investment adviser with the
Commission under the Advisers Act. The Adviser shall maintain such
registration in effect at all times during the term of this Agreement.
(C) The Adviser at all times shall provide its best judgment and
effort to the Fund in carrying out its obligations hereunder.
4. CONTROL BY THE BOARD.
Any investment program undertaken by Ivy pursuant to this
Agreement, as well as any other activities undertaken by Ivy with respect to the
Fund, shall at all times be subject to any directives of the Adviser and the
Board.
5. BOOKS AND RECORDS.
(a) Ivy agrees that all records that it maintains for the Fund,
on behalf of the Adviser, are the property of the Fund and further
agrees to surrender promptly to the Fund or to the Adviser any of such
records upon request. Ivy further agrees to preserve for the periods
prescribed by applicable laws, rules and regulations all records
required to be maintained by Ivy on behalf of the Adviser under such
applicable laws, rules and regulations, or such longer period as the
Adviser may reasonably request from time to time.
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6. COMPENSATION OF IVY.
In consideration of the services provided by Ivy under this
Agreement, the Adviser will pay Ivy a monthly fee equal to 50% of the amount of
the Management Fee received by the Adviser pursuant to the Investment Management
Agreement.
7. ALLOCATION OF EXPENSES.
Ivy shall pay the expenses incurred by it in providing services
under this Agreement, including, but not limited to, the salaries, employment
benefits and other related costs of those of its personnel engaged in providing
investment advice to the Fund hereunder, including, without limitation, office
space, office equipment, telephone and postage costs and other expenses.
8. USE OF NAME "IVY."
Ivy hereby grants to the Fund a royalty-free, non-exclusive
license to use the name "Ivy" in the name of the Fund for the duration of this
Agreement and any extensions or renewals thereof. Such license may, upon
termination of this Agreement, be terminated by Ivy, in which event the Fund
shall promptly take whatever action may be necessary to change its name and
discontinue and further use of the name "Ivy" in the name of the Fund or
otherwise. The name "Ivy" may be used or licensed by Ivy in connection with any
of its activities, or licensed by Ivy to any other party.
9. DURATION.
This Agreement will take effect on the date first set forth
above. Unless earlier terminated pursuant to paragraph 12 hereof, this Agreement
shall remain in effect for a period of two (2) years from such date and
thereafter from year to year, so long as such continuance shall be approved at
least annually by the Board or by the holders of a "majority of the outstanding
voting securities of the Fund," as defined in the Investment Company Act and the
rules thereunder, and provided that in either event such continuance is also
approved by the majority of the Managers who are not parties to this Agreement
or "interested persons," as defined in the Investment Company Act and the rules
thereunder, of any such party, by vote cast in person at a meeting called for
the purpose of voting on such approval.
10. LIABILITY OF IVY.
In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties hereunder on the part
of Ivy or any of its officers, directors or employees, Ivy shall not be liable
to the Adviser for any act or omission in the course of, or connected with,
rendering services hereunder or for any losses that may be sustained in the
purchase, holding or sale of any interest in a Portfolio Fund or allocation to
any Portfolio Manager.
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11. ASSIGNMENT OR AMENDMENT.
Any amendment to this Agreement shall be in writing and shall be
subject to: (i) the approval of the Board, including the vote of a majority of
the Managers who are not "interested persons," as defined by the Investment
Company Act and the rules thereunder, of the Fund; (ii) the affirmative vote or
written consent of the holders of a "majority of the outstanding voting
securities of the Fund," as defined by the Investment Company Act, to the extent
such a vote of security holders is required by the Investment Company Act. This
Agreement shall automatically and immediately terminate in the event of its
"assignment," as defined by the Investment Company Act and the rules thereunder.
12. TERMINATION.
This Agreement may be terminated (i) by Ivy at any time without
penalty upon sixty days' written notice to the other party and the Fund (which
notice may be waived by the Fund); or (ii) by the Fund at any time without
penalty upon sixty days' written notice to Ivy and the Adviser (which notice may
be waived by the Adviser), provided that such termination by the Fund shall be
directed or approved by the Board or by the vote of the holders of a "majority
of the outstanding voting securities of the Fund," as defined by the Investment
Company Act and the rules thereunder.
13. NOTICES.
Any notice or other communication required to be or that may be
given hereunder shall be in writing and shall be delivered personally,
telecopied, sent by certified, registered or express mail, postage prepaid or
sent by national next-day delivery service and shall be deemed given when so
delivered personally or telecopied, or if mailed, two days after the date of
mailing, or if by next-day delivery service, on the business day following
delivery thereto:
(a) If to the Adviser, to:
BNY Investment Advisors
Xxx Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: [Name of Contact]
Telecopier: 000-000-0000
(b) If to Ivy, to:
Ivy Asset Management Corp.
000 Xxxxxxx Xxxxxx
Xxxxxx Xxxx, Xxx Xxxx 00000
Attention: ____________
------------
Telecopier: 000-000-0000
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14. QUESTIONS OF INTERPRETATION.
This Agreement shall be governed by and construed in accordance
with the laws of the State of New York and the provisions of the Investment
Company Act. To the extent the law of the State of New York, or any of the
provisions herein, conflict with the provisions of the Investment Company Act,
the latter shall control.
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THE BANK OF NEW YORK, on behalf of
BNY INVESTMENT ADVISORS
By:
---------------------------------
Name:
Title:
IVY ASSET MANAGEMENT CORP.
By:
---------------------------------
Name:
Title:
The provisions of Section 8 are hereby agreed to and accepted.
XXX XXXX/SHORT HEDGE FUND LLC
By:
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Name:
Title:
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