MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT is made the __ day of [ ], 2003, by and
between Excelsior Absolute Return Fund of Funds, LLC, a Delaware limited
liability company (the "Company"), and U.S. Trust Hedge Fund Management, Inc., a
North Carolina corporation ("HFM").
WHEREAS, the Company is registered with the Securities and Exchange
Commission (the "Commission") under the Investment Company Act of 1940, as
amended (the "1940 Act"), as a closed-end, non-diversified management investment
company, and HFM is an investment adviser registered as such under with the
Commission under the Investment Advisers Act of 1940; and
WHEREAS, the Company desires to retain HFM to provide various
management and administrative services to the Company pursuant to this
Agreement; and
WHEREAS, HFM desires to be retained to provide various management
and administrative services to the Company pursuant to this Agreement;
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed, by and between the parties, as follows:
1. The Company hereby retains HFM to:
(a) provide, and HFM hereby agrees to provide, certain
management, administrative and other services to the Company. Notwithstanding
the appointment of HFM to provide such services hereunder, the Board shall
remain responsible for supervising and controlling the management, business and
affairs of the Company. The management, administrative and other services to be
provided by HFM shall include:
(i) providing office space, telephone and utilities;
(ii) providing administrative and secretarial, clerical and
other personnel as necessary to provide the services
required to be provided under this Agreement;
(iii) supervising the entities which are retained by the
Company to provide administration, custody and other
services to the Company;
(iv) handling investor inquiries regarding the Company and
providing investors with information concerning their
investments in the Company and capital account balances;
(v) monitoring relations and communications between
investors and the Company;
(vi) assisting in the drafting and updating of disclosure
documents relating to the Company and assisting in the
preparation of offering materials;
(vii) maintaining and updating investor information, such as
change of address and employment;
(viii) assisting in the preparation and mailing of investor
subscription documents and confirming the receipt of
such documents and funds;
(ix) assisting in the preparation of regulatory filings
with the Securities and Exchange Commission and state
securities regulators and other Federal and state
regulatory authorities;
(x) preparing reports to and other informational materials
for members and assisting in the preparation of proxy
statements and other member communications;
(xi) monitoring compliance with regulatory requirements and
with the Company's investment objective, policies and
restrictions as established by the Board;
(xii) reviewing accounting records and financial reports of
the Company, assisting with the preparation of the
financial reports of the Company and acting as liaison
with the Company's accounting agent and independent
auditors;
(xiii) assisting in the preparation and filing of tax
returns;
(xiv) coordinating and organizing meetings of the Board and
meetings of the members of the Company, in each case
when called by such persons;
(xv) preparing materials and reports for use in connection
with meetings of the Board;
(xvi) maintaining and preserving those books and records of
the Company not maintained by any Sub-advisers (as
defined in Paragraph 2 below) of the Company or the
Company's administrator, accounting agent or custodian
(which books and records shall be the property of the
Company and maintained and preserved as required by
the 1940 Act and the rules thereunder and shall be
surrendered to the Company promptly upon request);
(xvii) reviewing and arranging for payment of the expenses of
the Company;
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(xviii) assisting the Company in conducting offers to members
of the Company to repurchase member interests;
(xix) reviewing and approving all regulatory filings of the
Company required under applicable law;
(xx) reviewing investor qualifications and subscription
documentation and otherwise assisting in
administrative matters relating to the processing of
subscriptions for interests in the Company;
(xxi) providing the services of persons employed by HFM or
its affiliates who may be appointed as officers of the
Company by the Board; and
(xxii) assisting the Company in routine regulatory
examinations, and working closely with any counsel
retained to represent the members of the Board who are
not "interested persons," as defined by the 1940 Act
and the rules thereunder (the "Independent Managers")
of the Company in response to any litigation,
investigations or regulatory matters.
(b) invest excess cash of the Company as HFM, in its
discretion and subject to the investment objective and policies of the Company
and such policies as established by the Board, deems appropriate in short-term
money market securities.
(c) borrow money as HFM, in its discretion and subject to
the investment objective and policies of the Company and such policies as
established by the Board, deems necessary and appropriate for purposes of cash
management.
2. Without limiting the generality of paragraph 1 hereof, HFM
shall be authorized to open, maintain and close accounts in the name and on
behalf of the Company with brokers and dealers as it determines are appropriate;
to select and place orders with brokers, dealers or other financial
intermediaries for the execution, clearance or settlement of any transactions on
behalf of the Company on such terms as HFM considers appropriate and that are
consistent with the policies of the Company; and, subject to any policies
adopted by the Board and to the provisions of applicable law, to agree to such
commissions, fees and other charges on behalf of the Company as it shall deem
reasonable in the circumstances taking into account all such factors as it deems
relevant (including the quality of research and other services made available to
it even if such services are not for the exclusive benefit of the Company and
the cost of such services does not represent the lowest cost available) and
shall be under no obligation to combine or arrange orders so as to obtain
reduced charges unless otherwise required under the federal securities laws. HFM
may, subject to such procedures as may be adopted by the Board, use affiliates
of HFM as brokers to effect the Company's securities transactions and the
Company may pay such commissions to such brokers in such amounts as are
permissible under applicable law.
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3. Fees; Expenses
(a) In consideration for the provision by HFM of its
services hereunder, the Company will pay HFM a quarterly fee of 0.125% (0.50% on
an annualized basis) of the Company's "net assets" (the "Management Fee"). "Net
assets" shall equal the total value of all assets of the Company, less an amount
equal to all accrued debts, liabilities and obligations of the Company
calculated before giving effect to any repurchases of interests.
(b) The Management Fee will be computed based on the net
assets of the Company as of the start of business on the first business day of
each calendar quarter, after adjustment for any subscriptions effective on such
date, and will be due and payable in arrears within five business days after the
end of such calendar quarter.
(c) HFM is responsible for all costs and expenses associated
with the provision of its services hereunder. HFM shall, at its own expense,
maintain such staff and employ or retain such personnel and consult with such
other persons as may be necessary to render the services required to be provided
by HFM or furnished to the Company under this Agreement. Without limiting the
generality of the foregoing, the staff and personnel of HFM shall be deemed to
include persons employed or otherwise retained by HFM or made available to HFM.
4. The Company will, from time to time, furnish or otherwise
make available to HFM such financial reports, proxy statements, policies and
procedures and other information relating to the business and affairs of the
Company as HFM may reasonably require in order to discharge its duties and
obligations hereunder.
5. Except as provided herein or in another agreement between the
Company and HFM, the Company shall bear all of its own expenses, including: all
investment related expenses (including brokerage commissions); all costs and
expenses associated with the establishment of Portfolio Accounts; any
non-investment related interest expense; fees and disbursements of any attorneys
and accountants engaged by the Company; audit and tax preparation fees and
expenses of the Company; administrative expenses and fees; custody and escrow
fees and expenses; the costs of an errors and omissions/directors and officers
liability insurance policy and a fidelity bond; the fee payable to HFM; fees and
travel-related expenses of members of the Board (the "Managers") who are not
employees of HFM or any affiliated person of HFM; all costs and charges for
equipment or services used in communicating information regarding the Company's
transactions among HFM and any custodian or other agent engaged by the Company;
any extraordinary expenses; and such other expenses as may be approved from time
to time by the Board.
6. The compensation provided to HFM pursuant to paragraph 3(a)
hereof shall be the entire compensation for the services provided to the Company
and the expenses assumed by HFM under this Agreement.
7. HFM will use its best efforts in the supervision and
management of the investment activities of the Company and in providing services
hereunder, but in the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations hereunder, HFM, its
directors, officers or employees and its affiliates, successors or other legal
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representatives (collectively, the "Affiliates") shall not be liable to the
Company for any error of judgment, for any mistake of law, for any act or
omission by HFM or any of the Affiliates or by any Sub-Adviser or Sub-Manager or
for any loss suffered by the Company.
8. (a) The Company shall indemnify HFM and its directors,
officers or employees and their respective affiliates, executors, heirs,
assigns, successors or other legal representatives (each an "Indemnified
Person") against any and all costs, losses, claims, damages or liabilities,
joint or several, including, without limitation, reasonable attorneys' fees and
disbursements, resulting in any way from the performance or non-performance of
any Indemnified Person's duties with respect to the Company, except those
resulting from the willful malfeasance, bad faith or gross negligence of an
Indemnified Person or the Indemnified Person's reckless disregard of such
duties, and in the case of criminal proceedings, unless such Indemnified Person
had reasonable cause to believe its actions unlawful (collectively, "disabling
conduct"). Indemnification shall be made following: (i) a final decision on the
merits by a court or other body before which the proceeding was brought that the
Indemnified Person was not liable by reason of disabling conduct or (ii) a
reasonable determination, based upon a review of the facts and reached by (A)
the vote of a majority of the Managers who are not parties to the proceeding or
(B) legal counsel selected by a vote of a majority of the Board in a written
advice, that the Indemnified Person is entitled to indemnification hereunder.
The Company shall advance to an Indemnified Person (to the extent that it has
available assets and need not borrow to do so) reasonable attorneys' fees and
other costs and expenses incurred in connection with defense of any action or
proceeding arising out of such performance or non-performance. HFM agrees, and
each other Indemnified Person will agree as a condition to any such advance,
that in the event the Indemnified Person receives any such advance, the
Indemnified Person shall reimburse the Company for such fees, costs and expenses
to the extent that it shall be determined that the Indemnified Person was not
entitled to indemnification under this paragraph 8.
(b) Notwithstanding any of the foregoing to the contrary, the
provisions of this paragraph 8 shall not be construed so as to relieve the
Indemnified Person of, or provide indemnification with respect to, any liability
(including liability under Federal Securities laws, which, under certain
circumstances, impose liability even on persons who act in good faith) to the
extent (but only to the extent) that such liability may not be waived, limited
or modified under applicable law or that such indemnification would be in
violation of applicable law, but shall be construed so as to effectuate the
provisions of this paragraph 8 to the fullest extent permitted by law.
9. Nothing contained in this Agreement shall prevent HFM or any
affiliated person of HFM from acting as or manager for any other person, firm or
corporation and, except as required by applicable law (including Rule 17j-1
under the 1940 Act), shall not in any way bind or restrict HFM or any such
affiliated person from buying, selling or trading any securities or commodities
for their own accounts or for the account of others for whom they may be acting.
Nothing in this Agreement shall limit or restrict the right of any member,
officer or employee of HFM to engage in any other business or to devote his or
her time and attention in part to the management or other aspects of any other
business whether of a similar or dissimilar nature.
10. This Agreement will take effect on the date first set forth
above. Unless earlier terminated pursuant to this paragraph, this Agreement
shall remain in effect for a period of two (2) years from such date and shall
continue in effect from year to year thereafter, so long
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as such continuance shall be approved at least annually by the vote of a
"majority of the outstanding voting securities of the Company," as defined by
the 1940 Act and the rules thereunder, or by the Board; and provided that in
either event such continuance is also approved by a majority of the Independent
Managers, by vote cast in person at a meeting called for the purpose of voting
on such approval. The Company may at any time, without payment of any penalty,
terminate this Agreement upon sixty days' prior written notice to HFM, either by
majority vote of the Board or by the vote of a "majority of the outstanding
voting securities of the Company," as defined by the 1940 Act and the rules
thereunder. HFM may at any time, without payment of penalty, terminate this
Agreement upon sixty days' prior written notice to the Company. This Agreement
shall automatically terminate in the event of its "assignment," as defined by
the 1940 Act and the rules thereunder.
11. Any notice under this Agreement shall be given in
writing and shall be deemed to have been duly given when delivered by hand or
facsimile or five days after mailed by certified mail, post-paid, by return
receipt requested to the other party at the principal office of such party.
12. This Agreement may be amended only by the written
agreement of the parties. Any amendment shall be required to be approved by the
Board and by a majority of the Independent Managers in accordance with the
provisions of Section 15(c) of the 1940 Act and the rules thereunder. If
required by the 1940 Act, any amendment shall also be required to be approved by
the vote of a "majority of the outstanding rating securities of the Company," as
defined by the 1940 Act and the rules thereunder.
13. This Agreement shall be construed in accordance with the
laws of the State of New York and the applicable provisions of the 1940 Act. To
the extent the applicable law of the State of New York, or any of the provisions
herein, conflict with the applicable provisions of the 1940 Act, the latter
shall control.
14. The Company represents that this Agreement has been duly
approved by the Board, including the vote of a majority of the Independent
Managers, and by the vote of a "majority of the outstanding voting securities of
the Company," as defined by the 1940 Act and the rules thereunder.
15. The parties to this Agreement agree that the obligations
of the Company under this Agreement shall not be binding upon any of the
Managers, members of the Company or any officers, employees or agents, whether
past, present or future, of the Company, individually, but are binding only upon
the assets and property of the Company.
16. This Agreement embodies the entire understanding of the
parties.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement on the day and year first above written.
EXCELSIOR ABSOLUTE RETURN FUND
OF FUNDS, LLC
By: ________________________________
Attest: Name: Xxxxxxx Xxxxxxxx
Title: Presidents
___________________________
U.S. TRUST HEDGE FUND MANAGEMENT,
INC.
By: ________________________________
Attest: Name:
Title:
___________________________
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