FORM OF
MANAGEMENT AGREEMENT
BETWEEN
XXXXX XXX FLOATING RATE LIMITED LIABILITY COMPANY
AND
XXXXX XXX & FARNHAM INCORPORATED
Xxxxx Xxx Floating Rate Limited Liability Company, a Delaware limited liability
company under the Investment Company Act of 1940 ("1940 Act") as a closed-end
non-diversified management investment company ("LLC"), hereby appoints Xxxxx Xxx
& Farnham Incorporated, a Delaware corporation registered under the Investment
Advisers Act of 1940 as an investment adviser, of Chicago, Illinois ("Manager"),
to furnish investment advisory and portfolio management services with respect to
its assets represented by the shares of beneficial interest. LLC and Manager
hereby agree that:
1. Investment Management Services. Manager shall manage the investment
operations of LLC, subject to the terms of this Agreement and to the supervision
and control of LLC's Board of Managers ("Board"). Manager agrees to perform, or
arrange for the performance of, the following services for LLC:
(a) to obtain and evaluate such information relating to economies, industries,
businesses, securities and commodities markets, and individual securities,
commodities and indices as it may deem necessary or useful in discharging its
responsibilities hereunder;
(b) to formulate and maintain a continuing investment program in a manner
consistent with and subject to (i) LLC's operating agreement; (ii) LLC's
investment objectives, policies, and restrictions as set forth in written
documents furnished by the LLC to Manager; (iii) all securities, commodities,
and tax laws and regulations applicable to LLC; and (iv) any other written
limits or directions furnished by the Board to Manager;
(c) unless otherwise directed by the Board, to determine from time to time
securities, commodities, interests or other investments to be purchased, sold,
retained or lent by LLC, and to implement those decisions, including the
selection of entities with or through which such purchases, sales or loans are
to be effected;
(d) to use reasonable efforts to manage LLC so that it will qualify as a
regulated investment company under subchapter M of the Internal Revenue Code of
1986, as amended;
(e) to make recommendations as to the manner in which voting rights, rights to
consent to LLC action, and any other rights pertaining to LLC shall be
exercised;
(f) to make available to LLC promptly upon request all of LLC's records and
ledgers and any reports or information reasonably requested by LLC; and
(g) to the extent required by law, to furnish to regulatory authorities any
information or reports relating to the services provided pursuant to this
Agreement.
Except as otherwise instructed from time to time by the Board, with respect to
execution of transactions for LLC, Manager shall place, or arrange for the
placement of, all orders for purchases, sales, or loans with issuers, brokers,
dealers or other counterparties or agents selected by Manager. In connection
with the selection of all such parties for the placement of all such orders,
Manager shall attempt to obtain most favorable execution and price, but may
nevertheless in its sole discretion as a secondary factor, purchase and sell
portfolio securities from and to brokers and dealers who provide Manager with
statistical, research and other information, analysis, advice, and similar
services. In recognition of such services or brokerage services provided by a
broker or dealer, Manager is hereby authorized to pay such broker or dealer a
commission or spread in excess of that which might be charged by another broker
or dealer for the same transaction if the Manager determines in good faith that
the commission or spread is reasonable in relation to the value of the services
so provided.
LLC hereby authorizes any entity or person associated with Manager that is a
member of a national securities exchange to effect any transaction on the
exchange for its account account to the extent permitted by and in accordance
with Section 11(a) of the Securities Exchange Act of 1934 and Rule 11a2-2(T)
thereunder. LLC hereby consents to the retention by such entity or person of
compensation for such transactions in accordance with Rule 11a-2-2(T)(a)(iv).
Manager may, where it deems to be advisable, aggregate orders for its other
customers together with any securities of the same type to be sold or purchased
for LLC in order to obtain best execution or lower brokerage commissions. In
such event, Manager shall allocate the shares so purchased or sold, as well as
the expenses incurred in the transaction, in a manner it considers to be
equitable and fair and consistent with its fiduciary obligations to LLC and
Manager's other customers.
Manager shall for all purposes be deemed to be an independent contractor and not
an agent of LLC and shall, unless otherwise expressly provided or authorized,
have no authority to act for or represent LLC in any way.
2. Administrative Services. Manager shall supervise the business and affairs of
LLC and shall provide such services and facilities as may be required for
effective administration of LLC as are not provided by employees or other agents
engaged by LLC; provided that Manager shall not have any obligation to provide
under this Agreement any such services which are the subject of a separate
agreement or arrangement between LLC and Manager, any affiliate of Manager, or
any third party administrator ("Administrative Agreements").
3. Use of Affiliated Companies and Subcontractors. In connection with the
services to be provided by Manager under this Agreement, Manager may, to the
extent it deems appropriate, and subject to compliance with the requirements of
applicable laws and regulations and upon receipt of written approval of the
Board, make use of (i) its affiliated companies and their directors, managers,
trustees, officers, and employees and (ii) subcontractors selected by Manager,
provided that Manager shall supervise and remain fully responsible for the
services of all such third parties in accordance with and to the extent provided
by this Agreement. All costs and expenses associated with services provided by
any such third parties shall be borne by Manager or such parties.
4. Expenses Borne by LLC Except to the extent expressly assumed by Manager
herein or under a separate agreement between LLC and Manager and except to the
extent required by law to be paid by Manager, Manager shall not be obligated to
pay any costs or expenses incidental to the organization, operations or business
of LLC. Without limitation, such costs and expenses shall include but not be
limited to:
(a) all charges of depositories, custodians and other agencies for the
safekeeping and servicing of its cash, securities, and other property;
(b) all charges for equipment or services used for obtaining price quotations or
for communication between Manager or LLC and the custodian, transfer agent or
any other agent selected by LLC;
(c) all charges for administrative and accounting services provided to LLC by
Manager, or any other provider of such services;
(d) all charges for services of LLC's independent auditors and for services to
LLC by legal counsel;
(e) all compensation of Board, other than those affiliated with Manager, all
expenses incurred in connection with their services to LLC, and all expenses of
meetings of the Board or committees thereof;
(f) all expenses incidental to holding meetings of holders of units of interest
in the LLC ("Unitholders"), including printing and of supplying each record-date
Unitholder with notice and proxy solicitation material, and all other proxy
solicitation expense;
(g) all expenses of printing of annual or more frequent revisions of LLC
prospectus(es) and of supplying each then-existing Unitholder with a copy of a
revised prospectus;
(h) all expenses related to preparing and transmitting certificates representing
LLC shares;
(i) all expenses of bond and insurance coverage required by law or deemed
advisable by the Board;
(j) all brokers' commissions and other normal charges incident to the purchase,
sale, or lending of portfolio securities;
(k) all taxes and governmental fees payable to federal, state or other
governmental agencies, domestic or foreign, including all stamp or other
transfer taxes;
(l) all expenses of registering and maintaining the registration of LLC under
the 1940 Act and, to the extent no exemption is available, expenses of
registering LLC's shares under the 1933 Act, of qualifying and maintaining
qualification of LLC and its shares for sale under securities laws of various
states or other jurisdictions and of registration and qualification of LLC under
all other laws applicable to LLC or its business activities;
(m) all interest on indebtedness, if any, incurred by LLC; and
(n) all fees, dues and other expenses incurred by LLC in connection with
membership of LLC in any trade association or other investment company
organization.
5. Allocation of Expenses Borne by LLC. Any expenses borne by LLC that are
attributable solely to the organization, operation or business of LLC shall be
paid solely out of LLC's assets.
6. Expenses Borne by Manager. Manager at its own expense shall furnish all
executive and other personnel, office space, and office facilities required to
render the investment management and administrative services set forth in this
Agreement. Manager shall pay all expenses of establishing, maintaining, and
servicing the accounts of Unitholders. However, Manager shall not be required to
pay or provide any credit for services provided by LLC's custodian or other
agents without additional cost to LLC.
In the event that Manager pays or assumes any expenses of LLC not required to be
paid or assumed by Manager under this Agreement, Manager shall not be obligated
hereby to pay or assume the same or similar expense in the future; provided that
nothing contained herein shall be deemed to relieve Manager of any obligation to
LLC under any separate agreement or arrangement between the parties.
7. Management Fee. For the services rendered, facilities provided, and charges
assumed and paid by Manager hereunder, LLC shall pay to Manager an annual fee of
0.45% of the average net assets of LLC. The management fee shall accrue on each
calendar day, and shall be payable monthly on the first business day of the next
succeeding calendar month. The daily fee accrual shall be computed by
multiplying the fraction of one divided by the number of days in the calendar
year by the applicable annual rate of fee, and multiplying this product by the
net assets of LLC, determined in the manner established by the Board, as of the
close of business on the last preceding business day on which LLC's net asset
value was determined.
8. Retention of Sub-Adviser. Subject to obtaining the initial and periodic
approvals required under Section 15 of the 1940 Act, Manager may retain one or
more sub-advisers at Manager's own cost and expense for the purpose of
furnishing one or more of the services described in Section 1 hereof with
respect to LLC. Retention of a sub-adviser shall in no way reduce the
responsibilities or obligations of Manager under this Agreement, and Manager
shall be responsible to LLC for all acts or omissions of any sub-adviser in
connection with the performance of Manager's duties hereunder.
9. Non-Exclusivity. The services of Manager to LLC hereunder are not to be
deemed exclusive and Manager shall be free to render similar services to others.
10. Standard of Care. Neither Manager, nor any of its directors, officers,
stockholders, agents or employees shall be liable to LLC or its Unitholders for
any error of judgment, mistake of law, loss arising out of any investment, or
any other act or omission in the performance by Manager of its duties under this
Agreement, except for loss or liability resulting from willful misfeasance, bad
faith or gross negligence on Manager's part or from reckless disregard by
Manager of its obligations and duties under this Agreement.
11. Amendment. This Agreement may not be amended as to LLC without the
affirmative votes (a) of a majority of the Board, including a majority of those
Managers who are not "interested persons" of LLC or of Manager, voting in person
at a meeting called for the purpose of voting on such approval, and (b) of a
"majority of the outstanding shares" of LLC. The terms "interested persons" and
"vote of a majority of the outstanding shares" shall be construed in accordance
with their respective definitions in the 1940 Act and, with respect to the
latter term, in accordance with Rule 18f-2 under the 1940 Act.
12. Effective Date and Termination. This Agreement shall become effective as
November 1, 2001. This Agreement may be terminated at any time, without payment
of any penalty, by the Board of LLC, or by a vote of a majority of the
outstanding shares of the Portfolio, upon at least sixty (60) days' written
notice to Manager. This Agreement may be terminated by Manager at any time upon
at least sixty (60) days' written notice to LLC. This Agreement shall terminate
automatically in the event of its "assignment" (as defined in the 1940 Act).
Unless terminated as hereinbefore provided, this Agreement shall continue in
effect until July 31, 2001, and thereafter from year to year only so long as
such continuance is specifically approved at least annually (a) by a majority of
those Managers who are not interested persons of Board or of Manager, voting in
person at a meeting called for the purpose of voting on such approval, and (b)
by either the Board of LLC or by a "vote of a majority of the outstanding
shares" of LLC.
13. Ownership of Records; Interparty Reporting. All records required to be
maintained and preserved by LLC pursuant to the provisions of rules or
regulations of the Securities and Exchange Commission under Section 31(a) of the
1940 Act or other applicable laws or regulations which are maintained and
preserved by Manager on behalf of LLC and any other records the parties mutually
agree shall be maintained by Manager on behalf of LLC are the property of LLC
and shall be surrendered by Manager promptly on request by LLC; provided that
Manager may at its own expense make and retain copies of any such records.
LLC shall furnish or otherwise make available to Manager such copies of the
financial statements, proxy statements, reports, and other information relating
to the business and affairs of each Unitholder in LLC as Manager may, at any
time or from time to time, reasonably require in order to discharge its
obligations under this Agreement.
Manager shall prepare and furnish to LLC statistical data and other information
in such form and at such intervals as LLC may reasonably request.
14. Non-Liability of Board and Unitholders. Any obligation of LLC hereunder
shall be binding only upon the assets of LLC and shall not be binding upon any
Manager, officer, employee, agent or Unitholder of LLC. Neither the
authorization of any action by the Board or Unitholders of LLC nor the execution
of this Agreement on behalf of LLC shall impose any liability upon any Manager
or any Xxxxxxxxxx.
00. Use of Manager's Name. LLC may use the name "Xxxxx Xxx ________ LLC" or any
other name derived from the name "Xxxxx Xxx & Farnham" only for so long as this
Agreement or any extension, renewal, or amendment hereof remains in effect,
including any similar agreement with any organization which shall have succeeded
to the business of Manager as investment adviser. At such time as this Agreement
or any extension, renewal or amendment hereof, or such other similar agreement
shall no longer be in effect, LLC will cease to use any name derived from the
name "Xxxxx Xxx & Xxxxxxx" or otherwise connected with Manager, or with any
organization which shall have succeeded to Manager's business as investment
adviser.
16. References and Headings. In this Agreement and in any such amendment,
references to this Agreement and all expressions such as "herein," "hereof," and
"hereunder" shall be deemed to refer to this Agreement as amended or affected by
any such amendments. Headings are placed herein for convenience of reference
only and shall not be taken as a part hereof or control or affect the meaning,
construction or effect of this Agreement. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original.
Dated: November 1, 2001 XXXXX XXX FLOATING RATE LIMITED
LIABILITY COMPANY
Attest: By:____________________________
Name:
Title:
___________________________________
Name:
Title:
XXXXX XXX & XXXXXXX INCORPORATED
By:_____________________________
Attest: Name:
Title:
___________________________________
Name:
Title:
