SUB-INVESTMENT ADVISORY AGREEMENT
July 30, 1997
Xxxxxx Capital Management, L.L.C.
00 Xxxxx Xxxxx
Xxxxxx, XX 00000
Dear Sirs:
Warburg, Xxxxxx Institutional Fund, Inc. (the "Fund"), a
corporation organized and existing under the laws of the State of Maryland, on
behalf of the Post-Venture Capital Portfolio (the "Portfolio"), and Warburg,
Xxxxxx Counsellors, Inc., as its investment adviser ("Warburg"), herewith
confirms their agreement with Xxxxxx Capital Management, L.L.C. (the
"Sub-Adviser") as follows:
1. Investment Description; Appointment
The Fund desires to employ the capital of the Fund by
investing and reinvesting in securities of the kind and in accordance with the
limitations specified in the Fund's Articles of Incorporation, as may be amended
from time to time (the "Articles of Incorporation"), and in the Prospectus and
Statement of Additional Information, as from time to time in effect (the
"Prospectus" and "SAI," respectively), and in such manner and to such extent as
may from time to time be approved by the Board of Directors of the Fund. Copies
of the Prospectus, SAI and Articles of Incorporation have been or will be
submitted to the Sub-Adviser. The Fund agrees to provide the Sub-Adviser copies
of all amendments to the Prospectus and SAI on an on-going basis. The Fund
employs Warburg as its investment adviser. Warburg desires to employ and hereby
appoints the Sub-Adviser to act as its sub-investment adviser upon the terms set
forth in this Agreement. The Sub-Adviser accepts the appointment and agrees to
furnish the services set forth below for the compensation provided for herein.
2. Services as Sub-Investment Adviser
(a) Subject to the supervision and direction of Warburg, the
Sub-Adviser will provide investment advisory assistance and portfolio management
advice to the Fund in accordance with (a) the Articles of Incorporation, (b) the
Investment Company Act of 1940, as amended (the "1940 Act"), and the Investment
Advisers Act of 1940, as amended (the "Advisers Act"), and all applicable Rules
and Regulations of the Securities and Exchange Commission (the "SEC") and all
other applicable laws and regulations and (c) the Fund's investment objective
and policies as stated in the Prospectus and SAI and investment parameters
provided by Warburg from time to time. In connection therewith, the Sub-Adviser
will:
(i) determine whether to purchase, retain or sell
interests in United States or foreign private investment vehicles that
themselves invest in debt and equity securities of companies in the venture
capital and post-venture capital stages of development or companies engaged in
special situations or changes in corporate control, including buyouts
("Investments"). The Sub-Adviser is hereby authorized to execute, or place
orders for the execution of, all Investments on behalf of the Fund;
(ii) assist the custodian and accounting agent for
the Fund in determining or confirming, consistent with the procedures and
policies stated in the Prospectus and SAI, the value of any Investments for
which the custodian and accounting agent seek assistance from or identify for
review by the Sub-Adviser;
(iii) monitor the execution of orders for the
purchase or sale of Investments and the settlement and clearance of those
orders;
(iv) exercise voting rights in respect of
Investments; and
(v) provide reports to the Fund's Board of Directors
for consideration at quarterly meetings of the Board on the Investments and
furnish Warburg and the Fund's Board of Directors with such periodic and special
reports as the Fund or Warburg may reasonably request.
(b) In connection with the performance of the services
of the Sub-Adviser provided for herein, the Sub-Adviser may contract at its
own expense with third parties for the
acquisition of research, clerical services and other administrative services
that would not require such parties to be required to register as an investment
adviser under the Advisers Act; provided that the Sub-Adviser shall remain
liable for the performance of its duties hereunder.
3. Execution of Transactions
(a) The Sub-Adviser will not effect orders for the purchase or
sale of securities on behalf of the Fund through brokers or dealers as agents.
(b) It is understood that the services of the Sub-Adviser are
not exclusive, and nothing in this Agreement shall prevent the Sub-Adviser from
providing similar services to other investment companies or from engaging in
other activities, provided that those activities do not adversely affect the
ability of the Sub-Adviser to perform its services under this Agreement. The
Fund and Warburg further understand and acknowledge that the persons employed by
the Sub-Adviser to assist in the performance of its duties under this Agreement
will not devote their full time to that service. Nothing contained in this
Agreement will be deemed to limit or restrict the right of the Sub-Adviser or
any affiliate of the Sub-Adviser to engage in and devote time and attention to
other businesses or to render services of whatever kind or nature, provided that
doing so does not adversely affect the ability of the Sub-Adviser to perform its
services under this Agreement.
(c) On occasions when the Sub-Adviser deems the purchase or
sale of a security to be in the best interest of the Fund as well as of other
investment advisory clients of the Sub-Adviser, the Sub-Adviser may, to the
extent permitted by applicable laws and regulations, but shall not be obligated
to, aggregate the securities to be so sold or purchased with those of its other
clients. In such event, allocation of the securities so purchased or sold, as
well as the expenses incurred in the transaction, will be made by the
Sub-Adviser in a manner that is fair and equitable, in the judgment of the
Sub-Adviser, in the exercise of its fiduciary obligations to the Fund and to
such other clients. The Sub-Adviser shall provide to Warburg and the Fund all
information reasonably requested by Warburg and the Fund relating to the
decisions made by the Sub-Adviser regarding allocation of securities purchased
or sold, as well as the
expenses incurred in a transaction, among the Fund and the Sub-Adviser's other
investment advisory clients.
(d) In connection with the purchase and sale of securities for
the Fund, the Sub-Adviser will provide such information as may be reasonably
necessary to enable the custodian and co-administrators to perform their
administrative and recordkeeping responsibilities with respect to the Fund.
4. Disclosure Regarding the Sub-Adviser
(a) The Sub-Adviser has reviewed the disclosure about the
Sub-Adviser contained in the Fund's registration statement and represents and
warrants that, with respect to such disclosure about the Sub-Adviser or
information related, directly or indirectly, to the Sub-Adviser, such
registration statement contains, as of the date hereof, no untrue statement of
any material fact and does not omit any statement of a material fact which is
required to be stated therein or necessary to make the statements contained
therein not misleading.
(b) The Sub-Adviser agrees to notify Warburg and the Fund
promptly of any (i) statement about the Sub-Adviser contained in the Fund's
registration statement that becomes untrue in any material respect or (ii)
omission of a material fact about the Sub-Adviser in the Fund's registration
statement which is required to be stated therein or necessary to make the
statements contained therein not misleading or (iii) any reorganization or
change in the Sub-Adviser, including any change in its ownership or key
employees.
(c) Prior to the Fund or Warburg or any affiliated person (as
defined in the 1940 Act, an "Affiliate") of either using or distributing sales
literature or other promotional material referring to the Sub-Adviser, the
Sub-Adviser shall have the right to approve the general advertising or
promotional plan pursuant to which such literature or material is being utilized
or distributed; provided that the Sub-Adviser shall be deemed to have approved
such advertising or plan if it has not objected to its use within ten (10)
business days after such material has been sent to it. The Fund or Warburg will
use all reasonable efforts to ensure that all advertising, sales and promotional
material used or distributed by or on behalf of the Fund or Warburg that refers
to the Sub-Adviser will comply with the
requirements of the Advisers Act, the 1940 Act and the rules and regulations
promulgated thereunder.
(d) The Sub-Adviser has supplied Warburg and the Fund copies
of its Form ADV with all exhibits and attachments thereto and will hereinafter
supply Warburg, promptly upon preparation thereof, copies of all amendments or
restatements of such document.
5. Certain Representations and
Warranties of the Sub-Adviser
(a) The Sub-Adviser represents and warrants that it is a duly
registered investment adviser under the Advisers Act, a duly registered
investment adviser in any and all states of the United States in which the
Sub-Adviser is required to be so registered and has obtained all necessary
licenses and approvals in order to perform the services provided in this
Agreement. The Sub-Adviser covenants to maintain all necessary registrations,
licenses and approvals in effect during the term of this Agreement.
(b) The Sub-Adviser represents that it has read and
understands the Prospectus and SAI and warrants that in investing the Fund's
assets it will use all reasonable efforts to adhere to the Fund's investment
objectives, policies and restrictions contained therein.
6. Compliance
(a) The Sub-Adviser agrees that it shall promptly notify
Warburg and the Fund (i) in the event that the SEC or any other regulatory
authority has censured its activities, functions or operations; suspended or
revoked its registration as an investment adviser; or has commenced proceedings
or an investigation that may result in any of these actions, (ii) in the event
that there is a change in the Sub-Adviser, financial or otherwise, that
adversely affects its ability to perform services under this Agreement or (iii)
upon having a reasonable basis for believing that, as a result of the
Sub-Adviser's investing the Fund's assets, the Fund's investment portfolio has
ceased to adhere to the Fund's investment objectives, policies and restrictions
as stated in the Prospectus or SAI or is otherwise in violation of applicable
law.
(b) Warburg agrees that it shall promptly notify the
Sub-Adviser in the event that the SEC has censured Warburg or the Fund; placed
limitations upon any of their activities, functions or operations; suspended or
revoked Warburg's registration as an investment adviser; or has commenced
proceedings or an investigation that may result in any of these actions.
(c) The Fund and Warburg shall be given access to the records
of the Sub-Adviser at reasonable times solely for the purpose of monitoring
compliance with the terms of this Agreement and the rules and regulations
applicable to the Sub-Adviser relating to its providing investment advisory
services to the Fund, including without limitation records relating to trading
by employees of the Sub-Adviser for their own accounts and on behalf of other
clients. The Sub-Adviser agrees to cooperate with the Fund and Warburg and their
representatives in connection with any such monitoring efforts.
7. Books and Records
(a) In compliance with the requirements of Rule 31a-3 under
the 1940 Act, the Sub-Adviser hereby agrees that all records which it maintains
for the Fund are the property of the Fund and further agrees to surrender
promptly to either Warburg or the Fund any of such records upon the request of
either of them. The Sub-Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act and to preserve the records required
by Rule 204-2 under the Advisers Act for the period specified therein.
(b) The Sub-Adviser hereby agrees to furnish to regulatory
authorities having the requisite authority any information or reports in
connection with services that the Sub-Adviser renders pursuant to this Agreement
which may be requested in order to ascertain whether the operations of the Fund
are being conducted in a manner consistent with applicable laws and regulations.
8. Provision of Information;
Proprietary and Confidential Information
(a) Warburg agrees that it will furnish to the Sub-Adviser
information related to or concerning the Fund that the Sub-Adviser may
reasonably request.
(b) The Sub-Adviser agrees on behalf of itself and its
employees to treat confidentially and as proprietary information of the Fund all
records and other information relative to the Fund, Warburg and prior, present
or potential shareholders and not to use such records and information for any
purpose other than performance of its responsibilities and duties hereunder
except after prior notification to and approval in writing of the Fund, which
approval shall not be unreasonably withheld and may not be withheld where the
Sub-Adviser may be exposed to civil or criminal contempt proceedings for failure
to comply or when requested to divulge such information by duly constituted
authorities.
(c) The Sub-Adviser represents and warrants that neither it
nor any affiliate will use the name of the Fund, Warburg or any of their
affiliates in any prospectus, sales literature or other material in any manner
without the prior written approval of the Fund or Warburg, as applicable.
9. Standard of Care
The Sub-Adviser shall exercise its best judgment in rendering
the services described herein. The Sub-Adviser shall not be liable for any error
of judgment or mistake of law or for any loss suffered by the Fund or Warburg in
connection with the matters to which this Agreement relates, except that the
Sub-Adviser shall be liable for a loss resulting from a breach of fiduciary duty
by the Sub-Adviser with respect to the receipt of compensation for services;
provided that nothing herein shall be deemed to protect or purport to protect
the Sub-Adviser against any liability to the Fund or Warburg or to shareholders
of the Fund to which the Sub-Adviser would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or by reason of the Sub-Adviser's reckless disregard
of its obligations and duties under this Agreement. The Fund and Warburg
understand and agree that the Sub-Adviser may rely upon information furnished to
it reasonably believed by the Sub-Adviser to be accurate and reliable and,
except as herein provided, the Sub-Adviser shall not be accountable for loss
suffered by the Fund by reason of such reliance of the Sub-Adviser.
10. Indemnification
(a) The Sub-Adviser agrees to indemnify and hold harmless the
Fund, Warburg, any affiliate thereof, and each person, if any, who, within the
meaning of Section 15 of the Securities Act of 1933, as amended (the "1933
Act"), controls ("controlling person") any or all of the Fund and Warburg (all
of such persons being referred to as "Fund Indemnified Persons") against any and
all losses, claims, damages, liabilities or litigation (including legal and
other expenses) to which any Fund Indemnified Person may become subject under
the 1933 Act, the 1940 Act, the Advisers Act, the Internal Revenue Code of 1986,
as amended (the "Code"), or under any other statute, at common law or otherwise,
arising out of the Sub-Adviser's responsibilities as Sub-Adviser to the Fund
which (i) may be based upon any misfeasance, malfeasance or nonfeasance by the
Sub-Adviser, or any of its employees or representatives, or any affiliate of or
any person acting on behalf of the Sub-Adviser, (ii) may be based upon a failure
to comply with paragraph 5(b) of this Agreement, or (iii) may be based upon any
untrue statement or alleged untrue statement of a material fact about the
Sub-Adviser contained in the registration statement covering the shares of the
Fund, or any amendment or supplement thereto, or the omission or alleged
omission to state therein a material fact about the Sub-Adviser known or which
should have been known to the Sub-Adviser and was required to be stated therein
or necessary to make the statements therein not misleading, if such a statement
or omission was made in reliance upon information furnished to Warburg, the Fund
or any affiliate thereof by the Sub-Adviser or any affiliate of the Sub-Adviser;
provided that in no case shall the indemnity in favor of any Fund Indemnified
Person be deemed to protect such persons against any liability to which any such
person would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under this Agreement.
(b) The Fund agrees to indemnify and hold harmless the
Sub-Adviser, any of its affiliates, and each controlling person, if any, of the
Sub-Adviser (all of such persons being referred to as "Sub-Adviser Indemnified
Persons") against any and all losses, claims, damages, liabilities or litigation
(including legal and other expenses) to which any Sub-Adviser Indemnified Person
may become subject under the 1933 Act, the 1940 Act, the Advisers Act, the Code
or under any other statute, at common law or
otherwise, which (i) may be based upon any misfeasance, malfeasance or
nonfeasance by the Fund or Warburg, or any of their respective employees or
representatives, or any affiliate of or any person acting on behalf of the Fund
or Warburg, (ii) may be based upon a failure by the Fund or Warburg to comply
with this Agreement, or (iii) may be based upon any untrue statement or alleged
untrue statement of a material fact contained in the registration statement
covering the shares of the Fund, or any amendment or supplement thereto, or the
omission or alleged omission to state therein a material fact known or which
should have been known to the Fund and was required to be stated therein or
necessary to make the statements therein not misleading, unless such a statement
or omission was made in reliance upon information furnished to Warburg, the Fund
or any affiliate thereof by the Sub-Adviser or any affiliate of the Sub-Adviser;
provided that in no case shall the indemnity in favor of any Sub-Adviser
Indemnified Person be deemed to protect such persons against any liability to
which any such person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence in the performance of its duties or by
reason of its reckless disregard of its obligations and duties under this
Agreement.
(c) A party (the "Indemnifying Person") shall not be liable
under paragraphs 10(a) or 10(b) herein with respect to any claim made against
any Fund Indemnified Person or Sub-Adviser Indemnified Person, as applicable (a
Fund Indemnified Person and a Sub-Adviser Indemnified Person may be referred to
in this paragraph 10(c) as an "Indemnified Person"), unless such Indemnified
Person shall have notified the Indemnifying Person in writing within a
reasonable time after the summons, notice or other first legal process or notice
giving information of the nature of the claim shall have been served upon such
Indemnified Person (or after such Indemnified Person shall have received notice
of such service on any designated agent), but failure to notify the Indemnifying
Person of any such claim shall not relieve the Indemnifying Person from any
liability which it may have to any Indemnified Person against whom such action
is brought otherwise than on account of this paragraph 10. In case any such
action is brought against any Indemnified Person, the Indemnifying Person will
be entitled to participate, at its own expense, in the defense thereof or, after
notice to the Indemnified Person, to assume the defense thereof, with counsel
satisfactory to the Indemnified Person. If the Indemnifying Person assumes the
defense of any such action and the selection
of counsel by the Indemnifying Person to represent the
Indemnifying Person and the Indemnified Person would result in a conflict of
interests and therefore would not, in the reasonable judgment of the Indemnified
Person, adequately represent the interests of the Indemnified Person, the
Indemnifying Person will, at its own expense, assume the defense with counsel to
the Indemnifying Person and, also at its own expense, with separate counsel to
the Indemnified Person which counsel shall be satisfactory to the Indemnifying
Person and to the Indemnified Person. The Indemnified Person shall bear the fees
and expenses of any additional counsel retained by it, and the Indemnifying
Person shall not be liable to the Indemnified Person under this Agreement for
any legal or other expenses subsequently incurred by the Indemnified Person
independently in connection with the defense thereof other than reasonable costs
of investigation. The Indemnifying Person shall not have the right to compromise
on or settle the litigation without the prior written consent of the Indemnified
Person if such compromise or settlement results, or may result, in a finding of
wrongdoing on the part of the Indemnified Person.
11. Compensation
In consideration of the services rendered pursuant to this
Agreement, Warburg will pay the Sub-Adviser a quarterly fee calculated at an
annual rate of 1.00% of the net asset value of the Investments as of the last
day of each calendar quarter. The fee for the period from the date of this
Agreement to the end of the quarter during which this Agreement commenced shall
be prorated according to the proportion that such period bears to the full
quarterly period. Such fee shall be paid by Warburg to the Sub-Adviser within
ten (10) business days after the last day of each quarter or, upon termination
of this Agreement before the end of a quarter, within ten (10) business days
after the effective date of such termination. Upon any termination of this
Agreement before the end of a quarter, the fee for such part of that quarter
shall be prorated according to the proportion that such period bears to the full
quarterly period. For the purpose of determining fees payable to the
Sub-Adviser, the value of the Investments shall be computed in the manner
specified in the Prospectus or SAI. The Sub-Adviser shall have no right to
obtain compensation directly from the Fund for services provided hereunder and
agrees to look solely to Warburg for payment of fees due.
12. Expenses
(a) The Sub-Adviser will bear all expenses in connection with
the performance of its services under this Agreement, which shall not include
the Fund's expenses listed in paragraph 12(b).
(b) The Fund will bear certain other expenses to be incurred
in its operation, including: investment advisory and administration fees; taxes,
interest, brokerage fees and commissions, if any; fees of Directors of the Fund
who are not officers, directors, or employees of the Fund, Warburg or the
Sub-Adviser or affiliates of any of them; fees of any pricing service employed
to value shares of the Fund; SEC fees, state Blue Sky qualification fees and any
foreign qualification fees; charges of custodians and transfer and dividend
disbursing agents; the Fund's proportionate share of insurance premiums; outside
auditing and legal expenses; costs of maintenance of the Fund's existence; costs
attributable to investor services, including, without limitation, telephone and
personnel expenses; costs of preparing and printing prospectuses and statements
of additional information for regulatory purposes and for distribution to
existing shareholders; costs of shareholders' reports and meetings of the
shareholders of the Fund and of the officers or Board of Directors of the Fund;
and any extraordinary expenses.
13. Term of Agreement
This Agreement shall commence on the date first written above
and shall continue until April 17, 1998, and thereafter shall continue
automatically for successive annual periods, provided such continuance is
specifically approved at least annually by (a) the Board of Directors of the
Fund or (b) a vote of a "majority" (as defined in the 0000 Xxx) of the Fund's
outstanding voting securities, provided that in either event the continuance is
also approved by a majority of the Board of Directors who are not "interested
persons" (as defined the 0000 Xxx) of any party to this Agreement, by vote cast
in person at a meeting called for the purpose of voting on such approval. This
Agreement is terminable, without penalty, (i) by Warburg on 60 (sixty) days'
written notice to the Fund and the Sub-Adviser, (ii) by the Board of Directors
of the Fund or by vote of holders of a majority of the Fund's shares on 60
(sixty) days' written notice to Warburg and the Sub-Adviser, or (iii) by the
Sub-
Adviser upon 60 (sixty) days' written notice to the Fund and
Warburg. This Agreement will also terminate automatically in the event of its
assignment (as defined in the 0000 Xxx) by any party hereto. In the event of
termination of this Agreement for any reason, all records relating to the Fund
kept by the Sub-Adviser shall promptly be returned to Warburg or the Fund, free
from any claim or retention of rights in such records by the Sub-Adviser. In the
event this Agreement is terminated or is not approved in the foregoing manner,
the provisions contained in paragraph numbers 4(c), 7, 8, 9 and 10 shall remain
in effect.
14. Amendments
No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (a) the holders of a majority of the
outstanding voting securities of the Fund and (b) the Board of Directors of the
Fund, including a majority of Directors who are not "interested persons" (as
defined in the 0000 Xxx) of the Fund or of either party to this Agreement, by
vote cast in person at a meeting called for the purpose of voting on such
approval, if such approval is required by applicable law.
15. Notices
All communications hereunder shall be given (a) if to the
Sub-Adviser, to Xxxxxx Capital Management, L.L.C., 1330 Avenue of the Americas,
Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000 (Attention: Xxxxxxx X. Held), telephone:
(000) 000-0000, telecopy: (000) 000-0000, (b) if to Warburg, to Warburg, Xxxxxx
Counsellors, Inc., 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000
(Attention: Xxxxxx X. Xxxxx), telephone: (000) 000-0000, telecopy: (212)
878-9351, and (c) if to the Fund, c/o Warburg Pincus Funds, 000 Xxxxxxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000, telephone: (000) 000-0000, telecopy:
(000) 000-0000 (Attention: President).
16. Choice of Law
This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York in the United States,
including choice of law principles; provided that nothing herein shall be
construed in a manner inconsistent with the 1940 Act, the Advisers Act or any
applicable rules, regulations or orders of the SEC.
17. Miscellaneous
(a) The captions of this Agreement are included for
convenience only and in no way define or limit any of the provisions herein or
otherwise affect their construction or effect.
(b) If any provision of this Agreement shall be held or made
invalid by a court decision, by statute or otherwise, the remainder of this
Agreement shall not be affected thereby and, to this extent, the provisions of
this Agreement shall be deemed to be severable.
(c) Nothing herein shall be construed to make the Sub-Adviser
an agent of Warburg or the Fund.
(d) This Agreement may be executed in counterparts, with the
same effect as if the signatures were upon the same instrument.
Please confirm that the foregoing is in accordance with your
understanding by indicating your acceptance hereof at the place below indicated,
whereupon it shall become a binding agreement between us.
Very truly yours,
WARBURG, XXXXXX COUNSELLORS, INC.
By: _________________________________
Name:
Title:
WARBURG PINCUS INSTITUTIONAL FUND, INC.
By: _________________________________
Name:
Title:
XXXXXX CAPITAL MANAGEMENT, L.L.C.
By: _______________________________
Name:
Title:
