Exhibit (g)(3)
FORM OF SUB-INVESTMENT ADVISORY AGREEMENT
This AGREEMENT, dated ______________, 2008, is by and between Advantage Advisers
Multi-Sector Fund I, a Delaware business trust (the "Fund"), Advantage Advisers,
L.L.C., a Delaware limited liability company (the "Investment Adviser"), and
Eden Capital Management Partners, L.P., a Texas limited partnership (the
"Sub-Adviser");
WHEREAS, the Investment Adviser has agreed to furnish investment
advisory services to the Fund, a non-diversified, closed-end management
investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act");
WHEREAS, the Fund has heretofore filed a Registration Statement on Form
N-2 with the Securities and Exchange Commission (the "SEC") (as amended or
supplemented from time to time, the "Registration Statement") which includes a
prospectus (the "Prospectus") and a statement of additional information (the
"Statement of Additional Information");
WHEREAS, the Investment Adviser and the Fund each wish to retain the
Sub-Adviser to provide the Investment Adviser and the Fund with certain
sub-advisory services as described below in connection with Investment Adviser's
advisory activities on behalf of the Fund;
WHEREAS, the investment advisory agreement between the Investment
Adviser and the Fund dated April 25, 2003 (such agreement or the most recent
successor agreement between such parties relating to advisory services to the
Fund is referred to herein as the "Advisory Agreement") contemplates that the
Investment Adviser may sub-contract investment advisory services with respect to
the Fund to one or more sub-advisers pursuant to one or more sub-investment
advisory agreements agreeable to the Fund and approved in accordance with the
provisions of the 1940 Act; and
WHEREAS, this agreement has been approved in accordance with the
provisions of the 1940 Act and the Sub-Adviser is willing to provide such
services upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, it is agreed by and between the parties hereto as
follows:
Section 1. GENERAL. The Investment Adviser and the Fund hereby appoint
the Sub-Adviser to act as sub-adviser with respect to the
healthcare/biotechnology Separate Investment Account (as defined in the
Prospectus) and the Sub-Adviser accepts such appointment and agrees, all as
fully set forth herein, to act as a sub-adviser to the Fund with respect to the
investment of the healthcare/biotechnology Separate Investment Account's assets
and to supervise and arrange for the day-to-day operations of the
healthcare/biotechnology Separate Investment Account and the purchase of
securities for
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and the sale of securities held in the healthcare/biotechnology
Separate Investment Account.
Section 2. DUTIES AND OBLIGATIONS OF THE SUB-ADVISER WITH RESPECT TO
INVESTMENT OF ASSETS OF THE FUND. Subject to the succeeding provisions of this
Section 2 and the oversight and supervision of the Investment Adviser and
subject to the direction and control of the Fund's Board of Trustees, the
Sub-Adviser shall:
(a) act as investment adviser for, and invest and reinvest,
the healthcare/biotechnology Separate Investment Account's assets and, in
connection therewith, have complete discretion in purchasing and selling
securities and other assets for the healthcare/biotechnology Separate Investment
Account and in voting, exercising consents and exercising all other rights
appertaining to such securities and other assets on behalf of the Fund
consistent with the investment objective, policies and restrictions of the Fund,
subject to the oversight and supervision of the Investment Adviser and to the
direction and control of the Fund's Board of Trustees;
(b) supervise continuously the investment program of the
healthcare/biotechnology Separate Investment Account and the composition of its
investment portfolio;
(c) arrange, subject to the provisions of Section 4 hereof,
for the purchase and sale of securities and other assets held in the
healthcare/biotechnology Separate Investment Account; and
(d) provide, or arrange to have provided, investment research
to the Fund.
Section 3. [Reserved].
Section 4. COVENANTS. In the performance of its duties under this
Agreement, the Sub-Adviser shall at all times:
(a) Conform to, and act in accordance with, any requirements
imposed by: (i) the provisions of the 1940 Act and the Investment Advisers Act
of 1940, as amended (the "Advisers Act"), and all applicable Rules and
Regulations of the SEC; (ii) any other applicable provisions of law; (iii) the
provisions of the Amended and Restated Agreement and Declaration of Trust and
By-laws of the Fund, as such documents may be amended from time to time; (iv)
the investment strategy and investment policies of the Fund as set forth in the
Registration Statement; and (v) any policies and determinations of the Board of
Trustees of the Fund as communicated in writing to the Sub-Adviser.
(b) Without limiting the generality of paragraph (a) hereof,
the Sub-Adviser shall be authorized to open, maintain and close accounts in the
name and on behalf of the Fund with brokers and dealers as it determines are
appropriate; to select and
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place orders either directly with the issuer or with any broker or dealer.
Subject to the other provisions of this paragraph, in placing orders with
brokers and dealers, the Sub-Adviser will seek to obtain the best price and
execution, taking into account factors such as price, size of order, difficulty
of execution and operational facilities of a brokerage firm, the scope and
quality of brokerage services provided, and in the case of transactions effected
with unaffiliated brokers, the firm's risk in positioning a block of securities.
Consistent with this principle, the Sub-Adviser may place brokerage orders with
brokers (including affiliates of the Fund) that provide supplemental research,
market and statistical information, including advice as to the value of
securities, the advisability of investing in, purchasing or selling securities,
and the availability of securities or purchasers or sellers of securities, and
furnish analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and the performance of accounts.
Information and research received from such brokers will be in addition to, and
not in lieu of, the services required to be performed by the Investment Adviser
hereunder. A commission paid to such brokers may be higher than that which
another qualified broker would have charged for effecting the same transaction,
PROVIDED that the Sub-Adviser determines in good faith that such commission is
reasonable in terms either of the transaction or the overall responsibility of
the Sub-Adviser to the Fund and its other clients and that the total commissions
paid by the Fund will be reasonable in relation to the benefits to the Fund over
the long-term. In no instance, however, will the Fund's securities be purchased
from or sold to the Investment Adviser, or any affiliated person thereof, except
to the extent permitted by the SEC or by applicable law.
(c) Maintain books and records with respect to the
healthcare/biotechnology Separate Investment Account's securities transactions
and will render to the Investment Adviser and the Board of Trustees such
periodic and special reports as they may request.
(d) Keep the Fund and the Investment Adviser informed of
developments materially affecting the healthcare/biotechnology Separate
Investment Account and shall, on its own initiative, furnish to the Fund from
time to time whatever information the Sub-Adviser believes appropriate for this
purpose. The Sub-Adviser will periodically communicate to the Investment
Adviser, at such times as the Investment Adviser may direct, information
concerning the purchase and sale of securities for the healthcare/biotechnology
Separate Investment Account, including: (i) the name of the issuer, (ii) the
amount of the purchase or sale, (iii) the name of the broker or dealer, if any,
through which the purchase or sale is effected, (iv) the CUSIP number of the
instrument, if any, and (v) such other information as the Investment Adviser may
reasonably require for purposes of fulfilling its obligations to the Fund under
the Advisory Agreement.
(e) Will treat confidentially and as proprietary information
of the Fund all records and other information relative to the Fund, and
pertaining to the Fund's prior, current or potential shareholders with respect
to their investment in the Fund, in a manner consistent with the Privacy
Notification Policy of the Fund set forth in the Registration Statement (as
amended or supplemented from time to time) and will not use such records
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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 Fund, which approval shall not be unreasonably withheld and may not be
withheld where the Investment Adviser may be exposed to civil or criminal
contempt proceedings for failure to comply, when requested to divulge such
information by duly constituted authorities, or when so requested by the Fund.
(f) Will do and perform any such further acts and things
related to the management of the healthcare/biotechnology Separate Investment
Account or the performance of any other duty, obligation or agreement hereunder
as the Investment Adviser may from time to time reasonably request.
(g) If any of its affiliates conducts a commercial banking
operation, (i) it will maintain a policy and practice of conducting its
investment advisory services hereunder independently of said commercial banking
operations and (ii) when it makes investment recommendations for the
healthcare/biotechnology Separate Investment Account, its investment advisory
personnel will not inquire or take into consideration whether the issuer of
securities proposed for purchase or sale for the healthcare/biotechnology
Separated Investment Account are customers of the commercial department of its
affiliates.
Section 5. SERVICES NOT EXCLUSIVE. Nothing in this Agreement shall
prevent the Sub-Adviser or any member, manager, officer, employee or other
affiliate thereof from acting as investment adviser for any other person, firm
or corporation, or from engaging in any other lawful activity, and shall not in
any way limit or restrict the Sub-Adviser or any of its members, manager,
officers, employees or agents from buying, selling or trading any securities for
its or their own accounts or for the accounts of others for whom it or they may
be acting; PROVIDED, HOWEVER, that the Sub-Adviser will undertake no activities
which, in its judgment, will adversely affect the performance of its obligations
under this Agreement.
Section 6. BOOKS AND RECORDS. 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 the Fund any such records upon the Fund's request. The
Investment 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.
Section 7. AGENCY CROSS TRANSACTIONS. From time to time, the
Sub-Adviser or brokers or dealers affiliated with it may find themselves in a
position to buy for certain of their brokerage clients (each an "Account")
securities which the Sub-Adviser's investment advisory clients wish to sell, and
to sell for certain of their brokerage clients securities which advisory clients
wish to buy. Where one of the parties is an advisory client, the Sub-Adviser or
the affiliated broker or dealer cannot participate in this type of transaction
(known as a cross transaction) on behalf of any advisory client and retain
commissions from one or both parties to the transaction without the advisory
client's
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consent. This is because in a situation where the Sub-Adviser is making the
investment decision (as opposed to a brokerage client who makes his own
investment decisions), and the Sub-Adviser or an affiliate is receiving
commissions from both sides of the transaction, there is a potential conflicting
division of loyalties and responsibilities on the Sub-Adviser's part regarding
the advisory client. The SEC has adopted a rule under the Advisers Act, which
permits the Sub-Adviser, or its affiliates to participate on behalf of an
Account in agency cross transactions if the advisory client has given written
consent in advance. By execution of this Agreement, the Fund authorizes the
Sub-Adviser or its affiliates to participate in agency cross transactions
involving an Account. The Fund may revoke its consent at any time by written
notice to the Sub-Adviser.
Section 8. EXPENSES. During the term of this Agreement, the Sub-Adviser
will bear all costs and expenses of its employment and any overhead incurred in
connection with its duties hereunder and shall bear the costs of any salaries or
trustees fees of any officers or trustees of the Fund who are affiliated persons
(as defined in the 0000 Xxx) of the Sub-Adviser.
Section 9. COMPENSATION OF THE INVESTMENT ADVISER. As compensation for
all services rendered by the Sub-Adviser hereunder, the Investment Adviser, from
the "Management Fee" (as defined in the Advisory Agreement), will pay the
Sub-Adviser an amount equal to 0.25% of the average daily net assets of the
healthcare/biotechnology Separate Investment Account. Such fee will be due and
payable by the Investment Adviser in arrears within ten business days after the
receipt thereof from the Fund.
Section 10. INDEMNITY.
(a) The Fund hereby agrees to indemnify the Sub-Adviser, and
each of the Sub-Adviser's members, managers, officers, employees, agents,
associates and controlling persons and the directors, partners, members,
officers, employees and agents thereof (including any individual who serves at
the Sub-Adviser's request as director, officer, partner, member, trustee or the
like of another entity) (each such person being an "Indemnitee") against any
liabilities and expenses, including amounts paid in satisfaction of judgments,
in compromise or as fines and penalties, and counsel fees (all as provided in
accordance with applicable state law) reasonably incurred by such Indemnitee in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
investigative body in which such Indemnitee may be or may have been involved as
a party or otherwise or with which such Indemnitee may be or may have been
threatened, while acting in any capacity set forth herein or thereafter by
reason of such Indemnitee having acted in any such capacity, except with respect
to any matter as to which such Indemnitee shall have been adjudicated not to
have acted in good faith in the reasonable belief that such Indemnitee's action
was in the best interest of the Fund and furthermore, in the case of any
criminal proceeding, so long as such Indemnitee has no reasonable cause to
believe that the conduct was unlawful; provided, however, that (1) no Indemnitee
shall be indemnified hereunder against any liability to the Fund or its
shareholders or any expense of such Indemnitee arising by reason of (i) willful
misfeasance, (ii) bad faith, (iii) gross
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negligence or (iv) reckless disregard of the duties involved in the conduct of
such Indemnitee's position (the conduct referred to in such clauses (i) through
(iv) being sometimes referred to herein as "disabling conduct"), (2) as to any
matter disposed of by settlement or a compromise payment by such Indemnitee,
pursuant to a consent decree or otherwise, no indemnification either for said
payment or for any other expenses shall be provided unless there has been a
determination that such settlement or compromise is in the best interests of the
Fund and that such Indemnitee appears to have acted in good faith in the
reasonable belief that such Indemnitee's action was in the interest of the Fund
and did not involve disabling conduct by such Indemnitee and (3) with respect to
any action, suit or other proceeding voluntarily prosecuted by any Indemnitee as
plaintiff, indemnification shall be mandatory only if the prosecution of such
action, suit or other proceeding by such Indemnitee was authorized by a majority
of the full Board of Trustees of the Fund.
(b) The Fund shall make advance payments in connection with
the expenses of defending any action with respect to which indemnification might
be sought hereunder if the Fund receives a written affirmation of the
Indemnitee's good faith belief that the standard of conduct necessary for
indemnification has been met and a written undertaking to reimburse the Fund
unless it is subsequently determined that such Indemnitee is entitled to such
indemnification and if the trustees of the Fund determine that the facts then
known to them would not preclude indemnification. In addition, at least one of
the following conditions must be met: (A) the Indemnitee shall provide a
security for such Indemnitee-undertaking, (B) the Fund shall be insured against
losses arising by reason of any lawful advance, or (C) a majority of a quorum
consisting of trustees of the Fund who are neither "interested persons' of the
Fund (as defined in Section 2(a)(19) of the 0000 Xxx) nor parties to the
proceeding ("Disinterested Non-Party Trustees") or an independent legal counsel
in a written opinion, shall determine, based on a review of readily available
facts (as opposed to a full trial-type inquiry), that there is reason to believe
that the Indemnitee ultimately will be found entitled to indemnification.
(c) All determinations with respect to indemnification
hereunder shall be made (1) by a final decision on the merits by a court or
other body before whom the proceeding was brought that such Indemnitee is not
liable or is not liable by reason of disabling conduct, or (2) in the absence of
such a decision, by (i) a majority vote of a quorum of the Disinterested
Non-Party Trustees of the Fund, or (ii) if such a quorum is not obtainable or,
even if obtainable, if a majority vote of such quorum so directs, independent
legal counsel in a written opinion. All determinations that advance payments in
connection with the expense of defending any proceeding shall be authorized and
shall be made in accordance with the immediately preceding clause (2) above.
The rights accruing to any Indemnitee under these provisions
shall not exclude any other right to which such Indemnitee may be lawfully
entitled.
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Section 11. LIMITATION ON LIABILITY.
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(a) The Sub-Adviser will not be liable for any error of
judgment or mistake of law or for any loss suffered by the Sub-Adviser or by the
Fund in connection with the performance of this Agreement, except a loss
resulting from a beach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its duties under this Agreement.
(b) Notwithstanding anything to the contrary contained in this
Agreement, the parties hereto acknowledge and agree that, as provided in Section
5.4 of Article V of the Amended and Restated Agreement and Declaration of Trust
of the Fund, this Agreement is executed by the Trustees and/or officers of the
Fund, not individually but as such Trustees and/or officers of the Fund, and the
obligations hereunder are not binding upon any of the Trustees or shareholders
of the Fund individually, but bind only the estate of the Fund.
Section 12. DURATION AND TERMINATION. This Agreement shall become
effective as of the date hereof, and unless sooner terminated with respect to
the Fund as provided herein, shall continue in effect for a period of two years.
Thereafter, if not terminated, this Agreement shall continue in effect with
respect to the Fund for successive periods of 12 months; PROVIDED that such
continuance is specifically approved at least annually by both (a) the vote of a
majority of the Fund's Board of Trustees or the vote of a majority of the
outstanding voting securities of the Fund at the time outstanding and entitled
to vote, and (b) the vote of a majority of the Trustees who are not parties to
this Agreement or interested persons of any party to this Agreement, cast in
person at a meeting called for the purpose of voting on such approval.
Notwithstanding the foregoing, this Agreement may be terminated by the Fund at
any time, without the payment of any penalty, upon giving the Sub-Adviser 60
days' written notice (which notice may be waived by the Sub-Adviser); PROVIDED
that such termination by the Fund shall be directed or approved by the vote of a
majority of the Trustees of the Fund in office at the time or by the vote of the
holders of a majority of the voting securities of the Fund at the time
outstanding and entitled to vote, or by the Sub-Adviser on 60 days' written
notice (which notice may be waived by the Fund). This Agreement will also
immediately terminate in the event of its assignment. (As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"interested person" and "assignment" shall have the meanings provided such terms
in the 1940 Act and the rules thereunder.)
Section 13. NOTICES. Any notice under this Agreement shall be in
writing to the other party at such address as the other party may designate from
time to time for the receipt of such notice and shall be deemed to be received
on the earlier of the date actually received or on the fourth day after the
postmark if such notice is mailed first class postage prepaid.
Section 14. AMENDMENT OF THIS AGREEMENT. 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
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or termination is sought. Any amendment of this Agreement shall be subject to
the 1940 Act.
Section 15. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware for contracts to
be performed entirely therein without reference to choice of law principles
thereof and in accordance with the applicable provisions of the 1940 Act.
Section 16. MISCELLANEOUS. The captions in this Agreement are included
for convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding on, and shall inure to the
benefit of the parties hereto and their respective successors.
Section 17. COUNTERPARTS. This Agreement may be executed in
counterparts by the parties hereto, each of which shall constitute an original
counterpart, and all of which, together, shall constitute one Agreement.
Section 18. NOTICE OF CHANGE IN MEMBERSHIP. The Sub-Adviser will notify
the Investment Adviser and the Fund of any change in the membership of the
Sub-Adviser within a reasonable time after such change.
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IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by their duly authorized officers, all as of the day
and the year first above written.
ADVANTAGE ADVISERS MULTI-SECTOR FUND I
By:
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Name:
Title:
ADVANTAGE ADVISERS, L.L.C.
By:
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Name:
Title:
EDEN CAPITAL MANAGEMENT PARTNERS, L.P.
By:
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Name:
Title:
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