EXHIBIT (G)(2)
Form of Investment Sub-Advisory Agreement among the Company,
U.S. Trust Company and United States Trust Company of New York
INVESTMENT SUB-ADVISORY AGREEMENT
INVESTMENT SUB-ADVISORY AGREEMENT (the "Agreement") dated as of
, 2000 by and among Excelsior Venture Partners III, LLC, a Delaware
limited liability company (the "Company"), U.S. Trust Company ("UST"), a
Connecticut state bank and trust company and United States Trust Company of
New York ("USTNY"), a New York state- chartered bank and trust company.
WHEREAS, the Company is a closed-end, management investment
company that has elected to be treated as a business development company
under the Investment Company Act of 1940, as amended;
WHEREAS, UST is the investment adviser to the Company;
WHEREAS, UST desires to retain USTNY to render investment
sub-advisory services to the Company, and USTNY is willing to so render
such services;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto as
follows:
1. Definitions. As used in this Agreement, the following
terms have the meanings set forth below:
(a) "Board of Managers" means the board of managers
of the Company;
(b) "Company" means Excelsior Venture Partners III,
LLC;
(c) "Disabling Conduct" means, on the part of the
investment sub-adviser, any willful misfeasance, bad faith, or gross
negligence in the performance of its duties owed to the Company, or
reckless disregard of its obligations and duties owed to the Company;
(d) "Disinterested Manager" has the meaning set forth
in Section 10 hereof;
(e) "Exchange Act" means the Securities Exchange Act
of 1934, as amended;
(f) "Indemnified Person" has the meaning set forth in
Section 10 hereof;
(g) "Investment Company Act" means the Investment
Company Act of 1940, as amended;
(h) "Investment Advisory Agreement" means the
agreement between the Company and UST dated ______________, 2000
(i) "Manager" means any member of the Board of
Managers;
(j) "Operating Agreement" means the Limited Liability
Company Operating Agreement of the Company;
(k) "Registration Statement" means the Registration
Statement of the Company under the Securities Act (File No. 333-30986);
(l) "Securities Act" means the Securities Act of
1933, as amended;
(m) "Unit" has the meaning set forth in the Operating
Agreement.
(n) "UST" means U.S. Trust Company;
(o) "USTNY" means United States Trust Company of New
York;
2. Appointment. UST hereby appoints USTNY to act as
investment sub-adviser to the Company for the period and on the terms set
forth in this Agreement. USTNY accepts such appointment and agrees to
render the services herein set forth for the compensation herein provided.
USTNY may, in its discretion, provide such services through its own
employees or the employees of one or more affiliated companies that are
qualified to act as investment sub-adviser to the Company under applicable
law and are under the common control of U.S. Trust Corporation provided (i)
that all persons, when providing services hereunder, are functioning as
part of an organized group of persons, and (ii) the use of an affiliate's
employees does not result in an assignment of this agreement under the
Investment Company Act; and (iii) the use of an affiliate's employees has
been approved by the Board of Managers of the Company.
3. Delivery of Documents. UST has furnished USTNY with
copies properly certified or authenticated of each of the following:
(a) Certificate of Formation of the Company dated
February 18, 2000;
(b) Operating Agreement of the Company dated May 26,
2000;
(c) Investment Advisory Agreement between the Company
and UST dated ______________, 2000;
(d) Resolutions of the Board of Managers of the
Company authorizing the appointment of UST as the investment adviser for
the Company and the execution and delivery of the Investment Advisory
Agreement;
(e) Resolutions of the Board of Managers of the
Company authorizing the appointment of USTNY as the Company's investment
sub-adviser and the execution and delivery of this Agreement;
(f) The Company's Registration Statement relating to
the Company's Units including the prospectus and statement of additional
information of the Company.
UST will furnish USTNY from time to time with copies of all
amendments of or supplements to the foregoing, if any.
4. Sub-Advisory Services. Subject to the supervision of the
Board of Managers of the Company and the oversight of UST, at the request
of UST, USTNY will provide a continuous investment program for the Company,
including investment research and management with respect to all securities
and investments of the Company. At the request of UST, USTNY will determine
what securities and other investments will be purchased, retained or sold
by the Company. At the request of UST, USTNY will perform any or all of the
other duties of UST under the Investment Advisory Agreement. USTNY will
provide the services rendered by it hereunder in accordance with the
Company's investment objectives and policies as stated in the Prospectus,
the Company's policies and procedures and the requirements applicable to
UST under the Investment Advisory Agreement. USTNY further agrees that it:
(a) will conform with all applicable rules and
regulations of the Securities and Exchange Commission, and will in addition
conduct its activities under this Agreement in accordance with applicable
law, including but not limited to applicable banking law;
(b) will not make loans for the purpose of purchasing
or carrying Company Units, or make loans to the Company;
(c) will place orders pursuant to its investment
determinations for the Company either directly with the issuer or with any
broker or dealer selected by it. In placing orders with brokers and/or
dealers, USTNY shall use its best efforts to obtain the most favorable
execution of its orders, after taking into account all factors it deems
relevant, including the breadth of the market in the security, the price of
the security, the financial condition and execution capability of the
broker and/or dealer, and the reasonableness of the commission, if any,
both for the specific transaction and on a continuing basis. Consistent
with this obligation, USTNY may, to the extent permitted by law, purchase
and sell portfolio securities to and from brokers who provide brokerage and
research services (within the meaning of Section 28(e) of the Exchange Act)
to or for the benefit of the Company and/or other accounts over which USTNY
or any of its affiliates exercises investment discretion. USTNY is
authorized to pay to a broker who provides such brokerage and research
services a commission for effecting a securities transaction which is in
excess of the amount of commission another broker would have charged for
effecting that transaction if USTNY determines in good faith that such
commission was reasonable in relation to the value of the brokerage and
research services provided by such broker. This determination may be viewed
in terms of either that particular transaction or of the overall
responsibilities of USTNY with respect to the accounts as to which it
exercises investment discretion;
(d) will maintain books and records with respect to
the securities and other investment transactions entered into pursuant to
this Agreement and will render to UST and the Company's Board of Managers
such periodic and special reports as they may request;
(e) will treat confidentially and as proprietary
information of the Company all records and other information relative to
the Company and prior, present or potential shareholders, and will not 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 by the Company, which approval shall not be
unreasonably withheld and may not be withheld where USTNY 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 Company. Nothing contained herein, however, shall
prohibit USTNY from advertising or soliciting the public generally with
respect to other products or services, regardless of whether such
advertisement or solicitation may include prior, present or potential
shareholders of the Company.
5. Services Not Exclusive. The investment sub-advisory
services rendered by USTNY hereunder are not to be deemed exclusive, and
USTNY shall be free to render similar services to others so long as its
services under this Agreement are not impaired thereby.
6. Books and Records. USTNY shall provide the Company with
all records concerning USTNY's activities that the Company is required by
law to maintain. Any records required to be maintained and preserved
pursuant to the provisions of Rule 31a-1 and Rule 31a-2 under the
Investment Company Act which are prepared or maintained by USTNY on behalf
of the Company are the property of the Company and will be surrendered
promptly to the Company on request. The Company also shall comply with all
reasonable requests for information by the Company's officers or Board of
Managers, including information required for the Company's filings with the
Securities and Exchange Commission and state securities commissions.
7. Expenses.
(a) USTNY shall furnish, at its own expense, all
office space, office facilities, equipment and personnel necessary or
appropriate to the performance of its duties under this Agreement. USTNY
shall pay the salaries and fees of all officers and employees of the
Company performing services related to USTNY's duties under this Agreement.
(b) It is understood that the Company will pay all of
its expenses and liabilities, including all of such fees and expenses as
set forth in the Investment Advisory Agreement.
8. Compensation. For the services provided and the expenses
assumed pursuant to this Agreement, UST will pay USTNY a fee or fees as may
be agreed to in writing by UST and USTNY.
9. Limitation of Liability of the Investment Sub-Adviser.
(a) USTNY hereby is notified expressly of the
limitation of Managers' liability as set forth in the Operating Agreement
and agrees that any obligation of the Company arising in connection with
this Agreement shall be limited in all cases to the Company and its assets,
and USTNY shall not seek satisfaction of any such obligation from any
Manager of the Company.
(b) USTNY shall give the Company the benefit of its
best judgment and efforts in rendering services under this Agreement. In
the absence of Disabling Conduct, USTNY shall not be liable to the Company
or to any member of the Company or any other person for any act or omission
in the course of, or connected with, rendering services under this
Agreement or for any losses that may be sustained in the purchase, holding
or sale of any security.
10. Indemnification. The Company will indemnify USTNY, its
affiliates and each of their officers, directors, employees, members and
agents (each an "Indemnified Person") against, and hold each of them
harmless from, any and all losses, claims, damages, liabilities or expenses
(including reasonable counsel fees and expenses) incurred by any of them in
connection with or resulting from the actions or inactions of any
Indemnified Person in connection with the performance of or under this
Agreement not resulting from Disabling Conduct by the respective
Indemnified Person. Indemnification shall be made only following: (i) a
final decision on the merits by a court or other body before whom the
proceeding was brought that the Indemnified Person was not liable by reason
of Disabling Conduct; or (ii) in the absence of such a decision, a
reasonable determination, based upon a review of the facts, that the
Indemnified Person was not liable by reason of Disabling Conduct by (a) the
vote of a majority of a quorum of Managers of the Company who are not
"interested persons" of USTNY ("Disinterested Managers") or (b) independent
legal counsel in a written opinion. The Indemnified Person shall be
entitled to advances from the Company for payment of the reasonable
expenses incurred by it in connection with the matter as to which it is
seeking indemnification in the manner and to the fullest extent permissible
under the Delaware Limited Liability Company Act. The Indemnified Person
shall provide to the Company a written affirmation of its good faith belief
that the standard of conduct necessary for indemnification by the Company
has been met and a written undertaking to repay any such advance if it
should ultimately be determined that the standard of conduct has not been
met. In addition, at least one of the following additional conditions shall
be met: (a) the Indemnified Person shall provide security in form and
amount acceptable to the Company for its undertaking; (b) the Company is
insured against losses arising by reason of the advance; or (c) a majority
of a quorum of Disinterested Managers, or independent legal counsel, in a
written opinion, shall have determined, based on a review of facts readily
available to the Company at the time the advance is proposed to be made,
that there is reason to believe that the Indemnified Person will ultimately
be found to be entitled to indemnification.
No provision of this Agreement shall be construed to protect
any Indemnified Person from liability in violation of Section 17(h) or (i)
of the Investment Company Act.
11. Effective Date; Termination; Amendments.
(a) This Agreement shall be effective as of the date
first above written and, unless terminated sooner as provided herein, shall
continue until the second anniversary of the execution of this Agreement.
Thereafter, unless terminated sooner as provided herein, this Agreement
shall continue in effect for successive annual periods, provided that such
continuance is specifically approved at least annually by the vote of a
majority of the Board of Managers of the Company who are not parties to
this Agreement or interested persons of any such party, cast in person at a
meeting called for the purpose of voting on such continuance, and either:
(i) the vote of a majority of the outstanding voting securities of the
Company; or (ii) the vote of a majority of the full Board of Managers.
(b) This Agreement may be terminated at any time,
without the payment of any penalty, either by: (i) the Company, by action
of the Board of Managers or by vote of a majority of the outstanding voting
securities of the Company, on 60 days' written notice to USTNY; or (ii)
USTNY, on 90 days' written notice to the Company. This Agreement shall
terminate immediately in the event of its assignment.
(c) An affiliate of USTNY may assume USTNY's
obligations under this Agreement provided that: (i) the affiliate is
qualified to act as an investment sub-adviser to the Company under
applicable law; (ii) the assumption will not result in a change of actual
control or management of USTNY; and (iii) the assumption of USTNY's
obligations by the affiliate is approved by the Board of Managers of the
Company.
(d) This Agreement may be amended only if such
amendment is approved, to the extent required by the Investment Company
Act, by the vote of a majority of the outstanding voting securities of the
Company and by vote of a majority of the Board of Managers who are not
parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such amendment.
(e) As used in this Agreement, the terms
"specifically approved at least annually," "majority of the outstanding
voting securities," "interested persons" and "assignment" shall have the
same meanings as such terms have in the Investment Company Act and the
regulations thereunder.
12. Notices. All notices and other communications hereunder
shall be in writing or by confirm in telegram, cable, telex, or facsimile
sending device. Notices shall be addressed: (a) if to USTNY, to: United
States Trust Company of New York, 000 X. 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000; (b) if to UST, to: U.S. Trust Company, 000 Xxxx Xxxxx Xxxx,
Xxxxxxxx, Xxxxxxxxxxx 00000; or (c) if to the Company, to: Excelsior
Venture Partners III, LLC, 000 X. 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attn: Xxxxx X. Xxxx.
13. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of New York without giving effect to
the choice of law provisions thereof, to the extent that such laws are
consistent with the provisions of the Investment Company Act and the
regulations thereunder.
14. Miscellaneous. The captions in this Agreement are
included for the convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect their construction
or effect. Should any part of this Agreement be held or made invalid by a
court decision, statute, regulation, or otherwise, the remainder of this
Agreement shall not be affected thereby. This Agreement shall be binding
and shall inure to the benefit of the parties hereto and their respective
successors, to the extent permitted by law.
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be executed by their officers designated below as of the day and year
first above written.
U.S. TRUST COMPANY
By: ____________________________________
Name:
Title:
UNITED STATES TRUST COMPANY
OF NEW YORK
By: ___________________________________
Name:
Title:
EXCELSIOR VENTURE PARTNERS III, LLC
By: ____________________________________
Name:
Title:
