EX-2.(G)(II) 3 w09836exv2wxgyxiiy.txt FORM OF INVESTMENT ADVISORY AGREEMENT BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC INVESTMENT ADVISORY AGREEMENT AGREEMENT, made as of the ____ day of June, 2005, by and between BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC, a Delaware limited liability company (the "Fund"), and BANC OF AMERICA INVESTMENT ADVISORS, INC., a Delaware corporation (the "Adviser"). WITNESSETH WHEREAS, the Fund intends to engage in business as a non-diversified, closed-end management investment company and is registered as such under the Investment Company Act of 1940, as amended (the "Investment Company Act"); WHEREAS, the Adviser is registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the "Investment Advisers Act"), and engages in the business of acting as an investment adviser; WHEREAS, the Fund desires to retain the Adviser to render investment advisory and other services to the Fund in the manner and on the terms and conditions hereinafter set forth; and WHEREAS, the Adviser desires to be retained to perform such services on said terms and conditions. NOW, THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, the Fund and the Adviser agree as follows: 1. GENERAL PROVISIONS. The Fund hereby retains the Adviser to act as the investment adviser to the Fund and to perform for the Fund such duties and functions as are hereinafter set forth. In rendering services under this Agreement, the Adviser shall, as applicable, conform to (a) the provisions of the Investment Company Act and any rules or regulations thereunder; (b) any other applicable provisions of Federal or state law; (c) the provisions of the Limited Liability Company Agreement of the Fund, as amended from time to time (the "LLC Agreement"); (d) the policies and determinations of the Fund's Board of Managers (the "Board"), (e) the investment policies and investment restrictions of the Fund as reflected in the registration statement of the Fund under the Investment Company Act or as such policies may, from time to time, be amended; and (f) the Prospectus and Statement of Additional Information of the Fund in effect from time to time. The appropriate officers and employees of the Adviser shall be available upon reasonable notice for consultation with any members of the Board or officers of the Fund with respect to any matters dealing with the business and affairs of the Fund, including the valuation of any of the portfolio securities of the Fund. 2. INVESTMENT MANAGEMENT. (a) The Adviser shall, subject to the supervision and control of the Board, (i) regularly provide investment advice and recommendations to the Fund with respect to its investments, investment policies and the purchase and sale of securities for the Fund; (ii) develop, implement and supervise continuously the investment program of the Fund and the composition of its portfolio and determine what 1 securities shall be purchased and sold by the Fund; (iii) arrange, subject to the provisions of paragraph 6 hereof, for the purchase of securities and other investments for the Fund and the sale or redemption of securities and other investments held in the portfolio of the Fund; and (iv) take such further actions with respect to the foregoing as the Adviser shall deem necessary or advisable. (b) Notwithstanding subparagraph 2(a), and provided that the Fund shall not be required to pay any compensation for services other than as provided by the terms of this Agreement, including the provisions of paragraph 6 hereof, the Adviser may: (i) obtain investment information, research or assistance from any other person, firm or corporation to supplement, update or otherwise improve its investment management services; and (ii) enter into investment sub-advisory agreements with any registered investment advisers, subject to such approvals of the Board and investors of the Fund ("Investors") as may be required to comply with applicable provisions of the Investment Company Act, to provide the Fund with any or all of the investment advisory services required to be provided by the Adviser under this Agreement. (c) Nothing in this Agreement shall prevent the Adviser or any affiliate thereof from acting as investment adviser for any other person, firm, fund, corporation or other entity and shall not in any way limit or restrict the Adviser, or any of its affiliates, or their respective directors, officers, stockholders or employees from buying, selling or trading any securities or other investments for its or their own account or for the account of others for whom it or they may be acting, provided that such activities do not adversely affect or otherwise impair the performance by the Adviser of its duties and obligations under this Agreement and under the Investment Advisers Act. To the extent that the purchase or sale of securities or other investments of the same issuer may be deemed by the Adviser (or any affiliate) to be suitable for two or more accounts managed by the Adviser (or any affiliate), the available securities or investments may be allocated in a manner believed by the Adviser (or the affiliate) to be equitable to each account. It is recognized that in some cases this procedure may adversely affect the price paid or received by the Fund or the size of the position obtainable for or disposed of by the Fund. 3. REPORTS. The Fund shall, from time to time, furnish or otherwise make available to the Adviser such financial reports, proxy statements, policies and procedures and other information relating to the business and affairs of the Fund as the Adviser may reasonably require in order to discharge its duties and obligations hereunder. 4. ALLOCATION OF EXPENSES. All costs and expenses of the Fund not expressly assumed by the Adviser under this Agreement, shall be paid by the Fund, including, but not limited to: (a) all costs and expenses directly related to investment transactions and positions for the Fund's account, including, but not limited to, brokerage commissions, research fees, reasonable out of pocket expenses incurred in monitoring and evaluating private investment funds in which the Fund invests ("Underlying Funds") and the managers of such funds, interest and commitment fees on loans and debit balances, borrowing charges on securities sold short, dividends on securities sold but not yet purchased, custodial fees, margin fees, transfer taxes and premiums and taxes withheld on non-U.S. dividends; (b) all costs and expenses associated with the operation and registration of the Fund, offering costs and the costs of compliance with any applicable Federal and state laws; (c) the costs and expenses of holding meetings of the Board and any meetings of Investors, including costs associated with the preparation and dissemination of proxy materials; (d) the fees and disbursements of Fund counsel, legal counsel to the Managers of the Fund, if any, who are not "interested persons" as defined by the Investment Company Act and the rules thereunder, independent auditors for the Fund and other consultants and professionals engaged on behalf of the Fund; (e) the 2 Management Fee (as defined below); (f) the fees payable to fund accounting agents, transfer agents, custodians and other persons providing administrative services to the Fund; (g) the costs of a fidelity bond and any liability insurance obtained on behalf of the Fund and/or the Board; (h) all costs and expenses of preparing, setting in type, printing and distributing reports and other communications to Investors; (i) any entity-level taxes; and (j) such other expenses as may be approved by the Board. The Fund is also responsible for paying its ratable share of the fees and expenses of the Underlying Funds. Any officers or employees of the Adviser (or any entity controlling, controlled by, or under common control with the Adviser) who may also serve as officers, Managers or employees of the Fund shall not receive any compensation from the Fund for their services, provided, however, that notwithstanding the foregoing, the Fund may pay compensation to, and expenses of, the Fund's chief compliance officer to the extent that the Board expressly so authorizes, regardless of whether such officer is also an officer or employee of the Adviser (or any entity controlling, controlled by, or under common control with the Adviser). 5. COMPENSATION OF THE ADVISER. (a) Management Fee. In consideration of the services provided by the Adviser under this Agreement, the Fund agrees to pay the Adviser a management fee (the "Management Fee") computed at the annual rate of 1.25% of the aggregate value of outstanding limited liability company interests of the Fund ("Interests") determined no less frequently than quarterly (before any repurchases of Interests or the Incentive Allocation (as defined below)). (b) Incentive Allocation. The Adviser shall have the right as provided by the LLC Agreement to serve as the Special Advisory Member of the Fund and to receive in such capacity a performance-based allocation in accordance with the terms of the LLC Agreement (the "Incentive Allocation"). The Incentive Allocation, if any, will be computed and credited to the capital account of the Special Advisory Member as provided by the LLC Agreement. 6. PORTFOLIO TRANSACTIONS AND BROKERAGE. (a) The Adviser shall be responsible for the selection of brokers or dealers to execute the Fund's portfolio transactions. In selecting brokers or dealers to execute transactions on behalf of the Fund, the Adviser generally shall seek to obtain the best price and execution for the transactions, 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 the brokerage services provided, and such brokerage firm's risk in positioning a block of securities. (b) Consistent with the principle of seeking best price and execution in connection with the Fund's portfolio transactions, the Adviser shall have discretion, in the interests of the Fund, to place orders for the Fund with brokers or dealers that provide the Adviser with research services (as such services are defined in Section 28(e)(3) of the Securities Exchange Act of 1934, as amended (the "1934 Act")), including, without limitation, 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 furnishing analyses and reports concerning issuers, industries, securities, economic factors and trends, portfolio strategy and the performance of accounts, which may assist the Adviser in managing the assets of the Fund or other accounts for which the Adviser or any affiliate of the Adviser exercises "investment discretion" (as that term is defined in Section 3(a)(35) of the 1934 Act). The Adviser shall have discretion to cause the Fund to pay such brokers or dealers a commission for effecting a portfolio transaction for the Fund that is in excess of the amount of commission another broker or dealer adequately qualified to effect such transaction would have charged for effecting that transaction, if the Adviser determines, in good faith, that such commission is reasonable in relation to the value of the brokerage and/or research services provided 3 by such broker or dealer viewed in terms of either that particular transaction or the overall responsibilities of the Adviser or its affiliates with respect to accounts as to which they exercise investment discretion. In reaching such determination, the Adviser will not be required to place or attempt to place a specific dollar value on the brokerage or research services provided or being provided by such broker or dealer. In demonstrating that such determinations were made in good faith, the Adviser shall be prepared to show that all commissions were allocated for purposes contemplated by this Agreement and that the total commissions paid by the Fund over a representative period selected by the Board were reasonable in relation to the benefits to the Fund. (c) The Adviser shall have no duty or obligation to seek advance competitive bidding for the most favorable commission rate applicable to any particular portfolio transactions or to select any broker or dealer on the basis of its purported or "posted" commission rate but will, to the best of its ability, endeavor to be aware of the current level of the charges of eligible brokers or dealers and to minimize the expense incurred by the Fund for effecting its portfolio transactions to the extent consistent with the interests and policies of the Fund. (d) The Fund recognizes that a broker or dealer affiliated with the Adviser (i) may act as one of the regular brokers for the Fund so long as it is lawful for it so to act; (ii) may be a major recipient of brokerage commissions paid by the Fund; and (iii) may effect portfolio transactions for the Fund only if the commissions, fees or other remuneration received or to be received by it are determined in accordance with procedures contemplated by any rule, regulation or order adopted under the Investment Company Act to be within the permissible level of such commissions. (e) Subject to the foregoing provisions of this paragraph 6, the Adviser may also consider sales of Interests as a factor in the selection of brokers or dealers for its portfolio transactions. 7. DURATION. (a) This Agreement will take effect on the date first set forth above. Unless earlier terminated pursuant to paragraph 11 hereof, this Agreement shall remain in effect through October 31, 2006 and thereafter shall continue in effect from year to year, so long as such continuance shall be approved at least annually by the Board or by the holders of a "majority of the outstanding voting securities" of the Fund (as defined in the Investment Company Act), subject in such case to the approval by a vote of the majority of the Managers who are not parties to this Agreement or "interested persons" (as defined in the Investment Company Act and the rules thereunder) of any such party, cast in person at a meeting called for the purpose of voting on such approval. 8. DISCLAIMER OF MEMBER OR MANAGER LIABILITY. (a) The Adviser understands and agrees that the obligations of the Fund under this Agreement are not binding upon any Investor or Manager of the Fund personally, but bind only the Fund and the Fund's property. (b) The Adviser acknowledges that it has notice of the provisions of the LLC Agreement disclaiming Investor and Manager liability for acts and obligations of the Fund. 9. EXCULPATION; INDEMNIFICATION. (a) The Adviser will use its best efforts in providing services to the Fund. The Adviser shall not be liable to the Fund for any error of judgment or mistake of law or for any loss suffered by the Fund in connection with the performance by the Adviser of its duties under this Agreement, except a loss 4 resulting from a breach 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 the part of the Adviser or any of its officers, directors, employees or agents (collectively, the "Affiliates") in the performance of their duties under this Agreement, or from reckless disregard by the Adviser or its Affiliates of their obligations or duties under this Agreement. (b) The Fund shall indemnify and hold harmless the Adviser and its Affiliates (each, an "Indemnified Person") against any and all losses, claims, damages or liabilities, joint or several, including, without limitation, reasonable attorneys' fees and disbursements, reasonably incurred by them in connection with, or resulting from, their actions or inactions in connection with the performance of their duties under this Agreement, except those losses, claims, damages or liabilities resulting from willful misfeasance, bad faith or gross negligence in the performance by the Indemnified Persons of their duties under this Agreement, or the reckless disregard of their obligations or duties under this Agreement. (c) Notwithstanding any of the foregoing, the provisions of this paragraph 9 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 9 to the fullest extent permitted by law. 10. ASSIGNMENT OR AMENDMENT. Any amendment to this Agreement shall be in writing and shall be subject to: (a) the approval of the Board, including the vote of a majority of the Managers who are not "interested persons," as defined by the Investment Company Act and the rules thereunder, of the Fund or the Adviser; and (b) the affirmative vote or written consent of the holders of a "majority of the outstanding voting securities," as defined by the Investment Company Act, of the Fund, to the extent a vote of security holders is required by the Investment Company Act. This Agreement shall automatically and immediately terminate in the event of its "assignment," as defined in the Investment Company Act. 11. TERMINATION. This Agreement may be terminated (a) by the Adviser at any time without penalty upon sixty (60) days' written notice to the Fund (which notice may be waived by the Fund); or (b) by the Fund at any time without penalty upon sixty (60) days' written notice to the Adviser (which notice may be waived by the Adviser), provided that such termination by the Fund shall be directed or approved by the Board or by the vote of the holders of a "majority of the outstanding voting securities," as defined by the Investment Company Act, of the Fund. 12. NOTICES. Any notice or other communication required to be or that may be given hereunder shall be in writing and shall be delivered personally, telecopied, sent by certified, registered or express mail, postage prepaid or sent by national next-day delivery service and shall be deemed given when so delivered personally or telecopied, or if mailed, two days after the date of mailing, or if by next-day delivery service, on the business day following delivery thereto: 5 (a) If to the Fund, to: BACAP Alternative Multi-Strategy Fund, LLC 40 West 57th Street New York, NY 10019 Attention: Lawrence Morgenthal President Telecopier: 646-313-4708 (b) If to the Adviser, to: Banc of America Investment Advisors, Inc. 100 Federal Street Boston, MA 02110 Attention: Keith Winn President Telecopier: 617-434-0255 13. QUESTIONS OF INTERPRETATION. This Agreement shall be governed by the laws of The Commonwealth of Massachusetts applicable to agreements made and to be performed entirely within The Commonwealth of Massachusetts (without regard to any conflicts of law principles thereof). Any question of interpretation of any term or provision of this Agreement having a counterpart in or otherwise derived from a term or provision of the Investment Company Act shall be resolved by reference to such term or provision of the Investment Company Act and to interpretations thereof, if any, by the United States courts or, in the absence of any controlling decision of any such court, by rules, regulations or orders of the Securities and Exchange Commission ("SEC") issued pursuant to the Investment Company Act. In addition, where the effect of a requirement of the Investment Company Act reflected in any provision of this Agreement is revised by rule, regulation or order of the SEC, such provision shall be deemed to incorporate the effect of such rule, regulation or order. 14. DEFINITIONS. The terms and provisions of the Agreement shall be interpreted and defined in a manner consistent with the terms and provisions of the Investment Company Act and the rules thereunder. IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first written above. BACAP ALTERNATIVE MULTI-STRATEGY FUND, LLC By: _______________________________ Name: Lawrence Morgenthal Title: President BANC OF AMERICA INVESTMENT ADVISORS, INC. By: ________________________________ Name: Keith Winn Title: President 6