Exhibit 10.2
ALLIANCE CAPITAL MANAGEMENT L.P.
Discretionary Investment Advisory Agreement
with
Risk Capital Holdings. Inc.
Risk Capital Reinsurance Company
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(Name of Client)
Dated April 22, 1999
(Effective Date)
Alliance Capital Management L.P. (the "Adviser") and the undersigned
(the "Client") hereby agree as of the above date tint the Adviser shall act as
discretionary investment manager with respect to assets of the Client described
below (the "Investment Account") on the following terms and conditions:
1. The Investment Account
The Investment Account shall initially consist of cash, cash
equivalents, stocks, bonds, and other securities or assets the Client places in
the Investment Account or which shall become part of the Investment Account as a
result of transactions.
The Client may make additions to and withdrawals from the investment
Account provided the Adviser receives prior written notice of withdrawals. All
cash, securities and other assets in the Investment Account shall be held by
such other party as the Client shall designate as trustee or custodian (the
"Custodian"). The Adviser shall not be responsible for any custodial
arrangements involving any assets of the Investment Account or for the payment
of any custodial charges and fees, nor shall the Adviser have possession or
custody of any such assets. All payments, distributions and other transactions
in cash, securities or other assets in respect of the Investment Account shall
be made directly to or from the Custodian, and the Adviser shall have no
responsibility or liability with respect to transmittal or safekeeping of such
cash, securities or other assets of the Investment Account, or the acts or
omissions of the Custodian or others with respect thereto. The Client shall
direct the Custodian to furnish to the Adviser from time to time such reports
concerning assets, receipts and disbursements with respect to the Investment
Account as the Adviser shall reasonably request.
2. Services of Adviser
By execution of this Agreement, the Adviser accept appointment as
investment manager for the Investment Account with full discretion and agrees to
supervise and direct the investments of the Investment Account in accordance
with the written investment objectives, policies and restrictions of the Client
previously furnished to the Adviser as the same may be amended by the Client
from time to time. In the performance of its services, the Adviser will not be
liable for any error in judgment or any acts or omissions to act except those
resulting from the Adviser's negligence, wilful misconduct or malfeasance.
Nothing herein shall in any way constitute a waiver or limitation of any right
of any person under the Federal Securities Laws or any State Securities Laws.
The Adviser will render to the Client at least quarterly a written
report and inventory of the investments in the Investment Account. It is agreed
that the Adviser, in the maintenance of its records, does not assume
responsibility for the accuracy of information furnished by the Client or any
other person.
3. Funding Policy
The Client shall from time to time inform the Adviser in writing of
the funding policy applicable wit respect to the Client and of its cash
disbursement requirements. The Adviser shall make its investment decisions for
the Investment Account in accordance with such funding policy and requirements.
4. Investment Objectives, Policies and Restrictions
It will be the Client's responsibility to notify the Adviser in
writing of the investment objectives and policies of the Investment Account, and
of any modifications therein, as well as any specific investment restrictions
applicable thereto and to give the Adviser prompt written notice if the Client
deems any investments made for the Investment Account to be inconsistent with
such objectives, policies or restrictions. The Client is also required to notify
the Adviser in writing of specific restrictions governing the Investment Account
under the current or future laws of any jurisdiction or by virtue of the terms
of any other contract or instrument purporting to bind the Client or Adviser.
5. Delivery of Client Documentation
No later than the date of this Agreement, the Client will provide
the Adviser with copies of all documents relevant to the Adviser's management of
the Investment Account, (i.e. trust agreement, pension plan documents, by-laws,
etc. but only to the extent such documents are relevant to the Adviser's
management of the Investment Account), including the written statement of the
Client's investment objectives, policies and restrictions referred to above. The
Client further agrees to promptly deliver to the Adviser true and complete
copies of all amendments or supplements to such documents. The Adviser will be
indemnified and held harmless against any and all losses, costs, claims and
liabilities which it may suffer or incur arising out of any failure by the
Client to provide to the Adviser the documents required to be furnished in
accordance with the above provisions.
6. Discretionary Authority
The Adviser, whenever it deems appropriate and without prior
consultation with the Client, but subject to the client's investment objectives,
policies and restrictions referred to above and other terms hereof, may (i) buy,
sell, exchange, convert, liquidate or otherwise trade in any stock, bonds and
other securities (including money market instruments) and (ii), subject to the
provisions of paragraph 7 hereof, place orders for the execution of such
transactions with or through such brokers, dealers or issuers as the Adviser in
its absolute discretion may select.
It is understood that, to the extent permitted by the written
statement of investment objectives, policies and restrictions referred to above,
the Adviser may also effect transactions for the Investment Account in options
and financial futures, stock market index futures and other commodity contracts.
In such event, the Client will execute any additional documentation which the
Adviser deems necessary to enable it to engage in such transactions on behalf of
the Investment Account.
7. Allocation of Brokerage
When placing orders for the execution of transactions for the
Investment Account, the Adviser may, unless the Client otherwise directs,
allocate such transactions to such broker-dealers, for execution on such
markets, at such prices and at such commission rates, as in the good faith
judgment of the Adviser will be in the best interests of the Client In the
selection of such broker-dealers, the Adviser will take into consideration not
only the available prices and rates of brokerage commissions, but also other
relevant factors (such as, without limitation, execution capabilities, research
and other services provided by such broker-dealers which are expected to enhance
the general portfolio management capabilities of the Adviser, and the value of
an ongoing relationship of the Adviser with such broker-dealers) without having
to demonstrate that such factors are of a direct benefit to the Investment
Account. As a result, the commissions charged the Investment Account with
respect to a particular transaction may be somewhat higher than those another
broker-dealer might charge for the same transaction. The Adviser will exercise
good faith in negotiating the commissions paid by the Investment Account and
will seek to obtain the best price and execution for each transaction for the
Investment Account, taking into consideration the value of any brokerage and
research services provided by the broker-dealer effecting the transaction. As
set forth in Part II of the Adviser's Form ADV Registration Statement on file
with the Securities and Exchange Commission ("Form ADV"), the Adviser will not
implement other arrangements governing the use or selection of affiliated
broker-dealers or their correspondents to effect transactions for the Investment
Account without first obtaining express written consent or direction from the
Client, which consent or direction will constitute a modification to this
Agreement.
8. Aggregation of Transactions
The Client authorizes the Adviser in its discretion to aggregate
purchases and sales of securities for the Investment Account with purchases and
sales of securities of the same issuer for other clients of the Adviser
occurring on the same day. When transactions are so aggregated, the actual
prices applicable to the aggregated transactions will be averaged, and the
Investment Account and the accounts of other participating clients of the
Adviser will be deemed to have been purchased or
sold their proportionate share of the securities involved at the average price
so obtained.
9. Transaction Procedures
All transactions will be settled by payment to, or delivery by, the
Custodian of all cash, securities or other assets due to or from the Investment
Account. The Adviser may issue such instructions to the Custodian as may be
appropriate in connection with the settlement of transactions initiated by the
Adviser. Instructions of the Adviser to the Custodian shall be transmitted in
writing or, at the option of the Adviser, orally and confirmed in writing as
soon as practical thereafter. The Adviser will take reasonable measures to
insure that broker-dealers and issuers selected by the Adviser perform their
obligations wit respect to the Investment Account.
10. Fees
The compensation of the Adviser for its services under this
Agreement shall be calculated and paid in accordance with the attached Fee
Schedule, as the same may be amended from time to time by mutual agreement
between the Client and the Adviser. It is understood that, in the event that
such fees are to be billed to and paid by the Custodian, the Client will provide
written authorization to the Custodian to pay the fees of the Adviser directly
from the Investment Account.
11. Confidential Relationship
All information provided by the Client or the Custodian to the
Adviser shall be held as confidential by the Adviser; provided, however, as is
necessary to carry out the purposes of this Agreement or as may be required by
law, the Adviser shall be permitted to disclose or communicate to a proper party
any information received from the Client or the Custodian or developed by the
Adviser under the terms of this Agreement. All recommendations, advice and other
work product of the Adviser developed under the terms of this Agreement and
disclosed to the Client or the Custodian shall be held as confidential, except
as required by law, regulations, legal process or listing or quotation
requirements of any exchange or quotation system on which securities of Client
or its parent may be listed or quoted.
12. Services to Other Clients
It is understood that the Adviser performs investment advisory
services for various clients including investment companies. The Client agrees
that the Adviser may give advice and take action with respect to any of its
other clients which may differ from advice given, or the timing or nature of
action taken, with respect to the Investment Account, so long as it is the
Adviser's policy, to the extent practical, to allocate investment opportunities
to the Investment Account over a period of time on a fair and equitable basis
relative to other clients.
Nothing in this Agreement shall limit or restrict the Adviser or any
of its directors, officers, affiliates or employees from buying, selling or
trading in any securities or other assets for its or their own account or
accounts, and the Client acknowledges that the Adviser, its directors, officers,
affiliates and employees, and other clients of the Adviser, may at any time
have, acquire, increase, decrease or dispose of positions in investments which
are at the same time being acquired, held or disposed of for the Investment
Account.
The Adviser will not have any obligation to initiate the purchase or
sale, or to recommend for purchase or sale, for the Investment Account any
security or other asset which the Adviser, its directors, officers, affiliates
or employees may purchase, hold or sell for its or their own accounts or for the
accounts of any other clients of the Adviser.
13. Information Required by Adviser
The Client agrees to provide or instruct the Custodian to provide to
the Adviser such information as the Adviser may reasonably request as being
necessary or appropriate to the performance of the Adviser's responsibilities to
the Client under this Agreement.
14. Non-Public Information
The Adviser will have no obligation to purchase or sell for the
Investment Account the securities of any issuer on the basis of any material
non-public information as may come into its possession.
15. Proxies
Unless otherwise directed by the Client in writing, the Adviser will
not be required to take any action or render any advice with respect to the
voting of proxies solicited by or with respect to the issuers of securities in
which assets of the Investment Account may be invested from time to time.
16. Representations by Client
The Client represents and warrants that the employment of the
Adviser is authorized by the governing documents relating to the Investment
Account and that the terms of this Agreement do not violate any obligation by
which the Client is bound, whether arising by contract, operation of law or
otherwise and, if the Client is a person other than a natural person, that (i)
this Agreement has been duly authorized by appropriate action and when executed
and delivered will be binding upon the Client in accordance with its terms and
(ii) the Client will deliver to the Adviser such evidence of such authority as
the Adviser may reasonably require, whether by way of a certified resolution or
otherwise.
17. Representations by Adviser
The Adviser represents that it is registered as an investment
adviser under the Investment Advisers Act of 1940.
18. Indemnification
The Client and the Adviser agree to indemnify and hold each other
harmless from any and all expenses, damages, costs and fees, including
reasonable attorney's fees, which may be incurred by reason of the gross
negligence, willful misconduct or malfeasance on the part of the offending
party.
19. Valuation
In computing the market value of any security held in the Investment
Account which is listed on a national securities exchange, such security shall
be valued at the last quoted sale price on the valuation date on the principal
exchange on which the security is traded. Any other security or asset shall be
valued in a manner determined in good faith by the Advises and Client to reflect
its fair market value.
20. Receipt of Disclosure Statement
The Client acknowledges receipt of Part II of the Adviser's Form ADV
in compliance with Rule 204-3(b) under the Investment Advisers Act of 1940, as
amended ("Advisers Act") more than 48 hours prior to the date of execution of
this Agreement.
21. Notices
Unless otherwise specified herein, all notices, instructions and
advises with respect to security transactions or any other matters contemplated
by this Agreement shall be deemed duly given when received by the Adviser, the
Client and the Custodian, as applicable, at their respective addresses appearing
below. The Adviser may rely upon any notice (written or oral) from any person
which the Adviser reasonably believes to be an authorized representative of the
Client.
22. Specimen Signatures
The Adviser will forward from time to time to the Client and the
Custodian a list of names and specimen signatures of persons authorized to act
on behalf of the Adviser. The Client will forward to the Adviser a list of names
and specimen signatures of persons authorized to act on Client's behalf and
shall cause the Custodian to forward a like list and specimen signatures to the
Adviser.
23. Invalid Provisions
If any provision of this Agreement is held to be illegal, invalid or
unenforceable under present or future law, such provision shall be fully
severable, and this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part of this
Agreement, and the remaining provisions of this Agreement shall remain in full
force and effect and shall not be affected by the illegal, invalid or
unenforceable provision or its severance from this Agreement.
24. Termination; Assignment; Amendment
This Agreement may be terminated at any time by either party giving
to the other at least thirty (30) days' prior written notice of such
termination. Fees paid in advance of the effectiveness of the termination will
be prorated to the date of termination specified in the notice of termination,
and any unearned portion thereof will be refunded to the Client. No assignment
as that term is defined in the Advisers Act, shall be made by the Adviser
without the written consent of the Client. No assignment shall be deemed to
result from changes in the directors, officers or employees of the Adviser
except as may be provided in the Advisers Act. The Adviser agrees that it will
notify the Client of any change in the membership of the general partners of the
Adviser within a reasonable time after such change. This Agreement may be
amended or modified at any time by mutual agreement in writing.
25. Counterparts
This Agreement may be executed in two or more counterparts, each one
of which shall be deemed to be an original.
26. Governing Law
To the extent Federal law does not apply, this Agreement shall be
construed in accordance with and governed by the laws of the State of New York,
without regard to principles or conflicts of law.
27. Entire Agreement
This Agreement constitutes the entire agreement of the parties with
respect to management of the Investment Account.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective representatives as of the date first above written.
NAME OF Risk Capital Holdings, Inc.
CLIENT: Risk Capital Reinsurance Company
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BY: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Managing
Director and Chief Financial
Officer
ADDRESS: ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ALLIANCE CAPITAL MANAGEMENT L.P.
BY: ALLIANCE CAPITAL MANAGEMENT
CORPORATION, ITS GENERAL PARTNER
BY: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇
Assistant Secretary
ADDRESS: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇.▇. 10105
ALLIANCE CAPITAL MANAGEMENT L.P.
Fee Schedule
The fee for management of the assets in the Investment Account is
billed and payable on the last day of each calendar quarter based upon the value
of the assets in the Investment Account. On an annualized basis our fee is as
follows:
.40% - first $10 million
.25% - next $20 million
.20% - next $20 million
.15% - excess over $50 million
Alliance Investment Company Fees
Whenever assets in a client's account are invested in an investment
company managed by Alliance Capital Management L.P., the assets in the account
invested in the investment company are subjected to the management fee of such
company and the above fee schedule is then applied in full to the remaining
assets in the account (excluding the portion invested in. the investment
company).
In such event, the client will incur a higher total management fee
if the investment company's management fee rate exceeds the rates reflected in
the above schedule. In order to avoid a duplicative charge in respect of the
advisory fee paid directly to Adviser by the Fund, a dollar-for-dollar credit in
the amount of the Fund's advisory fee attributable to the client's investment in
the Fund will be reflected in the quarterly fee statement.
Information regarding the investment companies managed by Alliance
and their respective advisory fees is available upon request.
