SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_| Check the
appropriate box:
|X| Preliminary Proxy Statement |_| Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Under Rule 14a-12
EXCELSIOR PRIVATE EQUITY FUND II, INC.
------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
|_| Fee paid previously with preliminary materials.
------------------------------------------------------------------------
|_| Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the form or schedule and the date of its
filing.
(1) Amount previously paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
EXCELSIOR PRIVATE EQUITY FUND II, INC.
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036-1532
Dear Shareholder:
You are cordially invited to attend the Annual Meeting (the
"Meeting") of Shareholders of Excelsior Private Equity Fund II, Inc. (the
"Company") to be held on Monday, May 8, 2000 at 10:00 a.m., Eastern time,
at the offices of United States Trust Company of New York, 114 West 47th
Street, New York, New York 10036.
On January 12, 2000, The Charles Schwab Corporation and U.S. Trust
Corporation, the parent corporation of the United States Trust Company of New
York, entered into a definitive merger agreement. Following the merger, U.S.
Trust Corporation will be a wholly owned subsidiary of The Charles Schwab
Corporation. The merger is anticipated to close by July 2000, but is subject to
a number of conditions including regulatory and shareholder approvals. The
merger may be considered an assignment under the Investment Company Act of 1940
of the existing investment advisory agreement between Excelsior Private Equity
Fund II, Inc. and the United States Trust Company of New York, which would
result in termination of the Agreement. Consequently, the Board of Directors of
Excelsior Private Equity Fund II, Inc. has called an annual meeting of
shareholders to approve the following items.
At the Meeting, shareholders of the Company will be asked to vote on
the following matters: (1) approval or disapproval of a new investment advisory
agreement between the Company and United States Trust Company of New York (2)
election of directors and (3) ratification or rejection of the selection of
Ernst & Young LLP as the Company's independent accountants for the fiscal year
ending October 31, 2000.
Whether or not you plan to be present at the Meeting, your vote is
needed. If you do not plan to be present at the Meeting, please complete,
sign and return the enclosed proxy card promptly. A postage paid envelope
is enclosed for this purpose.
We look forward to seeing you at the Meeting or receiving your proxy
card so your shares may be voted at the Meeting.
Sincerely yours,
David I. Fann
President and Chief Executive Officer
SHAREHOLDERS ARE URGED TO SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED ENVELOPE.
[PRELIMINARY COPY]
EXCELSIOR PRIVATE EQUITY FUND II, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
March___, 2000
To the Shareholders of Excelsior Private Equity Fund II, Inc.:
The Annual Meeting of shareholders of Excelsior Private Equity Fund
II, Inc. (the "Company") will be held on Monday, May 8, 2000 at 10:00 a.m.
Eastern time, at the offices of United States Trust Company of New York,
114 West 47th Street, New York, New York 10036.
The meeting will be held for the following purposes:
(1) to approve or disapprove a new investment advisory agreement
between the Company and United States Trust Company of New York;
(2) to elect each of Mr. Bernstein, Mr. Hover, Mr. Murphy and Mr.
Imbimbo as directors of Excelsior Private Equity Fund II, Inc.;
(3) to ratify or reject the selection of Ernst & Young LLP as the
Company's independent accountants for the fiscal year ending
October 31, 2000; and
(4) the transaction of such other business as may properly come
before the Meeting or any adjournments thereof.
The proposals referred to above are discussed in the Proxy Statement
attached to this Notice. Each shareholder is invited to attend the Annual
Meeting of Shareholders in person. Shareholders of record at the close of
business on March 9, 2000 have the right to vote at the Meeting. If you
cannot be present at the Meeting, we urge you to fill in, sign and promptly
return the enclosed proxy in order that the Meeting can be held and a
maximum of shares may be voted.
By Order of the Board of Directors
of Excelsior Private Equity Fund II, Inc.
Ronald A. Schwartz
Secretary
WE NEED YOUR PROXY VOTE IMMEDIATELY
A SHAREHOLDER MAY THINK HIS OR HER VOTE IS NOT IMPORTANT, BUT IT IS VITAL.
BY LAW, THE ANNUAL MEETING OF SHAREHOLDERS OF THE COMPANY SCHEDULED FOR
MAY 8, 2000 WILL HAVE TO BE ADJOURNED WITHOUT CONDUCTING ANY BUSINESS IF
LESS THAN A MAJORITY OF THE SHARES ELIGIBLE TO VOTE ARE REPRESENTED AT THE
COMPANY'S MEETING. IN THAT EVENT, THE COMPANY WOULD CONTINUE TO SOLICIT
VOTES IN AN ATTEMPT TO ACHIEVE A QUORUM. CLEARLY, YOUR VOTE COULD BE
CRITICAL IN ALLOWING THE COMPANY TO HOLD THE MEETING AS SCHEDULED, SO
PLEASE RETURN YOUR PROXY CARD IMMEDIATELY.
[PRELIMINARY COPY]
EXCELSIOR PRIVATE EQUITY FUND II, INC.
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Excelsior Private Equity Fund II,
Inc. (the "Company"). The Annual Meeting will be held at the offices of
United States Trust Company of New York, 114 West 47th Street, New York,
New York 10036 on Monday, May 8, 2000 at 10:00 a.m. Eastern time (the
"Meeting"). This Proxy Statement and the accompanying proxy card are first
being sent to Shareholders on or about March __, 2000.
It is expected that the solicitation of proxies will be primarily by
mail. The Company's officers, investment adviser and administrator may also
solicit proxies by telephone, telegraph, facsimile, personal interview or the
internet. United States Trust Company of New York will bear the proxy costs of
approximately $__________, and all other costs in connection with the Meeting.
Any shareholder giving a proxy may revoke it at any time before it is exercised
by submitting to the Company a written notice of revocation or a subsequently
executed proxy or by attending the Meeting and electing to vote in person.
The following summarizes the proposals to be voted on at the Meeting.
Proposal
- --------
1. To approve or disapprove a new investment advisory agreement between
the Company and United States Trust Company of New York.
2. To elect each of Mr. Bernstein, Mr. Hover, Mr. Murphy and Mr. Imbimbo
as directors of Excelsior Private Equity Fund II, Inc.
3. To ratify or reject the selection of Ernst & Young LLP as the
Company's independent accountants for the fiscal year ending October
31, 2000.
A Proxy is enclosed with respect to the shares you own in the Company.
If the Proxy is executed properly and returned, the shares represented by
it will be voted at the Meeting in accordance with the instructions
thereon. Each full share is entitled to one vote and each fractional share
to a proportionate fractional vote. If you do not expect to be present at
the Meeting and wish your shares to be voted, please complete the enclosed
Proxy and mail it in the enclosed reply envelope.
-1-
THE BOARD OF EXCELSIOR PRIVATE EQUITY FUND II, INC. RECOMMENDS A VOTE IN
FAVOR OF EACH PROPOSAL DESCRIBED IN THIS PROXY STATEMENT.
-2-
INTRODUCTION
The Company has been organized as a Maryland corporation to engage in the
business of a closed-end management company that has elected to be treated as a
business development company under the Investment Company Act of 1940, as
amended (the "1940 Act"). This meeting constitutes an annual meeting of
shareholders that has been called to consider proposals relating to the
following transaction.
On January 12, 2000, The Charles Schwab Corporation ("Schwab") and U.S.
Trust Corporation entered into a definitive agreement to merge (the
"Merger"). Through its principal subsidiary Charles Schwab & Co., Inc.,
Schwab is the nation's fourth largest financial services firm and the
nation's largest electronic brokerage firm, in each case measured by
customer assets. At December 31, 1999, Schwab served 6.6 million active
accounts with $725 billion in customer assets through 340 branch offices,
four regional customer telephone service centers and automated telephonic
and online channels. Approximately 30% of Schwab's customer assets and
approximately 13% of its customer accounts are managed by 5,800
independent, fee-based investment advisors served by Schwab's institutional
investor segment. After the Merger, U.S. Trust Corporation will be a wholly
owned subsidiary of Schwab. The merger is anticipated to close by July
2000; however, it is subject to a number of conditions including certain
regulatory and shareholder approvals.
United States Trust Company of New York ("U.S. Trust" or the "Investment
Adviser") is the managing investment adviser of the Company and is responsible
for the Company's private equity investments. U.S. Trust, a subsidiary of U.S.
Trust Corporation, intends to continue to serve as the investment adviser to
the Company after the Merger. U.S. Trust has advised the Company that it does
not have any plan to materially alter the investment advisory services provided
to the Company as a result of the Merger or to make any changes in the key
personnel responsible for overseeing the investment activities of the Company.
The Merger, however, represents a change in ownership of the parent corporation
of U.S. Trust and, as such, may have the effect under the 1940 Act of
terminating the existing Management Agreement dated May 13, 1997, between the
Company and U.S. Trust (the "Existing Agreement") at the date of the
consummation of the Merger.
As a consequence of the Merger, and in order to provide continuity of
investment advisory services, the Board of Directors of Excelsior Private
Equity Fund II, Inc. (the "Board of Directors" or the "Board") has proposed
for the approval of its shareholders a new advisory agreement with U.S.
Trust to take effect upon the consummation of the Merger (the "New
Agreement"). Except as described below, the terms of the New Agreement are
identical to those of the Existing Agreement. In addition, the advisory
fees provided for in the Existing Agreement will remain the same and not
change in the New Agreement. The election of directors of Excelsior Private
Equity Fund II, Inc. and the ratification or rejection of Ernst & Young LLP
as the Company's independent accountants for the year ending October 31,
2000 are also on the agenda for the Meeting.
-3-
PROPOSAL 1: APPROVAL OF NEW INVESTMENT ADVISORY AGREEMENT
At the Meeting, shareholders of the Company will be asked to vote on the
approval of the New Agreement. The principal terms of the New Agreement are
summarized below and a copy of the New Agreement is attached to this Proxy
Statement as Appendix A. The description of the New Agreement that follows is
qualified in its entirety by reference to Appendix A.
As required by the 1940 Act, the Existing Agreement provides for
automatic termination upon "assignment." Consummation of the Merger between
U.S. Trust Corporation and Schwab may be deemed to be an assignment (as
defined in the 1940 Act) of the Existing Agreement resulting in the
termination of the Existing Agreement in accordance with its terms. In
anticipation of the consummation of the Merger, and to provide continuity
in investment advisory services, the Board of Directors, including a
majority of the Board members who are not "interested persons" (as defined
in the 1940 Act), at a meeting held on March 7, 2000, approved and directed
that there be submitted to the shareholders of the Company for approval, a
new investment advisory agreement between the Company and U.S. Trust.
If the Merger is not completed but the proposed New Agreement is approved
by the shareholders, U.S. Trust will operate under the New Agreement. If the
Merger is not completed, the New Agreement would become effective upon
termination of the definitive merger agreement. In the event the proposed New
Agreement is not approved by shareholders of the Company, the Board will
promptly consider alternatives to ensure continuing investment management
services for the Company. If the New Agreement is not approved and the
Merger is not completed, the Company will continue to operate under the
Existing Agreement.
COMPLIANCE WITH SECTION 15(F) OF THE 1940 ACT
Section 15(f) of the 1940 Act provides that when a change in the control
of an investment adviser occurs, the investment adviser or any of its
affiliated persons may receive an amount or benefit in connection therewith
as long as two conditions are satisfied. First, no "unfair burden" may be
imposed on the business development company as a result of the transaction
relating to the change of control, or any express or implied terms,
conditions or understandings applicable thereto. Second, during the
three-year period immediately following consummation of the transaction, at
least 75% of the business development company's board of directors must not
be "interested persons" of the investment adviser within the meaning of the
1940 Act.
With respect to the first condition, the term "unfair burden," as defined
in the 1940 Act, includes any arrangement during the two-year period after the
change in control whereby the investment adviser (or predecessor or
successor adviser), or any interested person of any such adviser, receives
or is entitled to receive any compensation, directly or indirectly, from
the business development company or its security holders (other than fees
for bona fide investment advisory or other services) or from any person in
connection with the purchase or sale of securities or other property to,
from or on behalf of the business development company
-4-
(other than fees for bona fide principal underwriting services). The
Company is not aware of any such compensation arrangements.
With respect to the second condition, in order to meet the
requirements of Section 15(f) of the 1940 Act, a new director who is not an
interested person of U.S. Trust or of Schwab has been selected and proposed
for election by a majority of the directors who are not interested persons
of U.S. Trust or Schwab. The election of directors is considered under
Proposal 2 below.
DESCRIPTION OF THE EXISTING AND NEW AGREEMENTS
The Existing Agreement was last approved by the sole shareholder on
May 13, 1997. In the Existing Agreement, subject to Board oversight, U.S. Trust
is responsible for identifying, evaluating, structuring, monitoring and
disposing of the Company's investments. U.S. Trust is also responsible for
performing, or arranging for suitable third parties to provide the management
and administrative services necessary for the operation of the Company.
TERMS AND CONDITIONS. As previously noted, the terms and conditions of
the New Agreement are substantially the same as those of the Existing
Agreement, except that:
o the New Agreement will be dated as of the date of the Merger if the
Merger is completed, or upon termination of the Existing Agreement if the
Merger is not completed;
o the New Agreement provides that U.S. Trust may provide advisory
services through its own employees or the employees of an affiliated
company as long as such employees function as part of an organized
group of persons, the use of such employees does not result in a
change of actual control or management of the Investment Adviser under the
1940 Act and the use of such employees has been approved by the Board;
o the New Agreement provides that an affiliate may assume the
obligations of U.S. Trust, under the New Agreement so long as:
o the affiliate is qualified to act as an investment adviser to the
Company under applicable law;
o the assumption will not result in a change of actual control or
management of U.S. Trust under the 1940 Act; and
o the assumption of U.S. Trust's obligations has been approved by
the Board of the Company.
UNLESS A DIFFERENCE IS SPECIFICALLY DISCUSSED ABOVE, THE TERMS OF THE
NEW AGREEMENT ARE SUBSTANTIALLY THE SAME AS THOSE IN THE EXISTING AGREEMENT
AND THERE ARE NO OTHER MATERIAL DIFFERENCES. THE ADVISORY FEES PROVIDED FOR IN
THE EXISTING AGREEMENT WILL REMAIN THE SAME AND NOT CHANGE IN THE NEW
AGREEMENT.
-5-
DESCRIPTION OF THE PROPOSED ADVISORY AGREEMENT
The Existing Agreement and New Agreement provide that, subject to the
general supervision of the Company's Board of Directors, U.S. Trust will,
among other things, (1) prepare and evaluate any pertinent research,
statistical, financial and economic data, and other information necessary
or appropriate for the performance of its duties under the agreement; (2)
identify, evaluate, structure, monitor and dispose of the Company's
investments in portfolio companies, private funds and short-term
investments; (3) render managerial assistance to entities in which the
Company has invested or is proposing to invest; (4) determine whether and
how to exercise warrants, voting rights or other rights with respect to the
Company's portfolio's securities; (5) provide valuations with respect to
the securities held by the Company (if so requested by the Board); (6)
render regular reports to the Company's officers and the Company's Board
concerning the investment performance of the Company, the discharge by U.S.
Trust of its responsibilities and any other subject that the Company's
officers or Board reasonably may request; and (7) assist the Company's
officers in connection with the operation of the Company and perform any
further acts that may be necessary to effectuate the purposes of the
agreement.
The Existing Agreement and New Agreement provide that U.S. Trust will
furnish at its own expense all office space, office facilities, supplies,
equipment and personnel necessary or appropriate to the performance of its
duties thereunder. U.S. Trust will also pay the salaries and fees of all
personnel of the Company or U.S. Trust performing services related to U.S.
Trust's duties under the Existing Agreement and New Agreement.
The Existing Agreement and New Agreement provide that U.S. Trust may
place orders for portfolio securities either directly with the issuer or
with any broker or dealer selected by U.S. Trust. In placing orders with
brokers and/or dealers under the Agreements, U.S. Trust is obligated,
subject to the considerations set forth below, to use its best efforts to
obtain the best net price and most favorable execution of 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, U.S. Trust may,
to the extent permitted by law, purchase and sell portfolio securities from
and to brokers who provide brokerage and research services (within the
meaning of Section 28(e) of the Securities Exchange Act of 1934) to or for
the benefit of the Company and/or other accounts over which U.S. Trust
exercises investment discretion. U.S. Trust is authorized under the
Agreements to pay a broker who provides such brokerage and research
services a commission for effecting a securities transaction which is in
excess of the amount of the commission another broker would have charged
for effecting that transaction if U.S. Trust determines in good faith that
such commission is reasonable in relation to the value of the brokerage and
research services provided by the broker viewed in terms of either that
particular transaction or the overall responsibilities of U.S. Trust with
respect to the accounts as to which it exercises investment discretion.
Under the Existing Agreement and New Agreement U.S. Trust may execute
transactions through itself and its affiliates on a securities exchange
provided that the commissions paid by the Company are "reasonable and fair"
compared to commissions received by other brokers
-6-
having comparable execution capability, and provided that the
transactions are effected pursuant to procedures established by the Board
of Directors. In each case, an affiliated broker may transmit, clear and
settle transactions for the Company that are executed on a securities
exchange provided that the affiliated broker arranges for unaffiliated
brokers to execute the transactions. Such commissions may not exceed the
usual and customary broker's commission.
In addition, the Board of Directors, in its discretion, may instruct
U.S. Trust to effect all or a portion of its securities transactions with
one or more brokers and/or dealers selected by the Board of Directors if
the Board of Directors determines that the use of such brokers and/or
dealers is in the best interest of the Company.
Under the Existing Agreement and New Agreement, when U.S. Trust deems
the purchase or sale of a security to be in the best interest of the
Company as well as other customers, U.S. Trust may, to the extent permitted
by applicable law, aggregate the securities to be so sold or purchased in
order to obtain the best execution or lower brokerage commissions. Under
the Existing and New Agreement, U.S. Trust may also purchase or sell a
particular security for one or more customers in different amounts.
Allocation of the securities purchased or sold in either manner, as well as
the expenses incurred in the transactions, will be made by U.S. Trust in a
manner that it believes is equitable and consistent with applicable law and
regulations and with its fiduciary obligations to the Company and to such
other customers.
The Existing Agreement and New Agreement require U.S. Trust to give
the Company the benefit of its best judgment and efforts in rendering
services to the Company. Under the Existing Agreement and New Agreement,
U.S. Trust will not be liable to the Company or to any shareholder of the
Company for any act or omission in the course of, or connected with,
rendering services under such agreement or for any losses that may be
sustained in the purchase, holding or sale of any security. The Company
will indemnify U.S. Trust against all losses, claims, damages, liabilities
or expenses that were not the result of U.S. Trust's bad faith, negligence,
misconduct or a breach of fiduciary duty owed to the Company.
Indemnification shall be made only following a final decision on the merits
or a reasonable determination by a quorum of the directors or counsel to
the Company that U.S. Trust was not liable by reason of bad faith,
negligence, misconduct, or breach of fiduciary duty owed to the Company.
U.S. Trust is entitled to advancement of expenses incurred in seeking
indemnification upon providing a written affirmation of its good faith
belief that it meets the requisite standard for indemnification and an
undertaking to repay the advance if it is ultimately determined that the
standard was not met.
No provision of this agreement shall be construed to protect any
director or officer of the Company or U.S. Trust from liability in
violation of Section 17(i) of the 1940 Act which prohibits protection from
liability in the event of willful misfeasance, bad faith, gross negligence,
or reckless disregard of one's duties or obligations under a contract.
EFFECTIVE DATE OF NEW AGREEMENT. If approved by a majority of the
outstanding shares (as defined below) of the Company and the Merger is
completed, the New Agreement will become effective at the time of the
consummation of the Merger, and will continue in effect for two years from
the date of effectiveness (unless terminated sooner). If the New Agreement
is approved by a majority of the outstanding shares, but the Merger is not
completed, the New Agreement
-7-
will be dated as of the date of termination of the Existing Agreement.
Thereafter, if not terminated, the New Agreement will continue in effect
for successive annual periods, provided that such continuance is
specifically approved at least annually by the vote of a majority of those
members of the Board who are not parties to the New Agreement or
"interested persons" (as defined in the 1940 Act) of any such party, and
either: (i) the vote of a majority of the outstanding shares of the
Company; or (ii) the vote of a majority of the full Board of Directors.
TERMINATION. The Existing Agreement and New Agreement provide that
they may be terminated at any time, without the payment of any penalty,
either by: (i) the Company, by action of the Board or by the vote of a
majority of the Company's outstanding shares, on 60 days' written notice to
U.S. Trust; or (ii) U.S. Trust, on 90 days' written notice to the Company.
The Existing Agreement and New Agreement provide that they will terminate
immediately in the event of an "assignment" (as defined in the 1940 Act).
FEES. For the services provided and the expenses assumed pursuant to
the Existing Agreement and New Agreement, U.S. Trust is entitled to a fee,
payable quarterly, at the following rates: (i) 1.5% per annum of the net
assets of the Company, determined as of the end of each fiscal quarter,
that are invested or committed to be invested in portfolio companies or
private funds and (ii) 0.5% of the net assets of the Company, determined as
of the end of each fiscal quarter, that are invested in short term
investments and are not committed to portfolio companies or private funds.
In addition to the management fee, pursuant to the Existing Agreement
and New Agreement, the Company has agreed to pay the Investment Adviser an
incentive fee in an amount equal to 20% of the realized capital gains (net
of realized capital losses and unrealized net capital depreciation) on
"direct investments" (as defined in the Agreement), less the aggregate
amount of incentive fee payments in prior years. No incentive fee will be
paid to the Investment Adviser with respect to the Company's investments in
private funds. If the amount of the incentive fee in any year is a negative
number, or cumulative net realized capital gains less net unrealized
capital depreciation at the end of any year is less than such amount
calculated at the end of the previous year, the Investment Adviser will be
required to repay to the company all or a portion of the incentive fee
previously paid. For the fiscal year ended October 31, 1999, Excelsior
Private Equity Fund II, Inc. paid U.S. Trust advisory fees in the amount of
$2,364,920 and $4,914,480 as an incentive carried interest.
THERE WILL BE NO CHANGE IN THE CONTRACTUAL ADVISORY FEES PAYABLE BY
THE COMPANY AS A RESULT OF APPROVAL OF THE NEW AGREEMENT. The New
Agreement, like the Existing Agreement, entitles U.S. Trust to receive
management and incentive fees, paid quarterly, at the annual rate described
above. U.S. Trust may from time to time voluntarily waive all or a portion
of the advisory fee payable by the Company, which waiver may be terminated
at any time.
EVALUATION BY THE BOARD OF DIRECTORS OF THE COMPANY. The New Agreement
was unanimously approved by the Board of Directors of the Company and by those
members of the Board of Directors who were not "interested persons" (as that
term is defined in the 1940 Act) of any party to the Company's New Agreement,
at a meeting held on March 7, 2000. The Board considered the Merger, that the
New Agreement is substantially the same
-8-
as the Company's Existing Agreement (except as noted above) and that
the contractual advisory fee rate payable by the Company under the New
Agreement for the Company would be identical to that payable under the
Company's Existing Agreement. The Board considered that U.S. Trust does not
have any plans to materially alter the investment advisory services
provided to the Company as a result of the Merger or to make any change in
the key personnel responsible for overseeing the investment activities of
the Company. The Board also considered the benefits that U.S. Trust may
derive from the Merger and the New Agreement including, but not limited to,
the potential receipt by U.S. Trust of brokerage and research services as
provided in the agreement. Based on its evaluation, the Board of Directors
concluded that approval of the New Agreement would be in the best interests
of the Company and its shareholders. With respect to the provisions of the
New Agreement regarding the use of employees and affiliates of U.S. Trust,
the Board considered that this provision would allow U.S. Trust to use the
best talent within its organization to update the Company.
INFORMATION ABOUT THE INVESTMENT ADVISER. U.S. Trust, which has its
principal offices at 114 West 47th Street, New York, New York 10036, is a
New York State-chartered bank and trust company and a member bank of the
Federal Reserve System. U.S. Trust serves as investment adviser to the
Company under the Existing Agreement and is a wholly owned subsidiary of
U.S. Trust Corporation, a registered bank holding company, which has
its principal offices at 114 West 47th Street, New York, - New York
10036. U.S. Trust provides wealth management, fiduciary and banking
services to individuals, corporations and institutions, both nationally and
internationally, including investment management and consulting, trust and
estate services, financial and estate planning, corporate trust and agency
services, custodial services and personal and corporate banking. On
December 31, 1999 the Asset Management Groups of U.S. Trust had approximately
$51.2 billion in aggregae assets under management.
The principal executive officers and directors of U.S. Trust and their
principal occupations as of December 31, 1999 are set forth in Annex I
hereto.
U.S. Trust also currently serves as investment adviser to UST Private
Equity Investors Fund, Inc. The approximate net assets (as of October 31,
1999), the annual advisory fees rate paid to U.S. Trust and fees waived by
U.S. Trust for the most recently ended fiscal year are as follows:
<TABLE>
<CAPTION>
Advisory Fees
Approximate Waived for the
Net Assets as of Advisory fiscal year ended
Name of Investment Company October, 31, 1999 Fees Rate October 31, 1999
- -------------------------- ----------------- --------- -----------------
<S> <C> <C> <C>
UST Private Equity Investors $40,295,269 1.5% of the net assets of the Company $146,907
Fund, Inc. invested or committed to be invested in
portfolio companies or private funds and 0.5% of the
net assets of the Company invested in short-term
investments plus an incentive fee in an amount equal to
10% of the cumulative realized capital gains (net of
realized capital losses and unrealized net capital
depreciation), less the aggregate amount of incentive
fee payments in prior years.*
</TABLE>
-9-
- ------------------------
*If the amount of the incentive fee in any year is a negative number, or
cumulative net realized gains less net unrealized capital depreciation at the
end of any year is less than such amount calculated at the end of the previous
year, U.S. Trust will be required to repay the Company all or a portion of the
incentive fee previously paid.
The approval of the New Agreement requires the affirmative vote of the
holders of a "majority of the outstanding shares" of the Company (as
defined by the 1940 Act), which means the lesser of (a) the holders of 67%
or more of the shares of the Company present at the Meeting if the holders
of more than 50% of the outstanding shares of the Company are present in
person or by proxy or (b) more than 50% of the outstanding shares of the
Company. This voting requirement is referred to herein as a "majority of
the outstanding shares." For more information, see "Voting Information -
Quorum."
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" THE NEW INVESTMENT ADVISORY AGREEMENT
-10-
PROPOSAL 2: ELECTION OF DIRECTORS
The second proposal to be considered at the Meeting is the election of
the directors of the Company.
Section 15(f) of the 1940 Act provides that when a change in the
control of an investment adviser occurs, the investment adviser or any of
its affiliated persons may receive an amount or benefit in connection
therewith as long as two conditions are satisfied, as mentioned above.
Section 15(f) provides, in pertinent part, that for a period of three years
after the change in control at least 75% of the members of the Board of
Directors may not be "interested persons" (as defined in the 1940 Act) of
the Investment Advisor or its predecessor. In order to meet the
requirements of Section 15(f), a person who is not an interested person of
either U.S. Trust or Schwab, Victor F. Imbimbo, Jr., has been selected and
proposed for election to the Board by the current disinterested directors.
The nominee has consented to serve as a director.
At the Meeting, shareholders will be asked to consider the election of
four board members who will constitute the entire Board of Directors of
Excelsior Private Equity Fund II, Inc. Each Board member so elected will
hold office until his or her successor is elected and qualifies, or until
his or her term as a director is terminated as provided in the Company's
by-laws. The persons named as proxies in the accompanying Proxy have been
designated by the Company's Board and intend to vote for the nominees named
below. Mr. Bernstein, Mr. Hover and Mr. Murphy are incumbent directors. Mr.
Bernstein and Mr. Murphy were appointed as directors of Excelsior Private
Equity Fund II, Inc. by the sole incorporator in the Articles of
Incorporation dated March 20, 1997. Mr. Hover was appointed as a director
on December 9, 1998 by the then current Directors in order to fill a vacancy
on the Board of Directors. Mr. Imbimbo was selected and proposed for election
as a Director on March 7, 2000 to fill a newly created vacancy resulting from a
recent expansion of the size of the Board from three (3) to four (4) directors.
All shares represented by valid Proxies will be voted in the election
of directors for each nominee named below unless authority to vote for a
particular nominee is withheld. The four nominees who receive the highest
number of votes cast at the Meeting will be elected as directors.
Cumulative voting is not permitted. Should any nominee withdraw from the
election or otherwise be unable to serve, the named proxies will vote for
the election of such substitute nominee as the Boards of Directors may
recommend unless a decision is made to reduce the number of directors. The
following table sets forth certain information about each of the nominees:
-11-
<TABLE>
<CAPTION>
Director Principal Occupation During
Name Age Since Past 5 Years and Other Affiliations
- ---- ---- ----- -----------------------------------
<S> <C> <C> <C>
John C. Hover, II* 56 December 9, 1998 Mr. Hover retired as Executive Vice President of the
United States Trust Company of New York in 1998 after
22 years of service. He was responsible for the
Personal Asset Management and Private Banking Group,
and served as Chairman of U. S. Trust International.
Prior to joining U.S. Trust he was a commercial
banker with Chemical Bank. Mr. Hover is a trustee of
the University of Pennsylvania, and is Chairman of
the Board of Overseers of the University's Museum of
Archaeology and Anthropology. He is a director and
Vice President of the Penn Club of New York. Mr.
Hover serves as a director of UST Private Equity
Investors Fund, Inc.
Gene M. Bernstein 52 March 20, 1997 Mr. Bernstein has been the President of BIG Venture
Inc., a privately held golf equipment marketing firm
since March 1994. From 1990 until 1994 he was the
President of Northville Industries Corp., a privately
held corporation engaged in petroleum, marketing,
distribution and trading. Mr. Bernstein was
Executive Vice President of Northville Industries
Corp. from 1982 to 1989. Mr. Bernstein serves as a
director of UST Private Equity Investors Fund, Inc.
Stephen V. Murphy 54 March 20, 1997 Since 1991, Mr. Murphy has been President of S.V.
Murphy & Co., Inc., an investment banking firm which
specializes in mergers and acquisitions, divestitures
and strategic and capital-related advisory services
for financial institutions. From 1988 until 1990, he
was Managing Director of Merrill Lynch Capital
Markets in charge of the Financial Institutions
Mergers and Acquisitions Department. Prior to 1988,
Mr. Murphy was Managing Director of The First Boston
Corporation where he headed up its Investment Banking
Department's Commercial Bank Group. Mr. Murphy
serves as a director of UST Private Equity Investors
Fund, Inc.
Victor F. Imbimbo, Jr 47 Nominee Mr. Imbimbo was the founder of Bedrock
Communications, Inc. a consulting company addressing
the merger of traditional and digital communications
solutions in 1996. He was also the founder of the
Hadley Group, a promotional marketing company, in
1985, which he ran until 1996.
- ------------------------
* This director is considered to be an "interested person" of the Company
as defined in the 1940 Act.
</TABLE>
In the fiscal year of the Company ended October 31, 1999, the Directors
met 4 times. Each of the current Directors attended all of the meetings of
the Board.
-12-
The Company does not have a compensation or nominating committee. The
Company has an audit committee that met once during the fiscal year ended
October 31, 1999. The Company's Board of Directors has not adopted a
written charter for the audit committee. Messrs. Murphy and Bernstein are
the only members of the audit committee. The audit committee has reviewed
and discussed the audited financial statements with management and the
matters required to be discussed by SAS 61 (Codification of Statements on
Auditing Standards) with the independent auditors. The audit committee has
received written disclosures from the independent accountants and has
discussed with the independent accountant the independent accountant's
independence. Based on the foregoing, the audit committee recommended to
the Board of Directors that the audited financial statements be included in
the Company's Annual Report on Form 10-K for the fiscal year ended October
31, 1999.
Each Director receives an annual fee of $15,000 and is reimbursed for
expenses incurred for attending meetings. The Company does not have a stock
option plan, other long-term incentive plan, retirement plan or other
retirement benefits. No person who is an officer, director or employee of
U.S. Trust or of any parent or subsidiary thereof, who serves as an
officer, director or employee of the Company receives any compensation from
the Company.
As of March 7, 2000 the board members and officers of the Company
owned beneficially less than 1% of the outstanding shares of the Company,
and less than 1% of the outstanding shares of the Company in the aggregate.
-13-
The following chart provides certain information about the fees
received by the Company's directors in the fiscal year ended October 31, 1999.
<TABLE>
<CAPTION>
Pension or Total Compensation
Aggregate Retirement Benefits from the Company
Name of Compensation Accrued As Part and Fund Complex*
Person/Position from the Company Of Fund Expenses Paid to Directors
- --------------- ---------------- ---------------- -----------------
<S> <C> <C> <C>
John C. Hover $15,000 None $30,000(2)**
Director
Gene M. Bernstein $15,000 None $30,000(2)**
Director
Steven V. Murphy $15,000 None $30,000(2)**
Director
* The "Fund Complex" consists of Excelsior Private Equity Funds II,
Inc. and UST Private Equity Investors Fund Inc.
** Number with investment companies in the Fund Complex for which each
individual served as a director.
</TABLE>
-14-
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
EACH OF THE FOREGOING NOMINEES FOR DIRECTOR NAMED IN THIS PROPOSAL 2.
PROPOSAL 3: RATIFICATION OF INDEPENDENT ACCOUNTANTS
Shareholders of the Company are also being asked to vote upon the
ratification or rejection of the selection of Ernst & Young LLP ("Ernst &
Young") as independent accountants for the Company's fiscal year ending
October 31, 2000.
The Board, including all of the Directors who are not "interested
persons" of the Company (as defined in the 1940 Act), selected Ernst & Young as
the Company's independent accountants at a meeting held on November 30, 1999
and ratified on March 7, 2000. Ernst & Young has stated that it has no material
direct or indirect financial interest in the Company. Ernst & Young, with
offices at 200 Clarendon Street, Boston, Massachusetts 02116 has served as the
Company's independent accountants since the date of inception of the Company.
A representative of Ernst & Young is expected to be available by
telephone at the Meeting should any matter arise requiring consultation
with the accountants, and Ernst & Young will be given the opportunity to
make a statement if it chooses.
In order for Proposal 3 to be adopted by the Company, it must be
approved by a "majority of the outstanding shares" of the Company. For more
information, see "Voting Information - Quorum." Unless instructed
otherwise, the persons named as proxies in the accompanying Proxy will vote
for Ernst & Young.
THE BOARD OF THE COMPANY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
RATIFICATION OF THE SELECTION OF ERNST & YOUNG AS INDEPENDENT ACCOUNTANTS
OF THE COMPANY.
-15-
VOTING INFORMATION
RECORD DATE. Only shareholders of record at the close of business on
March 9, 2000 will be entitled to vote at the Meeting. On that date, the
number of outstanding shares of the Company was 197,500. All shares of the
Company will vote in the aggregate.
If you do not plan to be present at the Meeting, you should send
your vote in by one of the following methods:
1. Complete, sign and return the enclosed proxy card promptly in
the postage-paid envelope; or
2. Vote by calling 1-800-690-6903; or
3. Vote through the Internet at www.proxyvote.com.
QUORUM. A quorum is constituted with respect to the Company by the
presence in person or by proxy of the holders of more than 50% of the
outstanding shares entitled to vote. For purposes of determining the
presence of a quorum, abstentions and broker "non-votes" (that is, proxies
from brokers or nominees indicating that such persons have not received
instructions from the beneficial owners or other persons entitled to vote
shares on a particular matter with respect to which the brokers or nominees
do not have discretionary power), will be treated as shares that are
present at the Meeting but which have not been voted. Abstentions and
broker "non-votes" will have the effect of a "no" vote for purposes of
obtaining the requisite approval for proposal one and three, but will have
no effect for proposal two.
In the event that a quorum is not present at the Meeting, or at any
adjournment thereof, or in the event that a quorum is present at the
Meeting but sufficient votes to approve any of the proposals are not
received, the persons named as proxies, or their substitutes, may propose
and vote for one or more adjournments of the Meeting to permit the further
solicitation of proxies. Any such adjournment will require the affirmative
vote of a majority of those shares affected by the adjournment that are
represented at the Meeting in person or by proxy. If a quorum is present,
the persons named as proxies will vote those proxies which they are
entitled to vote FOR any of the proposals in favor of such adjournments,
and will vote those proxies required to be voted AGAINST all proposals
against any such adjournments. A shareholder vote may be taken with respect
to the Company on any (but not all) of the Proposals prior to any such
adjournment as to which sufficient votes have been received for approval.
OTHER SHAREHOLDER INFORMATION. No person possessed sole or shared
voting or investment power with respect to more than 5% of the Company's
outstanding shares on March 9, 2000.
As of March 7, 2000, the Directors' and Executive Officers' share
ownership in the Company was as follows:
-16-
<TABLE>
<CAPTION>
Title Of Class Name Of Beneficial Owner Amount And Nature Percent of
Of Beneficial Class (1)
Ownership
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Shares i) Directors and Director Nominee
John C. Hover, II 0 shares 0%
Gene M. Bernstein 200 shares(2) 0.10%
Stephen V. Murphy 125 shares 0.06%
Victor F. Imbimbo, Jr. 0 shares 0%
ii) Executive Officers
David I. Fann 25 shares 0.01%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Directly owned unless otherwise indicated.
(2) Includes 100 shares owned by Mr. Bernstein's spouse, for which
Mr. Bernstein disclaims beneficial ownership.
All directors and executive officers as a group owned 347 shares
(0.18%) as of March 7, 2000.
ADDITIONAL INFORMATION
OFFICERS. Officers of the Company are elected by the directors and
hold office until they resign, are removed or are otherwise disqualified to
serve. The following table sets forth certain information about the
Company's officers:
-17-
<TABLE>
<CAPTION>
Principal Occupation
Position with During Past 5 Years and
Name and Address Age the Company Other Affiliations
---------------- --- ----------- -------------------
<S> <C> <C> <C>
David I. Fann 35 President Managing Director of United States Trust Company
United States Trust Company of and Chief Executive of New York. Mr. Fann serves as President and
New York Officer Chief Executive Officer of Excelsior Private
114 West 47th Street Equity Investors Fund II, Inc. and UST Private
New York, NY 10036 Equity Investors Fund, Inc. He is focused on
direct investments in healthcare, consumer
services and e-commerce. Prior to joining U.S.
Trust in April of 1994, Mr. Fann served in various
capacities for Citibank from 1986 through 1994,
including, as a Vice President of Citibank and its
small business investment company subsidiary,
Citicorp Venture Capital Ltd. from 1991 until
1994. While at Citicorp Venture Capital Ltd., Mr.
Fann invested in buyout and venture capital
transactions and venture capital funds and served
on the Board of Directors of several of its
portfolio companies. Mr. Fann holds a B.A.S.
degree in industrial engineering and economics
from Stanford University. Mr. Fann serves on the
United States Trust Company of New York Portfolio
Policy Committee, Strategy Review Committee, and
the Special Fiduciary Committee. Mr. Fann is on
the Board of the Somerset Exchange Fund, Classroom
Connect, Inc., Conway Stuart Medical, Inc.,
SurVivaLink Corp. and Protogene Laboratories, Inc.
Douglas A. Lindgren 38 Chief Investment Managing Director of United States Trust Company
United States Trust Company Officer and Executive of New York. Mr. Lindgren is Chief Investment
of New York Vice President Officer of Excelsior Private Equity Fund II, Inc.
114 West 47th Street and Executive Vice President of UST Private Equity
New York, NY 10036 Investors Fund, Inc. He is focused on direct
investments in information technology, Internet
services, and communications. Prior to joining
U.S. Trust in April 1995, Mr. Lindgren served in
various capacities for Inco Venture Capital
Management ("IVCM") from January 1988 through
March of 1995, including President and Managing
Principal from January 1993 through March of
1995. While at IVCM, Mr. Lindgren invested in
venture capital and buyout transactions and served
on the board of directors of several of its
portfolio companies. Before joining IVCM, Mr.
Lindgren was employed by Salomon Brothers Inc and
Smith Barney, Harris Upham & Co., Inc. He is an
Adjunct Professor of Finance at Columbia
University's Graduate School of Business, where he
has taught courses on venture capital since 1993.
Mr. Lindgren holds a M.B.A. and B.A. from Columbia
University. He serves on the United States Trust
Company of New York Portfolio Policy Committee.
-18-
Mr. Lindgren is on the Board of Powersmart Inc.,
MarketFirst Software, Inc., Managemark, Inc.,
Constellar Corporation, ReleaseNow.com, Inc.,
LifeMinders.com, Inc., Zeus Wireless, Inc. and
firstsource.
Ronald A. Schwartz 51 Secretary Mr. Schwartz is Vice President and Assistant
United States Trust General Counsel of United States Trust Company of
Company of New York New York. Prior to joining U.S. Trust in 1991,
114 West 47th Street Mr. Schwartz was associated with the firm of
New York, NY Walter, Conston, Alexander & Green from 1985
through 1990, with a focus on securities law as
well as mergers and acquisitions. Mr. Schwartz
received a BA and an MA degree from the University
of California at Berkeley, and a JD from Boalt
Hall, University of California.
Brian F. Schmidt 41 Chief Financial Officer Senior Vice President at U.S. Trust Company. Mr.
U.S. Trust Company Schmidt is the Chief Financial Officer of
225 High Ridge Road Excelsior Private Equity Investors Fund II, Inc.
Stamford, CT 06905 and UST Private Equity Investors Fund, Inc. He is
the Division Manager for the Mutual Funds
Administration Department. He is responsible for the
operation and administration of the Excelsior
Family of Funds and the U.S. Trust Common Trust
Funds. Mr. Schmidt joined U.S. Trust in 1991 from
Prudential Insurance Company of America, where he
was Director of Accounting. Prior to that he was
a senior accounting manager at Dreyfus
Corporation. Mr. Schmidt has 16 years of
experience in financial services, concentrating in
mutual funds. He received his BS degree from
Marist College. He is on the accountant's and
treasurer's committee of the Investment Company
Institute.
Frank D. Bruno 40 Treasurer Mr. Bruno is a Vice President in the Mutual Funds
U.S. Trust Company Administration Department. Prior to joining U.S. Trust, he
225 High Ridge Road worked for the Dreyfus Corporation and Price
Stamford, CT 06905 Waterhouse. Mr. Bruno received his BS degree from
The Pennsylvania State University.
</TABLE>
All officers of the Company are employees and/or officers of the
Investment Adviser.
PAYMENTS TO AFFILIATES. For the fiscal year ended October 31, 1999 the
Company paid the following brokerage commissions to US Trust Strategic
Trading, an affiliated broker of U.S. Trust.
-19-
Percentage of Broker
Brokerage Commissions Commissions paid
to an Affiliated Broker to Affiliated Broker
----------------------- --------------------
$2,368 100%
Administrator. Chase Global Funds Services Company, which is located
at 73 Tremont Street, Boston, MA 02108, is the administrator for the
Company. The Company paid Chase Global Funds Services Company $58,000 in
fees for the fiscal year ended October 31, 1999.
OTHER MATTERS
Shareholder proposals intended for inclusion in the Company's proxy
statement in connection with the Company's 2001 annual meeting of
shareholders pursuant to Rule 14a-8 under the Securities Exchange Act of
1934 (the "Exchange Act") must be received by the Company at the Company's
principal executive offices by , 200_. In order for proposals
made outside of Rule 14a-8 under the Exchange Act to be considered "timely"
within the meaning of Rule 14a-4(c) under the Exchange Act, such proposals
must be received by the Company at the Company's principal executive
offices not later than , 200_. Any shareholder who wishes to
submit a proposal for consideration at a meeting of shareholders should
send such proposal to the Company at 114 West 47th Street, New York, New
York 10036.
No business other than the matters described above is expected to come
before the Meeting, but should any other matter requiring a vote of
shareholders arise, including any question as to an adjournment of the
Meeting, the person named in the enclosed Proxy will vote thereon according
to their best judgment in the interests of the Company.
Dated: March , 2000
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING AND WHO
WISH TO HAVE THEIR SHARES VOTED ARE REQUESTED TO COMPLETE THE ENCLOSED
PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF
MAILED IN THE UNITED STATES.
THE COMPANY WILL FURNISH, WITHOUT CHARGE, COPIES OF THE COMPANY'S
ANNUAL REPORT TO SHAREHOLDERS DATED JANUARY 31, 2000 TO ANY SHAREHOLDER
UPON REQUEST. THE COMPANY'S REPORT TO SHAREHOLDERS MAY BE OBTAINED FROM THE
COMPANY BY WRITING TO THE COMPANY AT 114 WEST 47th STREET, NEW YORK, NEW
YORK 10036, BY CALLING (800) 446-1012 (FROM OVERSEAS, CALL (617) 557-8280)
OR BY THE INTERNET: http://www.excelsiorfunds.com.
-20-
<TABLE>
<CAPTION>
ANNEX I
Position with
U. S. Trust Name Principal Occupation Type of Business
- ------------ ---- -------------------- ----------------
<S> <C> <C> <C>
Director Eleanor Baum Dean of School of Engineering at Academic
4 Arleigh Road The Cooper Union for the
Great Neck, NY 11021 Advancement of Science & Art
Director Samuel C. Butler Partner in Cravath, Swaine & Moore Law Firm
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Director Peter O. Crisp Retired Chairman of Venrock, Inc. Venture Capital
103 Horseshoe Road
Mill Neck, NY 11765
Director Antonia M. Grumbach Partner in Patterson, Belknap, Web Law Firm
Patterson, Belknap, Webb & & Tyler, LLP
Tyler, LLP
1133 Avenue of the Americas
New York, NY 10036
Director, Chairman of H. Marshall Schwarz Chairman of the Board & Chief Asset Management,
the Board and Chief United States Trust Company of Executive Officer of U.S. Trust Investment and
Executive Officer New York Corporation and U.S. Trust Fiduciary Services
114 West 47th Street
New York, NY 10036
Director Philippe de Montebello Director of the Metropolitan Museum Art Museum
The Metropolitan Museum of Art of Art
1000 Fifth Avenue
New York, NY 10028
Director Robert E. Denham Partner in Munger, Tolles & Olson Law Firm
Munger, Tolles & Olson LLP LLP
355 South Grand Avenue
35th Floor
Los Angeles, CA 90071
Director John H. Stookey Chairman of Suburban Propane Pts. Petrochemicals and
Suburban Propane Pts. Propane
P.O. Box 455
Sheffield, MA 01257
Director Robert N. Wilson Vice Chairman of the Board of Health Care Products
Johnson & Johnson Johnson & Johnson
One Johnson & Johnson Plaza
New Brunswick, NJ 08933
Director Peter L. Malkin Chairman of Wien & Malkin LLP Law Firm
Wien & Malkin LLP
Lincoln Building
60 East 42nd Street
New York, NY 10165
Director David A. Olsen Retired Chairman of Risk & Insurance
1120 Park Avenue Johnson & Higgins Services
New York, NY 10128
Director Carl H. Pforzheimer, II Managing Partner Broker-Dealer
Carl H. Pforzheimer & Co. Investment Adviser
650 Madison Avenue
New York, NY 10022
Director Ruth A. Wooden President & CEO Not-for- Profit
60 Gramercy Park North National Parenting Association
Apt. 2m
New York, NY 10016
Director Philip L. Smith Corporate Director and Trustee Consumer Goods
P.O. Box 386
Ponte Verde Beach, FL 32004
Executive Vice President Paul K. Napoli Executive Vice President of U.S. Asset Management,
United States Trust Company of Trust Corporation and U.S. Trust Investment and
New York Private Banking
114 West 47th Street
New York, NY 10036
Director and Maribeth S. Rahe Vice Chairman of U.S. Trust Asset Management,
Vice Chairman United States Trust Company of Corporation and U.S. Trust Investment and
New York Fiduciary Services
114 West 47th Street
New York, NY 10036
Director, Vice Chairman Frederick B. Taylor Vice Chairman and Chief Investment Asset Management,
and Chief Investment United States Trust Company of Officer of U.S. Trust Corporation Investment and
Officer New York and U.S. Trust Fiduciary Services
114 West 47th Street
New York, NY 10036
Director, President and Jeffrey S. Maurer President and Chief Operating Asset Management,
Chief Operating Officer United States Trust Officer of U.S. Trust Corporation Investment and
Company of New York and U.S. Trust Fiduciary Services
114 West 47th Street
New York, NY 10036
Executive Vice President John L. Kirby Executive Vice President and Chief Asset Management,
and Chief Financial United States Trust Company of Financial Officer of U.S. Trust Investment and
Officer New York Corporation and U.S. Trust Fiduciary Services
114 West 47th Street
New York, NY 10036
Executive Vice President Kenneth G. Walsh Executive Vice President of U.S. Asset Management,
United States Trust Trust Corporation and U.S. Trust Investment and
Company of New York Fiduciary Services
114 West 47th Street
New York, NY 10036
Executive Vice President John M. Deignan Executive Vice President Private Banking,
United States Trust Company of Investment
New York Management and
114 West 47th Street Fiduciary Services
New York, NY 10036
</TABLE>
Exhibit B
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF EXCELSIOR PRIVATE
EQUITY FUND II, INC. (THE "COMPANY")
THIS PROXY IS SOLICITED BY THE BOARD OF THE COMPANY for use at an
annual meeting of shareholders to be held on May 6, 2000, at 10:00 a.m.
Eastern time, at the offices of United States Trust Company of New York,
114 West 47th Street, New York, New York 10036.
The undersigned hereby appoints Frank D. Bruno, Brian F. Schmidt and
Ronald A. Schwartz, and each of them, with full power of substitution, as
proxies of the undersigned to vote at the above-stated annual meeting, and
at all adjournments or postponements thereof, all shares representing
interests in the Company held of record by the undersigned on March 9,
2000, the record date for the meeting, upon the following matters AND UPON
ANY OTHER MATTER THAT MAY COME BEFORE THE MEETING, IN THEIR DISCRETION.
Every properly signed proxy will be voted in the manner specified
thereon and, in the absence of specification, will be treated as GRANTING
authority to vote FOR Proposal 1, Proposal 2 and Proposal 3.
[Name and Address of Shareholder] _______ Shares of __________________
Excelsior Private Equity Fund II, Inc.
PLEASE SIGN AND RETURN PROMPTLY IN
ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED.
_____________________________________________
(Signature(s) of Shareholder(s))
_________________
Date
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON.
WHEN SHARES ARE HELD BY JOINT TENANTS, BOTH
SHOULD SIGN. WHEN SIGNING AS ATTORNEY OR
EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN,
PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL CORPORATE
NAME BY PRESIDENT OR OTHER AUTHORIZED
OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN
PARTNERSHIP NAME BY AUTHORIZED PERSON.
[VOTING ON REVERSE SIDE]
B-1
Please vote by filling in the appropriate box below, as shown, using blue
or black ink or dark pencil.
(1) Election of Directors of the Company:
[ ] For all nominees listed below (except as marked to the contrary
below).
[ ] Withhold authority to vote for all nominees listed below.
INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through his name in the list below:
John C. Hover
Gene M. Bernstein
Steven V. Murphy
Victor F. Imbimbo
(2) Proposal to approve or disapprove a new Investment Advisory Agreement
between the Company and United States Trust Company of New York.
[ ] For [ ] Against [ ] Abstain
(3) Proposal to ratify or reject the selection of Ernst & Young, LLP as
independent accountants for the Company's fiscal year ending October
31, 2000.
[ ] For [ ] Against [ ] Abstain
The proxies are authorized in their discretion on any other business
which may properly come before the Meeting and any adjournments thereof.
(Please Date and SIGN REVERSE SIDE.)
B-2
EXHIBIT A
MANAGEMENT AGREEMENT
MANAGEMENT AGREEMENT, dated as of _________, 2000 by and between
Excelsior Private Equity Fund II, Inc., a Maryland corporation (the
"Company") and United States Trust Company of New York, a New York
corporation ("U.S. Trust" or the "Managing Investment Adviser").
W I T N E S S E T H
WHEREAS, the Company has been organized as a Maryland corporation
to engage in the business of a closed-end management investment company
registered under the Securities Act of 1933, as amended, and has elected to
be regulated as a business development company under the Investment Company
Act of 1940, as amended; and
WHEREAS, the Company seeks to retain U.S. Trust to provide
certain investment advisory and administrative services; and
WHEREAS, U.S. Trust is willing to furnish such investment
advisory and administrative services to the Company on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
promises herein contained and other good and valuable consideration, the
Company and U.S. Trust hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms
have the meanings set forth below:
(a) "Board of Directors" means the board of directors of
the Company;
(b) "Company" means Excelsior Private Equity Fund II, Inc.;
(c) "Director" means any member of the Board of Directors;
(d) "Disabling Conduct" means, on the part of the Managing
Investment Adviser, any bad faith, negligence, misconduct or any breach of
fiduciary duty owed to the Company;
(e) "Exchange Act" means the Securities Exchange Act of
1934, as amended;
(f) "Investment Company Act" means the Investment Company
Act of 1940, as amended;
(1)
(g) "Managing Investment Adviser" means United States Trust
Company of New York;
(h) "Portfolio Companies" means Later-Stage Venture Capital
Companies and Middle-Market Companies, each as defined in the Registration
Statement;
(i) "Private Funds" has the meaning set forth in the
Registration Statement;
(j) "Registration Statement" means the Registration
Statement of the Company which is effective under the Securities Act;
(k) "Securities Act" means the Securities Act of 1933, as
amended;
(l) "Short-Term Investments" has the meaning set forth in
the Registration Statement;
(m) "U.S. Trust" means United States Trust Company of New
York.
2. Appointment. The Company hereby appoints U.S. Trust to act
as the managing investment adviser and administrator to the Company for the
period and on the terms set forth in this Agreement. U.S. Trust accepts
such appointment and agrees to be responsible for finding, evaluating,
structuring, and monitoring the Company's investments in Portfolio
Companies, Private Funds and Short-Term Investments and performing the
management and administrative services necessary for the operation of the
Company for the compensation provided by this Agreement. The Managing
Investment Adviser 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 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) that such organized group
of persons is managed at all times by authorized officers of the Managing
Investment Adviser.
3. Duties of the Managing Investment Adviser. Subject to the
direction and control of the Board of Directors, the Managing Investment
Adviser shall:
(a) prepare (or otherwise obtain) and evaluate on both a
macroeconomic and microeconomic level any pertinent research; statistical,
financial and economic data; and other information necessary or appropriate
for the performance of its duties under this Agreement;
(2)
(b) identify, evaluate, structure, monitor and dispose of
the Company's investments in Portfolio Companies, Private Funds and Short-
Term Investments;
(c) make available and, if requested by entities in which
the Company has invested or is proposing to invest, render managerial
assistance to and exercise management rights in, such entities;
(d) determine the securities to be purchased by the
Company, and continuously monitor such securities and the issuers thereof
to determine whether and when to sell, exchange or take any other action
concerning such securities including the making of follow-on investments in
Portfolio Companies when appropriate;
(e) determine whether and how to exercise warrants, voting
rights or other rights with respect to the Company's portfolio securities;
(f) select broker-dealers to carry out the Company's
securities transactions, including broker-dealers who are affiliated with
the Managing Investment Adviser or the Company;
(g) provide valuations with respect to the securities held
by the Company as provided in the Registration Statement;
(h) provide, at its expense, office space, equipment,
facilities and supplies and clerical services necessary for the operation
of the Company;
(i) keep and maintain the books and records of the Company;
(j) administer stockholders' accounts and handle
communications and correspondence with stockholders;
(k) prepare accounting, management and other reports;
(l) conduct relations with custodians, depositories,
transfer agents, accountants, attorneys, any selling agent, any escrow
agent, insurers, banks and such other persons in any such other capacity
deemed necessary or desirable for the operation of the Company;
(m) render regular reports to the Company's officers and
the Board of Directors concerning the investment performance of the
Company, the Managing Investment Adviser's discharge of its
responsibilities under this Agreement and any other subject as the
Company's officers or the Board of Directors reasonably may request; and
(3)
(n) assist the Company's officers in connection with the
operation of the Company and perform any further acts that may be necessary
to effectuate the purposes of this Agreement or that may be requested by
the Company.
4. Supervision and Compliance. The activities of the Managing
Investment Adviser shall be subject at all times to the direction and
control of the Board of Directors and shall comply with: (a) the Articles
of Incorporation of the Company and the By-Laws of the Company, as such
documents are amended from time to time; (b) the Registration Statement,
including the investment objective and policies set forth therein; (c) the
applicable provisions of the Investment Company Act and the applicable
regulations thereunder; (d) the Internal Revenue Code of 1986, as amended,
and the regulations thereunder applicable to regulated investment
companies; (e) any other applicable laws or regulations; and (f) such other
limitations as the Board of Directors may adopt.
5. Delegation. In performing its duties under this Agreement
and assuming the obligations set forth herein, the Managing Investment
Adviser may, at its own expense, employ certain of its affiliates of other
entities; provided that the Managing Investment Adviser understands and
agrees that it shall remain fully responsible for the performance of all
the duties set forth in this Agreement and that it shall supervise the
activities of each such affiliate or other entity. Any agreement between
the Managing Investment Adviser and an affiliate or other such entity shall
be subject to the renewal, termination and amendment provisions applicable
to this Agreement.
6. Purchase and Sale of Securities. The Managing Investment
Adviser shall, at its own expense, place orders for the purchase, sale or
loan of securities by the Company either directly with the issuer or with
any broker and/or dealer who deals in such securities.
(a) In placing orders with brokers and/or dealers, the
Managing Investment Adviser shall use its best efforts to obtain the best
net price and 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, the Managing Investment
Adviser 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 the Managing
Investment Adviser exercises investment discretion. The Managing
Investment Adviser is authorized to pay 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 the Managing
Investment Adviser determines in good faith that such commission was
reasonable in relation to the value of 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
(4)
of the Managing Investment Adviser with respect to the accounts as to which it
exercises investment discretion.
(b) The Managing Investment Adviser may execute
transactions through itself and its affiliates on a securities exchange
provided that the commissions paid by the Company are "reasonable and fair"
compared to commissions received by other brokers having comparable
execution capability and provided that the transactions are effected
pursuant to procedures established by the Board of Directors. An
affiliated broker may transmit, clear and settle transactions for the
Company that are executed on a securities exchange provided that the
affiliated broker arranges for unaffiliated brokers to execute the
transactions.
(c) Notwithstanding the foregoing, the Board of Directors
periodically shall review the commissions paid by the Company and determine
whether those commissions were reasonable in relation to the brokerage and
research services received. In addition, the Board of Directors, in its
discretion, may instruct the Managing Investment Adviser to effect all or a
portion of its securities transactions with one or more brokers and/or
dealers selected by the Board of Directors, if it determines that the use
of such brokers and/or dealers is in the best interest of the Company.
(d) When the Managing Investment Adviser deems the purchase
or sale of a security to be in the best interest of the Company as well as
other customers, the Managing Investment Adviser, to the extent permitted
by applicable law, may aggregate the securities to be so sold or purchased
in order to obtain the best execution or lower brokerage commissions. The
Managing Investment Adviser also may purchase or sell a particular security
for one or more customers in different amounts. Allocation of the
securities purchased or sold in either manner, as well as the expenses
incurred in the transactions, will be made by the Managing Investment
Adviser in a manner that is equitable and consistent with applicable law
and regulations, any guidelines adopted by the Board of Directors and with
its fiduciary obligations to the Company and to such other customers.
7. Expenses.
(a) The Managing Investment Adviser 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. The Managing Investment Adviser also shall pay the salaries
and fees of all personnel of the Company or the Managing Investment Adviser
performing services related to the Managing Investment Adviser's duties
under this Agreement.
(b) It is understood that the Company will pay all of its
expenses and liabilities, including fees of the Directors; fees of the
Managing Investment Adviser; expenses of registering the Company's shares
under federal and state securities laws; interest; taxes; fees and expenses
of the Company's legal counsel and independent accountants; fees and
expenses of the Transfer Agent; expenses of printing and mailing share
certificates, stockholder reports, notices
(5)
to stockholders and proxy statements; reports to regulatory bodies;
brokerage and other expenses in connection with the execution, recording
and settlement of portfolio security transactions; expenses in connection
with the acquisition and disposition of portfolio securities of the
registration of privately issued portfolio securities; costs of third
party evaluations or appraisals of the Company (or its assets) or its
actual investments; expenses of membership in investment company
associations; expenses of fidelity bonding and other insurance premiums;
expenses of stockholders' meetings; Securities and Exchange Commission and
state blue sky registration fees; fees payable to the National Association
of Securities Dealers, Inc., if any, in connection with the offering of
the Company's shares; and the Company's other business and operating
expenses.
8. Compensation of the Managing Investment Adviser. In
consideration of the services to be rendered by the Managing Investment
Adviser under this Agreement, the Company shall pay the Managing Investment
Adviser:
(a) quarterly and payable in arrears on the last day of
each calendar quarter, a management fee equal to 1.5% per annum of the net
assets of the Company, determined as of the end of each calendar quarter,
that are invested or committed to be invested in Portfolio Companies or
Private Funds, and equal to 0.5% of the net assets of the Company,
determined as of the end of each calendar quarter, that are invested in
Short-Term Investments and are not committed to Portfolio Companies or
Private Funds; and
(b) an incentive fee in an amount equal to 20% of the
realized capital gains (net of realized capital losses and unrealized net
capital depreciation) on investments other than investments in Private
Funds. If the amount of the incentive fee in any year is a negative
number, or cumulative net realized capital gains less net unrealized
capital depreciation at the end of any year is less than such amount
calculated at the end of the previous year, the Managing Investment Adviser
agrees to repay to the Company all or a portion of the incentive fee
previously paid.
9. Services to Others. The services of the Managing Investment
Adviser to the Company are not to be deemed exclusive and the Managing
Investment Adviser is free to render services to others and to engage in
other activities; provided, however, that those services and activities do
not adversely affect the Managing Investment Adviser's ability to perform
its obligations under this Agreement.
10. Books, Records, and Information. The Managing Investment
Adviser shall provide the Company with all records concerning the Managing
Investment Adviser'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 the Managing Investment Adviser 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
(6)
by the Company's officers or Board of Directors, including information
required for the Company's filings with the Securities and Exchange
Commission and state securities commissions.
11. Limitations on Liability.
(a) The Managing Investment Adviser hereby is notified
expressly of the limitation of directors' liability as set forth in the
Articles of Incorporation and the Bylaws of the Company 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 the Managing
Investment Adviser shall not seek satisfaction of any such obligation from
any Director of the Company.
(b) The Managing Investment Adviser shall give the Company
the benefit of its best judgment and efforts in rendering services under
this Agreement. In the absence of Disabling Conduct, the Managing
Investment Adviser shall not be liable to the Company or to any shareholder
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.
12. Indemnification. The Company will indemnify the Managing
Investment Adviser against, and hold it harmless from, any and all losses,
claims, damages, liabilities or expenses (including reasonable counsel fees
and expenses) not resulting from Disabling Conduct by the Managing
Investment Adviser. 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 Managing Investment Adviser 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
Managing Investment Adviser was not liable by reason of Disabling Conduct
by (a) the vote of a majority of a quorum of Directors of the Company who
are neither "interested persons" of the Company nor parties to the
proceeding ("disinterested non-party Directors") or (b) independent legal
counsel in a written opinion. The Managing Investment Adviser 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 Maryland General Corporation Law. The Managing Investment
Adviser 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 Managing Investment Adviser 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 non-party Directors, or
independent legal counsel, in a written opinion, shall have determined,
based on a review of facts readily available
(7)
to the Company at the time the advance is proposed to be made, that there
is reason to believe that the Managing Investment Adviser will ultimately
be found to be entitled to indemnification.
No provision of this Agreement shall be construed to protect any
Director or officer of the Company or the Managing Investment Adviser from
liability in violation of Section 17(i) of the Investment Company Act.
13. 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 Directors 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 Directors.
(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 Directors or by vote of a majority of the outstanding voting
securities of the Company, on 60 days' written notice to the Managing
Investment Adviser; or (ii) the Managing Investment Adviser, on 90 days'
written notice to the Company. This Agreement shall terminate immediately
in the event of its assignment.
(c) An affiliate of the Investment Adviser may assume the
Investment Advisers obligation's under this Agreement provided that (i) the
affiliate is qualified to act as an investment adviser to the Company under
applicable law; (ii) the affiliate is under the common control of U.S.
Trust Corporation; (iii) the assumption will not result in a change of
actual control or management of the Investment Adviser and (iv) the
assumption of the Investment Adviser's obligations by the affiliate is
approved by the Board of Directors 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 Directors 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.
(8)
14. 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 U.S. Trust, at U.S.
Trust's address, 114 W. 47th Street, New York, New York 10036; or (b) if to
the Company, at the address of the Company, attn: David I. Fann.
15. 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.
16. 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.
(9)
IN WITNESS WHEREOF, the Company and the Managing Investment
Adviser have caused this Agreement to be executed and delivered in their
names and on their behalf by the undersigned, duly authorized officers, all
as of the day and year first above written.
EXCELSIOR PRIVATE EQUITY FUND II, INC.
By: _____________________________________
Name:
Title: President
UNITED STATES TRUST COMPANY
OF NEW YORK
By: _____________________________________
Name:
Title:
