INVESTMENT ADVISORY MANAGEMENT AGREEMENT BETWEEN BLACKHAWK CAPITAL GROUP BDC, INC. AND BARAK ASSET MANAGEMENT, LLC
Exhibit
10.2
BETWEEN
BLACKHAWK
CAPITAL GROUP BDC, INC.
AND
BARAK
ASSET MANAGEMENT, LLC
Investment
Advisory Management Agreement made this 31st
day of
October 2006, by and between BLACKHAWK CAPITAL GROUP BDC, INC., a Delaware
corporation (the "Corporation"), and BARAK ASSET MANAGEMENT, LLC., a New York
limited liability corporation (the "Adviser").
WHEREAS,
the Corporation is a business development company ("BDC") regulated under the
Investment Company Act of 1940, as amended (the "Investment Company
Act");
WHEREAS,
the Adviser is an investment adviser registered under the Investment Advisers
Act of 1940, as amended (the "Advisers Act"); and
WHEREAS,
the Corporation desires to retain the Adviser to furnish investment services
to
the Corporation on the terms and conditions hereinafter set forth with respect
to certain assets (the “Portfolio”), and the Adviser wishes to be retained to
provide such services pursuant to and in compliance with the BDC provisions
under the Investment Company Act, the other applicable provisions of the
Investment Company Act and the Advisers Act.
NOW,
THEREFORE, in the consideration of the premises and for other good and valuable
consideration, the parties hereby agree as follows:
1. Duties
of the Adviser.
| (a) |
The
Corporation hereby employs the Adviser to act as an investment adviser
to
the Corporation, subject to the supervision of the Board of Directors
of
the Corporation, for the period and upon the terms herein set forth,
(i)
in accordance with the investment objectives, policies and restrictions
that are set forth in the Corporation's Form 1-E and related Offering
Circular, to be dated November __, 2006, to be filed with the Securities
and Exchange Commission ("SEC"), and as the same shall be amended
from
time to time and provided to the Adviser (the "Blackhawk Investment
Objectives and Policies"), (ii) in accordance with the Investment
Company
Act and (iii) during the term of this Agreement in accordance with
all
other applicable federal and state laws, rules and regulations, and
[the
Corporation's certificate of incorporation, as amended, and by-laws,
in
each case as provided to you from time to time]. Without limiting
the
generality of the foregoing, the Adviser shall, during the term and
subject to the provisions of this Agreement, (i) determine the composition
of the Portfolio of the Corporation, the nature and timing of the
changes
therein and the manner of implementing such changes; (ii) identify,
evaluate and negotiate the structure of investments made by the
Corporation with respect to the Portfolio; (iii) close and monitor
the
Corporation's investments with respect to the Portfolio; (iv) determine
the securities and other assets that the Corporation will purchase,
retain, or sell in the Portfolio; (v) perform due diligence on prospective
portfolio companies; and (vi) provide the Corporation with such other
investment advisory, research and related services as the Corporation
may,
from time to time, reasonably require for the investment of the Portfolio.
The Adviser acknowledges that it is one of the investment advisers
retained or to be retained by the Corporation and that Adviser's
retention
by the Corporation is not exclusive. The Adviser shall have the power
and
authority on behalf of the Corporation to effectuate its investment
decisions for the Corporation’s Portfolio, including the execution and
delivery of all documents relating to the Corporation's investments
within
the Portfolio. In the event that the Corporation determines to acquire
debt financing, the Adviser will arrange for such financing on the
Corporation's behalf, subject to the oversight and approval of the
Corporation's Board of Directors. Subject to the approval of the
Board of
Directors of the Corporation, if it is necessary for the Adviser
to make
investments on behalf of the Corporation through a special purpose
vehicle, the Adviser shall have authority to create or arrange for
the
creation of such special purpose vehicle and to make such investments
through such special purpose vehicle in accordance with the Investment
Company Act. The Adviser shall invest and reinvest the assets in
such
stocks, bonds, or other property of any kind, as it deems in the
best
interest of the Corporation to achieve the investment objectives
designated by the Corporation on the Corporation and consistent with
the
Blackhawk Investment Objectives and
Policies.
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| (b) |
Valuation
of Account.
The Adviser shall determine the fair market value of assets held
in the
Portfolio at least quarterly, based primarily on the periodic statements
issued by the custodial broker dealer and other information supplied
by
the issuer(s) of the securities in the accounts in which the Portfolio
is
held.
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| (c) |
Disbursement
of Account.
The Corporation may advise the Adviser that the Corporation intends
to
withdraw monies from its accounts on a regular basis as designated
on the
Client Instruction Form. If the Corporation elects to withdraw monies
at
any other time, the Corporation agrees to provide written notice
to the
Adviser pursuant to Section 11.
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| (d) |
Adviser
Acceptance.
The Adviser hereby accepts such engagement and agrees during the
term
hereof to render the services described herein for the compensation
provided herein.
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| (e) |
Sub-Adviser.
Subject to the requirements of the Investment Company Act and the
approval
of the Board of Directors of the Corporation, the Adviser is hereby
authorized to enter into one or more sub-advisory agreements with
other
investment advisers (each, a "Sub-Adviser") pursuant to which the
Adviser
may obtain the services of the Sub-Adviser(s) to assist the Adviser
in
fulfilling its responsibilities hereunder. Specifically, the Adviser
may
retain a Sub-Adviser to recommend specific securities or other investments
based upon the Corporation's investment objective and policies set
forth
in the Blackhawk Investment Objectives and Policies, and work, along
the
Adviser, in structuring, negotiating, arranging or effecting the
acquisition or disposition of such investments and monitoring investments
on behalf of the Corporation, subject to the compensation payable
to any
Sub-Adviser. Any sub-advisory agreement entered in by the Adviser
shall be
in accordance with the requirements of the Investment Company Act
and
other applicable federal and state law and approved by the Corporation.
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| (f) |
Independent
Contractor.
The Adviser shall for all purposes herein provided be deemed to be
an
independent contractor and, expect as expressly provided or authorized
herein, shall have no authority to act for or represent the Corporation
in
any way or otherwise be deemed an agent of the
Corporation.
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| (g) |
Books
and Records.
The Adviser shall keep and preserve for the period required by the
Advisers Act any books and records relevant to the provision of its
investments advisory services to the Corporation and shall specifically
maintain all books and records with respect to the Corporation's
portfolio
transactions and shall render to the Corporation's Board of Directors
such
periodic and special reports as the Board may reasonably request.
The
Adviser agrees that all records that it maintains for the Corporation
are
the property of the Corporation and will surrender promptly to the
Corporation any such records upon the Corporation's request, provided
that
the Adviser may retain a copy of such
records.
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2. Corporation's
Responsibilities and Expenses Payable by the Corporation.
All
investment professionals of the Adviser and its staff, when and to the extent
engaged in providing investment advisory and management services hereunder,
and
the compensation and routine overhead expenses of such personnel allocable
to
such services, will be provided and paid for by the Adviser and not by the
Corporation. The Corporation will bear all other costs and expenses of its
operations and transactions, including (without limitation) those relating
to:
organization and offering; calculating the Corporation's net asset value
(including the cost and expenses of any independent valuation firm); expenses
incurred by the Adviser payable to third parties, including agents, consultants
or other advisors, in monitoring financial and legal affairs for the Corporation
and in monitoring the Corporation's investments and performing due diligence
on
its prospective portfolio companies; interest payable on debt, if any, incurred
to finance the management fees; administration fees, if any; fees payable to
third parties, including agents, consultants or other advisors, relating to,
or
associated with, evaluating and making investments; transfer agent and custodial
fees; federal and state registration fees; if applicable, all costs of
registration and listing the Corporation's shares on any securities exchange;
federal, state and local taxes; independent Directors' fees and expenses; costs
of preparing and filing reports or other documents required by the SEC; cost
of
any report, proxy statements or other notices to stockholders, including
printing costs; the Corporation's allocable portion of the fidelity bond,
directors and officers/errors and omissions liability insurance, and any other
insurance premiums; direct costs and expenses of administration, including
printing, mailing, long distance telephone, copying, secretarial and other
staff, independent auditors and outside legal costs; and all other expenses
incurred by the Corporation in connection with administering the Corporation's
business.
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3. Accounts.
The
parties hereto agree as follows:
| (a) |
Establishment
of Accounts.
The Adviser shall establish such accounts in the name of the Corporation
with a custodian, as are necessary to account for the Portfolio’s assets
and any additions, income, receipts and disbursements in connection
therewith. The accounts will be established upon receipt of proper
notice
from the custodian that cash and securities are ready to be deposited
by
the Corporation in an account designated by the custodian as a custodial
account to be managed by the Adviser and the duties of the Adviser
shall
commence upon receipt of such
assets.
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| (b) |
Executive
Services.
The Corporation agrees that the Adviser shall have full authority
and
discretion to select any broker or dealer, including affiliates of
the
Adviser, to act as broker in effecting any transaction in respect
of the
account. If the Adviser’s affiliate acts as the broker-dealer, the
affiliate shall charge a brokerage commission similar to the full
service
commission schedule as published and in effect. If the affiliated
broker-dealer executes transactions for this account as principal
any
xxxx-up or markdown will be in accordance with the NASD Rules of
Fair
Practice. These commissions shall be in addition to the advisory
fees
charged by the Adviser pursuant to this Agreement. The Adviser shall
instruct the carrying brokerage firm to forward to the Corporation
and to
any designated interested parties copies of all brokerage confirmations
promptly after execution of
transactions.
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| (c) |
Custodian
Services.
The Adviser shall not act as custodian for the account or take or
have
possession of any assets of the Corporation. The custodian for the
account
may be a brokerage firm designated by the Adviser or a third party
selected by the Corporation.
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4. Compensation
of the Adviser.
The
Corporation agrees to pay, and the Adviser agrees to accept, as a compensation
for the services provided by the Adviser hereunder, a base management fee ("Base
Management Fee") as hereinafter-set forth in Exhibit
1 Investment Advisory Fee Schedule,
attached hereto. The Corporation shall make any payments due hereunder to the
Adviser or to the Adviser's designee as the Adviser may otherwise direct. To
the
extent permitted by applicable law, including, without limitation, the BDC
provisions of the Investment Company Act, subject to the written agreement
between the Corporation and the Adviser, the Adviser may elect or the
Corporation may adopt a deferred compensation plan pursuant to which the Adviser
may elect to defer all or a portion of its fees hereunder for a specified period
of time. Until paid, the fees and expenses of the Adviser shall constitute
a
lien upon the assets of the Portfolio’s accounts.
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5. Covenants
of the Adviser.
The
Adviser covenants that it is registered as an investment adviser under the
Advisers Act. The Adviser agrees that its activities will at all times be in
compliance in all material respects with all applicable federal and state laws
governing its operations and investments. The Adviser further covenants that
it
will strictly comply with the BDC provisions of the Investment Company Act.
6. Excess
Brokerage Commissions.
The
Adviser is hereby authorized, in its absolute discretion, to the fullest extent
now or hereafter permitted by law, to cause the Corporation to pay a member
of a
national securities exchange, broker or dealer an amount of commission for
effecting a securities transaction in excess of the amount of commission of
another member of such exchange, broker or dealer (hereinafter the firm) would
have charged for effecting that transaction, if the Adviser determines in her
sole discretion that taking into account such factors as price (including the
applicable brokerage commission or dealer spread), size of order, difficulty
of
execution, and operational facilities of the firm and the firm's risk in
positioning blocks of securities, that such amount of commission is reasonable
in relation to the value of the brokerage and/or research services provided
by
such member, broker or dealer, viewed in terms of either that particular
transaction or its overall responsibilities with respect to the Corporation's
portfolio, and in the Adviser’s sole discretion, constitutes the best net
results for the Corporation and is fair and in the best interests of the
Corporation.
7. Limitations
of the Employment of the Adviser.
The
services of the Adviser to the Corporation are not exclusive, and the Adviser
may engage in any other business or render similar or different services to
others including, without limitation, the direct and indirect sponsorship or
management of other investment based accounts or commingled pools of capital,
however structured, so long as its services to the Corporation hereunder are
not
impaired thereby. Nothing in this Agreement shall limit or restrict the right
of
any manager, partner, member, officer or employee of the Adviser to engage
on
any other business or to devote his or her time and attention in part to any
other business, whether or a similar or dissimilar nature, or to receive any
fees or compensation in connection therewith (including fees for serving as
a
director of, or providing consulting services to, one or more of the
Corporation's portfolio companies, subject to the applicable law). The Adviser
assumes no responsibility under this Agreement other than to render the services
called for hereunder.
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8. Limitation
of Liability of the Adviser; Indemnification.
The
Adviser (and its officers, managers, members, partners, agents, employees,
controlling persons, members and any other person or entity affiliated with
the
Adviser), shall not be liable to the Corporation for any action taken or omitted
to the taken by the Adviser in connection with the performance of any of its
duties or obligations under this Agreement or otherwise as an investment adviser
of the Corporation, except to the extent specified in Section 36(b) of the
Investment Company Act concerning loss resulting from a breach of fiduciary
duty
(as the same is finally determined by judicial proceedings) with respect to
the
receipt of compensation for services, and the Corporation shall indemnify,
defend and protect the Adviser (and its officers, managers, partners, agents,
employees, controlling persons, members and any other person or entity
affiliated with the Adviser, each of whom shall be deemed a third party
beneficiary hereof) (collectively, the "Indemnified Parties") and hold them
harmless from and against all damages, liabilities, cost and expenses (including
reasonable attorney's fees and amounts reasonably paid in settlement) incurred
by the Indemnified Parties in or by reason of any pending, threatened or
completed action, suit, investigation or other proceeding (including an action
or suit by or in the right of the Corporation or its security holders) arising
out of or otherwise based upon the performance of the Adviser's duties or
obligations under this Agreement or otherwise as an investment adviser of the
Corporation. Notwithstanding the preceding sentence of this Section 8 to the
contrary, nothing contained herein shall protect or be deemed to protect the
Indemnified Parties against or entitle or be deemed to entitle the Indemnified
Parties to indemnification in respect of, any liability to the Corporation
or
its security holders to which the Indemnified Parties would otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence in the
performance of the Adviser's duties or by reason of reckless disregard of the
Adviser's duties and obligations under this Agreement (as the same shall be
determined in accordance with the Investment Company Act and interpretive of
guidance by the SEC or its staff thereunder). The corporation’s obligation to
defend shall not be affected by an allegation of willful misfeasance, bad faith
or reckless disregard, unless and until such allegations have been reduced
to a
final judgment by a court of competent jurisdiction form which no appeal has
been timely taken..
9. Representations
by Corporation.
The
Corporation represents that the terms hereof do not violate any obligation
by
which the Corporation is bound, whether arising by contract, operation of law
or
otherwise, and that, if required (i) this contract has been duly authorized
by
appropriate action and is binding upon the Corporation in accordance with its
terms, and (ii) the Corporation will deliver to the Adviser such evidence of
such authority as it may reasonably require, whether by way of a certified
resolution, trust agreement, or otherwise.
10. Effectiveness,
Duration and Termination of Agreement.
| (a) |
This
Agreement shall become effective as if the first date above written.
This
Agreement shall remain in effect for one year, and thereafter shall
continue automatically for successive annual periods, provided that
such
continuance is specifically approved at least annually by (a) the
vote of
the Corporation's Board of Directors, or by the vote of a majority
of the
outstanding voting securities of the Corporation and (b) the vote
of a
majority of the Corporation's directors who are independent directors,
are
not interested parties of this Agreement or "interested persons"
(as such
term is defined in Section 2(a)(19) of the Investment Company Act)
of any
such party, in accordance with the requirements of the Investment
Company
Act; provided
that the failure of such bodies to so approve such continuation shall
be
promptly communicated to the Adviser. This Agreement may be terminated
at
any time, without the payment of any penalty, upon 60 days' written
notice, by the vote of a majority of the outstanding voting securities
of
the Corporation, or by the vote of the Corporation's Board of Directors
or
by the Adviser. This Agreement will automatically terminate in the
event
of its "assignment" (as such term is defined for purposes of Section
15(a)(4) of the Investment Company Act). The provisions of Section
8 of
this Agreement shall remain in full force and effect, and the Adviser
shall remain entitled to the benefits thereof, notwithstanding any
termination of this Agreement. Further, notwithstanding the termination
or
expiration of this Agreement as aforesaid, the Adviser shall be entitled
to any amounts owed under Section 4 through the date of termination
or
expiration and Section 8 shall continue in force and effect and apply
to
the Adviser and it representatives as and to the extent
applicable.
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| (b) |
Upon
termination, the Adviser will liquidate the Portfolio unless the
Corporation provides written instructions to the contrary. The Adviser
agrees to use its commercially reasonable efforts to liquidate the
Portfolio (i) upon receipt of proper written notice on the business
day on
which such termination shall become effective, if such notice is
received
on or before 12:00 noon and (ii) as of the following business day,
if such
notice is received after 12:00 noon.
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| (c) |
Termination
of this Agreement shall not affect any liability resulting from sales
or
exchanges initiated prior to written notice of such revocation or
resulting from the winding down and liquidation of the accounts.
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| (d) |
Upon
termination, the Corporation shall receive a refund of the portion
of the
prepaid management fee, if any, which is not utilized.
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| (e) |
The
Adviser will not accept instructions to terminate this Agreement
unless
the Corporation provides written notice
thereof.
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11. Notice.
All
written notices required hereunder shall be deemed effective when received
by
the Adviser at its office at 1230 Avenue of the Xxxxxxxx, 0xx Xxxxx, Xxx Xxxx,
Xxx Xxxx 00000 or by fax at 000-000-0000 or by the Corporation at the address
shown on the Client Instruction Form. Each party shall be entitled to presume
the correctness of such addresses until notified in writing to the contrary.
Receipt of a telegram or facsimile transmission by either party will constitute
receipt of proper written notice hereunder. The Corporation agrees to indemnify
and hold harmless the Adviser against claims, losses, expenses, or damages,
including reasonable fees of investigation and counsel, in connection with
any
action taken by the Adviser upon receipt of a telegram or facsimile transmission
in Corporation's name.
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12. Disclosure/Acknowledgement
of Receipt of Form ADV Part II.
By
execution of this Agreement, the Corporation hereby acknowledges that the
Adviser has informed the Corporation of the following: the Adviser is an
Investment Adviser registered with the SEC; the Corporation has received and
had
an opportunity to read the Adviser’s Form ADV Part II, as required by Rule 204-3
of the Advisers Act.
13. Amendments.
This
Agreement may be amended by mutual written consent, but the consent of the
Corporation must be obtained in conformity with the requirements of the
Investment Company Act.
14. Assignment.
This
Agreement may not be assigned by either party except with the written consent
of
the other party.
15. Severability.
It is
understood by the parties hereto that if any term, provision, duty obligation,
or undertaking herein contained is held by the courts to be unenforceable or
illegal or in conflict with the applicable state law, the validity of the
remaining portions shall not be affected, and the rights and obligation of
the
parties shall be construed and enforced as if such invalid or unenforceable
provision was not contained herein unless in so doing the consideration for
services to be rendered herein is reduced or the responsibilities are increased
by the deletion involved.
16. Entire
Agreement; Governing Law.
This
Agreement contains the entire agreement of the parties and supersedes all prior
agreements, understandings and arrangements with respect to the subject matter
hereof. This Agreement shall be construed and interpreted in accordance with
the
laws of the State of New York. This Agreement is also intended to conform to
the
requirements of the Employee Retirement Income Security Act of 1974 when
applicable and shall in all events be construed and interpreted in accordance
therewith. To the extent any of the provisions herein conflict with the
provisions of the Investment Company Act, the latter shall control.
[The
remainder of this page intentionally left blank]
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IN
WITNESS WHEREOF,
the
parties hereto have caused this Agreement to be duly executed on the date above
written.
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BLACKHAWK
CAPITAL GROUP BDC, INC.
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| By: | /s/ Xxxxx X. Xxxxxx | |
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Name: Xx.
Xxxxx X. Xxxxxx
Title: President
and Chief Executive Officer
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BARAK
ASSET MANAGEMENT, LLC
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| By: | /s/ Xxxxxx X. Highland | |
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Name: Xxxxxx
X. Highland
Title: President
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9
EXHIBIT
1
INVESTMENT
ADVISORY FEE SCHEDULE
INVESTMENT
ADVISORY FEES:
The
Adviser shall receive fees calculated based upon the average cash value of
assets at the end of each quarter including the value of any withdrawals from
the assets made during that quarter:
(1) Equities
including common stocks, convertible preferred and convertible
bonds:
1.8%
or
180 basis points on assets equal to $50,000 to $200,000
1.55%
or
155 basis points on assets equal to $200,001 to 500,000
1.20%
or
120 basis points on assets equal to $500,001 to $1,500,000
0.95%
or
95 basis points on assets equal to $1,500,001 to $3,500,000
0.70%
or
70 basis points on assets equal to $3,500,001 to $7,500,000
0.55%
or
55 basis points on assets equal to or greater than $7,500,001
(2) Bonds
including taxable or tax-exempt (municipal bonds):
0.50%
or
50 basis points on assets equal to $50,000 to $200,000
0.40%
or
40 basis points on assets equal to $200,001 to $500,000
0.30%
or
30 basis points on assets equal to $500,001 to $1,500,000
0.20%
or
20 basis points on assets greater than or equal to $1,500,001
(3) Open-end,
closed-end, and Exchange Traded Funds
1.75%
or
175 basis points on assets equal to $50,000 to $200,000
1.50%
or
150 basis points on assets equal to $200,001 to 500,000
1.25%
or
125 basis points on assets equal to $500,001 to $1,500,000
1.00%
or
100 basis points on assets equal to $1,500,001 to $3,500,000
0.75%
or
75 basis points on assets equal to $3,500,001 to $7,500,000
0.50%
or
50 basis points on assets equal to or greater than $7,500,001
Any
fees
and expenses charged by any fund pursuant to their prospectuses are in addition
to the Adviser’s investment advisory fee and shall treated as an expense against
the value of assets in the calculation of the Adviser’s fee. Brokerage
commissions are to be paid in addition to investment advisory services.
If
any of
the above listed securities do not trade on any exchange, NASD, OTC Bulletin
Board or Pink Sheets, the following shall apply as to how to value such
securities: Securities will be valued at cost according to generally accepted
accounting principals (GAAP).
10
PAYMENT
OF FEES:
Investment
Advisory Fees shall be billed and payable quarterly (or a prorated period,
when
applicable).
Fee
amounts shall be debited from the Corporation's accounts on the date on which
the Adviser dispatches a Quarterly Statement setting forth the basis for these
charges.
Upon
termination and liquidation the Adviser shall calculate the fee based upon
the
cash value of assets realized and the fee earned will be prorated based on
the
time elapsed since the prior quarterly fee payment through that liquidation
of
the accounts is complete or the accounts or assets are transferred to the
Corporation's control or to another manager.
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