INVESTMENT ADVISORY AGREEMENT
THIS
AGREEMENT is made as of this _____ day of _____________, 20__ by and between the
National Renewable Energy Investment Fund, Inc., a Maryland corporation having
its principal place of business in West Des Moines, IA (the “Company”), and Miles
Capital, Inc., an Iowa corporation having its principal place of business in
West Des Moines, Iowa (the “Adviser”).
WHEREAS,
the Company is an organized, non-diversified management investment company that
intends to elect treatment as a business development company under the
Investment Company Act of 1940, as amended (the “1940
Act”);
WHEREAS,
the Adviser is registered under the Investment Advisers Act of 1940, as amended
(the “Advisers
Act”) and engages in the business of acting as an investment adviser;
and
NOW
THEREFORE, in consideration of the mutual covenants herein contained and other
good and valuable consideration, the receipt of which is hereby acknowledged,
the parties agree as follows:
1. Appointment
of Adviser.
The
Company appoints the Adviser to act as manager and investment adviser to the
Company for the period and on the terms herein set forth. The Adviser accepts
such appointment and agrees to render the services herein set forth, for the
compensation herein provided.
2. Duties of
the Adviser.
Subject
to the overall supervision and review of the Board of Directors of the Company
(“Board”), the
Adviser will regularly provide the Company with investment research, advice and
supervision and will furnish continuously an investment program for the Company,
consistent with the investment objective and policies of the Company. The
Adviser will provide, on behalf of the Company, any managerial assistance
requested by the portfolio companies of the Company. The Adviser will determine
from time to time what securities shall be purchased for the Company, what
securities shall be held or sold by the Company and what portion of the
Company’s assets shall be held uninvested as cash or in other liquid assets,
subject always to the provisions of the Company’s Articles of Incorporation,
Bylaws, and any subsequent registration statement of the Company under the
Securities Act of 1933 (the “1933 Act”) covering
the Company’s shares, as filed with the Securities and Exchange Commission (the
“Commission”),
as any of the same may be amended from time to time, and to the investment
objectives of the Company, as each of the same shall be from time to time in
effect, and subject, further, to such policies and instructions as the Board may
from time to time establish. To carry out such determinations, the Adviser will
exercise full discretion and act for the Company in the same manner and with the
same force and effect as the Company itself might or could do with respect to
purchases, sales or other transactions, as well as with respect to all other
things necessary or incidental to the furtherance or conduct of such purchases,
sales or other transactions. 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 Company, the nature and timing of the changes therein and the
manner of implementing such changes; (ii) identify, evaluate and negotiate
the structure of the investments made by the Company; (iii) perform due
diligence on prospective portfolio companies; (iv) monitor the Company’s
investments; (v) provide the Company with such other investment advisory,
research and related services as the Company may, from time to time, reasonably
require for the investment of its funds.
3. Administrative
Duties of the Adviser.
The
Adviser agrees to furnish office facilities and clerical and administrative
services necessary to the operation of the Company (other than services provided
by the Company’s custodian, accounting agent, administrator, dividend and
interest paying agent and other service providers). The Adviser is authorized to
conduct relations with the Company’s custodians, depositaries, underwriters,
brokers, dealers, placement agents, banks, insurers, accountants, attorneys,
pricing agents, and other persons as may be deemed necessary or desirable. To
the extent requested by the Company, the Adviser shall (i) oversee the
performance of, and payment of the fees to, the Company’s service providers, and
make such reports and recommendations to the Board concerning such matters as
the parties deem desirable; (ii) respond to inquiries and otherwise assist
such service providers in the preparation and filing of regulatory reports,
proxy statements, shareholder communications and the preparation of Board
materials and reports; (iii) establish and oversee the implementation of
borrowing facilities or other forms of leverage authorized by the Board; and
(iv) supervise any other aspect of the Company’s administration as may be
agreed upon by the Company and the Adviser. The Company shall reimburse the
Adviser or its affiliate for all out-of-pocket expenses incurred in providing
the services set forth in this Section 3.
4. Delegation
of Responsibilities.
The
Adviser is authorized to delegate any or all of its rights, duties and
obligations under this Agreement to one or more sub-advisers, and may enter into
agreements with sub-advisers, and may replace any such sub-advisers from time to
time in its discretion, in accordance with the 1940 Act, the Advisers Act, and
rules and regulations thereunder, as such statutes, rules and regulations are
amended from time to time or are interpreted from time to time by the staff of
the Commission, and if applicable, exemptive orders or similar relief granted by
the Commission, and upon receipt of approval of such sub-advisers by the Board
and by shareholders (unless any such approval is not required by such statutes,
rules, regulations, interpretations, orders or similar relief).
5. Independent
Contractors.
The
Adviser and any sub-advisers shall for all purposes herein be deemed to be
independent contractors and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Company in any way or
otherwise be deemed to be an agent of the Company.
6. Compliance
with Applicable Requirements.
In
carrying out its obligations under this Agreement, the Adviser shall at all
times conform to:
a. all
applicable provisions of the 1940 Act and the Advisers Act and any applicable
rules and regulations adopted thereunder;
b. the
provisions of any registration statement of the Company, as the same may be
amended from time to time under the 1933 Act, including without limitation, the
investment objectives set forth therein;
c. the
provisions of the Company’s Articles of Incorporation, as the same may be
amended from time to time;
d. the
provisions of the Bylaws of the Company, as the same may be amended from time to
time;
e. all
policies, procedures and directives adopted by the Board; and
f. any
other applicable provisions of state, federal or foreign law.
7. Policies
and Procedures.
The
Adviser represents to the Company that is has adopted and implemented written
policies and procedures reasonably designed to prevent violation of the federal
securities laws (as that term is used in Rule 38a-1 adopted under the 0000 Xxx)
by the Adviser and its supervised persons. The Adviser shall provide the
Company, at such times as the Company shall reasonably request, with a copy of
such policies and procedures and a report of such policies and procedures; such
report shall be of sufficient scope and in sufficient detail as may reasonably
be required to comply with Rule 38a-1 under the 1940 Act and to provide
reasonable assurance that any material inadequacies would be disclosed by such
examination, and, if there are no such inadequacies, the reports shall so
state.
8. Brokerage.
The
Adviser is responsible for decisions to buy and sell securities for the Company,
broker-dealer selection, and negotiation of brokerage commission rates. The
Adviser’s primary consideration in effecting a security transaction will be to
obtain the best execution. In selecting
a
broker-dealer to execute a particular transaction, the Adviser will take the
following into consideration: the best net price available; the reliability,
integrity and financial condition of the broker-dealer; the size of and the
difficulty in executing the order; and the value of the expected contribution of
the broker-dealer to the investment performance of the Company on a continuing
basis. Accordingly, the price to the Company in any transaction may be less
favorable than that available from another broker-dealer if the difference is
reasonably justified by other aspects of the execution services
offered.
Subject
to such policies as the Board may from time to time determine, the Adviser shall
not be deemed to have acted unlawfully, or to have breached any duty created by
this Agreement or otherwise, solely by reason of its having caused the Company
to pay a broker or dealer that provides brokerage and research services to the
Adviser an amount of commission for effecting a Company investment transaction
in excess of the amount of commission another broker or dealer would have
charged for effecting that transaction, if the Adviser determines in good faith
that such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the Adviser’s overall
responsibilities with respect to the Company and to other clients of the Adviser
as to which the Adviser exercises investment discretion. The Adviser is further
authorized to allocate the orders placed by it on behalf of the Company to such
brokers and dealers who also provide research or statistical material or other
services to the Company, the Adviser or to any sub-Adviser. Such allocation
shall be in such amounts and proportions as the Adviser shall determine and the
Adviser will report on said allocations regularly to the Board indicating the
brokers to whom such allocations have been made and the basis
therefore.
9. Books and
Records.
The
Adviser will maintain complete and accurate records in respect of all
transactions relating to the Company’s portfolio. The Adviser will keep or will
cause to be kept records in respect of all such portfolio transactions executed
on behalf of the Company. To the extent permitted by applicable law, the Adviser
shall provide access to its books and records relating to the Company as the
Company may reasonably request. The Adviser shall have access at all reasonable
times to books and records maintained for the Company to the extent necessary
for the Adviser to comply with all applicable securities or other laws to which
it is subject, and further provided that the Company shall produce copies of
such records and books whenever reasonably required to do so by the Adviser for
the purpose of legal proceedings or dealings with any governmental or regulatory
authorities or for its internal compliance procedures.
10. Compensation.
For the
services, payments and facilities to be furnished hereunder by the Adviser, the
Adviser shall receive from the Company the following compensation:
a.
Base Management Fee.
The Adviser shall receive quarterly a base management fee (the “Base Management Fee”)
equal to: (i) for the period beginning at the Commencement of Operations and
ending six months from the Commencement of Operations (the “Initial Period”), (A)
1.0% per annum of the Company’s Gross Invested
Assets
which are invested in Public Securities, and (B) 1.5% per annum of the Company’s
Gross Invested Assets which are not invested in Public Securities; and (ii)
thereafter (“Subsequent Periods”),
(A) 1.0% per annum of the Company’s Gross Assets which are invested in Public
Securities, and (B) 1.5% per annum of the Company’s Gross Assets which are not
invested in Public Securities. “Gross Invested
Assets” shall mean the Company’s total assets, less the cash proceeds and
cash equivalent investments of the Company’s initial public offering of its
shares which are not invested in debt or equity securities of portfolio
companies in accordance with the Company’s investment
objectives. “Gross Assets” shall
mean the Company’s total assets, including investments made with the proceeds of
borrowings, less any uninvested cash or cash equivalents resulting from
borrowings. During the Initial Period, the Base Management Fee will
be payable each month in arrears and will be calculated based on the value of
the Company’s Gross Invested Assets as of the end of the
month. During the Subsequent Periods and beginning at the end of the
first full quarter following the Initial Period, the Base Management Fee shall
be calculated quarterly and paid quarterly in arrears within thirty
(30) days of the end of each calendar quarter. “Commencement of
Operations” shall mean the day the Company receives the proceeds from its
initial pubic offering of its common shares. “Public Securities”
shall mean equity securities which are publicly-traded on a national securities
exchange, over-the-counter market or similar market.
b.
Incentive Fee.
The Adviser shall receive an incentive fee (the “Incentive Fee”). The
Incentive Fee shall consist of two parts, as follows:
(i)
Investment Income Fee. The Adviser shall receive an investment income fee (the
“Investment Income
Fee”) equal to 20% of the amount of the Pre-Incentive Fee Investment Net
Income for the quarter that exceeds a quarterly hurdle rate equal to 2.0% (8%
annualized) of the Company’s Net Managed Assets. “Net Managed Assets”
shall mean total assets less indebtedness of the Company. “Pre-Incentive Fee Net
Investment Income” shall mean interest income, dividend income, and any
other income (including accrued income that the Company has not yet received in
cash, any fees such as commitment, origination, syndication, structuring,
diligence, monitoring, and consulting fees or other fees that the Company is
entitled to receive from portfolio companies) accrued during the calendar
quarter, minus the Company’s operating expenses for such quarter (including the
Base Management Fee, expenses payable pursuant to Section 11 below, any
interest expense, any tax expense, and dividends paid on issued and outstanding
preferred stock, if any, but excluding the Incentive Fee payable
hereunder). The Investment Income Fee shall be calculated and payable
quarterly in arrears within thirty (30) days of the end of each calendar
quarter, with the fee first accruing upon the first anniversary of the
Commencement of Operations. The Investment Income Fee calculation shall be
adjusted appropriately on the basis of the number of calendar days in the first
quarter the fee accrues or the calendar quarter during which this Agreement is
in effect in the event of termination of the Agreement during any calendar
quarter.
(ii)
Capital Gains
Fee. The Adviser shall receive a capital gains fee (the “Capital Gains Fee”)
equal to 20% of (1) (a) the Company’s net realized capital gain (realized
capital gains less realized capital losses) on a cumulative basis from the
Commencement of Operations to the end of such fiscal year, less (b) any
unrealized capital depreciation at the end of such fiscal year, less (2) the
aggregate amount of any Capital Gains Fees paid in all prior fiscal years.
For the purposes of this paragraph, realized capital gains on a security shall
be calculated as the excess of the net amount realized from the sale or other
disposition of such security over the original cost for the security. Realized
capital losses on a security shall be calculated as the amount by which the net
amount realized from the sale or other disposition of such security is less than
the original cost of such security. Unrealized capital depreciation on a
security shall be calculated as the amount by which the Company’s original cost
of such security exceeds the fair value of such security at the end of a fiscal
year. The Capital Gains Fee shall be calculated and payable annually
within thirty (30) days of the end of each calendar year. In the
event this Agreement is terminated, the Capital Gains Fee calculation shall be
undertaken as of, and any resulting Capital Gains Fee shall be paid,
within fifteen (15) days of the date of termination.
The
Adviser may, from time to time, waive or defer all or any part of the
compensation described in this Section 10. The parties do hereby expressly
authorize and instruct the Company’s administrator, or its successors, to
calculate the fee payable hereunder and to remit all payments specified herein
to the Adviser.
11. Adviser Purchase of Company
Stock.
Beginning
two years after the Commencement of Operations and to the extent permissible
under federal securities laws and regulations, including Regulation M, the
Adviser will purchase, in the open market through an independent trustee or
agent, shares of the Company’s common stock equal to a value of 20% of the
Capital Gains Fee it receives, up to a maximum of $2,500,000. Any purchase
of such stock shall comply with any applicable six-month holding period under
Section 16(b) of the Securities Act and all other restrictions contained in any
law or regulation. The Advisor may change or terminate its obligation
under this paragraph upon at least 90 days’ prior written notice to the
Company.
12. Expenses
of the Adviser.
The
compensation and allocable routine overhead expenses of all investment
professionals of the Adviser and its staff, when and to the extent engaged in
providing investment advisory services required to be provided by the Adviser
under Section 2 hereof, will be provided and paid for by the Adviser and
not by the Company. It is understood that the Company will pay all expenses
other than those expressly stated to be payable by the Adviser hereunder, which
expenses payable by the Company shall include, without limitation the
following:
a. other than
as set forth in the first sentence of this Section 10 above, expenses of
maintaining the Company and continuing its existence and related
overhead,
b. commissions,
spreads, fees and other expenses connected with the acquisition, holding and
disposition of securities and other investments including placement and similar
fees in connection with direct placements entered into on behalf of the
Company,
c. auditing,
accounting and legal expenses,
d. taxes
and interest,
e. governmental
fees,
f. expenses
of listing shares of the Company with a stock exchange, and expenses of issue,
sale, repurchase and redemption (if any) of interests in the Company, including
expenses of conducting tender offers for the purpose of repurchasing Company
securities,
g. expenses
of registering and qualifying the Company and its securities under federal and
state securities laws and of preparing and filing registration statements and
amendments for such purposes,
h. expenses
of communicating with shareholders, including website expenses and the expenses
of preparing, printing, and mailing press releases, reports and other notices to
shareholders and of meetings of shareholders and proxy solicitations
therefore,
i. expenses
of reports to governmental officers and commissions,
j. insurance
expenses,
k. association
membership dues,
l. fees,
expenses and disbursements of custodians and subcustodians for all services to
the Company (including without limitation safekeeping of funds, securities and
other investments, keeping of books, accounts and records, and determination of
net asset values),
m. fees,
expenses and disbursements of transfer agents, dividend and interest paying
agents, shareholder servicing agents and registrars for all services to the
Company,
n. compensation
and expenses of directors of the Company who are not members of the Adviser’s
organization,
o. pricing,
valuation, and other consulting or analytical services employed in considering
and valuing the actual or prospective investments of the Company,
p. all
expenses incurred in leveraging of the Company’s assets through a line of credit
or other indebtedness or issuing and maintaining preferred shares,
r. all
expenses incurred in connection with the organization of the Company and any
offering of common shares, and
s. such
non-recurring items as may arise, including expenses incurred in litigation,
proceedings and claims and the obligation of the Company to indemnify its
directors, officers and shareholders with respect thereto.
13. Covenants
of the Adviser.
The
Adviser represents that it is, and covenants that it shall remain during the
term of this Agreement, 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.
14. Non-Exclusivity.
The
Company understands that the persons employed by the Adviser to assist in the
performance of the Adviser’s duties under this Agreement may not devote their
full time to such service and nothing contained in this Agreement shall be
deemed to limit or restrict the right of the Adviser or any affiliate of the
Adviser to engage in and devote time and attention to other businesses or to
render services of whatever kind or nature, so long as the Adviser’s services to
the Company are not impaired by the provision of such services to others. The
Company further understands and agrees that officers and directors of the
Adviser may serve as officers or directors of the Company, and that officers or
directors of the Company may serve as officers or directors of the Adviser to
the extent permitted by law; and that the officers and directors of the Adviser
are not prohibited from engaging in any other business activity or from
rendering services to any other person, or from serving as partners, officers or
directors of any other firm or company, including other investment advisory
companies. The Adviser covenants to provide written notification to
the Company prior to entering into an advisory relationship with another fund
having a similar investment strategy.
15. Effective
Date, Term and Approval.
This
Agreement shall become effective with respect to the Company as of the
Commencement of Operations (the “Effective Date”).
This Agreement shall continue in force and effect for two years from the date of
this Agreement, and may be continued from year to year thereafter, provided that
the continuation of the Agreement is specifically approved at least
annually:
a. (i) by
the Board or (ii) by the vote of “a majority of the outstanding voting
securities” of the Company (as defined in Section 2(a)(42) of the 0000
Xxx); and
b. by
the affirmative vote of a majority of the directors who are not parties to this
Agreement or “interested persons” (as defined in the 0000 Xxx) of a party to
this Agreement (other than as directors of the Company), by votes cast in person
at a meeting specifically called for such purpose.
16. Termination.
This
Agreement may be terminated by the Company at any time, without the payment of
any penalty by the Company, by vote of the Board or by vote of a majority of the
outstanding voting securities of the Company, on no more than sixty
(60) days’ written notice to the Adviser. This Agreement may be terminated
by the Adviser at any time, without the payment of any penalty by the Adviser,
on no less than sixty (60) days’ written notice to the Company. The notice
provided for herein may be waived by the party entitled to receipt thereof. This
Agreement shall automatically terminate in the event of its assignment, the term
“assignment” for purposes of this paragraph having the meaning defined in
Section 2(a)(4) of the 1940 Act. Upon termination pursuant to this
Section 16, the Adviser must deliver all copies of books and records
maintained in accordance with this Agreement and applicable law.
17. Amendment.
No
amendment of this Agreement shall be effective unless it is in writing and
signed by the party against which enforcement of the amendment is sought. No
amendment to Section 10 or Section 12 of this Agreement shall be effective
unless it is approved by the vote of a majority of the outstanding voting
securities of the Company.
18. Liability
of Adviser.
The
Adviser will not be liable in any way for any default, failure or defect in any
of the securities comprising the Company’s portfolio if it has satisfied the
duties and the standard of care, diligence and skill set forth in this
Agreement. However, the Adviser shall be liable to the Company for any loss,
damage, claim, cost, charge, expense or liability resulting from the Adviser’s
willful misconduct, bad faith or gross negligence or disregard by the Adviser of
the Adviser’s duties or standard of care, diligence and skill set forth in this
Agreement or a material breach or default of the Adviser’s obligations under
this Agreement.
19. Notices.
Any
notices under this Agreement shall be in writing, addressed and delivered,
telecopied or mailed postage paid, to the other party entitled to receipt
thereof at such address as such party may designate for the receipt of such
notice. Until further notice to the other party, it is agreed that the address
of the Company and that of the Adviser shall be 0000 00xx
Xxxxxx; Xxxxx 0000, Xxxx Xxx Xxxxxx, Xxxx 00000-0000.
20. Questions
of Interpretation.
Any
question of interpretation of any term or provision of this Agreement having a
counterpart in or otherwise derived from a term or provision of the 1940 Act or
the Advisers Act shall be resolved by reference to such term or provision of the
1940 Act or the Advisers Act and to interpretations thereof, if any, by the
United States courts or in the absence of any controlling decision of any such
court, by rules, regulations or orders of the Commission issued pursuant to said
Acts. In addition, where the effect of a requirement of the 1940 Act or the
Advisers Act reflected in any provision of the Agreement is revised by rule,
regulation or order of the Commission, such provision shall be deemed to
incorporate the effect of such rule, regulation or order. Subject to the
foregoing, this Agreement shall be governed by and construed in accordance with
the laws (without reference to conflicts of law provisions) of the State of
Delaware.
[Signature
page to follow.]
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in
duplicate by their respective duly authorized officers on the day and year first
written above.
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