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EXHIBIT 10(A)
PLYMOUTH COMMERCIAL MORTGAGE FUND
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made by and between Plymouth Commercial Mortgage
Fund, a Delaware business trust (the "Company"), and Emerald Advisers, Inc., a
Delaware corporation (the "Adviser").
1. PURPOSE OF THE COMPANY
The Company is a closed-end management investment company that will
elect to be regulated as a business development company under the Investment
Company Act of 1940, as amended (the "1940 Act").
2. THE INVESTMENT ADVISER
The Adviser is registered as an investment adviser with the U.S.
Securities and Exchange Commission (the "SEC") under the Investment Advisers
Act of 1940, as amended (the "Advisers Act"), and has entered into this
Agreement with the Company to act as its investment adviser on the terms set
forth herein.
3. OBLIGATIONS OF THE ADVISER
The Company hereby engages the Adviser's services as the Company's
investment adviser. As such, the Adviser will:
(a) advise the Company as to the acquisition and disposition of
securities, loans, real estate interests and other assets in
accordance with the Company's investment policies;
(b) assist the Company in making available and, if requested by
entities in which the Company has invested or is proposing to
invest, in rendering managerial assistance to such entities;
(c) provide to the Company, to the extent required, office space and
facilities and the services of the Adviser's officers and
employees;
(d) maintain the Company's books of account and other records and
files;
(e) report to the Company's Board of Trustees (the "Board"), or to any
committee thereof or officer of the Company acting pursuant to the
authority of the Board, at such times and in such detail as the
Board deems appropriate in order to enable the Company to determine
that its investment policies are being observed and implemented and
that the Adviser's obligations hereunder are being fulfilled. Any
investment program undertaken by the Adviser pursuant hereto and
any other activities undertaken by the Adviser on the Company's
behalf shall at all times be subject to any directives of the Board
or any duly constituted committee thereof or officer of the Company
acting pursuant to authority of the Board;
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(f) subject to the Company's investment policies and any specific
directives from the Board, effect acquisitions and dispositions for
the Company's account in the Adviser's discretion and to arrange
for the documents evidencing securities, loans, real estate
interests and other assets acquired on behalf of the Company to be
delivered to a custodian of the Company;
(g) on a continuing basis, monitor, manage and service the Company's
loan portfolio and other investments; and
(h) comply with all applicable rules and regulations of the SEC and, in
addition, conduct its activities under this Agreement in accordance
with other applicable law.
4. STATUS OF THE ADVISER
For a period of two years after the completion of the sale by
Plymouth of newly issues common shares of beneficial interest for cash pursuant
to an offering to be commenced in or about October 1996, the services of the
Adviser to the Company with regard to advice on new loan package purchases are
to be deemed exclusive, and the Adviser shall not be free to render similar
services to others. After this period, the services of the Adviser to the
Company are not to be deemed exclusive, and the Adviser shall be free to render
similar services to others so long as its services to the Company are not
impaired thereby. The Adviser shall be deemed to be an independent contractor
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 an agent
of the Company. To the extent that the purchase or sale of securities or other
investments of any issuer may be deemed by the Adviser, and to the extent
permitted by applicable law, to be suitable for two or more accounts managed by
the Adviser, the available securities or investments may be allocated in a
manner believed by the Adviser to be equitable to each account. It is
recognized that in some cases this may adversely affect the price paid or
received by the Company or the size or position obtainable for or disposed of
by the Company.
5. EXPENSES TO BE PAID BY THE ADVISER
The Adviser shall pay all expenses incurred by it in rendering the
services to be rendered by the Adviser hereunder. Generally, and except as may
otherwise be specified in this Agreement, these expenses include the cost of
office space, telephone service, equipment and personnel required to perform
its obligations under this Agreement. Without limiting the generality of the
foregoing, the Adviser will pay the salaries and other employee benefits of the
persons in its organization whom the Adviser may engage to render such
services, including without limitation persons who may from time to time act as
the Company's officers. Notwithstanding the foregoing, the Board may, in its
sole discretion, award to such officers options to acquire shares of beneficial
interest in the Company, which options shall not be deemed part of their
salaries or other employee benefits for the purpose of this paragraph.
6. EXPENSES TO BE PAID BY THE COMPANY
In general, the Company shall pay all of its operating expenses and
reimburse the Adviser promptly for expenses which the Adviser may pay on the
Company's behalf, except those
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specifically required to be borne by the Adviser under this Agreement.
Expenses borne by the Company include but are not limited to:
(a) all expenses of any offering and sale by the Company of its shares,
including promotional expenses;
(b) fees and disbursements of the Company's outside legal counsel and
accountants and the custodian of its investments;
(c) fees and expenses incurred in producing and effecting filings with
federal and state securities administrators;
(d) costs of the Company's periodic reports to (and other
communications with) shareholders;
(e) fees and expenses of members of the Board who are not directors,
officers or employees of the Adviser;
(f) premiums for the fidelity bond maintained by the Company;
(g) all costs related to portfolio investments, including without
limitation financing costs, legal and accounting fees, expenses
related to protecting or maintaining the value of the loan
portfolio or its underlying collateral, and other professional or
technical fees and expenses (e.g., credit reports, title searches
and delivery charges, property taxes, insurance premiums,
long-distance telephone charges, costs of specialized consultants
such as accountants or industry-specific technical experts, and
travel expenses) incurred in acquiring, monitoring, negotiating,
working-out, and effecting disposition of such investments, as well
as responding to any litigation arising therefrom; and
(h) all expenses related to any borrowings by the Company.
7. COMPENSATION TO THE ADVISER
During the term of this Agreement, the Company will pay to the
Adviser, on the 15th day of each month: (a) a fee calculated at an effective
annual rate of 5.94% of the Company's invested assets as of the end of the
previous month; and (b) a fee calculated at an effective annual rate of 0.48%
of the Company's cash and short-term investments as of the end of the previous
month.
For purposes of calculating the fee to be paid on a monthly basis,
"invested assets" means the asset value as determined by the Board as of the
end of the previous fiscal quarter minus cash, short-term investments,
intangible assets, and the amount of collections applied to the carrying value
of the loan portfolio since the end of the previous quarter, plus the cost of
loans purchased and capitalized advances to protect portfolio investments or
underlying collateral since the end of the previous quarter. Such values shall
be established using generally accepted accounting principles ("GAAP"). The
fee paid on a monthly basis will be ratified on a quarterly basis by the Board.
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8. CERTAIN RECORDS
The Adviser shall keep and maintain all books and records with
respect to the Company's portfolio transactions required by Rule 31a-1 under
the 1940 Act and shall render to the Board such periodic and special reports as
the Board may reasonably request. The Adviser shall also furnish to the
Company any other information that is required to be filed by the Company with
the SEC or sent to shareholders under the 1940 Act (including rules adopted
thereunder) or any exemptive or other relief that the Adviser or the Company
obtains from the SEC. The Adviser agrees that the records that it maintains on
behalf of the Company are the property of the Company and the Adviser will
surrender promptly to the Company any of such records upon the Company's
request; provided, however, that the Adviser may retain a copy of such records.
In addition, for the duration of this Agreement, the Adviser shall preserve for
the periods prescribed by Rule 31a-2 under the 1940 Act any such records as are
required to be maintained by it pursuant to this Agreement, and shall transfer
said records to any successor investment adviser upon the termination of this
Agreement (or, if there is no successor investment adviser, to the Company.)
9. LIABILITY OF THE ADVISER AND INDEMNIFICATION
The duties of the Adviser shall be confined to those expressly set
forth herein, and no implied duties are assumed by or may be asserted against
the Adviser hereunder. The Adviser may rely on information reasonably believed
by it to be accurate and reliable. The Adviser shall not be liable to the
Company or to any shareholder of the Company for any error of judgment or
mistake of law or for any loss arising out of any investment or for any act or
omission in carrying out its duties hereunder, except:
(a) for a loss resulting from willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of
reckless disregard of its obligations and duties hereunder, except
as may otherwise be provided under provisions of applicable state
law which cannot be waived or modified hereby;
(b) to the extent specified in Section 36(b) of the 1940 Act concerning
losses resulting from a breach of fiduciary duty with respect to
the Adviser's receipt of compensation; and
(c) for a loss resulting from any breach of any representation and
warranty of the Adviser contained in this Agreement.
In the absence of willful misfeasance, bad faith, gross negligence
or reckless disregard of obligations or duties hereunder on the part of the
Adviser, to the fullest extent permitted by applicable law, the Company hereby
agrees to indemnify and hold the Adviser harmless from and against all claims,
actions, suits and proceedings at law or in equity, whether brought or asserted
by a private party or a governmental agency, instrumentality or entity of any
kind, relating to the sale, purchase, pledge of, advertisement of, or
solicitation of sales or purchases of any security (whether of the Company or
otherwise) by the Company, its officers, trustees, employees or agents in
alleged violation of applicable federal, state or foreign laws, rules or
regulations.
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As used in this Section 9, the term "Adviser" shall include any
affiliates of the Adviser performing services for the Company contemplated
hereby and the directors, officers, employees and other corporate agents of the
Adviser and such affiliates.
10. APPROVAL OF THE AGREEMENT
The Company represents that: (a) the terms of this Agreement were
approved by the Board, including a majority of its members casting their votes
in person who are not "interested persons" of the Company, at a meeting held on
September 13, 1996, called for the purpose of voting on such approval; and (b)
this Agreement was approved by the "vote of a majority of the outstanding
voting securities" (as defined in Section 2(a)(42) of the 0000 Xxx) of the
Company, at a meeting held on September 13, 1996. This Agreement shall
continue in effect for two (2) years from the date of its execution and
thereafter from year to year as long as such continuance is specifically
approved at least annually by the Board, including a majority of its members
casting their votes in person who are not "interested persons" of the Company
at a meeting called for the purpose of voting on such approval, or by "vote of
a majority of the outstanding voting securities" of the Company.
11. TERMINATION OF THE AGREEMENT
The foregoing notwithstanding, this Agreement may be terminated by
the Company at any time, without payment of any penalty, on sixty (60) days'
written notice to the Adviser if the decision to terminate has been made by the
Board or by "vote of a majority of the outstanding voting securities" of the
Company. This Agreement will terminate automatically in the event of its
"assignment" (as defined in Section 2(a)(4) of the 1940 Act). The Adviser may
also terminate this Agreement on sixty (60) days' written notice to the
Company; provided, however, that the Adviser may not terminate this Agreement
unless: (a) the terms of a new investment advisory agreement with the Adviser
or another investment adviser have been approved by the Board, including a
majority of its members casting their votes in person who are not parties to
such agreement or "interested persons" of any such party, at a meeting called
for the purpose of voting on such approval; and (b) such new investment
advisory agreement has been approved by the "vote of a majority of the
outstanding voting securities" of the Company.
12. JURISDICTION
This Agreement shall be governed by the laws of the State of Texas.
13. SEVERABILITY
If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
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IN WITNESS WHEREOF, the parties have executed this Agreement on and
as of September 22, 1996.
PLYMOUTH COMMERCIAL EMERALD ADVISERS, INC.
MORTGAGE FUND
By: /s/ Xxxxxx X. Xxxxxxxx By: /s/ Xxxx X. Xxxxxx
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Name: Xxxxxx X. Xxxxxxxx Name: Xxxx X. Xxxxxx
Title: President Title: Vice President
Attest: /s/ Xxxxx X. Xxxxxx Attest: /s/ Xxxxx X. Xxxxxx
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Name: Xxxxx X. Xxxxxx Name: Xxxxx X. Xxxxxx
Title: Senior Vice President/Secretary Title: Senior Vice
President/Secretary
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