INVESTMENT ADVISORY AGREEMENT
Exhibit G
AGREEMENT dated April 28, 2005 between The Hyperion Total Return Fund, Inc. (the
“Fund”), a Maryland corporation, and Hyperion Capital Management, Inc. (the “Advisor”), a Delaware
corporation.
In consideration of the mutual promises and agreements herein contained and other good and
valuable consideration, the receipt of which is hereby acknowledged, it is agreed by and between
the parties hereto as follows:
1. In General
The Advisor agrees, all as more fully set forth herein, to act as investment adviser to the
Fund with respect to the investment of the Fund’s assets and to supervise and arrange the purchase
of securities for and the sale of securities held in the investment portfolio of the Fund.
2. Duties and obligations of the Advisor with respect to
investments of assets of the Fund
(a) Subject to the succeeding provisions of this paragraph and subject to
the direction and control of the Fund’s Board of Directors, the Advisor shall (i) act as investment
adviser for and supervise and manage the investment and reinvestment of the Fund’s assets and in
connection therewith have complete discretion in purchasing and selling securities and other assets
for the Fund and in voting, exercising consents and exercising all other rights appertaining to
such securities and other assets on behalf of the Fund; (ii) supervise continuously the investment
program of the Fund and the composition of its investment portfolio; and (iii) arrange, subject to
the provisions of paragraph 3 hereof, for the purchase and sale of securities and other assets held
in the investment portfolio of the Fund.
(b) In the performance of its duties under this Agreement, the
Advisor shall at all times conform to, and act in accordance with, any requirements imposed by (i)
the provisions of the Investment Company Act of 1940 (the “Act”), and of any rules or regulations
in force thereunder; (ii) any other applicable provision of law; (iii) the Provisions of the
Articles of Incorporation and By-Laws of the Fund, as such documents are amended from time to time;
and (iv) any policies and determinations of the Board of Directors of the Fund.
(c) The Advisor will bear all costs and expenses of its partners and employees and any
overhead incurred in connection with its duties hereunder and shall bear the costs of any salaries
or directors fees of any officers or directors of the Fund who are affiliated persons (as defined
in the Act) of the Advisor.
(d) The Advisor shall give the Fund the benefit of its best judgment and effort in rendering
services hereunder, but the Advisor shall not be liable for any act or omission or for any loss
sustained by the Fund in connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence in the performance of its duties,
or by reason of its reckless disregard of its obligations and duties under this Agreement.
(e) Nothing in this Agreement shall prevent the Advisor or any director, officer, employee or
other affiliate thereof from acting as investment adviser for any other other
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person, firm or corporation, or from engaging in any lawful activity, and shall not in any way
limit or restrict the Advisor or any of its partners, officers, employees or agents from buying,
selling or trading any securities for its or their own accounts or for the accounts of others for
whom it or they may be acting, provided, however, that the Advisor will undertake no activities
which, in its judgment, will adversely affect the performance of its obligations under this
Agreement.
3. Portfolio Transactions and Brokerage
The Advisor is authorized, for the purchase and sale of the Fund’s portfolio securities, to
employ such securities dealers as may, in the judgment of the Advisor, implement the policy of the
Fund to obtain the best net results taking into account such factors as price, including dealer
spread, the size, type and difficulty of the transaction involved, the firm’s general execution and
operational facilities and the firm’s risk in positioning the securities involved. Consistent with
this policy, the Advisor is authorized to direct the execution of the Fund’s portfolio transactions
to dealers and brokers furnishing statistical information or research deemed by the Advisor to be
useful or valuable to the performance of its investment advisory functions for the Fund.
4. Compensation of the Advisor
(a) The Fund agrees to pay to the Advisor and the Advisor agrees to
accept as full compensation for all services rendered by the Advisor as such, a fee computed and
payable monthly in an amount equal to .65% of the Fund’s average weekly net assets on an annualized
basis, for the then-current fiscal year. For any period less than a month during which this
Agreement is in effect, the fee shall be prorated according to the proportion which such period
bears to a full month of 28, 29, 30 or 31 days, as the case may be.
(b) For purposes of this Agreement, the average weekly net assets of the Fund shall mean the
average weekly value of the total assets of the Fund, minus the sum of accrued liabilities
(including accrued expenses) of the Fund and any declared but unpaid dividends on the Common Shares
issued by the Fund and any Preferred Shares issued by the Fund (the “Preferred Shares”) and any
accumulated dividends on any Preferred Shares, but without deducting the aggregate liquidation
value of the Preferred Shares. The average weekly net assets of the Fund shall be calculated
pursuant to the procedures adopted by resolutions of the Directors of the Fund for calculating the
net asset value of the Fund’s shares or delegating such calculations to third parties.
5. Indemnity
(a) The Fund hereby agrees to indemnify the Advisor and each of the
Advisor’s directors, officers, employees and agents (including any individual who serves at the
Advisor’s request as director, officer, partner, trustee or the like of another corporation or
other entity) (each such person being an “indemnitee”) against any liabilities and expenses,
including amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and
counsel fees (all as provided in accordance with applicable corporate law) reasonably incurred by
such indemnitee in connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or investigative body in
which he may be or may have been involved as a party or otherwise or with which he may be or may
have been threatened, while acting in any capacity set forth above in this Section 5 or thereafter
by reason of his having acted in any such capacity, except with respect to any matter as to which
he
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shall have been adjudicated not to have acted in good faith in the reasonable belief that his
action was in the best interest of the Fund and furthermore, in the case of any criminal
proceeding, so long as he had no reasonable cause to believe that the conduct was unlawful,
provided, however, that (1) no indemnitee shall be indemnified hereunder against any liability to
the Fund or its shareholders or any expense of such indemnitee arising by reason of (i) willful
misfeasance, (ii) bad faith, (iii) gross negligence or (iv) reckless disregard of the duties
involved in the conduct of his position (the conduct referred to in such clauses (i) through (iv)
being sometimes referred to herein as “disabling conduct”), (2) as to any matter disposed of by
settlement or a compromise payment by such indemnitee, pursuant to a consent decree or otherwise,
no indemnification either for said payment or for any other expenses shall be provided unless there
has been a determination that such settlement or compromise is in the best interests of the Fund
and that such indemnitee appears to have acted in good faith in the reasonable belief that his
action was in the best interest of the Fund and did not involve disabling conduct by such
indemnitee and (3) with respect to any action, suit or other proceeding voluntarily prosecuted by
any indemnitee as plaintiff, indemnification shall be mandatory only if the prosecution of such
action, suit or other proceeding by such indemnitee was authorized by a majority of the full Board
of the Fund.
(b) The Fund shall make advance payments in connection with the expenses of defending any
action with respect to which indemnification might be sought hereunder if the Fund receives a
written affirmation of the indemnitee’s good faith belief that the standard of conduct necessary
for indemnification has been met and a written undertaking to reimburse the Fund unless it is
subsequently determined that he is entitled to such indemnification and if the directors of the
Fund determine that the facts then known to them would not preclude indemnification. In addition,
at least one of the following conditions must be met: (A) the indemnitee shall provide a security
for this undertaking, (B) the Fund shall be insured against losses arising by reason of any lawful
advances, or (C) a majority of a quorum consisting of directors of the Fund who are neither
“interested persons” of the Fund (as defined in
Section 2(a)(19) of the Act) nor parties to the
proceeding (“Disinterested Non-Party Directors”) or an independent legal counsel in a written
opinion, shall determine, based on a review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the indemnitee ultimately will be found
entitled to indemnification.
(c) All determinations with respect to indemnification hereunder shall be made (1) by a final
decision on the merits by a court or other body before whom the proceeding was brought that such
indemnitee is not liable by reason of disabling conduct or, (2) in the absence of such a decision,
by (i) a majority vote of a quorum of the Disinterested Non-Parry Directors of the Fund, or (ii) if
such a quorum is not obtainable or even, if obtainable, if a majority vote of such quorum so
directs, independent legal counsel in a written opinion. All determinations regarding advance
payments in connection with the expense of defending any proceeding shall be authorized in
accordance with the immediately preceding clause (2) above.
The rights accruing to any indemnitee under these provisions shall not exclude any other right
to which he may be lawfully entitled.
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6. Duration and Termination
This Agreement shall become effective on the date first set forth above and shall continue in
effect until the next meeting of stockholders of the Fund (but in any event not more than two years
after such effective date) and thereafter from year to year, but only so long as such continuation
is specifically approved at least annually in accordance with the requirements of the Investment
Company Act of 1940.
This Agreement may be terminated by the Advisor at any time without penalty upon giving the
Fund sixty days’ written notice (which notice may be waived by the Fund) and may be terminated by
the Fund at any time without penalty upon giving the Advisor sixty days’ notice (which notice may
be waived by the Advisor), provided that such termination by the Fund shall be directed or approved
by the vote of a majority of the Directors of the Fund in office at the time or by the vote of the
holders of a “majority” (as defined in the Investment Company Act of 1940) of the voting securities
of the Fund at the time outstanding and entitled to vote. This Agreement shall terminate
automatically in the event of its assignment (as “assignment” is defined in the Investment Company
Act of 1940). The Advisor is a corporation and will notify the Fund promptly after any change in
the ownership of such corporation.
7. Notices
Any notice under this Agreement shall be in writing to the other party at such address as the
other party may designate from time to time for the receipt of such notice and shall be deemed to
be received on the earlier of the date actually received or on the fourth day after the postmark if
such notice is mailed first class postage prepaid.
8. Governing Law
This Agreement shall be construed in accordance with the laws of the State of New York for
contracts to be performed entirely therein without reference to choice of law principles thereof
and in accordance with the applicable provisions of the Act.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing instrument to be
executed by their duly authorized officers and their respective seals to be hereunto affixed,
all as of the day and the year first above written,
| THE HYPERION TOTAL RETURN FUND, INC. | ||||||
| By: | /s/ Xxxxxx X. Xxxxxxx | |||||
| Name: | Xxxxxx X. Xxxxxxx | |||||
| Title: | Treasurer | |||||
| HYPERION CAPITAL MANAGEMENT, INC. | ||||||
| By: | /s/ Xxxxxx X. Xxx | |||||
| Name: | Xxxxxx X. Xxx | |||||
| Title: | Secretary | |||||
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