EXHIBIT (10)(A)
INVESTMENT ADVISORY AGREEMENT
This Investment Advisory Agreement ("Agreement") is made as of the ____
day of ___________, 2000 between SBM Certificate Company, a Maryland
corporation (the "Company"), and Key Asset Management, Inc., a New York
corporation (the "Adviser") (collectively, the "Parties").
WHEREAS, the Company is organized and operates as a face-amount
certificate investment company and is so registered under the Investment
Company Act of 1940, as amended, (the "Act"); and
WHEREAS, the Company has registered, or will register, certain
face-amount certificates ("Certificates") under the Securities Act of 1933, as
amended, ("1933 Act"), to the extent required thereby; and
WHEREAS, the assets of the Company will be used to support the Company's
obligations under the Certificates to the extent required by the Act; and
WHEREAS, the Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, and is engaged principally in the business of
rendering investment advisory services; and
WHEREAS, the Company desires to have the Adviser perform the investment
advisory services described herein, and the Adviser desires to provide these
services to the Company.
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 THE ADVISER.
(a) The Company hereby appoints the Adviser, and the Adviser hereby
accepts such appointment, to act as the investment adviser to the Company for
the period and on the terms herein set forth, for the compensation provided on
Schedule A hereto.
(b) The Adviser shall for all purposes herein be deemed to be an
independent contractor and shall, except as expressly provided or authorized
(whether herein or otherwise), have no authority to act for or represent the
Company in any way or otherwise be deemed an agent of the Company.
2. SERVICES TO BE PROVIDED BY THE ADVISER.
The Adviser, at its own expense or pursuant to arrangements with others
to bear the expenses, shall furnish the services described below to the
Company subject to the overall supervision and review of the Company's Board
of Directors ("Board") and in accordance with, as in effect from time to time,
the provisions of the Company's Articles of Incorporation ("Articles"),
By-Laws, registration statements, and applicable law (including, without
limitation, the Act, the 1933 Act, and the Internal Revenue Code). The Adviser
shall give the Company the benefit of its best judgment and efforts in
rendering its services as investment adviser.
(a) INVESTMENT PROGRAM. The Adviser shall continuously furnish an
investment program for the Company. In connection therewith, the Adviser
shall:
(i) select and manage the securities investments of the Company to
ensure that the Company has, in cash or qualified investments (as that
term is defined by Section 28(b) of the Act), assets having an aggregate
value not less than that required by applicable law;
(ii) determine, consistent with guidelines provided from time to time by
the Company, what securities investments the Company shall purchase,
hold, sell, or exchange and what portion, if any, of the Company's
assets shall remain uninvested, and shall take such steps as may be
necessary to implement the same;
(iii) determine, to whatever extent necessary, the manner in which to
exercise any voting rights, rights to consent to corporate action, or
other rights pertaining to the Company's securities investment and
(iv) render regular reports to the Company, at regular meetings of its
Board and at such other times as may be reasonably requested by the
Board, of (x) the decisions which it has made with respect to the
investment of the assets of the Company and the purchase and sale of its
investment securities, (y) the reasons for such decisions, and (z) the
extent to which it has implemented those decisions.
(b) PORTFOLIO SECURITIES TRANSACTIONS. The Adviser, subject to and in
accordance with any directions that the Company's Board may issue from time to
time, shall place orders for the execution of the Company's securities
transactions. When placing orders, the Adviser shall seek to obtain the best
net price and execution ("best execution") for the Company, but this
requirement shall not be deemed to obligate the Adviser to place any order
solely on the basis of obtaining the lowest commission rate if the other
standards set forth in this section have been satisfied. The Parties recognize
that there are likely to be many cases in which different brokers are equally
able to provide best execution and that, in selecting among such brokers with
respect to particular trades, it may be desirable to choose those brokers who
furnish research, statistical, quotations and other information to the
Company, as well as the Adviser, in accordance with the standards set forth
below. Moreover, to the extent that it continues to be lawful to do so and so
long as the Board determines that the Company will benefit, directly or
indirectly, by doing so, the Adviser may place orders with a broker who
charges a commission for a securities transaction which is in excess of the
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amount of commission that another broker would have charged for effecting that
transaction, provided that the excess commission is reasonable in relation to
the value of "brokerage and research services" (as defined in Section 28(e)(3)
of the Securities Exchange Act of 1934) provided by that broker. Accordingly,
the Company and the Adviser agree that the Adviser shall select brokers for
the execution of the Company's transactions from among:
(i) those brokers and dealers who provide quotations and other services
to the Company, specifically including the quotations necessary to
determine the aggregate assets of the Company, in such amount of total
brokerage as may reasonably be required in light of such services; and
(ii) those brokers and dealers who supply research, statistical and
other data to the Adviser or its affiliates, which the Adviser or its
affiliates may lawfully and appropriately use in their investment
advisory capacities, which relate directly to securities, actual or
potential, of the Company, or which place the Adviser in a better
position to make decisions in connection with the management of the
Company's assets, whether or not such data may also be useful to the
Adviser and its affiliates in managing other portfolios or advising
other clients, in such amount of total brokerage as may reasonably be
required.
The Adviser shall render regular reports to the Company, not less
frequently than quarterly, of how much total brokerage business has been
placed by the Adviser with brokers falling into each of the categories
referred to above and the manner in which the allocation has been
accomplished. The Adviser agrees that no investment decision will be made or
influenced by a desire to provide brokerage for allocation in accordance with
the foregoing, and that the right to make such allocation of brokerage shall
not interfere with the Adviser's paramount duty to obtain the best execution
for the Company.
(c) TENDER OFFER SOLICITATION FEES. The Adviser shall use its best
efforts to recapture all available tender offer solicitation fees in
connection with tenders of the securities of the Company, and any similar
payments, provided, however, that neither the Adviser, nor any affiliate of
the Adviser shall be required to register as a broker-dealer for this purpose.
The Adviser shall advise the Board of any fees or payments of whatever type
that it may be possible for the Adviser or an affiliate of the Adviser to
receive in connection with the purchase or sale of investment securities for
the Company.
(d) VALUATION OF INVESTMENTS. The Adviser shall value the investments of
the Company as often as necessary to enable the Company to continually meet
the capital stock and minimum certificate reserve requirements required by the
Act. The Company shall provide, or arrange for others to provide, all
necessary information for the calculation of the aggregate value of the
Company's assets.
(e) ASSISTANCE WITH REGULATORY MATTERS. The Adviser shall provide such
assistance, cooperation, and information to the Company or its designee, as
the same may reasonably request from time to time, to enable the Company to:
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(i) prepare, amend, file, and/or deliver its registration statements,
regulatory reports, periodic reports to shareholders and other documents
(including tax returns) required by applicable law in a timely manner;
and
(ii) develop, implement, maintain, and monitor a compliance program for
assuring compliance with all federal and state securities law matters.
The Parties acknowledge that the Company or its designee shall have
primary responsibility for the foregoing matters.
(f) INFORMATION, RECORDS, AND CONFIDENTIALITY.
(i) The Company or its designee shall provide timely information to the
Adviser regarding such matters as cash received from the issuance of the
Certificates, and all other information as may be reasonably necessary
or appropriate for the Adviser to perform its responsibilities
hereunder.
(ii) The Company shall own and control all records maintained hereunder
by the Adviser on the Company's behalf and, upon request of the Company
or in the event of termination of this Agreement for any reason, the
Adviser shall promptly return to the Company all such records, free from
any claim or retention of rights by the Adviser and without charge by
the Adviser except for the Adviser's direct expenses.
(iii) The Adviser shall not disclose or use any records or information
obtained pursuant hereto except as expressly authorized herein, and
shall keep confidential any information obtained pursuant hereto, and
disclose such information only if the Company has authorized such
disclosure, or if such disclosure is expressly required by applicable
federal or state regulatory authorities.
(g) PERSONNEL. The Adviser shall compensate all Directors, officers and
employees of the Company who are directors, officers, stockholders, or
employees of the Adviser or its affiliates.
(h) DELEGATION TO SUB-ADVISERS. Subject to the approval of the Board and
the shareholders of the Company, the Adviser may delegate to a sub-adviser
certain of its duties herein, provided that the Adviser shall continue to
supervise the performance of any such sub-adviser.
3. EXPENSES OF THE COMPANY.
Except for expenses that the Adviser expressly assumes pursuant to this
Agreement, the Company shall bear, or cause others to bear, all expenses for
its operations and activities, and shall cause the Adviser to be reimbursed,
by the Company or others, for any such expense that the Adviser incurs on
behalf of the Company. The expenses borne by the Company include, without
limitation:
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(a) fees and expenses paid to the Adviser as provided herein;
(b) expenses of all audits of the Company's financial statements by
independent public accountants;
(c) expenses of transfer or dividend disbursing agent, registrar,
custodian, or depository appointed for safekeeping of the Company's cash,
securities, and other property;
(d) expenses of obtaining quotations which assist in calculating the
value of the assets of the Company;
(e) salaries and other compensation of executive officers of the Company
who are not directors, officers, stockholders or employees of the Adviser or
its affiliates;
(f) all taxes levied against the Company, including issuance and
transfer taxes, and corporate fees payable by the Company to federal, state or
other governmental agencies;
(g) brokerage fees and commissions in connection with the purchase and
sale of securities for the Company, and similar fees and charges for the
acquisition, disposition, lending or borrowing of such securities;
(h) costs, including the interest expense, of borrowing money in
connection with the purchase or sale of securities for the Company;
(i) costs incident to meetings of the Board and shareholders of the
Company;
(j) fees and expenses of Directors who are not "interested persons" of
the Company within the meaning of the Act;
(k) legal fees, including the legal fees related to the registration and
continued qualification of the Certificates for sale;
(l) costs and expense of registering and maintaining the registration of
the Company and the Certificates under federal and any applicable state laws;
(m) the preparation, setting in type, printing in quantity and
distribution of materials distributed to current and prospective Certificate
holders of the Company, such as prospectuses, supplements thereto, and any
other communications pertaining to the Certificate holders;
(n) the preparation, setting in type, printing in quantity and
distribution of materials distributed to the shareholders of the Company, such
as periodic reports, proxy materials (including proxy statements and proxy
cards) relating to the Company and the processing, including tabulation, of
the results of voting instruction and proxy solicitations, and any other
communications pertaining to the shareholders;
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(o) the fees and expenses involved in the preparation of all reports as
required by federal or state law;
(p) postage;
(q) extraordinary or non-recurring expenses, such as legal claims and
liabilities and litigation costs and indemnification payments by the Company
in connection therewith;
(r) trade association dues for the Investment Company Institute or
similar organizations; and
(s) any errors and omissions or other liability insurance premiums
covering the Directors, officers, and employees of the Company.
4. COMPENSATION OF THE ADVISER.
As compensation to the Adviser for services rendered furnished
hereunder, the Company shall pay the Adviser a fee in the amount and manner
set forth in Schedule A. The fee shall be reduced by any tender solicitation
fees received by the Adviser, or any affiliated person of the Adviser, in
connection with the tender of investments of the Company or any similar
payments (less any direct expenses incurred by the Adviser, or any affiliated
person of the Adviser, in connection with such fees or payments).
5. ACTIVITIES OF THE ADVISER.
The services of the Adviser to the Company under this Agreement are not
exclusive, and the Adviser and any of its affiliates shall be free to render
similar services to others, so long as its services hereunder are not impaired
thereby. Subject to and in accordance with the Company's Articles of
Incorporation and By-Laws, the Articles of Incorporation and By-Laws of the
Adviser, and any applicable requirements of the Act, it is understood that
Directors, officers, agents, shareholders, and Certificate holders of the
Company are or may be interested persons of the Adviser or its affiliates as
directors, officers, agents, or stockholders, or otherwise; that directors,
officers, agents, or stockholders of the Adviser or its affiliates are or may
be interested persons of the Company as Directors, officers, agents,
shareholders or otherwise; that the Adviser or its affiliates may be
interested in the Company as shareholders or otherwise; and the effect of such
interest shall be governed by the Act.
6. LIABILITIES OF THE ADVISER.
The Adviser shall indemnify and hold harmless the Company and each of
its Directors and officers (or former Directors and officers) and each person,
if any, who controls the Company within the meaning of Section 15 of the 1933
Act (collectively, "Indemnitees") from all loss, cost, liability, claim,
damage, or expense (including the reasonable cost of investigating and
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defending against the same and any counsel fees reasonably incurred in
connection therewith) (collectively, "Loss") incurred by any Indemnitees under
the 1933 Act or under common law or otherwise which arise out of or are based
upon or are a result of (i) the Adviser's willful misfeasance, bad faith, or
negligence in the performance of its duties, or (ii) the reckless disregard of
its obligations and duties under this Agreement, or that of its officers,
agents, and employees, in the performance of this Agreement.
In no event shall Adviser be liable to any Indemnitee for any Loss that
does not arise out of or is not based upon or is not a result of (i) the
Adviser's willful misfeasance, bad faith, or negligence in the performance of
its duties, or (ii) the reckless disregard of its obligations and duties under
this Agreement, or that of its officers, agents, and employees, in the
performance of this Agreement.
In case any action shall be brought against any Indemnitee, the Adviser
shall not be liable under its indemnity agreement contained in this paragraph
with respect to any claim made against any Indemnitee, unless the Indemnitee
shall have notified the Adviser in writing within a reasonable time after the
summons or other first legal process giving information of the nature of the
claim shall have been served upon the Indemnitee (or after the Indemnitee
shall have received notice of such service on any designated agent), but
failure to notify the Adviser of any such claim shall not relieve it from
liability to the Indemnitees against whom such action is brought otherwise
than on account of this Section 6. The Adviser shall be entitled to
participate at its own expense in the defense, or, if it so elects, to assume
the defense of any suit brought to enforce any such liability, but if the
Adviser elects to assume the defense, such defense shall be conducted by
counsel chosen by it and satisfactory to the Indemnitees that are defendants
in the suit. In the event the Adviser elects to assume the defense of any such
suit and retain such counsel, the Indemnitees that are defendants in the suit
shall bear the fees and expenses of any additional counsel retained by them,
but, in case the Adviser does not elect to assume the defense of any such
suit, the Adviser will reimburse the Indemnitees that are defendants in the
suit for the reasonable fees and expenses of any counsel retained by them. The
Adviser shall promptly notify the Company of the commencement of any
litigation or proceedings in connection with the issuance or sales of the
shares
7. TERM AND TERMINATION.
(a) TERM. This Agreement shall become effective on the date hereof.
Unless terminated as herein provided, this Agreement shall remain in full
force and effect until -------------------, 2000, and shall continue in full
force and effect thereafter so long as such continuance is approved at least
annually (a) by either the Directors of the Company or by vote of a majority
of the Company's outstanding voting securities, and (b) in either event by the
vote of a majority of the 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 approval.
(b) TERMINATION. This Agreement:
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( i ) may at any time be terminated by the Company without the payment
of any penalty, either by vote of the Board or by vote of a majority of
the Company's outstanding voting securities, on 60 days' written notice
to the Adviser;
( ii ) shall automatically and immediately terminate in the event of its
assignment; and
( iii ) may be terminated by the Adviser on 60 days' written notice to
the Company.
As used in this Section 7, the terms "assignment," "interested persons,"
and "vote of a majority of the outstanding voting securities" shall have the
meanings set forth for any such terms in the Act.
8. NOTICE. Any notice under this Agreement shall be given in writing
addressed and delivered, or mailed post-paid, to the other party at any office
of such party.
9. 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.
10. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Maryland.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
effective as of the date first written above.
SBM CERTIFICATE COMPANY
By:____________________________
ATTEST
By:________________________________
KEY ASSET MANAGEMENT, INC.
By:____________________________
ATTEST
By:________________________________
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SCHEDULE A
This schedule is an integral part of the Agreement to which it is
attached. Capitalized terms used herein have the same meaning as given to them
in the Agreement, except as otherwise noted. This schedule sets out the
compensation of the Adviser for services rendered with respect the Company.
COMPENSATION
For its services during the term of this Agreement, Adviser shall
receive a quarterly fee payable in arrears equal to ___ % per annum of the
average daily net asset value of the Company's assets managed by the Adviser:
Adopted: ___________, 2000
Last Amended: Not applicable
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