INVESTMENT ADVISORY AGREEMENT
Exhibit
10.1
THIS
INVESTMENT
ADVISORY AGREEMENT ("Agreement")
made this 1st day of March, 2007, by and between Renaissance
Capital Growth & Income Fund III, Inc., a
Texas
corporation (the "Fund"), and XXXX
Capital Group, Inc., a
Texas
corporation (the "Adviser"):
WHEREAS,
the
Fund operates as a business development company (a “BDC”) under the Investment
Company
Act of 1940, as amended (the“Act"),
and
engages in the business of making investments consistent with its operation
as a
BDC;
WHEREAS,
the
Adviser is engaged in the business of rendering investment advisory, management
and administrative services with respect to investments of the type made by
the
Fund; and
WHEREAS,
the
Fund deems it advisable to retain the Adviser to render certain investment
advisory, management and administrative services to the Fund, and the Adviser
desires to provide such services to the
Fund, on
the terms and conditions hereinafter set forth;
NOW,
THEREFORE,
in
consideration of the premises and the mutual agreements contained herein, the
Fund and the Adviser hereby agree as follows:
1. Engagement.
Commencing
on the date hereof, the Fund engages and retains the Adviser to provide, or
to
make arrangements with suitable third parties to provide, the investment
advisory, management and administrative services described below, subject to
the
supervision of the Board of Directors of the Fund (collectively, the “Board” and
each member, a “Director”), for the period and on the terms and conditions set
forth in this Agreement. The Adviser hereby accepts such engagement and agrees,
during the terms of this Agreement, at its own expense (except as otherwise
provided herein), to provide, or to make satisfactory arrangements for the
provision of, such services and to assume the obligations herein set forth
for
the compensation provided herein.
2. Term.
Subject
to the provisions of Section 13 hereof, the initial term of this Agreement
will
be for the period commencing on the date of this Agreement and expiring two
years from said date. Thereafter, this Agreement shall automatically be extended
for successive one-year terms until terminated by either party hereto in
accordance with the provisions of Section 13.
3. Provision
of Investment Advisory Services.
The
Adviser shall, within a reasonable period of time after any request by the
Fund,
provide the Fund with such investment research and advice as the Fund may
request with respect to any existing or proposed investment that is consistent
with the investment objective and policies of the Fund as set forth in the
Fund's most recent prospectus as filed with the Securities and Exchange
Commission or in such other, more recent document as may properly set forth
such
information. The Adviser agrees to comply with all provisions of the Act and
all
rules and regulations promulgated thereunder in providing the services to the
Fund described herein. The Adviser's investment services shall include
identifying, evaluating, structuring, acquiring, monitoring, holding, managing
and arranging for the disposition of investments for the Fund.
4. Provision
of Management and Administrative Services.
The
Adviser shall provide, or arrange for suitable third parties to provide, any
and
all management and administrative services reasonably necessary for the
operation
of the
Fund and the conduct of its business. Such management and administrative
services shall include,
but not
be limited to, the following:
a. Providing
the Fund with such office space, equipment, facilities and certain supplies,
and
the services of such clerical and other personnel of the Adviser, as may be
necessary or required for the reasonable conduct of the business of the
Fund:
b. Keeping
and maintaining the books and records of the Fund and handling communications
and correspondence with shareholders of the Fund:
c. Preparing
such accounting, management and other reports and documents as may be necessary
or appropriate for the reasonable conduct of the business of the
Fund;
d. Making
such arrangements and handling such communications with accountants, attorneys,
banks, transfer agents, custodians, underwriters, insurance companies,
depositories and other persons as may from time to time be requested by the
Fund
or may be reasonably necessary to perform any of the other services to be
rendered by the Adviser under this Agreement;
e. Providing
such other managerial and administrative services as may be reasonably requested
by the Fund to identify, evaluate, structure, monitor, acquire and dispose
of
Fund investments;
f. Providing
such other advice and recommendations with respect to the business and affairs
of the Fund as the Adviser shall deem to be desirable or appropriate;
and
g. Providing,
as may be appropriate or necessary, from time to time, a director designee
or
advisory director
to the Fund’s portfolio companies and making arrangements for the provision, at
such costs as are reasonable
and
appropriate and for the benefit of the Fund, of such other management assistance
to portfolio companies as may be appropriate or necessary pursuant to the
applicable requirements of the Act.
5. Supervision.
The
performance by the Adviser of its duties and obligations hereunder shall be
subject to the control and supervision of the Board, including those Directors
who are not “interested persons” of the Fund within the meaning of Section
2(a)(19) of the Act (the “Disinterested Directors”). The Adviser's determination
of what services are necessary or required for the operation or to reasonably
conduct the business of the Fund shall be subject to review by the Board and
such Disinterested Directors. The Adviser shall provide such periodic reports
to
the Fund of the performance of its obligations hereunder as may be requested
by
the Board. The Adviser and its affiliates shall, for all purposes herein
described, be deemed to be an independent contractor and shall, unless otherwise
expressly provided or authorized, have no authority to act for or represent
the
Fund in any way or otherwise be deemed an agent of the Fund.
6. Allocation
of Costs and Expenses.
a. Costs
and Expenses of the Adviser.
Except
as set forth below, the Adviser shall bear the costs and expenses incurred
or
paid by the Adviser in providing the services to the Fund under Section 3 hereof
that are not directly allocable and identifiable to the Fund or its business
or
its investments or proposed investments. Included in such costs to be borne
by
the Adviser are the cost of office space, equipment and certain supplies
utilized by the Fund's personnel and all wages, salaries and benefits of the
Adviser's staff and personnel (except for (i) consultants retained by the
Adviser or the Fund with respect to proposed or actual investments and (ii)
persons responsible for the Fund’s compliance with applicable laws and
regulations). Notwithstanding the foregoing, the Adviser shall not be
responsible for the cost of services provided by any custodian, transfer agent,
accountant or counsel required by the Fund.
b. Expenses
of the Fund.
Except
as provided in Section 6(a) above, the Fund shall bear (and shall reimburse
the
Adviser for) all costs and expenses directly allocable and identifiable to
the
Fund or its business or its investments,
including, but not limited to, all out-of-pocket expenses with respect to
proposed or actual investments
or
dispositions thereof, expenses of registering securities under federal and
state
securities laws, costs of printing proxies and other expenses related to
meetings of shareholders, calculating the Fund’s net asset value (including the
cost and expenses of any independent valuation firm), litigation expenses,
costs
of third party evaluations or appraisals of the Fund (or its assets) or its
proposed or actual investments, the Fund’s fidelity bond, directors and
officers/errors and omissions liability insurance, and any other insurance
premiums, fees for Disinterested Directors, fees of legal counsel and other
legal fees, fees of independent public accountants, Director fees, expenses
of
printing or distributing reports to shareholders and regulatory bodies, federal,
state and local taxes, and any other costs and expenses directly allocable
and
identifiable to the Fund or its business or investments.
7. Compensation
of the Adviser.
The Fund
agrees to pay, and the Adviser agrees to accept, as compensation for the
services provided by the Adviser hereunder, a Base Management Fee (“Base
Management Fee”) and an Incentive Fee (“Incentive Fee”) as set forth below. The
Base Management Fee shall be calculated on a quarterly basis. The Base
Management Fee for each fourth quarter shall be calculated net of any Incentive
Fee payable as of the end of the calendar year ended with that quarter. The
Fund
shall make any payments due hereunder to the Adviser or to the Adviser’s
designee as the Adviser may otherwise direct.
a. Base
Management Fee.
The
Base Management Fee shall be calculated at an annual rate of 1.75 percent
(0.4375 on a quarterly basis) of the Fund’s Net Assets. The Base Management Fee
will be payable in arrears, based on the Net Assets of the Fund at the end
of
each calendar quarter. Such payment shall be payable to the Adviser no later
than the day after which filings with the Securities and Exchange Commission
are
required to be made by the Fund for such calendar quarter. If this agreement
is
terminated prior to the end of a quarter of a calendar quarter, then the Base
Management Fee shall be appropriately pro rated. For this purpose, “Net Assets”
shall mean the gross assets of the Fund, less any outstanding liabilities,
as
determined consistent with generally accepted accounting principals then in
affect.
b. Incentive
Fee.
The
Incentive Fee will be calculated and payable in arrears as of the end of each
calendar year (or upon termination of this Agreement as set forth below), and
will equal 20 percent of the Fund’s realized capital gains for the calendar
year, if any, computed net of all realized capital losses and unrealized capital
depreciation at the end of the calendar year. The effect of the use of this
method to calculate the Incentive Fee is that each year, the cumulative
performance of the Fund since its inception will provide the basis for the
calculation of the Incentive Fee. In the event that this Agreement shall
terminate as of a date that is not a calendar year end, the termination date
shall be treated as though it were a calendar year end for purposes of
calculating and paying the Incentive Fee.
8. Covenants
of the Adviser.
The
Adviser covenants that it is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended. 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.
9. Covenants
of the Fund.
The Fund
covenants that it has elected to be regulated as a BDC pursuant to Section
54(a)
of the Act. The Fund agrees that, for the duration of this Agreement, it will
not have outstanding any option, warrant or right issued pursuant to Section
61(a)(3)(B) of the Act and will not have in place any profit-sharing plan as
described in Section 57(n) of the Act.
10. Liability
of the Adviser.
The
Adviser, its officers, directors, employees, agents and affiliates
(collectively, "Affiliates") shall not be liable to the Fund, or any shareholder
of the Fund, for any error of judgment or mistake of law or any loss or damage
with respect to any investment of the Fund or arising from any act or omission
of the Adviser or any of its Affiliates in the performance of its obligations
hereunder, unless such loss or damage is the result of bad faith, negligence,
misconduct or any breach of fiduciary duty, disregard of any duties or
obligations owed to the Fund by the Adviser or such Affiliates by reason of
this
Agreement or any relation created hereby.
11. Indemnification
of the Adviser.
The
Fund
shall indemnify and hold harmless, to the extent permitted by law, the Adviser
and any of its Affiliates, who was or is a party or is threatened to be made
a
party to any threatened, pending or completed action, suit or proceeding whether
civil, criminal, administrative or investigative (including any action by or
in
the right of the Fund), by reason of any acts or omissions or alleged acts
or
omissions arising out of the activities of such person, if such activities
were
performed in good faith either on behalf of the Fund or in furtherance of the
interest of the Fund, and in a manner reasonably believed by such person to
be
within the scope of the authority conferred by this Agreement or by law against
losses, damages or expenses for which such person has not otherwise been
reimbursed (including, but not limited to, accountants' and attorneys' fees,
judgments, fines and amounts paid in settlement) actually and reasonably
incurred by such person in connection with such action, suit or proceeding,
so
long as such person was not guilty of willful misfeasance, bad faith, gross
negligence, or reckless disregard in the performance of his obligations and
duties under such contract, and, with respect to any criminal action or
proceedings, had no reasonable cause to believe his conduct was unlawful. The
satisfaction of any indemnification and any holding harmless hereunder shall
be
from and limited to Fund assets. Notwithstanding the foregoing, absent a court
determination that the person seeking indemnification was not liable by reason
of "disabling conduct"
within
the meaning of Section 17(h) of the Act, the decision by the Fund to indemnify
such person shall be based upon the reasonable determination, after review
of
the facts, of the non-party Directors of the Fund, or of independent legal
counsel in a written opinion that such person was not liable by reason of such
disabling conduct.
12. Obligations
of the Adviser Not Exclusive.
The
obligations of the Adviser to the Fund are not exclusive. The Adviser may,
in
its discretion, render the same or similar services to any person or persons
whose business may be in direct or indirect competition with the business of
the
Fund and may be in direct competition with the Fund for particular investments.
Additionally, it is contemplated that from time to time one or more of
Affiliates of the Adviser may serve as directors, officers or employees of
the
Fund or the portfolio companies of the Fund or otherwise have an interest or
affiliation with the Fund or such portfolio companies or have the same or
similar relationships with competitors of the Fund and their portfolio
companies. Neither the Adviser nor any of its Affiliates shall in any manner
be
liable to the Fund solely by reason of the aforementioned activities of the
Adviser or such Affiliates.
13. Duration
and Termination.
This
Agreement shall become effective as of the first date above written. This
Agreement shall remain in effect for two years, 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 Fund’s Board of
Directors, or by the vote of a majority of the outstanding voting securities
of
the Fund and (b) the vote of a majority of the Fund’s Directors who are not
parties to this Agreement or who are Disinterested Directors of any such party,
in accordance with the requirements of the Act. 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 Fund,
or
by the vote of the Fund’s 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 Act). Notwithstanding the
termination or expiration of this Agreement as aforesaid, the Adviser shall
be
entitled to any amounts owed under Section 7 through the date of termination
or
expiration and Sections 8, 9 and 10 shall continue in force and effect and
apply
to the Parties and their representatives as and to the extent
applicable.
14. Use
of Name.
The
Adviser reserves the right to grant the use of the names "Renaissance" or
"Renaissance
Capital" or similar names to another investment company, business development
company or business enterprise. The Adviser also reserves the right to withdraw
from the Fund the right to use the name or names "Renaissance" or "Renaissance
Capital" upon termination of this Agreement or at any other time, provided
that,
if the right to withdraw the name or names "Renaissance" or "Renaissance
Capital" is exercised by the Adviser, the Directors will submit the question
of
continuing this Agreement to a vote of the shareholders of the
Fund.
15. Notices.
All
notices, requests, consents and other communications under this Agreement shall
be in writing and shall be deemed to have been delivered on the date personally
delivered, as evidenced by an executed receipt, or on the date received if
mailed, postage prepaid, by certified mail, return receipt requested, or upon
the date of transmission if telegraphed or faxed and confirmed the same day,
if
addressed to the respective parties as follows:
|
If
to the Fund:
Renaissance
Capital Growth & Income Fund III, Inc.
0000
Xxxxx Xxxxxxx Xxxxxxxxxx,
Xxxxx
000/ XX 00
Xxxxxx,
XX 00000
Fax
No: 214/ 000-0000
XXXX:
President
|
If
to the Adviser:
XXXX
Capital Group, Inc.
0000
Xxxxx Xxxxxxx Xxxxxxxxxx
Xxxxx
000/ XX 00
Xxxxxx,
XX 00000
Fax
No: 214/000-0000
XXXX:
President
|
16. Definitions.
The
terms
"assignment" and "majority
of the outstanding voting securities" shall have the meanings given to them
by
Sections 2(a)(4) and 2(a)(42), respectively, of the Act.
17. Assignment.
This
Agreement may not be assigned by either party hereto and will automatically
terminate in the event of its assignment.
18. Amendment.
This
Agreement may be amended only by an instrument in writing executed by both
parties thereto; provided, however, that this Agreement may be amended by the
parties only if such amendment is approved in conformity with the
Act.
19. Governing
Law.
This
Agreement shall be construed and enforced in accordance with and governed by
the
laws of the State of Texas and the applicable provisions of the
Act.
20. Prior
Agreements.
This
Agreement supersedes any prior Investment Advisory Agreements between the
parties hereto.
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date
and year first above written.
