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EXHIBIT (C)(1)
INVESTMENT ADVISORY AGREEMENT
Investment Advisory Agreement executed as of February 14, 1996,
between SIERRA PRIME INCOME FUND, a Massachusetts business trust (the "Trust")
and SIERRA INVESTMENT ADVISORS CORPORATION, a California corporation (the
"Advisor").
Witnesseth:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY ADVISOR TO THE TRUST.
(a) Subject always to the control of the Board of Trustees, the
Advisor will, at its expense, furnish continuously an investment program for
the Trust, will make investment decisions on behalf of the Trust and will,
subject to the provisions of paragraph (c), place all orders for the purchase
and sale of its portfolio securities. Subject always to the control of the
Trustees, the Advisor will also manage, supervise and conduct the other affairs
and business of the Trust and matters incidental thereto. In the performance
of its duties, the Advisor will comply with the provisions of the Agreement and
Declaration of Trust, the By-laws of the Trust and the Trust's stated
investment objectives, policies and restrictions as set forth in its
Registration Statement on Form N-2, File No. 33-98824 and will use its best
efforts to safeguard and promote the welfare of the Trust and to comply with
other policies which the Trustees may from time to time determine.
(b) The Advisor, at its expense, will furnish all necessary office
space and equipment, bookkeeping and clerical services (excluding securities
accounting and transfer agency services) required for it to perform its duties
hereunder and will pay all salaries, fees and expenses of Officers and Trustees
of the Trust who are affiliated with the Advisor.
(c) In the selection of banks, syndicated loan agents, brokers,
dealers, futures commissions merchants or any other sources of portfolio
investments for the Trust (hereafter, "brokers or dealers") and the placing of
orders for the purchaser and/or sale of portfolio investments for the Trust,
the Advisor shall seek to obtain the most favorable price and execution
available, except to the extent it may be permitted to pay higher brokerage
commissions for brokerage and research services as described below. In using
its best efforts to obtain for the Trust the most favorable price and execution
available, the Advisor, bearing in mind the Trust's best interests at all
times, shall consider all factors it deems relevant, including, by way of
illustration, price, the size of the transaction, the nature of the market for
the security, the amount of the commission, the timing of the transaction
taking into account market prices and trends, the reputation, experience and
financial stability of the broker or dealer involved and the quality of service
rendered by the broker or dealer in other transactions. Subject to such
policies as the Trustees may determine, the Advisor shall not be deemed to have
acted unlawfully or to have breached any duty created by this Contract or
otherwise solely by reason of its having caused the Trust to pay, a broker or
dealer that provides brokerage and research services to the Advisor an amount
of commission for effecting a portfolio investment transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction, if the Advisor 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 Advisor's overall responsibilities with
respect to the Trust and to other clients of the Advisor as to which the
Advisor exercised investment discretion. The Trust hereby agrees with the
Advisor and with any Sub-Advisor selected by the Advisor as provided in Section
1(d) that any entity or person associated with the Advisor or such Sub-Advisor
which is a member of a national securities exchange is authorized to effect any
transaction on such exchange for the account of the Trust which is permitted by
Section 11(a)(1)(H) of the Securities Exchange Act of 1934 and Rule 11a2-2(T)
thereunder, and the Trust hereby consents to the retention of compensation for
such transactions in accordance with Rule 11a2-2(T)(a)(2)(iv).
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(d) Subject to the provisions of the Agreement and Declaration of
Trust of the Trust and the Investment Company Act of 1940, the Advisor, at its
expense, may select and contract with one or more investment advisers (the
"Sub-Adviser") for the Trust to perform some or all of the services for which
it is responsible pursuant to paragraph (a) of this Section 1 (and any related
facilities or services for which it is responsible under paragraph (b) of this
Section 1). The Advisor will compensate any Sub-Adviser of the Trust for its
services to the Trust. The Advisor may terminate the services of any
Sub-Adviser at any time in its sole discretion, and shall at such time assume
the responsibilities of such Sub-Advisor unless and until a successor
Sub-Adviser is selected.
(e) The Advisor shall not be obligated to pay any expenses of or
for the Trust not expressly assumed by the Advisor pursuant to this Section
other than as provided in Section 3.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees officers and
employees of the Trust may be a shareholder, director, officer or employee of,
or be otherwise interested in, the Advisor, and in any person controlled by or
under common control with the Advisor, and that the Advisor and any person
controlled by or under common control with the Advisor may have an interest in
the Trust.
The Trust also understands that the Advisor now acts, will continue to
act and may act in the future as investment adviser to fiduciary and other
managed accounts and as investment adviser to one or more other investment
companies or series of investment companies, and the Trust has no objection to
the Advisor so acting, provided that whenever the Trust and one or more other
accounts or investment companies advised by the Advisor have available funds
for investment, investments suitable and appropriate for each will be allocated
in accordance with procedures believed to be equitable to each entity.
Similarly, opportunities to sell securities will be allocated in an equitable
manner. The Trust recognizes that in some cases this procedure may adversely
affect the size of the position that may be acquired or disposed of for the
Trust. In addition, the Trust understands that the persons employed by the
Advisor to assist the performance of the Advisor's duties hereunder will not
devote their full time to such services and nothing contained herein shall be
deemed to limit or restrict the right of the Advisor or any affiliate of the
Advisor to engage in and devote time and attention to other businesses or to
render services of whatever kind or nature.
3. COMPENSATION TO BE PAID BY THE TRUST TO THE ADVISOR.
The Trust will pay to the Advisor as compensation for services
rendered, for the facilities furnished and for the expenses borne by the
Advisor pursuant to Section 1, a fee, computed and paid monthly at the annual
rate of .95% of the value of the Trust's average daily net assets. Such
average daily net asset value of the Trust shall be determined by taking an
average of all of the determinations of such net asset value during such month
at the close of business on each business day during such month while this
Agreement is in effect. Such fee shall be payable for each month within five
(5) business days after the end of such month.
In the event that expenses of the Trust for any fiscal year (not
including any interest, taxes, brokerage, extraordinary expenses or
distribution expenses paid by the Trust pursuant to any distribution plan)
should exceed the expense limitation on investment company expenses enforced by
any statute or regulatory authority of any jurisdiction in which shares of the
Trust are qualified for offer and sale, the compensation due the Advisor for
such fiscal year shall be reduced by the amount of such excess by a reduction
or refund thereof. In the event that the expenses of the Trust exceed any
expense limitation which the Advisor may, by written notice to the Trust,
voluntarily declare to be effective with respect to the Trust, subject to such
terms and conditions as the Advisor may prescribe in such notice, the
compensation due the Advisor shall be reduced, and, if necessary, the Advisor
shall bear the Trust's expenses to the extent required by such expense
limitation.
The Advisor shall not be required to reimburse any amount in excess of
the compensation paid to it pursuant to Section 3. If the Advisor shall serve
for less than the whole of a month, the foregoing compensation shall be
prorated.
4. ASSIGNMENT TERMINATES THIS AGREEMENT; AMENDMENTS OF THIS AGREEMENT.
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This Agreement shall automatically terminate, without the payment of
any penalty, in the event of its assignment; and this Agreement shall not be
amended unless such amendment is approved at a meeting by the affirmative vote
of a majority of the outstanding shares of the Trust, and by the vote, cast in
person at a meeting called for the purpose of voting on such approval, of a
majority of the Board of Trustees who are not interested persons of the Trust
or of the Advisor or of any Sub-Adviser of the Trust as defined in the
Investment Company Act of 1940, as amended.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT.
This Agreement shall become effective upon its execution, and shall
remain in full force and effect continuously thereafter (unless terminated
automatically as set forth in Section 4) until terminated as follows:
(a) Either party hereto may at any time terminate this
Agreement by not more than sixty days' written notice delivered or
mailed by registered mail, postage prepaid, to the other party, or
(b) If (i) the Board of Trustees or the shareholders by
the affirmative vote of a majority of the outstanding shares of the
Trust, and (ii) a majority of the Board of Trustees who are not
interested persons of the Trust or of the Advisor, as defined in the
Investment Company Act of 1940, as amended, by vote cast in person at
a meeting called for the purpose of voting on such approval, do not
specifically approve at least annually the continuance of this
Agreement, then this Agreement shall automatically terminate at the
close of business on the second anniversary of its execution, or upon
the expiration of one year from the effective date of the last such
continuance, whichever is later; provided, however, that if the
continuance of this Agreement is submitted to the shareholders of the
Trust for their approval and such shareholders fail to approve such
continuance of this Agreement as provided herein, the Advisor may
continue to serve hereunder in a manner consistent with the Investment
Company Act of 1940 and the rules and regulations thereunder.
Action by the Trust under paragraph (a) above may be taken either (i)
by vote of a majority of its Trustees, or (ii) by the affirmative vote of a
majority of the outstanding shares of the Trust.
Termination of this Agreement pursuant to this Section 5 shall be
without the payment of any penalty.
1. CERTAIN INFORMATION.
The Advisor shall promptly notify the Trust in writing of the
occurrence of any of the following events: (a) the Advisor shall fail to be
registered as an investment adviser under the Investment Company Act of 1940,
as amended, from time to time, and under the laws of any jurisdiction in which
the Advisor is required to be registered as an investment adviser in order to
perform its obligations under this Agreement, (b) the Advisor shall have been
served or otherwise have notice of any action, suit, proceeding, inquiry or
investigation, at law or in equity, before or by any court, public board or
body, involving the affairs of the Trust and (c) there shall be any change in
the control of the Advisor.
2. CERTAIN DEFINITIONS.
For the purposes of this Agreement, the "affirmative vote of a
majority of the outstanding shares" of the Trust means the affirmative vote, at
a duly called and held meeting of shareholders, (a) of the holders of 67% or
more of the shares of the Trust present (in person or by proxy) and entitled to
vote at such meeting, if the holders of more than 50% of the outstanding shares
of the Trust entitled to vote at such meeting are present in person or by
proxy, or (b) of the holders of more than 50% of the outstanding shares of the
Trust entitled to vote at such meeting, whichever is less.
For the purposes of this Agreement, the terms "affiliated person",
"control", "interested person" and "assignment" shall have their respective
meanings defined in the Investment Company Act of 1940, as amended, and the
rules and regulations thereunder, subject, however, to such exemptions as may
be granted by the Securities and Exchange Commission under said Act; the term
"specifically approve at least annually" shall be construed in a manner
consistent with the Investment Company Act of 1940 and the rules and
regulations thereunder; and the term "brokerage and research
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services" shall have the meaning given in the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder.
3. NONLIABILITY OF ADVISOR.
The Advisor shall exercise its best judgement in rendering its
services under this Agreement. In the absence of willful misfeasance, bad
faith or gross negligence on the part of the Advisor, or reckless disregard of
its obligations and duties hereunder, the Advisor shall not be subject to any
liability to the Trust, or to any shareholder of the Trust, for any act or
omission in the course of, or connected with, rendering services hereunder.
4. USE OF NAME.
The Advisor owns the name "Sierra", which may be used by the Trust
only with the consent of the Advisor. The Advisor consents to the use by the
Trust of the name "Sierra Prime Income Fund" or any other name embodying the
name "Sierra", but only on condition and so long as (i) this Agreement shall
remain in full force, (ii) the Trust shall fully perform, fulfill and comply
with all provisions of this Agreement expressed herein to be performed,
fulfilled or complied with by it, and (iii) Sierra Investment Advisors
Corporation is the Advisor of the Trust. No such name shall be used by the
Trust at any time or in any place or for any purposes or under any conditions
except as provided in this section. The foregoing authorization by the Advisor
to the Trust to use the name "Sierra" as part of a business or name is not
exclusive of the right of the Advisor itself to use, or to authorize others to
use, the same; the Trust acknowledges and agrees that as between the Advisor
and the Trust, the Advisor has the exclusive right so to use, or authorize
others to use, said name, and the Trust agrees to take such action as may
reasonably be requested by the Advisor to give full effect to the provisions of
this section (including, without limitation, consenting to such use of said
name). Without limiting the generality of the foregoing, the Trust agrees
that, upon (i) any termination of this Agreement by either party, (ii) the
violation of any of its provisions by the Trust or (iii) termination of this
Investment Advisor Agreement between the Advisor and the Trust, the Trust will,
at the request of the Advisor, within six months after such termination or
violation, use its best efforts to change the name of the Trust so as to
eliminate all reference, if any, to the name "Sierra" and will not thereafter
transact any business in a name containing the name "Sierra" in any form or
combination whatsoever, or designate itself as the same entity as or successor
to an entity of such name, or otherwise use the name "Sierra" or any other
reference to the Advisor. Such covenants on the part of the Trust shall be
binding upon it, its trustees, offices, stockholders, creditors and all other
persons claiming under or through it.
5. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Trust is on
file with the Secretary of The Commonwealth of Massachusetts, and notice is
hereby given that this instrument is executed on behalf of the Trustees of the
Trust, as Trustees, and not individually and that the obligations of this
instrument are not binding upon any of the Trustee or shareholders individually
but are binding only upon the assets and property of the Trust.
6. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall together,
constitute only one instrument.
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IN WITNESS WHEREOF, SIERRA PRIME INCOME FUND and SIERRA INVESTMENT
ADVISORS CORPORATION have each caused this instrument to be signed in
counterparts on its behalf by its duly authorized representative, all as of the
day and year first above written.
SIERRA PRIME INCOME FUND
By /s/ Xxxxx Xxxxx
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Title: Executive Vice President and Treasurer
SIERRA INVESTMENT ADVISORS CORPORATION
By /s/ Xxxxxxx X. Goth
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Title: Chief Operating Officer
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