INVESTMENT ADVISORY AGREEMENT
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THIS INVESTMENT ADVISORY AGREEMENT ("Agreement") is made this ____th day of
November, 2004 by and between RMK ADVANTAGE INCOME FUND, INC. (the "Fund"), a
Maryland corporation, having its principal place of business at Xxxxx Xxxxx
Xxxxxx, Xxxxxxx, Xxxxxxxxx 00000, and XXXXXX ASSET MANAGEMENT, INC. (the
"Adviser"), a Tennessee corporation, having its principal place of business at
000 Xxxxx 00xx Xxxxxx, Xxxxx 0000, Xxxxxxxxxx, Xxxxxxx 00000.
WHEREAS, the Fund, a closed-end, diversified management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), wishes to retain the Adviser to provide investment advisory services to
the Fund; and
WHEREAS, the Adviser is willing to furnish such services on the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed as follows:
1. APPOINTMENT OF THE ADVISER. The Fund hereby appoints the Adviser as
investment adviser for the Fund for the period and on the terms set forth
hereinafter. The Adviser hereby accepts such appointment and agrees during such
period to render the services and to assume the obligations herein set forth.
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 Fund in any way or
otherwise be deemed an agent of the Fund.
2. INVESTMENT ADVISORY SERVICES. Subject to the supervision of the Fund's
Board of Directors, the Adviser shall provide the Fund with investment research,
advice, management and supervision and shall furnish a continuous investment
program for the Fund's portfolio of securities consistent with the Fund's
investment objectives, policies and limitations, the 1940 Act, the applicable
rules and regulations of the Securities and Exchange Commission and other
applicable federal and state laws. Without limiting the generality of the
foregoing, the Adviser shall: (i) obtain and evaluate such information and
advice relating to the economy, securities markets and securities as it deems
necessary or useful to discharge its duties hereunder; (ii) determine the
securities to be purchased, sold or otherwise disposed by the Fund and the
timing of such purchases, sales and dispositions; (iii) place orders pursuant to
its investment determinations for the Fund either directly with the issuer or
with any broker or dealer; and (iv) take such other actions and perform such
other functions of management and supervision with respect to the Fund as it
deems necessary or appropriate or as may be directed by the Board of Directors
of the Fund.
3. PORTFOLIO TRANSACTIONS. In placing orders with brokers and dealers, the
Adviser shall attempt to obtain the best net price and most favorable execution
of the orders.
(i) The Adviser may, in its discretion, use brokers who provide the
Fund with research, analysis, advice and similar services to
execute transactions on behalf of the Fund, and the Adviser may
pay to those brokers in return for brokerage and research services
a higher commission than may be charged by other brokers, subject
to the Adviser determining in good faith that such commission is
reasonable in terms either of the particular transaction or of the
overall responsibility of the Adviser to the Fund and its other
clients and that the total commissions paid by the Fund will be
reasonable in relation to the benefits to the Fund over the long
term.
(ii) The Adviser may, to the extent permitted by applicable laws and
regulations, aggregate securities to be sold or purchased for the
Fund and for its other clients in order to obtain the most
favorable price and efficient execution. In that event, allocation
of the securities purchased or sold, as well as expenses incurred
in the transaction, will be made by the Adviser in the manner it
considers to be the most equitable and consistent with its
fiduciary obligations to the Fund and to its other clients.
(iii) The Adviser may use brokers who are affiliated with the Adviser,
provided that no such broker will be utilized in any transaction
in which such broker acts as principal and the commissions, fees
or other remuneration received by such brokers is reasonable and
fair compared to the commissions, fees or other remuneration paid
to other brokers in connection with comparable transactions
involving similar securities being purchased or sold during a
comparable period of time.
(iv) The Adviser shall provide such reports to the Board of Directors
as it may reasonably request with respect to the Fund's total
brokerage and transaction activities and the manner in which that
business was allocated.
The Fund hereby authorizes any entity or person associated with the Adviser
which is a member of a national securities exchange to effect any transaction on
the exchange for the account of the Fund which is permitted by Section 11(a) of
the Securities Exchange Act of 1934 and Rule 11a2-2(T) thereunder, and the Fund
hereby consents to the retention of compensation by such entity or person for
such transaction in accordance with Rule 11a2-2(T)(a)(2)(iv).
4. CODE OF ETHICS. The Adviser shall adopt a written code of ethics
complying with the requirements of Rule 17j-1 under the 1940 Act and Section
204A of the Investment Advisers Act of 1940 and shall provide the Fund with a
copy of the code of ethics and evidence of its adoption. Within forty-five (45)
days of the end of the last calendar quarter of each year while this Agreement
is in effect, an executive officer of the Adviser shall certify to the Board
that the Adviser has complied with the requirements of Rule 17j-1 and Section
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204A during the previous year and that there has been no violation of the
Adviser's code of ethics or, if such a violation has occurred, that appropriate
action was taken in response to such violation. Upon the written request of the
Fund, the Adviser shall permit the Fund to examine the reports required to be
made to the Adviser by Rule 17j-l(c)(l).
5. BOOKS AND RECORDS. The Adviser shall oversee the maintenance of all
books and records with respect to the Fund's securities transactions and the
Fund's books of account in accordance with all applicable federal and state laws
and regulations. In compliance with the requirements of Rule 31a-3 under the
1940 Act, the Adviser hereby agrees that any records which it maintains for the
Fund are the property of the Fund and further agrees to surrender promptly to
the Fund any of such records upon the Fund's request. The Adviser further agrees
to arrange for the preservation of the records required to be maintained by Rule
31a-1 under the 1940 Act for the periods prescribed by Rule 31a-2 under the 1940
Act.
6. REPORTS. The Adviser shall furnish to or place at the disposal of the
Fund such information, evaluations, analyses and opinions formulated or obtained
by the Adviser in the discharge of its duties as the Fund may, from time to
time, reasonably request. The Fund shall furnish the Adviser with such documents
and information with regard to its affairs as the Adviser may, at any time or
from time to time, reasonably request in order to discharge its obligations
under this Agreement.
7. FUND PERSONNEL. The Adviser agrees to permit individuals who are
directors, officers or employees of the Adviser to serve (if duly appointed or
elected) as directors, officers or employees of the Fund, without remuneration
from or other cost to the Fund.
8. DISQUALIFICATION. The Adviser shall immediately notify the Board of
Directors of the occurrence of any event which would disqualify the Adviser from
serving as an investment adviser of an investment company pursuant to Section 9
of the 1940 Act or any other applicable statute or regulation.
9. EXPENSES. The Adviser shall be responsible for expenses incurred in
providing office space, equipment and personnel as may be necessary or
convenient to provide investment advisory services to the Fund, including
payment of all fees, expenses and salaries of the directors, officers or
employees of the Fund who are directors, officers or employees of the Adviser.
The Fund shall bear the expense of its operation, except those specifically
allocated to the Adviser under this Agreement or under any separate agreement
between the Fund and the Adviser. Subject to any separate agreement or
arrangement between the Fund and the Adviser, the expenses hereby allocated to
the Fund, and not to the Adviser, include, but are not limited to: (i)
organizational expenses; (ii) legal and audit expenses; (iii) borrowing
expenses; (iv) interest; (v) taxes; (vi) governmental fees; (vii) fees,
voluntary assessments and other expenses incurred in connection with membership
in investment company organizations; (viii) the cost (including brokerage
commissions or charges, if any) of securities purchased or sold by the Fund and
any losses incurred in connection therewith; (ix) fees of custodians, transfer
agents, registrars or other agents; (x) expenses of preparing share
certificates; (xi) expenses relating to the redemption or repurchase of shares;
(xii) expenses of registering and qualifying shares for sale under applicable
federal law and maintaining such registrations and qualifications; (xiii)
expenses of preparing, setting in print, printing and distributing prospectuses,
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proxy statements, reports, notices and dividends to stockholders; (xiv) cost of
stationery; (xv) costs of stockholders and other meetings of the Fund; (xvi)
compensation and expenses of the independent directors of the Fund; (xvii) the
Fund's portion of premiums of any fidelity bond and other insurance covering the
Fund and its officers and directors; and (xviii) the fees and other expenses of
listing and maintaining the Fund's shares on the New York Stock Exchange or any
other national stock exchange.
10. COMPENSATION. As compensation for the services performed hereunder, the
Adviser shall receive from the Fund an advisory fee at the annual rate of 0.65%
of the Fund's average daily total assets minus liabilities (other than the
aggregate indebtedness entered into for purposes of leverage) ("Managed
Assets"). This advisory fee shall be payable monthly as soon as practicable
after the last day of each month based on the average of the daily values placed
on the Managed Assets of the Fund as determined at the close of business on each
day throughout the month. The Managed Assets of the Fund will be valued as of
the close of regular trading on the New York Stock Exchange (currently 4:00
p.m., Eastern time) on each business day throughout the month or, if the Fund
lawfully determines the value of its Managed Assets as of some other time on
each business day, as of such time. The first payment of such fee shall be made
as promptly as possible at the end of the month next succeeding the effective
date of this Agreement. In the event that the Adviser's right to such fee
commences on a date other than the first day of the month, the fee for such
month shall be based on the average daily Managed Assets of the Fund in that
period from the date of commencement to the last day of the month. If the Fund
determines the value of its Managed Assets more than once on any business day,
the last such determination on that day shall be deemed to be the sole
determination on that day. The value of the Managed Assets shall be determined
pursuant to the applicable provisions of the Fund's Articles of Incorporation,
its By-Laws and the 1940 Act. If, pursuant to such provisions, the determination
of the net asset value of the Fund is suspended for any particular business day,
then the value of the Managed Assets of the Fund on that day shall be deemed to
be the value of its Managed Assets as determined on the preceding business day.
If the determination of the net asset value of the Fund has been suspended for
more than one month, the Adviser's compensation payable at the end of that month
shall be computed on the basis of the value of the Managed Assets of the Fund as
last determined (whether during or prior to such month).
11. NON-EXCLUSIVE SERVICES. Nothing in this Agreement shall limit or
restrict the right of any director, officer, or employee of the Adviser who may
also be a director, officer, or employee of the Fund, to engage in any other
business or to devote his time and attention in part to the management or other
aspects of any other business, whether of a similar nature or a dissimilar
nature, nor to limit or restrict the right of the Adviser to engage in any other
business or to render services of any kind, including investment advisory and
management services, to any other corporation, firm, individual or association.
The Fund acknowledges that the Adviser or one or more of its "affiliated
persons" may have investment responsibilities or render investment advice to or
perform other investment advisory services for other individuals or entities and
that the Adviser, its "affiliated persons" or any of its or their directors,
officers, agents or employees may buy, sell or trade in securities for its or
their respective accounts ("Affiliated Accounts"). Subject to the provisions of
Section 3, the Fund agrees that the Adviser or its "affiliated persons" may give
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advice or exercise investment responsibility and take such other action with
respect to Affiliated Accounts which may differ from the advice given or the
timing or nature of action with respect to the Fund, provided that the Adviser
acts in good faith. The Fund further acknowledges that one or more of the
Affiliated Accounts may at any time hold, acquire, increase, decrease, dispose
of or otherwise deal with positions in investments in which the Fund may have an
interest. The Adviser shall have no obligation to recommend for the Fund a
position in any investment which an Affiliated Account may acquire, and the Fund
shall have no first refusal, co-investment or other rights in respect of any
such investment, either for the Fund or otherwise.
12. LIMITATION OF LIABILITY.
12.1 Neither the Adviser nor any director, officer or employee of the
Adviser performing services for the Fund at the direction or request of the
Adviser in connection with the Adviser's discharge of its obligations hereunder
shall be liable for any error of judgment or mistake of law or for any loss
suffered by the Fund in connection with any matter to which this Agreement
relates; provided that nothing herein contained shall be construed (i) to
protect the Adviser against any liability to the Fund or its Stockholders to
which the Adviser would otherwise be subject by reason of the Adviser's
misfeasance, bad faith, or gross negligence in the performance of the Adviser's
duties, or by reason of the Adviser's reckless disregard of its obligations and
duties under this Agreement ("disabling conduct") or (ii) to protect any
director, officer or employee of the Adviser who is or was a Director or officer
of the Fund against any liability to the Fund or its Stockholders to which such
person would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
such person's office with the Fund.
12.2 The Fund will indemnify the Adviser against, and hold it harmless
from, any and all expenses (including reasonable counsel fees and expenses)
incurred investigating or defending against claims for losses or liabilities
described in Section 12.1 not resulting from negligence, disregard of its
obligations and duties under this Agreement or disabling conduct by the Adviser.
Indemnification shall be made only following: (i) a final decision on the merits
by a court or other body before whom the proceeding was brought that the Adviser
was not liable by reason of negligence, disregard of its obligations and duties
under this Agreement or disabling conduct or (ii) in the absence of such a
decision, a reasonable determination, based upon a review of the facts, that the
Adviser was not liable by reason of negligence, disregard of its obligations and
duties under this Agreement or disabling conduct by (a) the vote of a majority
of a quorum of directors of the Fund who are neither "interested persons" of the
Fund nor parties to the proceeding ("disinterested non-party directors") or (b)
an independent legal counsel in a written opinion. The Adviser shall be entitled
to advances from the Fund for payment of the reasonable expenses incurred by it
in connection with the matter as to which it is seeking indemnification
hereunder in the manner and to the fullest extent permissible under the Maryland
General Corporation Law. The Adviser shall provide to the Fund a written
affirmation of its good faith belief that the standard of conduct necessary for
indemnification by the Fund has been met and a written undertaking to repay any
such advance if it should ultimately be determined that the standard of conduct
has not been met. In addition, at least one of the following additional
conditions shall be met: (a) the Adviser shall provide security in form and
amount acceptable to the Fund for its undertaking; (b) the Fund is insured
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against losses arising by reason of the advance; or (c) a majority of a quorum
of the full Board of Directors of the Fund, the members of which majority are
disinterested non-party directors, or independent legal counsel, in a written
opinion, shall have determined, based on a review of facts readily available to
the Fund at the time the advance is proposed to be made, that there is reason to
believe that the Adviser will ultimately be found to be entitled to
indemnification hereunder.
13. TERM OF AGREEMENT. The term of this Agreement shall begin on the date
first above written and, unless sooner terminated as hereinafter provided, this
Agreement shall remain in effect through August 31, 2006. Thereafter, this
Agreement shall continue in effect from year to year, subject to the termination
provisions and all other terms and conditions hereof, provided such continuance
is approved at least annually by vote of the holders of a majority of the
outstanding voting securities of the Fund or by the directors, provided that in
either event such continuance is also approved annually by the vote, cast in
person at a meeting called for the purpose of voting on such approval, of a
majority of the directors who are not parties to this Agreement or interested
persons of either party hereto ("Independent Directors"); and provided further
that the Adviser shall not have notified the Fund in writing at least sixty (60)
days prior to the first expiration date hereof or at least sixty (60) days prior
to any expiration date hereof of any year thereafter that it does not desire
such continuation. The Adviser shall furnish to the Fund, promptly upon its
request, such information as may reasonably be necessary to evaluate the terms
of this Agreement or any extension, renewal or amendment thereof.
14. AMENDMENT OR ASSIGNMENT OF AGREEMENT. This Agreement may be amended at
any time, but only by written agreement between the Adviser and the Fund, which
amendment has been authorized by the Board, including the vote or written
consent of a majority of the Independent Directors and, where required by the
1940 Act, the shareholders of the Fund in the manner required by the 1940 Act
and the rules thereunder. This Agreement shall terminate automatically and
immediately in the event of its assignment. The Adviser shall notify the Fund in
writing in advance of any proposed change of "control" to enable the Fund to
take the steps necessary to enter into a new advisory agreement, if necessary.
15. TERMINATION OF AGREEMENT. This Agreement may be terminated at any time
by either party hereto, without the payment of any penalty, upon sixty (60)
days' prior written notice to the other party; provided that in the case of
termination by the Fund, such action shall have been authorized (i) by
resolution of the directors, including the vote or written consent of a majority
of the Independent Directors or (ii) by vote of a majority of the outstanding
voting securities of the Fund.
16. INTERPRETATION AND DEFINITION OF TERMS. Any question of interpretation
of any term or provision of this Agreement having a counterpart in or otherwise
derived from a term or provision of the 1940 Act shall be resolved by reference
to such term or provision of the 1940 Act and to interpretation thereof, if any,
by the United States courts or, in the absence of any controlling decision of
any court, by rules, regulations or orders of the Securities and Exchange
Commission validly issued pursuant to the 1940 Act. Specifically, the terms
"affiliated person," "assignment," "control," "interested person" and "majority
of the outstanding voting securities" shall have the meanings given to them by
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Section 2(a) of the 1940 Act, subject to such exemptions as may be granted by
the Securities and Exchange Commission by any rule, regulation or order.
17. GOVERNING LAW. Except insofar as the 1940 Act or other federal laws and
regulations may be controlling, this Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Maryland.
18. NOTICE. Any notice under this Agreement shall be given in writing
addressed and delivered or mailed postage prepaid to the other party to this
Agreement at its principal place of business.
19. CAPTIONS. The captions in this Agreement are included for convenience
of reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
20. 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 caused this instrument to be signed on
their behalf by their respective officers thereunto duly authorized all as of
the date first written above.
RMK ADVANTAGE Income Fund, Inc.
By:
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Name:
Title:
XXXXXX ASSET MANAGEMENT, INC.
By:
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Name:
Title:
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