Exhibit 10.1

 

INVESTMENT ADVISORY AND

ADMINISTRATIVE SERVICES AGREEMENT

BETWEEN

TERRA INCOME FUND 6, INC.

AND

TERRA INCOME ADVISORS, LLC

 

This Investment Advisory and Administrative Services Agreement
(this “Agreement”) is made this 30th day of April, 2019, by and between TERRA
INCOME FUND 6, INC., a Maryland corporation (the “Company”), and TERRA INCOME
ADVISORS, LLC, a Delaware limited liability company (the “Advisor”).

 

RECITALS

 

WHEREAS, the Company is a non-diversified, closed-end management investment
company that intends to elect to be treated as a business development company
(“BDC”) under the Investment Company Act of 1940, as amended (the “Investment
Company Act”);

 

WHEREAS, the Advisor is a registered investment adviser under the Investment
Advisers Act of 1940, as amended (the “Advisers Act”); and

 

WHEREAS, the Company desires to retain the Advisor to furnish investment
advisory services to the Company and to provide for the administrative services
necessary for the operation of the Company on the terms and conditions set forth
herein, and the Advisor wishes to be retained to provide such services.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the promises herein and for other good and
valuable consideration, the parties hereby agree as follows:

 

1.           Duties of the Advisor.

 

(a)         Retention of Advisor. The Company hereby employs the Advisor to act
as the investment adviser to the Company and to manage the investment and
reinvestment of the assets of the Company, subject to the supervision of the
board of directors of the Company (the “Board”), for the period and upon the
terms set forth herein:

 

(i)       in accordance with the investment objectives, policies and
restrictions that are set forth in the Company’s Registration Statement on Form
N-2 filed with the Securities and Exchange Commission (the “SEC”) (File No.
333-202399), as amended from time to time (the “Registration Statement”);

 

(ii)      in accordance with all other applicable federal and state laws, rules
and regulations, and the Company’s Articles of Amendment and Restatement (the
“Articles”) and bylaws (the “Bylaws”), in each case as amended from time to
time;

 

(iii)     in accordance with such investment policies, directives and regulatory
restrictions as the Company may from time to time establish or issue and
communicate to the Advisor in writing; and

 

(iv)     in accordance with the Company’s compliance policies and procedures as
applicable to the Advisor and as administered by the Company’s chief compliance
officer.

 

(b)         Responsibilities of Advisor. Without limiting the generality of the
foregoing, the Advisor shall, during the term and subject to the provisions of
this Agreement:

 

(i)       determine the composition and allocation of the portfolio of the
Company, the nature and timing of the changes therein and the manner of
implementing such changes;

 

(ii)      identify, evaluate and negotiate the structure of the investments made
by the Company;

 

 

 

 

(iii)     execute, close, service and monitor the Company’s investments;

 

(iv)    determine the securities and other assets that the Company shall
purchase, retain or sell;

 

(v)      perform due diligence on prospective portfolio companies; and

 

(vi)     provide the Company with such other investment advisory, research and
related services as the Company may, from time to time, reasonably request or
require for the investment of its funds and the disposition of such investments.

 

(c)         Power and Authority. To facilitate the Advisor’s performance of
these undertakings, but subject to the restrictions contained herein, the
Company hereby delegates to the Advisor, and the Advisor hereby accepts, the
power and authority on behalf of the Company to effectuate its investment
decisions for the Company, including the execution and delivery of all documents
relating to the Company’s investments and the placing of orders for other
purchase or sale transactions on behalf of the Company. In the event that the
Company determines to acquire debt financing, the Advisor shall arrange for such
financing on the Company’s behalf, subject to the oversight and approval of the
Board.

 

(d)         Administrative Services. Subject to the supervision, direction and
control of the Board, the provisions of the Articles and Bylaws and applicable
federal and state law, the Advisor shall perform, or cause to be performed by
other persons, all administrative services in connection with the operation of
the Company.

 

(e)         Acceptance of Employment. The Advisor hereby accepts such employment
and agrees during the term hereof to render the services described herein for
the compensation provided herein, subject to the limitations contained herein.

 

(f)          Sub-Advisors. The Advisor is hereby authorized to enter into one or
more sub-advisory agreements with other investment advisers (each, a
“Sub-Advisor”) pursuant to which the Advisor may obtain the services of the
Sub-Advisor(s) to assist the Advisor in fulfilling its responsibilities
hereunder. Specifically, the Advisor may retain a Sub-Advisor to recommend
specific securities or other investments based upon the Company’s investment
objectives, policies and restrictions, and work, along with the Advisor, in
sourcing, structuring, negotiating, arranging or effecting the acquisition or
disposition of such investments and monitoring investments on behalf of the
Company, subject to the oversight of the Advisor and the Company.

 

(i)       The Advisor and not the Company shall be responsible for any
compensation payable to any Sub-Advisor.

 

(ii)      Any sub-advisory agreement entered into by the Advisor shall be in
accordance with the requirements of the Investment Company Act, including
without limitation the requirements relating to Board approval and the Company’s
stockholder approval thereunder, and other applicable federal and state law.

 

(iii)     Any Sub-Advisor shall be subject to the same fiduciary duties imposed
on the Advisor pursuant to this Agreement, the Investment Company Act and the
Advisers Act, as well as other applicable federal and state law.

 

(g)         Independent Contractor Status. The Advisor shall, for all purposes
herein provided, be deemed to be an independent contractor and, except as
expressly provided or authorized herein, shall have no authority to act for or
represent the Company in any way or otherwise be deemed an agent of the Company.

 

(h)         Record Retention. Subject to review by, and the overall control of,
the Board, the Advisor shall keep and preserve for the period required by the
Investment Company Act any books and records relevant to the provision of its
investment advisory services to the Company and shall specifically maintain all
books and records with respect to the Company’s portfolio transactions and shall
render to the Board such periodic and special reports as the Board may
reasonably request or as may be required under applicable federal and state law,
and shall make such records available for inspection by the Board and its
authorized agents, at any time and from time to time during normal business
hours. The Advisor agrees that all records that it maintains for the Company are
the property of the Company and shall surrender promptly to the Company any such
records upon the Company’s request and upon termination of this Agreement
pursuant to Section 9, provided that the Advisor may retain a copy of such
records.

 

 2 

 

 

The following provisions in this Section 1 shall apply for only so long as the
shares of common stock of the Company (“Shares”) are not listed on a national
securities exchange.

 

(i)          Administrator. The Advisor shall, upon request by an official or
agency administering the securities laws of a state, province or commonwealth
(an “Administrator”), submit to such Administrator the reports and statements
required to be distributed to the Company’s stockholders pursuant to this
Agreement, the Registration Statement and applicable federal and state law.

 

(j)          Fiduciary Duty. It is acknowledged that the Advisor shall have a
fiduciary responsibility for the safekeeping and use of all funds and assets of
the Company, whether or not in the Advisor’s immediate possession or control.
The Advisor shall not employ, or permit another to employ, such funds or assets
in any manner except for the exclusive benefit of the Company. The Advisor shall
not, by entry into an agreement with any stockholder of the Company or
otherwise, contract away the fiduciary obligation owed to the Company and the
Company’s stockholders under common law.

 

2.           The Company’s Responsibilities and Expenses Payable by the Company.

 

(a)          Advisor Personnel. All personnel of the Advisor, when and to the
extent engaged in providing investment advisory services hereunder, and the
compensation and routine overhead expenses of such personnel allocable to such
services, shall be provided and paid for by the Advisor and not by the Company.

 

(b)         Costs. Subject to the limitations on reimbursement of the Advisor as
set forth in Section 2(c) below, the Company, either directly or through
reimbursement to the Advisor, shall bear all other costs and expenses of its
operations and transactions, including (without limitation): expenses deemed to
be “organization and offering expenses” of the Company for purposes of Conduct
Rule 2310(a)(12) of Financial Industry Regulatory Authority, Inc. (for purposes
of this Agreement, such expenses, exclusive of commissions, the dealer manager
fee and any discounts, are hereinafter referred to as “Organization and Offering
Expenses”); corporate and organizational expenses relating to offerings of
Shares, subject to limitations included in the Agreement; the cost of
calculating the Company’s net asset value, including the cost of any third-party
valuation firms; the cost of effecting sales and repurchases of Shares and other
securities; fees payable to third parties relating to, or associated with,
making investments and valuing investments, including fees and expenses
associated with performing due diligence reviews of prospective investments;
transfer agent and custodial fees, fees and expenses associated with marketing
efforts (including attendance at investment conferences and similar events);
federal and state registration fees; federal, state and local taxes; independent
directors’ fees and expenses; brokerage commissions for the Company’s
investments; costs of proxy statements, stockholders’ reports, notices and other
filings; fidelity bond, directors and officers errors and omissions liability
insurance and other insurance premiums; direct costs such as printing, mailing,
long-distance telephone and staff costs associated with the Company’s reporting
and compliance obligations under the Investment Company Act and applicable
federal and state securities laws, including compliance with the Sarbanes-Oxley
Act; fees and expenses associated with accounting, corporate governance,
independent audits and outside legal costs; and all other expenses incurred by
the Advisor, any Sub-Advisor or the Company in connection with administering the
Company’s business, including expenses incurred by the Advisor or any
Sub-Advisor in performing administrative services for the Company, and the
reimbursement of the compensation of the Company’s chief financial officer and
chief compliance officer paid by the Advisor, to the extent they are not
controlling persons of the Advisor or any of its affiliates.

 

Notwithstanding the foregoing, the Company shall not be liable for Organization
and Offering Expenses to the extent that Organization and Offering Expenses,
together with all prior Organization and Offering Expenses, exceed 1.5% of the
aggregate gross proceeds from the Company’s offering of Shares
(the “Reimbursable O&O Expenses”).

 

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The following provisions in this Section 2(c) shall apply for only so long as
the Shares are not listed on a national securities exchange.

 

(c)         Limitations on Reimbursement of Expenses.

 

(i) In addition to the compensation paid to the Advisor pursuant to Section 3,
the Company shall reimburse the Advisor for all expenses of the Company incurred
by the Advisor as well as the actual cost of goods and services used for or by
the Company and obtained from entities not affiliated with the Advisor. The
Advisor may be reimbursed for the administrative services performed by it on
behalf of the Company; provided, however, the reimbursement shall be an amount
equal to the lesser of the Advisor’s actual cost or the amount the Company would
be required to pay third parties for the provision of comparable administrative
services in the same geographic location; and provided, further, that such costs
are reasonably allocated to the Company on the basis of assets, revenues, time
records or other method conforming with generally accepted accounting
principles. No reimbursement shall be permitted for services for which the
Advisor is entitled to compensation by way of a separate fee. Excluded from the
allowable reimbursement shall be:

 

(A) rent or depreciation, utilities, capital equipment and other costs of
administrative items of the Advisor; and

 

(B) salaries, fringe benefits, travel expenses and other administrative items
incurred or allocated to any executive officer or board member of the Advisor
(or any individual performing such services) or a holder of 10% or greater
equity interest in the Advisor (or any person having the power to direct or
cause the direction of the Advisor, whether by ownership of voting securities,
by contract or otherwise).

 

(d)          Periodic Reimbursement. Expenses incurred by the Advisor on behalf
of the Company and payable pursuant to this Section 2 shall be reimbursed no
less than monthly to the Advisor. The Advisor shall prepare a statement
documenting the expenses of the Company and the calculation of the reimbursement
and shall deliver such statement to the Company prior to full reimbursement.

 

3.           Compensation of the Advisor. The Company agrees to pay, and the
Advisor agrees to accept, as compensation for the services provided by the
Advisor hereunder, a base management fee (the “Base Management Fee”) and an
incentive fee (the “Incentive Fee”) as set forth herein. See Appendix A attached
hereto for examples of how these fees are calculated.

 

(a)         Base Management Fee. The Base Management Fee shall be calculated at
an annual rate of 2.0% of the Company’s average gross assets. The Base
Management Fee shall be payable quarterly in arrears, and shall be calculated
based on the average value of the Company’s gross assets at the end of the two
most recent completed calendar quarters. All or any part of the Base Management
Fee not taken as to any quarter shall be deferred without interest and may be
taken in such other quarter as the Advisor shall determine.

 

(b)         Incentive Fee. The Incentive Fee shall consist of two parts, as
follows:

 

(i) The first part, referred to as the “Subordinated Incentive Fee on Income,”
shall be calculated and payable quarterly in arrears based on the Company’s
“Pre-Incentive Fee Net Investment Income” for the immediately preceding quarter.
The payment of the Subordinated Incentive Fee on Income shall be subject to
payment of a preferred return to investors each quarter, expressed as a
quarterly rate of return on Adjusted Capital (as defined below) at the beginning
of the most recently completed calendar quarter, of 2.0% (8.0% annualized),
subject to a “catch up” feature (as described below).

 

 4 

 

 

For purposes of this fee, “Pre-Incentive Fee Net Investment Income” means
interest income, dividend income and any other income (including any other fees,
other than fees for providing managerial assistance, such as commitment,
origination, structuring, diligence and consulting fees or other fees that the
Company receives from portfolio companies) accrued during the calendar quarter,
minus the Company’s operating expenses for the quarter (including the Base
Management Fee, expenses payable under this Agreement and any interest expense
and dividends paid on any issued and outstanding preferred shares, but excluding
the Incentive Fee). Pre-Incentive Fee Net Investment Income includes, in the
case of investments with a deferred interest feature (such as original issue
discount, debt instruments with payment-in-kind interest and zero coupon
securities), accrued income that the Company has not yet received in cash.
Pre-Incentive Fee Net Investment Income does not include any realized capital
gains, realized capital losses or unrealized capital appreciation or
depreciation.

 

For purposes of this fee, “Adjusted Capital” shall mean cumulative gross
proceeds generated from sales of the Shares (including proceeds from the
Company’s distribution reinvestment plan) reduced for distributions from
non-liquidating dispositions of the Company’s investments paid to stockholders
and amounts paid for share repurchases pursuant to the Company’s share
repurchase program.

 

The calculation of the Subordinated Incentive Fee on Income for each quarter is
as follows:

 

(A) No Subordinated Incentive Fee on Income shall be payable to the Advisor in
any calendar quarter in which the Company’s Pre-Incentive Fee Net Investment
Income does not exceed the preferred return rate of 2.0% or 8.0% annualized
(the “Preferred Return”) on Adjusted Capital;

 

(B) 100% of the Company’s Pre-Incentive Fee Net Investment Income, if any, that
exceeds the preferred return but is less than or equal to 2.5% in any calendar
quarter (10% annualized) shall be payable to the Advisor, all or any portion of
which may be waived or deferred in the Advisor’s discretion. This portion of the
Company’s Subordinated Incentive Fee on Income is referred to as the “catch up”
and is intended to provide the Advisor with an incentive fee of 20% on all of
the Company’s Pre-Incentive Fee Net Investment Income when the Company’s
Pre-Incentive Fee Net Investment Income reaches 2.5% (10% annualized) in any
calendar quarter; and

 

(C) For any quarter in which the Company’s Pre-Incentive Fee Net Investment
Income exceeds 2.5% (10% annualized), the Subordinated Incentive Fee on Income
shall equal 20% of the amount of the Company’s Pre-Incentive Fee Net Investment
Income, as the Preferred Return and catch up will have been achieved.

 

(ii) The second part of the Incentive Fee, referred to as the “Incentive Fee on
Capital Gains,” shall be an incentive fee on capital gains earned on liquidated
investments from the portfolio and payable in arrears as of the end of each
calendar year (or upon termination of the investment advisory Agreement). This
fee shall equal 20.0% of the Company’s incentive fee capital gains, which shall
equal the Company’s realized capital gains on a cumulative basis from inception,
calculated as of the end of the applicable period, computed net of all realized
capital losses and unrealized capital depreciation on a cumulative basis, less
the aggregate amount of any previously paid capital gain incentive fees.

 

(c)         Waiver or Deferral of Fees.

 

The Advisor shall have the right to elect to temporarily or permanently waive or
defer all or a portion of the Base Management Fee or Incentive Fee that would
otherwise be paid to it. Prior to the payment of any fee to the Advisor, the
Company shall obtain written instructions from the Advisor with respect to any
waiver or deferral of any portion of such fees. Any portion of a deferred fee
payable to the Advisor and not paid over to the Advisor with respect to any
month, calendar quarter or year shall be deferred without interest and may be
paid over in any such other month prior to the occurrence of termination of this
Agreement, as the Advisor may determine upon written notice to the Company. Any
of the fees payable to the Advisor under this Agreement for any partial month or
calendar quarter shall be appropriately prorated.

 

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4.           Covenants of the Advisor.

 

(a)         Advisor Status. The Advisor covenants that it will be registered as
an investment Advisor under the Advisers Act as of the date the Company
commences investment operations and will maintain such registration. The Advisor
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.

 

The following provisions in this Section 4 shall apply for only so long as the
Shares are not listed on a national securities exchange.

 

(b)         Reports to Stockholders. The Advisor shall prepare or shall cause to
be prepared and distributed to the Company’s stockholders during each year the
following reports of the Company (either included in a periodic report filed
with the SEC or distributed in a separate report):

 

(i) Quarterly Reports. Within 60 days of the end of each calendar quarter, a
report containing the same financial information contained in the Company’s
Quarterly Report on Form 10-Q filed by the Corporation under the Securities
Exchange Act of 1934, as amended.

 

(ii) Annual Report. Within 120 days after the end of the Company’s fiscal year,
an annual report containing:

 

(A) A balance sheet as of the end of each fiscal year and statements of income,
equity and cash flow, for the year then ended, all of which shall be prepared in
accordance with generally accepted accounting principles and accompanied by an
auditor’s report containing an opinion of an independent certified public
accountant;

 

(B) A report of the activities of the Company during the period covered by the
report;

 

(C) Where forecasts have been provided to the Company’s stockholders, a table
comparing the forecasts previously provided with the actual results during the
period covered by the report; and

 

(D) A report setting forth distributions by the Company for the period covered
thereby and separately identifying distributions from (a) cash flow from
operations during the period, (b) cash flow from operations during a prior
period which have been held as reserves and (c) proceeds from disposition of the
Company’s assets.

 

(iii) Previous Reimbursement Reports. The Advisor shall prepare or shall cause
to be prepared a report, prepared in accordance with the American Institute of
Certified Public Accountants United States Auditing Standards relating to
special reports, and distributed to stockholders not less than annually,
containing an itemized list of the costs reimbursed to the Advisor pursuant to
Section 2(c) for the previous fiscal year. The special report shall at a minimum
provide:

 

(A) A review of the time records of individual employees, the costs of whose
services were reimbursed; and

 

(B) A review of the specific nature of the work performed by each such employee.

 

(iv) Proposed Reimbursement Reports. The Advisor shall prepare or shall cause to
be prepared a report containing an itemized estimate of all proposed expenses
for which it shall receive reimbursements pursuant to Section 2(c) for the next
fiscal year, together with a breakdown by year of such expenses reimbursed in
each of the last five public programs formed by the Advisor.

 

(c)         Reports to Administrators. The Advisor shall, upon written request
of any Administrator, submit any of the reports and statements to be prepared
and distributed by it pursuant to this Section 4 to such Administrator.

 

 6 

 

 

(d)         Reserves. In performing its duties hereunder, the Advisor shall
cause the Company to provide for adequate reserves for normal replacements and
contingencies (but not for payment of fees payable to the Advisor hereunder) by
causing the Company to retain a reasonable percentage of proceeds from offerings
and revenues.

 

(e)         Recommendations Regarding Reviews. From time to time and not less
than quarterly, the Advisor must review the Company’s accounts to determine
whether cash distributions are appropriate. The Company may, subject to
authorization by the Board, distribute pro rata to its stockholders funds
received by the Company which the Advisor deems unnecessary to retain in the
Company.

 

(f)          Temporary Investments. The Advisor shall, in its sole discretion,
temporarily place proceeds from offerings by the Company into short-term, highly
liquid investments which, in its reasonable judgment, afford appropriate safety
of principal during such time as it is determining the composition and
allocation of the portfolio of the Company and the nature, timing and
implementation of any changes thereto pursuant to Section 1(b); provided
however, that the Advisor shall be under no fiduciary obligation to select any
such short-term, highly-liquid investment based solely on any yield or return of
such investment. The Advisor shall cause any proceeds of the offering of the
Company’s securities not committed for investment within the later of two years
from the date of effectiveness of the Registration Statement or one year from
termination of the Company’s offering, unless a longer period is permitted by
the applicable Administrator, to be paid as a distribution to the stockholders
of the Company as a return of capital without deduction of Front End Fees (as
defined below).

 

5.           Brokerage Commissions; Limitations on Front End Fees; Period of
Offering; Assessments.

 

(a)         Brokerage Commissions. The Advisor is hereby authorized, to the
fullest extent now or hereafter permitted by law, to cause the Company to pay a
member of a national securities exchange, broker or dealer an amount of
commission for effecting a securities transaction in excess of the amount of
commission another member of such exchange, broker or dealer would have charged
for effecting that transaction, if the Advisor determines in good faith, taking
into account such factors as price (including the applicable brokerage
commission or dealer spread), size of order, difficulty of execution and
operational facilities of the firm and the firm’s risk and skill in positioning
blocks of securities, that such amount of commission is reasonable in relation
to the value of the brokerage and/or research services provided by such member,
broker or dealer, viewed in terms of either that particular transaction or its
overall responsibilities with respect to the Company’s portfolio, and
constitutes the best net results for the Company.

 

The following provisions in this Section 5 shall apply for only so long as the
Shares are not listed on a national securities exchange.

 

(b)         Limitations. Notwithstanding anything herein to the contrary:

 

(i) All fees and expenses paid by any party for any services rendered to
organize the Company and to acquire assets for the Company (“Front End Fees”)
shall be reasonable and shall not exceed 15% of the gross offering proceeds,
regardless of the source of payment. Any reimbursement to the Advisor or any
other person for deferred organizational and offering expenses, including any
interest thereon, if any, will be included within this 15% limitation.

 

(ii) The Advisor shall commit at least 82% of the gross offering proceeds toward
the investment or reinvestment of assets and reserves as set forth in Section
4(d) on behalf of the Company. The remaining proceeds may be used to pay Front
End Fees.

 

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6.           Other Activities of the Advisor.

 

The services of the Advisor to the Company are not exclusive, and the Advisor
may engage in any other business or render similar or different services to
others including, without limitation, the direct or indirect sponsorship or
management of other investment based accounts or commingled pools of capital,
however structured, having investment objectives similar to those of the
Company, so long as its services to the Company hereunder are not impaired
thereby, and nothing in this Agreement shall limit or restrict the right of any
manager, partner, member (including its members and the owners of its members),
officer or employee of the Advisor to engage in any other business or to devote
his or her time and attention in part to any other business, whether of a
similar or dissimilar nature, or to receive any fees or compensation in
connection therewith (including fees for serving as a director of, or providing
consulting services to, one or more of the Company’s portfolio companies,
subject to applicable law). The Advisor assumes no responsibility under this
Agreement other than to render the services called for hereunder. It is
understood that directors, officers, employees and stockholders of the Company
are or may become interested in the Advisor and its affiliates, as directors,
officers, employees, partners, stockholders, members, managers or otherwise, and
that the Advisor and directors, officers, employees, partners, stockholders,
members and managers of the Advisor and its affiliates are or may become
similarly interested in the Company as stockholders or otherwise.

 

7.           Responsibility of Dual Directors, Officers and/or Employees. If any
person who is a manager, partner, member, officer or employee of the Advisor is
or becomes a director, officer or employee of the Company and acts as such in
any business of the Company, then such manager, partner, member, officer or
employee of the Advisor shall be deemed to be acting in such capacity solely for
the Company, and not as a manager, partner, member, officer or employee of the
Advisor or under the control or direction of the Advisor, even if paid by the
Advisor.

 

8.            Indemnification; Limitation of Liability.

 

(a)         Indemnification. The Advisor (and its officers, managers, partners,
members (and their members, including the owners of their members), agents,
employees, controlling persons and any other person or entity affiliated with
the Advisor) shall not be liable to the Company for any action taken or omitted
to be taken by the Advisor or such other person in connection with the
performance of any of its duties or obligations under this Agreement or
otherwise as an investment Advisor of the Company (except to the extent
specified in Section 36(b) of the Investment Company Act concerning loss
resulting from a breach of fiduciary duty (as the same is finally determined by
judicial proceedings)) with respect to the receipt of compensation for services,
and the Company shall indemnify, defend and protect the Advisor (and its
officers, managers, partners, members (and their members, including the owners
of their members), agents, employees, controlling persons and any other person
or entity affiliated with the Advisor, each of whom shall be deemed a third
party beneficiary hereof (collectively, the “Indemnified Parties”)) and hold
them harmless from and against all damages, liabilities, costs and expenses
(including reasonable attorneys’ fees and amounts reasonably paid in settlement)
incurred by the Indemnified Parties in or by reason of any pending, threatened
or completed action, suit, investigation or other proceeding (including an
action or suit by or in the right of the Company or its stockholders) arising
out of or otherwise based upon the performance of any of the Advisor’s duties or
obligations under this Agreement or otherwise as an investment Advisor of the
Company, to the extent such damages, liabilities, costs and expenses are not
fully reimbursed by insurance, and to the extent that such indemnification would
not be inconsistent with the laws of the State of Maryland, the Articles or the
provisions of Section II.G of the Omnibus Guidelines published by the North
American Securities Administrators Association on March 29, 1992, as amended
from time to time.

 

The following provisions in this Section 8 shall apply for only so long as the
Shares are not listed on a national securities exchange.

 

(b)         Limitations on Indemnification. Notwithstanding Section 8(a) to the
contrary, the Company shall not provide for indemnification of the Indemnified
Parties for any liability or loss suffered by the Indemnified Parties, nor shall
the Company provide that any of the Indemnified Parties be held harmless for any
loss or liability suffered by the Company, unless all of the following
conditions are met:

 

(i) the Indemnified Party has determined, in good faith, that the course of
conduct which caused the loss or liability was in the best interests of the
Company;

 

(ii) the Indemnified Party was acting on behalf of or performing services for
the Company;

 

(iii) such liability or loss was not the result of negligence or misconduct by
the Indemnified Party; and

 

(iv) such indemnification or agreement to hold harmless is recoverable only out
of the Company’s net assets and not from stockholders.

 

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Furthermore, the Indemnified Party shall not be indemnified for any losses,
liabilities or expenses arising from or out of an alleged violation of federal
or state securities laws unless one or more of the following conditions are met:

 

(i) there has been a successful adjudication on the merits of each count
involving alleged securities law violations;

 

(ii) such claims have been dismissed with prejudice on the merits by a court of
competent jurisdiction; or

 

(iii) a court of competent jurisdiction approves a settlement of the claims
against a particular indemnitee and finds that indemnification of the settlement
and related costs should be made, and the court of law considering the request
for indemnification has been advised of the position of the SEC and the
published position of any state securities regulatory authority in which
securities of the Company were offered or sold as to indemnification for
violations of securities laws.

 

(c)         Advancement of Funds. The Company shall be permitted to advance
funds to the Indemnified Party for legal expenses and other costs incurred as a
result of any legal action for which indemnification is being sought and will do
so if:

 

(i) the proceeding relates to acts or omissions with respect to the performance
of duties or services on behalf of the Company;

 

(ii) the Indemnified Party provides the Company with written affirmation of his
or her good faith belief that the standard of conduct necessary for
indemnification by the Company has been met;

 

(iii) the legal proceeding was initiated by a third party who is not a
stockholder or, if by a stockholder of the Company acting in his or her capacity
as such, a court of competent jurisdiction approves such advancement; and

 

(iv) the Indemnified Party provides the Company with a written agreement to
repay the amount paid or reimbursed by the Company, together with the applicable
legal rate of interest thereon, in cases in which such Indemnified Party is
found not to be entitled to indemnification.

 

9.           Effectiveness, Duration and Termination of Agreement.

 

(a)         Term and Effectiveness. This Agreement shall become effective as of
the date that the Company meets the minimum offering requirement, as such term
is defined in the prospectus contained in the Registration Statement as declared
effective by the SEC. This Agreement shall remain in effect for two years from
the date the Company meets such minimum offering requirement, and thereafter
shall continue automatically for successive one-year periods, provided that such
continuance is specifically approved at least annually by (i) the vote of the
Board, or by the vote of a majority of the outstanding voting securities of the
Company and (ii) the vote of a majority of the Company’s directors who are not
parties to this Agreement or “interested persons” (as such term is defined in
Section 2(a)(19) of the Investment Company Act) of any such party (“Independent
Directors”), in accordance with the requirements of the Investment Company Act.

 

(b)         Termination. This Agreement may be terminated at any time, without
the payment of any penalty, (i) by the Company upon 60 days’ prior written
notice to the Advisor, (A) upon the vote of a majority of the outstanding voting
securities of the Company or (B) by the vote of the Company’s Independent
Directors, or (ii) by the Advisor upon 120 days’ prior written notice to the
Company. This Agreement shall automatically terminate in the event of its
“assignment” (as such term is defined for purposes of Section 15(a)(4) of the
Investment Company Act). The provisions of Section 8 shall remain in full force
and effect, and the Advisor shall remain entitled to the benefits thereof,
notwithstanding any termination of this Agreement.

 

 9 

 

 

(c)         Payments to and Duties of Advisor Upon Termination.

 

(i) After the termination of this Agreement, the Advisor shall not be entitled
to compensation for further services provided hereunder, except that it shall be
entitled to receive from the Company within 30 days after the effective date of
such termination all unpaid reimbursements and all earned but unpaid fees
payable to the Advisor prior to termination of this Agreement.

 

(ii) The Advisor shall promptly upon termination:

 

(A) Deliver to the Board a full accounting, including a statement showing all
payments collected by it and a statement of all money held by it, covering the
period following the date of the last accounting furnished to the Board;

 

(B) Deliver to the Board all assets and documents of the Company then in custody
of the Advisor; and

 

(C) Cooperate with the Company to provide an orderly management transition.

 

The following provisions in this Section 9 shall apply for only so long as the
Shares are not listed on a national securities exchange.

 

(d)         Other Matters. Without the approval of holders of a majority of the
Shares entitled to vote on the matter, the Advisor shall not: (i) amend this
Agreement except for amendments that do not adversely affect the interests of
the stockholders; (ii) voluntarily withdraw as the Advisor unless such
withdrawal would not affect the tax status of the Company and would not
materially adversely affect the stockholders; (iii) appoint a new Advisor;
(iv) sell all or substantially all of the Company’s assets other than in the
ordinary course of the Company’s business; or (v) cause the merger or other
reorganization of the Company. In the event that the Advisor should withdraw
pursuant to (ii) above, the withdrawing Advisor shall pay all expenses incurred
as a result of its withdrawal. The Company may terminate the Advisor’s interest
in the Company’s revenues, expenses, income, losses, distributions and capital
by payment of an amount equal to the then present fair market value of the
terminated Advisor’s interest, determined by agreement of the terminated Advisor
and the Company. If the Company and the Advisor cannot agree upon such amount,
then such amount will be determined in accordance with the then current rules of
the American Arbitration Association. The expenses of such arbitration shall be
borne equally by the terminated Advisor and the Company. The method of payment
to the terminated Advisor must be fair and must protect the solvency and
liquidity of the Company.

 

10.          Conflicts of Interests and Prohibited Activities.

 

This Section 10 shall apply for only so long as the Shares are not listed on a
national securities exchange.

 

(a)          No Exclusive Agreement. The Advisor is not hereby granted or
entitled to an exclusive right to sell or exclusive employment to sell assets
for the Company.

 

(b)         Rebates, Kickbacks and Reciprocal Arrangements.

 

(i) The Advisor agrees that it shall not (A) receive or accept any rebate,
give-up or similar arrangement that is prohibited under applicable federal or
state securities laws, (B) participate in any reciprocal business arrangement
that would circumvent provisions of applicable federal or state securities laws
governing conflicts of interest or investment restrictions or (C) enter into any
agreement, arrangement or understanding that would circumvent the restrictions
against dealing with affiliates or promoters under applicable federal or state
securities laws.

 

(ii) The Advisor agrees that it shall not directly or indirectly pay or award
any fees or commissions or other compensation to any person or entity engaged to
sell the Shares or give investment advice to a potential stockholder; provided,
however, that this subsection shall not prohibit the payment to a registered
broker-dealer of sales commissions for selling or distributing Shares.

 

 10 

 

 

(c)          Commingling. The Advisor covenants that it shall not permit or
cause to be permitted the Company’s funds to be commingled with the corporations
of any other entity. Nothing in this Section 10(c) shall prohibit the Advisor
from establishing a master fiduciary account pursuant to which separate
sub-trust accounts are established for the benefit of affiliated programs,
provided that the Company’s funds are protected from the claims of other
programs and creditors of such programs.

 

11.          Notices. Any notice under this Agreement shall be given in writing,
addressed and delivered or mailed, postage prepaid, to the other party at its
principal office.

 

12.          Amendments. This Agreement may be amended in writing by mutual
consent of the parties hereto, subject to the provisions of the Investment
Company Act and the Articles.

 

13.          Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original copy and all of which together shall
constitute one and the same instrument binding on all parties hereto,
notwithstanding that all parties shall not have signed the same counterpart.

 

14.          Entire Agreement; Governing Law. This Agreement contains the entire
agreement of the parties and supersedes all prior agreements, understandings and
arrangements with respect to the subject matter hereof. Notwithstanding the
place where this Agreement may be executed by any of the parties hereto, this
Agreement shall be construed in accordance with the laws of the State of New
York. For so long as the Company is regulated as a BDC under the Investment
Company Act, this Agreement shall also be construed in accordance with the
applicable provisions of the Investment Company Act. In such case, to the extent
the applicable laws of the State of New York, or any of the provisions herein,
conflict with the provisions of the Investment Company Act, the latter shall
control.

 

 11 

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed on the date above written.

 

  Company:       Terra Income Fund 6, Inc.

 

  By: /s/ Vikram S. Uppal   Name: Vikram S. Uppal   Title: Chief Executive
Officer

 

  ADVISOR:       Terra Income Advisors, LLC

 

  By: /s/ Vikram S. Uppal   Name: Vikram S. Uppal   Title: Chief Executive
Officer

 

[Signature page to Investment Advisory and Administrative Services Agreement]

 

 

 

 

Appendix A

 

Example 1: Subordinated Incentive Fee on Income for Each Calendar Quarter

 

Scenario 1

 

Assumptions

 

Investment income (including interest, dividends, fees, etc.) = 1.25%

Hurdle rate(1) = 2.0%

Base management fee(2) = 0.5%

Other expenses (legal, accounting, custodian, transfer agent, etc.)(3) = 0.2%

Pre-incentive fee net investment income

(investment income – (base management fee + other expenses)) = 0.55%

 

Pre-incentive fee net investment income does not exceed the hurdle rate;
therefore, there is no subordinated incentive fee on income payable.

 

Scenario 2

 

Assumptions

 

Investment income (including interest, dividends, fees, etc.) = 2.9%

Hurdle rate(1) = 2.0%

Base management fee(2) = 0.5%

Other expenses (legal, accounting, custodian, transfer agent, etc.)(3) = 0.2%

Pre-incentive fee net investment income

(investment income – (base management fee + other expenses)) = 2.2%

 

Subordinated incentive fee on income = 100% × pre-incentive fee net investment
income (subject to “catch-up”)(4)

 

Catch up = 100% x (2.2% – 2.0%)   = 0.2%

 

Pre-incentive fee net investment income exceeds the hurdle rate, but does not
fully satisfy the “catch-up” provision; therefore, the subordinated incentive
fee on income is 0.2%.

 

Scenario 3

 

Assumptions

 

Investment income (including interest, dividends, fees, etc.) = 3.5%

Hurdle rate(1) = 2.0%

Base management fee(2) = 0.5%

Other expenses (legal, accounting, custodian, transfer agent, etc.)(3) = 0.2%

Pre-incentive fee net investment income

(investment income – (base management fee + other expenses)) = 2.8%

 

Catch up = 100% × pre-incentive fee net investment income (subject to
“catch-up”)(4)

 

Subordinated incentive fee on income = 100% × “catch-up” + (20.0% ×
(pre-incentive fee net investment income – 2.5%))

 

Catch up   = 2.5% – 2.0%     = 0.50%

 

Subordinated incentive fee on income = (100% × 0.5%) + (20.0% × (2.8% – 2.5%))

 

= 0.5% + (20% × 0.3%) = 0.5% + 0.06% = 0.56%

 

 A-1 

 

 

Pre-incentive fee net investment income exceeds the hurdle rate and fully
satisfies the “catch-up” provision, therefore the subordinated incentive fee on
income is 0.56%.

 

(1) Represents 8.0% annualized hurdle rate.

 

(2) Represents 2.0% annualized base management fee on average gross assets.
Examples assume assets are equal to adjusted capital.

 

(3) Excludes organizational and offering expenses.

 

(4) The “catch-up” provision is intended to provide our advisor with an
incentive fee of 20.0% on all pre-incentive fee net investment income when our
net investment income exceeds 2.5% in any calendar quarter.

 

Example 2: Incentive Fee on Capital Gains

Scenario 1

 

Assumptions

 

Year 1: $20 million investment made in Company A (“Investment A”), and $30
million investment made in Company B (“Investment B”)

 

Year 2: Investment A sold for $50 million and fair market value (“FMV”) of
Investment B determined to be $32 million

 

Year 3: FMV of Investment B determined to be $25 million

 

Year 4: Investment B sold for $31 million

 

The incentive fee on capital gains would be:

 

Year 1: None

 

Year 2: Incentive fee on capital gains of $6 million ($30 million realized
capital gains on sale of Investment A multiplied by 20.0%)

 

Year 3: None à $5 million (20.0% multiplied by ($30 million cumulative realized
capital gains less $5 million cumulative unrealized capital depreciation)) less
$6 million (previous capital gains fee paid in Year 2)

 

Year 4: Incentive fee on capital gains of $200,000 à $6.2 million ($31 million
cumulative realized capital gains multiplied by 20.0%) less $6 million
(incentive fee on capital gains taken in Year 2)

 

Scenario 2

 

Assumptions

 

Year 1: $20 million investment made in Company A (“Investment A”), $30 million
investment made in Company B (“Investment B”) and $25 million investment made in
Company C (“Investment C”)

 

Year 2: Investment A sold for $50 million, FMV of Investment B determined to be
$25 million and FMV of Investment C determined to be $25 million

 

Year 3: FMV of Investment B determined to be $27 million and Investment C sold
for $30 million

 

Year 4: FMV of Investment B determined to be $35 million

 

Year 5: Investment B sold for $20 million

 

The incentive fee on capital gains would be:

 

Year 1: None

 

Year 2: Incentive fee on capital gains of $5 million à 20.0% multiplied by $25
million ($30 million realized capital gains on Investment A less unrealized
capital depreciation on Investment B)

 

 A-2 

 

 

Year 3: Incentive fee on capital gains of $1.4 million à $6.4 million (20.0%
multiplied by $32 million ($35 million cumulative realized capital gains less $3
million unrealized capital depreciation)) less $5 million incentive fee on
capital gains received in Year 2

 

Year 4: None

 

Year 5: None à $5 million (20.0% multiplied by $25 million (cumulative realized
capital gains of $35 million less realized capital losses of $10 million)) less
$6.4 million cumulative incentive fee on capital gains paid in Year 2 and Year 3

 

* The returns shown are for illustrative purposes only. No incentive fee is
payable to Terra Income Advisors in any calendar quarter in which our
pre-incentive fee net investment income does not exceed the hurdle rate.
Positive returns are shown to demonstrate the fee structure and there is no
guarantee that positive returns will be realized. Actual returns may vary from
those shown in the examples above.

 

 A-3