AMENDED AND RESTATED INVESTMENT
ADVISORY
AND MANAGEMENT AGREEMENT
BETWEEN
MVC CAPITAL, INC.
AND
THE TOKARZ GROUP ADVISERS LLC
Agreement made
this 14th day of April 2009, by and between MVC Capital, Inc., a
Delaware corporation (the “Fund”), and The Tokarz Group
Advisers LLC, a Delaware limited liability company (the
“Adviser”).
Whereas, the Fund
is a closed-end management investment company that has elected to
be regulated as a business development company (“BDC”)
under the Investment Company Act of 1940 (the “Investment
Company Act”); and
Whereas, the
Adviser is an investment adviser that has registered under the
Investment Advisers Act of 1940, as amended (the “Advisers
Act”); and
Whereas, on
October 31, 2006, the Fund and the Adviser entered into an
Investment Advisory and Management Agreement (the “Original
Agreement”), pursuant to which the Adviser agreed to furnish
investment advisory services to the Fund, that they now wish to
amend and restate in its entirety; and
Now, therefore, in
consideration of the premises and for other good and valuable
consideration, the parties hereby agree that the Original Agreement
is hereby amended and restated in its entirety to read as
follows:
1. Duties of
the Adviser .
(a) The
Fund hereby employs the Adviser to act as the investment adviser to
the Fund and to manage the investment and reinvestment of the
assets of the Fund, subject to the supervision of the Board of
Directors of the Fund (the “Board”), for the period and
upon the terms herein set forth: (i) in accordance with the
investment objectives, policies and restrictions that are
determined by the Board from time to time and disclosed to the
Adviser, which objectives, policies and restrictions shall
initially be those set forth in the Fund’s Registration
Statement on Form N-2, filed with the Securities and Exchange
Commission (the “SEC”) on January 18, 2008 (the
“Registration Statement”); (ii) in accordance with
the Investment Company Act; and (iii) during the term of this
Agreement in accordance with all other applicable federal and state
laws, rules and regulations, and the Fund’s charter and
by-laws. References in this Agreement to the “Fund”
shall also include any wholly-owned subsidiary of the Fund, where
appropriate and as applicable.
Without
limiting the generality of the foregoing, the Adviser shall, during
the term and subject to the provisions of this Agreement:
(i) determine the composition of the portfolio of the Fund,
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 Fund; (iii)
close and monitor the Fund’s investments; (iv) determine
the securities and other assets that the Fund will purchase,
retain, or sell; (v) perform due diligence on prospective
portfolio companies; (vi) provide the Fund with such other
investment advisory, research and related services as the Fund may,
from time to time, reasonably require for the investment of its
funds; (vii) oversee the performance of the Fund’s
outside service providers, including the Fund’s
administrator, transfer agent and custodian; (viii) oversee
compliance by the Fund with U.S. federal, state and other
applicable laws and regulations; (ix) provide the Fund with office
space;
and
(x) pay the salaries, fees and expenses of such of the
Fund’s directors, officers or employees who are directors,
officers, principals or employees of the Adviser or any of its
affiliates, except that the Fund will reimburse the Adviser for
(a) its allocable portion of the compensation payable to its
chief financial officer (“CFO”), chief compliance
officer (“CCO”) and secretary in an amount not to
exceed $200,000 per year, in the aggregate, (b) travel
expenses, or an appropriate portion of such expenses (in the event
such expenses are not otherwise reimbursed by a portfolio company
or third party), that relate to attendance at meetings of the Board
or any committees thereof and the Fund’s portfolio companies
or performing other managerial assistance for portfolio companies
and (c) unreimbursed travel and other related out-of-pocket
expenses in connection with the sourcing of investments for the
Fund as set forth in Section 2(xviii). The Adviser may
delegate any of the foregoing duties to a third party with the
consent of the Board. The Adviser shall have the power and
authority on behalf of the Fund to effectuate its investment
decisions for the Fund, including the execution and delivery of all
documents relating to the Fund’s investments and the placing
of orders for other purchase or sale transactions on behalf of the
Fund. In the event that the Fund, in consultation with the Adviser,
determines to incur debt financing, the Adviser will arrange for
such financing on the Fund’s behalf, subject to the approval
of the Board. Furthermore, the Fund shall consult with the Adviser
prior to issuing any preferred stock. The Adviser will offer, and
provide where requested, on the Fund’s behalf and/or on
behalf of a subsidiary of the Fund, significant managerial
assistance to the issuers of securities in which the Fund is
invested. The Adviser shall make available to the Fund individuals
to serve as directors and/or officers of the Fund, as deemed
necessary by the Board.
(b) The
Adviser shall manage the Fund’s day-to-day operations and
oversee the administration, recordkeeping and compliance functions
of the Fund and/or third parties performing such functions for the
Fund. Without limiting the generality of the foregoing, the Adviser
specifically shall be responsible for overseeing: (i) the
preparation of periodic financial statements; (ii) the
preparation of financial and accounting reports for presentation to
the Fund’s Board and for stockholders and governmental
agencies; (iii) the preparation and filing of the Fund’s
tax returns (and those of any wholly-owned subsidiary involved with
the Fund’s operations); (iv) the preparation and
providing of such reports and analyses to the Fund’s Board
and stockholders as may from time to time be considered necessary
or appropriate by the Fund’s Board; (v) the arrangement
of the payment of the Fund’s expenses and the performance of
administrative and professional services rendered to the Fund by
others; (vi) the preparation of any proxy statements and
arranging and conducting meetings of stockholders of the Fund;
(vii) the procurement of insurance for the Fund, its
subsidiaries and/or its officers and directors, as directed by the
Board; and (viii) such other operational, administrative and
regulatory compliance duties as shall from time to time arise as a
result of the Fund’s operations and investing
activities.
(c) The
Adviser hereby accepts such employment and agrees during the term
hereof to render the services described herein for the compensation
provided herein. The parties acknowledge and agree that, subject to
the approval of the directors who are not “interested
persons” (as defined under the 1940 Act) of the Fund and who
constitute a majority of the Board (the “Independent
Board”), the Fund may retain the Adviser, under an
arrangement separate from this Agreement (a “Separate
Agreement”), pursuant to which the Adviser would agree to
furnish portfolio management or other management services to an
investment vehicle other than the Fund ( e.g. , a private
equity fund, BDC or managed account of an operating company) where
that investment vehicle is comprised substantially of assets other
than the Fund’s assets (a “Third-Party Vehicle”).
Notwithstanding anything to the contrary in this Agreement, the
terms and obligations under this Agreement shall not cover the
Adviser’s services rendered to a Third-Party Vehicle covered
under a Separate Agreement.
(d) Subject
to the requirements of the Investment Company Act, the Adviser is
hereby authorized to enter into one or more sub-advisory agreements
with other investment advisers (each, a “Sub-Adviser”)
pursuant to which the Adviser may obtain the services of the
Sub-Adviser(s) to assist the
Adviser in
providing the investment advisory services ( i.e. , the
making of investment recommendations or decisions for the Fund)
required to be provided by the Adviser under Section 1(a) of this
Agreement. Specifically, the Adviser may retain a Sub-Adviser to
recommend specific securities or other investments based upon the
Fund’s investment objectives and policies. The Adviser, and
not the Fund, shall be responsible for any compensation payable to
any Sub-Adviser. Any sub-advisory agreement entered into by the
Adviser shall be in accordance with the requirements of the
Investment Company Act and other applicable federal and state law.
Nothing in this subsection (d) will obligate the Adviser to
pay any expenses that are the expenses of the Fund under
Section 2.
(e) The
Adviser, and any Sub-Adviser, shall for all purposes herein
provided each 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 Fund in any way or otherwise be deemed
an agent of the Fund.
(f) The
Adviser 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 Fund and shall
specifically maintain all books and records with respect to the
Fund’s portfolio transactions and shall render to the Board
such periodic and special reports as the Board may reasonably
request. The Adviser agrees that all records that it maintains for
the Fund are the property of the Fund and will surrender promptly
to the Fund any such records upon the Fund’s request,
provided that the Adviser may retain a copy of such records. Upon
termination of this Agreement, the Adviser shall have no further
obligations under this Section 1(f).
(g) Prior
to the Effective Date (as defined in Section 10 below), the
Adviser shall adopt and implement written policies and procedures
reasonably designed to prevent its violation of the Federal
Securities laws. Also prior to the Effective Date, the Adviser
shall have provided to the Fund, and shall provide the Fund at such
times in the future as the Fund shall reasonably request, a copy of
such policies and procedures (and any amendments thereto) and a
report of such policies and procedures. Such report shall be of
sufficient scope and in sufficient detail, as may reasonably be
required to comply with Rule 38a-1 under the Investment
Company Act (“Rule 38a-1”) and to provide
reasonable assurance that any material inadequacies would be
disclosed by such examination, and, if there are no such
inadequacies, the report shall so state.
2.
Fund’s Responsibilities and Expenses Payable by the
Fund .
All
investment professionals of the Adviser and its staff, when and to
the extent engaged in providing services required to be provided by
the Adviser under Section 1(a) and (b), and the compensation and
routine overhead expenses of such personnel allocable to such
services, will be provided and paid for by the Adviser and not by
the Fund, except that costs or expenses relating specifically to
items identified in the next sentence shall be borne by the Fund,
as appropriate. The Fund will bear all costs and expenses of its
operations and transactions, including, without limitation, those
relating to: (i) the cost and expenses of any independent
valuation firm; (ii) expenses incurred by the Adviser payable to
third parties, including agents, consultants or other advisors, in
monitoring financial and legal affairs for the Fund and in
monitoring the Fund’s investments and performing due
diligence on its prospective portfolio companies, provided,
however , the retention by the Adviser of any third party to
perform such services shall require the advance approval of the
Board (which approval shall not be unreasonably withheld) if the
fees for such services are expected to exceed $30,000; once the
third party is approved any expenditure to such third party will
not require additional approval from the Board; (iii) interest
payable on debt and other direct borrowing costs, if any, incurred
to finance the Fund’s investments or to maintain its tax
status; (iv) offerings of the Fund’s common stock and
other securities; (v) investment advisory and management fees;
(vi) fees and payments due under any administration agreement
between the Fund and its administrator; (vii) transfer agent
and custodial fees; (viii) federal
and state
registration fees; (ix) all costs of registration and listing
the Fund’s shares on any securities exchange;
(x) federal, state and local taxes; (xi) independent
directors’ fees and expenses; (xii) costs of preparing
and filing reports or other documents required by governmental
bodies (including the SEC); (xiii) costs of any reports, proxy
statements or other notices to stockholders, including printing and
mailing costs; (xiv) the cost of the Fund’s fidelity
bond, directors and officers/errors and omissions liability
insurance, and any other insurance premiums; (xv) direct costs
and expenses of administration, including printing, mailing, long
distance telephone, copying, independent auditors and outside legal
costs; (xvi) the costs and expenses associated with the
establishment of an SPV (as defined in Section 3(c) below);
(xvii) the allocable portion of the cost (excluding office
space) of the Fund’s CFO, CCO and secretary (subject to the
limit set forth in Section 1(a)); (xviii) subject to a
cap of $150,000 in any fiscal year of the Fund, fifty percent of
the unreimbursed travel and other related ( e.g. , meals)
out-of-pocket expenses (subject to item (ii) above) incurred
by the Adviser in sourcing investments for the Fund; provided
that , if the investment is sourced for multiple clients of the
Adviser, then the Fund shall only reimburse fifty percent of its
allocable pro rata portion of such expenses; and (xix) all
other expenses incurred by the Fund in connection with
administering the Fund’s business (including travel and other
out-of-pocket expenses (subject to item (ii) above) incurred
in providing significant managerial assistance to a portfolio
company). Additionally, any unsatisfied payment obligation to the
Adviser of a wholly-owned subsidiary of the Fund, which arises
under this Agreement, shall be the sole responsibility of the Fund
and not the subsidiary, and such unsatisfied payments are
specifically acknowledged as neither loans nor capital
contributions to the subsidiary, and the Fund will not seek
reimbursement from the subsidiary of such unsatisfied payments.
Notwithstanding the foregoing, absent the consent of the Board, any
fees or income earned, on the Fund’s behalf, by any officer,
director, employee or agent of the Adviser in connection with the
monitoring or closing of an investment or disposition by the Fund
or for providing managerial assistance to a portfolio company
(which includes, for example, service on the board of directors of
a portfolio company but does not include the Adviser’s
furnishing of portfolio management or other management services to
a Third-Party Vehicle) shall inure to the Fund.
3.
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 hereinafter set
forth. The Fund shall make any payments due hereunder to the
Adviser or to the Adviser’s designee as the Adviser may
otherwise direct. To the extent permitted by applicable law, the
Adviser may elect, or the Fund may adopt a deferred compensation
plan pursuant to which the Adviser may elect, to defer all or a
portion of its fees hereunder for a specified period of
time.
(a) The
Base Management Fee shall be 2.00% per annum of the Fund’s
total assets (excluding: (i) cash, (ii) the value of any
investment in a Third-Party Vehicle covered by a Separate Agreement
and (iii) the value of any investment by the Fund not made in
a portfolio company (“Non-Eligible Assets”); but
including assets purchased with borrowed funds that are not
Non-Eligible Assets). The Base Management Fee will be payable
quarterly in arrears. The Base Management Fee will be calculated
based on the value of the Fund’s total assets (excluding
Non-Eligible Assets, but including assets purchased with borrowed
funds that are not Non-Eligible Assets) at the end of the most
recently completed fiscal quarter. Base Management Fees for any
partial fiscal quarter will be appropriately pro rated.
(b) The
Incentive Fee shall consist of two parts, as follows:
(i) One
part will be calculated and payable quarterly in arrears based on
the Pre-Incentive Fee net operating income for the fiscal quarter
(the “Income Incentive Fee”).
“Pre-Incentive
Fee net
operating income” means interest income, dividend income and
any other income (including any other fees paid to the Fund such as
directors’, commitment, origination, structuring, diligence
and consulting fees or other fees that the Fund receives from
portfolio companies) accrued by the Fund during the fiscal quarter,
minus the Fund’s operating expenses for the fiscal quarter
(including the Base Management Fee and any interest expense and
dividends paid on any issued and outstanding preferred stock, but
excluding the Incentive Fee (whether paid or accrued)).
Pre-Incentive
Fee net operating income includes, in the case of investments with
a deferred interest feature (such as market discount, debt
instruments with payment-in-kind interest, preferred stock with
payment-in-kind dividends and zero coupon securities), accrued
income that has not yet been received in cash. Pre-Incentive Fee
net operating income does not include any realized capital gains,
realized and unrealized capital losses or unrealized capital
appreciation or depreciation.
In
calculating the amount of the Income Incentive Fee, pre-Incentive
Fee net operating income, at the end of the immediately preceding
fiscal quarter, will be compared to two “hurdle
amounts”: 1.75% of the Fund’s net assets (defined as
total assets less total liabilities) (the “Lower Hurdle
Amount”) and 2.1875% of the Fund’s net assets (the
“Higher Hurdle Amount”). The Fund will pay the Adviser
the Income Incentive Fee with respect to the Fund’s
pre-Incentive Fee net operating income in each fiscal quarter as
follows:
(A)
no Income Incentive Fee in any fiscal quarter in which the
Fund’s pre-Incentive Fee net operating income does not exceed
the Lower Hurdle Amount;
(B)
100% of the Fund’s pre-Incentive Fee net operating income
with respect to that portion of such pre-Incentive Fee net
operating income, if any, that exceeds the Lower Hurdle Amount but
is less than the Higher Hurdle Amount in any fiscal quarter;
and
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