Exhibit 10.1
EXECUTION COPY
SETTLEMENT
AGREEMENT
This Settlement
Agreement, dated this 24 th day of April, 2009 (this
“ Agreement ”), by and among Springbok Capital
Management, LLC, Springbok Capital Onshore, LLC, Gavin Saitowitz,
Soundpost Partners, LP, Jaime Lester, Lyrical Partners, L.P.,
Jeffrey Keswin, Edward Gage, and Robert S. Everett (the foregoing
individuals and entities being collectively referred to herein as
the “ Springbok Group ”), and MCG Capital
Corporation, a Delaware corporation (the “ Company
”).
WHEREAS, the Springbok Group
(i) has nominated three individuals for election (the “
Contested Election ”) to the Company’s Board of
Directors (the “ Board ”) at the 2009 annual
meeting of stockholders of the Company (the “ 2009 Annual
Meeting ”) and (ii) has taken certain actions in
furtherance thereof, including, but not limited to, requesting to
inspect certain of the Company’s books and records pursuant
to Section 220 of the Delaware General Corporation Law (such
letter and related requests, the “ Demand ”);
and
WHEREAS, the Company has accepted
Mr. Saitowitz’s and Springbok Capital Onshore,
LLC’s nominations of Mr. Saitowitz, Mr. Everett and
Edward Gage as candidates for election to the Board; and
WHEREAS, Springbok Capital Onshore,
LLC; Gavin Saitowitz; Edward Gage; and Robert S. Everett have filed
an action against Steven F. Tunney, Jeffrey Bucher, Edward Civera,
A. Hugh Ewing, III, Kim D. Kelly, Robert J. Merrick, Wallace B.
Millner, III, Richard W. Neu, Kenneth O’Keefe, B. Hagen
Saville, and MCG in the Court of Chancery of the State of Delaware
on February 11, 2009, captioned Springbok Capital Onshore,
LLC, et al. v. Tunney, et al., Case No. 4358-VCL (the
“Delaware Action”), seeking (a) a declaratory
judgment that MCG’s directors had breached their fiduciary
duties in adopting certain of MCG’s bylaws, that those bylaws
were invalid, and that Mr. Saitowitz, Mr. Gage, and
Mr. Everett had been properly nominated to stand for election
at the 2009 Annual Meeting, (b) injunctive relief relating
thereto, and (c) costs and expenses, including
attorneys’ fees; and
WHEREAS, the Company has filed an
action against Springbok Capital Management, LLC; Springbok Capital
Onshore, LLC; Gavin Saitowitz; Soundpost Partners, LP; Jaime
Lester, Lyrical Partners, LP; and Jeffrey Keswin in the United
States District Court for the Southern District of New York on
March 4, 2009, captioned MCG Capital Corp. v. Springbok
Capital Management, LLC, et al. , Case No. 09-CV-2003 (the
“New York Action”), which alleged that the
defendants’ Schedule 13D filings (the “13D
Filings”) were inadequate and sought injunctive relief;
and
WHEREAS, the Company and the members
of the Springbok Group have determined that the interests of the
Company and its stockholders would be best served at this time by,
among other things, avoiding the Contested Election and the
substantial expense and disruption that may result
therefrom.
NOW, THEREFORE, in consideration of
the foregoing premises and the respective representations,
warranties and agreements hereinafter set forth, and, intending to
be legally bound hereby, the parties hereby agree as
follows:
Section 1. Board
Appointment; Board Size .
(a) The Board shall (i) appoint
Gavin Saitowitz (the “ Springbok Nominee ”) to
the Board, effective April 30, 2009, to serve as a Class II
director, (ii) nominate the Springbok Nominee at the 2009
Annual Meeting for re-election as a Class II director with a term
expiring at the Company’s 2012 Annual Meeting of Stockholders
(the “ Vacancy Date ”), (iii) recommend
that the stockholders of the Company at the 2009 Annual Meeting
vote to elect the Springbok Nominee as a director, and
(iv) use its reasonable best efforts (which shall include the
solicitation of proxies) to ensure that the Springbok Nominee is
elected at the 2009 Annual Meeting. Mr. Saitowitz will not be
required to provide a description of any compensation or other
material monetary agreements, arrangements or understandings, as
described in Article II, Section 11 of the Company’s
Amended and Restated Bylaws.
(b) If the Springbok Nominee is not
elected to the Board at the 2009 Annual Meeting, Springbok Capital
Management, LLC, Springbok Capital Onshore, LLC, Soundpost
Partners, LP, and Lyrical Partners, L.P. (the “ Springbok
Consent Group ”) shall thereafter be entitled to nominate
an individual to serve on the Board, subject to a determination by
the Board’s Nominating and Corporate Governance Committee
that such individual is qualified, which agreement may not be
unreasonably withheld, and thereafter, the Board will promptly
appoint such individual to the Board to serve until the Vacancy
Date.
(c) The size of the Board shall be
decreased to eight (8) members as promptly as practicable
following the appointment of the Springbok Nominee but, in any
event, no later than August 31, 2009. The composition of the
Board shall consist of six (6) independent directors and two
(2) management directors until the Vacancy Date. The
aforementioned size and composition of the Board may be changed
prior to the Vacancy Date, only with the express written consent of
the Springbok Consent Group, which consent shall be provided in the
Springbok Consent Group’s sole discretion; provided
that the size of the Board may be increased in connection with a
merger, share exchange or other business combination in which the
Company is the surviving entity and which is approved by the
stockholders of the Company. This Section 1(c) shall terminate
in its entirety upon the occurrence of a Change of Control (as
defined below) of the Company.
Section 2. Contested
Election; Voting; Springbok Group Schedule 13D; Proxy Statement and
Demand Withdrawal; Nominee Information .
(a) The Springbok Group hereby
withdraws the notice submitted to the Company on January 16,
2009 in which it nominated Robert S. Everett, Gavin Saitowitz and
Edward Gage as nominees for election at the 2009 Annual Meeting,
which withdrawal shall be irrevocable and effective as of the date
that the Springbok Nominee is nominated and recommended by the
Company for re-election as a director as described above. The
Springbok Group shall promptly cease, and shall cause all of their
affiliates (as defined in Rule 12b-2 of the Securities Exchange Act
of 1934, as amended (the “ Exchange Act ”))
(“ Affiliates ”) to cease, any and all efforts
with respect to the Contested Election.
(b) The Springbok Group and their
Affiliates shall (i) vote all shares of the Voting Securities
(as defined below) which they beneficially own (as determined by
Rule 13d-3 of the Exchange Act) as of the record date in favor of,
and will support, the election of each of the Company’s
director nominees at each meeting of stockholders of the Company to
elect
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directors of the Company held on or before the
Standstill Date (as defined below), (ii) vote at the 2009
Annual Meeting all shares of Voting Securities which they
beneficially own as of the record date, with respect to the
proposals described in the Company’s preliminary proxy
materials filed on April 9, 2009, which are to be submitted to
the Company’s stockholders at the 2009 Annual Meeting, in
accordance with the Board’s recommendation, and
(iii) will not support or participate in any “withhold
the vote” or similar campaign with respect to any meeting to
elect directors of the Company held on or before the Standstill
Date, and, in the event of any such campaign, will vote their
shares in accordance with this paragraph.
(c) The Springbok Group shall
promptly file an amendment to its Schedule 13D with respect to the
Company (the “ Schedule 13D ”) reporting the
entry into this Agreement, amending applicable items to conform to
its obligations hereunder and appending this Agreement and the
Press Release (as hereinafter defined in Section 6) as
exhibits thereto.
(d) The Springbok Group hereby
irrevocably withdraws its Demand, and shall promptly return to the
Company all materials and summaries or duplicates thereof that have
been delivered to the Springbok Group or its Representatives (as
defined in Section 3(c) below) prior to the date hereof in
response to the Demand.
(e) The Springbok Group shall
promptly provide to the Company any information reasonably
requested by the Company for inclusion in any filings with the U.S.
Securities and Exchange Commission.
Section 3. Additional
Agreements .
(a) Replacement Nominee . If,
on or prior to the Vacancy Date, Mr. Saitowitz becomes unable
to serve as a director of the Company, the Springbok Consent Group
shall be entitled to nominate an individual to serve on the Board,
subject to a determination by the Board’s
Nominating & Corporate Governance Committee that such
individual is qualified, which agreement may not be unreasonably
withheld (such individual or any replacement nominee selected
pursuant to Section 1(b) or Section 3(a), a “
Replacement Nominee ”) and the Board shall promptly
appoint such nominee to the Board to serve for the remainder of
Mr. Saitowitz’s term. The Replacement Nominee will not
be required to provide a description of any compensation or other
material monetary agreements, arrangements or understandings, as
described in Article II, Section 11 of the Company’s
Amended and Restated Bylaws.
(b) Committee Participation .
Subject to applicable law and the NASDAQ Global Select Market
listing standards, the Board shall, effective April 30, 2009,
appoint Mr. Saitowitz (or the Replacement Nominee, if
applicable), at his request, to each of the Nominating and
Corporate Governance, Audit, Compensation and Investment and
Valuation Committees.
(c) Standstill Agreement .
Each member of the Springbok Group will not, and will cause each of
its respective Affiliates, directors, officers, employees, agents,
consultants, advisors or other representatives, including legal
counsel, accountants and financial advisors (collectively, “
Representatives ”) not to, do any of the following,
directly or indirectly, for a period commencing on the date hereof
and ending on the day after the date of the 2010 Annual Meeting of
Stockholders, including any adjournments or postponements thereof
(the “ Standstill Date ”), unless they have
obtained the prior written consent of the Board:
(i) (A) engage, or in any way
participate, directly or indirectly, in any
“solicitation” (as such term is defined in Rule
14a-1(l) promulgated by the SEC under the Exchange Act) of proxies
or consents in any “election contest” with respect to
the Company’s directors (regardless of whether it involves
the election or removal of directors of the Company), (B) seek
to advise, encourage or influence any Person with respect to the
voting of any voting securities of the Company in any
“election contest” with respect to the Company’s
directors (regardless of whether it involves the election, removal
of or withholding votes for directors of the Company),
(C) initiate, propose or otherwise “solicit” (as
such term is defined in Rule 14a-1(l) promulgated by the SEC under
the Exchange Act) stockholders of the Company for the approval of
stockholder proposals in connection with the election or removal of
or withholding votes for directors of the Company, or
(D) induce or attempt to induce any other Person to initiate
any such shareholder proposal;
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(ii) form, join or in any way
participate in a partnership, syndicate, or other group, including
without limitation any “group” as defined under
Section 13(d)(3) of the Exchange Act, with respect to any
voting securities of the Company in connection with any
“election contest” with respect to the Company’s
directors (regardless of whether it involves the election or
removal of or withholding votes for directors of the Company),
other than a “group” that only includes members who are
currently identified as Reporting Persons in the Springbok
Group’s Schedule 13D filings (or Affiliates thereof or
successors thereto) or parties to this Agreement;
(iii) seek, alone or in concert with
others, (A) to call a meeting of stockholders or solicit
consents from stockholders or conduct a nonbinding referendum of
stockholders, (B) to obtain representation on the Board except
as otherwise expressly permitted in this Agreement, (C) to
effect the removal of any member of the Board ( provided
that this shall not pertain to any members of the Springbok Group
who are directors of the Company), (D) to make a stockholder
proposal at any meeting of the stockholders of the Company except
as otherwise expressly permitted in this Agreement, or (E) to
amend any provision of the Company’s Restated Certificate of
Incorporation or the Company’s Amended and Restated
Bylaws;
(iv) sell, offer or agree to sell,
all or substantially all, directly or indirectly, through swap or
hedging transactions or otherwise, any voting rights decoupled from
the underlying Voting Securities held by the Springbok Group to any
Third Party (as defined below);
(v) other than Mr. Saitowitz,
the Replacement Nominee or any other member of the Springbok Group
who is a director of the Company, if applicable, in their capacity
as a director, effect or seek to effect (including, without
limitation, by entering into any discussions, negotiations,
agreements or understandings, whether or not legally enforceable,
with any Person), offer or propose to effect, cause or participate
in, or in any way assist or facilitate any other Person to effect
or seek, offer or propose to effect or participate in, (i) any
acquisition of more than ten percent (10%) of any securities,
or any material assets or businesses, of the Company or any of its
subsidiaries or portfolio companies, (ii) any tender offer or
exchange offer, merger, acquisition, share exchange or other
business combination involving more than ten percent (10%) of
any of the Voting Securities or any of the material assets or
businesses of the Company or any of its
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subsidiaries or portfolio companies,
or (iii) any recapitalization, restructuring, liquidation,
dissolution or other extraordinary transaction with respect to the
Company or any of its subsidiaries or portfolio companies or any
material portion of its or their businesses;
(vi) enter into any discussions,
negotiations, agreements or understandings with any Third Party
with respect to the foregoing, or advise, assist, encourage or seek
to persuade any Third Party to take any action with respect to any
of the foregoing, or otherwise take or cause any action
inconsistent with any of the foregoing; or
(vii) request, directly or
indirectly, any amendment or waiver of any provision of this
Section 3(c) (including this clause (vii) by the Company
or any of its Representatives).
(d) Expenses . Within five
(5) business days following the dismissal of the Delaware
Action, the Company agrees to reimburse the Springbok Group the sum
of $550,000. If any party to this Agreement brings an action or
other legal proceeding with respect to this Agreement against
another party to this Agreement, the party that is found to have
been in violation of this Agreement shall be responsible for all
fees and expenses (including attorney’s fees, costs and
expenses). Except as otherwise provided in this clause (d), all
attorneys’ fees, costs and expenses incurred by each of the
parties hereto will be borne by such party.
(e) Release; Waiver .
Promptly after the execution of this Agreement, the Company shall
file a voluntary dismissal with prejudice of the New York Action
and shall not, nor shall any director, officer or employee of the
Company, thereafter sue the Springbok Group or any member thereof,
with respect to any matter relating to the Contested Election, the
2009 Annual Meeting, the Demand or the 13D Filings; and the
Springbok Group shall cause Springbok Capital Onshore, LLC; Gavin
Saitowitz; Edward Gage; and Robert S. Everett, to file a voluntary
dismissal with prejudice of the Delaware Action and shall not, nor
shall any member of the Springbok Group, thereafter sue the Company
with respect to any matter relating to the Contested Election, the
2009 Annual Meeting, the Demand or the 13D Filings. On behalf of
themselves and each of their respective directors, officers,
managers, members, and employees, the Company and the Springbok
Group hereby release and forever discharge each other, and each of
their respective successors, assigns, parent and subsidiary
companies, joint ventures, partnerships, owners, directors,
officers, partners, principals, managers, members, employees,
attorneys, consultants, financial advisors, shareholders, insurers
and agents (collectively, “ Affiliated Persons
”), from all claims and demands, rights and causes of action
of any kind arising out of or relating to the Contested Election,
the 2009 Annual Meeting, the Demand, the 13D Filings, the
contemplated proxy contest in connection with the 2009 Annual
Meeting, the Delaware and New York Actions and all other actions,
and/or any and all claims of any kind, whether asserted
or
