INVESTMENT ADVISORY AGREEMENT BETWEEN OXFORD LANE CAPITAL CORP. AND OXFORD LANE MANAGEMENT, LLC
Exhibit
g
[Form of
Investment Advisory Agreement]
BETWEEN
AND
OXFORD
LANE MANAGEMENT, LLC
Agreement
made this 9th day of September, 2010, by and between OXFORD LANE CAPITAL CORP.,
a Maryland corporation (the “Corporation”), and OXFORD LANE MANAGEMENT, LLC, a
Connecticut limited liability company (the “Adviser”).
WHEREAS,
the Corporation is a newly formed, non-diversified closed-end management
investment company registered under the Investment Company Act of 1940 (the
“Investment Company Act”);
WHEREAS,
the Adviser is a newly organized investment adviser that has registered under
the Investment Advisers Act of 1940, as amended (the “Advisers Act”);
and
WHEREAS,
the Corporation desires to retain the Adviser to furnish investment advisory
services to the Corporation on the terms and conditions hereinafter set forth,
and the Adviser wishes to be retained to provide such services.
NOW,
THEREFORE, in consideration of the premises and for other good and valuable
consideration, the parties hereby agree as follows:
1. Duties of the
Adviser.
(a) The
Corporation hereby employs the Adviser to act as the investment adviser to the
Corporation and to manage the investment and reinvestment of the assets of the
Corporation, subject to the supervision of the Board of Directors of the
Corporation, for the period and upon the terms herein set forth, (i) in
accordance with the investment objective, policies and restrictions that are set
forth in the Corporation’s Registration Statement on Form N-2, dated June 25,
2010, as the same shall be amended from time to time (as amended, 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 Corporation’s
charter and by-laws. 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
Corporation, 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 Corporation; (iii) close, monitor and service the
Corporation’s investments; (iv) determine the securities and other assets that
the Corporation will purchase, retain, or sell; and (v) provide the Corporation
with such other investment advisory, research and related services as the
Corporation may, from time to time, reasonably require for the investment of its
funds. The Adviser shall have the power and authority on behalf of
the Corporation to effectuate its investment decisions for the Corporation,
including the execution and delivery of all documents relating to the
Corporation’s investments and the placing of orders for other purchase or sale
transactions on behalf of the Corporation. In the event that the
Corporation determines to acquire debt financing, the Adviser will arrange for
such financing on the Corporation’s behalf, subject to the oversight and
approval of the Corporation’s Board of Directors. If it is necessary for the
Adviser to make investments on behalf of the Company through a special purpose
vehicle, the Adviser shall have authority to create or arrange for the creation
of such special purpose vehicle and to make such investments through such
special purpose vehicle (in accordance with the Investment Company
Act).
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(b) The
Adviser hereby accepts such employment and agrees during the term hereof to
render the services described herein for the compensation provided
herein.
(c) 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
fulfilling its responsibilities hereunder. Specifically, the Adviser
may retain a Sub-Adviser to recommend specific securities or other investments
based upon the Corporation’s investment objective and policies, and work, along
with the Adviser, in structuring, negotiating, arranging or effecting the
acquisition or disposition of such investments and monitoring investments on
behalf of the Corporation, subject to the oversight of the Adviser and the
Corporation. The Adviser and not the Corporation, 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.
(d) The
Adviser 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 Corporation in any way or otherwise be
deemed an agent of the Corporation.
(e) 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 Corporation and shall specifically maintain all books
and records with respect to the Corporation’s portfolio transactions and shall
render to the Corporation’s Board of Directors such periodic and special reports
as the Board may reasonably request. The Adviser agrees that all
records that it maintains for the Corporation are the property of the
Corporation and will surrender promptly to the Corporation any such records upon
the Corporation’s request, provided that the Adviser may retain a copy of such
records.
2. Corporation’s
Responsibilities and Expenses Payable by the Corporation.
All
personnel of the Adviser, when and to the extent engaged in providing investment
advisory services hereunder, and the compensation and expenses of such personnel
allocable to such services, will be provided and paid for by the Adviser and not
by the Corporation. The Corporation shall be responsible for all
other costs and expenses of its operations and transactions, including (without
limitation) those relating to: organization and offering; calculating the
Corporation’s net asset value; effecting sales and repurchases of shares of the
Corporation’s common stock and other securities; investment advisory fees; fees
and all other expenses payable to third parties relating to, or associated with
(i) making and/or investigating possible investments and (ii) monitoring and/or
protecting the Corporation’s interests in existing investments; transfer agent
and custodial fees; federal and state registration fees; all costs of
registration and listing the Corporation’s shares on any securities exchange;
federal, state and local taxes; independent Directors’ fees and expenses; costs
of proxy statements, stockholders’ reports and notices; fidelity bond, directors
and officers/errors and omissions liability insurance, and any other insurance
premiums; direct costs such as printing, mailing, long distance telephone,
staff, independent auditors and outside legal costs; travel-related and other
expenses for executive and administrative staff in connection with activities
for the benefit of the Corporation; expenses for branding, marketing and
advertising the Corporation; office equipment and supplies and all other
expenses incurred by the Corporation or BDC Partners, LLC in connection with
administering the Corporation’s business, including payments under the
Administration Agreement between the Corporation and BDC Partners, LLC based
upon the Corporation’s allocable portion of BDC Partners, LLC’s overhead in
performing its obligations under the Administration Agreement, including
rent.
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3. Compensation of the
Adviser.
The
Corporation agrees to pay to the Adviser, 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 Adviser may agree to temporarily or
permanently waive, in whole or in part, the Base Management Fee and/or the
Incentive Fee.
The Base
Management Fee shall be calculated at an annual rate of 2.00% of the
Corporation’s gross assets. For services rendered under this
agreement, the Base Management Fee will be payable quarterly in arrears. The
Base Management Fee will be calculated based on the average value of the
Corporation’s gross assets at the end of the two most recently completed
calendar quarters, and adjusted for any share issuances, debt issuances,
repurchases or redemptions during the current calendar quarter. Base Management
Fees for any partial month or quarter will be appropriately pro
rated.
The
Incentive Fee shall be calculated and payable quarterly in arrears based on the
pre-Incentive Fee net investment income for the immediately preceding calendar
quarter. For this purpose, pre-Incentive Fee net investment income means
interest income, dividend income and any other income (including any other fees
such as commitment, origination, structuring, diligence and consulting fees and
other fees that the Corporation receives from portfolio companies) accrued by
the Corporation during the calendar quarter, minus the Corporation’s operating
expenses for the quarter (including the Base Management Fee, expenses payable
under the Administration Agreement to the Administrator, and any interest
expense and dividends paid on any issued and outstanding preferred stock, 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 pay in kind interest and zero
coupon securities), accrued income that the Corporation has not yet received in
cash. Pre-Incentive Fee net investment income does not include any
realized or unrealized capital gains. Pre-Incentive Fee net
investment income, expressed as a rate of return on the value of the
Corporation’s net assets at the end of the immediately preceding calendar
quarter, will be compared to a “hurdle rate” of 1.75% per quarter (7.00%
annualized). The Corporation’s net investment income used to
calculate the Incentive Fee is also included in the amount of its gross assets
used to calculate the Base Management Fee, to the extent it is not
distributed. The Corporation will pay the Adviser an Incentive Fee
with respect to the Corporation’s pre-Incentive Fee net investment income in
each calendar quarter as follows: (1) no Incentive Fee in any calendar quarter
in which the Corporation’s pre-Incentive Fee net investment income does not
exceed the hurdle rate of 1.75%; (2) 100% of the Corporation’s pre-Incentive Fee
net investment income with respect to that portion of such pre-Incentive Fee net
investment income, if any, that exceeds the hurdle rate but is less than 2.1875%
in any calendar quarter (8.75% annualized); this portion of the pre-Incentive
Fee net investment income (which exceeds the hurdle but is less than 2.1875%) is
referred to herein as the “catch-up.” The “catch-up” is meant to provide the
Adviser with 20% of the Corporation’s pre-Incentive Fee net investment income as
if a hurdle did not apply if this net investment income exceeds 2.1875% in any
calendar quarter; and (3) 20.0% of the amount of the Corporation’s pre-Incentive
Fee net investment income, if any, that exceeds 2.1875% in any calendar quarter
(8.75% annualized). Once the hurdle is reached and the catch-up is achieved, 20%
of all pre-Incentive Fee investment income thereafter is allocated to the
Adviser. These calculations will be appropriately pro rated for any
period of less than three months and adjusted for any share issuances,
redemptions or repurchases during the relevant quarter.
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4. Covenants of the
Adviser.
The
Adviser covenants that is registered as an investment adviser under the Advisers
Act. The Adviser 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.
5. Excess Brokerage
Commissions.
The
Adviser is hereby authorized, to the fullest extent now or hereafter permitted
by law, to cause the Corporation 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 Adviser 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 Corporation’s portfolio, and constitutes the best net results for the
Corporation.
6. Limitations on the
Employment of the Adviser.
The
services of the Adviser to the Corporation are not exclusive, and the Adviser
may engage in any other business or render similar or different services to
others so long as its services to the Corporation hereunder are not impaired
thereby, and nothing in this Agreement shall limit or restrict the right of any
manager, officer or employee of the Adviser 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. So long as this Agreement or any extension,
renewal or amendment remains in effect, the Adviser shall be the only investment
adviser for the Corporation, subject to the Adviser’s right to enter into
sub-advisory agreements. The Adviser 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 Corporation are or may become interested in the Adviser and
its affiliates, as directors, officers, employees, partners, stockholders,
members, managers or otherwise, and that the Adviser and directors, officers,
employees, partners, stockholders, members and managers of the Adviser and its
affiliates are or may become similarly interested in the Corporation as
stockholders or otherwise.
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7. Responsibility of Dual
Directors, Officers and/or Employees.
If any
person who is a manager, officer or employee of the Adviser is or becomes a
director, officer and/or employee of the Corporation and acts as such in any
business of the Corporation, then such manager, officer and/or employee of the
Adviser shall be deemed to be acting in such capacity solely for the
Corporation, and not as a manager, officer or employee of the Adviser or under
the control or direction of the Adviser, although paid by the
Adviser.
8. Limitation of Liability of
the Adviser; Indemnification.
The
Adviser (and its officers, managers, agents, employees, controlling persons,
members and any other person or entity affiliated with the Adviser, including
without limitation BDC Partners, LLC) shall not be liable to the Corporation for
any action taken or omitted to be taken by the Adviser in connection with the
performance of any of its duties or obligations under this Agreement or
otherwise as an investment adviser of the Corporation, except to the extent
specified in Section 36(b) of the Investment Company Act concerning loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services, and the Corporation shall indemnify the Adviser (and
its officers, managers, agents, employees, controlling persons, members and any
other person or entity affiliated with the Adviser, including without limitation
BDC Partners, LLC) (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 Corporation or its security holders)
arising out of or otherwise based upon the performance of any of the Adviser’s
duties or obligations under this Agreement or otherwise as an investment adviser
of the Corporation. Notwithstanding the preceding sentence of this
Paragraph 8 to the contrary, nothing contained herein shall protect or be deemed
to protect the Indemnified Parties against or entitle or be deemed to entitle
the Indemnified Parties to indemnification in respect of, any liability to the
Corporation or its security holders to which the Indemnified Parties would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of the Adviser’s duties or by reason of the
reckless disregard of the Adviser’s duties and obligations under this
Agreement.
9. Effectiveness, Duration and
Termination of Agreement.
This
Agreement shall become effective as of the date above written. This
Agreement shall remain in effect for two years, and thereafter shall continue
automatically for successive annual periods, provided that such continuance is
specifically approved at least annually by (a) the vote of the Corporation’s
Board of Directors, or by the vote of a majority of the outstanding voting
securities of the Corporation and (b) the vote of a majority of the
Corporation’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, in accordance with the requirements of the Investment
Company Act. This Agreement may be terminated at any time, without
the payment of any penalty, upon 60 days’ written notice, by the vote of a
majority of the outstanding voting securities of the Corporation, or by the vote
of the Corporation’s Directors or by the Adviser. This Agreement will
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 Paragraph 8 of this Agreement shall remain in
full force and effect, and the Adviser shall remain entitled to the benefits
thereof, notwithstanding any termination of this Agreement.
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10. 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.
11. Amendments.
This
Agreement may be amended by mutual consent, but the consent of the Corporation
must be obtained in conformity with the requirements of the Investment Company
Act.
12. 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. This Agreement shall be construed in accordance with the laws
of the State of New York applicable to contracts formed and to be performed
entirely within the State of New York and the applicable provisions of the
Investment Company Act. 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.
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IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed on the date above written.
By: ___________________________
Xxxx X.
Xxxxxxxxx, President
OXFORD
LANE MANAGEMENT, LLC
By: ___________________________
Xxxxxxxx
X. Xxxxx, Managing Member
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