EX-99.(10)(1) 4 d222154dex99101.htm INVESTMENT MANAGEMENT AGREEMENT INVESTMENT MANAGEMENT AND ADVISORY AGREEMENT
INVESTMENT MANAGEMENT AND ADVISORY AGREEMENT
This AGREEMENT (this “Agreement”) is made as of the 11th day of April, 2016 between XXXXXXX XXXXX ASSET MANAGEMENT, L.P. (the “Investment Adviser”), a limited partnership formed under the laws of the state of Delaware, and XXXXXXX SACHS PRIVATE MIDDLE MARKET CREDIT LLC, a Delaware limited liability company (the “Company”).
(a) Subject to the supervision of the Board of Directors, the Investment Adviser will regularly provide the Company with investment research, advice and supervision and will furnish continuously an investment program for the Company consistent with the investment objectives and policies of the Company. It will determine from time to time what securities or other investments (each such investment being called herein an “Investment” and collectively, “Investments”) shall be purchased for the Company, what Investments shall be held or sold by the Company, and what portion of the Investments shall be held uninvested as cash and cash equivalents, subject always to the provisions of the Company’s Certificate of Formation and the Limited Liability Company Agreement of the Company (as in effect from time to time, the “LLC Agreement”) and of the Investment Company Act, and to the investment objectives, policies and restrictions of the Company, as each of the same shall be from time to time in effect, and subject, further, to such policies and instructions as the Board of Directors may from time to time establish.
(b) The Investment Adviser is hereby authorized to cause the Company to make Investments, directly or indirectly through one or more subsidiaries or special purposes vehicles.
(c) The Investment Adviser is hereby authorized, on behalf of the Company and at the direction of the Board of Directors pursuant to delegated authority, to possess, transfer, mortgage, pledge or otherwise deal in, and exercise all rights, powers, privileges and other incidents of ownership or possession with respect to, Investments and other property and funds held or owned by the Company, including, without limitation, exercising and enforcing rights with respect to any claims relating to such Investments and other property and funds, including with respect to litigation, bankruptcy or other reorganization.
(d) Subject to the general supervision of the Board of Directors, the Investment Adviser will provide certain administrative services to the Company other than such administrative services provided by the Company’s administrator (such administrator, or any successor administrator, including any affiliate of the Investment Adviser, the “Administrator”). The Investment Adviser will, to the extent such services are not required to be performed by the Administrator or others pursuant to a custodian agreement (or a transfer agency agreement to the extent that a person other than the Investment Adviser is serving thereunder as the Company’s transfer agent), (i) provide supervision of all aspects of the Company’s operations not referred to in paragraphs (a) to (c) above; (ii) coordinate with and oversee the services being performed by the Administrator and the Company’s custodian and transfer agent, (iii) provide the Company with personnel to perform such executive, administrative and clerical services as are reasonably necessary to provide effective administration of the Company; (iv) provide on behalf of the Company significant managerial assistance to those portfolio companies of the Company that the Company is required to provide such services to under the Investment Company Act; (v) arrange for, at the Company’s expense, (A) the preparation for the Company of all required tax returns, (B) the preparation and submission of reports to existing holders of equity interests in the Company and regulatory authorities and (C) the preparation and submission of the Company’s Form 10 or registration statement, as applicable, and all other documents necessary to fulfill regulatory requirements and maintain the registration and qualifications of the Company with the SEC and other regulatory authorities; (vi) maintain all of the Company’s records and (vii) provide the Company with adequate office space and all necessary office equipment and services including telephone service, heat, utilities, stationery supplies and similar items.
(e) The Investment Adviser will also provide to the Board of Directors such periodic and special reports as it may reasonably request. The Investment Adviser shall for all purposes herein be deemed to be an independent contractor and shall, except as otherwise expressly provided or authorized, have no authority to act for or represent the Company in any way or otherwise be deemed an agent of the Company.
(f) The Investment Adviser will maintain all books and records with respect to the Company’s securities transactions required by sub-paragraphs (b)(5), (6), (9) and (10) and paragraph (f) of Rule 31a-l under the Investment Company Act (other than those records being maintained by the Administrator or the Company’s custodian or transfer agent) and preserve such records for the periods prescribed therefor by Rule 31a-2 of the Investment Company Act. The Investment Adviser will also provide to the Board of Directors such periodic and special reports as it may reasonably request.
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(g) The Investment Adviser will notify the Board of Directors of any change in the Investment Adviser’s membership within a reasonable time after such change.
(h) The Investment Adviser’s services hereunder are not deemed exclusive, and it shall be free to render similar services to others. The Investment Adviser 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; provided that its services to the Company hereunder are not impaired thereby. Nothing in this Agreement shall limit or restrict the right of the Investment Adviser or any manager, partner, officer or employee of the Investment Adviser to engage in any other business or to devote his, her or its 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 Investments, subject at all times to applicable law).
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litigation, arbitration, mediation, government investigation or dispute in connection with the business of the Company and the amount of any judgment or settlement paid in connection therewith, or the enforcement of the Company’s rights against any person and indemnification or contribution expenses payable by the Company to any person and other extraordinary expenses not incurred in the ordinary course of the Company’s business. The Investment Adviser shall not be required to pay expenses of activities which are primarily intended to result in sales of Units in the Company, including, but not limited to, all costs and expenses associated with the preparation and distribution of an offering memorandum, a subscription agreement, if applicable, a registration statement or an equityholder application form.
Company expenses borne by the Company in the ordinary course on an annual basis (excluding the Management Fee, the Incentive Fee, organizational and start-up expenses, and leverage-related expenses) shall not exceed an amount equal to 0.5% of the aggregate amount of Commitments to the Company by Common Unitholders, provided, however, that expenses incurred outside of the ordinary course, including litigation and similar expenses, are not subject to such cap.
To the extent that expenses to be borne by the Company pursuant to this Section 3 are paid by the Investment Adviser, the Company shall reimburse the Investment Adviser for such expenses, provided, however, that the Investment Adviser may elect, from time to time and in its sole discretion, to bear certain of the Company’s expenses set forth above, including organizational and other expenses.
4. Compensation of the Investment Adviser.
(a) The Company shall pay to the Investment Adviser for its services to the Company a management fee (the “Management Fee”) in such amounts and at such times as set forth in Appendix I.
(b) The Company shall also pay to the Investment Adviser an incentive fee (the “Incentive Fee”) in such amounts and at such times as set forth in Appendix II.
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other clients. If any occasion should arise in which the Investment Adviser gives any advice to its clients concerning the shares of the Company, it will act solely as investment counsel for such clients and not in any way on behalf of the Company. The Investment Adviser may, on occasions when it deems the purchase or sale of a security to be in the best interests of the Company as well as its other customers (including any investment company or advisory account for which the Investment Adviser or any of its affiliates acts as an investment adviser), aggregate, to the extent permitted by applicable laws and regulations, the securities to be sold or purchased in order to obtain the best net price and the most favorable execution. In such event, allocation of the securities so purchased or sold, as well as the expenses incurred in the transaction, will be made by the Investment Adviser in the manner it considers to be the most equitable and consistent with its fiduciary obligations to the Company and to such other customers.
6. Limitation of Liability of Investment Adviser and the Company. The Investment Adviser shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Company in connection with the matters to which this Agreement relates, except a loss resulting from willful misfeasance, bad faith or gross negligence on the Investment Adviser’s part in the performance of its duties or from reckless disregard by the Investment Adviser of its obligations and duties under this Agreement. Any person, even though also employed by the Investment Adviser, who may be or become an employee of and paid by the Company shall be deemed, when acting within the scope of his employment by the Company, to be acting in such employment solely for the Company and not as the Investment Adviser’s employee or agent.
Any termination of this Agreement pursuant to this Section 7 shall be without penalty or other additional payment save that (i) the Company shall pay the Management Fee referred to in Appendix I prorated to the date of termination and the Final Incentive Fee Payment referred to in Appendix II; and (ii) the Company shall honor any trades entered but not settled before the date of any such termination. Sections 3, 4, 6, 7, 9 and 10 hereof shall survive the termination of this Agreement.
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required under the Investment Company Act, no amendment of this Agreement shall be effective as to the Company until approved by vote of the holders of a majority of the outstanding voting securities of the Company and by a majority of the Board of Directors, including a majority of the directors who are not interested persons (as defined in the Investment Company Act) of the Company and have no financial interest in this Agreement, cast in person at a meeting called for the purpose of voting on such amendment. If any provision or any part of a provision of this Agreement shall be found to be void or unenforceable, it shall not affect the remaining part which shall remain in full force and effect.
9. General. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. The Company consents to exclusive jurisdiction and venue for any litigation arising out of this Agreement to the United States District Court for the Southern District of New York, unless no federal jurisdiction exists, in which case the Company consents to jurisdiction and venue in the Supreme Court of the State of New York, New York County. Nothing herein shall constitute a waiver or limitation of any rights which the Company may have, if any, under any applicable law.
If to the Investment Adviser:
Xxxxxxx Xxxxx Asset Management, L.P.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: President
Fax: (000) 000-0000
If to the Company:
Xxxxxxx Sachs Private Middle Market Credit LLC
c/o Goldman Xxxxx Asset Management, L.P.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Chief Executive Officer
Fax: (000) 000-0000
or to such other address as to which the party receiving the notice shall have notified the other party in writing.
12. Effective Date. This Agreement shall be effective as of the date first written above.
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XXXXXXX SACHS ASSET MANAGEMENT, L.P. | ||
By: |
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Name: Xxxxxxxx Xxxx | ||
Title: Authorized Signatory | ||
XXXXXXX SACHS PRIVATE MIDDLE MARKET CREDIT LLC | ||
By: |
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Name: Xxxxxxxx Xxxx | ||
Title: Authorized Signatory |
[Signature Page to Investment Management and Advisory Agreement]
APPENDIX I
Management Fee
The Company will pay the Investment Adviser the Management Fee, payable quarterly in arrears, equal to 0.375% (i.e., an annual rate of 1.50%) of the average net asset value of the Company at the end of the then-current quarter and the prior calendar quarter (and, in the case of the Company’s first quarter, the Company’s net asset value as of such quarter-end). The Management Fee for any partial quarter will be appropriately prorated.
APPENDIX II
Incentive Fee.
1. | Incentive Fee: The Company will pay to the Investment Adviser an Incentive Fee (as follows: |
a. | First, no Incentive Fee will be payable to the Investment Adviser until the Company has made cumulative distributions pursuant to this clause (a) equal to aggregate Contributed Capital (as defined below); |
b. | Second, no Incentive Fee will be payable to the Investment Adviser until the Company has made cumulative distributions pursuant to this clause (b) equal to a 7% return per annum, compounded annually, on aggregate unreturned Contributed Capital, from the date each capital contribution is made through the date such capital has been returned; |
c. | Third, subject to clauses (a) and (b), the Investment Adviser will be entitled to an Incentive Fee equal to 100% of all amounts designated by the Company for distribution and Incentive Fee payments, until such time as the cumulative Incentive Fee paid to the Investment Adviser pursuant to this clause (c) is equal to 15% of the amount by which the sum of (i) cumulative distributions to holders of Units (“Unitholders”) pursuant to clauses (a) and (b) above and (ii) the cumulative Incentive Fee paid to the Investment Adviser pursuant to this clause (c) exceeds Contributed Capital; and |
d. | Fourth, at any time that clause (c) has been satisfied, the Investment Adviser will be entitled to an Incentive Fee equal to 15% of all amounts designated by the Company for distribution and Incentive Fee payments. |
The Incentive Fee will be calculated on a cumulative basis and the amount of the Incentive Fee payable prior to a proposed distribution will be determined and, if applicable, paid in accordance with the foregoing formula each time amounts are to be distributed to the Unitholders. The Incentive Fee is a fee owed by the Company to the Investment Adviser and is not paid out of distributions made to Unitholders.
Notwithstanding anything to the contrary herein, in no event will an amount be paid with respect to the Incentive Fee to the extent it would cause the aggregate amount of the Company’s capital gains paid in respect of the Incentive Fee to exceed 20% of the Company’s realized capital gains computed net of all realized capital losses and unrealized capital depreciation, in each case determined on a cumulative basis from inception of the Company through the date of the proposed payment.
“Contributed Capital” means the aggregate amount of capital contributions that have been made by all Unitholders in respect of their Units to the Company. All distributions (or deemed distributions), including, without limitation, investment income (i.e. proceeds received in respect of interest payments, dividends and fees) and proceeds attributable to the repayment or disposition of any Investment, to Unitholders will be considered a return of Contributed Capital. For the avoidance of doubt, unreturned Contributed Capital at any time shall equal aggregate Contributed Capital minus cumulative distributions, but shall never be less than zero.
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upon such termination, then the Investment Adviser will reimburse the Company for the difference between the amount of Incentive Fees actually received and the amount determined at termination (the “Investment Adviser Reimbursement Obligation”); provided, that in no event will the Investment Adviser be required to reimburse the Company an amount greater than the aggregate Incentive Fees paid to the Investment Adviser, reduced by the excess (if any) of (a) the aggregate federal, state and local income tax liability the Investment Adviser incurred in connection with the payment of such Incentive Fees (assuming the highest marginal applicable federal and New York city and state income tax rates applied to such payments), over (b) an amount equal to the U.S. federal and state tax benefits available to the Investment Adviser by virtue of the payment made by the Investment Adviser pursuant to its Investment Adviser Reimbursement Obligation (assuming that, to the extent such payments are deductible by the Investment Adviser, the benefit of such deductions will be computed using the then highest marginal applicable federal and New York city and state income tax rates). |