INVESTMENT ADVISORY AGREEMENT BETWEEN STAR MOUNTAIN CREDIT OPPORTUNITIES FUND, LP AND STAR MOUNTAIN FUND MANAGEMENT, LLC
Exhibit 10.1
BETWEEN
AND
STAR MOUNTAIN FUND MANAGEMENT, LLC
Agreement made this 1st day of September, 2019, by and between Star Mountain Credit
Opportunities Fund, LP, a Delaware limited partnership (such limited partnership and any successor entity, the “Fund”), and Star Mountain Fund Management, LLC, a Delaware limited liability company (the “Adviser”).
WHEREAS, the Fund is a Delaware limited partnership that may in the future convert to a closed-end management investment company that may elect to be treated as a business
development company (“BDC”) under the Investment Company Act of 1940, as amended (the “Investment Company Act”) (such election, together with any accompanying restructuring of the Fund, the “BDC Conversion”); and
WHEREAS, the Fund desires to retain the Adviser to furnish investment advisory services to the Fund 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:
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Definitions.
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Capitalized terms used herein without definition shall have the same meaning as set forth in the Amended and Restated Limited Partnership Agreement of the Fund, dated as of
September 13, 2019 (as it may be amended from time to time, the “Partnership Agreement”).
| 2. |
Duties of the Adviser.
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(a) The Fund hereby engages 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 Fund’s general partner (the “General Partner”) (or, following the BDC Conversion, the board of directors of the Fund (the “Board of Directors”)), 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 Fund’s Confidential Private Placement Memorandum, dated September 1, 2019, as the same may be amended from time to time, and, following the BDC
Conversion, in any registration statements filed by the Fund with the Securities and Exchange Commission (the “SEC”); (ii) during the term of this Agreement in accordance with all other applicable federal and state laws, rules and
regulations, and the Fund’s organizational documents, as the same may be amended or superseded from time to time; and (iii) following the BDC Conversion, the Adviser will manage the assets of the Fund in accordance with the Investment Company Act
and such policies and instructions as the Board of Directors may establish. 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, source, research, 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; and (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, including providing operating and managerial assistance to the Fund and its portfolio companies, as required. 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 determines to directly or indirectly (including through any Alternative Investment Vehicle or any subsidiary of the Fund (a “Subsidiary”)) acquire debt financing, the Adviser
will arrange for such financing on the Fund’s behalf, subject to the oversight and approval of the General Partner (or, following the BDC Conversion, the Board of Directors). If it is necessary or appropriate for the Adviser to make investments on
behalf of the Fund 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 following the BDC Conversion). The authority of the Adviser conferred pursuant to this Agreement shall apply equally in respect of any controlled Subsidiary of the Fund.
(b) The Adviser hereby accepts such engagement 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 Fund’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 Fund, subject to the oversight
of the Adviser and the Fund. The Adviser shall be responsible for any compensation payable to any Sub-Adviser. Nothing in this subsection 2(c) will obligate the Adviser to pay any expenses that are the expenses of the Fund under Section 3 hereof.
Following the BDC Conversion, any sub-advisory agreement entered into by the Adviser shall be subject to approval by the Board of Directors as required by Section 15 of the Investment Company Act and shall otherwise 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 Fund in any way or otherwise be deemed an agent of the Fund.
(e) Following the BDC Conversion, 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 in accordance with Section 31(a) of the Investment Company Act with respect to the Fund’s portfolio transactions and shall render to the
Fund’s Board of Directors such periodic and special reports as the Board of Directors 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.
| 3. |
Fund’s Responsibilities and Expenses Payable by the Fund.
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(a) All personnel of the Adviser, when and to the extent engaged in providing investment advisory and management services hereunder, 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 as provided below.
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(b) The Fund will bear all other costs and expenses of its investment activities, operations, administration, transactions, meetings or liquidation, including, without
limitation, legal, accounting, tax, auditing, consulting and other professional expenses (including, without limitation, expenses relating to establishing reputation and public relations in connection with self-sourced lending or other financial
transactions); the Management Fee (as defined below) and Incentive Compensation (as defined below); professional liability insurance (including costs relating to directors’ and officers’ liability insurance and errors and omissions insurance);
research and market data expenses; interest on indebtedness; custodial fees; bank service fees; investment-related fees and expenses (such as third-party sourcing fees, fees and expenses of legal and other professionals, due diligence expenses and
travel, lodging and meal expenses) related to the analysis, purchase or sale of investments, whether or not the investments are consummated; expenses related to special purpose vehicles (including, without limitation, overhead expenses related
thereto); interest payable on debt, if any, incurred to finance the Fund’s investments; other expenses related to the purchase, monitoring, sale, settlement, custody or transmittal of Fund assets (directly or through trading Affiliates) as will be
determined by the Adviser (or, following the BDC Conversion, an Affiliate thereof, as applicable) in its sole discretion (including costs associated with systems and software used in connection with investment- related activities); costs of
reporting to investors and investor meetings (including meetings of the Advisory Committee and reasonable expenses incurred by members of the Advisory Committee in connection with their attendance); administration fees and expenses charged by any
third-party provider of administration services; entity-level taxes; expenses relating to the offer, transfer, sale and marketing of Interests in the Fund (other than any private placement fees or expenses incurred in connection with the sale of
Interests or interests in the BDC Vehicle prior to an initial public offering (including a Qualified IPO, an “IPO”), which will instead be borne by the General Partner and/or the Adviser); organizational fees and expenses of the Fund or any
Parallel Investment Entity (including legal, accounting, consulting, filing and other direct organizational costs, but excluding any costs and expenses incurred in connection with the BDC Conversion or an IPO) up to an aggregate amount not to
exceed $1 million; filing fees and expenses; Federal and state registration fees and expenses; regulatory and compliance fees and expenses of the Fund (including with respect to any registration activities of the Fund); costs of winding up and
liquidating the Fund; costs associated with the BDC Conversion and ensuring compliance with the applicable BDC and regulated investment company (“RIC”) requirements under the Investment Company Act and the U.S. Internal Revenue Code of 1986,
as amended (the “Code”), respectively, including, but not limited to, costs incurred in connection with the organization of, and transfer of assets to, a private investment vehicle and all other expenses incurred in connection with effecting
the BDC Conversion; expenses incurred in connection with a Limited Partner that defaults in respect of a Commitment; and other expenses associated with the operation of the Fund and its investment activities, including extraordinary expenses such
as litigation, workout and restructuring and indemnification expenses, if any. For the avoidance of doubt, the Fund will also bear its allocable share (based on invested capital) of any of the foregoing expenses incurred by any Subsidiary.
(c) Following the BDC Conversion, the Fund will also be responsible for the costs of the offering of common shares and other securities, including, but not limited to,
all expenses incurred in connection with an IPO; costs and expenses relating to distributions paid to investors; costs of effecting sales and repurchases of the Fund’s securities; allocated costs incurred by the Adviser or its Affiliate in
providing managerial assistance to those companies in which the Fund has invested who request it; transfer agent fees; fees and expenses paid to the Fund’s independent directors (including expenses and costs related to meetings of the independent
directors); costs of preparing and filing reports with the SEC and other Fund reporting and compliance costs, including registration and listing fees; the Fund’s allocable portion of the fidelity bond; the costs of reports, proxy statements or
other notices to investors, including printing and mailing costs; the costs of any stockholders’ meetings and communications; expenses payable under any underwriting agreement, including associated fees, expenses and any indemnification
obligations; and all other expenses incurred by the Fund in connection with maintaining its status as a BDC. In addition, the Fund will reimburse the Adviser or its Affiliates, as applicable, for all costs and expenses incurred in connection with
administering the Fund’s business including out of pocket expenses (including travel, lodging and meals), the Fund’s allocable portion of the Adviser’s or any affiliated Administrator’s (as defined below) overhead expenses in performing its
obligations under this Agreement or any administration agreement with one or more Administrators (each, an “Administration Agreement”), as applicable, including rent and the allocable portion of the compensation paid by the Adviser or its
Affiliates, as applicable, to the Fund’s Chief Compliance Officer and Chief Financial Officer and their respective staffs (based on the percentage of time such individuals devote, on an estimated basis, to the business affairs of the Fund),
third-party software licensing, implementation, data management and recovery services and custom development costs.
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(d) To the extent that expenses to be borne by the Fund are paid by the Adviser and/or one or more administrators of the Fund (each, together with any successor
thereto, an “Administrator”), the Fund will reimburse the Adviser and/or such Administrator(s), as applicable, for such expenses, it being understood that the administrative services contemplated by this Section 3 may be performed by the
Adviser or any of its Affiliates, one or more third party Administrators, or a combination thereof.
| 4. |
Compensation of the Adviser.
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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 (the “Management Fee”)
and, following the BDC Conversion, incentive compensation (“Incentive Compensation”) 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 or waive all or a portion of its fees hereunder for a specified period of time.
(a) The Fund will pay to the Adviser an annual Management Fee, payable quarterly in arrears at a rate of 1.75% per annum of the average of the Fund’s total gross assets
(excluding cash or cash equivalents but including assets purchased with borrowed amounts) as of the end of each of the two most recently completed calendar quarters. The Management Fee is payable quarterly in arrears and will be appropriately prorated for any partial quarter
(b) Following the BDC Conversion, Incentive Compensation will be payable by the Fund to the Adviser and will consist of two components that are independent of each other, with the result that one component may be payable even if the other is not. A portion of the incentive fee is based on a percentage
of the Fund’s income (an “Income Incentive Fee”) and a portion is based on a percentage of the Fund’s capital gains (the “Capital Gains Incentive Fee”), each as described below:
| (i) |
Income Incentive Fee.
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The first component of the Incentive Compensation, the Income Incentive Fee, is payable quarterly in arrears. The Income Incentive Fee will be determined by comparing the
Fund’s Pre-Incentive Fee Net Investment Income (as defined herein) to a “Hurdle Amount.” The Hurdle Amount is equal to the product of (i) the hurdle rate of 1.75% per quarter (7.00%
annualized) and (ii) the Fund’s net assets at the end of the immediately preceding quarter.
The Fund will pay the Adviser an Income
Incentive Fee quarterly in arrears with respect to the Fund’s Pre-Incentive Fee Net Investment Income in each calendar quarter as follows:
| 1) |
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| 3) |
Pre-Incentive Fee Net Investment Income shall mean interest income, dividend income
and any other income accrued or earned by the Fund during the calendar quarter, minus the Fund’s operating expenses for the quarter (including Management Fee, administrative expenses payable under the Administration Agreement or any Sub-Administration Agreement, and any interest expense and
dividends paid on any issued and outstanding preferred stock, but excluding Incentive Compensation). 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 Fund has not yet received in cash. Pre-Incentive Fee Net Investment Income does not include any realized capital gains, realized capital losses and unrealized capital appreciation or depreciation.
| (ii) |
Capital Gains Incentive Fee.
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Incentive Fee on Capital Gains
The second component of the Incentive Compensation, the Capital Gains Incentive Fee, is payable at the end of each calendar year in arrears.
The amount payable equals:
20% of cumulative realized capital gains from inception through the end of such calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis,
less the aggregate amount of any previously paid incentive fee on capital gains as calculated in accordance with GAAP.
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Transaction Fees
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(a) If the Adviser or its Affiliates or their respective officers, directors, partners, members, shareholders or employees (other than the Fund, any Alternative
Investment Vehicle, any Subsidiary or any Parallel Investment Entity) receive any compensation in the form of directors’ fees, transaction fees, monitoring fees, financial advisory fees, investment management fees, origination fees, arrangement
fees, commitment fees, broken deal fees and other fees for similar or related services and any other compensation in connection with lending or other financial transactions or investments (including, without limitation, acquisitions, dispositions,
recapitalizations and restructurings), the portion of such compensation ratably attributable to investments made (or, in the case of broken deal fees, proposed) either directly by the Fund or indirectly through an Alternative Investment Vehicle or
a Subsidiary will be either (a) paid to the Fund (or such Alternative Investment Vehicle or Subsidiary, as applicable) or (b) prior to the BDC Conversion, applied as an offset to the Management Fee. Prior to the BDC Conversion, if the Management
Fee is not sufficient to offset any such fees, any shortfall will be carried forward to reduce future Management Fees until the earlier of such time as (i) such shortfall is fully offset or (ii) the Adviser is no longer entitled to receive the
Management Fee from the Fund. Upon the BDC Conversion or such time that the Adviser is no longer entitled to receive the Management Fee from the Fund, any remaining shortfall shall be paid by the Adviser or its Affiliates to the Fund.
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(b) Any fees received by the Adviser or its Affiliates in connection with or arising from providing administrative, collateral management or similar or related services
in respect of lending or other financial transactions or Investments will be retained by the Adviser and will not be applied as an offset to the Management Fee, it being understood that, in the event that any expenses incurred by the Adviser or its
Affiliates in connection with the provision of the foregoing services are charged to the Fund (or an Alternative Investment Vehicle or a Subsidiary) as a Fund Expense, the portion of such compensation ratably attributable to such expenses will be
either (i) paid to the Fund (or an Alternative Investment Vehicle, as applicable) or (ii) prior to the BDC Conversion, paid to the Adviser and applied as an offset to the Management Fee as provided in Section 5(a) above.
| 6. |
Covenants of the Adviser.
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(a) 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, including, but not limited to, the Investment Advisers Act of 1940, as amended (the “Advisers Act”).
(b) The Adviser further covenants that it will maintain its registration as an investment adviser under the Advisers Act at all times that the Adviser is required by
applicable law or regulation to be registered.
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Excess Brokerage Commissions.
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The Adviser is hereby authorized, to the fullest extent now or hereafter permitted by law, to cause the Fund to pay any broker-dealer or other member of a national securities exchange (a “Broker-Dealer”) an amount of commission for effecting a securities transaction in excess of the amount of commission another Broker-Dealer would have charged for effecting that transaction, if the Adviser determines in good faith, taking into account such factors as overall cost of the transaction (including the applicable brokerage commission or dealer spread); the size and type of the transaction; the nature of the market for the financial instrument; execution capability, speed and efficiency; market intelligence regarding the transaction; the extent to which the Broker-Dealer makes a market in the financial instrument involved or has access to such markets; the Broker-Dealer’s financial stability; the Broker-Dealer’s reputation for diligence, fairness and integrity; quality of service rendered by the Broker-Dealer in other transactions for the Adviser; confidentiality considerations; the quality and usefulness of research services and investment ideas presented by the Broker-Dealer; the Broker-Dealer’s willingness to correct errors; the Broker-Dealer’s ability to accommodate any special execution or order handling requirements in connection with any particular transaction; and other factors deemed appropriate by the Adviser.
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| 8. |
Limitations on the Activities of the Adviser.
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The services of the Adviser to the Fund are not exclusive, and the Adviser and each of its Affiliates 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 Fund and nothing in
this Agreement shall limit or restrict the right of any member, manager, partner, 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, 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 Fund’s portfolio companies, subject to applicable law), provided
that the foregoing shall be without prejudice to the obligations of the Adviser and its Affiliates pursuant to the Partnership Agreement or any related agreement. So long as this Agreement or any extension, renewal or amendment remains in effect,
the Adviser shall be the only investment adviser for the Fund, 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, limited partners and/or stockholders of the Fund 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 Fund as limited partners, stockholders or otherwise.
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Responsibility of Dual Directors, Officers and/or Employees.
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If any person who is a member, manager, partner, officer or employee of the Adviser or any of its Affiliates is or becomes a director, officer and/or employee of the Fund and
acts as such in any business of the Fund, then such member, manager, partner, officer and/or employee of the Adviser or such Affiliate shall be deemed to be acting in such capacity solely for the Fund, and not as a member, manager, partner, officer
or employee of the Adviser or such Affiliate or under the control or direction of the Adviser or the such Affiliate, even if paid by the Adviser or such Affiliate.
| 10. |
Exculpation; Indemnification; Advancement of Expenses.
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(a) None of the Adviser, its Affiliates, and their respective directors, officers, partners, members, shareholders, “controlling persons” (as defined under the Investment
Company Act), employees, agents, consultants and representatives (collectively, the “Covered Persons”) will be liable to the Fund or the Limited Partners for (i) any act taken or failed to be taken by any such Covered Person except for any
such act or failure to act that constitutes (x) Disabling Conduct (as defined below), (y) a knowing and material breach of this Agreement, the Partnership Agreement or, following the BDC Conversion, any Shareholder Agreement, that has not been
cured within thirty (30) days or (z) a violation of the antifraud provisions of any U.S. federal securities law, in each case, as finally determined by a court of competent jurisdiction, (ii) any act or failure to act by any Limited Partner or
(iii) any mistake, negligence, misconduct or bad faith of any broker or other agent or representative of the Fund selected or employed by the General Partner or the Adviser or their Affiliates in good faith.
Notwithstanding anything to the contrary in this Section 10 (except as provided in Section 10(f)), any Covered Person may consult with legal counsel and accountants in respect of
Fund affairs and shall be fully protected and justified in taking or refraining from any action in good faith, in reliance upon and in accordance with the opinion or advice of such counsel or accountants selected in good faith for purposes of
exculpation and indemnification contemplated herein (irrespective of any judicial determination regarding the conduct of such Covered Person).
(b) To the fullest extent permitted by law, the Fund shall indemnify and hold harmless the Covered Persons from and against all claims, damages, liabilities, costs and
expenses, including legal fees (“Indemnifiable Items”), to which they may be or become subject by reason of their activities on behalf of the Fund, or otherwise relating to this Agreement, except (i) to the extent that such Indemnifiable
Items were incurred as a result of such Covered Person’s (x) Disabling Conduct, (y) knowing and material breach of this Agreement, the Partnership Agreement or, following the BDC Conversion, any Shareholder Agreement, that has not been cured within
thirty (30) days or (z) violation of the antifraud provisions of any U.S. federal securities law, in each case, as finally determined by a court of competent jurisdiction, (ii) with respect to any Indemnifiable Items that arise out of any action,
suit or proceeding solely among the General Partner, the Adviser and/or their respective Affiliates and their respective directors, officers, partners, members, shareholders and employees and (iii) 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 a tribunal of competent jurisdiction) with respect to the receipt of compensation for services to the extent the Fund elects to
be regulated as a BDC under the Investment Company Act. The termination of any proceeding by settlement, judgment, order, conviction or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the
Covered Person’s conduct constituted Disabling Conduct, a knowing and material breach of this Agreement or the Partnership Agreement that has not been cured within thirty (30) days or a violation of the antifraud provisions of any U.S. federal
securities law. “Disabling Conduct” shall mean fraud, willful misfeasance or gross negligence as finally determined by a court of competent jurisdiction.
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(c) Expenses (including attorneys’ fees) incurred by a Covered Person in defense or settlement of any claim that may be subject to a right of indemnification hereunder
(i) prior to the BDC Conversion, may, in the General Partner’s sole discretion, and (ii) following the BDC Conversion, shall, be advanced by the Fund prior to the final disposition thereof upon receipt of an undertaking by or on behalf of such
Covered Person to repay the amount advanced to the extent that it shall be determined ultimately that such Covered Person is not entitled to be indemnified hereunder; provided that no advances shall be made by the Fund in respect of any
action, suit or proceeding against a Covered Party initiated by (i) the Fund, (ii) Unaffiliated Investors holding greater than 50% of the Commitments of the Unaffiliated Investors or (iii) following the BDC Conversion, BDC Vehicle shareholders
holding more than 50% of the BDC Shares and bringing substantially similar claims under their respective Shareholder Agreements. For the avoidance of doubt, in the event any such Covered Person is not finally determined to have engaged in Disabling
Conduct, a knowing and material breach of this Agreement, the Partnership Agreement or, following the Conversion, any Shareholder Agreement, that has not been cured within thirty (30) days or a violation of the antifraud provisions of any U.S.
federal securities laws, in each case, by a court of competent jurisdiction, the indemnification provision described in Section 10(b) will apply. The right of any Covered Person to the indemnification provided herein shall be cumulative of, and in
addition to, any and all rights to which such Covered Person may otherwise be entitled by contract or as a matter of law or equity and shall be extended to such Covered Person’s successors, assigns and legal representatives.
(d) In the event that (i) a Covered Person is appointed to serve as a manager, director or officer of the issuer of any Portfolio Investment, or is otherwise authorized
to act on behalf of such issuer and (ii) such Covered Person is entitled to seek indemnification from such issuer pursuant to a written agreement with such issuer entered into after the Initial Closing (a “Written Agreement”) or pursuant to
such issuer’s articles of incorporation, bylaws, partnership agreement, limited liability company agreement or other constitutive documents, the Adviser will endeavor to ensure that any such Written Agreement shall provide that the indemnification
obligations of such issuer are primary and the indemnification obligations of the Fund are secondary. Prior to an IPO, any Covered Person meeting the criteria described in clauses (i) and (ii) above (a “Representative”) entitled to
indemnification from the Fund in connection with Indemnifiable Items arising from such Representative’s activities in such capacity shall use reasonable efforts to first seek recovery under any other indemnity or any insurance policies by which
such Representative is indemnified or covered (other than pursuant to terms of the operating agreements of the General Partner, the Adviser and their Affiliates), as the case may be, but only to the extent that the indemnitor with respect to such
indemnity, or insurer with respect to such insurance policy, provides such indemnity or coverage on a timely basis. Prior to making an indemnification payment or providing advancement of expenses pursuant to this Section 10 to a Representative that
is also entitled to indemnification from an issuer of a Portfolio Investment or insurance policy, the Adviser shall require such Representative to agree that it shall (x) cause the Fund to be subrogated to its rights with respect to such payment
from such issuer or insurance policy, as applicable, (y) assign to the Fund all of its rights to advancement, indemnification or contribution from or with respect to such issuer or insurance policy and (z) cooperate with the Fund in its efforts to
recover such payments through indemnification or otherwise.
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(e) In any action, suit or proceeding against the Fund or the Covered Persons relating to or arising out of, or alleged to relate to or arise out of, any Indemnifiable
Items, the Covered Persons shall have the right to jointly employ, at the expense of the Fund, counsel of the Covered Persons’ choice, which counsel shall be reasonably satisfactory to the Fund, in such action, suit or proceeding; provided that
if retention of joint counsel by the Covered Persons would create a conflict of interest, each group of Covered Persons which would not cause such a conflict shall have the right to employ, at the expense of the Fund, separate counsel of the
Covered Persons’ choice, which counsel shall be reasonably satisfactory to the Fund, in such action, suit or proceeding.
(f) Notwithstanding anything in this Section 10 to the contrary, nothing contained herein shall be construed so as to provide for the exculpation of the Adviser or
Covered Persons for any liability (including liability under federal securities laws which, under certain circumstances, impose liability even on persons that act in good faith), to the extent (but only to the extent) that such liability may not be
waived, modified or limited under applicable law, but shall be construed so as to effectuate the provisions of this Section 10 to the fullest extent permitted by law. In addition, following the BDC Conversion, nothing contained herein shall
protect or be deemed to protect the Covered Persons against or entitle or be deemed to entitle the Covered Persons to indemnification in respect of any liability to the Fund or its security holders to which the Covered Persons 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 (as the same shall be determined
in accordance with the Investment Company Act and any interpretations or guidance by the SEC or its staff thereunder to the extent the Fund elects to be regulated as a BDC under the Investment Company Act). The provisions set forth in this Section
10 shall not be construed to limit or exclude any other right to which a Covered Person may be lawfully entitled and shall survive the termination of this Agreement.
| 11. |
Use of Name.
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The Fund acknowledges that it has adopted its name through the permission of the Adviser. The Adviser hereby consents to the non-exclusive use by the Fund of the name “Star Mountain” only so long as the Adviser serves as the investment adviser of the Fund. The Fund agrees that it will indemnify and hold harmless the Adviser and its Affiliates from and against any and all costs, losses, claims, damages or liabilities, joint or several, including, without limitation, attorneys’ fees and disbursements, which may arise out of the Fund’s use or misuse of the name “Star Mountain” (other than any losses from the Fund’s use or misuse of the name resulting from the Disabling Conduct of the Adviser or any other Covered Person) or out of any breach of, or failure to comply with, this Section 11. The provisions set forth in this Section 11 shall survive the termination of this Agreement.
| 12. |
Effectiveness, Duration and Termination of Agreement.
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(a) This Agreement shall become effective as of the first date above written.
(b) Prior to the BDC Conversion, this Agreement shall remain in effect until September 1, 2021 and shall be automatically extended for one-year terms thereafter, except
(i) if terminated by the mutual agreement of the parties hereto or (ii) upon termination of the Fund under the Partnership Agreement.
| (c) |
Following the BDC Conversion:
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| (i) |
This Agreement shall continue in effect for two years from the date of the Fund’s election to regulated as a BDC under the Investment Company Act, 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 Fund’s Board of Directors, or by the vote of a majority of the outstanding voting securities of the Fund (as defined in the Investment Company Act) and (B)
the vote of a majority of the Fund’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; and
|
9
| (ii) |
The Agreement may be terminated at any time, without the payment of any penalty, upon sixty (60) days’ written notice, by the vote of a majority of the outstanding voting securities of the Fund, or by the vote of the Fund’s Board of
Directors or by the Adviser.
|
(d) 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)
or in the event that the General Partner is removed as general partner of the Fund pursuant to Section 5.10 of the Partnership Agreement.
(e) The provisions of Sections 3, 10, and 15 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. Further, notwithstanding the termination or expiration of this Agreement as aforesaid, the Adviser shall be entitled to any amounts owed under Sections 3 and 4 through the date of termination or
expiration and Section 10 shall continue in force and effect and apply to the Adviser and each Covered Person as and to the extent applicable.
| 13. |
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.
| 14. |
Amendments.
|
Prior to the BDC Conversion, this Agreement may be amended by consent of the General Partner, the Adviser and Unaffiliated Investors holding greater than 50% of the Commitments
of the Unaffiliated Investors; provided, however, that without the consent of any Unaffiliated Limited Partners, the Adviser and the General Partner may amend this Agreement to (i) make a change that does not adversely affect the
Limited Partners in any material respect; (ii) make a change that is necessary or desirable to cure any ambiguity, or to correct or supplement any provision in this Agreement that would otherwise be inconsistent with any other provision in this
Agreement, or to otherwise provide for matters or questions arising under this Agreement so long as such change shall not be inconsistent with the provisions of this Agreement, in each case so long as such change does not adversely affect the
Limited Partners in any material respect; (iii) make a change that is necessary or desirable to satisfy any requirements, conditions or guidelines contained in any opinion, directive, order, statute, ruling or regulation of any U.S. federal, state
or non U.S. governmental entity, so long as such change is made in a manner which minimizes any adverse effect on the Limited Partners; (iv) address the implementation of the AIFM Directive; (v) make any amendments that are required or appropriate
to facilitate the BDC Conversion in accordance with Article XI of the Partnership Agreement; (vi) make any other amendments similar to the foregoing; or (vii) immediately prior to such time as the Fund elects to be regulated as a BDC under the
Investment Company Act, subject to applicable law, to remove any provision of this Agreement that would not continue to apply following the BDC Conversion.
Following the BDC Conversion, this Agreement may be amended by the mutual consent of the parties hereto; provided that the approval of the Fund’s independent directors
and the majority of the outstanding voting securities of the Fund must be obtained in conformity with the requirements of the Investment Company Act.
10
| 15. |
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 Delaware. Following the BDC Conversion, 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 Delaware, or any of the provisions herein, conflict with the provisions of the Investment Company Act, the latter shall control. To the fullest extent permitted by law, in the event of any dispute arising
out of the terms and conditions of this Agreement, the parties hereto consent and submit to the jurisdiction of the courts of the State of Delaware or (to the extent subject matter jurisdiction exists therefor) of the United States for the District
of Delaware.
| 16. |
Severability.
|
If it is determined by a tribunal of competent jurisdiction that any provision of this Agreement is invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.
| 17. |
Counterparts.
|
This Agreement may be executed, through the use of separate signature pages or supplemental agreements in any number of counterparts with the same effect as if the parties
executing such counterparts had all executed one counterpart.
| 18. |
No Third-Party Rights.
|
This Agreement is intended solely for the benefit of the parties hereto and, except as expressly provided to the contrary in this Agreement (including the Section 10
indemnification provisions), is not intended to confer any benefits upon, or create any rights in favor of, any Person other than the parties hereto.
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11
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed on the date above written.
| By: | Star Mountain Credit Opportunities Fund GP, LLC, its general partner | ||
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By:
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/s/ Xxxxx X. Xxxxxx | ||
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Name: Xxxxx X. Xxxxxx
|
|||
|
Title: Authorized Signatory
|
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STAR MOUNTAIN FUND MANAGEMENT, LLC
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| By: | Star Mountain Capital, LLC, its managing member | ||
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By:
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/s/ Xxxxx X. Xxxxxx | ||
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Name: Xxxxx X. Xxxxxx
|
|||
|
Title: Authorized Signatory
|
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