Exhibit G
INVESTMENT ADVISORY MANAGEMENT AGREEMENT
Agreement made this [X] day of April 2004, by and between Porticoes
Capital Corporation, a Maryland corporation (the "Corporation"), and Porticoes
Investment Management, LLC, a Delaware limited liability company (the
"Adviser").
WHEREAS, the Corporation is a newly organized closed-end management
investment company that has elected to be treated as a business development
company 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 (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 engages 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 April __,
2004, 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) 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 and monitor
the Corporation's investments; (iv) determine the securities and other assets
that the Corporation will purchase, retain, or sell; (v) perform due diligence
on prospective portfolio companies; (vi) arrange for, structure and negotiate
financing for the Corporation (including collateralized debt obligation
transactions and securitizations); and (vii) 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 or arrange
financing on behalf of the Corporation 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 or
arrange such financing through such special purpose vehicle in accordance with
the Investment Company Act.
(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) Subject to the requirements of the Investment Company Act, the Adviser
is hereby authorized to enter into one or more sub-advisory agreements with
other investment advisers (each, a "Sub-Adviser") pursuant to which the Adviser
may obtain the services of the Sub-Adviser(s) to assist the Adviser in
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.
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All investment professionals of the Adviser and their respective staffs,
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 PIM
Holdings, LLC (the "Administrator") pursuant to an Administration Agreement (the
"Administration Agreement") between the Corporation and the Administrator. The
Corporation will bear 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 (including the cost and
expenses of any independent valuation firm); expenses incurred by the Adviser
payable to third parties, including agents, consultants or other advisors, in
monitoring financial and legal affairs for the Corporation and in monitoring the
Corporation's investments and performing due diligence on its prospective
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portfolio companies; interest payable on debt, if any, incurred to finance the
Corporation's investments; offerings of the Corporation's common stock and other
securities; investment advisory and management fees; administration fees, if
any, payable under the Administration Agreement; fees payable to third parties,
including agents, consultants or other advisors, relating to, or associated
with, evaluating and making 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; brokerage commissions; costs of
preparing and filing reports or other documents required by the Securities and
Exchange Commission; costs of any reports, proxy statements or other notices to
stockholders, including printing costs; the Corporation's allocable portion of
the fidelity bond, directors and officers/errors and omissions liability
insurance, and any other insurance premiums; direct costs of administration,
including printing, mailing, long distance telephone, copying, secretarial and
other staff, independent audits and outside legal costs; and all other expenses
incurred by the Corporation or the Administrator in connection with
administering the Corporation's business, including payments under the
Administration Agreement based upon the Corporation's allocable portion of
overhead and other expenses incurred by the Administrator in performing its
obligations under the Administration Agreement, including rent and the
Corporation's chief compliance officer and chief financial officer and their
respective staffs.
3. Compensation of the Adviser.
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The Corporation agrees to pay, and the Adviser agrees to accept, as
compensation for the services provided by the Adviser hereunder, a base
management fee ("Base Management Fee") and an incentive fee ("Incentive Fee") as
hereinafter set forth. The Corporation 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
Corporation may adopt a deferred compensation plan pursuant to which the Adviser
may elect, to defer all or a portion of its fees hereunder for a specified
period of time.
(a) The Base Management Fee shall be calculated at an annual rate of 2.00%
of the Corporation's gross assets. For services rendered during the period
commencing from the closing of the Corporation's offering of its common stock,
pursuant to the Registration Statement, through and including _________, 2004,
the Base Management Fee will be payable monthly in arrears by the ___ day after
the end of such month. For services rendered after ________, 2004, the Base
Management Fee will be payable quarterly in arrears by the ___ day after the end
of such quarter. For the first quarter of the Corporation's operations, the Base
Management Fee will be calculated based on the initial value of the
Corporation's gross assets. Subsequently, 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 appropriately
adjusted for any share issuances or repurchases during the current calendar
quarter. Base Management Fees for any partial month or quarter will be
appropriately pro rated.
(b) The Incentive Fee shall consist of two parts, as follows:
(i) One part will be calculated and payable quarterly in arrears by
the ___ day after the end of such quarter based on the
pre-Incentive Fee net investment income for the immediately
preceding calendar quarter. For this purpose,
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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 fees for providing significant managerial
assistance or other fees that the Corporation receives from
portfolio companies) earned by the Corporation during the
calendar quarter, minus the Corporation's operating expenses
for the quarter (including the Base Management Fee, any fees
and expenses payable under this Agreement, 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 any consulting
or other fees that we receive from portfolio companies but does
not include any realized capital gains, realized capital losses
or unrealized capital appreciation. 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% annualized). 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; (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);
and (3) 20% 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). These calculations will be
appropriately pro rated for any period of less than three
months and adjusted for any share issuances or repurchases
during the current quarter.
(ii) The second part of the Incentive Fee (the "Capital Gains Fee")
will be determined and payable in arrears as of the end of each
calendar year by the ____ day after the end of such calendar
year (or upon termination of this Agreement as set forth
below), commencing on December 31, 2004, and will equal 20.0%
of the Corporation's net realized capital gains for the
calendar year, if any, computed net of all unrealized capital
losses and unrealized capital depreciation at the end of such
year; provided that the Incentive Fee determined as of December
31, 2004 will be calculated for a period of shorter than twelve
calendar months any net realized capital gains and net
unrealized capital losses for the period ending December 31,
2004. In the event that this Agreement shall terminate as of a
date that is not a calendar year end, the termination date
shall be treated as though it were a calendar year end for
purposes of calculating and paying a Capital Gains Fee.
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4. Covenants of the Adviser.
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The Adviser covenants that it 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.
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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 Engagement of the Adviser.
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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 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
Corporation, 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, 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
Corporation's portfolio companies, subject to applicable law). 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.
7. Responsibility of Dual Directors, Officers and/or Employees.
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If any person who is a manager, partner, officer or employee of the
Adviser or the Administrator 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, partner, officer and/or employee of
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the Adviser or the Administrator shall be deemed to be acting in such capacity
solely for the Corporation, and not as a manager, partner, officer or employee
of the Adviser or the Administrator or under the control or direction of the
Adviser or the Administrator, even if paid by the Adviser or the Administrator.
8. Limitation of Liability of the Adviser; Indemnification.
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The Adviser (and its officers, managers, agents, employees, controlling
persons, members and any other person or entity affiliated with the Adviser,
including without limitation the Administrator) 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 (as the same is finally
determined by judicial proceedings) with respect to the receipt of compensation
for services, and the Corporation shall indemnify, defend and protect the
Adviser (and its officers, managers, agents, employees, controlling persons,
members and any other person or entity affiliated with the Adviser, including
without limitation the Administrator, each of whom shall be deemed a third party
beneficiary hereof) (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
(as the same shall be determined in accordance with the Investment Company Act
and any interpretations or guidance by the Securities and Exchange Commission or
its staff thereunder).
9. Effectiveness, Duration and Termination of Agreement.
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This Agreement shall become effective as of the first 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
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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. Further, notwithstanding the termination or expiration of this
Agreement as aforesaid, the Adviser shall be entitled to any amounts owed under
Paragraph 3 through the date of termination or expiration and Paragraph 8 shall
continue in force and effect and apply to the Adviser and its representatives as
and to the extent applicable.
10. Notices.
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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.
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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.
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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 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.
PORTICOES CAPITAL CORPORATION
By:
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Name:
Title:
PORTICOES INVESTMENT ADMINISTRATION, LLC
By: PIM Holdings, LLC, its sole member
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Name:
Title:
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