Exhibit (g)(1)
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
BETWEEN
BLACKRIDGE INVESTMENT CORP.
AND
BLACKSTONE MEZZANINE ADVISORS L.P.
Agreement made this 25th day of May 2004, by and between BLACKRIDGE
INVESTMENT CORP., a Maryland corporation (the "Corporation"), and BLACKSTONE
MEZZANINE ADVISORS L.P., a Delaware limited partnership (the "Advisor").
WHEREAS, the Corporation is a newly-organized closed-end
non-diversified 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 Advisor is an investment advisor that has registered under
the Investment Advisers Act of 1940 (the "Advisers Act"); and
WHEREAS, the Corporation desires to retain the Advisor to furnish
investment advisory services to the Corporation on the terms and conditions
hereinafter set forth, and the Advisor wishes to be retained to provide such
services.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereby agree as follows:
1. Duties of the Advisor.
(a) The Corporation hereby employs the Advisor to act as the investment
advisor 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 14,
2004, as the same shall be amended from time to time (as amended, the
"Registration Statement"), (ii) in accordance with the Investment Company Act,
(iii) in accordance with the policies adopted by the Board of Directors to the
extent that such policies do not conflict with any provision of this Agreement
and (iv) 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 Advisor shall, during the term and subject to
the
provisions of this Agreement, (1) determine the composition of the portfolio
of the Corporation, the nature and timing of the changes thereto and the manner
of implementing such changes; (2) identify, evaluate and negotiate the structure
of the investments made by the Corporation; (3) close and monitor the
Corporation's investments; (4) determine the securities and other assets that
the Corporation will purchase, retain, or sell and the terms on which such
securities are purchased and/or sold; (5) perform due diligence on prospective
portfolio companies; and (6) provide the Corporation with such other investment
advisory, research and related services as the Corporation and the Advisor
mutually agree may, from time to time, reasonably be required for the investment
of the Corporation's funds. The Advisor 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 obtain debt financing, the Advisor will undertake to
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
Advisor to make investments on behalf of the Corporation through a special
purpose vehicle, the Advisor 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 compliance with the Investment Company Act.
(b) The Advisor hereby accepts such employment 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
Advisor is hereby authorized to enter into one or more sub-advisory agreements
with other investment advisors (each, a "Sub-Advisor") pursuant to which the
Advisor may obtain the services of the Sub-Advisor(s) to assist the Advisor in
fulfilling its responsibilities hereunder. Specifically, the Advisor may retain
a Sub-Advisor to recommend specific securities or other investments based upon
the Corporation's investment objective and policies, and work, along with the
Advisor, 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 Advisor and the Corporation. The
Advisor, and not the Corporation, shall be responsible for any compensation
payable to any Sub-Advisor. Any sub-advisory agreement entered into by the
Advisor shall be in accordance with the requirements of the Investment Company
Act and other applicable federal and state law.
(d) The Advisor 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.
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(e) The Advisor 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 render to the
Corporation's Board of Directors such periodic and special reports as the Board
may reasonably request. The Advisor 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 Advisor may retain a copy of such records.
(f) So long as this Agreement is in effect, the Corporation shall not,
unless the Advisor otherwise determines in its sole discretion, subject to the
approval of the Board of Directors, invest in any of the following:
(i) mezzanine or private equity investments in any company in
which Blackstone Group Holdings L.P. or any of its
affiliates ("Blackstone") has a pre-existing investment;
(ii) non-control common equity investments in any company
unless the Corporation has purchased, or will purchase,
debt securities or preferred stock of such company;
(iii) control equity investments of greater than $20 million;
(iv) equity investments in start-up companies and other venture
capital equity investments;
(v) real estate and real estate-related securities, including
mortgage-backed securities; or
(vi) distressed debt.
2. Corporation's Responsibilities and Expenses Payable by the
Corporation. All investment professionals of the Advisor 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 the Advisor and not by the Corporation. The Corporation will bear all
other costs and expenses of its operations and transactions, including (without
limitation) those relating to: its organization and any offering of the
Corporation's common stock and any other securities, including the securities
issued pursuant to the Registration Statement; calculating the Corporation's net
asset value (including the cost and expenses of any independent valuation firm);
expenses incurred by the Advisor 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 portfolio
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companies; interest payable on debt or dividends on the Corporation's preferred
stock, if any; investment advisory and management fees; administration fees, if
any, payable under the Administration Agreement between the Corporation and
Blackridge Administration LLC (the "Administrator") dated as of May 25, 2004
(the "Administration Agreement), to the Corporation's administrator; 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; 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 cost of the fidelity bond,
directors and officers/errors and omissions liability insurance, and any other
insurance premiums; direct costs and expenses of administration, including
printing, mailing, long distance telephone, copying, secretarial and other
staff, independent auditors and outside legal costs; and all other expenses
incurred by the Corporation or the Administrator in connection with
administering the Corporation's business, such as the Corporation's allocable
portion of overhead under the Administration Agreement including costs incurred
by the Administrator in connection with providing managerial assistance on the
Corporation's behalf to those portfolio companies to which the Corporation is
required to provide assistance, rent, the full cost of the Corporation's chief
financial officer and his or her staff, the Corporation's allocable portion of
the cost of the Corporation's chief compliance officer and his or her staff,
technology and communications costs and other operating costs; provided,
however, that if at any time in the future the Corporation's chief financial
officer shall provide services to affiliates of the Advisor in addition to his
or her role as the Corporation's chief financial officer, then the Corporation
will thereafter bear only its allocable portion of the cost of its chief
financial officer and his or her staff. The Advisor may be reimbursed directly
from existing and prospective portfolio companies for out-of-pocket costs
incurred by the Advisor. The Corporation hereby consents to such reimbursements
and acknowledges the appropriateness thereof. Further, to the extent the
Corporation is reimbursed for any out-of-pocket costs incurred by the Advisor,
the Corporation shall, to the same extent, reimburse the Advisor for such costs.
3. Compensation of the Advisor. The Corporation agrees to pay, and the
Advisor agrees to accept, as compensation for the services provided by the
Advisor hereunder, a base management fee (the "Base Management Fee") and an
incentive fee (the "Incentive Fee") as hereinafter set forth. The Corporation
shall make any payments due hereunder to the Advisor or to the Advisor's
designee as the Advisor may otherwise direct. To the extent permitted by
applicable law, the Advisor may, in its sole discretion, elect, or the
Corporation may adopt a deferred compensation plan pursuant to which the Advisor
may elect, to defer all or a portion of its fees hereunder for a specified
period of time.
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(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 September 30, 2004, the Base
Management Fee will be payable monthly in arrears. For services rendered after
such time, the Base Management Fee will be payable quarterly in arrears. Through
September 30, 2004, the Base Management Fee will be calculated based on the
value of the Corporation's gross assets immediately following the closing of the
Corporation's offering of its common stock pursuant to the Registration
Statement. For quarters ended subsequent to September 30, 2004, the Base
Management Fee will be calculated based on the average value of the
Corporation's gross assets at the end of (i) such quarterly period and (ii) the
prior quarterly period, appropriately adjusted for any share issuances or
repurchases by the Corporation during such quarterly period. The Base Management
Fee for any partial month or quarter will be appropriately pro rated. The
Corporation shall make a good faith estimate of the Base Management Fee (the
"Estimated Base Management Fee") payable for each period described above within
five (5) business days of the end of each such period. The Corporation shall pay
to the Advisor in cash an amount equal to such Estimated Base Management Fee
within ten (10) business days of the end of each such period. A final
calculation of such Base Management Fee (the "Final Base Management Fee") shall
be completed in conjunction with the completion of the Corporation's financial
statements for each such period. To the extent the Estimated Base Management Fee
previously paid to the Advisor for such period exceeds the Final Base Management
Fee for such period, within ten (10) business days of written notification by
the Corporation, the Advisor shall pay, in cash, such difference to the
Corporation. To the extent the Estimated Base Management Fee previously paid to
the Advisor for such period is less than the Final Base Management Fee for such
period, within ten (10) business days of the calculation of the Final Base
Management Fee for such period, the Corporation shall pay, in cash, such
difference to the Advisor.
(b) The Incentive Fee shall consist of two parts, as follows:
(i) One part will be calculated and payable quarterly in
arrears based on the pre-Incentive Fee net investment
income for such quarter. For this purpose, pre-Incentive
Fee net investment income means interest income, dividend
income and any other income, including any other fees
(other than fees for providing managerial assistance) such
as commitment, origination, structuring, diligence and
consulting fees or other fees that the Corporation
receives from portfolio companies, accrued by the
Corporation during such quarter, minus the Corporation's
operating expenses for such quarter (including the Base
Management Fee and any interest expense and dividends paid
on any
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issued and outstanding preferred stock, but excluding the
Incentive Fee and costs of providing managerial assistance
up to the amount of related fees recognized as income).
Pre-Incentive Fee net investment income does not include
any realized capital gains, realized capital losses or
unrealized capital appreciation or depreciation. The
pre-Incentive Fee net investment income for such quarter
will be divided by the value of the Corporation's net
assets (defined as total assets less indebtedness for
borrowed money) at the end of the immediately preceding
quarter to determine a rate of return (the "Rate of
Return"). Such Rate of Return will be compared to a
"hurdle rate" of 1.75% per quarter (7.00% annualized) (the
"Hurdle Rate"). The Corporation will pay the Advisor an
Incentive Fee with respect to the Corporation's
pre-Incentive Fee net investment income for each quarterly
period as follows: (1) no Incentive Fee for any quarterly
period in which the Rate of Return does not exceed the
Hurdle Rate; and (2) in any quarterly period in which the
Rate of Return exceeds the Hurdle Rate, (x) 100% of the
Corporation's pre-Incentive Fee net investment income in
excess of the amount required to achieve the Hurdle Rate,
not to exceed 0.4375% of the Corporation's net assets
(defined as total assets less indebtedness for borrowed
money) at the end of the immediately preceding quarter
(1.75% annualized) and (y) 20% of the amount of the
Corporation's pre-Incentive Fee net investment income, if
any, for such quarterly period that exceeds 2.1875% of the
Corporation's net assets (defined as total assets less
indebtedness for borrowed money) at the end of the
immediately preceding 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 by the Corporation during
such quarterly period.
(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 (or upon termination of this
Agreement as set forth below), commencing on December 31,
2004, and will equal 20.0% of the Corporation's realized
capital gains for such calendar year, if any, computed net
of all realized capital losses and unrealized capital
depreciation in such year. For clarification, this
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calculation is intended to (1) reflect the reversal of
unrealized capital depreciation, if any, included in this
calculation in prior periods related to investments
subject to realizations during the calendar year for which
such calculation is being made, to the extent such
unrealized depreciation reduced incentive fees otherwise
payable in prior periods, and (2) exclude any losses,
realized or unrealized, which are the result of an
adjustment to, or realization of, previously recognized
unrealized capital appreciation which was not included in
this calculation in prior periods. The Incentive Fee
determined as of December 31, 2004 will be calculated for
the period commencing from the closing of the
Corporation's offering of its common stock pursuant to the
Registration Statement and ending on December 31, 2004 and
shall be calculated in the same manner described in the
first sentence of this paragraph. In the event that this
Agreement is terminated or expires as of a date that is
not a calendar year end, the termination date or
expiration date, as the case may be, shall be treated as
though it were a calendar year end for purposes of
calculating and paying a Capital Gains Fee.
(iii) The Incentive Fee payable for any period shall be
calculated in conjunction with the completion of the
Company's financial statements for such period. The
Incentive Fee, if any, shall be payable by the Corporation
to the Advisor in cash within ten (10) business days of
the completion of such calculation, which date shall not
be later than 100 days following the end of such period.
4. Representations and Covenants of the Advisor. The Advisor represents
that it is registered as an investment advisor under the Advisers Act. The
Advisor will use its best efforts to ensure 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 Advisor 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 Advisor determines in good faith, taking
into account such factors as price (including the applicable brokerage
commission or dealer spread), size of order, difficulty of
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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 Advisor. The services of the
Advisor to the Corporation are not exclusive, and the Advisor and its affiliates
and their respective officers and directors 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 Advisor
or its affiliates 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). The Corporation acknowledges that the Advisor serves as the investment
advisor to Blackstone Mezzanine Partners L.P and that, notwithstanding anything
in the preceding sentence to the contrary, such service shall be permitted under
the terms of this Agreement. So long as this Agreement or any extension, renewal
or amendment remains in effect, the Advisor shall be the only investment advisor
for the Corporation, subject to the Advisor's right to enter into sub-advisory
agreements. The Advisor 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 Advisor and its affiliates, as directors, officers,
employees, partners, stockholders, members, managers or otherwise, and that the
Advisor and directors, officers, employees, partners, stockholders, members and
managers of the Advisor 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. If any
person who is a manager, partner, officer or employee of the Advisor 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 the Advisor 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 Advisor or the
Administrator or under the control or direction of the Advisor or the
Administrator, even if paid by the Advisor or the Administrator.
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8. Limitation of Liability of the Advisor. The Advisor (and its
officers, managers, partners, agents, employees, controlling persons, members
and any other person or entity affiliated with the Advisor, including without
limitation its general partner and the Administrator) shall not be liable to the
Corporation for any action taken or omitted to be taken by the Advisor in
connection with the performance of any of its duties or obligations under this
Agreement or otherwise as an investment advisor 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.
9. Effectiveness, Duration and Termination of Agreement. This Agreement
shall become effective as of the first date above written. This Agreement shall
remain in effect for two years. Thereafter, this Agreement 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 Advisor. 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 Section 8
of this Agreement shall remain in full force and effect, and the Advisor (and
its officers, managers, partners, agents, employees, controlling persons,
members and any other person or entity affiliated with the Advisor, including
without limitation its general partner and the Administrator) shall remain
entitled to the benefits thereof, notwithstanding any expiration or termination
of this Agreement. Further, notwithstanding the termination or expiration of
this Agreement as aforesaid, the Advisor shall be entitled to any amounts owed
under Section 3 as of and through the date of termination or expiration.
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
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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.
BLACKRIDGE INVESTMENT CORP.
By: /s/ Xxxxxx Xxxxxx
---------------------
Name: Xxxxxx Xxxxxx
Title: Chief Executive Officer
BLACKSTONE MEZZANINE ADVISORS L.P.
By: BMEZ Advisors L.L.C., its General
Partner
By: /s/ Xxxxx X. Xxxxxxxx
---------------------
Xxxxx X. Xxxxxxxx
its Founding Member
By: /s/ Xxxxxxx X. Xxxxxxxxxx
-------------------------
Xxxxxxx X. Xxxxxxxxxx
its Founding Member
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