INVESTMENT ADVISORY AGREEMENT BETWEEN GOLUB CAPITAL BDC, INC. AND GC ADVISORS LLC
BETWEEN
XXXXX CAPITAL BDC,
INC.
AND
GC ADVISORS
LLC
Investment
Advisory Agreement made this _____ day of ____________, 2010 (this “Agreement”),
by and between XXXXX CAPITAL BDC, INC., a Delaware corporation (the
“Corporation”), and GC ADVISORS LLC, a Delaware limited liability company (the
“Adviser”).
WHEREAS,
the Corporation is a newly organized corporation that will operate as a
closed-end, non-diversified management investment company;
WHEREAS,
the Corporation has filed a registration statement on Form N-2 (the
“Registration Statement”) to register shares of its common stock for issuance in
an initial public offering (the “Offering”);
WHEREAS,
prior to the effectiveness of the Registration Statement, the Corporation filed
an election to be treated as a business development company under the Investment
Company Act of 1940, as amended (the “Investment Company Act”);
WHEREAS,
prior to and in anticipation of the Offering, the Corporation has acquired
interests in senior secured loans and other debt obligations that will comprise
a portion of the Corporation’s initial portfolio;
WHEREAS,
the Adviser is registered as an investment adviser under the Investment Advisers
Act of 1940, as amended (the “Investment Advisers Act”); and
WHEREAS,
the Corporation desires to retain the Adviser to furnish investment advisory
services to the Corporation on the terms and conditions hereinafter set forth,
and the Adviser wishes to be retained to provide such services.
NOW,
THEREFORE, in consideration of the premises and for other good and valuable
consideration, the parties hereby agree as follows:
1. Duties
of the Adviser.
(a) The
Corporation hereby employs the Adviser to act as the investment adviser to the
Corporation and to manage the investment and reinvestment of the assets of the
Corporation, subject to the supervision of the board of directors of the
Corporation (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 Registration Statement, as the same may
be amended from time to time, (ii) in accordance with the Investment Company
Act, the Investment Advisers Act and all other applicable federal and state law
and (iii) in accordance with the Corporation’s certificate of incorporation and
bylaws. 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 (including performing due diligence on prospective
portfolio companies); (iii) execute, close, service and monitor the
Corporation’s investments; (iv) determine the securities and other assets that
the Corporation will purchase, retain or sell; and (v) provide the Corporation
with such other investment advisory, research and related services as the
Corporation may, from time to time, reasonably require for the investment of its
funds. The Adviser shall have the power and authority on behalf of the
Corporation to effectuate its investment decisions for the Corporation,
including the execution and delivery of all documents relating to the
Corporation’s investments and the placing of orders for other purchase or sale
transactions on behalf of the Corporation. In the event that the Corporation
determines to acquire debt financing or to refinance existing debt financing,
the Adviser shall arrange for such financing on the Corporation’s behalf,
subject to the oversight and approval of the Board of Directors. If it is
necessary for the Adviser to make investments on behalf of the Corporation
through a subsidiary or special purpose vehicle, the Adviser shall have
authority to create or arrange for the creation of such subsidiary or special
purpose vehicle and to make such investments through such subsidiary or special
purpose vehicle in accordance with the Investment Company Act.
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(b) The
Adviser hereby accepts such employment and agrees during the term hereof to
render the services described herein for the amounts of compensation provided
herein.
(c) Subject
to the requirements of the Investment Company Act, the Adviser is hereby
authorized, but not required, 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 in all cases 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, the Investment Advisers Act and other applicable federal and state
law.
(d) For
all purposes herein provided, the Adviser shall 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
Adviser shall keep and preserve, in the manner and for the period that would be
applicable to investment companies registered under the Investment Company Act,
any books and records relevant to the provision of its investment advisory
services to the Corporation, shall specifically maintain all books and records
with respect to the Corporation’s portfolio transactions and shall render to the
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 Corporation are the property of the Corporation and shall surrender
promptly to the Corporation any such records upon the Corporation’s request,
provided that the Adviser may retain a copy of such records.
2. Corporation’s
Responsibilities and Expenses Payable by the Corporation. All
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, shall be provided and paid for by the Adviser and
not by the Corporation. The Corporation shall bear all other costs and expenses
of its operations and transactions, including, without limitation, those
relating to: (a) organization of the Corporation; (b) calculations of the net
asset value of the Corporation, including the cost and expenses of any
independent valuation firm; (c) fees and expenses incurred by the Adviser and
payable to third parties, including agents, consultants or other advisors, in
connection with monitoring the financial and legal affairs of the Corporation
and in monitoring the Corporation’s investments, performing due diligence on
prospective portfolio companies or otherwise relating to, or associated with,
evaluating and making investments; (d) interest payable on debt, if any,
incurred by the Corporation to finance its investments and expenses related to
unsuccessful portfolio acquisition efforts; (e) offerings of the common stock
and other securities of the Corporation, including the initial public offering
of the common stock of the Corporation; (f) investment advisory and management
fees; (g) administration fees payable under the administration agreement dated
as of even date herewith (the “Administration Agreement”), between the
Corporation and GC Service Company, LLC (the “Administrator”), the Corporation’s
administrator; (h) fees payable to third parties, including agents, consultants
or other advisors, relating to, or associated with, evaluating and making
investments, including costs associated with meeting potential financial
sponsors; (i) fees incurred by the Corporation in connection with the services
of transfer agents and dividend agents and custodial fees and expenses; (j)
federal and state registration fees; (k) all costs of registration and listing
the Corporation’s securities on any securities exchange; (l) federal, state and
local taxes; (m) independent Directors’ fees and expenses; (n) costs of
preparing and filing reports or other documents required by the Securities and
Exchange Commission and other regulators; (o) costs of any reports, proxy
statements or other notices to stockholders, including printing costs; (p) costs
associated with individual or group stockholders; (q) the Corporation’s
allocable portion of any fidelity bond, directors’ and officers’ errors and
omissions liability insurance policies, and any other insurance premiums; (r )
direct costs and expenses of administration, including printing, mailing, long
distance telephone, copying, secretarial and other staff, independent auditors
and outside legal costs; (s) proxy voting expenses; (t) and any and all other
expenses incurred by the Corporation or the Administrator in connection with
administering the Corporation’s business, including payments made under the
Administration Agreement based upon the Corporation’s allocable portion of the
Administrator’s overhead in performing its obligations under the Administration
Agreement, including rent and the allocable portion of the cost of the
Corporation’s chief compliance officer and chief financial officer and their
respective staffs.
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3. Compensation of the
Adviser. The Corporation agrees to pay, and the Adviser agrees to accept,
as compensation for the investment advisory and management services provided by
the Adviser hereunder, a fee consisting of two components: a base
management fee (the “Base Management Fee”) and an incentive fee (the “Incentive
Fee”), each 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 adopt a deferred compensation plan pursuant to which it 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 equal to 1.375% of the
average adjusted gross assets of the Corporation. As described below,
average adjusted gross assets of the Corporation for any period shall exclude
cash and cash equivalents and include assets purchased by the Corporation with
borrowed funds. For services rendered under this Agreement, the Base
Management Fee shall be payable quarterly in arrears. The Base Management Fee
shall be calculated based on the average value of the gross assets of the
Corporation at the end of the two most recently completed calendar
quarters. Such amount shall be appropriately adjusted (based on the
actual number of days elapsed relative to the total number of days in such
calendar quarter) for any share issuances or repurchases during a calendar
quarter. The Base Management Fee for any partial month or quarter
shall be appropriately pro-rated (based on the number of days actually elapsed
at the end of such partial month or quarter relative to the total number of days
in such month or quarter). For purposes of this Agreement, cash
equivalents shall mean U.S. government securities and commercial paper
instruments maturing within 270 days of the date of purchase of such instrument
by the Corporation.
(b) The
Incentive Fee shall be calculated and paid as set forth on Schedule A hereto, as
such schedule may be amended from time to time.
(c) As
set forth in Schedule A hereto, the Incentive Fee calculation shall include a
limitation such that the Corporation can only pay an Incentive Fee for any
quarter to the Adviser if, after giving effect to such payment, the cumulative
Incentives Fees paid to the Adviser from the date on which the Corporation
elected to be treated as a business development company through the date of such
payment would be less than or equal to 20% of the Cumulative Pre-Incentive Net
Income (as such term is defined in Schedule A hereto) of the
Corporation.
4. Covenants of the
Adviser. The Adviser hereby covenants that it is registered as
an investment adviser under the Investment Advisers Act. The Adviser hereby
agrees that its activities shall at all times be in compliance in all material
respects with all applicable federal and state laws governing its operations and
investments.
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5. Excess Brokerage
Commissions. The Adviser is hereby authorized, to the fullest extent now
or hereafter permitted by law, to cause the Corporation to pay a member of a
national securities exchange, broker or dealer an amount of commission for
effecting a securities transaction in excess of the amount of commission another
member of such exchange, broker or dealer would have charged for effecting such
transaction if the Adviser determines, in good faith and 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
the amount of such 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 result for the Corporation.
6. Proxy
Voting. The Adviser shall be responsible for voting any
proxies solicited by an issuer of securities held by the Corporation in the best
interest of the Corporation and in accordance with the Adviser’s proxy voting
policies and procedures, as any such proxy voting policies and procedures may be
amended from time to time. The Corporation has been provided with a
copy of the Adviser’s proxy voting policies and procedures and has been informed
as to how it can obtain further information from the Adviser regarding proxy
voting activities undertaken on behalf of the Corporation. The
Adviser shall be responsible for reporting the Corporation’s proxy voting
activities, as required, through periodic filings on Form N-PX.
7. Limitations on the
Employment of the Adviser. The services of the Adviser to the Corporation
are not, and shall not be, exclusive. 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; provided that
its services to the Corporation hereunder are not impaired
thereby. 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 portfolio companies
of the Corporation, subject at all times to applicable law). So long
as this Agreement or any extension, renewal or amendment hereof remains in
effect, the Adviser shall be the only investment adviser for the Corporation,
subject to the Adviser’s right to enter into sub-advisory
agreements. The Adviser assumes no responsibility under this
Agreement other than to render the services called for hereunder. It is
understood that directors, officers, employees and stockholders of the
Corporation are or may become interested in the Adviser and its affiliates, as
directors, officers, employees, partners, stockholders, members, managers or
otherwise, and that the Adviser and directors, officers, employees, partners,
stockholders, members and managers of the Adviser and its affiliates are or may
become similarly interested in the Corporation as stockholders or
otherwise.
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Subject
to any restrictions prescribed by law, by the provisions of the Code
of Ethics of the Corporation and the Adviser and by the Adviser’s Allocation
Policy, the Adviser and its members, officers, employees and agents shall be
free from time to time to acquire, possess, manage and dispose of securities or
other investment assets for their own accounts, for the accounts of their family
members, for the account of any entity in which they have a beneficial interest
or for the accounts of others for whom they may provide investment advisory,
brokerage or other services (collectively, “Managed Accounts”), in transactions
that may or may not correspond with transactions effected or positions held by
the Corporation or to give advice and take action with respect to Managed
Accounts that differs from advice given to, or action taken on behalf of, the
Corporation; provided that the Adviser allocates investment opportunities to the
Corporation, over a period of time on a fair and equitable basis compared to
investment opportunities extended to other Managed Accounts. The
Adviser is not, and shall not be, obligated to initiate the purchase or sale for
the Corporation of any security that the Adviser and its members, officers,
employees or agents may purchase or sell for its or their own accounts or for
the account of any other client if, in the opinion of the Adviser, such
transaction or investment appears unsuitable or undesirable for the
Corporation. Moreover, it is understood that when the Adviser
determines that it would be appropriate for the Corporation and one or more
Managed Accounts to participate in the same investment opportunity, the Adviser
shall seek to execute orders for the Corporation and for such Managed Account(s)
on a basis that the Adviser considers to be fair and equitable over
time. In such situations, the Adviser may (but is not required to)
place orders for the Corporation and each Managed Account simultaneously or on
an aggregated basis. If all such orders are not filled at the same
price, the Adviser may cause the Corporation and each Managed Account to pay or
receive the average of the prices at which the orders were filled for the
Corporation and all relevant Managed Accounts on each applicable
day. If all such orders cannot be fully executed under prevailing
market conditions, the Adviser may allocate the investment opportunities among
participating accounts in a manner that the Adviser considers equitable, taking
into account, among other things, the size of each account, the size of the
order placed for each account and any other factors that the Adviser deems
relevant.
8. Responsibility of Dual
Directors, Officers and/or Employees. 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 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
and/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.
9. Limitation of Liability of
the Adviser; Indemnification. The Adviser (and its officers, managers,
partners, agents, employees, controlling persons, members and any other person
or entity affiliated with the Adviser, 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 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, partners, agents, employees, controlling persons, members
and any other person or entity affiliated with the Adviser, including without
limitation its general partner and 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 9 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).
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10. 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,
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 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 shall
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 9 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 Section 3 through the date of termination or expiration and
Section 9 shall continue in force and effect and apply to the Adviser and its
representatives as and to the extent applicable.
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11. 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.
12. 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.
13. Entire Agreement; Governing
Law. This Agreement contains the entire agreement of the parties and
supersedes all prior agreements, understandings and arrangements with respect to
the subject matter hereof. This Agreement shall be construed in accordance with
the laws of the State of New York 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.
* * * *
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed on the date above written.
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XXXXX
CAPITAL BDC, INC.
Name:
_____________________________
Title: _____________________________
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GC
ADVISORS LLC
Name:
_____________________________
Title: _____________________________
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SCHEDULE
A
Calculation
and Payment of Incentive Fee
The
Incentive Fee shall be calculated as provided below and payable (i) quarterly in
arrears or (ii) in the event that the Investment Advisory Agreement is
terminated, as of the termination date (each, a “Performance Period”). The
Adviser shall not be required to reimburse the Corporation for any part of an
Incentive Fee it receives that was based on accrued interest that the
Corporation accrues but never actually receives.
Income and Capital Gains Incentive Fee
Calculation
The
income and capital gains incentive fee calculation (the “Income and Capital
Gains Incentive Fee Calculation”) has two parts: (i) the income component and
(ii) the capital gains component.
Income
Component
The
income component is calculated quarterly in arrears based on the Pre-Incentive
Fee Net Investment Income of the Corporation for the immediately preceding
calendar quarter.
Pre-Incentive
Fee Net Investment Income shall not include any realized capital gains, realized
capital losses or unrealized capital appreciation or
depreciation. Once calculated, Pre-Incentive Fee Net Investment
Income, expressed as a rate of return on the value of the net assets of the
Corporation at the end of the immediately preceding calendar quarter, shall be
compared to a fixed “hurdle rate” of 2.0% quarterly. For purposes of
this calculation, net assets for any period shall be equal to total assets less
indebtedness of the Corporation, before taking into account any Incentive Fees
payable during such period. Pre-Incentive Fee Net Investment Income
used to calculate the income component of the Incentive Fee shall also be
included in the amount of the total assets of the Corporation used to calculate
the 1.375% Base Management Fee. For purposes of this calculation,
total assets of the Corporation shall exclude cash and cash equivalents and
shall include assets purchased with borrowed funds.
The
income component of the Income and Capital Gains Incentive Fee Calculation with
respect to the Pre-Incentive Fee Net Investment Income of the corporation shall
be calculated quarterly, in arrears, as follows:
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•
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zero
in any calendar quarter in which the Pre-Incentive Fee Net Investment
Income does not exceed the hurdle
rate;
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•
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100.0%
of the Pre-Incentive Fee Net Investment Income of the Corporation with
respect to that portion of such Pre-Incentive Fee Net Investment Income,
if any, that exceeds the hurdle rate but is less than 2.5% in any calendar
quarter; and
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•
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20.0%
of the amount of the Pre-Incentive Fee Net Investment Income of the
Corporation, if any, that exceeds 2.5% in any calendar
quarter.
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The
portion of the Pre-Incentive Fee Net Investment Income which exceeds the hurdle
rate but is less than 2.5% is the “catch-up” provision. These
calculations shall be appropriately adjusted for any share issuances or
repurchases during the quarter (based on the actual number of days elapsed
relative to the total number of days in such calendar quarter).
Capital Gains
Component
The
second part of the Incentive Fee Calculation (the “Capital Gain Incentive Fee”)
shall equal (a) 20.0% of the Capital Gain Incentive Fee Base of the Corporation
(as defined below), if any, calculated in arrears as of the end of each calendar
year (or upon termination of the Investment Advisory Agreement, as of the
termination date), commencing with the year ending December 31, 2010, less (b)
the aggregate amount of any previously paid Capital Gain Incentive
Fees. For purposes of this calculation, the Capital Gain Incentive
Fee Base shall equal the sum of (1) the realized capital gains of the
Corporation, if any, on a cumulative positive basis from the date of the
Corporation’s election to be treated as a business development company through
the end of each calendar year, (2) all realized capital losses of the
Corporation on a cumulative basis and (3) all unrealized capital depreciation of
the Corporation on a cumulative basis.
The
cumulative aggregate realized capital gains of the Corporation shall be
calculated as the sum of the differences, if positive, between (a) the net sales
price of each investment in the Corporation’s portfolio when sold and (b) the
accreted or amortized cost basis of such investment. The cumulative
aggregate realized capital losses of the Corporation shall be calculated as the
sum of the amounts by which (a) the net sales price of each investment in the
Corporation’s portfolio when sold is less than (b) the accreted or amortized
cost basis of such investment. The aggregate unrealized capital
depreciation of the Corporation shall be calculated as the sum of the
differences, if negative, between (a) the valuation of each investment in the
Corporation’s portfolio as of the applicable Capital Gain Incentive Fee
calculation date and (b) the accreted or amortized cost basis of such
investment.
The sum
of the Income Incentive Fee and the Capital Gain Incentive Fee shall be the
Incentive Fee.
Limitation
on Incentive Fee
Each
quarterly Incentive Fee payable on the Income and Capital Gain Incentive Fee
Calculation shall be subject to a cap (the “Incentive Fee Cap”). The
Incentive Fee Cap in any quarter shall be equal to the difference between (a)
20.0% of Cumulative Pre-Incentive Fee Net Income (as defined below) and (b)
cumulative Incentive Fees of any kind paid to the Adviser by the Corporation
since the effective date of the Corporation’s election to be treated as a
business development company. To the extent the Incentive Fee Cap is zero or a
negative value in any quarter, no incentive fee shall be payable in that
quarter. “Cumulative Pre-Incentive Fee Net Income” shall be equal to the sum of
(a) Pre-Incentive Fee Net Investment Income (as defined below) for each period
since the effective date of the Corporation’s election to be treated as a
business development company and (b) cumulative aggregate realized capital
gains, cumulative aggregate realized capital losses, cumulative aggregate
unrealized capital depreciation and cumulative aggregate unrealized capital
appreciation since the date of effective the Corporation’s election to be
treated as a business development company. “Pre-Incentive Fee Net
Investment Income” means, with respect to any calendar quarter, interest income,
dividend income and any other income (including any other fees such as
commitment, origination, structuring, diligence and consulting fees or other
fees that the Corporation receives from portfolio companies but excluding fees
for providing managerial assistance) accrued during such calendar quarter, minus
operating expenses for such calendar quarter (including the Base Management Fee,
taxes, any expenses payable under the Investment Advisory Agreement and the
Administration Agreement, and any interest expense and dividends paid on any
outstanding preferred stock, but excluding the Incentive Fee, if any).
Pre-Incentive Fee Net Investment Income includes, in the case of investments
with a deferred interest feature such as market discount, debt instruments with
payment in kind (“PIK”) interest, preferred stock with PIK dividends and zero
coupon securities, accrued income that the Corporation has not yet received in
cash.
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If, for
any relevant period, the Incentive Fee Cap calculation results in the
Corporation paying less than the amount of the Incentive Fee calculated above,
then the difference between the Incentive Fee and the Incentive Fee Cap will not
be paid by the Corporation, and will not be received by the Adviser, as an
Incentive Fee, either at the end of such relevant period or at the end of any
future period.
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