EXHIBIT g
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT (the "Agreement") made this ____ day of
___________, 2004, by and between XXXXXXXX MEZZANINE CAPITAL CORP., a Maryland
corporation (the "Company"), and XXXXXXXX CAPITAL MANAGEMENT, L.L.C., a Delaware
limited liability company (the "Adviser").
WHEREAS, the Company is a newly organized, closed-end non-diversified
investment company that has elected business development company status under
the Investment Company Act of 1940, as amended (collectively, with the rules and
regulations promulgated thereunder, the "Investment Company Act");
WHEREAS, the Adviser is an investment adviser registered as such under
the Investment Advisers Act of 1940, as amended (collectively, with the rules
and regulations promulgated thereunder, the "Advisers Act"); and
WHEREAS, the Company desires to retain the Adviser to furnish
investment advisory services to the Company 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 mutual promises and covenants
herein contained, it is agreed by and between the parties hereto as follows:
1. DUTIES OF THE ADVISER.
(a) The Company hereby employs the Adviser to act as the
investment adviser to the Company and to manage the investment and
reinvestment of the assets of the Company, subject to the supervision
of the Board of Directors of the Company (the "Board"), for the period
and upon the terms herein set forth, in accordance with (i) the
investment objectives, policies and restrictions that are set forth in
the Company's Registration Statement on Form N-2, as such investment
objectives, policies and restrictions may be amended from time to time,
(ii) the Investment Company Act, (iii) all other applicable federal and
state securities and commodities laws, rules and regulations, and (iv)
the Company's articles of incorporation and by-laws, as such articles
of incorporation and by-laws may be amended from time to time.
(b) Without limiting the generality of the foregoing
paragraph (a), the Adviser shall, during the term and subject to the
provisions of this Agreement: (i) determine the composition of the
portfolio of the Company, 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 Company;
(iii) close, monitor and service the Company's investments; (iv)
determine the securities and other assets that the Company will
purchase, retain, or sell; (v) recommend to the Valuation Committee of
the Board the fair value of the Company's investments which are not
publicly traded debt or equity securities based upon the valuation
guidelines adopted by the Board; and (vi) provide the Company with such
other investment advisory, research and related services as the Company
may, from time to time, reasonably require for the investment of the
Company's assets. The Adviser shall have the power and authority on
behalf of the
Company to effectuate its investment decisions for the Company,
including the execution and delivery of all documents relating to the
Company's investments and the placing of orders for other purchase or
sale transactions on behalf of the Company. In the event that the
Company determines to acquire debt financing, the Adviser will arrange
for such financing on the Company's behalf, subject to the oversight
and approval of the Board.
(c) The Adviser shall keep and preserve for the period
required by the Investment Company Act any books and records related to
the provision of investment advisory services to the Company and
required to be maintained under Rule 31a-2 under the Investment Company
Act for an investment adviser to a business development company, and
shall render to the Board such periodic and special reports as the
Board may reasonably request. The Adviser agrees that any records that
it maintains for the Company as required under the Investment Company
Act are the property of the Company and will surrender promptly to the
Company any such records upon the Company's request, provided that (i)
the Adviser may retain a copy of such records, and (ii) nothing
contained herein shall prevent the Adviser from using the performance
track record of the Company following any termination of this
Agreement.
(d) The Adviser hereby accepts such employment and agrees
during the term hereof to render the services described herein for the
compensation provided herein.
(e) 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 Company in any way or otherwise be deemed an agent of the
Company.
(f) The Adviser agrees that its activities with respect
to the Company will at all times be in compliance in all material
respects with applicable federal securities and state securities laws
governing its operations and investments.
2. USE OF SUB-INVESTMENT ADVISER. The Adviser may, subject to the
approvals required under the Investment Company Act, employ a sub-investment
adviser to assist the Adviser in the performance of its duties under this
Agreement. Such use does not relieve the Adviser of any duty or liability it
would otherwise have under this Agreement. Compensation of any such
sub-investment adviser for services provided and expenses assumed under any
agreement between the Adviser and such sub-investment adviser permitted under
this paragraph is the sole responsibility of the Adviser.
3. SERVICES NOT EXCLUSIVE. The services furnished by the Adviser
hereunder are not to be deemed exclusive and the Adviser and its affiliates
shall be free to furnish similar services to others so long as its services
under this Agreement are not impaired thereby. Nothing in this Agreement shall
limit or restrict the right of any manager, officer, agent or employee of the
Adviser or its affiliates, who may also be a manager, officer, agent or employee
of the Company, to engage in any other business or to devote his or her time and
attention in part to the management or other aspects of any other business,
whether of a similar nature or dissimilar nature.
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4. EXPENSES.
(a) The Company will pay all expenses (including without
limitation accounting, legal, printing, clerical, filing, and other
expenses) incurred in connection with the organization of the Company
and the initial offering of its shares of its common stock (the
"Offering"). Except as otherwise expressly provided for in Section 4(b)
of this Agreement, during the term of this Agreement the Company will
bear all of its expenses incurred in its operations including but not
limited to the following: (i) brokerage and commission expense and
other transaction costs incident to the acquisition and dispositions of
investments; (ii) federal, state, and local taxes and fees, including
transfer taxes and filing fees, incurred by or levied upon the Company;
(iii) interest charges and other fees in connection with borrowings by
the Company; (iv) fees and expenses payable to the SEC and any fees and
expenses of state securities regulatory authorities; (v) expenses of
printing and distributing reports and notices to stockholders; (vi)
costs of proxy solicitation; (vii) costs of meetings of stockholders
and the Board; (viii) charges and expenses of the Company's custodian,
administrator, transfer and dividend disbursing agent, and accounting
agent; (ix) compensation and expenses of the Company's directors who
are not interested persons of the Company or the Adviser, and of any of
the Company's officers who are not interested persons of the Adviser;
expenses of all directors in attending meetings of the Board or
stockholders; (x) legal and auditing expenses, including expenses
incident to the documentation for, and consummation of, transactions;
(xi) costs of certificates representing the shares of the Company's
common stock; (xii) costs of stationery and supplies; (xiii) the costs
of membership by the Company in any trade organizations; (xiv) expenses
associated with litigation and other extraordinary or non-recurring
expenses; (xv) any insurance premiums; and (xvi) the costs of providing
significant managerial assistance offered to and accepted by the
recipient of Company investments.
(b) The expenses to be borne by the Adviser are limited
to the following: (i) all costs and fees incident to the
identification, selection and investigation of prospective Company
investments, including associated due diligence expenses such as travel
expenses and professional fees (but excluding legal and accounting fees
and other costs incident to the closing, documentation, or consummation
of such transactions), (ii) the cost of adequate office space for the
Company and the Adviser and all necessary office equipment and
services, including telephone service, heat, utilities, and similar
items; (iii) the salaries and expenses of Adviser's employees and
personnel; and (iv) the costs of providing the Company with such
corporate, administrative, and clerical personnel (including directors
and officers of the Company who are interested persons of the Adviser
and are acting in their respective capacities as directors and officers
of the Company) as the members of the Adviser reasonably deem necessary
or advisable to perform the investment advisory services required to be
performed by the Adviser under this Agreement.
(c) The Company may pay directly any expenses incurred by
it in its normal operations and, if any such payment is consented to by
the Adviser and acknowledged as otherwise payable by the Adviser
pursuant to this Agreement, the Company may reduce the fee payable to
the Adviser pursuant to Section 5 thereof by such amount. To the
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extent that such deductions exceed the fee payable to the Adviser on
any quarterly payment date, such excess shall be carried forward and
deducted in the same manner from the fee payable on the next succeeding
quarterly payment date.
(d) The payment or assumption by the Adviser of any
expense of the Company that the Adviser is not required by this
Agreement to pay or assume shall not obligate the Adviser to pay or
assume the same or any similar expense of the Company on any subsequent
occasion.
5. COMPENSATION.
(a) The Company agrees to pay the Adviser, and the
Adviser agrees to accept as compensation for the services provided
hereunder, a base management fee ("Base Management Fee") and an
incentive fee ("Incentive Fee") as hereafter set forth. The Adviser may
agree to temporarily or permanently waive, in whole or in part, the
Base Management Fee and/or the Incentive Fee.
(b) The Base Management Fee shall be calculated at an
annual rate of 2.5% of the Company's net assets up to $100 million and
2.0% of the Company's net assets in excess of $100 million. To the
extent the Company incurs indebtedness to make investments in portfolio
companies, the Base Management Fee will also include an amount equal to
an annual rate of 1.5% of the outstanding aggregate amount of
indebtedness that is, as of the end of such calendar quarter, invested
in portfolio companies ("Outstanding Employed Indebtedness"). The Base
Management Fee will be payable quarterly, in arrears, promptly
following the end of each calendar quarter and shall be calculated
based on the value of the Company's net assets and Outstanding Employed
Indebtedness at the end of the most recently completed calendar
quarter.
(c) The Incentive Fee shall consist of two parts, as
follows:
(1) One part will be calculated and payable
quarterly in arrears promptly following the end of
the quarter based on the Net Investment Income (as
defined below) for the immediately preceding calendar
quarter (the "Income Fee"). For each quarterly
payment of the incentive fee payable with this
Section 5(c)(i), the Company shall pay the Adviser
20% of Net Investment Income, expressed as a rate of
return on the value of the Company's net assets at
the end of the immediately preceeding calendar
quarter, in excess of the Quarterly Preferred Return
Amount. "Net Investment Income" means (i) interest
income, dividend income and any other income earned
by the Company during the calendar quarter, including
any consulting or other fees the Company receives
from any portfolio company or entity in which it owns
securities, but excluding any net realized capital
gains relating to the Company's investments, minus
(ii) the Company's operating expenses during such
calendar quarter, including the Base Management Fee
and any interest expense and dividends paid on any
outstanding indebtedness or preferred stock, if any,
of the Company, but excludes the Incentive Fee
payable under this Section
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5(c) during such quarter. The "Quarterly Preferred
Return Amount" shall equal 2% per calendar 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 (or
upon termination of this Agreement as set forth
below) promptly following the end of such calendar
year, commencing on December 31, 2004, and will equal
20.0% of the Company's net realized capital gains for
the calendar year less any net unrealized capital
losses at the end of such year.
(d) If this Agreement becomes effective or terminates
before the end of any fiscal quarter, the Base Management Fee and
Incentive Fee for the period from the effective day to the end of the
fiscal quarter or from the beginning of such quarter to the date of
termination, as the case may be, shall be prorated according to the
proportion which such period bears to the full fiscal quarter in which
such effectiveness or termination occurs. 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.
(e) If (i) the Adviser, (ii) a manager, officer, agent or
employee of the Adviser, (iii) a company controlling, controlled by, or
under common control with the Adviser, or (iv) a director, officer,
agent or employee of any such company receives any compensation from a
company whose securities are held in the Company's portfolio in
connection with the provision to that company of significant managerial
assistance, the compensation due to the Adviser hereunder shall be
reduced by the amount of such fee. If such amounts have not been fully
offset at the time of termination of this Agreement, the Adviser shall
pay such excess amounts to the Company upon termination.
6. LIMITATION OF LIABILITY OF THE ADVISER; INDEMNIFICATION. The
Adviser (and its officers, managers, agents, employees, controlling persons,
members and any other person or entity affiliated with the Adviser) shall not be
liable to the Company 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 Company, except to
the extent specified in Section 36(b) of the Investment Company Act concerning
loss resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services, and the Company shall indemnify the Adviser (and its
officers, managers, agents, employees, controlling persons, members and any
other person or entity affiliated with the Adviser) (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 Company
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 Company. Notwithstanding the preceding sentence
of this Section 6 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
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liability to the Company 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. Notwithstanding any termination of this Agreement, the provisions of
Paragraph 6 of this Agreement shall remain in full force and effect, and the
Adviser (and its officers, managers, agents, employees, controlling persons,
members and any other person or entity affiliated with the Adviser) shall remain
entitled to the benefits thereof.
7. DURATION AND TERMINATION.
(a) This Agreement shall become effective as of the date
hereof and shall continue in effect for two years thereafter and
subsequently for successive periods of one year, subject to the
provisions for termination and all of the other terms and conditions
hereof if such continuation shall be specifically approved at least
annually (i) by the vote of a majority of the directors of the Company,
cast in person at a meeting called for that purpose, or by the vote of
a majority of the outstanding voting securities of the Company and (ii)
by the vote of a majority of the Company'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.
(b) This Agreement may be terminated at any time, without
penalty, by the directors of the Company or by the shareholders of the
Company acting by the vote of at least a majority of its outstanding
voting securities, provided in either case that 60 days' written notice
of termination be given to the Adviser at its principal place of
business. This Agreement may also be terminated by the Adviser at any
time by giving 60 days' written notice of termination to the Company,
addressed to its principal place of business.
8. NOTICE. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to the other party at such
address as such other party may designate for the receipt of such notice.
9. PROPRIETARY RIGHTS. The Adviser has proprietary rights in the
Company's name. The Company acknowledges and agrees that the Adviser may
withdraw the use of such names from the Company should it cease to act as the
investment adviser to the Company.
10. NOTICE OF FILING OF ARTICLES OF INCORPORATION. All parties
hereto are expressly put on notice of the Company's Articles of Incorporation
and all amendments thereto, all of which are on file with the State Department
of Assessments and Taxation of the State of Maryland, and the limitation of
director, officer, agent, employee and stockholder liability contained therein.
This Agreement has been executed by and on behalf of the Company by its
representatives as such representatives and not individually, and the
obligations of the Company hereunder are not binding upon any of the directors,
officers, agents, employees or stockholders of the Company individually but are
binding upon only the assets and property of the Company.
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11. AMENDMENT OF THIS AGREEMENT. This Agreement may be amended by
the mutual consent of the parties in writing, but the consent of the Company
must be obtained in accordance with the requirements of the Investment Company
Act.
12. ASSIGNMENT. This Agreement shall terminate automatically in
the event of any assignment (within the meaning of the Investment Company Act)
of this Agreement.
13. GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of Maryland, without giving effect to the conflicts
of laws principles thereof, and in accordance with the Investment Company Act.
To the extent that the applicable laws of the State of Maryland conflict with
the applicable provisions of the Investment Company Act, the Investment Company
Act shall control.
14. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule, or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors. As used in this
Agreement, the terms "majority of the outstanding voting securities",
"affiliated person", "interested person", "assignment", "investment adviser",
"net assets", "security", and "significant managerial assistance" shall have the
same meaning as such terms have in the Investment Company Act, subject to such
exemption as may be granted by the Commission by any rule, regulation, or order.
Where the effect of a requirement of the Investment Company Act reflected in any
provision of this Agreement is relaxed by a rule, regulation, or order of the
Commission, whether of special or general application, such provision shall be
deemed to incorporate the effect of such rule, regulation, or order.
15. ENTIRE AGREEMENT. This Agreement is the entire contract
between the parties relating to the subject matter hereof and supersedes all
prior agreements between the parties relating to the subject matter hereof.
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IN WITNESS WHEREOF, the Company and the Adviser have caused this
Agreement to be executed as of the day and year first above written.
XXXXXXXX MEZZANINE CAPITAL CORP.
By: ______________________________
Name: ____________________________
Title: ___________________________
ATTEST: ________________________
Name: ___________________________
Title: ____________________________
XXXXXXXX CAPITAL MANAGEMENT, L.L.C.
By: ______________________________
Name: ____________________________
Title: ___________________________
ATTEST: ________________________
Name: ___________________________
Title: ____________________________
