As filed with the Securities and Exchange Commission on March 30, 2015
Securities Act File No. 333-198981
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
¨ Pre-Effective Amendment No.
x Post-Effective Amendment No. 1
Credit Suisse Park View BDC, Inc.
(Exact name of registrant as specified in charter)
One Madison Avenue
New York, New York 10010
(Address of Principle Executive Offices)
212-325-2000
(Registrants telephone number, including area code)
Karen Regan
Vice President and Secretary
One Madison Avenue
New York, New York 10010
(Name and address of agent for service)
COPIES TO:
Steven B. Boehm, Esq. Harry S. Pangas, Esq. Sutherland Asbill & Brennan LLP 700 Sixth Street, NW Washington, DC 20001 Tel: (202) 383-0100 Fax: (202) 637-3593 |
Rose F. DiMartino, Esq. Willkie Farr & Gallagher LLP 787 Seventh Avenue New York, New York 10019 Telephone: (212) 728-8000 Facsimile: (212) 728-9294 |
Approximate date of proposed public offering: As soon as practicable after the effective date of this Registration Statement.
If any securities being registered on this form will be offered on a delayed or continuous basis in reliance on Rule 415 under the Securities Act of 1933, other than securities offered in connection with a dividend reinvestment plan, check the following box. x
It is proposed that this filing will become effective (check appropriate box):
x | when declared effective pursuant to Section 8(c). |
EXPLANATORY NOTE
This Post-Effective Amendment No. 1 to the Registration Statement on Form N-2 (File No. 333-198981) of Credit Suisse Park View BDC, Inc. (the Registration Statement) is being filed pursuant to Rule 462(d) under the Securities Act of 1933, as amended (the Securities Act), solely for the purpose of filing exhibits to the Registration Statement. Accordingly, this Post-Effective Amendment No. 1 consists only of a facing page, this explanatory note and Part C of the Registration Statement on Form N-2 setting forth the exhibits to the Registration Statement. This Post-Effective Amendment No. 1 does not modify any other part of the Registration Statement. Pursuant to Rule 462(d) under the Securities Act, this Post-Effective Amendment No. 1 shall become effective immediately upon filing with the Securities and Exchange Commission. The contents of the Registration Statement are hereby incorporated by reference.
PART C
Other Information
Item 25. Financial Statements and Exhibits
(1) Financial Statements
The following financial statements of Credit Suisse Corporate Credit Solutions, LLC are included in Part A of this Registration Statement.
INDEX TO FINANCIAL STATEMENTS
(2) Exhibits
(a)(1) | Articles of Amendment and Restatement of the Registrant* | |
(a)(2) | Articles of Incorporation of the Registrant(3) | |
(b) | Form of Bylaws of the Registrant(2) | |
(c) | Form of Voting Agreement(2) | |
(d) | Form of Subscription Agreement (included in the Prospectus as Appendix A) | |
(e) | Form of Dividend Reinvestment Plan(2) | |
(g)(1) | Amended and Restated Investment Advisory Agreement* | |
(h)(1) | Form of Dealer Manager Agreement(4) | |
(j) | Form of Amended and Restated Custodian Agreement(2) | |
(k)(1) | Form of Master Administration and Accounting Agreement with State Street Bank and Trust Company(2) | |
(k)(2) | Form of Co-Administration Agreement with Credit Suisse Asset Management, LLC, dated as of September 5, 2014(2) | |
(k)(4) | Senior Secured Revolving Credit Agreement by and among Credit Suisse Corporate Credit Solutions, LLC, the Lenders thereto and Capital One, N.A., as Administrative Agent, dated as of October 31, 2014(2) | |
(k)(5) | Guarantee, Pledge and Security Agreement by and among Credit Suisse Corporate Credit Solutions, LLC, to subsidiary Guarantors party thereto and Capital One, N.A., as Revolving Administrative Agent and Collateral Agent, dated as of October 31, 2014(2) | |
(k)(6) | Form of Indemnification Agreement between Registrant and the independent directors(2) | |
(l) | Opinion of Sutherland Asbill & Brennan LLP(3) | |
(n) | Consent of KPMG LLP(4) | |
(r)(1) | Code of Ethics(1) | |
(s) | Power of Attorney(3) |
* | Filed herewith |
(1) | Previously filed as an exhibit to this Registration Statement on Form N-2 filed on September 26, 2014. |
(2) | Previously filed as an exhibit to Pre-Effective Amendment No. 1 to this Registration Statement on Form N-2 filed on January 9, 2015. |
(3) | Previously filed as an exhibit to Pre-Effective Amendment No. 2 to this Registration Statement on Form N-2 filed on February 5, 2015. |
(4) | Previously filed as an exhibit to Pre-Effective Amendment No. 3 to this Registration Statement on Form N-2 filed on March 13, 2015. |
C-1
Item 26. Marketing Arrangements
The information contained under the heading Plan of Distribution in this Registration Statement is incorporated herein by reference.
Item 27. Other Expenses of Issuance And Distribution
SEC registration fee |
$ | 64,400 | ||
FINRA filing fee |
75,500 | |||
Accounting fees and expenses |
105,000 | * | ||
Blue Sky expenses |
200,000 | * | ||
Legal fees and expenses |
1,800,000 | * | ||
Printing and engraving |
100,000 | * | ||
Transfer agent fees |
| |||
Miscellaneous fees and expenses |
120,000 | * | ||
|
|
|||
Total |
$ | 2,464,900 | ||
|
|
|||
* These amounts are estimates. |
Item 28. Persons Controlled by or under Common Control
See Management of the Company, Certain Relationships and Related Party Transactions and Control Persons and Principal Holders of Securities in the Prospectus contained herein.
Item 29. Number of Holders of Securities
The following table sets forth the number of record holders of the Registrants common stock at March 6, 2015.
Title of Class |
Number of Record Holders |
|||
Common stock, $0.01 par value |
1 |
Item 30. Indemnification
The information contained under the heading Description of Our Capital Stock is incorporated herein by reference.
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the Securities Act) may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described above, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person in the successful defense of an action suit or proceeding) is asserted by a director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is again public policy as expressed in the Act and will be governed by the final adjudication of such issue.
C-2
The Registrant carries liability insurance for the benefit of its directors and officers (other than with respect to claims resulting from the willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office) on a claims-made basis.
The Investment Advisory Agreement provides that the Adviser (and any of its affiliates, directors, officers, members, employees, agents, or representatives) shall not be liable to us 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 the Investment Advisory Agreement or otherwise as an investment adviser of us, except to the extent specified in Section 36(b) of the 1940 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 we shall indemnify, defend and protect the Adviser (and its affiliates, directors, officers, members, employees, agents, and representatives, 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 us or our security holders) arising out of or otherwise based upon the performance of any of the Advisers duties or obligations under the Investment Advisory Agreement or otherwise as our investment adviser. Notwithstanding the preceding sentence, and only until such time, if any, as our common stock is listed on a national securities exchange, we shall not provide for indemnification of an Indemnified Party for any liability or loss suffered by such Indemnified Party, nor shall we provide that an Indemnified Party be held harmless for any loss or liability suffered by us, unless: (1) the Indemnified Party has determined, in good faith, that the course of conduct that caused the loss or liability was in our best interest; (2) the Indemnified Party was acting on our behalf or performing services for us; (3) such liability or loss was not the result of (i) negligence or misconduct, in the case that the Indemnified Party is the Adviser, an affiliate of the Adviser or one of our officers, or (ii) gross negligence or willful misconduct, in the case that the Indemnified Party is a director who is also not one of our officers or our Adviser or an affiliate of our Adviser; and (4) the indemnification or agreement to hold harmless is recoverable only out of our net assets and not from our stockholders.
Pursuant to the Co-Administration Agreement with the Adviser, the Registrant will indemnify, defend and protect the Adviser and certain of its related 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 Adviser and such related parties arising out of or otherwise based upon the performance of any of its obligations under the agreement. Such indemnity does not apply in instances of willful misfeasance, bad faith or gross negligence in the performance of the Advisers duties, by reason of reckless disregard of its duties and obligations under the Co-Administration Agreement or by reason of a material and knowing violation of United States securities laws.
Pursuant to the Administration Agreement, the Registrant will indemnify and hold State Street harmless from all loss, cost, damage and expense, including reasonable fees and expenses for counsel, incurred by State Street and its directors, officers, employees and agents resulting from any claim, demand, action or suit in connection with State Streets acceptance of the Administration Agreement, any action or omission by State Street in the performance of its duties thereunder, or as a result of acting upon any instructions reasonably believed by State Street to have been duly authorized by the Registrant or upon reasonable reliance on information or records given or made by the Registrant or its investment adviser. However, such indemnification shall not apply to actions or omissions of State Street, its directors, officers, employees or agents in cases of its or their own fraud, negligence, willful misconduct, or bad faith.
Pursuant to the dealer manager agreement with Credit Suisse Securities (USA), LLC, the Registrant agrees to indemnify, defend and hold harmless the dealer manager, and certain of its related parties, against any and all claims, demands, liabilities and expenses (including the cost of investigating and defending such claims, demands or liabilities, including attorneys fees) incurred by the dealer manager arising out of or based upon (a) any untrue statement or alleged untrue statement of a material fact contained in any of the Registrants documents; (b) any omission or alleged omission to state a material fact required to be stated in any of the Registrants documents or necessary to make the statements in such documents not misleading; provided, however, that the Registrants agreement to indemnify the dealer manager certain of its related parties shall not be deemed to cover any claims, demands, liabilities or expenses arising out of or based upon any statements or representations made by the dealer manager or its representatives or agents that are inconsistent with or vary from statements and representations contained in any of the Registrants documents and in such financial and other statements relating to the Company as provided to the dealer manager by us; or (c) the Registrants breach of the dealer manager agreement.
The Registrant has entered into indemnification agreements with its independent directors. The indemnification agreements are intended to provide the Registrants independent directors the maximum indemnification permitted under applicable law. Each indemnification agreement provides that the Registrant shall indemnify and advance expenses to the independent director who is a party to the agreement (an Indemnified Person) against money damages actually and reasonably incurred by such Indemnified Person in connection with any claim or proceeding that is asserted against such Indemnified Person arising out of such persons service to the Registrant.
Item 31. Business and Other Connections of Adviser
A description of any other business, profession, vocation or employment of a substantial nature in which the Adviser, and each managing director, director or executive officer of the Adviser, is or has been during the past two fiscal years, engaged in for his or her own account or in the capacity of director, officer, employee, partner or trustee, is set forth in Part A of this Registration Statement in the section entitled The Adviser. Additional information regarding the Adviser and its officers and directors is set forth in its Form ADV, as filed with the Securities and Exchange Commission (SEC File No. 801-37170), and is incorporated herein by reference.
Item 32. Location of Accounts and Records
All accounts, books and other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940, and the rules thereunder are maintained at the offices of:
(1) | the Registrant at One Madison Avenue, New York, New York 10010; |
(2) | the Transfer Agent, American Stock Transfer & Trust Company, is 6201 15th Avenue, Brooklyn, New York 11219; |
(3) | the Custodian, State Street Bank and Trust Company, is 225 Franklin Street, Boston, Massachusetts 02110; |
(4) | the Adviser at One Madison Avenue, New York, New York 10010; and |
(5) | the Administrators: the Adviser at One Madison Avenue, New York, New York 10010 and State Street Bank and Trust Company at 225 Franklin Street, Boston, Massachusetts 02110. |
C-3
Item 33. Management Services
Not Applicable.
Item 34. Undertakings
We hereby undertake:
(1) to suspend the offering of shares until the prospectus is amended if (i) subsequent to the effective date of this registration statement, its net asset value declines more than ten percent from its net asset value as of the effective date of this registration statement, or (ii) its net asset value increases to an amount greater than its net proceeds as stated in the prospectus;
(2) to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement
(i) to include any prospectus required by Section 10(a)(3) of the Securities Act;
(ii) to reflect in the prospectus any facts or events after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; and
(iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
(3) that, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of those securities at that time shall be deemed to be the initial bona fide offering thereof;
(4) to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering; and
(5) that, for the purpose of determining liability under the Securities Act to any purchaser, if the Registrant is subject to Rule 430C [17 CFR 230.430C]: Each prospectus filed pursuant to Rule 497(b), (c), (d) or (e) under the Securities Act [17 CFR 230.497(b), (c), (d) or (e)] as part of a registration statement relating to an offering, other than prospectuses filed in reliance on Rule 430A under the Securities Act [17 CFR 230.430A], shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use; and
(6) that for the purpose of determining liability of the Registrant under the Securities Act to any purchaser in the initial distribution of securities. The undersigned Registrant undertakes that in an offering of securities of the undersigned Registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned Registrant will be a seller to the purchaser and will be considered to offer or sell such securities to the purchaser.
(i) any preliminary prospectus or prospectus of the undersigned Registrant relating to the offering required to be filed pursuant to Rule 497 under the Securities Act [17 CFR 230.497];
(ii) the portion of any advertisement pursuant to Rule 482 under the Securities Act [17 CFR 230.482] relating to the offering containing material information about the undersigned Registrant or its securities provided by or on behalf of the undersigned Registrant; and
(iii) any other communication that is an offer in the offering made by the undersigned Registrant to the purchaser.
C-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Post-Effective Amendment No. 1 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, and the State of New York, on the 30th day of March, 2015.
By: | /s/ John G. Popp | |
Name: John G. Popp | ||
Title: Chief Executive Officer |
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment No. 1 to the Registration Statement has been signed by the following persons in the capacities set forth below on the 30th day of March, 2015. This document may be executed by the signatories hereto on any number of counterparts, all of which constitute one and the same instrument.
Name |
Title |
Date | ||
/s/ John G. Popp |
||||
John G. Popp | Chief Executive Officer and President (Principal Executive Officer) |
March 30, 2015 | ||
/s/ Bruce S. Rosenberg |
||||
Bruce S. Rosenberg | Chief Financial Officer (Principal Financial and Accounting Officer) |
March 30, 2015 | ||
/s/ Enrique R. Arzac* |
||||
Enrique R. Arzac | Director | March 30, 2015 | ||
/s/ Steven N. Rappaport* |
||||
Steven N. Rappaport | Chairman of the Board | March 30, 2015 |
* By: | /s/ Karen Regan | |
Karen Regan, as Attorney-in-fact |
Exhibit (a)(1)
CREDIT SUISSE PARK VIEW BDC, INC.
ARTICLES OF AMENDMENT AND RESTATEMENT
FIRST: Credit Suisse Park View BDC, Inc., a Maryland corporation (the Corporation), desires to amend and restate its charter as currently in effect and as hereinafter amended.
SECOND: The following provisions are all the provisions of the charter of the Corporation currently in effect and as hereinafter amended:
ARTICLE I
INCORPORATOR/NAME
Section 1.1 Incorporator. The undersigned, Bruce Rosenberg, whose address is Eleven Madison Avenue New York, New York 10010, being at least 18 years of age, by these Articles of Incorporation and by Articles of Conversion effective as of 7:00 p.m. on January 30, 2015, does hereby convert Credit Suisse Corporate Credit Solutions, LLC, a Delaware limited liability company formed on August 5, 2014, into a corporation formed under the general laws of the State of Maryland.
Section 1.2 Name. The name of the corporation (which is hereinafter called the Corporation) is:
Credit Suisse Park View BDC, Inc.
ARTICLE II
PURPOSES AND POWERS
The purposes for which the Corporation is formed are to engage in any lawful act or activity for which corporations may be organized under the general laws of the State of Maryland as now or hereafter in force, including, without limitation or obligation, engaging in business as a business development company under the Investment Company Act of 1940, as amended (together with any rules and regulations and any applicable guidance and/or interpretations of the Securities and Exchange Commission (the SEC) or its staff promulgated thereunder, the 1940 Act).
ARTICLE III
PRINCIPAL OFFICE IN STATE AND RESIDENT AGENT
The address of the principal office of the Corporation in this State is c/o CSC-Lawyers Incorporating Service Company, 7 St. Paul Street, Suite 820, Baltimore, Maryland 21202. The name and address of the resident agent of the Corporation are CSC-Lawyers Incorporating Service Company, 7 St. Paul Street, Suite 820, Baltimore, Maryland 21202. The resident agent is a Maryland corporation.
ARTICLE IV
DEFINITIONS
As used in the Charter, the following terms shall have the following meanings unless the context otherwise requires:
1940 Act. The term 1940 Act shall have the meaning as provided in Article II herein.
Acquisition Expenses. The term Acquisition Expenses shall mean any and all expenses incurred by the Corporation, the Adviser or any of their Affiliates in connection with the initial purchase or acquisition of assets, whether or not acquired, by the Corporation, including, without limitation, legal fees and expenses, travel and communications expenses, costs of appraisals, non-refundable option payments on assets not acquired, accounting fees and expenses and miscellaneous expenses.
Acquisition Fee. The term Acquisition Fee shall mean any and all fees and commissions, exclusive of Acquisition Expenses, paid by any Person to any other Person (including any fees or commissions paid by or to any Affiliate of the Corporation or the Adviser) in connection with the initial purchase or acquisition of assets by the Corporation. Included in the computation of such fees or commissions shall be any commission, selection fee, supervision fee, financing fee or non-recurring management fee or any fee of a similar nature, however designated.
Additional Preferred Directors. The term Additional Preferred Directors shall have the meaning as provided in Section 5.9 herein.
Adviser or Advisers. The term Adviser or Advisers shall mean the Person or Persons, if any, appointed, employed or contracted with by the Corporation and responsible for directing or performing the day-to-day business affairs of the Corporation, including any Person to whom the Adviser subcontracts all or substantially all of such functions.
Advisory Agreement. The term Advisory Agreement shall mean any investment advisory agreement with an Adviser.
Affiliate or Affiliated. The term Affiliate or Affiliated shall mean, with respect to any Person, (i) any Person directly or indirectly owning, controlling or holding, with the power to vote, ten percent or more of the outstanding voting securities of such other Person; (ii) any Person ten percent or more of whose outstanding voting securities are directly or indirectly owned, controlled or held, with the power to vote, by such other Person; (iii) any Person directly or indirectly controlling, controlled by or under common control with such other Person; (iv) any executive officer, director, trustee or general partner of such other Person; and (v) any legal entity for which such Person acts as an executive officer, director, trustee or general partner.
Assessment. The term Assessment shall mean any additional amounts of capital which may be mandatorily required of, or paid voluntarily by, a Stockholder beyond his or her subscription commitment excluding deferred payments.
Benefit Plan Investor. The term Benefit Plan Investor means a benefit plan investor as defined in section 3(42) of ERISA.
-2-
Board or Board of Directors. The term Board or Board of Directors shall mean the board of directors of the Corporation, as of any particular time.
Business Day. The term Business Day shall mean any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in New York City are authorized or required by law, regulation or executive order to close.
Bylaws. The term Bylaws shall mean the bylaws of the Corporation, as amended from time to time.
Capital Contributions. The term Capital Contributions shall mean the total investment, including the original investment and amounts reinvested pursuant to a distribution reinvestment plan, in the Corporation by a Stockholder or by all Stockholders, as the case may be. Unless otherwise specified, Capital Contributions shall be deemed to include principal amounts to be received on account of deferred payments.
Charter. The term Charter shall mean the charter of the Corporation, as may be amended from time to time.
Code. The term Code shall mean the Internal Revenue Code of 1986, as amended.
Commencement of the Initial Public Offering. The term Commencement of the Initial Public Offering shall mean the date that the SEC declares effective the registration statement filed under the Securities Act for the Initial Public Offering.
Common Shares. The term Common Shares shall have the meaning as provided in Section 6.1 herein.
Controlling Person. The term Controlling Person shall mean a Person, whatever his or her title, who performs functions for the Sponsor similar to those of (a) the chairman or other member of a board of directors, (b) executive officers or (c) those holding ten percent or more equity interest in the Sponsor, or a Person having the power to direct or cause the direction of the Sponsor, whether through the ownership of voting securities, by contract or otherwise.
Corporation. The term Corporation shall have the meaning as provided in Article I herein.
Covered Securities. The term Covered Securities shall have the meaning set forth in Section 18 of the Securities Act.
Dealer-Manager. The term Dealer-Manager shall have the meaning as provided in Section 10.2 herein.
Director or Directors. The term Director or Directors shall have the meaning as provided in Section 5.1 herein.
-3-
Distributions. The term Distributions shall mean any distributions (as such term is defined in Section 2-301 of the MGCL) by the Corporation to owners of Shares, including distributions that may constitute a return of capital for federal income tax purposes.
ERISA. The term ERISA means the Employee Retirement Income Security Act of 1974, as amended.
ERISA Controlling Person. The term ERISA Controlling Person means a Person (other than a benefit plan investor) who has discretionary authority or control with respect to the assets of the Corporation or who provides investment advice for a fee (direct or indirect) with respect to such assets, or any affiliate of such a Person within the meaning of 29 C.F.R. § 2510.3-101(f)(3).
Exchange Act. The term Exchange Act shall mean the Securities Exchange Act of 1934, as amended from time to time, or any successor statute thereto. Reference to any provision of the Exchange Act shall mean such provision as in effect from time to time, as the same may be amended, and any successor provision thereto, as interpreted by any applicable regulations as in effect from time to time.
Front End Fees. The term Front End Fees shall mean fees and expenses paid by any party for any services rendered to organize the Corporation and to acquire assets for the Corporation, including Organization and Offering Expenses, Acquisition Fees, Acquisition Expenses, and any other similar fees, however designated by the Sponsor.
Indemnitee. The term Indemnitee shall have the meaning as provided in Section 11.2(b) herein.
Independent Expert. The term Independent Expert shall mean a Person with no material current or prior business or personal relationship with the Sponsor who is engaged to a substantial extent in the business of rendering opinions regarding the value of assets of the type held by the Corporation, and who is qualified to perform such work.
Initial Public Offering. The term Initial Public Offering shall mean the first Offering pursuant to an effective registration statement filed under the Securities Act.
Investment in Program Assets. The term Investment in Program Assets shall mean the amount of Capital Contributions actually paid or allocated to the purchase or development of assets acquired by the Corporation (including working capital reserves allocable thereto, except that working capital reserves in excess of three percent shall not be included) and other cash payments such as interest and taxes, but excluding Front End Fees.
Liquidity Event. The term Liquidity Event shall mean (i) a Listing, (ii) a merger or another transaction approved by the Board in which Stockholders receive cash and/or securities of a Publicly Traded Entity or (iii) a sale of all or substantially all of the assets of the Corporation either on a complete portfolio basis or individually followed by a liquidation.
-4-
Listing. The term Listing shall mean the listing of the Common Shares on a national securities exchange. Upon such Listing, the Common Shares shall be deemed Listed.
MGCL. The term MGCL shall mean the Maryland General Corporation Law, as amended from time to time.
NASAA Omnibus Guidelines. The term NASAA Omnibus Guidelines shall mean the Omnibus Guidelines published by the North American Securities Administrators Association on May 7, 2007.
Non-Compliant Tender Offer. The term Non-Compliant Tender Offer shall have the meaning as provided in Section 10.6 herein.
Offering. The term Offering shall mean any offering and sale of Shares.
Organization and Offering Expenses. The term Organization and Offering Expenses shall mean any and all costs and expenses incurred by the Corporation and to be paid from the assets of the Corporation in connection with the formation of the Corporation and the qualification and registration of an Offering, and the marketing and distribution of Shares, including, without limitation, total underwriting and brokerage discounts and commissions (including fees of the underwriters attorneys), expenses for printing, engraving and amending registration statements or supplementing prospectuses, mailing and distributing costs, salaries of employees while engaged in sales activity, telephone and other telecommunications costs, all advertising and marketing expenses, charges of transfer agents, registrars, trustees, escrow holders, depositories and experts and fees, expenses and taxes related to the filing, registration and qualification of the sale of Shares under federal and state laws, including taxes and fees and accountants and attorneys fees.
Person. The term Person shall mean an individual, corporation, partnership, estate, trust (including a trust qualified under Sections 401(a) or 501(c)(17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity, or any government or any agency or political subdivision thereof, and also includes a group as that term is used for purposes of Section 13(d)(3) of the Exchange Act.
Plan. The term Plan means any employee benefit plan subject to Part 4 of Title I of ERISA, or any plan to which section 4975 of the Code applies.
Plan Asset Regulation. The term Plan Asset Regulation means 29 C.F.R. § 2510.3-101, as modified by section 3(42) of ERISA.
Preferred Shares. The term Preferred Shares shall have the meaning as provided in Section 6.1 herein.
Prospectus. The term Prospectus shall have the meaning as provided in Section 2(10) of the Securities Act, including a preliminary prospectus, an offering circular as described
-5-
in Rule 256 of the General Rules and Regulations under the Securities Act or, in the case of an intrastate offering, any document by whatever name known, utilized for the purpose of offering and selling Shares to the public.
Publicly Offered Securities. The term Publicly Offered Securities means publicly offered securities as defined in 29 C.F.R. § 2510.3-101(b)(2) or any successor regulation thereto.
Publicly Traded Entity. The term Publicly Traded Entity shall mean any entity having securities listed on a national securities exchange or included for quotation on an interdealer quotation system.
Roll-Up Entity. The term Roll-Up Entity shall mean a partnership, corporation, trust or similar entity that would be created or would survive after the successful completion of a proposed Roll-Up Transaction.
Roll-Up Transaction. The term Roll-Up Transaction shall mean a transaction involving the acquisition, merger, conversion or consolidation either directly or indirectly of the Corporation and the issuance of securities of a Roll-Up Entity to the holders of Common Shares. Such term does not include:
(a) a transaction involving securities of the Roll-Up Entity that have been listed on a national securities exchange for at least twelve months; or
(b) a transaction involving the conversion to corporate, trust or association form of only the Corporation, if, as a consequence of the transaction, there will be no significant adverse change in any of the following:
(i) | voting rights of the holders of Common Shares; |
(ii) | the term of existence of the Corporation; |
(iii) | Sponsor or Adviser compensation; or |
(iv) | the Corporations investment objectives. |
SEC. The term SEC shall have the meaning as provided in Article II hereto.
Securities Act. The term Securities Act shall mean the Securities Act of 1933, as amended from time to time, or any successor statute thereto. Reference to any provision of the Securities Act shall mean such provision as in effect from time to time, as the same may be amended, and any successor provision thereto, as interpreted by any applicable regulations as in effect from time to time.
Shares. The term Shares shall mean shares of stock of the Corporation of any class or series, including Common Shares or Preferred Shares.
-6-
Sponsor. The term Sponsor shall mean any Person which (i) is directly or indirectly instrumental in organizing, wholly or in part, the Corporation, (ii) will control, manage or participate in the management of the Corporation, (iii) takes the initiative, directly or indirectly, in founding or organizing the Corporation, either alone or in conjunction with one or more other Persons, (iv) receives a material participation in the Corporation in connection with the founding or organizing of the business of the Corporation, in consideration of services or property, or both services and property, (v) has a substantial number of relationships and contacts with the Corporation, (vi) possesses significant rights to control assets of the Corporation, (vii) receives fees for providing services to the Corporation which are paid on a basis that is not customary in the industry or (viii) provides goods or services to the Corporation on a basis which was not negotiated at arms-length with the Corporation. Sponsor does not include any Person whose only relationship with the Corporation is that of an independent manager of a portion of the Corporations assets and whose only compensation is as such, or wholly independent third parties such as attorneys, accountants and underwriters whose only compensation is for professional services.
Stockholder List. The term Stockholder List shall have the meaning as provided in Section 10.4 herein.
Stockholders. The term Stockholders shall mean the holders of record of the Shares as maintained in the books and records of the Corporation or its transfer agent.
ARTICLE V
PROVISIONS FOR DEFINING, LIMITING
AND REGULATING CERTAIN POWERS OF THE
CORPORATION AND OF THE STOCKHOLDERS AND DIRECTORS
Section 5.1 Number, Vacancies, Classification and Election of Directors. The business and affairs of the Corporation shall be managed under the direction of the Board of Directors. The number of directors of the Corporation (the Directors) is three, which number may be increased or decreased only by the Board of Directors pursuant to the Bylaws, or the Charter, but shall never be less than the minimum number required by the MGCL. A director shall have the qualifications, if any, specified in the Bylaws. The names of the directors who shall serve until their successors are duly elected and qualify are:
Steven N. Rappaport
Enrique R. Arzac
John G. Popp
The Board of Directors may fill any vacancy, whether resulting from an increase in the number of directors or otherwise, on the Board of Directors in the manner provided in the Bylaws.
The Corporation elects at such time as it becomes eligible pursuant to Section 3-802 of the MGCL to make the election as provided for under Section 3-804(c) of the MGCL that, except as may be provided by the Board of Directors in setting the terms of any class or series of
-7-
Preferred Shares or as may be required by the 1940 Act, any and all vacancies on the Board of Directors may be filled only by the affirmative vote of a majority of the remaining Directors in office, even if the remaining Directors do not constitute a quorum, and any Director elected to fill a vacancy shall serve for the remainder of the full term of the directorship in which such vacancy occurred.
On the date of the Commencement of the Initial Public Offering, the Directors (other than any Director elected solely by holders of one or more classes or series of Preferred Stock in connection with dividend arrearages) shall be classified, with respect to the terms for which they severally hold office, into three classes, as determined by the Board of Directors, as nearly equal in size as is practicable. The term of office of one class of Directors shall expire at the first annual meeting of Stockholders following the Commencement of the Initial Public Offering, the term of office of another class of Directors shall expire at the second annual meeting of Stockholders following the Commencement of the Initial Public Offering and the term of office of the remaining class of Directors shall expire at the third annual meeting of the Stockholders following the Commencement of the Initial Public Offering, and, in each case, when their respective successors are duly elected and qualify. The initial directors of each class shall be determined by the Board of Directors before or as soon as reasonably practicable after the Commencement of the Initial Public Offering. At each annual meeting of Stockholders, commencing with the annual meeting next following the Commencement of the Initial Public Offering, the successors to the class of Directors whose term expires at such meeting shall be elected to hold office for a term expiring at the third succeeding annual meeting of Stockholders following the meeting at which they were elected and until their respective successors are duly elected and qualify.
A majority of the Board of Directors shall be independent directors, except for a period of up to 60 days, or such longer period permitted by law, after the death, removal or resignation of an independent director pending the election of such independent directors successor. A Director is considered independent if he or she is not an interested person as that term is defined under Section 2(a)(19) of the 1940 Act.
Section 5.2 Extraordinary Actions. Except as specifically provided in Section 5.7 (relating to removal of directors), in Section 12.2 (relating to certain amendments to the Charter) and in Section 12.3 (relating to certain actions), notwithstanding any provision of law permitting or requiring any action to be taken or approved by the affirmative vote of Stockholders entitled to cast a greater number of votes, any such action shall be effective and valid if declared advisable by the Board of Directors and taken or approved by the affirmative vote of Stockholders entitled to cast a majority of all the votes entitled to be cast on the matter.
Section 5.3 Quorum. The presence in person or by proxy of holders of Shares of the Corporation entitled to cast a majority of the votes entitled to be cast (without regard to class) shall constitute a quorum at any meeting of Stockholders, except with respect to any such matter that, under applicable statutes or regulatory requirements or the Charter, requires approval by a separate vote of one or more classes or series of Shares, in which case the presence in person or by proxy of Stockholders entitled to cast a majority of the votes entitled to be cast by such classes or series of Shares on such matter shall constitute a quorum. To the extent permitted by Maryland law as in effect from time to time, the foregoing quorum provision may be changed by the Bylaws.
-8-
Section 5.4 Authorization by Board of Stock Issuance. The Board of Directors may authorize the issuance from time to time of Shares of any class or series, whether now or hereafter authorized, or securities or rights convertible into Shares of any class or series, whether now or hereafter authorized, for such consideration, if any, as the Board of Directors may deem advisable (including compensation for the Directors or without consideration in the case of a stock split or stock dividend), subject to such restrictions or limitations, if any, as may be set forth in the Charter or the Bylaws.
Section 5.5 Preemptive Rights and Appraisal Rights. Except as may be provided by the Board of Directors in setting the terms of classified or reclassified Shares pursuant to Section 6.4 or as may otherwise be provided by a contract approved by the Board of Directors, no holder of Shares shall, as such holder, have any preemptive right to purchase or subscribe for any additional Shares or any other security of the Corporation which the Corporation may issue or sell. Holders of Shares shall not be entitled to exercise any rights of an objecting Stockholder provided for under Title 3, Subtitle 2 of the MGCL or any successor statute unless the Board of Directors, upon such terms and conditions specified by the Board of Directors, shall determine that such rights apply, with respect to all or any classes or series of Shares, or any proportion of the Shares thereof, to a particular transaction or all transactions occurring after the date of such determination in connection with which holders of such Shares would otherwise be entitled to exercise such rights.
Section 5.6 Determinations by Board. The determination as to any of the following matters, made by or pursuant to the direction of the Board of Directors not inconsistent with the Charter, shall be final and conclusive and shall be binding upon the Corporation and every holder of Shares: the amount of the net income of the Corporation for any period and the amount of assets at any time legally available for the payment of dividends, purchase of Shares or the payment of other Distributions on Shares; the amount of paid-in surplus, net assets, other surplus, annual or other cash flow, funds from operations, net profit, net assets in excess of capital, undivided profits or excess of profits over losses on sales of assets; the amount, purpose, time of creation, increase or decrease, alteration or cancellation of any reserves or charges and the propriety thereof (whether or not any obligation or liability for which such reserves or charges shall have been created shall have been set aside, paid or discharged); any interpretation or resolution of any ambiguity with respect to any provision of the Charter (including any of the terms, preferences, conversion or other rights, voting powers or rights, restrictions, limitations as to dividends or other Distributions, qualifications and terms and conditions of redemption of any class or series of Shares) or the Bylaws; the fair value, or any sale, bid or asked price to be applied in determining the fair value, of any asset owned or held by the Corporation or of any Shares; the number of Shares of any class or series of the Corporation; any matter relating to the acquisition, holding and disposition of any assets by the Corporation; any interpretation of the terms and conditions of one or more agreements with any Person, corporation, association, company, trust, partnership (limited or general) or other entity; the compensation of directors, officers, employees or agents of the Corporation; any conflict between the MGCL and the provisions set forth in the NASAA Omnibus Guidelines; or any other matter relating to the business and affairs of the Corporation or required or permitted by applicable law, the Charter or
-9-
Bylaws or otherwise to be determined by the Board of Directors; provided, however, that any determination by the Board of Directors as to any of the preceding matters shall not render invalid or improper any action taken or omitted prior to such determination and no Director shall be liable for making or failing to make such a determination; and provided, further, that to the extent the Board determines that the MGCL conflicts with the provisions set forth in the NASAA Omnibus Guidelines included in this Charter, the NASAA Omnibus Guidelines control to the extent any provisions of the MGCL are not mandatory.
Section 5.7 Removal of Directors. Subject to the rights of holders of one or more classes or series of Preferred Shares to elect or remove one or more Directors, from and after the Commencement of the Initial Public Offering any Director, or the entire Board of Directors, may be removed from office at any time only for cause and only by the affirmative vote of at least 75% of the votes entitled to be cast generally in the election of Directors, voting together as a single class. For the purpose of this paragraph, cause shall mean, with respect to any particular Director, conviction of a felony or a final judgment of a court of competent jurisdiction holding that such Director caused demonstrable, material harm to the Corporation through bad faith or active and deliberate dishonesty.
Section 5.8 Stockholder Action by Unanimous Written Consent. Any action required or permitted to be taken by the Stockholders, unless such action is taken at a duly called annual or special meeting of Stockholders, may only be taken by the unanimous written consent of all Stockholders entitled to vote thereon.
Section 5.9 Additional Preferred Directors. During any period when the holders of one or more classes or series of Preferred Shares, due to the occurrence of an event or events, have the right to elect additional Directors who, together with the Directors elected by the separate vote of the holders of one or more classes or series of Preferred Shares prior to such event or events, constitute a majority of the total number of Directors (the additional Directors elected by the separate vote of such holders following such event, the Additional Preferred Directors), then, upon commencement and for the duration of the period during which such right continues: (i) the otherwise total authorized number of Directors of the Corporation shall automatically be increased by such specified number of Additional Preferred Directors, and the holders of such Preferred Shares shall be entitled to elect the Additional Preferred Directors so provided for or fixed pursuant to said provisions, and (ii) each such Additional Preferred Director shall serve until the next meeting of Stockholders at which Directors are elected and until his or her successor is duly elected and qualified, or until his or her right to hold such office terminates pursuant to said provisions, whichever occurs earlier, subject to his or her earlier death, resignation, retirement, disqualification or removal. Except as otherwise provided by the Board of Directors in fixing the terms of such class or series of Preferred Shares, whenever the holders of any class or series of Preferred Shares having such right to elect Additional Preferred Directors are divested of such right pursuant to the terms of such class or series of Preferred Shares, the terms of office of all such Additional Preferred Directors, or such other Directors elected to fill any vacancies resulting from the death, resignation, disqualification or removal of such Additional Preferred Directors, shall forthwith terminate, all such Additional Preferred Directors shall automatically cease to be qualified to serve as Directors, and the total authorized number of Directors of the Corporation shall be automatically reduced accordingly.
-10-
ARTICLE VI
STOCK
Section 6.1 Authorized Shares. The Corporation has authority to issue 200,000,000 Shares, initially consisting of 198,000,000 shares of common stock, $0.01 par value per share (Common Shares), and 2,000,000 shares of preferred stock, $0.01 par value per share (Preferred Shares). The aggregate par value of all authorized Shares having par value is $2,000,000.00. All Shares shall be fully paid and nonassessable when issued and the Corporation shall not make any mandatory Assessments against any Stockholder beyond such Stockholders subscription commitment. If Shares of one class or series are classified or reclassified into Shares of another class or series pursuant to this Article VI, the number of authorized Shares of the former class or series shall be automatically decreased and the number of Shares of the latter class or series shall be automatically increased, in each case by the number of Shares so classified or reclassified, so that the aggregate number of Shares of all classes and series that the Corporation has authority to issue shall not be more than the total number of Shares set forth in the first sentence of this paragraph. The Board of Directors, with the approval of a majority of the entire Board and without any action by the Stockholders, may amend the Charter from time to time to increase or decrease the aggregate number of Shares or the number of Shares of any class or series that the Corporation has authority to issue.
Section 6.2 Common Shares.
Section 6.2.1 Common Shares Subject to Terms of Preferred Shares. The Common Shares shall be subject to the express terms of any series of Preferred Shares.
Section 6.2.2 Description. Except as may otherwise be specified in the Charter, each Common Share shall entitle the holder thereof to one vote per share on all matters upon which Stockholders are entitled to vote pursuant to Section 10.1 hereof. The Board may classify or reclassify any unissued Common Shares from time to time into one or more classes or series of Shares.
Section 6.2.3 Rights Upon Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up, or any Distribution of the assets of the Corporation, the aggregate assets of the Corporation available for Distribution to holders of the Common Shares shall be determined in accordance with applicable law. Each holder of Common Shares of a particular class or series shall be entitled to receive, ratably with each other holder of Common Shares of such class or series, that portion of such aggregate assets available for Distribution as the number of outstanding Common Shares of such class or series held by such holder bears to the total number of outstanding Common Shares of such class or series then outstanding.
Section 6.2.4 Voting Rights. Except as may be provided otherwise in the Charter, and subject to the express terms of any series of Preferred Shares, the holders of the Common Shares shall have the exclusive right to vote on all matters (as to which a common stockholder shall be entitled to vote pursuant to applicable law) at all meetings of the Stockholders.
-11-
Section 6.3 Preferred Shares. The Board, including a majority of the independent directors on the Board, may classify any unissued Preferred Shares and reclassify any previously classified but unissued Preferred Shares of any series from time to time, into one or more classes or series of Shares.
Section 6.4 Classified or Reclassified Shares. Prior to issuance of classified or reclassified Shares of any class or series, the Board by resolution shall: (a) designate that class or series to distinguish it from all other classes and series of Shares; (b) specify the number of Shares to be included in the class or series; (c) set or change, subject to the express terms of any class or series of Shares outstanding at the time, the preferences, conversion or other rights, voting powers (including exclusive voting rights, if any), restrictions, limitations as to dividends or other Distributions, qualifications and terms and conditions of redemption for each class or series; and (d) cause the Corporation to file articles supplementary with the State Department of Assessments and Taxation of Maryland. Any of the terms of any class or series of Shares set or changed pursuant to clause (c) of this Section 6.4 may be made dependent upon facts or events ascertainable outside the Charter (including determinations by the Board or other facts or events within the control of the Corporation) and may vary among holders thereof, provided that the manner in which such facts, events or variations shall operate upon the terms of such class or series of Shares is clearly and expressly set forth in the articles supplementary or other charter document.
Section 6.5 Deferred Payments. The Corporation shall not have authority to make arrangements for deferred payments on account of the purchase price of Shares unless all of the following conditions are met: (a) such arrangements are warranted by the Corporations investment objectives; (b) the period of deferred payments coincides with the anticipated cash needs of the Corporation; (c) the deferred payments shall be evidenced by a promissory note of the Stockholder, which note shall be with recourse, shall not be negotiable, shall be assignable only subject to defenses of the maker and shall not contain a provision authorizing a confession of judgment; and (d) selling commissions and Front End Fees paid upon deferred payments are payable when payment is made on the note. The Corporation shall not sell or assign the deferred obligation notes at a discount. In the event of default in the payment of deferred payments by a Stockholder, the Stockholder may be subjected to a reasonable penalty. The provisions of this Section 6.5 shall not apply after the Common Shares qualify as Covered Securities.
Section 6.6 Distributions.
(a) Any Advisory Agreement shall provide that the Adviser shall cause the Corporation to provide for adequate reserves for normal replacements and contingencies (but the Corporation shall not be required to maintain reserves for payment of fees payable to the Adviser) by causing the Corporation to retain a reasonable percentage of proceeds from offerings and revenues.
-12-
(b) From time to time and not less than quarterly, the Corporation shall cause the Adviser to review the Corporations accounts to determine whether cash distributions are appropriate. The Corporation may, subject to authorization by the Board of Directors, distribute pro rata to the Stockholders funds received by the Corporation which the Board of Directors deems unnecessary to retain in the Corporation. The Board of Directors may from time to time authorize the Corporation to declare and pay to Stockholders such dividends or other Distributions, in cash or other assets of the Corporation or in securities of the Corporation, including in Shares of one class or series payable to holders of Shares of another class or series, or from any other source as the Board of Directors in its discretion shall determine. The Board of Directors may endeavor to authorize the Corporation to declare and pay such dividends and other Distributions (i) as may be necessary or advisable for the Corporation to qualify as a Regulated Investment Company under the Code or as may be necessary or advisable under the 1940 Act and (ii) to the extent that the Board of Directors deems it unnecessary for the Corporation to retain funds received by it; provided, however, Stockholders shall have no right to any dividend or other Distribution unless and until authorized by the Board and declared by the Corporation. The exercise of the powers and rights of the Board of Directors pursuant to this Section 6.6 shall be subject to the provisions of any class or series of Shares at the time outstanding. The receipt by any Person in whose name any Shares are registered on the records of the Corporation or by his or her duly authorized agent shall be a sufficient discharge for all dividends or other Distributions payable or deliverable in respect of such Shares and from all liability to see to the application thereof. Distributions in kind shall not be permitted, except for distributions of readily marketable securities or securities of the Corporation, distributions of beneficial interests in a liquidating trust established for the dissolution of the Corporation and the liquidation of its assets in accordance with the terms of the Charter or in kind distributions in which (a) the Board advises each Stockholder of the risks associated with direct ownership of the property, (b) the Board offers each Stockholder the election of receiving such in-kind distributions and (c) in-kind distributions are made only to those Stockholders that accept such offer. The restrictions in this Section 6.6 shall be effective until the qualification of the Shares as Covered Securities.
Section 6.7 Charter and Bylaws. All Persons who acquire Shares of the Corporation acquire the same, and the rights of all Stockholders and the terms of all Shares are, subject to the provisions of the Charter and the Bylaws. The Board of Directors shall have the exclusive power, at any time, to make, alter, amend or repeal the Bylaws.
Section 6.8 No Issuance of Share Certificates. Unless otherwise provided by the Board of Directors, the Corporation shall not issue stock certificates. A Stockholders investment shall be recorded on the books of the Corporation. To transfer his or her Shares, a Stockholder shall submit an executed form to the Corporation, which form shall be provided by the Corporation upon request. Such transfer will also be recorded on the books of the Corporation. Upon issuance or transfer of Shares, the Corporation will provide the Stockholder with information concerning his or her rights with regard to such Shares, as required by the Bylaws and the MGCL or other applicable law.
-13-
Section 6.9 Suitability of Stockholders. Upon the Commencement of the Initial Public Offering and until the earlier of a Liquidity Event or the date the Corporation is no longer subject to the NASAA Omnibus Guidelines, the following provisions shall apply:
Section 6.9.1 Investor Suitability Standards. Subject to suitability standards established by individual states and any amendment to the income and net worth standards set forth in the NASAA Omnibus Guidelines, including any amendment or restatement thereto, to become a Stockholder, if such prospective Stockholder is an individual (including an individual beneficiary of a purchasing individual retirement account), or if the prospective Stockholder is a fiduciary (such as a trustee of a trust or corporate pension or profit sharing plan, or other tax-exempt organization, or a custodian under a Uniform Gifts to Minors Act), such individual or fiduciary, as the case may be, must represent to the Corporation, among other requirements as the Corporation may require from time to time, that:
(a) such individual (or, in the case of sales to fiduciary accounts, that the beneficiary, the fiduciary account or the donor or grantor who directly or indirectly supplies the funds to purchase the Shares if the donor or grantor is the fiduciary) has a minimum annual gross income of $70,000 and a net worth (excluding home, furnishings and automobiles) of not less than $70,000; or
(b) such individual (or, in the case of sales to fiduciary accounts, that the beneficiary, the fiduciary account or the donor or grantor who directly or indirectly supplies the funds to purchase the Shares if the donor or grantor is the fiduciary) has a net worth (excluding home, furnishings and automobiles) of not less than $250,000.
Section 6.9.2 Determination of Suitability of Sale. The Sponsor and each Person selling Common Shares on behalf of the Corporation shall make every reasonable effort to determine that the purchase of Common Shares by a Stockholder is a suitable and appropriate investment for such Stockholder. In making this determination, the Sponsor or each Person selling Common Shares on behalf of the Corporation shall ascertain that the prospective Stockholder: (a) meets the minimum income and net worth standards established for the Corporation; (b) can reasonably benefit from the Corporation based on the prospective Stockholders overall investment objectives and portfolio structure; (c) is able to bear the economic risk of the investment based on the prospective Stockholders overall financial situation; and (d) has apparent understanding of (i) the fundamental risks of the investment; (ii) the risk that the Stockholder may lose the entire investment; (iii) the lack of liquidity of the Common Shares; (iv) the restrictions on transferability of the Common Shares; and (v) the tax consequences of the investment.
The Sponsor or each Person selling Common Shares on behalf of the Corporation shall make this determination on the basis of information it has obtained from a prospective Stockholder. Relevant information for this purpose will include at least the age, investment objectives, investment experiences, income, net worth, financial situation and other investments of the prospective Stockholder, as well as any other pertinent factors.
The Sponsor or each Person selling Common Shares on behalf of the Corporation shall maintain records of the information used to determine that an investment in Common Shares is suitable and appropriate for a Stockholder. The Sponsor or each Person selling Common Shares on behalf of the Corporation shall maintain these records for at least six years.
-14-
Section 6.10 Repurchase of Shares. The Board of Directors may establish, from time to time, a program or programs by which the Corporation voluntarily repurchases Shares from the Stockholders; provided, however, that such repurchase does not impair the capital or operations of the Corporation.
ARTICLE VII
ADVISER
Section 7.1 Supervision of Adviser. The Board may exercise broad discretion in allowing the Adviser to administer and regulate the operations of the Corporation, to act as agent for the Corporation, to execute documents on behalf of the Corporation and to make executive decisions that conform to general policies and principles established by the Board. The Board shall oversee the Adviser to assure that the administrative procedures, operations and programs of the Corporation are reasonable and appropriate and that (i) the expenses incurred are reasonable in light of the operations of the Corporation, (ii) prior to the qualification of the Common Shares as Covered Securities, all Front End Fees are reasonable and do not exceed 15% of the gross proceeds of any Offering, regardless of the source of payment, and (iii) prior to the qualification of the Common Shares as Covered Securities, the percentage of gross proceeds of any Offering committed to Investment in Program Assets shall be at least 85%. All items of compensation to underwriters or dealers, including, but not limited to, selling commissions, expenses, rights of first refusal, consulting fees, finders fees and all other items of compensation of any kind or description paid by the Corporation, directly or indirectly, shall be taken into consideration in computing the amount of allowable Front End Fees. The Board of Directors also will be responsible for determining that compensation to be paid to the Adviser is reasonable in relation to the nature and quality of services performed and the investment performance of the Corporation and that the provisions of any Advisory Agreement are being carried out. The Board of Directors may consider all factors that it deems relevant in making these determinations. So long as the Corporation is a business development company under the 1940 Act, compensation to the Adviser shall be considered presumptively reasonable if the incentive fee is limited to the amounts allowed by the 1940 Act.
Section 7.2 Fiduciary Obligations; Experience. The Adviser has a fiduciary responsibility and duty to the Corporation and the Stockholders for the safekeeping and use of all the funds and assets of the Corporation, whether or not in the Advisers immediate possession or control. The Adviser shall not employ, or permit another to employ, such funds or assets except for the exclusive benefit of the Corporation. The Adviser may not contract away the fiduciary obligation owed to the Corporation and the Stockholders under common law. The investment committee of the Adviser shall have at least three years relevant experience demonstrating the knowledge and experience to acquire and manage the type of assets being acquired by the Corporation and shall have not less than four years relevant experience in the kind of service being rendered or otherwise must demonstrate sufficient knowledge and experience to perform the services proposed. Any sub-adviser to the Corporation shall be subject to the same fiduciary duties imposed on the Adviser pursuant to this Section 7.2, the 1940 Act and the Investment Advisers Act of 1940, as amended from time to time (together with any rules and regulations and any applicable guidance and/or interpretations of the SEC or its staff promulgated thereunder), as well as other applicable federal and state law.
-15-
Section 7.3 Successor Adviser. The Board of Directors shall determine whether any successor Adviser possesses sufficient qualifications to perform the advisory function for the Corporation and whether the compensation provided for in its contract with the Corporation is reasonable.
Section 7.4 Termination. Any Advisory Agreement shall provide that it is terminable, without cause or penalty, by (a) a majority of the Independent Directors on 60 days written notice or (b) the Adviser on 120 days written notice. In the event of termination, the Adviser will cooperate with the Corporation and the Board in making an orderly transition of the advisory function. In addition, if the Corporation elects to continue its operations, the Adviser shall pay all expenses incurred as a result of its withdrawal. Upon termination of the Advisory Agreement, the Corporation shall pay the Adviser all amounts then accrued but unpaid to the Adviser. The method of payment must be fair and protect the solvency and liquidity of the Corporation.
Section 7.5 Organization and Offering Expenses Limitation. Prior to the qualification of the Common Shares as Covered Securities, unless otherwise provided in any resolution adopted by the Board, the Corporation shall reimburse the Adviser and its Affiliates for Organization and Offering Expenses incurred by the Adviser or its Affiliates; provided, however, that the total amount of all Organization and Offering Expenses shall be reasonable, as determined by the Board, and shall be included in Front End Fees for purposes of the limit on such Front End Fees set forth in Section 7.1.
Section 7.6 Acquisition Fees. Unless otherwise provided in any resolution adopted by the Board, the Corporation may pay the Adviser and its Affiliates fees for the review and evaluation of potential investments; provided, however, that the Board shall conclude that the total of all Acquisition Fees and Acquisition Expenses are reasonable.
Section 7.7 Limitations on Reimbursement of Expenses. In addition to the compensation paid to the Adviser, the Corporation shall reimburse the Adviser, at the end of each fiscal quarter, for all expenses of the Corporation incurred by the Adviser as well as the actual cost of goods and services used for or by the Corporation and obtained from entities not Affiliated with the Adviser. The Adviser may be reimbursed for the administrative services performed by it on behalf of the Corporation pursuant to any separate administration or co-administration agreement with the Adviser; provided, however, prior to the qualification of the Common Shares as Covered Securities, such reimbursement shall be an amount equal to the lower of the Advisers actual cost or the amount the Corporation would be required to pay third parties for the provision of comparable administrative services in the same geographic location; and provided, further, that such costs are reasonably allocated to the Corporation on the basis of assets, revenues, time records or other methods conforming with generally accepted accounting principles. No such reimbursement shall be permitted for services for which the Adviser is entitled to compensation by way of a separate fee. Excluded from such allowable reimbursement shall be: (i) rent or depreciation, utilities, capital equipment, and other administrative items of the Adviser; and (ii) salaries, fringe benefits, travel expenses and other administrative items incurred by or allocated to any Controlling Person of the Adviser.
-16-
ARTICLE VIII
INVESTMENT LIMITATIONS
Section 8.1 Investment Objectives. The Corporations investment objective is to generate current income and, to a lesser extent, capital appreciation. The independent directors on the Board shall review the investment policies of the Corporation with sufficient frequency (not less often than annually) to determine that the policies being followed by the Corporation are in the best interests of the Corporation.
Section 8.2 Investments in Other Programs.
(a) Prior to the qualification of the Common Shares as Covered Securities, the Corporation may invest in general partnerships or joint ventures with non-Affiliates that own and operate specific assets, only if the Corporation, alone or together with any publicly registered Affiliate of the Corporation meeting the requirements of subsection (b) below, acquires a controlling interest in such a general partnership or joint venture, but in no event shall the Adviser be entitled to duplicate fees; provided, however that the foregoing is not intended to prevent the Corporation from carrying out its business of investing and reinvesting its assets in securities of other issuers. For purposes of this Section, controlling interest means an equity interest possessing the power to direct or cause the direction of the management and policies of the general partnership or joint venture, including the authority to: (i) review all contracts entered into by the general partnership or joint venture that will have a material effect on its business or assets; (ii) cause a sale or refinancing of the assets or its interest therein subject, in certain cases where required by the partnership or joint venture agreement, to limits as to time, minimum amounts and/or a right of first refusal by the joint venture partner or consent of the joint venture partner; (iii) approve budgets and major capital expenditures, subject to a stated minimum amount; (iv) veto any sale or refinancing of the assets, or alternatively, to receive a specified preference on sale or refinancing proceeds; and (v) exercise a right of first refusal on any desired sale or refinancing by the joint venture partner of its interest in the assets, except for transfer to an Affiliate of the joint venture partner.
(b) The Corporation may invest in general partnerships or joint ventures with other publicly registered Affiliates of the Corporation only if all of the following conditions are met: (i) the Affiliate and the Corporation have substantially identical investment objectives; (ii) there are no duplicate fees to the Adviser; (iii) the compensation payable by the general partnership or joint venture to the Advisers by each of the Corporation and its Affiliate that invests in such partnership or joint venture is substantially identical; (iv) each of the Corporation and the Affiliate has a right of first refusal to buy if the other party wishes to sell assets held in the partnership or joint venture; (v) the investment of each of the Corporation and its Affiliate is on substantially the same terms and conditions; and (vi) any Prospectus in use or proposed to be used when such an investment has been made or is contemplated discloses the potential risk of impasse on partnership or joint venture decisions since neither the Corporation nor its Affiliate controls the partnership or joint venture, and the potential risk that, while the Corporation or its Affiliate may have the right to buy the assets from the partnership or joint venture, it may not have the resources to do so.
-17-
(c) Prior to the qualification of the Common Shares as Covered Securities, the Corporation may invest in general partnerships or joint ventures with Affiliates other than publicly registered Affiliates of the Corporation only if all of the following conditions are met: (i) the investment is necessary to relieve the Adviser from any commitment to purchase the assets entered into in compliance with Section 9.1 prior to the closing of the offering period of the Corporation; (ii) there are no duplicate fees to the Adviser; (iii) the investment of each entity is on substantially the same terms and conditions; (iv) the Corporation has a right of first refusal to buy if the Adviser wishes to sell assets held in the partnership or joint venture; and (v) any Prospectus in use or proposed to be used when such an investment has been made or is contemplated discloses the potential risk of impasse on partnership or joint venture decisions.
(d) The Corporation may be structured to conduct operations through separate single-purpose entities managed by the Adviser (multi-tier arrangements); provided that the terms of any such arrangements do not result in the circumvention of any of the requirements or prohibitions contained herein or under applicable federal or state securities laws. Any agreements regarding such arrangements shall accompany any Prospectus, if such agreement is then available, and the terms of such agreement shall contain provisions assuring that all of the following restrictions apply: (i) there will be no duplication or increase in Organization and Offering Expenses, fees payable to the Adviser, program expenses or other fees and costs; (ii) there will be no substantive alteration in the fiduciary and contractual relationship between the Adviser, the Corporation and the Stockholders; and (iii) there will be no diminishment in the voting rights of the Stockholders.
(e) Other than as specifically permitted in subsections (b), (c), (d) and (f), and except as otherwise permitted under the 1940 Act, exemptive relief granted by the SEC pursuant thereto, or by a determination of the staff of the SEC under the 1940 Act, the Corporation shall not invest in general partnerships or joint ventures with Affiliates.
(f) Except as otherwise permitted under the 1940 Act, exemptive relief granted by the SEC pursuant thereto, or by a determination of the staff of the SEC under the 1940 Act, the Corporation shall be permitted to invest in general partnership interests of limited partnerships only if: (i) the Corporation, alone or together with any publicly registered Affiliate of the Corporation meeting the requirements of subsection (b) above, acquires a controlling interest as defined in subsection (a) above; (ii) the Adviser is not entitled to any duplicate fees; (iii) no additional compensation beyond that permitted under applicable law is paid to the Adviser; and (iv) the agreement of limited partnership or other applicable agreement complies with this Section 8.2.
Section 8.3 Other Goods or Services.
(a) In addition to the services to be provided under any Advisory Agreement, the Corporation may accept goods or other services provided by the Adviser in connection with the operation of assets subject to the restrictions contained in the 1940 Act, provided that: (i) the Adviser, as a fiduciary, determines such self-dealing arrangement is in the
-18-
best interest of the Corporation; (ii) the terms pursuant to which all such goods or services are provided to the Corporation by the Adviser shall be embodied in a written contract, the material terms of which must be fully disclosed to the Stockholders; (iii) prior to the qualification of the Common Shares as Covered Securities, the contract may be modified only with approval of Stockholders entitled to cast a majority of all the votes entitled to be cast on the matter; and (iv) the contract shall contain a clause allowing termination without penalty on 60 days notice. Without limitation of the foregoing, and prior to the qualification of the Common Shares as Covered Securities, arrangements to provide such goods or other services must meet all of the following criteria: (x) the Adviser must be independently engaged in the business of providing such goods or services to Persons other than Affiliates and at least 33% of the Advisers associated gross revenues must come from Persons other than Affiliates; (y) the compensation, price or fee charged for providing such goods or services must be comparable and competitive with the compensation, price or fee charged in the same geographic location by Persons other than the Adviser and its Affiliates who provide comparable goods or services which could reasonably be made available to the Corporation; and (z) except in extraordinary circumstances, the compensation and other material terms of the arrangement must be fully disclosed to the Stockholders. Extraordinary circumstances are limited to instances when immediate action is required and the goods or services are not immediately available from Persons other than the Adviser and its Affiliates.
(b) Notwithstanding the foregoing clause (a), if the Adviser is not engaged in the business to the extent required by such clause, the Adviser may provide to the Corporation other goods and services if all of the following additional conditions are met: (i) the Adviser can demonstrate the capacity and capability to provide such goods or services on a competitive basis; (ii) prior to the qualification of the Common Shares as Covered Securities, the goods or services are provided at the lesser of cost or the competitive rate charged in the same geographic location by Persons other than the Adviser and its Affiliates who are in the business of providing comparable goods or services; (iii) prior to the qualification of the Common Shares as Covered Securities, the cost is limited to the reasonable necessary and actual expenses incurred by the Adviser on behalf of the Corporation in providing such goods or services, exclusive of expenses of the type which may not be reimbursed under applicable federal or state securities laws; and (iv) expenses are allocated in accordance with generally accepted accounting principles and are made subject to any special audit required by applicable federal and state securities laws.
ARTICLE IX
CONFLICTS OF INTEREST
Section 9.1 Sales and Leases to the Corporation. Except as otherwise permitted under the 1940 Act, exemptive relief granted by the SEC pursuant thereto, or by a determination of the staff of the SEC under the 1940 Act, the Corporation shall not purchase or lease assets in which the Adviser or any Affiliate thereof has an interest unless all of the following conditions are met: (a) the transaction occurs at the formation of the Corporation and is fully disclosed to the Stockholders either in a Prospectus or in a periodic report filed with the SEC or otherwise and (b) the assets are sold or leased upon terms that are reasonable to the Corporation and at a price not to exceed the lesser of cost or fair market value as determined by an Independent Expert. Notwithstanding anything to the contrary in this
-19-
Section 9.1, the Adviser may purchase assets in its own name (and assume loans in connection therewith) and temporarily hold title thereto, for the purposes of facilitating the acquisition of the assets, the borrowing of money, obtaining financing for the Corporation, or the completion of construction of the assets, provided that all of the following conditions are met: (a) the assets are purchased by the Corporation at a price no greater than the cost of the assets to the Adviser; (b) all income generated by, and the expenses associated with, the assets so acquired shall be treated as belonging to the Corporation; and (c) there are no other benefits arising out of such transaction to the Adviser apart from compensation otherwise permitted by the NASAA Omnibus Guidelines.
Section 9.2 Sales and Leases to the Adviser or Affiliates. Except as otherwise permitted under the 1940 Act, exemptive relief granted by the SEC pursuant thereto, or by a determination of the staff of the SEC under the 1940 Act, the Corporation shall not sell assets to the Adviser or any Affiliate thereof unless such sale is duly approved by the Stockholders entitled to cast a majority of all the votes entitled to be cast on the matter. The Corporation shall not lease assets to the Adviser or any Affiliate thereof unless all of the following conditions are met: (a) the transaction occurs at the formation of the Corporation and is fully disclosed to the Stockholders in a Prospectus or in a periodic report filed with the SEC and (b) the terms of the transaction are fair and reasonable to the Corporation.
Section 9.3 Loans. Except for the advancement of funds pursuant to Article XI, no loans, credit facilities, credit agreements or otherwise shall be made by the Corporation to the Adviser or any Affiliate thereof.
Section 9.4 Commissions on Financing, Refinancing or Reinvestment. The Corporation shall not pay, directly or indirectly, a commission or fee to the Adviser or any Affiliate thereof (except as otherwise specified in this Article IX and by Section 7.1 of this Charter) in connection with the reinvestment of cash flow from operations and available reserves or of the proceeds of the resale, exchange or refinancing of assets.
Section 9.5 Rebates, Kickbacks and Reciprocal Arrangements. The Adviser shall not receive or accept any rebate or give-ups or similar arrangement that is prohibited under applicable federal or state securities laws. The Adviser shall not participate in any reciprocal business arrangement that would circumvent provisions of applicable federal or state securities laws governing conflicts of interest or investment restrictions, or enter into any agreement, arrangement or understanding that would circumvent the restrictions against dealing with affiliates or promoters under applicable federal or state securities laws. The Adviser shall not directly or indirectly pay or award any fees or commissions or other compensation to any Person engaged to sell Shares or give investment advice to a potential Stockholder; provided, however, that this Section 9.5 shall not prohibit the payment to a registered broker-dealer or other properly licensed agent of sales commissions for selling or distributing Shares.
Section 9.6 Commingling. The funds of the Corporation shall not be commingled with the funds of any other Person. Nothing in this Section 9.6 shall prohibit the Adviser from establishing a master fiduciary account pursuant to which separate sub-trust accounts are established for the benefit of affiliated programs, provided that the Corporations funds are protected from the claims of other programs and creditors of such programs.
Section 9.7 Lending Practices. On financing made available to the Corporation by the Adviser, the Adviser may not receive interest in excess of the lesser of the Advisers cost of funds or the amounts that would be charged by unrelated lending institutions
-20-
on comparable loans for the same purpose. The Adviser shall not impose a prepayment charge or penalty in connection with such financing and the Adviser shall not receive points or other financing charges. The Adviser shall be prohibited from providing permanent financing for the Corporation. For purposes of this Section 9.7, permanent financing shall mean any financing with a term in excess of twelve months.
Section 9.8 Other Transactions. Except as otherwise permitted under the 1940 Act, exemptive relief granted by the SEC pursuant thereto, or by a determination of the staff of the SEC under the 1940 Act, the Corporation shall not engage in any other transaction with the Adviser or an Affiliate thereof unless: (a) such transaction complies with the NASAA Omnibus Guidelines included in this Charter and all applicable law and (b) a majority of the Directors (including a majority of the independent directors of the Corporation) not otherwise interested in such transaction approve such transaction as fair and reasonable to the Corporation and on terms and conditions not less favorable to the Corporation than those available from non-Affiliated third parties.
Section 9.9 Exchanges. Prior to the qualification of the Common Shares as Covered Securities, the Corporation may not acquire assets from Affiliates in exchange for capital stock of the Corporation.
Section 9.10 No Exclusive Agreement. The Corporation shall not grant or entitle the Adviser to an exclusive right to sell or exclusive employment to sell assets for the Corporation.
ARTICLE X
STOCKHOLDERS
Section 10.1 Voting Rights of Stockholders. Subject to the provisions of any class or series of Shares then outstanding and the mandatory provisions of any applicable laws or regulations, including the MGCL, or other provisions of this Charter, and prior to the qualification of the Common Shares as Covered Securities, the Stockholders may, without the necessity for concurrence by the Adviser: (a) elect or remove Directors, as provided in Sections 5.1 and 5.6 hereof; (b) approve or disapprove an amendment of the Charter, as provided in Article XII hereof; (c) approve or disapprove the dissolution of the Corporation; (d) remove the Adviser and elect a new Adviser; and (e) approve or disapprove the sale of all or substantially all of the assets of the Corporation, when such sale is to be made other than in the ordinary course of the Corporations business. Without the approval of Stockholders entitled to cast a majority of all the votes entitled to be cast on the matter, or such other approval as may be required under the mandatory provisions of any applicable laws or regulations, including the MGCL, or other provisions of this Charter, and prior to the qualification of the Common Shares as Covered Securities: the Corporation shall not permit the Adviser to (A) amend the Charter except for amendments that do not adversely affect the rights of Stockholders; (B) appoint a new Adviser (other than a sub-adviser pursuant to the terms of an Advisory Agreement and applicable law); (C) sell all or substantially all of the Corporations assets other than in the ordinary course of the Corporations business or as otherwise permitted by law; (D) cause the merger or similar reorganization of the Corporation except as permitted by law; or (E)
-21-
except as permitted under the Advisory Agreement, voluntarily withdraw as the Adviser unless such withdrawal would not affect the tax status of the Corporation and would not materially adversely affect the Stockholders.
Section 10.2 Voting Limitations on Shares Held by the Adviser and Affiliates. With respect to Shares owned by the Adviser or Credit Suisse Securities (USA), LLC (the Dealer-Manager), neither the Adviser nor the Dealer-Manager may vote or consent on matters submitted to the Stockholders regarding the removal of the Adviser or any transaction between the Corporation and the Adviser or any of its Affiliates. In determining the requisite percentage in interest of Shares entitled to vote on a matter, and necessary to approve a matter, on which the Adviser and the Dealer-Manager may not vote or consent, any Shares owned by any of them shall not be included.
Section 10.3 Right of Inspection. Any Stockholder shall be permitted access to the records of the Corporation to which it is entitled under applicable law at all reasonable times and may inspect and copy any of them for a reasonable charge. Inspection of the Corporations books and records by the office or agency administering the securities laws of a jurisdiction shall be provided upon reasonable notice and during normal business hours. Information regarding stockholders right to access the Corporations records pertaining to its stockholders is set forth in the Bylaws.
Section 10.4 Access to Stockholder List. An alphabetical list of the names, addresses and telephone numbers of the Stockholders, along with the number of Shares held by each of them (the Stockholder List), shall be maintained as part of the books and records of the Corporation and shall be available for inspection by any Stockholder or the Stockholders designated agent at the home office of the Corporation upon the request of the Stockholder. The Stockholder List shall be updated at least quarterly to reflect changes in the information contained therein. A copy of the Stockholder List shall be mailed to any Stockholder so requesting within ten days of receipt by the Corporation of the request. The copy of the Stockholder List shall be printed in alphabetical order, on white paper, and in a readily readable type size (in no event smaller than ten-point type). The Corporation may impose a reasonable charge for expenses incurred in reproduction pursuant to the Stockholder request. A Stockholder may request a copy of the Stockholder List in connection with matters relating to Stockholders voting rights and the exercise of Stockholder rights under federal proxy laws.
If the Adviser or the Board neglects or refuses to exhibit, produce or mail a copy of the Stockholder List as requested, the Adviser and/or the Board, as the case may be, shall be liable to any Stockholder requesting the Stockholder List for the costs, including reasonable attorneys fees, incurred by that Stockholder for compelling the production of the Stockholder List, and for actual damages suffered by any Stockholder by reason of such refusal or neglect. It shall be a defense that the actual purpose and reason for the requests for inspection or for a copy of the Stockholder List is to secure such list of Stockholders or other information for the purpose of selling such list or copies thereof, or of using the same for a commercial purpose other than in the interest of the applicant as a Stockholder relative to the affairs of the Corporation. The Corporation may require the Stockholder requesting the Stockholder List to represent that the list is not requested for a commercial purpose unrelated to the Stockholders interest in the Corporation. The remedies provided hereunder to Stockholders requesting copies of the Stockholder List are in addition to and shall not in any way limit other remedies available to Stockholders under federal law or the laws of any state.
-22-
Section 10.5 Reports.
(a) The Corporation shall cause to be prepared and mailed or delivered by any reasonable means, including an electronic medium, a copy of the Corporations Annual Report on Form 10-K to each Stockholder as of a record date after the end of the fiscal year within 120 days after the end of the fiscal year to which it relates for each fiscal year ending after the Commencement of the Initial Public Offering that shall include: (i) financial statements prepared in accordance with generally accepted accounting principles which are audited and reported on by independent certified public accountants; (ii) a report of the material activities of the Corporation during the period covered by the report; (iii) where forecasts have been provided to the Stockholders, a table comparing the forecasts previously provided with the actual results during the period covered by the report; and (iv) a report setting forth distributions to Stockholders for the period covered thereby and separately identifying distributions from: (A) cash flow from operations during the period; (B) cash flow from operations during a prior period which have been held as reserves; (C) proceeds from disposition of assets; and (D) reserves from the gross proceeds. Such Annual Report on Form 10-K must also contain a breakdown of the costs reimbursed to the Adviser. The Corporation shall take reasonable steps to ensure that: (v) within the scope of the annual audit of the Corporations financial statements, the independent certified public accountants preparing such Annual Report on Form 10-K will issue a special report on the allocation of such costs to the Corporation in accordance with the Advisory Agreement; (w) the special report shall be in accordance with the American Institute of Certified Public Accountants United States Auditing Standards relating to special reports; (x) the additional costs of such special report will be itemized and may be reimbursed to the Adviser by the Corporation in accordance with this Section 10.5 only to the extent that such reimbursement, when added to the cost for administrative services rendered, does not exceed the competitive rate for such services as determined above; (y) the special report shall at minimum provide a review of the time records of individual employees, the costs of whose services were reimbursed and the specific nature of the work performed by each such employee; and (v) the prospectus, prospectus supplement or periodic report as filed with the SEC shall disclose in tabular form an itemized estimate of such proposed expenses for the next fiscal year together with a breakdown by year of such expenses reimbursed in each of the last five public programs formed by the Adviser and subject to the NASAA Omnibus Guidelines.
(b) The Corporation shall cause to be prepared and mailed or delivered to each Stockholder within 60 days after the end of each fiscal quarter of the Corporation a Quarterly Report on Form 10-Q filed by the Corporation under the Exchange Act.
(c) The Corporation shall cause to be prepared and mailed or delivered within 75 days after the end of each calendar year of the Corporation to each Person who was at any time during such calendar year a Stockholder all information pertaining to such Stockholders investment in the Corporation necessary for the preparation of such Persons federal income tax return.
-23-
(d) If Shares have been purchased on a deferred payment basis, on which there remains an unpaid balance during any period covered by any report required by subsections (a) and (b) above, then such report shall contain a detailed statement of the status of all deferred payments, actions taken by the Corporation in response to any defaults and a discussion and analysis of the impact on capital requirements of the Corporation.
Section 10.6 Tender Offers. If any Person makes a tender offer, including, without limitation, a mini-tender offer, such Person must comply with all of the provisions set forth in Regulation 14D of the Exchange Act, including, without limitation, disclosure and notice requirements, that would be applicable if the tender offer was for more than five percent of the outstanding Shares; provided, however, that, unless otherwise required by the Exchange Act, such documents are not required to be filed with the SEC. In addition, any such Person must provide notice to the Corporation at least ten Business Days prior to initiating any such tender offer. No Stockholder may transfer any Shares held by such Stockholder to any Person who initiates a tender offer without complying with the provisions set forth above (a Non-Compliant Tender Offer) unless such Stockholder shall have first offered such Shares to the Corporation at the tender offer price offered in such Non-Compliant Tender Offer. In addition, any Person who makes a Non-Compliant Tender Offer shall be responsible for all expenses incurred by the Corporation in connection with the enforcement of the provisions of this Section 10.6, including, without limitation, expenses incurred in connection with the review of all documents related to such tender offer. In addition to the remedies provided herein, the Corporation may seek injunctive relief, including, without limitation, a temporary or permanent restraining order, in connection with any Non-Compliant Tender Offer. This Section 10.6 shall be of no force or effect with respect to any Shares that are then Listed.
ARTICLE XI
LIABILITY LIMITATION AND INDEMNIFICATION
Section 11.1 Limitation of Stockholder Liability. No Stockholder shall be liable for any debt, claim, demand, judgment or obligation of any kind of, against or with respect to the Corporation by reason of his being a Stockholder, nor shall any Stockholder be subject to any personal liability whatsoever, in tort, contract or otherwise, to any Person in connection with the Corporations assets or the affairs of the Corporation by reason of being a Stockholder.
Section 11.2 Limitation of Director and Officer Liability.
(a) Subject to any limitations set forth under Maryland law or the 1940 Act or in this Article XI, no Director or officer of the Corporation shall be liable to the Corporation or its Stockholders for money damages.
(b) Notwithstanding anything to the contrary contained in paragraph (a) above, the Corporation shall not provide that a Director, the Adviser or any Affiliate of the Adviser (the Indemnitee) be held harmless for any loss or liability suffered by the Corporation, unless all of the following conditions are met:
(i) The Indemnitee has determined, in good faith, that the course of conduct that caused the loss or liability was in the best interests of the Corporation.
-24-
(ii) The Indemnitee was acting on behalf of or performing services for the Corporation.
(iii) Such liability or loss was not the result of (A) negligence or misconduct, in the case that the Indemnitee is the Adviser or an Affiliate of the Adviser, or (B) gross negligence or willful misconduct, in the case that the Indemnitee is a Director who is not also an officer of the Corporation or the Adviser or an Affiliate of the Adviser.
(iv) Such agreement to hold harmless is recoverable only out of the Corporations net assets and not from the Stockholders.
(c) Notwithstanding the foregoing, paragraph (b) above shall (i) not apply in respect of the Dealer-Manager and (ii) only apply to an Indemnitee prior to the qualification of the Common Shares as Covered Securities.
Section 11.3 Indemnification.
(a) Subject to any limitations set forth under Maryland law or the 1940 Act or in paragraph (b) or (c) below, the Corporation shall indemnify and, without requiring a preliminary determination of the ultimate entitlement to indemnification, pay or reimburse reasonable expenses in advance of final disposition of a proceeding to (i) any individual who is a present or former Director or officer of the Corporation and who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity, (ii) any individual who, while a Director or officer of the Corporation and at the request of the Corporation, serves or has served as a director, officer, partner, member, manager or trustee of another corporation, real estate investment trust, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise and who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity or (iii) the Adviser or any of its Affiliates acting as an agent of the Corporation, in each case to the maximum extent permitted by Maryland law. The rights to indemnification and advance of expenses provided to a Director or officer hereby shall vest immediately upon election of such Director or officer. The Corporation may, with the approval of the Board of Directors or any duly authorized committee thereof, provide such indemnification and advance for expenses to a Person who served a predecessor of the Corporation in any of the capacities described in (i) or (ii) above and to any employee or agent of the Corporation or a predecessor of the Corporation. The Board may take such action as is necessary to carry out this Section 11.3(a).
(b) Notwithstanding anything to the contrary contained in paragraph (a) above, the Corporation shall not provide for indemnification of an Indemnitee for any liability or loss suffered by such Indemnitee, unless all of the following conditions are met:
(i) The Indemnitee has determined, in good faith, that the course of conduct that caused the loss or liability was in the best interests of the Corporation.
-25-
(ii) The Indemnitee was acting on behalf of or performing services for the Corporation.
(iii) Such liability or loss was not the result of (A) negligence or misconduct, in the case that the Indemnitee is the Adviser, an Affiliate of the Adviser or an officer of the Corporation, or (B) gross negligence or willful misconduct, in the case that the Indemnitee is a Director who is not also an officer of the Corporation or the Adviser or an Affiliate of the Adviser.
(iv) Such indemnification or agreement to hold harmless is recoverable only out of the Corporations net assets and not from the Stockholders.
(c) Notwithstanding anything to the contrary contained in paragraph (a) above, the Corporation shall not provide indemnification to an Indemnitee for any loss, liability or expense arising from or out of an alleged violation of federal or state securities laws by such party unless one or more of the following conditions are met: (i) there has been a successful adjudication on the merits of each count involving alleged material securities law violations as to the Indemnitee; (ii) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the Indemnitee; or (iii) a court of competent jurisdiction approves a settlement of the claims against the Indemnitee and finds that indemnification of the settlement and the related costs should be made, and the court considering the request for indemnification has been advised of the position of the SEC and of the published position of any state securities regulatory authority in which Shares were offered or sold as to indemnification for violations of securities laws.
(d) Notwithstanding the foregoing, paragraphs (b) and (c) above shall (i) not apply in respect of the Dealer-Manager and (ii) only apply to an Indemnitee prior to the qualification of the Common Shares as Covered Securities.
Section 11.4 Payment of Expenses. The Corporation may pay or reimburse reasonable legal expenses and other costs incurred by an Indemnitee in advance of final disposition of a proceeding only if all of the following are satisfied: (a) the proceeding relates to acts or omissions with respect to the performance of duties or services on behalf of the Corporation, (b) the Indemnitee provides the Corporation with written affirmation of the Indemnitees good faith belief that the Indemnitee has met the standard of conduct necessary for indemnification by the Corporation as authorized by Section 11.3 hereof, (c) the legal proceeding was initiated by a third party who is not a Stockholder or, if by a Stockholder of the Corporation acting in his or her capacity as such, a court of competent jurisdiction approves such advancement, and (d) the Indemnitee provides the Corporation with a written agreement to repay the amount paid or reimbursed by the Corporation, together with the applicable legal rate of interest thereon, if it is ultimately determined that the Indemnitee did not comply with the requisite standard of conduct and is not entitled to indemnification. Notwithstanding the foregoing, this Section 11.4 shall (i) not apply in respect of the Dealer-Manager and (ii) only apply to an Indemnitee prior to the qualification of the Common Shares as Covered Securities.
Section 11.5 Express Exculpatory Clauses in Instruments. Neither the Stockholders nor the Directors, officers, employees or agents of the Corporation shall be liable
-26-
under any written instrument creating an obligation of the Corporation by reason of their being Stockholders, Directors, officers, employees or agents of the Corporation, and all Persons shall look solely to the Corporations assets for the payment of any claim under or for the performance of that instrument. The omission of the foregoing exculpatory language from any instrument shall not affect the validity or enforceability of such instrument and shall not render any Stockholder, Director, officer, employee or agent liable thereunder to any third party, nor shall the Directors or any officer, employee or agent of the Corporation be liable to anyone as a result of such omission.
Section 11.6 1940 Act Limitation on Indemnification. As required under the 1940 Act, no provision of this Article XI shall be effective to protect or purport to protect any Director, any officer of the Corporation, the Adviser or any Affiliate of the Adviser against liability to the Corporation or the Stockholders to which he, she or it would otherwise be subject by reason of willful misconduct, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his, her or its office.
Section 11.7 Amendment or Repeal. Neither the amendment nor repeal of this Article XI, nor the adoption or amendment of any other provision of the Charter or Bylaws inconsistent with this Article XI, shall apply to or affect in any respect the applicability of the preceding sections of this Article XI with respect to any act or failure to act which occurred prior to such amendment, repeal, or adoption.
Section 11.8 Non-Exclusivity. The indemnification and advancement of expenses provided or authorized by this Article XI shall not be deemed exclusive of any other rights, by indemnification or otherwise, to which a Director or an officer of the Corporation may be entitled under the Bylaws, a resolution of the Stockholders or the Board, an agreement, or otherwise.
ARTICLE XII
AMENDMENTS
Section 12.1 Amendments Generally. The Corporation reserves the right from time to time, upon the requisite approval by the Board of Directors and/or the Stockholders, to make any amendment to the Charter, now or hereafter authorized by law, including any amendment altering the terms or contract rights, as expressly set forth in the Charter, of any Shares. All rights and powers conferred by the Charter on Stockholders, Directors and officers are granted subject to this reservation. Except as provided in Section 12.2 and Section 12.3 and except for those amendments permitted to be made without Stockholder approval under Maryland law or by specific provision in the Charter, and provided further that the Board has declared the amendment advisable and directed that it be submitted for consideration by the Stockholders as required by the MGCL, any amendment to the Charter shall be valid only if approved by the affirmative vote of Stockholders entitled to cast a majority of all the votes entitled to be cast on the matter.
Section 12.2 Specific Charter Amendments. Any amendment to, or any amendment inconsistent with, the provisions of, Section 5.1, Section 5.2, Section 5.7, Section 5.8,
-27-
Section 6.7, Article XI, Section 12.1, this Section 12.2 or Section 12.3 of this Charter may be adopted only by the affirmative vote of the Stockholders entitled to cast at least 75% of the votes entitled to be cast thereon, with holders of each class or series of Shares voting as a separate class, and the affirmative vote of at least 75% of the entire Board, unless the Continuing Directors of the Corporation, by a vote of at least 75% of such Directors, approve such amendment, in which case, such amendment shall be approved as required by applicable law, the Charter and Bylaws and, until the Common Shares qualify as Covered Securities, the NASAA Omnibus Guidelines (without regard to the provisions of this Section 12.2).
Section 12.3 Approval of Certain Extraordinary Actions and Charter Amendments. (a) Required Votes. Except as provided in Section 12.3(b), the affirmative vote of the Stockholders entitled to cast at least 75% of the votes entitled to be cast generally in the election of Directors, with holders of each class or series of Shares voting as a separate class, and the affirmative vote of at least 75% of the entire board, shall be necessary to effect:
(i) Any amendment to the Charter to make Common Shares a redeemable security and any other proposal to convert the Corporation from a closed-end company to an open-end company (as defined in the 1940 Act), or any amendment to Article II;
(ii) Any Stockholder proposal as to specific investment decisions made or to be made regarding the Corporations assets;
(iii) After the qualification of the Common Shares as Covered Securities, any proposal as to the voluntary liquidation or dissolution of the Corporation or any amendment to the Charter to terminate the existence of the Corporation; and
(iv) Any Business Combination (as defined below).
(b) If any proposal, transaction or Business Combination described in Section 12.3(a) is approved by at least 75% of the Continuing Directors, then, notwithstanding the requirements of Section 12.3(a), such proposal, transaction or Business Combination shall be approved as required by applicable law, the Charter and Bylaws and, until the Common Shares qualify as Covered Securities, the NASAA Omnibus Guidelines (without regard to the provisions of Section 12.3(a)).
For the purposes of this Article XII:
(a) Business Combination shall mean any of the transactions described or referred to in any one or more of the following subparagraphs:
(i) | any merger, consolidation or statutory share exchange of the Corporation with or into any other person; |
(ii) | any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions in any 12-month period) to or with any other |
-28-
Person of any assets of the Corporation having an aggregate Fair Market Value of $1,000,000 or more except for portfolio transactions of the Corporation effected in the ordinary course of the Corporations business; |
(iii) | the issuance or transfer by the Corporation (in one transaction or a series of transactions in any 12-month period) of any securities of the Corporation to any other person in exchange for cash, securities or other property (or a combination thereof) having an aggregate Fair Market Value of $1,000,000 or more excluding (x) sales of any securities of the Corporation in connection with a public offering or private placement thereof, (y) issuances of any securities of the Corporation pursuant to a dividend reinvestment and/or cash purchase plan adopted by the Corporation and (z) issuances of any securities of the Corporation upon the exercise of any stock subscription rights distributed by the Corporation. |
(b) Continuing Director means any member of the Board of Directors who (i) is not an Interested Party or an Affiliate or an Associate of an Interested Party and has been a member of the Board of Directors for a period of at least 24 months (or since the Corporations commencement of operations, if that period is less than 24 months); or (ii) is a successor of a Continuing Director who is not an Interested Party or an Affiliate or an Associate of an Interested Party and is recommended to succeed a Continuing Director by a majority of the Continuing Directors then in office or is nominated for election by the Stockholders by a majority of the Continuing Directors then in office; or (iii) is appointed to the Board of Directors to be a Continuing Director by a majority of the Continuing Directors then in office and who is not an Interested Party or an Affiliate or Associate of an Interested Party.
(c) Interested Party shall mean any Person which enters, or proposes to enter, into a Business Combination with the Corporation or which individually or together with any other persons beneficially owns or is deemed to own, directly or indirectly, more than 5 percent of any class of the Corporations securities (within the meaning of Section 13(d) of the Exchange Act).
(d) Affiliate and Associate shall have the respective meanings ascribed to such terms in Rule 12b-2 of the Exchange Act; provided that for purposes of this Section 12.3, the term Affiliate shall also include any person who, at or prior to the time of election to the Board of Directors, had expressed support in writing of any proposals of an Interested Party for which Stockholder approval would be required (for purposes of consideration of these proposals only).
(e) Fair Market Value means:
(i) | in the case of stock, the highest closing sale price during the 30-day period immediately preceding the relevant date |
-29-
of a share of such stock on the New York Stock Exchange, or if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Exchange Act on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the relevant date on any quotation system then in use, or if no such quotations are available, the fair market value on the relevant date of a share of such stock as determined by at least 75% of the Continuing Directors, and |
(ii) | in the case of property other than cash or stock, the fair market value of such property on the relevant date as determined by at least 75% of the Continuing Directors. |
Continuing Directors of the Corporation, by the vote of at least 75% of such directors, shall have the power to determine, on the basis of information known to them after reasonable inquiry, all facts necessary to determine (i) whether a Person is an Affiliate or Associate of another, and (ii) whether the assets which are the subject of any Business Combination have, or the consideration to be received for the issuance or transfer of securities by the Corporation in any Business Combination has, an aggregate Fair Market Value of $1,000,000 or more.
ARTICLE XIII
ERISA TRANSFER RESTRICTIONS
Notwithstanding any other provision herein, if and to the extent that any class or series of Shares do not constitute Publicly Offered Securities, in order to avoid the possibility that the underlying assets of the Corporation could be treated as assets of any Plan pursuant to the Plan Asset Regulation, the Corporation, at the direction of the Board of Directors or any duly-authorized committee of the Board, or, if authorized by the Board, any officer of the Corporation or the Adviser on behalf of the Corporation, shall have the power to (1) require any Person proposing to acquire Shares to furnish such information as may be necessary to determine whether such person is (i) a Benefit Plan Investor, or (ii) an ERISA Controlling Person, (2) restrict or prohibit transfers of Shares to any Person, and (3) redeem any outstanding Shares for such price and on such other terms and conditions as may be determined by or at the direction of the Board.
ARTICLE XIV
ROLL-UP TRANSACTIONS
In connection with any proposed Roll-Up Transaction, and prior to the qualification of the Common Shares as Covered Securities, an appraisal of all of the Corporations assets shall be obtained from a competent Independent Expert. If the appraisal
-30-
will be included in a Prospectus used to offer the securities of a Roll-Up Entity, the appraisal shall be filed with the SEC and the states as an exhibit to the registration statement for the offering. Prior to the qualification of the Common Shares as Covered Securities, the Corporations assets shall be appraised on a consistent basis, and the appraisal shall be based on the evaluation of all relevant information and shall indicate the value of the assets as of a date immediately prior to the announcement of the proposed Roll-Up Transaction. Such appraisal shall assume an orderly liquidation of the assets over a twelve-month period. The terms of the engagement of the Independent Expert shall clearly state that the engagement is for the benefit of the Corporation and the Stockholders. A summary of such appraisal, indicating all material assumptions underlying the appraisal, shall be included in a report to Stockholders in connection with a proposed Roll-Up Transaction. Prior to the qualification of the Common Shares as Covered Securities and in connection with a proposed Roll-Up Transaction, the Person sponsoring the Roll-Up Transaction shall offer to holders of Common Shares who vote against the proposed Roll-Up Transaction the choice of:
(a) accepting the securities of a Roll-Up Entity offered in the proposed Roll-Up Transaction; or
(b) one of the following:
(i) remaining as Stockholders and preserving their interests therein on the same terms and conditions as existed previously; or
(ii) receiving cash in an amount equal to the Stockholders pro rata share of the appraised value of the Corporations net assets.
Prior to the qualification of the Common Shares as Covered Securities, the Corporation is prohibited from participating in any proposed Roll-Up Transaction:
(c) that would result in the holders of Common Shares having voting rights in a Roll-Up Entity that are less than the rights provided for in Section 10.1 hereof;
(d) that includes provisions that would operate as a material impediment to, or frustration of, the accumulation of Shares by any purchaser of the securities of the Roll-Up Entity (except to the minimum extent necessary to preserve the tax status of the Roll-Up Entity), or which would limit the ability of an investor to exercise the voting rights of its securities of the Roll-Up Entity on the basis of the number of Shares held by that investor;
(e) in which investors rights to access of records of the Roll-Up Entity will be less than those described in Sections 10.3 and 10.4 hereof; or
(f) in which any of the costs of the Roll-Up Transaction would be borne by the Corporation if the Roll-Up Transaction is rejected by the holders of Common Shares.
THIRD: The amendment to and restatement of the charter as hereinabove set forth have been duly advised by the Board of Directors and approved by the stockholders of the Corporation as required by law.
FOURTH: The current address of the principal office of the Corporation is as set forth in Article III of the foregoing amendment and restatement of the charter.
FIFTH: The name and address of the Corporations current resident agent are as set forth in Article III of the foregoing amendment and restatement of the charter.
SIXTH: The number of directors of the Corporation and the names of those currently in office are as set forth in Article V of the foregoing amendment and restatement of the charter.
SEVENTH: The undersigned acknowledges these Articles of Amendment and Restatement to be the corporate act of the Corporation and, as to all matters or facts required to be verified under oath, the undersigned acknowledges that, to the best of the undersigneds knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury.
-Signature page follows-
-31-
IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment and Restatement to be signed in its name and on its behalf by its Vice President and Secretary and attested to by its Treasurer on the 30th day of March, 2015.
ATTEST: | CREDIT SUISSE PARK VIEW BDC, INC. | |||||||||
/s/ Rocco DelGuercio | By: | /s/ Karen Regan | ||||||||
Rocco DelGuercio |
Karen Regan |
|||||||||
Treasurer |
Vice President and Secretary |
[Signature Page to Articles of Amendment and Restatement
Credit Suisse Park View BDC, Inc.]
Exhibit (g)(1)
AMENDED AND RESTATED
INVESTMENT ADVISORY AGREEMENT
Amended and Restated Investment Advisory Agreement (the Agreement) dated as of December 2, 2014, by and between the Fund, and Credit Suisse Asset Management, LLC, a Delaware limited liability company, (the Adviser). For purposes of this Agreement, the Fund shall refer to Credit Suisse Corporate Credit Solutions, LLC, a Delaware limited liability company, prior to the date of the Conversion (as defined below), and Credit Suisse Park View BDC, Inc., a Maryland corporation, from and after the date of the Conversion.
WHEREAS, the Fund desires to retain the Adviser to render investment advisory services to the Fund subject to and in accordance with the terms and conditions hereinafter set forth;
WHEREAS, the Adviser is willing to perform such services on the terms and conditions hereinafter set forth;
WHEREAS, on September 5, 2014, the Fund and the Adviser entered into an Investment Advisory Agreement, pursuant to which the Adviser agreed to furnish investment advisory services to the Fund (the Original Agreement);
WHEREAS, the Fund and the Adviser, with the approval of the Funds sole member, desire to amend and restate the Original Agreement in its entirety;
WHEREAS, the Fund intends to sell shares of common stock pursuant to a registration statement filed with, and declared effective by, the Securities and Exchange Commission (SEC) under the Securities Act of 1933, as amended (Initial Closing);
WHEREAS, the Fund intends, subsequent to the date hereof, to elect (the Election) to be regulated as a business development company under the Investment Company Act of 1940, as amended from time to time (together with any rules and regulations and any applicable guidance and/or interpretations of the SEC or its staff promulgated thereunder, the 1940 Act);
WHEREAS, the Fund intends, subsequent to the date of Election, to convert into Credit Suisse Park View BDC, Inc. by filing a Certificate of Conversion with the Secretary of State of Delaware and Articles of Conversion with the Secretary of State of Maryland (collectively, the Conversion);
WHEREAS, DLJ MB II, LLC, an affiliate of the Adviser, is the managing member (Managing Member) of the Fund, effective as of the date of effectiveness of the Original Agreement; and
WHEREAS, in connection with the Conversion, the Managing Member would cease to be the Managing Member of the Fund.
-1-
NOW THEREFORE, in consideration of the premises and mutual covenants herein contained, the Adviser and the Fund agree as follows:
1. | Investment Description; Appointment. |
The Fund desires to employ its capital by investing and reinvesting in securities and other instruments in accordance with the investment objective, policies and restrictions that are set forth in the Funds Registration Statement on Form N-2, as the same shall be amended from time to time (as amended, the Registration Statement).
The Fund hereby appoints the Adviser as the investment adviser of the Fund with full discretionary investment authority to provide portfolio management services to the Fund by investing and reinvesting Fund assets in accordance with this Agreement and the investment objective, policies and restrictions set forth in the Registration Statement. The Adviser accepts the appointment and agrees to furnish the services for the compensation set forth in this Agreement.
2. | Services as Investment Adviser. |
(a) In providing portfolio management services to the Fund, the Adviser will comply with (i) (X) prior to the date of the Conversion, the Amended and Restated Limited Liability Company Agreement of the Fund, dated September 5, 2014 (as may be amended or amended and restated from time to time, the LLC Agreement) and (Y) after the date of the Conversion, the articles of incorporation (as may be amended or amended and restated from time to time, the Articles of Incorporation) and by-laws of the Fund, (ii) after the Election, the 1940 Act and (iii) the Investment Advisers Act of 1940, as amended from time to time (together with any rules and regulations and any applicable guidance and/or interpretations of the SEC or its staff promulgated thereunder, the Advisers Act) and will, subject to the supervision and direction of the board of directors of the Fund (the Board of Directors):
(1) manage the Funds assets in accordance with the Funds investment objective, policies and restrictions as set forth in the Registration Statement as such Registration Statement may be amended from time to time, or as modified from time to time by the Fund upon reasonable notice to the Adviser;
(2) determine the composition of the portfolio of the Fund, the nature and timing of the changes therein and the manner of implementing such changes;
(3) make investment decisions for the Fund, including negotiating the terms of investments in, and dispositions of, portfolio securities and other instruments on behalf of the Fund;
(4) monitor the Funds investments;
(5) perform due diligence on prospective portfolio companies;
(6) exercise voting rights in respect of portfolio securities and other investments for the Fund;
-2-
(7) serve on, and exercise observer rights for, boards of directors and similar committees of portfolio companies of the Fund; and
(8) provide the Fund with such other investment advisory and related services as the Fund may, from time to time, reasonably require for the investment of its funds.
(b) The Adviser shall have the power and authority on behalf of the Fund to effectuate its investment decisions for the Fund, including the execution and delivery of all documents relating to the Funds investments and the placing of orders for other purchase or sale transactions on behalf of the Fund. In the event that the Fund determines to acquire debt financing, the Adviser will arrange for such financing on the Funds 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 Fund through a special purpose vehicle, the Adviser shall have authority to create or arrange for the creation of such special purpose vehicle and to make such investments through such special purpose vehicle in accordance with the 1940 Act.
(c) Subject to the requirements of the 1940 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 Funds investment objective and policies, and work, along with the Adviser, in structuring, negotiating, arranging or effecting the acquisition or disposition of such investments and monitoring investments on behalf of the Fund, subject to the oversight of the Adviser and the Fund. The Adviser, and not the Fund, 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 1940 Act and other applicable federal and state law.
(d) The Adviser shall for all purposes herein provided be deemed to be an independent contractor and, except as expressly provided or authorized herein, shall have no authority to act for or represent the Fund in any way or otherwise be deemed an agent of the Fund.
(e) The Adviser shall keep and preserve for the period required by the 1940 Act any books and records relevant to the provision of its investment advisory services to the Fund and shall specifically maintain all books and records with respect to the Funds portfolio transactions and shall render to the 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 Fund are the property of the Fund and will surrender promptly to the Fund any such records upon the Funds request, provided that the Adviser may retain a copy of such records.
-3-
The following provisions in Section 2(f)-(g) shall apply for only so long as the Funds shares of common stock are not listed on a national securities exchange.
(f) The Adviser shall, upon request by an official or agency administering the securities laws of a state (a State Administrator), submit to such State Administrator the reports and statements required to be distributed to Fund stockholders pursuant to this Agreement, the Registration Statement and applicable federal and state law.
(g) The Adviser has a fiduciary responsibility and duty to the Fund and the Fund stockholders for the safekeeping and use of all the funds and assets of the Fund, whether or not in the Advisers immediate possession or control. The Adviser shall not employ, or permit another to employ, such funds or assets except for the exclusive benefit of the Fund. The Adviser may not contract away the fiduciary obligation owed to the Fund and the Fund stockholders under common law. Any Sub-Adviser shall be subject to the same fiduciary duties imposed on the Adviser pursuant to this Section 2(g), the 1940 Act and the Advisers Act, as well as other applicable federal and state law.
3. | Brokerage. |
(a) In executing transactions for the Fund, selecting brokers or dealers and negotiating any brokerage commission rates, the Adviser will use its best efforts to seek the best overall terms available. In assessing the best overall terms available for any portfolio transaction, the Adviser will consider all factors it deems relevant including, but not limited to, breadth of the market in the security, the price of the security, the financial condition and execution capability of the broker or dealer and the reasonableness of any commission for the specific transaction and for transactions executed through the broker or dealer in the aggregate. In selecting brokers or dealers to execute a particular transaction and in evaluating the best overall terms available, the Adviser may consider the brokerage and research services (as those terms are defined in Section 28(e) of the Securities Exchange Act of 1934, as the same may from time to time be amended (the Exchange Act)) provided to the Fund and/or other accounts over which the Adviser or an affiliate exercises investment discretion.
The following provisions in Section 3(b) shall apply for only so long as the Funds shares of common stock are not listed on a national securities exchange.
(b) Limitations. Notwithstanding anything herein to the contrary:
(i) All Front End Fees (as defined in the Articles of Incorporation) shall be reasonable and shall not exceed 15% of the gross proceeds of any offering and sale of the Funds shares, regardless of the source of payment. Any reimbursement to the Adviser or any other person for deferred Organizational and Offering Expenses (as defined in the Articles of Incorporation), including any interest thereon, if any, will be included within this 15% limitation.
(ii) The Adviser shall cause the Fund to commit at least 85% of the gross proceeds of any offering and sale of the Funds shares towards the investment or reinvestment of assets and reserves as set forth in Section 7(f) below on behalf of the Fund. The remaining proceeds may be used to pay Front End Fees.
-4-
4. | Information Provided to the Fund. |
The Adviser will keep the Fund informed of developments materially affecting the Fund, and will, on its own initiative, furnish the Fund from time to time with whatever information the Adviser believes is appropriate for this purpose. The Adviser will furnish the Fund with whatever statistical information the Fund may reasonably request with respect to the securities and other investments that the Fund may hold or contemplate purchasing. The Adviser will also furnish the Fund with any materials the Fund may reasonably request to allow the Board of Directors to evaluate the terms of this Agreement, including any renewal thereof, in accordance with Section 15(c) of the 1940 Act.
5. | Standard of Care. |
The Adviser shall exercise its best judgment in rendering the services listed in Sections 2, 3 and 4 above. The Adviser shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund in connection with the matters to which this Agreement relates, provided that nothing herein shall be deemed to protect or purport to protect the Adviser against any liability to the Fund to which the Adviser would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence on its part in the performance of its duties or by reason of the Advisers reckless disregard of its obligations and duties under this Agreement.
6. | Compensation of the Adviser. |
(a) The Fund agrees to pay the Adviser, as compensation for the services provided by the Adviser hereunder, a base management fee (Management Fee) and an incentive fee (Incentive Fee) as hereinafter set forth. The Fund shall make any payments due under this Agreement to the Adviser or to the Advisers designee as the Adviser may direct.
(b) The Fund shall pay the Adviser the Management Fee as follows:
(i) Subject to Section 6(b)(iii) hereof, on September 30, 2014, the Fund shall pay the Adviser a Management Fee at an annual rate of 1.75% of an amount equal to the average of the Funds Gross Assets as of (x) September 5, 2014 and (y) September 30, 2014.
(ii) Subject to Section 6(b)(iii) hereof, after September 30, 2014 and until December 31, 2015, the Management Fee shall be payable monthly in arrears, at an annual rate of 1.75% of an amount equal to the average of the Funds Gross Assets at the end of each of the two most recently completed calendar months. Thereafter, the Management Fee shall be payable quarterly in arrears, at an annual rate of 1.75% of an amount equal to the average of the Funds Gross Assets at the end of each of the two most recently completed calendar quarters.
(iii) Notwithstanding anything to the contrary herein, until such time, if any, as the Funds shares are listed on a national securities exchange (the Listing), the
-5-
Adviser shall waive its right to receive 0.25% of the Management Fee such that the annual rate at which the Management Fee shall be calculated is 1.50%, rather than 1.75%. Such fee waiver shall terminate if and when a Listing occurs. The Adviser shall not have the right to recover any amounts previously waived.
(iv) As used herein, Gross Assets shall mean the Funds total assets as determined on a consolidated basis in accordance with generally accepted accounting principles in the United States, excluding cash and cash equivalents, but including assets purchased with borrowed amounts; provided, however, that following any Listing, Gross Assets shall include cash and cash equivalents and assets purchased with borrowed amounts.
(v) The Management Fee for any partial month or quarter, as applicable, will be appropriately prorated and adjusted for any share issuances or repurchases during the relevant calendar months or quarters, as applicable.
(c) The Incentive Fee, examples of which are shown in Exhibit A hereto, consists of two components that are independent of each other, with the result that one component may be payable even if the other is not. A portion of the Incentive Fee is based on the Funds income and a portion is based on the Funds capital gains, each as described below.
(i) The portion of the Incentive Fee based on income will be determined and paid quarterly in arrears, commencing with the quarter ended September 30, 2014, by reference to the Funds aggregate pre-Incentive Fee net investment income, as adjusted, from the immediately preceding calendar quarter. The aggregate pre-Incentive Fee net investment income at the immediately preceding calendar quarter (the Ordinary Income), expressed as a rate of return on the value of the Funds net assets at the end of the immediately preceding calendar quarter, will be compared to a performance threshold of 1.75% per quarter (7% annualized). For the avoidance of doubt, pre-Incentive Fee net investment income is net of all Fund fees and expenses, including the Management Fee but excluding any Incentive Fee paid.
Ordinary Income means consolidated interest income, dividend income and any other income (including any other fees, such as commitment, origination, structuring, diligence and consulting fees but excluding fees for providing significant managerial assistance) accrued by the Fund during the calendar quarter, minus the Funds operating expenses for the quarter (including the Management Fee, any expenses whether incurred directly by the Fund or incurred by the Adviser on behalf of the Fund, including expenses under any Placement Agent Agreement (as defined below) and any administration agreement with an administrator, and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the Incentive Fee (both on income and capital gains). Ordinary Income includes, in the case of investments with a deferred interest feature (such as market discount, debt instruments with payment-in-kind interest, preferred stock with payment-in-kind dividends and zero coupon securities), consolidated accrued income that the Fund has not yet received in cash. Ordinary Income does not include any realized capital gains, realized capital losses or unrealized capital depreciation.
-6-
Ordinary Income, expressed as a rate of return on the value of the Funds 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 Fund will pay the Adviser an Incentive Fee with respect to the Funds Ordinary Income in each calendar quarter as follows:
(A) no Incentive Fee in any calendar quarter in which the Funds Ordinary Income does not exceed the hurdle rate;
(B) 100% of the Funds Ordinary Income with respect to that portion of such Ordinary Income, if any, that exceeds the hurdle rate but is less than 2.1875% in any calendar quarter (8.75% annualized); and
(C) 20% of the amount of the Funds Ordinary 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 appropriately adjusted for any share issuances or repurchases during the current quarter.
(ii) The portion of the Incentive Fee based on capital gains is calculated on an annual basis and payable in arrears as of the end of each calendar year (or upon termination of this Agreement, as applicable). For each period beginning on January 1 of each calendar year and ending on December 31 of the calendar year or, in the case of the Funds first and last year, the appropriate portion thereof (each, an Annual Period), the Adviser will receive an Incentive Fee equal to 20% of the difference, if positive, of the sum of the Funds aggregate realized capital gains, if any, computed net of the Funds aggregate realized capital losses, if any, and the Funds aggregate unrealized capital depreciation, if any, in each case from the beginning of the Annual Period until the end of such Annual Period. For the avoidance of doubt, unrealized capital gains are excluded from the calculation above. The capital gains-based Incentive Fee shall be payable commencing with the Annual Period in which the date of the effectiveness of this Agreement occurs.
7. | Covenants of the Adviser. |
(a) 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.
-7-
The following provisions in Section 7(b)-(h) shall apply for only so long as the Funds shares of common stock are not listed on a national securities exchange.
(b) The Adviser shall prepare or shall cause to be prepared and mailed or delivered by any reasonable means, including an electronic medium, a copy of the Funds Annual Report on Form 10-K to each stockholder as of a record date after the end of the fiscal year within 120 days after the end of the fiscal year to which it relates for each fiscal year ending after the Initial Closing that shall include: (i) financial statements prepared in accordance with generally accepted accounting principles which are audited and reported on by independent certified public accountants; (ii) a report of the material activities of the Fund during the period covered by the report; (iii) where forecasts have been provided to the Fund stockholders, a table comparing the forecasts previously provided with the actual results during the period covered by the report; and (iv) a report setting forth distributions to Fund stockholders for the period covered thereby and separately identifying distributions from: (A) cash flow from operations during the period; (B) cash flow from operations during a prior period which have been held as reserves; (C) proceeds from disposition of assets; and (D) reserves from the gross proceeds. Such Annual Report on Form 10-K must also contain a breakdown of the costs reimbursed to the Adviser. The Fund shall take reasonable steps to assure that: (v) within the scope of the annual audit of the Funds financial statements, the independent certified public accountants preparing such Annual Report on Form 10-K will issue a special report on the allocation of such costs to the Fund in accordance with this Agreement; (w) the special report shall be in accordance with the American Institute of Certified Public Accountants United States Auditing Standards relating to special reports; (x) the additional costs of such special report will be itemized and may be reimbursed to the Adviser by the Fund in accordance with this Section 7(b) only to the extent that such reimbursement, when added to the cost for administrative services rendered, does not exceed the competitive rate for such services as determined above; (y) the special report shall at minimum provide a review of the time records of individual employees, the costs of whose services were reimbursed and the specific nature of the work performed by each such employee; and (v) the prospectus, prospectus supplement or periodic report as filed with the SEC shall disclose in tabular form an itemized estimate of such proposed expenses for the next fiscal year together with a breakdown by year of such expenses reimbursed in each of the last five public programs formed by the Adviser and subject to the Omnibus Guidelines published by the North American Securities Administrators Association on May 7, 2007.
(c) The Adviser shall prepare or shall cause to be prepared and mailed or delivered to each Fund stockholder within 60 days after the end of each fiscal quarter of the Fund a Quarterly Report on Form 10-Q filed by the Fund under the Exchange Act.
(d) The Adviser shall prepare or shall cause to be prepared and mailed or delivered within 75 days after the end of each calendar year of the Fund to each person who was at any time during such calendar year a Fund stockholder all information pertaining to such stockholders investment in the Fund necessary for the preparation of such persons federal income tax return.
(e) The Adviser shall, upon written request of any State Administrator, submit any of the reports and statements to be prepared and distributed by it pursuant to this Section 7 to such State Administrator.
-8-
(f) In performing its duties hereunder, the Adviser shall cause the Fund to provide for adequate reserves for normal replacements and contingencies (but not for the payment of fees payable to the Adviser described in Section 6) by causing the Fund to retain a reasonable percentage of proceeds from offerings and revenues.
(g) From time to time and not less than quarterly, the Fund shall cause the Adviser to review the Funds accounts to determine whether cash distributions are appropriate. The Fund may, subject to authorization by the Funds Board of Directors, distribute pro rata to the Fund stockholders funds which the Funds Board of Directors deems unnecessary to retain in the Fund. In no event shall funds be advanced or borrowed solely for the purpose of such cash distributions. Any cash distributions to the Adviser shall be made only in conjunction with distributions to stockholders and as a result of any shares held by the Adviser. All such cash distributions shall be made only out of funds legally available therefor pursuant to the Maryland General Corporation Law, as amended from time to time (MGCL).
(h) The Adviser shall, in its sole discretion, temporarily place proceeds from offerings by the Fund of its equity securities into short-term, highly liquid investments which, in its reasonable judgment, afford appropriate safety of principal during such time as it is determining the composition and allocation of the portfolio of the Fund and the nature, timing and implementation of any changes thereto pursuant to Section 2; provided however, that the Adviser shall be under no fiduciary obligation to select any such short-term, highly liquid investment based solely on any yield or return of such investment. The Adviser shall cause any proceeds of the offering of Fund securities not committed for investment within the later of two years from the date of effectiveness of the Registration Statement or one year from termination of the offering, unless a longer period is permitted by the applicable State Administrator, to be paid as a distribution to the stockholders of the Fund as a return of capital without deduction of Front End Fees.
8. | Responsibility of Dual Directors, Officers and/or Employees. |
If any person who is a manager, partner, officer or employee of the Adviser is or becomes a director, officer and/or employee of the Fund and acts as such in any business of the Fund, then such manager, partner, officer and/or employee of the Adviser shall be deemed to be acting in such capacity solely for the Fund, and not as a manager, partner, officer or employee of the Adviser or under the control or direction of the Adviser, even if paid by the Adviser.
9. | Expenses. |
(a) All investment professionals of the Adviser and their respective staffs, when and to the extent engaged in providing investment advisory services hereunder, and the compensation and routine overhead expenses of such personnel allocable to such services, will be provided and paid for by the Adviser and not by the Fund. The Fund will bear all other costs and expenses of its operations and transactions, including (without limitation) those relating to: (i) the Funds organizational expenses; (ii) the Funds offering expenses (up to $1,500,000 in aggregate); (iii) the Management Fee and Incentive Fee; (iv) fees and expenses payable under
-9-
any administration agreement with an administrator; (v) certain expenses whether incurred directly by the Fund or incurred by the Adviser or any administrator on behalf of the Fund, including, without limitation (A) fees and expenses payable by the Fund under any dealer manager or similar agreement between the Fund and any dealer manager (a Placement Agent Agreement), if any; (B) expenses in connection with the purchase, holding, sale, exchange or other disposition of investments, including all transaction costs associated with the Sold Assets (as defined in the Purchase and Sale Agreement between the Fund and Credit Suisse Loan Funding LLC, dated September 5, 2014); (C) expenses in connection with the Funds ongoing operations including legal, administrative, custodial, accounting, tax, audit or other expenses relating to the Funds operations or infrastructure, including valuation and pricing services or experts, acquiring research, the costs of enforcing the Funds rights, and expenses in connection with the preparation of any exemptive relief applications filed with the SEC on behalf of the Fund; (D) expenses incurred in connection with the development, negotiation and structuring of prospective investments; (E) other administrative expenses such as (but not limited to) performing risk management, regulatory and legal compliance, fund accounting, investor reporting costs, calculating fund net asset values, and anti-money-laundering, client identification and know-your-customer analyses; (F) custodial, administrator, trustee and other third-party service provider fees and expenses; (G) costs of third-party consultants; (H) costs related to obtaining debt financing, including legal and other fees incurred in connection therewith; (I) insurance premiums and expenses (including for fidelity bond, director and officer liability, errors and omissions, and comprehensive general liability insurance) paid by the Fund and/or its respective officers with regard to losses, claims, damages, liabilities and expenses that would otherwise be indemnification expenses; (J) deal sourcing and due diligence expenses, including diligence on underlying assets (including expenses incurred in connection with third party consultants), monitoring third-party service providers and background checks, and deal-related and investor-related travel expenses; (K) the cost of software (including fees and expenses of third-party software developers) used by the Fund to track, settle and monitor investments and to wire funds to and from the Fund; (L) all expenses associated with meetings and communications with the Fund and its shareholders; (M) all expenses of any future public or private offering of shares and other securities issued by the Fund (including the costs of listing the Funds shares and any of the Funds other securities on a national securities exchange); (N) costs of winding up the Fund; (O) taxes; (P) extraordinary expenses (such as litigation and indemnification expenses); (Q) all costs and expenses incurred in connection with the formation and maintenance of one or more entities or vehicles to hold assets of the Fund for tax or other purposes, and (R) other ongoing operational expenses, including those set forth in the organizational documents of the Fund.
For the avoidance of doubt, Fund expenses include those expenses attributable to any wholly-owned subsidiary through which the Fund makes investments.
The following provisions in Section 9(b) shall apply for only so long as the Funds shares of common stock are not listed on a national securities exchange.
(b) In addition to the compensation paid to the Adviser pursuant to Section 6, the Fund shall reimburse the Adviser for all expenses of the Fund incurred by the Adviser as well
-10-
as the actual cost of goods and services used for or by the Fund and obtained from entities not affiliated with the Adviser. The Adviser may be reimbursed for the administrative services performed by it on behalf of the Fund pursuant to any separate administration or co-administration agreement with the Adviser; provided, however, such reimbursement shall be an amount equal to the lower of the Advisers actual cost or the amount the Fund would be required to pay third parties for the provision of comparable administrative services in the same geographic location; and provided, further, that such costs are reasonably allocated to the Fund on the basis of assets, revenues, time records or other methods conforming with generally accepted accounting principles. No such reimbursement shall be permitted for services for which the Adviser is entitled to compensation by way of a separate fee. Excluded from such allowable reimbursement shall be:
(i) rent or depreciation, utilities, capital equipment, and other administrative items of the Adviser; and
(ii) salaries, fringe benefits, travel expenses and other administrative items incurred by or allocated to any Controlling Person of the Adviser. The term Controlling Person shall mean a person, whatever his or her title, who performs functions for the Adviser similar to those of (a) the chairman or other member of a board of directors, (b) executive officers or (c) those holding 10% or more equity interest in the Adviser, or a Person having the power to direct or cause the direction of the Adviser, whether through the ownership of voting securities, by contract or otherwise.
10. | Services to Other Companies or Accounts. |
The Fund understands that the Adviser now acts, will continue to act and may act in the future as investment adviser to fiduciary and other managed accounts and to one or more investment companies or series of investment companies, and the Fund has no objection to the Adviser so acting, provided that whenever the Fund and one or more other accounts or investment companies or portfolios advised by the Adviser have available funds for investment, investments suitable and appropriate for each will, subject to the investment objective, policies and restrictions set forth in the Registration Statement, be allocated in a manner believed by the Adviser to be fair and equitable to each entity over time. The Fund recognizes that in some cases this procedure may adversely affect the size of the position obtainable for the Fund. Any allocation or co-investment will be done in accordance with any exemptive order or similar relief, if any, issued by the Securities and Exchange Commission or its staff to which the Fund may be subject. In addition, the Fund understands that the persons employed by the Adviser to assist in the performance of the Advisers duties hereunder will not devote their full time to such service and nothing contained herein shall be deemed to limit or restrict the right of the Adviser or any affiliate of the Adviser to engage in and devote time and attention to other businesses or to render services of whatever kind or nature, provided that doing so does not adversely affect the ability of the Adviser to perform its services under this Agreement.
-11-
11. | Limitation of Liability of the Adviser; Indemnification. |
(a) The Adviser (and any of its affiliates, directors, officers, members, employees, agents, or representatives) shall not be liable to the Fund 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 Fund, except to the extent specified in Section 36(b) of the 1940 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 Fund shall indemnify, defend and protect the Adviser (and its affiliates, directors, officers, members, employees, agents, and representatives, 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 Fund or its security holders) arising out of or otherwise based upon the performance of any of the Advisers duties or obligations under this Agreement or otherwise as an investment adviser of the Fund. Notwithstanding the preceding sentence of this Section 11(a) 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 Fund 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 Advisers duties, by reason of the reckless disregard of the Advisers duties and obligations under this Agreement (as the same shall be determined in accordance with the 1940 Act) or by reason of a material and knowing violation of United States securities laws.
The following provisions in Section 11(b)-(c) shall (i) not apply in respect of Credit Suisse Securities (USA), LLC and (ii) apply for only so long as the Funds shares of common stock are not listed on a national securities exchange.
(b) Notwithstanding Section 11(a) to the contrary, the Fund shall not provide for indemnification of the Indemnified Parties for any liability or loss suffered by the Indemnified Parties, nor shall the Fund provide that any of the Indemnified Parties be held harmless for any loss or liability suffered by the Fund, unless all of the following conditions are met:
(i) the Indemnified Party has determined, in good faith, that the course of conduct that caused the loss or liability was in the best interests of the Fund;
(ii) the Indemnified Party was acting on behalf of or performing services for the Fund;
(iii) such liability or loss was not the result of (A) negligence or misconduct, in the case that the Indemnified Party is the Adviser or an Affiliate (as defined in the Articles of Incorporation) of the Adviser, or (B) gross negligence or willful misconduct, in the case that the Indemnified Party is a director of the Fund who is not also an officer of the Fund or the Adviser or an Affiliate of the Adviser; and
-12-
(iv) such indemnification or agreement to hold harmless is recoverable only out of the Funds net assets and not from the Fund stockholders.
Furthermore, the Indemnified Party shall not be indemnified for any losses, liabilities or expenses arising from or out of an alleged violation of federal or state securities laws by such party unless one or more of the following conditions are met:
(i) there has been a successful adjudication on the merits of each count involving alleged material securities law violations as to the Indemnified Party;
(ii) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the Indemnified Party; or
(iii) a court of competent jurisdiction approves a settlement of the claims against the Indemnified Party and finds that indemnification of the settlement and the related costs should be made, and the court considering the request for indemnification has been advised of the position of the SEC and of the published position of any state securities regulatory authority in which shares of stock of the Fund were offered or sold as to indemnification for violations of securities laws.
(c) The Fund may pay or reimburse reasonable legal expenses and other costs incurred by the Indemnified Party in advance of final disposition of a proceeding only if all of the following are satisfied:
(i) the proceeding relates to acts or omissions with respect to the performance of duties or services on behalf of the Fund;
(ii) the Indemnified Party provides the Fund with written affirmation of such Indemnified Partys good faith belief that the Indemnified Party has met the standard of conduct necessary for indemnification by the Fund;
(iii) the legal proceeding was initiated by a third party who is not a Fund stockholder, or, if by a Fund stockholder acting in his or her capacity as such, a court of competent jurisdiction approves such advancement; and
(iv) the Indemnified Party provides the Fund with a written agreement to repay the amount paid or reimbursed by the Fund, together with the applicable legal rate of interest thereon, if it is ultimately determined that the Indemnified Party did not comply with the requisite standard of conduct and is not entitled to indemnification.
12. | Term of Agreement. |
(a) This Agreement shall continue for an initial two-year period commencing on the date first written above, and thereafter shall continue automatically for successive annual periods unless otherwise terminated, provided that, following the Election and for so long as the Fund is regulated as a business development company under the 1940 Act, such continuance is
-13-
specifically approved at least annually by (1) the Board of Directors or (2) by a vote of a Majority of the Outstanding Shares of the Fund, provided that in either event such continuance is also approved by a majority of the Board of Directors, who are not interested persons (as defined in the 1940 Act) of any party to this Agreement, by vote cast in person at a meeting called for the purpose of voting on such approval. Majority of the Outstanding Shares means the lesser of (1) 67% or more of the outstanding voting securities of the Fund present at a meeting, if the holders of more than 50% of the outstanding voting securities of the Fund are present or represented by proxy or (2) a majority of outstanding voting securities of the Fund.
(b) Prior to the Conversion, this Agreement is terminable (i) in the sole discretion of the Managing Member upon 60 days notice to the Adviser or (ii) by the Adviser upon 60 days notice to the Fund.
(c) Following the Election and for so long as the Fund is regulated as a business development company under the 1940 Act, this Agreement is terminable:
(i) (1) on 60 days written notice, by the Board of Directors or the affirmative vote of a Majority of the Outstanding Shares, in each case without penalty, or (2) automatically in the event of its assignment (as defined in the 1940 Act); or
(ii) upon 120 days written notice by the Adviser.
(d) Upon any removal of the Adviser in accordance with this Section 12, the Adviser will be entitled to any Management Fee, Incentive Fee or other reimbursable expenses that have accrued but remain unpaid as of such removal date.
The following provisions in Section 12(e)-(f) shall apply for only so long as the Funds shares of common stock are not listed on a national securities exchange.
(e) Without the approval of holders of a majority of the shares entitled to vote on the matter, or such other approval as may be required under the mandatory provisions of any applicable laws or regulations, including the MGCL, or provisions of the Articles of Incorporation, the Adviser shall not: (i) amend this Agreement except for amendments that do not adversely affect the interests of the stockholders; (ii) voluntarily withdraw as the Adviser unless such withdrawal would not affect the tax status of the Fund and would not materially adversely affect the stockholders; (iii) appoint a new investment adviser to the Fund (other than a sub-adviser pursuant to the terms of this Agreement and applicable law); (iv) sell all or substantially all of the Funds assets other than in the ordinary course of the Funds business; or (v) cause the merger or other reorganization of the Fund. In the event that the Adviser should withdraw pursuant to (ii) above, the withdrawing Adviser shall pay all expenses incurred as a result of its withdrawal.
(f) Upon termination of this Agreement, the Fund may terminate the Advisers interest in the Funds revenues, expenses, income, losses, distributions and capital by payment of an amount equal to the then present fair market value of the terminated Advisers interest, determined by agreement of the terminated Adviser and the Fund. If the Fund and the
-14-
Adviser cannot agree upon such amount, the parties will submit to binding arbitration which cost shall be borne equally by the terminated Adviser and the Fund. The method of payment to the terminated Adviser shall be fair and shall protect the solvency and liquidity of the Fund.
13. | Conflicts of Interest and Prohibited Activities. |
This Section 13 shall apply for only so long as the Funds shares of common stock are not listed on a national securities exchange.
(a) The Adviser is not hereby granted or entitled to an exclusive right to sell or exclusive employment to sell assets for the Fund.
(b) The Adviser shall not receive or accept any rebate or give-ups or similar arrangement that is prohibited under applicable federal or state securities laws. The Adviser shall not directly or indirectly pay or award any fees or commissions or other compensation to any Person engaged to sell shares of the Funds stock or give investment advice to a potential stockholder; provided, however, that this subsection shall not prohibit the payment to a registered broker-dealer or other properly licensed agent of sales commissions for selling or distributing the Funds common stock.
(c) The Adviser covenants that it shall not permit or cause to be permitted the Funds funds from being commingled with the funds of any other entity. However, nothing in this subsection shall prohibit the Adviser from establishing a master fiduciary account pursuant to which separate sub-trust accounts are established for the benefit of affiliated programs, provided that the Funds funds are protected from the claims of other programs and creditors of such programs.
14. | Use of Names. |
The Fund recognizes that directors, officers and employees of the Adviser may from time to time serve as directors, trustees, officers and employees of corporations and business trusts (including other investment companies) and that such other corporations and trusts may include the name CS or Credit Suisse as part of their names, and that the Adviser or its affiliates may enter into advisory or other agreements with such other corporations and trusts. If the Adviser ceases to act as the investment adviser of the Fund, the Fund agrees that, at the Advisers request, the Funds license to use the words CS or Credit Suisse, or any derivation thereof, will terminate and that the Fund will immediately take all necessary action to change its name to a name not including the words CS or Credit Suisse or any derivation thereof.
15. | Voting of Proxies. |
The Fund hereby authorizes and directs the Adviser to vote (by proxy or otherwise) in all matters for which a securityholder vote is solicited by, or with respect to, issuers of securities held directly by the Fund, in such manner as the Adviser deems appropriate in accordance with the policies and procedures established by the Adviser from time to time. With
-15-
regard to all other matters for which securityholder action is required or solicited with respect to securities beneficially held by the Fund (such as all matters relating to class actions, including, without limitation, matters relating to opting in or opting out of a class and approval of class settlements), the Adviser is authorized and obligated to take any action it deems appropriate.
16. | Assignment. |
This Agreement may not be assigned (as defined in the Advisers Act) by the Adviser without the consent of the Fund, provided, that, following the Election and for so long as the Fund is regulated as a business development company under the 1940 Act, this Agreement shall terminate automatically in the event of its assignment (as defined in the 1940 Act).
17. | Notices. |
Notices of any kind to be given shall be in writing and shall be duly given if mailed or delivered to the addresses and to such individual as shall be specified by each party to the other party from time to time.
18. | Miscellaneous. |
Notice is hereby given that this Agreement is entered into on behalf of the Fund by an officer of the Fund in his or her capacity as an officer and not individually. It is understood and expressly stipulated that none of the Directors or Members of the Fund shall be personally liable hereunder. Neither the Directors, officers, agents nor Members of the Fund assume any personal liability for obligations entered into on behalf of the Fund. All persons dealing with the Fund must look solely to the property of the Fund for the enforcement of any claims against the Fund.
19. | Amendments. |
This Agreement may be amended by mutual consent, but the consent of the Fund must be obtained in conformity with the requirements of the 1940 Act.
20. | Entire Agreement; Governing Law. |
This Agreement contains the entire agreement of the parties and supersedes all prior agreements, understandings and arrangements with respect to the subject matter hereof. This Agreement shall be construed in accordance with the laws of the State of Delaware and the applicable provisions of the 1940 Act. To the extent the applicable laws of the State of Delaware, or any of the provisions herein, conflict with the provisions of the 1940 Act, the latter shall control.
[Signature Page Follows This Page]
-16-
Please confirm that the foregoing is in accordance with your understanding by indicating your acceptance hereof at the place below indicated, whereupon it shall become a binding agreement between us.
CREDIT SUISSE CORPORATE CREDIT SOLUTIONS, LLC | ||
By: |
| |
Name: | ||
Title: | ||
CREDIT SUISSE ASSET MANAGEMENT, LLC | ||
By: |
| |
Name: | ||
Title: |
Signature Page
Investment Advisory Agreement
Credit Suisse Park View BDC, Inc.
Exhibit A
Below are examples of the two-part incentive fee:
Example 1: Incentive Fee on Income, Determined on a Quarterly Basis
Alternative 1 Assumptions(*)
| Investment income (including interest, dividends, fees, etc.) = 1.25% |
| Hurdle rate(1) = 1.75% |
| Management fee(2) = 0.60% |
| Other expenses (legal, accounting, custodian, transfer agent, etc.) (3) = 0.20% |
| Pre-incentive fee net investment income (investment income (management fee + other expenses) = 0.45% |
Pre-incentive fee net investment income does not exceed hurdle rate, therefore there is no incentive fee.
Alternative 2 Assumptions(*)
| Investment income (including interest, dividends, fees, etc.) = 2.75% |
| Hurdle rate(1) = 1.75% |
| Management fee(2) = 0.60% |
| Other expenses (legal, accounting, custodian, transfer agent, etc.) (3) = 0.20% |
| Pre-incentive fee net investment income (investment income (management fee + other expenses) = 1.95% |
Pre-incentive net investment income exceeds hurdle rate, therefore there is an income incentive fee payable by the Fund to the Adviser.
Incentive |
= 100% x pre-incentive fee net investment income, subject to catch up(4) | |
= 100% x (1.95%-1.75%)
= 0.20% |
Alternative 3 Assumptions(*)
| Investment income (including interest, dividends, fees, etc.) = 3.25% |
| Hurdle rate(1) = 1.75% |
| Management fee(2) = 0.60% |
| Other expenses (legal, accounting, custodian, transfer agent, etc.)(3) = 0.20% |
| Pre-incentive fee net investment income (investment income (management fee + other expenses) = 2.45% |
Pre-incentive net investment income exceeds hurdle rate, therefore there is an income incentive fee payable by the Fund to the Adviser.
| Incentive fee = 20% x pre-incentive fee net investment income, subject to catch-up(4) |
| Incentive fee = 100% × catch-up + (20% × (pre-incentive fee net investment income 2.1875%)) |
| Catch-up = 2.1875% - 1.75% = 0.4375% |
Incentive |
= (100% x 0.4375%) + (20% x (2.45% - 2.1875%) | |
= 0.4375% + (20% x 0.2625%)
= 0.4375% + 0.0525%
= 0.49% |
(1) | Represents 7% annualized hurdle rate. |
(2) | Represents 2.40% annualized management fee. |
(3) | Excludes organizational and offering expenses. |
(4) | The catch-up provision is intended to provide the Adviser with an incentive fee of 20% on all of the Funds investment income as if a hurdle rate did not apply when our net investment income exceeds 2.2875% in any calendar quarter. |
(*) | The hypothetical amount of pre-incentive fee net investment income shown is based on a percentage of total net assets |
Example 2: Capital Gains Portion of Incentive Fee
Alternative 1 Assumptions
| Year 1: $20 million investment made in company A (Investment A), and $30 million investment made in company B (Investment B) |
| Year 2: Investment A sold for $50 million and fair market value, or FMV, of Investment B determined to be $32 million |
| Year 3: FMV of Investment B determined to be $25 million |
| Year 4: Investment B sold for $31 million |
The capital gains portion of the incentive fee would be:
| Year 1: None |
| Year 2: Capital gains incentive fee of $6 million ($30 million realized capital gains on sale of Investment A multiplied by 20%) |
| Year 3: None |
| Year 4: $200,000 ($1 million realized capital gain on the sale of Investment B multiplied by 20%) |
Alternative 2 Assumptions
| Year 1: $20 million investment made in company A (Investment A), $30 million investment made in company B (Investment B) and $25 million investment made in company C (Investment C) |
| Year 2: Investment A sold for $50 million, FMV of Investment B determined to be $25 million and FMV of Investment C determined to be $25 million |
| Year 3: FMV of Investment B determined to be $25 million and Investment C sold for $35 million |
| Year 4: FMV of Investment B determined to be $30 million |
| Year 5: Investment B sold for $40 million. |
The capital gains portion of the incentive fee, if any, would be:
| Year 1: None |
| Year 2: $5 million capital gains incentive fee (20% multiplied by $25 million ($30 million realized capital gains on Investment A less $5 million unrealized capital depreciation on Investment B) |
| Year 3: $2 million (20% multiplied by $10 million realized capital gain on Investment C) |
| Year 4: None |
| Year 5: $2 million (20% multiplied by $10 million realized capital gain on Investment B) |
* The hypothetical amounts of returns shown are based on a percentage of the Funds total net assets and assume no leverage. There is no guarantee that positive returns will be realized and actual returns may vary from those shown in this example.