EXHIBIT 10.1
AMENDED AND RESTATED INVESTMENT ADVISORY
AND MANAGEMENT AGREEMENT
BETWEEN
MVC CAPITAL, INC.
AND
THE TOKARZ GROUP ADVISERS LLC
     Agreement made this 14th day of April 2009, by and between MVC Capital,
Inc., a Delaware corporation (the “Fund”), and The Tokarz Group Advisers LLC, a
Delaware limited liability company (the “Adviser”).
     Whereas, the Fund is a closed-end management investment company that has
elected to be regulated as a business development company (“BDC”) under the
Investment Company Act of 1940 (the “Investment Company Act”); and
     Whereas, the Adviser is an investment adviser that has registered under the
Investment Advisers Act of 1940, as amended (the “Advisers Act”); and
     Whereas, on October 31, 2006, the Fund and the Adviser entered into an
Investment Advisory and Management Agreement (the “Original Agreement”),
pursuant to which the Adviser agreed to furnish investment advisory services to
the Fund, that they now wish to amend and restate in its entirety; and
     Now, therefore, in consideration of the premises and for other good and
valuable consideration, the parties hereby agree that the Original Agreement is
hereby amended and restated in its entirety to read as follows:
1. Duties of the Adviser.
          (a) The Fund hereby employs the Adviser to act as the investment
adviser to the Fund and to manage the investment and reinvestment of the assets
of the Fund, subject to the supervision of the Board of Directors of the Fund
(the “Board”), for the period and upon the terms herein set forth: (i) in
accordance with the investment objectives, policies and restrictions that are
determined by the Board from time to time and disclosed to the Adviser, which
objectives, policies and restrictions shall initially be those set forth in the
Fund’s Registration Statement on Form N-2, filed with the Securities and
Exchange Commission (the “SEC”) on January 18, 2008 (the “Registration
Statement”); (ii) in accordance with the Investment Company Act; and
(iii) during the term of this Agreement in accordance with all other applicable
federal and state laws, rules and regulations, and the Fund’s charter and
by-laws. References in this Agreement to the “Fund” shall also include any
wholly-owned subsidiary of the Fund, where appropriate and as applicable.
               Without limiting the generality of the foregoing, the Adviser
shall, during the term and subject to the provisions of this Agreement:
(i) determine the composition of the portfolio of the Fund, the nature and
timing of the changes therein and the manner of implementing such changes;
(ii) identify, evaluate and negotiate the structure of the investments made by
the Fund; (iii) close and monitor the Fund’s investments; (iv) determine the
securities and other assets that the Fund will purchase, retain, or sell;
(v) perform due diligence on prospective portfolio companies; (vi) provide the
Fund with such other investment advisory, research and related services as the
Fund may, from time to time, reasonably require for the investment of its funds;
(vii) oversee the performance of the Fund’s outside service providers, including
the Fund’s administrator, transfer agent and custodian; (viii) oversee
compliance by the Fund with U.S. federal, state and other applicable laws and
regulations; (ix) provide the Fund with office space;

 

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and (x) pay the salaries, fees and expenses of such of the Fund’s directors,
officers or employees who are directors, officers, principals or employees of
the Adviser or any of its affiliates, except that the Fund will reimburse the
Adviser for (a) its allocable portion of the compensation payable to its chief
financial officer (“CFO”), chief compliance officer (“CCO”) and secretary in an
amount not to exceed $200,000 per year, in the aggregate, (b) travel expenses,
or an appropriate portion of such expenses (in the event such expenses are not
otherwise reimbursed by a portfolio company or third party), that relate to
attendance at meetings of the Board or any committees thereof and the Fund’s
portfolio companies or performing other managerial assistance for portfolio
companies and (c) unreimbursed travel and other related out-of-pocket expenses
in connection with the sourcing of investments for the Fund as set forth in
Section 2(xviii). The Adviser may delegate any of the foregoing duties to a
third party with the consent of the Board. 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
Fund’s investments and the placing of orders for other purchase or sale
transactions on behalf of the Fund. In the event that the Fund, in consultation
with the Adviser, determines to incur debt financing, the Adviser will arrange
for such financing on the Fund’s behalf, subject to the approval of the Board.
Furthermore, the Fund shall consult with the Adviser prior to issuing any
preferred stock. The Adviser will offer, and provide where requested, on the
Fund’s behalf and/or on behalf of a subsidiary of the Fund, significant
managerial assistance to the issuers of securities in which the Fund is
invested. The Adviser shall make available to the Fund individuals to serve as
directors and/or officers of the Fund, as deemed necessary by the Board.
          (b) The Adviser shall manage the Fund’s day-to-day operations and
oversee the administration, recordkeeping and compliance functions of the Fund
and/or third parties performing such functions for the Fund. Without limiting
the generality of the foregoing, the Adviser specifically shall be responsible
for overseeing: (i) the preparation of periodic financial statements; (ii) the
preparation of financial and accounting reports for presentation to the Fund’s
Board and for stockholders and governmental agencies; (iii) the preparation and
filing of the Fund’s tax returns (and those of any wholly-owned subsidiary
involved with the Fund’s operations); (iv) the preparation and providing of such
reports and analyses to the Fund’s Board and stockholders as may from time to
time be considered necessary or appropriate by the Fund’s Board; (v) the
arrangement of the payment of the Fund’s expenses and the performance of
administrative and professional services rendered to the Fund by others;
(vi) the preparation of any proxy statements and arranging and conducting
meetings of stockholders of the Fund; (vii) the procurement of insurance for the
Fund, its subsidiaries and/or its officers and directors, as directed by the
Board; and (viii) such other operational, administrative and regulatory
compliance duties as shall from time to time arise as a result of the Fund’s
operations and investing activities.
          (c) The Adviser hereby accepts such employment and agrees during the
term hereof to render the services described herein for the compensation
provided herein. The parties acknowledge and agree that, subject to the approval
of the directors who are not “interested persons” (as defined under the 1940
Act) of the Fund and who constitute a majority of the Board (the “Independent
Board”), the Fund may retain the Adviser, under an arrangement separate from
this Agreement (a “Separate Agreement”), pursuant to which the Adviser would
agree to furnish portfolio management or other management services to an
investment vehicle other than the Fund (e.g., a private equity fund, BDC or
managed account of an operating company) where that investment vehicle is
comprised substantially of assets other than the Fund’s assets (a “Third-Party
Vehicle”). Notwithstanding anything to the contrary in this Agreement, the terms
and obligations under this Agreement shall not cover the Adviser’s services
rendered to a Third-Party Vehicle covered under a Separate Agreement.
          (d) Subject to the requirements of the Investment Company Act, the
Adviser is hereby authorized to enter into one or more sub-advisory agreements
with other investment advisers (each, a “Sub-Adviser”) pursuant to which the
Adviser may obtain the services of the Sub-Adviser(s) to assist the

 

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Adviser in providing the investment advisory services (i.e., the making of
investment recommendations or decisions for the Fund) required to be provided by
the Adviser under Section 1(a) of this Agreement. Specifically, the Adviser may
retain a Sub-Adviser to recommend specific securities or other investments based
upon the Fund’s investment objectives and policies. 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 Investment Company Act and other applicable federal and
state law. Nothing in this subsection (d) will obligate the Adviser to pay any
expenses that are the expenses of the Fund under Section 2.
          (e) The Adviser, and any Sub-Adviser, shall for all purposes herein
provided each 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.
          (f) The Adviser shall keep and preserve for the period required by the
Investment Company Act any books and records relevant to the provision of its
investment advisory services to the Fund and shall specifically maintain all
books and records with respect to the Fund’s portfolio transactions and shall
render to the Board 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 Fund’s request, provided that the Adviser may retain a
copy of such records. Upon termination of this Agreement, the Adviser shall have
no further obligations under this Section 1(f).
          (g) Prior to the Effective Date (as defined in Section 10 below), the
Adviser shall adopt and implement written policies and procedures reasonably
designed to prevent its violation of the Federal Securities laws. Also prior to
the Effective Date, the Adviser shall have provided to the Fund, and shall
provide the Fund at such times in the future as the Fund shall reasonably
request, a copy of such policies and procedures (and any amendments thereto) and
a report of such policies and procedures. Such report shall be of sufficient
scope and in sufficient detail, as may reasonably be required to comply with
Rule 38a-1 under the Investment Company Act (“Rule 38a-1”) and to provide
reasonable assurance that any material inadequacies would be disclosed by such
examination, and, if there are no such inadequacies, the report shall so state.
2. Fund’s Responsibilities and Expenses Payable by the Fund.
          All investment professionals of the Adviser and its staff, when and to
the extent engaged in providing services required to be provided by the Adviser
under Section 1(a) and (b), 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, except that costs or expenses relating
specifically to items identified in the next sentence shall be borne by the
Fund, as appropriate. The Fund will bear all costs and expenses of its
operations and transactions, including, without limitation, those relating to:
(i) the cost and expenses of any independent valuation firm; (ii) expenses
incurred by the Adviser payable to third parties, including agents, consultants
or other advisors, in monitoring financial and legal affairs for the Fund and in
monitoring the Fund’s investments and performing due diligence on its
prospective portfolio companies, provided, however, the retention by the Adviser
of any third party to perform such services shall require the advance approval
of the Board (which approval shall not be unreasonably withheld) if the fees for
such services are expected to exceed $30,000; once the third party is approved
any expenditure to such third party will not require additional approval from
the Board; (iii) interest payable on debt and other direct borrowing costs, if
any, incurred to finance the Fund’s investments or to maintain its tax status;
(iv) offerings of the Fund’s common stock and other securities; (v) investment
advisory and management fees; (vi) fees and payments due under any
administration agreement between the Fund and its administrator; (vii) transfer
agent and custodial fees; (viii) federal

 

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and state registration fees; (ix) all costs of registration and listing the
Fund’s shares on any securities exchange; (x) federal, state and local taxes;
(xi) independent directors’ fees and expenses; (xii) costs of preparing and
filing reports or other documents required by governmental bodies (including the
SEC); (xiii) costs of any reports, proxy statements or other notices to
stockholders, including printing and mailing costs; (xiv) the cost of the Fund’s
fidelity bond, directors and officers/errors and omissions liability insurance,
and any other insurance premiums; (xv) direct costs and expenses of
administration, including printing, mailing, long distance telephone, copying,
independent auditors and outside legal costs; (xvi) the costs and expenses
associated with the establishment of an SPV (as defined in Section 3(c) below);
(xvii) the allocable portion of the cost (excluding office space) of the Fund’s
CFO, CCO and secretary (subject to the limit set forth in Section 1(a));
(xviii) subject to a cap of $150,000 in any fiscal year of the Fund, fifty
percent of the unreimbursed travel and other related (e.g., meals) out-of-pocket
expenses (subject to item (ii) above) incurred by the Adviser in sourcing
investments for the Fund; provided that, if the investment is sourced for
multiple clients of the Adviser, then the Fund shall only reimburse fifty
percent of its allocable pro rata portion of such expenses; and (xix) all other
expenses incurred by the Fund in connection with administering the Fund’s
business (including travel and other out-of-pocket expenses (subject to item
(ii) above) incurred in providing significant managerial assistance to a
portfolio company). Additionally, any unsatisfied payment obligation to the
Adviser of a wholly-owned subsidiary of the Fund, which arises under this
Agreement, shall be the sole responsibility of the Fund and not the subsidiary,
and such unsatisfied payments are specifically acknowledged as neither loans nor
capital contributions to the subsidiary, and the Fund will not seek
reimbursement from the subsidiary of such unsatisfied payments. Notwithstanding
the foregoing, absent the consent of the Board, any fees or income earned, on
the Fund’s behalf, by any officer, director, employee or agent of the Adviser in
connection with the monitoring or closing of an investment or disposition by the
Fund or for providing managerial assistance to a portfolio company (which
includes, for example, service on the board of directors of a portfolio company
but does not include the Adviser’s furnishing of portfolio management or other
management services to a Third-Party Vehicle) shall inure to the Fund.
3. Compensation of the Adviser.
          The Fund agrees to pay, and the Adviser agrees to accept, as
compensation for the services provided by the Adviser hereunder, a base
management fee (“Base Management Fee”) and an incentive fee (“Incentive Fee”) as
hereinafter set forth. The Fund shall make any payments due hereunder to the
Adviser or to the Adviser’s designee as the Adviser may otherwise direct. To the
extent permitted by applicable law, the Adviser may elect, or the Fund may adopt
a deferred compensation plan pursuant to which the Adviser may elect, to defer
all or a portion of its fees hereunder for a specified period of time.
          (a) The Base Management Fee shall be 2.00% per annum of the Fund’s
total assets (excluding: (i) cash, (ii) the value of any investment in a
Third-Party Vehicle covered by a Separate Agreement and (iii) the value of any
investment by the Fund not made in a portfolio company (“Non-Eligible Assets”);
but including assets purchased with borrowed funds that are not Non-Eligible
Assets). The Base Management Fee will be payable quarterly in arrears. The Base
Management Fee will be calculated based on the value of the Fund’s total assets
(excluding Non-Eligible Assets, but including assets purchased with borrowed
funds that are not Non-Eligible Assets) at the end of the most recently
completed fiscal quarter. Base Management Fees for any partial fiscal quarter
will be appropriately pro rated.
          (b) The Incentive Fee shall consist of two parts, as follows:
               (i) One part will be calculated and payable quarterly in arrears
based on the Pre-Incentive Fee net operating income for the fiscal quarter (the
“Income Incentive Fee”). “Pre-Incentive

 

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Fee net operating income” means interest income, dividend income and any other
income (including any other fees paid to the Fund such as directors’,
commitment, origination, structuring, diligence and consulting fees or other
fees that the Fund receives from portfolio companies) accrued by the Fund during
the fiscal quarter, minus the Fund’s operating expenses for the fiscal quarter
(including the Base Management Fee and any interest expense and dividends paid
on any issued and outstanding preferred stock, but excluding the Incentive Fee
(whether paid or accrued)).
          Pre-Incentive Fee net operating 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), accrued income that has not yet been
received in cash. Pre-Incentive Fee net operating income does not include any
realized capital gains, realized and unrealized capital losses or unrealized
capital appreciation or depreciation.
          In calculating the amount of the Income Incentive Fee, pre-Incentive
Fee net operating income, at the end of the immediately preceding fiscal
quarter, will be compared to two “hurdle amounts”: 1.75% of the Fund’s net
assets (defined as total assets less total liabilities) (the “Lower Hurdle
Amount”) and 2.1875% of the Fund’s net assets (the “Higher Hurdle Amount”). The
Fund will pay the Adviser the Income Incentive Fee with respect to the Fund’s
pre-Incentive Fee net operating income in each fiscal quarter as follows:
          (A) no Income Incentive Fee in any fiscal quarter in which the Fund’s
pre-Incentive Fee net operating income does not exceed the Lower Hurdle Amount;
          (B) 100% of the Fund’s pre-Incentive Fee net operating income with
respect to that portion of such pre-Incentive Fee net operating income, if any,
that exceeds the Lower Hurdle Amount but is less than the Higher Hurdle Amount
in any fiscal quarter; and
          (C) 20% of the amount of the Fund’s pre-Incentive Fee net operating
income, if any, that exceeds the Higher Hurdle Amount in any fiscal quarter.
          These calculations will be appropriately pro rated for any period of
less than three months and adjusted for any share issuances or repurchases
during the current fiscal quarter.
               (ii) The second part of the Incentive Fee (the “Capital Gains
Fee”) will be determined and payable in arrears as of the end of each fiscal
year (or upon termination of this Agreement as set forth below), commencing with
the fiscal year ending on October 31, 2009, and will equal 20% of: (a) the
Fund’s cumulative aggregate net realized capital gains on the Fund’s investments
made after November 1, 2003 (the “Fund’s New Portfolio”) (exclusive of any
realized gains on an investment in a Third-Party Vehicle covered by a Separate
Agreement or that are subject to an SPV Incentive Allocation, as defined below);
minus (b) the aggregate unrealized capital depreciation of the Fund’s New
Portfolio calculated from November 1, 2003. If the Capital Gains Fee is positive
at the end of such year, then the aggregate amount of Capital Gains Fees paid in
all prior years shall be subtracted from the Capital Gains Fee for such year. If
the Capital Gains Fee is negative, then there will be no Capital Gains Fee
payable for such year. If this Agreement shall terminate as of a date that is
not a fiscal year end, the termination date shall be treated as though it were a
fiscal year end for purposes of calculating and paying a Capital Gains Fee.
Furthermore, upon the tender of a notice of termination of this Agreement, all
unrealized capital gains on the Fund’s New Portfolio shall be deemed realized at
their net asset value last determined by the Valuation Committee of the Board
and the Capital Gains Fee shall be determined and deemed payable as

 

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of the date of a tender of a notice of termination of this Agreement. Any
Capital Gains Fee due upon the tender of a notice of termination of this
Agreement shall be paid as soon as practicable after the Capital Gains Fee is
permitted to be paid under applicable law. Any Capital Gains Fee to be made
under this Section 3 shall be paid as soon as practicable following the
completion of the audit of the financial statements of the Fund for the
applicable fiscal year performed in accordance with generally accepted
accounting principles.
          For purposes of this Section 3(b)(ii):
          “Cumulative aggregate net realized capital gains” means cumulative
aggregate realized capital gains minus cumulative aggregate realized capital
losses.
          “Cumulative aggregate realized capital gains” are calculated as the
sum of the differences, if positive, between (a) the net sales price of each
investment in the Fund’s New Portfolio when sold and (b) the accreted or
amortized cost basis of such investment.
          “Cumulative aggregate realized capital losses” are calculated as the
sum of the amounts by which (a) the net sales price of each investment in the
Fund’s New Portfolio when sold is less than (b) the accreted or amortized cost
basis of such investment.
          “Aggregate unrealized capital depreciation” means the sum of the
differences, if negative, between (a) the valuation of each investment in the
Fund’s New Portfolio, as of the applicable Capital Gains Fee calculation date
and (b) the accreted or amortized cost basis of such investment.
          Notwithstanding the foregoing, in no event shall either the Fund’s
contribution of an investment to a Subsidiary (as defined in Section 4) or the
Fund’s distribution of an investment to the Fund’s stockholders be deemed to be
a realization event.
          (iii) Notwithstanding the foregoing, in no event shall the sum of the
Capital Gains Fee and the SPV Incentive Allocation (as defined below), if any,
for any fiscal year exceed: (a) 20% of (i) the Fund’s cumulative aggregate
realized capital gains on the Fund’s investments (the “Fund’s Total Portfolio”)
(including any realized gains attributable to an SPV Incentive Allocation (as
defined below)), minus (ii) the sum of the cumulative aggregate realized capital
losses on, and aggregate unrealized capital depreciation of, the Fund’s Total
Portfolio; minus (b) the aggregate amount of Capital Gains Fees paid and the
value of SPV Incentive Allocations made in all prior years (the “Cap”).
Furthermore, in the event that the Capital Gains Fee for any fiscal year exceeds
the Cap (“Uncollected Capital Gains Fees”), all or a portion of such amount
shall be accrued and payable to the Adviser following any subsequent fiscal year
in which the Agreement is in effect, but only to the extent the Capital Gains
Fee, plus the amount of Uncollected Capital Gains Fees, each calculated as of
the end of such subsequent fiscal year, do not exceed the Cap. Any remaining
Uncollected Capital Gains Fees shall be paid in following subsequent fiscal
years in accordance with the same process, provided the Agreement is in effect
during such fiscal year.
          For purposes of this Section 3(b)(iii):
          “Cumulative aggregate realized capital gains” are calculated as the
sum of the differences, if positive, between (a) the net sales price of each
investment in the Fund’s portfolio when sold and (b) with respect to investments
held by the Fund on November 1, 2003, the fair value of such investment on

 

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November 1, 2003, and with respect to all other investments, the accreted or
amortized cost basis of such investment.
          “Cumulative aggregate realized capital losses” are calculated as the
sum of the amounts by which (a) the net sales price of each investment in the
Fund’s portfolio when sold is less than (b) with respect to investments held by
the Fund on November 1, 2003, the fair value of such investment on November 1,
2003, and with respect to all other investments, the accreted or amortized cost
basis of such investment.
          “Aggregate unrealized capital depreciation” is calculated as the sum
of the differences, if negative, between (a) the valuation of each investment in
the Fund’s portfolio as of the applicable Capital Gains Fee calculation date and
(b) with respect to investments held by the Fund on November 1, 2003, the fair
value of such investment on November 1, 2003, and with respect to all other
investments, the accreted or amortized cost basis of such investment.
          (c) The Fund hereby authorizes the Adviser to create or arrange for
the creation of one or more special purpose vehicles for which it may serve as
the general partner or managing member, as applicable, for purposes of making
investments on behalf of the Fund (each, an “SPV”). A Third-Party Vehicle shall
not be considered an SPV. Furthermore, the Fund authorizes the Adviser, in its
role as the general partner or managing member, as applicable, of an SPV, to
receive an incentive allocation equal to 20% of the net profits of the SPV (the
“SPV Incentive Allocation”). The Adviser acknowledges and agrees that: (i) prior
to the SPV conducting any investment activities, the Board must approve the
SPV’s organizational documents; and (ii) subject to the approval of the Board,
the Adviser will establish procedures for every SPV to ensure that any SPV
Incentive Allocation received by the Adviser will not cause the total
compensation received by the Adviser under this Agreement to exceed the limits
imposed by Section 205(b)(3) of the Advisers Act.
          In addition, for each of fiscal years 2009 and 2010, the Adviser
hereby agrees to absorb or reimburse operating expenses of the Fund (promptly
following the completion of such year), to the extent necessary to limit the
Fund’s Expense Ratio for any such year to 3.50% (the “Expense Cap”); provided,
however, if on October 31, 2009, the Fund’s net assets have not increased by at
least 5% from October 31, 2008, the dollar value of the Expense Cap shall
increase by 5% for fiscal 2010. For purposes of this paragraph, the Fund’s
“Expense Ratio” shall be calculated as of October 31 of any such year and mean:
(i) the consolidated expenses of the Fund (which expenses shall include any
amounts payable to the Adviser under the Base Management Fee, but shall exclude
the amount of any interest and other direct borrowing costs, taxes, incentive
compensation, and extraordinary expenses (including, but not limited to, any
legal claims and liabilities and litigation costs and any indemnification
related thereto, and the costs of any spin-off or other similar type transaction
contemplated by this Agreement)), as a percentage of (ii) the average net assets
of the Fund (i.e., average consolidated assets less average consolidated
liabilities) during such fiscal year as set forth in the Fund’s financial
statements contained in the Fund’s annual report on Form 10-K.
4. The Adviser’s Management of Private Equity Funds. As consideration for the
Fund entering into this Agreement, the Adviser acknowledges the parties’
objective of having the Fund’s stockholders participate in private investment
funds managed by the Adviser. During the term of this Agreement, the Adviser
agrees that, absent the consent of the Board, the Adviser shall not establish a
private investment fund managed by the personnel of the Adviser with the
investment objective of: (a) investing in mezzanine and debt securities; or
(b) making equity or other “non-debt” investments that are: (i) at the time of
the formation of the private fund, expected to be equal to or less than the
lesser of 10% of the

 

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Fund’s net assets or $25 million; and (ii) issued by U.S. companies with less
than $150 million in revenues (“Targeted Investments”). If the Board approves
the formation of a new private investment fund for investment in Targeted
Investments, this private investment fund may have a general partner or managing
member (a “Private Fund General Partner”) that is a Subsidiary (as defined
below), is owned (directly or indirectly) 100% by a Subsidiary, or is jointly
owned by the Adviser and a Subsidiary. In such cases, Private Fund General
Partners shall be entitled to the entire portion of incentive allocations paid
by the private investment funds managed by the Adviser, unless a portion thereof
is allocated to a third party that is not affiliated with, and independent of,
the Adviser. The Fund represents that the Independent Board resolved to
establish a wholly-owned subsidiary of the Fund (a “Subsidiary”) that would,
among other things, have the authority to invest (directly or indirectly) in, or
serve as, a Private Fund General Partner. It is understood that the Fund may
pursue a spin-off of a Subsidiary to all stockholders (on a pro-rata basis), at
such time as the Independent Board deems appropriate (e.g., when suitable market
conditions are deemed to exist), the specific terms of which would be subject to
the due diligence of, and the consideration and approval by, the Independent
Board. In addition, the Adviser will use its reasonable efforts to include the
Subsidiary in opportunities to participate in other new private investment funds
formed to pursue investments other than Targeted Investments.
5. Registration of the Adviser. 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.
6. Brokerage Commissions. The Adviser is hereby authorized, to the fullest
extent now or hereafter permitted by law, to cause the Fund to pay a member of a
national securities exchange, broker or dealer an amount of commission for
effecting a securities transaction in excess of the amount of commission another
member of such exchange, broker or dealer would have charged for effecting that
transaction, if the Adviser determines in good faith, taking into account such
factors as price (including the applicable brokerage commission or dealer
spread), size of order, difficulty of execution, and operational facilities of
the firm and the firm’s risk and skill in positioning blocks of securities, that
such amount of commission is reasonable in relation to the value of the
brokerage and/or research services provided by such member, broker or dealer,
viewed in terms of either that particular transaction or its overall
responsibilities with respect to the Fund’s portfolio, and constitutes the best
net results for the Fund.
7. Limitations on the Business of the Adviser. The services of the Adviser to
the Fund are not exclusive, and the Adviser may engage in any other business or
render similar or different services to others including, without limitation,
the direct or indirect sponsorship or management of other investment based
accounts or commingled pools of capital, however structured, having investment
objectives similar to those of the Fund, and subject to compliance with
applicable law and adherence to Section 4. Nothing in this Agreement shall limit
or restrict the right of any member, manager, partner, officer or employee of
the Adviser to engage in any other business or to devote his or her time and
attention in part to any other business, whether of a similar or dissimilar
nature, or to receive any fees or compensation in connection therewith.
Notwithstanding the foregoing, the Adviser will not undertake any conflicting
duties of loyalty which would affect its prior fiduciary duty to the Fund. In
furtherance of this requirement, for a period of three years from November 1,
2008 (unless this Agreement ceases to be in effect), the Adviser shall give the
Fund 30 days’ advance notice in writing of any proposed undertaking by it of
material significance (including the taking on of any new clients) and will
provide the Fund and the Fund’s independent directors with all information
relevant to a determination of the effect of such undertaking on the Adviser’s
ability to carry out its obligations to the Fund under this Agreement.
Furthermore, during the term of this Agreement, the Adviser shall not manage
another business development company, a private equity fund or other similar
vehicle with the investment objective of investing in Targeted Investments,

 

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without the consent of the Board. So long as this Agreement or any extension,
renewal or amendment remains in effect, the Adviser shall be the only investment
adviser for the Fund, subject to the Adviser’s right to enter into sub-advisory
agreements (in accordance with the requirements under the Investment Company
Act). The Adviser assumes no responsibility under this Agreement other than to
render the services called for hereunder. It is understood that directors,
officers, employees and stockholders of the Fund are or may become interested in
the Adviser and its affiliates, as directors, officers, employees, partners,
stockholders, members, managers or otherwise, and that the Adviser and
directors, officers, employees, partners, stockholders, members and managers of
the Adviser and its affiliates are or may become similarly interested in the
Fund as stockholders or otherwise.
8. Responsibility of Dual Directors, Officers and/or Employees. If any person
who is a manager, partner, officer, principal 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, when acting on behalf of the Fund, 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 or the
Administrator, even if paid by the Adviser.
9. Limitation of Liability of the Adviser; Indemnification. The Adviser, its
members and their respective officers, managers, partners, agents, employees,
controlling persons, members and any other person affiliated with any of them
(collectively, the “Indemnified Parties”), 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: (a) to the extent
specified in Section 36(b) of the Investment Company Act concerning loss
resulting from a breach of fiduciary duty (as the same is finally determined by
judicial proceedings) with respect to the receipt of compensation for services;
or (b) with respect to any loss by the Fund caused by the willful misfeasance,
bad faith or gross negligence in the performance of any Indemnified Party’s
duties under this Agreement, or the reckless disregard of the Adviser’s duties
and obligations under this Agreement (as the same shall be determined in
accordance with the Investment Company Act and any interpretations or guidance
by the SEC or its staff thereunder). The Fund shall indemnify, defend and
protect the Indemnified Parties (each of whom shall be deemed a third party
beneficiary hereof) 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 Adviser’s duties or obligations under this Agreement or otherwise as
an investment adviser of the Fund. Notwithstanding the foregoing provisions of
this Section 9 to the contrary, nothing contained herein shall protect or be
deemed to protect the Indemnified Parties against or entitle or be deemed to
entitle the Indemnified Parties to indemnification in respect of, any liability
to the 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 any Indemnified Party’s duties or by reason of
the reckless disregard of the Adviser’s duties and obligations under this
Agreement (as the same shall be determined in accordance with the Investment
Company Act and any interpretations or guidance by the SEC or its staff
thereunder). Furthermore, the Adviser shall indemnify, defend and protect the
Fund and hold it harmless in connection with losses or damages arising out of
conduct identified in clauses (a) and (b) of this Section 9.
10. Effectiveness, Duration and Termination of Agreement. This Agreement shall
become effective as of the date first written above (the “Effective Date”). This
Agreement shall remain in effect for one year after such date, and thereafter
shall continue automatically for successive annual periods, provided that such
continuance is specifically approved at least annually by: (a) the vote of the
Board, or

 

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by the vote of a “majority of the outstanding voting securities” of the Fund (as
such term is defined in Section 2(a)(42) of the Investment Company Act); and
(b) the vote of a majority of the Fund’s directors who are not parties to this
Agreement and are not “interested persons” (as such term is defined in
Section 2(a)(19) of the Investment Company Act) of any party to this Agreement,
in accordance with the requirements of the Investment Company Act. This
Agreement may be terminated at any time without the payment of any penalty, upon
60 days’ written notice, by: (a) the Adviser, at any time, in the event (i) a
majority of the current members of the Independent Board ceases to serve as
directors of the Fund; or (ii) the Fund undergoes a change in “control” (as such
term is defined by Section 2(a)(9) of the Investment Company Act) not caused by
the Adviser; or (b) the Adviser, at any time, following October 31, 2010; or
(c) the vote of the stockholders holding a “majority of the outstanding voting
securities” of the Fund (as such term is defined by Section 2(a)(42) of the
Investment Company Act); or (d) the action of the Fund’s directors.
          This Agreement will automatically terminate in the event of its
“assignment” (as such term is defined for purposes of Section 15(a)(4) of the
Investment Company Act). Under no circumstances shall this agreement be assigned
or transferred without the consent of the Fund’s Board. Following the
termination of this Agreement, the Fund shall not have any obligation or
liability to the Adviser or to the principals, officers and/or employees of the
Adviser other than the obligation to pay the Adviser any outstanding amounts
owed under Section 3 calculated until and through the date of termination of the
Agreement. Notwithstanding anything to the contrary, the provisions of
Section 10 (Limitation of Liability of the Adviser; Indemnification) shall
continue in full force and effect and apply to the Adviser and its
representatives as and to the extent applicable.
          This amendment and restatement of the Original Agreement shall not be
treated as a termination of the Original Agreement.
11. The Fund’s Portfolio Manager. The Adviser represents that it will enter into
an agreement with Mr. Tokarz pursuant to which Mr. Tokarz will agree to serve as
the portfolio manager primarily responsible for the day-to-day management of the
Fund’s portfolio for the fiscal years 2009 and 2010 (subject to the termination
of the Agreement in accordance with the provisions of Section 10). In addition,
the parties hereby acknowledge that Mr. Tokarz is the current Portfolio Manager
of the Fund and the Adviser covenants that throughout the term of this Agreement
it will not undertake any action that would cause Mr. Tokarz to cease to serve
as the Fund’s primary Portfolio Manager, including, without limitation,
transferring any controlling interest in the Adviser to another entity or
person. Notwithstanding the foregoing, it is understood by the Fund that
Mr. Tokarz is not required to devote his full business time and attention to his
duties as the Fund’s Portfolio Manager or to the Adviser. In addition, as of the
effective date of the Original Agreement, the employment agreement between
Mr. Tokarz and the Fund dated November 1, 2003, as extended on October 31, 2005
(the “Employment Agreement”), terminated and any outstanding obligations under
that agreement are superseded by those under this Agreement.
12. Coordination with Code Section 409A. This Agreement is intended to comply
with the short-term deferral rule described in the final regulations promulgated
under Section 409A of the U.S. Internal Revenue Code of 1986, as amended (the
“Code”), and therefore to be exempt from Code Section 409A. Specifically, with
respect to the Base Management Fee described in Section 3(a) and payable
quarterly in arrears, all payments made with respect to the first quarter of a
fiscal year (i.e., November 1 through January 31) shall be paid no later than
the later of March 15 of the fiscal year, or the last date that would enable the
payment to satisfy the short-term deferral rule and maintain the Code
Section 409A exemption. Similarly, with respect to the first part of the
Incentive Fee (also called the “Income Incentive Fee”)

 

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described in Section 3(b)(i) and payable quarterly in arrears, all such Income
Incentive Fee payments made with respect to the first quarter of a fiscal year
(i.e., November 1 through January 31) shall be paid no later than the later of
March 15 of the fiscal year, or the last date that would enable the payment to
satisfy the short-term deferral rule and maintain the Code Section 409A
exemption. With respect to the second part of the Incentive Fee (also called the
“Capital Gains Fee”) described in Section 3(b)(ii) and payable in arrears at the
end of each fiscal year, all such Capital Gains Fee payments shall be paid no
later than the later of March 15 following the end of the fiscal year, or the
last date that would enable the payment to satisfy the short-term deferral rule
and maintain the Code Section 409A exemption.
13. Use of the Fund’s Name. The Adviser acknowledges that the name of the Fund
is the Fund’s property and, as such, the Adviser shall not, without the prior
written consent of the Board, use, or cause to be used, the Fund’s name or any
derivative thereof, including, but not limited to, the term “MVC.”
14. Amendments of this Agreement. This Agreement may not be amended or modified
except by an instrument in writing signed by all parties hereto, but the consent
of the Fund must be obtained in conformity with the requirements of the
Investment Company Act.
15. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, including without limitation
Sections 5-1401 and 5-1402 of the New York General Obligations Law and New York
Civil Practice Laws and Rules 327(b), and the applicable provisions of the
Investment Company Act, if any. To the extent that the applicable laws of the
State of New York, or any of the provisions herein, conflict with the applicable
provisions of the Investment Company Act, if any, the latter shall control. The
parties unconditionally and irrevocably consent to the exclusive jurisdiction of
the courts located in the State of New York and waive any objection with respect
thereto, for the purpose of any action, suit or proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby.
16. No Waiver. The failure of either party to enforce at any time for any period
the provisions of or any rights deriving from this Agreement shall not be
construed to be a waiver of such provisions or rights or the right of such party
thereafter to enforce such provisions, and no waiver shall be binding unless
executed in writing by all parties hereto.
17. Severability. If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any law or public policy, all other
terms and provisions of this Agreement shall nevertheless remain in full force
and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party.
18. Headings. The descriptive headings contained in this Agreement are for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
19. Counterparts. This Agreement may be executed in one or more counterparts,
each of which when executed shall be deemed to be an original instrument and all
of which taken together shall constitute one and the same agreement.
20. Notices. All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given or made (and shall be deemed to
have been duly given or made upon receipt) by delivery in person, by overnight
courier service (with signature required), by facsimile, or by registered or
certified mail (postage prepaid, return receipt requested) to the respective
parties at their respective principal executive office addresses.
21. Entire Agreement. This Agreement constitutes the entire agreement of the
parties with respect to the subject matter hereof and supersedes all prior
agreements and undertakings (including the Original

 

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Agreement and the Employment Agreement), both written and oral, between the
parties with respect to such subject matter.
22. Certain Matters of Construction.
          (a) The words “hereof,” “herein,” “hereunder” and words of similar
import shall refer to this Agreement as a whole and not to any particular
Section or provision of this Agreement, and reference to a particular Section of
this Agreement shall include all subsections thereof.
          (b) Definitions shall be equally applicable to both the singular and
plural forms of the terms defined, and references to the masculine, feminine or
neuter gender shall include each other gender.
          (c) The word “including” shall mean including without limitation.
          In witness whereof, the parties hereto have caused this Agreement to
be duly executed on the date above written.

            MVC Capital, Inc.
      By:   /s/ Emilio Dominianni         Name: Emilio Dominianni       Title:
Director       The Tokarz Group Advisers LLC
      By:   /s/ Michael Tokarz         Name: Michael Tokarz       Title: Manager