FS Investment Corporation 8-K


Exhibit 10.1


 





 


AMENDED AND RESTATED


 


INVESTMENT ADVISORY


 


AGREEMENT


 


BETWEEN


 


FS INVESTMENT CORPORATION


 


AND


 


FB INCOME ADVISOR, LLC


 


This Amended and Restated Investment Advisory
Agreement (the “Agreement”) made this 17th day of July, 2014, by and between FS INVESTMENT CORPORATION,
a Maryland corporation (the “Company”), and FB INCOME ADVISOR, LLC, a Delaware limited liability company
(the “Adviser”). This Agreement amends and restates in its entirety that certain Amended and Restated
Investment Advisory Agreement, dated as of April 16, 2014, by and between the Company and the Adviser (as amended, the “Original
Investment Advisory Agreement”).


 


WHEREAS, the Company is a non-diversified,
closed-end management investment company that has elected to be regulated as a business development company (“BDC”)
under the Investment Company Act of 1940, as amended (the “Investment Company Act”);


 


WHEREAS, the Adviser is an investment adviser
that has registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”);


 


WHEREAS, pursuant to the Original Investment
Advisory Agreement, the Company retained the Adviser to furnish investment advisory services (the “Investment Advisory
Services”) to the Company on the terms and conditions set forth therein;


 


WHEREAS, the Company and the Adviser desire
to amend and restate in its entirety the Original Investment Advisory Agreement; and


 


WHEREAS, the Company desires to continue
to retain the Adviser to furnish the Investment Advisory Services to the Company on the terms and conditions hereinafter set forth,
and the Adviser wishes to continue to be retained to provide such services.


 


NOW, THEREFORE, in consideration of the
premises and for other good and valuable consideration, the parties hereby agree as follows:


 


1.Duties of the Adviser.


 


(a)Retention of the Adviser.
The Company hereby employs the Adviser to act as the investment adviser to the Company and to manage the investment and reinvestment
of the assets of the Company, subject to the supervision of the Board of Directors of the Company (the “Board”),
for the period and upon the terms herein set forth:


 


(i)in accordance with the
investment objectives, policies and restrictions that are set forth in the Company’s then effective Registration Statement
on Form N-2 filed with the Securities and Exchange Commission (the “SEC”), as amended from time to time,
if any, and/or the Company’s periodic reports filed with the SEC from time to time; and


 


(ii)during the term of this
Agreement in accordance with all other applicable federal and state laws, rules and regulations, and the Company’s charter
and bylaws, in each case as amended from time to time.


 


(b)Responsibilities of the Adviser.
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
and allocation of the portfolio of the Company, the nature and timing of the changes therein and the manner of implementing such
changes;


 


(ii)identify, evaluate and
negotiate the structure of the investments made by the Company;


 


(iii)execute, monitor and
service the Company’s investments;


 


(iv)determine the securities
and other assets that the Company shall purchase, retain, or sell;


 


(v)perform due diligence on
prospective portfolio companies; and


 


(vi)provide the Company with
such other investment advisory, research and related services as the Company may, from time to time, reasonably require for the
investment of its funds.


 


(c)Power and Authority. To facilitate
the Adviser’s performance of these undertakings, but subject to the restrictions contained herein, the Company hereby delegates
to the Adviser (which power and authority may be delegated by the Adviser to one or more investment sub-advisers), and the Adviser
hereby accepts, the power and authority on behalf of the Company to effectuate its investment decisions for the Company, including
the execution and delivery of all documents relating to the Company’s investments and the placing of orders for other purchase
or sale transactions on behalf of the Company. In the event that the Company determines to acquire debt or other financing, the
Adviser shall arrange for such financing on the Company’s behalf, subject to the oversight and approval of the Board. If
it is necessary for the Adviser to make investments on behalf of the Company 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 Investment Company Act.


 


(d)Acceptance of Employment.
The Adviser hereby accepts such employment and agrees during the term hereof to render the services described herein for the compensation
provided herein, subject to the limitations contained herein.


 


(e)Sub-Advisers. 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 Company’s investment objectives, policies and restrictions, and work, along with the Adviser, in sourcing, structuring,
negotiating, arranging or effecting the acquisition or disposition of such investments and monitoring investments on behalf of
the Company, subject to the oversight of the Adviser and the Company.


 


(i)The Adviser and not the
Company shall be responsible for any compensation payable to any Sub-Adviser.


 


(ii)Any sub-advisory agreement
entered into by the Adviser shall be in accordance with the requirements of the Investment Company Act, including, without limitation,
the requirements relating to Board and Company stockholder approval thereunder, and other applicable federal and state law.


 


(iii)Any Sub-Adviser shall
be subject to the same fiduciary duties imposed on the Adviser pursuant to this Agreement, the Investment Company Act and the Advisers
Act, as well as other applicable federal and state law.


 


(f)Independent Contractor Status.
The Adviser shall, for all purposes herein provided, be deemed to be an independent contractor and, except as expressly provided
or authorized herein, shall have no authority to act for or represent the Company in any way or otherwise be deemed an agent of
the Company.


 


(g)Record Retention. Subject
to review by and the overall control of the Board, the Adviser shall keep and preserve for the period required by the Investment
Company Act any books and records relevant to the provision of the Investment Advisory Services to the Company and shall specifically
maintain all books and records with respect to the Company’s portfolio transactions and shall render to the Board such periodic
and special reports as the Board may reasonably request or as may be required under applicable federal and state law, and shall
make such records available for inspection by the Board and its authorized agents, at any time and from time to time during normal business hours. The Adviser agrees that all records
that it maintains for the Company are the property of the Company and shall surrender promptly to the Company any such records
upon the Company’s request and upon termination of this Agreement pursuant to Section 9, provided that the Adviser may
retain a copy of such records.


 




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2.Company’s Responsibilities and Expenses Payable
by the Company.


 


(a)Adviser Personnel. All personnel
of the Adviser, when and to the extent engaged in providing the Investment Advisory Services hereunder, and the compensation and
routine overhead expenses of such personnel allocable to such services, shall be provided and paid for by the Adviser and not by
the Company.


 


3.Compensation of the Adviser. The Company
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 Adviser may agree to temporarily or permanently waive, in whole or in part, the Base Management Fee and/or the Incentive
Fee.


 


(a)Base Management Fee. The Base
Management Fee shall be calculated at an annual rate of 1.75% of the Company’s average gross assets. The Base Management
Fee shall be payable quarterly in arrears, and shall be calculated based on the average value of the Company’s gross assets
at the end of the two most recently completed calendar quarters. All or any part of the Base Management Fee not taken as to any
quarter shall be deferred without interest and may be taken in such other quarter as the Adviser shall determine. The Base Management
Fee for any partial month or quarter shall be appropriately pro rated.


 


(b)Incentive Fee. The Incentive
Fee shall consist of two parts, as follows:


 


(i)The first part, referred
to as the “Subordinated Incentive Fee on Income,” shall be calculated and payable quarterly in arrears based on the
Company’s “Pre-Incentive Fee Net Investment Income” for the immediately preceding quarter. The payment of the
Subordinated Incentive Fee on Income shall be subject to payment of a preferred return to investors each quarter, expressed as
a rate of return on the value of the Company’s net assets at the end of the most recently completed calendar quarter, of
1.875% (7.50% annualized), subject to a “catch up” feature (as described below).


 


For this purpose, “Pre-Incentive
Fee Net Investment Income” means interest income, dividend income and any other income (including any other fees, other than
fees for providing managerial assistance, such as commitment, origination, structuring, diligence and consulting fees or other
fees that the Company receives from portfolio companies) accrued during the calendar quarter, minus the Company’s operating
expenses for the quarter (including the Base Management Fee, expenses payable under that certain Administration Agreement, dated
as of April 16,2014, as the same may be amended from time to time, whereby the Adviser provides administrative services necessary
for the operation of the Company, and any interest expense and dividends paid on any issued and outstanding preferred stock, but
excluding the Incentive Fee). Pre-Incentive Fee Net Investment Income includes, in the case of investments with a deferred interest
feature (such as original issue discount debt instruments with payment-in-kind interest and zero coupon securities), accrued income
that the Company has not yet received in cash. Pre-Incentive Fee Net Investment Income does not include any realized capital gains,
realized capital losses or unrealized capital appreciation or depreciation.


 


The calculation of the Subordinated Incentive
Fee on Income for each quarter is as follows:


 


(A)No Subordinated Incentive
Fee on Income shall be payable to the Adviser in any calendar quarter in which the Company’s Pre-Incentive Fee Net Investment
Income does not exceed the preferred return rate of 1.875% or 7.50% annualized (the “Preferred Return”)
on net assets;


 


(B)100% of the Company’s
Pre-Incentive Fee Net Investment Income, if any, that exceeds the Preferred Return but is less than or equal to 2.34375% in any
calendar quarter (9.375% annualized) shall be payable to the Adviser. This portion of the company’s Subordinated Incentive
Fee on Income is referred to as the “catch up” and is intended to provide the Adviser with an incentive fee of 20%
on all of the Company’s Pre-Incentive Fee Net Investment Income when the Company’s Pre-Incentive Fee Net Investment
Income reaches 2.34375% (9.375% annualized) on net assets in any calendar quarter; and


 




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(C)For any quarter in which
the Company’s Pre-Incentive Fee Net Investment Income exceeds 2.34375% (9.375% annualized) on net assets, the Subordinated
Incentive Fee on Income shall equal 20% of the amount of the Company’s Pre-Incentive Fee Net Investment Income, as the Preferred
Return and catch-up will have been achieved;


 


provided that, no Subordinated Incentive Fee
on Income in respect of this Section 3(b)(i) will be payable except to the extent that 20.0% of the cumulative net increase in
net assets resulting from operations over the calendar quarter for which such fees are being calculated and the eleven preceding
calendar quarters exceeds the cumulative Incentive Fees accrued and/or paid pursuant to Section 3(b) for such eleven preceding
calendar quarters. For the foregoing purpose, the “cumulative net increase in net assets resulting from operations”
is an amount, if positive, equal to the sum of Pre-Incentive Fee Net Investment Income, Base Management Fees, realized gains and
losses and unrealized appreciation and depreciation of the Company for the calendar quarter for which such fees are being calculated
and the eleven preceding calendar quarters.


 


(ii)The second part of the
Incentive Fee, referred to as the “Incentive Fee on Capital Gains,” shall be determined and payable in
arrears as of the end of each calendar year (or upon termination of this Agreement). This fee shall equal 20.0% of the Company’s
incentive fee capital gains, which shall equal the Company’s realized capital gains on a cumulative basis from inception,
calculated as of the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation
on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees.


 


4. Covenants of the Adviser.


 





The Adviser covenants that it will register
as an investment adviser under the Advisers Act and will maintain such registration. 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.


 


5. Brokerage Commissions.


 


The Adviser is hereby authorized, to the
fullest extent now or hereafter permitted by law, to cause the Company 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 Company’s
portfolio, and constitutes the best net results for the Company.


 


6.Other Activities of the Adviser. 


 


The services of the Adviser to the Company
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 Company, so long as its services to the Company
hereunder are not impaired thereby, and nothing in this Agreement shall limit or restrict the right of any manager, partner, member
(including its members and the owners of its members), officer or employee of the Adviser to engage in any other business or to
devote his or her time and attention in part to any other business, whether of a similar or dissimilar nature, or to receive any
fees or compensation in connection therewith (including fees for serving as a director of, or providing consulting services to,
one or more of the Company’s portfolio companies, subject to applicable law). 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 Company 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 Company as stockholders
or otherwise.


 




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7.Responsibility of Dual Directors, Officers and/or
Employees.


 





If any person who is a manager, partner,
member, officer or employee of the Adviser is or becomes a director, officer and/or employee of the Company and acts as such in
any business of the Company, then such manager, partner, member, officer and/or employee of the Adviser shall be deemed to be acting
in such capacity solely for the Company, and not as a manager, partner, member, officer or employee of the Adviser or under the
control or direction of the Adviser, even if paid by the Adviser.


 


8. Indemnification.


 





The Adviser (and its officers, managers,
partners, members (and their members, including the owners of their members), agents, employees, controlling persons and any other
person or entity affiliated with the Adviser) shall not be liable to the Company for any action taken or omitted to be taken by
the Adviser in connection with the performance of any of its duties or obligations under this Agreement or otherwise as an investment
adviser of the Company (except to the extent specified in Section 36(b) of the Investment Company Act concerning loss resulting
from a breach of fiduciary duty (as the same is finally determined by judicial proceedings) with respect to the receipt of compensation
for services, and the Company shall indemnify, defend and protect the Adviser (and its officers, managers, partners, members (and
their members, including the owners of their members), agents, employees, controlling persons and any other person or entity affiliated
with the Adviser, 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 Company or its security
holders) arising out of or otherwise based upon the performance of any of the Adviser’s duties or obligations under this
Agreement or otherwise as an investment adviser of the Company, to the extent such damages, liabilities, costs and expenses are
not fully reimbursed by insurance, and to the extent that such indemnification would not be inconsistent with the laws of the State
of Maryland or the charter of the Company. Notwithstanding the preceding sentence of this Section 8 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 Company or its stockholders to which the Indemnified Parties would
otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of the Advisor’s
duties or by reason of the reckless disregard of the Advisor’s duties and obligations under this Agreement (to the extent
applicable, 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).


 


9. Duration and Termination of Agreement.


 





(a)Term. This Agreement shall
remain in effect for two years commencing on April 16, 2014, and thereafter shall continue automatically for successive annual
periods, provided that such continuance is specifically approved at least annually by (i) the vote of the Board, or by the
vote of a majority of the outstanding voting securities of the Company and (ii) the vote of a majority of the Company’s
directors who are not parties to this Agreement or “interested persons” (as such term is defined in Section 2(a)(19)
of the Investment Company Act) of any such party, in accordance with the requirements of the Investment Company Act.


 


(b)Termination. This Agreement
may be terminated at any time, without the payment of any penalty, upon 60 days’ written notice, (a) by the vote of a majority
of the outstanding voting securities of the Company, (b) by the vote of the Board or (c) by the Adviser. This Agreement shall automatically
terminate in the event of its “assignment” (as such term is defined for purposes of Section 15(a)(4) of the Investment
Company Act). The provisions of Section 8 of this Agreement shall remain in full force and effect, and the Adviser shall remain
entitled to the benefits thereof, notwithstanding any termination of this Agreement. Further, notwithstanding the termination or
expiration of this Agreement as aforesaid, the Adviser shall be entitled to any amounts owed to it under Section 3 through the
date of termination or expiration and Section 8 shall continue in force and effect and apply to the Adviser and its representatives
as and to the extent applicable.


 




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10. Notices.


 


Any notice under this Agreement shall be
given in writing, addressed and delivered or mailed, postage prepaid, to the other party at its principal office.


 


11.Amendments.


 


This Agreement may be amended by mutual
consent but the consent of the Company must be obtained in conformity with the requirements of the Investment Company Act.


 


12.Entire Agreement; Governing Law.


 





This Agreement contains the entire agreement
of the parties and supersedes all prior agreements, understandings and arrangements with respect to the subject matter hereof.
Notwithstanding the place where this Agreement may be executed by any of the parties hereto, this Agreement shall be construed
in accordance with the laws of the State of New York. For so long as the Company is regulated as a BDC under the Investment Company
Act, this Agreement shall also be construed in accordance with the applicable provisions of the Investment Company Act. In such
case, to the extent the applicable laws of the State of New York, or any of the provisions herein, conflict with the provisions
of the Investment Company Act, the latter shall control.


 




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IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be duly executed on the date above written.


 





	 	FS INVESTMENT CORPORATION
	 	 
	 	By:	/s/ Stephen S. Sypherd	 
	 	 	    Name:  Stephen S. Sypherd 
	 	 	    Title:    Vice President, Secretary and Treasurer 
	 	 
	 	 
	 	 
	 	FB INCOME ADVISOR, LLC
	 	 
	 	By:	/s/ Michael C. Forman	 
	 	 	    Name:  Michael C. Forman 
	 	 	    Title:    Manager