Document:

Exhibit 10.33

 

MANAGEMENT SERVICES AGREEMENT

 

This Management Services Agreement (the “Agreement”) is entered into as of October 6, 2005 by and among Newton Acquisition Merger Sub, Inc., a Delaware corporation (together with its subsidiaries, “MergerSub”), Newton Acquisition, Inc., a Delaware corporation (“Newton”, and together with MergerSub, the “Companies”), TPG GenPar IV, L.P., TPG GenPar III, L.P. (“TPG”) and Warburg Pincus LLC (“Warburg”, together with TPG, the “Managers”).

 

WHEREAS, each of the Companies will engage in a transaction in which MergerSub will merge with and into The Neiman Marcus Group, Inc., a Delaware corporation (“Neiman Marcus”), with Neiman Marcus surviving (the “Merger”) pursuant to an Agreement and Plan of Merger, dated as of May 1, 2005 (as amended from time to time, the “Merger Agreement”); and

 

WHEREAS, the Companies wish to retain the Managers to provide certain management and advisory services to the Companies, and the Managers are willing to provide such services on the terms set forth below.

 

NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto, intending to be legally bound, hereby agree as follows:

 

1.             Services.  Each of the Managers hereby agrees that, during the term of this Agreement (the “Term”), it will provide the following consulting and advisory services to the Companies as reasonably requested from time to time by the Companies:

 

(a)           advice in connection with the negotiation and consummation of agreements, contracts, documents and instruments necessary to provide the Companies with financing on terms and conditions satisfactory to the Companies;

 

(b)           advice in connection with acquisition, disposition and change of control transactions involving any of the Companies or any of their direct or indirect subsidiaries or any of their respective successors;

 

(c)           financial, managerial and operational advice in connection with day-to-day operations, including, without limitation, advice with respect to the development and implementation of strategies for improving the operating, marketing and financial performance of the Companies; and

 

(d)           such other services (which may include financial and strategic planning and analysis, consulting services, human resources and executive recruitment services and other services) as such Manager and the Companies may from time to time agree in writing.

 

Each of the Managers will devote such time and efforts to the performance of the services contemplated hereby as such Manager deems reasonably necessary or appropriate; provided, however, that no minimum number of hours is required to be devoted by any Manager on a

 

 

weekly, monthly, annual or other basis.  The Companies acknowledge that each of the Manager’s services are not exclusive to the Companies and that each Manager may render similar services to other persons and entities.  The Managers and the Companies understand that the Companies may at times engage one or more investment bankers or financial advisers to provide services in addition to, but not in lieu of, services provided by the Managers under this Agreement; provided that any such engagement will be made pursuant to the terms of the Amended and Restated Limited Liability Operating Agreement (the “LLC Agreement”) of Newton Holding, LLC (“Holding”) among affiliates of the Managers and certain other parties.  In providing services to the Companies, each Manager will act as an independent contractor and it is expressly understood and agreed that this Agreement is not intended to create, and does not create, any partnership, agency, joint venture or similar relationship and that no party has the right or ability to contract for or on behalf of any other party or to effect any transaction for the account of any other party.

 

2.             Payment of Fees.

 

(a)           On the date hereof, the Companies, jointly and severally, will pay to TPG (or such affiliates as they may designate) a transaction fee (the “Transaction Fee”) of $25,000,000.

 

(b)           During the Term, the Companies, jointly and severally, will pay to the Managers an aggregate annual Monitoring Fee (the “Monitoring Fee”) equal to the lesser of (i) 0.25% of the consolidated annual revenue of the Companies and (ii) $10,000,000 as compensation for the services provided by the Managers under this Agreement, such fee being payable by the Companies quarterly in arrears.  The Monitoring Fee will be divided between the Managers as follows (i) TPG will be entitled to 50% and (ii) Warburg will be entitled to 50%.  The percentages set forth in the preceding sentence are herein referred to as the “Relative Interests”.

 

(c)           During the Term, the Managers will advise the Companies in connection with financing, acquisition, disposition and change of control transactions involving the Companies or any of their direct or indirect subsidiaries (however structured), and the Companies will pay to the Managers an aggregate fee (the “Subsequent Fee”) in connection with each such transaction equal to customary fees charged by internationally-recognized investment banks for serving as a financial advisor in similar transactions, such fee to be due and payable for the foregoing services at the closing of such transaction.  Notwithstanding the foregoing, no Subsequent Fee in respect of any transaction will exceed one percent (1%) of the gross transaction value of such transaction as reasonably determined by the Managers.  Each Subsequent Fee will be divided between the Managers in proportion to their Relative Interests.

 

(d)           The parties hereto acknowledge and agree that an objective of the Companies is to maximize value for their direct and indirect equity holders, which may include the consummation by either of the Companies, one or more of their subsidiaries or any of their successors of a qualified public offering (an “QPO”), as such term is defined in the LLC Agreement, or the sale of either of the Companies or their successors (through merger or otherwise) or a sale of all or substantially all of the assets of either of the Companies or their successors (any such sale transaction, a “Sale”).  The services provided to the Companies by the

 

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Managers will help to facilitate the consummation of a QPO or Sale, should the Companies determine to pursue such a transaction.  In the event a QPO or Sale is consummated, the Companies will pay in cash on the date of consummation of such QPO or Sale (in lieu of any Subsequent Fee) an aggregate success fee (the “Success Fee”) in an amount equal to the product of (i) $10,000,000 and (ii) 50% of (x) the Total Enterprise Value of the Companies divided by (y) the Companies’ consolidated EBITDA for the most recent period of four consecutive fiscal quarters.  For such calculation, EBITDA will be the consolidated earnings before interest, taxes, depreciation and amortization of the Companies (excluding extraordinary gains and losses) derived by the Managers from the Companies’ consolidated statement of earnings for such period.  The Success Fee will be divided between the Managers in proportion to their Relative Interests.  For purposes of this provision, “Total Enterprise Value” means the enterprise value of the Companies and their subsidiaries, taken as a whole, as determined by the Managers in their reasonable discretion, using customary and appropriate valuation methodologies.

 

(e)           Each payment made pursuant to this Section 2 will be paid by wire transfer of immediately available funds to the accounts specified on Schedule 1 hereto, or to such other account(s) as the Managers may specify to the Companies in writing prior to such payment.  In the event of a QPO or a Sale that includes non-cash consideration, each Manager may elect to receive all or any portion of its fee in the form of such non-cash consideration, valued at the sale price.

 

3.             Deferral.  Any fee that would have been payable to the Managers pursuant to Section 2 above absent the restrictions, if any, in any financing or similar agreements (the “Financing Documents”) applicable to the Companies (the “Deferred Fees”) will accrue upon the immediately succeeding period in which such amounts could, consistent with the Financing Documents, be paid, and will be paid in such succeeding period (in addition to such other amounts that would otherwise be payable at such time) in the manner set forth in Section 2.

 

4.             Term.  This Agreement will continue in full force and effect unless terminated by the unanimous consent of the Managers; provided that this agreement will terminate automatically upon the consummation of a QPO or a Sale that constitutes a Sale of the Companies taken as a whole or all or substantially all the assets of the Companies taken as a whole (in each case, following payment of the Success Fee); provided, further, that the termination of this Agreement will not relieve a party from liability for any breach of this Agreement on or prior to such termination.  In the event of a termination of this Agreement, the Companies will pay the Managers (or its designees) all unpaid Transaction Fees (pursuant to Section 2(a) above), Monitoring Fees (pursuant to Section 2(b) above), Subsequent Fees (pursuant to Section 2(c) above), Deferred Fees (pursuant to Section 3 above) and expenses (pursuant to Section 5(a) below) due with respect to periods prior to the date of termination.  This Section 4, Section 5 and Section 9 will survive termination of this Agreement.

 

5.             Expenses; Indemnification.

 

(a)           Expenses.  The Companies, jointly and severally, will pay to the Managers (or their respective designees) on demand all Reimbursable Expenses.  As used herein, “Reimbursable Expenses” means (i) all out-of-pocket expenses incurred from and after the consummation of the merger (the “Closing Date”) relating to the services provided by the

 

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Managers or their respective affiliates to the Companies or any of their affiliates from time to time (including, without limitation, all air travel (by first class on a commercial airline or by charter, as determined by the appropriate Manager) and other travel related expenses), (ii) all out-of-pocket legal expenses incurred by any Managers or their respective affiliates from and after Closing Date in connection with the enforcement of rights or taking of actions under this Agreement, the Merger Agreement or any related documents or instruments; and (iii) all expenses incurred from and after the Closing Date by the Managers and their respective affiliates which are properly allocable to the Companies under this Agreement.

 

(b)           Indemnity and Liability.  The Companies, jointly and severally, will indemnify, exonerate and hold each of the Managers, and each of their respective partners, shareholders, members, affiliates, directors, officers, fiduciaries, managers, controlling persons, employees and agents and each of the partners, shareholders, members, affiliates, directors, officers, fiduciaries, managers, controlling persons, employees and agents of each of the foregoing (collectively, the “Indemnitees”) free and harmless from and against any and all actions, causes of action, suits, claims, liabilities, losses, damages and costs and out-of-pocket expenses in connection therewith (including attorneys’ fees and expenses) incurred by the Indemnitees or any of them before or after the date of this Agreement (collectively, the “Indemnified Liabilities”), arising out of any action, cause of action, suit, arbitration, investigation or claim arising out of, or in any way relating to (i) this Agreement, the Merger Agreement, any transaction to which any of the Companies is a party or any other circumstances with respect to any of the Companies or (ii) operations of, or services provided by any of the Managers to, the Companies, or any of their respective affiliates from time to time; provided  that the foregoing indemnification rights will not be available to the extent that any such Indemnified Liabilities arose on account of such Indemnitee’s gross negligence or willful misconduct; and further  provided that if and to the extent that the foregoing undertaking may be unavailable or unenforceable for any reason, the Companies hereby agree to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law.  For purposes of this Section 5(b), none of the circumstances described in the limitations contained in the two provisos in the immediately preceding sentence will be deemed to apply absent a final non-appealable judgment of a court of competent jurisdiction to such effect, in which case to the extent any such limitation is so determined to apply to any Indemnitee as to any previously advanced indemnity payments made by the Companies, then such payments will be promptly repaid by such Indemnitee to the Companies without interest.  The rights of any Indemnitee to indemnification hereunder will be in addition to any other rights any such person may have under any other agreement or instrument referenced above or any other agreement or instrument to which such Indemnitee is or becomes a party or is or otherwise becomes a beneficiary or under law or regulation.

 

6.             Disclaimer and Limitation of Liability; Opportunities.

 

(a)           Disclaimer; Standard of Care.  None of the Managers makes any representations or warranties, express or implied, in respect of the services to be provided by the Managers hereunder.  In no event will the Managers or Indemnitees be liable to the Companies or any of their respective affiliates for any act, alleged act, omission or alleged omission that

 

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does not constitute gross negligence or willful misconduct of such Manager as determined by a final, non-appealable determination of a court of competent jurisdiction.

 

(b)           Freedom to Pursue Opportunities.  In recognition that each Manager and its respective Indemnitees currently have, and will in the future have or will consider acquiring, investments in numerous companies with respect to which each Manager or its respective Indemnitees may serve as an advisor, a director or in some other capacity, and in recognition that each Manager and its respective Indemnitees have myriad duties to various investors and partners, and in anticipation that the Companies, on the one hand and the Managers (or one or more affiliates, associated investment funds or portfolio companies), on the other hand, may engage in the same or similar activities or lines of business and have an interest in the same areas of corporate opportunities, and in recognition of the benefits to be derived by the Companies hereunder and in recognition of the difficulties which may confront any advisor who desires and endeavors fully to satisfy such advisor’s duties in determining the full scope of such duties in any particular situation, the provisions of this Section 6(b) are set forth to regulate, define and guide the conduct of certain affairs of the Companies as they may involve such Manager.  Except as a Manager may otherwise agree in writing after the date hereof:

 

(i)            Such Manager and its respective Indemnitees will have the right:  (A) to directly or indirectly engage in any business (including, without limitation, any business activities or lines of business that are the same as or similar to those pursued by, or competitive with, the Companies and their subsidiaries), (B) to directly or indirectly do business with any client or customer of the Companies and their subsidiaries, (C) to take any other action that such Manager believes in good faith is necessary to or appropriate to fulfill its obligations as described in the first sentence of this Section 6(b), and (D) not to present potential transactions, matters or business opportunities to the Companies or any of their subsidiaries, and to pursue, directly or indirectly, any such opportunity for itself, and to direct any such opportunity to another Person.

 

(ii)           Such Manager and its respective Indemnitees will have no duty (contractual or otherwise) to communicate or present any corporate opportunities to the Companies or any of their affiliates or to refrain from any actions specified in Section 6(b)(i), and the Companies, on their own behalf and on behalf of their affiliates, hereby renounce and waive any right to require such Manager or any of its Indemnitees to act in a manner inconsistent with the provisions of this Section 6(b).

 

(iii)          None of such Manager, nor any of its Indemnitees will be liable to the Companies or any of their affiliates for breach of any duty (contractual or otherwise) by reason of any activities or omissions of the types referred to in this Section 6(b) or of any such Person’s participation therein.

 

(c)           Limitation of Liability.  In no event will the Managers or any of their Indemnitees be liable to the Companies or any of their affiliates for any indirect, special, incidental or consequential damages, including, without limitation, lost profits or savings,

 

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whether or not such damages are foreseeable, or for any third party claims (whether based in contract, tort or otherwise), relating to the services to be provided by the Managers hereunder.

 

7.             Assignment, etc.  Except as provided below, none of the parties hereto will have the right to assign this Agreement without the prior written consent of each of the other parties.  Notwithstanding the foregoing, (a) any Manager may assign all or part of its rights and obligations hereunder to any of its respective affiliates which provides services similar to those called for by this Agreement, in which event such Manager will be released of its rights to fees under Section 2 and reimbursement of expenses under Section 5(a) and all of its obligations hereunder and (b) the provisions hereof for the benefit of Indemnitees of the Managers will inure to the benefit of such Indemnitees and their successors and assigns.

 

8.             Amendments and Waivers.  No amendment or waiver of any term, provision or condition of this Agreement will be effective, unless in writing and executed by each Manager and the Companies; provided, that any Manager may waive any portion of any fee to which it is entitled pursuant to this Agreement, and, unless otherwise directed by such Manager, such waived portion will revert to the Companies.  No waiver on any one occasion will extend to or effect or be construed as a waiver of any right or remedy on any future occasion.  No course of dealing of any person nor any delay or omission in exercising any right or remedy will constitute an amendment of this Agreement or a waiver of any right or remedy of any party hereto.

 

9.             Governing Law; Jurisdiction. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES THEREOF.  ANY ACTION OR PROCEEDING AGAINST THE PARTIES RELATING IN ANY WAY TO THIS AGREEMENT MAY BE BROUGHT AND ENFORCED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK OR (TO THE EXTENT SUBJECT MATTER JURISDICTION EXISTS THEREFOR) THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK SITTING IN MANHATTAN, AND THE PARTIES IRREVOCABLY SUBMIT TO THE JURISDICTION OF BOTH SUCH COURTS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING.

 

10.           Entire Agreement.  This Agreement contains the entire understanding of the parties with respect to the subject matter hereof and supersedes any prior communication or agreement with respect thereto.

 

11.           Notice.  All notices, demands, and communications required or permitted under this Agreement will be in writing and will be effective if served upon such other party and such other party’s copied persons as specified below to the address set forth for it below (or to such other address as such party will have specified by notice to each other party) if (i) delivered personally, (ii) sent and received by facsimile, (iii) sent by electronic mail or (iv) sent by certified or registered mail or by Federal Express, DHL, UPS or any other comparably reputable overnight courier service, postage prepaid, to the appropriate address as follows:

 

If to the Companies (with a copy, which will not constitute notice, to TPG and WP), to:

 

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Newton Acquisition, Inc.
 One Marcus Square

1618 Main Street

Dallas, TX  75201

Telephone: 214.741.6911

 

If to TPG, to:

 

Texas Pacific Group

301 Commerce Street, Suite 3300
 Fort Worth, Texas 76102
 Attention:  David A. Spuria
 Telephone:  1 (817) 871-4000
 Facsimile No.:  1 (817) 871-4088

Email: dspuria@texpac.com

 

with a copy (which will not constitute notice) to:

 

Cleary, Gottlieb, Steen & Hamilton LLP
 One Liberty Plaza
 New York, NY  10006
 Attention:  David Leinwand, Esq.

Telephone: (212) 225-2000
 Facsimile No.:(212) 225-3999

Email:  dleinwand@cgsh.com

 

If to Warburg, to:

Warburg Pincus LLC

466 Lexington Avenue

New York, NY  10017

Attention: Kewsong Lee and Scott A. Arenare

Telephone: (212) 878-0600

Facsimile No.:(212) 878-9100

Email: klee@warburgpincus.com; sarenare@warburgpincus.com

 

with a copy (which will not constitute notice) to:

 

Willkie Farr & Gallagher LLP

787 Seventh Avenue

New York, NY  10019-6099

Attention: Holly K. Youngwood, Esq. and Steven J. Gartner, Esq.

Telephone:  1 (212) 728-8000

Facsimile No.: 1 (212) 728-8111

Email: hyoungwood@willkie.com, sgartner@willkie.com

 

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Unless otherwise specified herein, such notices or other communications will be deemed effective, (a) on the date received, if personally delivered or sent by facsimile or electronic mail during normal business hours, (b) on the business day after being received if sent by facsimile or electronic mail other than during normal business hours, (c) one business day after being sent by Federal Express, DHL or UPS or other comparably reputable delivery service and (d) five business days after being sent by registered or certified mail.  Each of the parties hereto will be entitled to specify a different address by giving notice as aforesaid to each of the other parties hereto.

 

12.           Severability.  If in any proceedings a court will refuse to enforce any provision of this Agreement, then such unenforceable provision will be deemed eliminated from this Agreement for the purpose of such proceedings to the extent necessary to permit the remaining provisions to be enforced.  To the full extent, however, that the provisions of any applicable law may be waived, they are hereby waived to the end that this Agreement be deemed to be valid and binding agreement enforceable in accordance with its terms, and in the event that any provision hereof will be found to be invalid or unenforceable, such provision will be construed by limiting it so as to be valid and enforceable to the maximum extent consistent with and possible under applicable law.

 

13.           Counterparts.  This Agreement may be executed in any number of counterparts and by each of the parties hereto in separate counterparts, each of which when so executed will be deemed to be an original and all of which together will constitute one and the same agreement.

 

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IN WITNESS WHEREOF, each of the parties has duly executed this Agreement as of the date first above written.

 

 

	
 
    	
Newton   Acquisition, Inc.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ David A. Spuria
    
	
 
    	
 
    	
Name:
    	
David.   A. Spuria
    
	
 
    	
 
    	
Title:
    	
Vice   President
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Newton   Acquisition Merger Sub, Inc.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ David A. Spuria
    
	
 
    	
 
    	
Name:
    	
David.   A. Spuria
    
	
 
    	
 
    	
Title:
    	
Vice   President
    

 

 

 

	
 
    	
TPG   GenPar IV, L.P.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
TPG   Advisors IV, Inc. its General Partner
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/ David A. Spuria
    
	
 
    	
 
    	
 
    	
Name:
    	
David   A. Spuria 
    
	
 
    	
 
    	
 
    	
Title:
    	
Vice   President
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
TPG   GenPar III, L.P.
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
By:
    	
TPG   Advisors III, Inc., its General Partner
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/ David A. Spuria
    
	
 
    	
 
    	
 
    	
Name:
    	
David   A. Spuria 
    
	
 
    	
 
    	
 
    	
Title:
    	
Vice   President
    

 

 

	
 
    	
Warburg   Pincus LLC
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/   Kewsong Lee
    
	
 
    	
 
    	
 
    	
Name:
    	
Kewsong   Lee
    
	
 
    	
 
    	
 
    	
Title:
    	
Managing   Director
    

 

 

Schedule 1

 

Wire Transfer Instructions for TPG:

 

Bank:  JPMorgan Chase

ABA#:  021000021

Account:  TPG GenPar IV, L.P.

Account Number:  46108216111

 

Wire Transfer Instructions for Warburg:

 

Bank:  JPMorgan Chase

ABA#:  021000021

Account: Warburg Pincus LLC

Account Number:  006-083528Exhibit 10.1

 

EXECUTION VERSION

 

RESTATED INVESTMENT ADVISORY AND
 MANAGEMENT AGREEMENT
 BETWEEN
 ARES CAPITAL CORPORATION
 AND
 ARES CAPITAL MANAGEMENT LLC

 

Agreement (this “Agreement”) made as of this 6th day of June 2011, between ARES CAPITAL CORPORATION, a Maryland corporation (the “Corporation”), and ARES CAPITAL MANAGEMENT LLC, a Delaware limited liability company (the “Adviser”).

 

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

 

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

 

WHEREAS, on September 30, 2004, the Corporation and the Adviser entered into an Investment Advisory and Management Agreement, pursuant to which the Adviser agreed to furnish investment advisory services to the Corporation (the “Initial Agreement”);

 

WHEREAS, the Corporation and the Adviser, with the approval of the Corporation’s stockholders, agreed to amend and restate the Initial Agreement in its entirety on June 1, 2006 (as amended and restated, the “Original Agreement”); and

 

WHEREAS, the Corporation and the Adviser, with the approval of the Corporation’s stockholders, desire to further amend and restate the Original Agreement in its entirety.

 

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 (and that the Original Agreement shall be deemed of no further force and effect whatsoever):

 

1.                                      Duties of the Adviser.

 

(a)                                 The Corporation hereby employs the Adviser to act as the investment adviser to the Corporation and to manage the investment and reinvestment of the assets of the Corporation, subject to the supervision of the Board of Directors of the Corporation (the “Board”), 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 Corporation’s Board of Directors from time to time and disclosed to the Adviser, which objectives, policies and restrictions, as of the date hereof, shall be those set forth in the Corporation’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission (the “SEC”) on March 1, 2011,

 

 

(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 Corporation’s charter and by-laws.

 

Without limiting the generality of the foregoing, the Adviser shall, during the term and subject to the provisions of this Agreement,

 

(i)                                     determine the composition of the portfolio of the Corporation, the nature and timing of the changes therein and the manner of implementing such changes;

 

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

 

(iii)                               close and monitor the Corporation’s investments;

 

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

 

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

 

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

 

The Adviser shall have the power and authority on behalf of the Corporation to effectuate its investment decisions for the Corporation, including the execution and delivery of all documents relating to the Corporation’s investments and the placing of orders for other purchase or sale transactions on behalf of the Corporation.  In the event that the Corporation determines to incur debt financing, the Adviser will arrange for such financing on the Corporation’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 Corporation 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.

 

(b)                                 The Adviser hereby accepts such employment and agrees during the term hereof to render the services described herein for the compensation provided herein.

 

(c)                                  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 Adviser in providing the investment advisory services required to be provided by the Adviser under Section 1(a) hereof.  Specifically, the Adviser may retain a Sub-Adviser to recommend specific securities or other investments based upon the Corporation’s investment objectives and policies, and work, along with the Adviser, in structuring, negotiating, arranging or effecting the acquisition or disposition of such investments and monitoring

 

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investments on behalf of the Corporation, subject to the oversight of the Adviser and the Corporation.  The Adviser, and not the Corporation, shall be responsible for any compensation payable to any Sub-Adviser.  Any sub-advisory agreement entered into by the Adviser shall be in accordance with the requirements of the Investment Company Act and other applicable federal and state law.  Nothing in this subsection (c) will obligate the Adviser to pay any expenses that are the expenses of the Corporation under Section 2 hereof.

 

(d)                                 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 Corporation in any way or otherwise be deemed an agent of the Corporation.

 

(e)                                  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 Corporation and shall specifically maintain all books and records with respect to the Corporation’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 Corporation are the property of the Corporation and will surrender promptly to the Corporation any such records upon the Corporation’s request, provided that the Adviser may retain a copy of such records.

 

2.                                      Corporation’s Responsibilities and Expenses Payable by the Corporation.  All investment professionals of the Adviser and its staff, when and to the extent engaged in providing investment advisory services required to be provided by the Adviser under Section 1(a) hereof, 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 Corporation.  The Corporation will bear all costs and expenses of its operations and transactions, including those relating to:

 

·                                          organization;

 

·                                          calculating the Corporation’s net asset value (including the cost and expenses of any independent valuation firm);

 

·                                          expenses incurred by the Adviser payable to third parties, including agents, consultants or other advisors, in monitoring financial and legal affairs for the Corporation and in monitoring the Corporation’s investments (including the cost of consultants hired to develop information technology systems designed to monitor the Corporation’s investments) and performing due diligence on its prospective portfolio companies;

 

·                                          interest payable on debt, if any, incurred to finance the Corporation’s investments;

 

·                                          offerings of the Corporation’s common stock and other securities;

 

·                                          investment advisory and management fees;

 

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·                                          administration fees, if any, payable under the Amended and Restated Administration Agreement (the “Administration Agreement”) between the Corporation and Ares Operations LLC or any successor thereto (the “Administrator”), the Corporation’s administrator;

 

·                                          fees payable to third parties, including agents, consultants or other advisors, relating to, or associated with, evaluating and making investments (including payments to third party vendors for financial information services);

 

·                                          transfer agent and custodial fees;

 

·                                          federal and state registration fees;

 

·                                          all costs of registration and listing the Corporation’s shares on any securities exchange;

 

·                                          federal, state and local taxes;

 

·                                          independent directors’ fees and expenses;

 

·                                          costs of preparing and filing reports or other documents required by governmental bodies (including the SEC);

 

·                                          costs of any reports, proxy statements or other notices to stockholders, including printing costs;

 

·                                          the Corporation’s allocable portion of the fidelity bond, directors and officers/errors and omissions liability insurance, and any other insurance premiums;

 

·                                          direct costs and expenses of administration, including printing, mailing, long distance telephone, cellular phone and data service, copying, secretarial and other staff, independent auditors and outside legal costs; and

 

·                                          all other expenses incurred by the Corporation or the Administrator in connection with administering the Corporation’s business (including payments under the Administration Agreement between the Corporation and the Administrator based upon the Corporation’s allocable portion of the Administrator’s overhead in performing its obligations under the Administration Agreement, including rent and the allocable portion of the cost of the Corporation’s officers and their respective staffs (including travel expenses)).

 

3.                                      Compensation of the Adviser.  The Corporation 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 Corporation shall make any payments due hereunder to the Adviser or to the Adviser’s designee as the Adviser may otherwise direct.  To the extent permitted by applicable

 

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law, the Adviser may elect, or the Corporation 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 1.50% per annum of the Corporation’s total assets (other than cash or cash equivalents but including assets purchased with borrowed funds).  For services rendered after the date hereof, the Base Management Fee will be payable quarterly in arrears.  The Base Management Fee will be calculated based on the average value of the Corporation’s total assets (other than cash or cash equivalents but including assets purchased with borrowed funds) at the end of the two most recently completed calendar quarters, and appropriately adjusted for any share issuances or repurchases during the current calendar quarter.  Base Management Fees for any partial month or 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 investment income for the quarter.  “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 Corporation receives from portfolio companies) accrued by the Corporation during the calendar quarter, minus the Corporation’s operating expenses for the quarter (including the Base Management Fee, expenses payable under the Administration Agreement, 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 market discount, debt instruments with payment-in-kind interest, preferred stock with payment-in-kind dividends and zero coupon securities), accrued income that we have not yet received in cash.  Pre-Incentive Fee net investment income does not include any realized capital gains, realized and unrealized capital losses or unrealized capital appreciation or depreciation.

 

Pre-Incentive Fee net investment income, expressed as a rate of return on the value of the Corporation’s net assets (defined as total assets less indebtedness) at the end of the immediately preceding calendar quarter, will be compared to a “hurdle rate” of 1.75% per quarter (7% annualized).  The Corporation will pay the Adviser an Incentive Fee with respect to the Corporation’s Pre-Incentive Fee net investment income in each calendar quarter as follows:

 

(A)                               no Incentive Fee in any calendar quarter in which the Corporation’s Pre-Incentive Fee net investment income does not exceed the hurdle rate;

 

(B)                               100% of the Corporation’s Pre-Incentive Fee net investment income with respect to that portion of such Pre-Incentive Fee net investment income, if any, that exceeds the hurdle rate but is less than 2.1875% in any calendar quarter (8.75% annualized); and

 

(C)                               20% of the amount of the Corporation’s Pre-Incentive Fee net investment income, if any, that exceeds 2.1875% in any calendar quarter (8.75% annualized).

 

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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 quarter.

 

(ii)                                  The second part of the Incentive Fee (the “Capital Gains Fee”) will be determined and payable in arrears as of the end of each calendar year (or upon termination of this Agreement as set forth below), commencing with the calendar year ending on December 31, 2004, and is calculated at the end of each applicable year by subtracting (1) the sum of the Corporation’s cumulative aggregate realized capital losses and aggregate unrealized capital depreciation from (2) the Corporation’s cumulative aggregate realized capital gains, in each case calculated from October 8, 2004.  If such amount is positive at the end of such year, then the Capital Gains Fee for such year is equal to 20.0% of such amount, less the aggregate amount of Capital Gains Fees paid in all prior years.  If such amount is negative, then there is no Capital Gains Fee for such year.  If this Agreement shall terminate as of a date that is not a calendar year end, the termination date shall be treated as though it were a calendar year end for purposes of calculating and paying a Capital Gains Fee.  This amendment and restatement of the Original Agreement shall not be treated as such a termination.

 

For purposes of this Section 3(b)(ii):

 

The 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 Corporation’s portfolio when sold and (b) the accreted or amortized cost basis of such investment.

 

The 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 Corporation’s portfolio when sold is less than (b) the accreted or amortized cost basis of such investment.

 

The aggregate unrealized capital depreciation is calculated as the sum of the differences, if negative, between (a) the valuation of each investment in the Corporation’s portfolio as of the applicable Capital Gains Fee calculation date and (b) the accreted or amortized cost basis of such investment.

 

Notwithstanding the foregoing, if the Corporation is required by United States generally accepted accounting principles (“GAAP”) to record an investment at its fair value as of the time of acquisition instead of at the actual amount paid for such investment (including, for example, as a result of the application of the acquisition method of accounting), then solely for the purposes of calculating the Capital Gains Fee, the “accreted or amortized cost basis” of an investment shall be an amount (the “Contractual Cost Basis”) equal to (1) (x) the actual amount paid by the Corporation for such investment plus (y) any amounts recorded in the Corporation’s financial statements as required by GAAP that are attributable to the accretion of such investment plus (z) any other adjustments made to the cost basis included in the Corporation’s financial statements, including payment-in-kind interest or additional amounts funded (net of repayments) minus (2) any amounts recorded in the Corporation’s financial statements as required by GAAP that are attributable to the amortization of such investment.  For the avoidance of doubt, the Contractual Cost Basis as determined pursuant to the foregoing sentence may be higher or lower than the fair value of such investment (as determined in accordance with GAAP) at the time of acquisition.  In connection with the foregoing, in the event investments are

 

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purchased in a single transaction or series of related transactions for an aggregate purchase price without the Corporation allocating such purchase price to specific investments, the Corporation may assign a Contractual Cost Basis to a specific investment equal to such investment’s Pro Rata Share of such aggregate purchase price paid. “Pro Rata Share” means the resulting percentage determined using the amount at which a specific investment acquired in a single transaction or series of related transactions is recorded in the Corporation’s financial statements at the time of acquisition according to GAAP divided by the total amount at which all investments acquired in the same transaction or series of related transactions are recorded in the Corporation’s financial statements at the time of acquisition according to GAAP.

 

(iii)                               Payment of any Incentive Fee otherwise earned by the Adviser shall be deferred (“Deferred Incentive Fees”) if, during the most recent four full calendar quarter period ending on or prior to the date such payment is to be made, the sum of (a) the Corporation’s aggregate distributions to its stockholders and (b) the change in the Corporation’s net assets (before taking into account any incentive fees payable during that period) is less than 7.0% of the Corporation’s net assets at the beginning of such period.  These calculations will be appropriately adjusted for any share issuances or repurchases during the relevant period.  Any Deferred Incentive Fees shall be carried over for payment in subsequent calculation periods by the Corporation, to the extent such payment could be otherwise be made under this Agreement.

 

4.                                      Covenants 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.

 

5.                                      Excess Brokerage Commissions.  The Adviser is hereby authorized, to the fullest extent now or hereafter permitted by law, to cause the Corporation to pay a member of a national securities exchange, broker or dealer an amount of commission for effecting a securities transaction in excess of the amount of commission another member of such exchange, broker or dealer would have charged for effecting 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 Corporation’s portfolio, and constitutes the best net results for the Corporation.

 

6.                                      Limitations on the Employment of the Adviser.  The services of the Adviser to the Corporation 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 Corporation, and 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 (including fees for serving as a director of, or

 

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providing consulting services to, one or more of the Corporation’s portfolio companies, subject to applicable law).  So long as this Agreement or any extension, renewal or amendment remains in effect, the Adviser shall be the only investment adviser for the Corporation, subject to the Adviser’s right to enter into sub-advisory agreements.  The Adviser assumes no responsibility under this Agreement other than to render the services called for hereunder.  It is understood that directors, officers, employees and stockholders of the Corporation are or may become interested in the Adviser and its affiliates, as directors, officers, employees, partners, stockholders, members, managers or otherwise, and that the Adviser and directors, officers, employees, partners, stockholders, members and managers of the Adviser and its affiliates are or may become similarly interested in the Corporation as stockholders or otherwise.

 

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

 

8.                                      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 Corporation for any action taken or omitted to be taken by the Adviser in connection with the performance of any of its duties or obligations under this Agreement or otherwise as an investment adviser of the Corporation, except to the extent specified in Section 36(b) of the Investment Company Act concerning loss resulting from a breach of fiduciary duty (as the same is finally determined by judicial proceedings) with respect to the receipt of compensation for services.  The Corporation 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 Corporation or its security holders) arising out of or otherwise based upon the performance of any of the Adviser’s duties or obligations under this Agreement or otherwise as an investment adviser of the Corporation.  Notwithstanding the foregoing provisions 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 Corporation or its security holders to which the Indemnified Parties would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of 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).

 

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9.                                      Effectiveness, Duration and Termination of Agreement.  This Agreement shall become effective as of the first date above written.  This Agreement shall remain in effect for 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 by the vote of stockholders holding a majority of the outstanding voting securities of the Corporation and

 

(b)                                 the vote of a majority of the Corporation’s Directors who are not parties to this Agreement or “interested persons” (as such term is defined in Section 2(a)(19) of the Investment Company Act) of any 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 the vote of stockholders holding a majority of the outstanding voting securities of the Corporation, or by the vote of the Corporation’s Directors or by the Adviser.

 

This Agreement 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).  The provisions of Section 8 hereof shall remain in full force and effect, and the Adviser shall remain entitled to the benefits thereof, notwithstanding any termination of this Agreement.  Further, notwithstanding the termination or expiration of this Agreement as aforesaid, the Adviser shall be entitled to any amounts owed under Section 3 hereof through the date of termination or expiration and Section 8 hereof shall continue in full force and effect and apply to the Adviser and its representatives as and to the extent applicable.

 

10.                               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 Corporation must be obtained in conformity with the requirements of the Investment Company Act.

 

11.                               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.

 

12.                               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.

 

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13.                               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.

 

14.                               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.

 

15.                               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.

 

16.                               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.

 

17.                               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 Agreement), both written and oral, between the parties with respect to such subject matter.

 

18.                               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 hereof 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.

 

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

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

 

	
 
    	
ARES   CAPITAL CORPORATION
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Penni F. Roll
    
	
 
    	
 
    	
Name:
    	
Penni   F. Roll
    
	
 
    	
 
    	
Title:
    	
Chief   Financial Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
ARES   CAPITAL MANAGEMENT LLC
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Daniel F. Nguyen
    
	
 
    	
 
    	
Name:
    	
Daniel   F. Nguyen
    
	
 
    	
 
    	
Title:
    	
Vice   President, Chief Financial Officer and Treasurer

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