Exhibit 10.1
INVESTMENT ADVISORY AGREEMENT
This INVESTMENT ADVISORY AGREEMENT (this "Agreement") is entered into as of
April 29, 2008, 2008 by and between MACC PRIVATE EQUITIES INC., a corporation
organized under the laws of the State of Delaware (the "Company"), and
EUDAIMONIA ASSET MANAGMENT, LLC, a limited liability company organized under the
laws of the State of California ("Eudaimonia").
R E C I T A L S
WHEREAS, the Company is a closed-end investment company that has elected to
be regulated as a business development company (a "BDC") under the Investment
Company Act of 1940, as amended (the "1940 Act");
WHEREAS, Eudaimonia is qualified to provide investment advisory services to
the Company and is registered as an investment advisor under the Investment
Advisors Act of 1940, as amended; and
WHEREAS, this Agreement is subject to approval by the holders of a
majority, as defined in the 1940 Act, of the Company's outstanding voting
securities and will become effective as of the date of such approval (the
"Effective Date").
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the parties hereto agree as follows:
Section 1. Definitions.
1.1 The "1940 Act" has the meaning set forth in the first recital hereof.
1.2 "Affiliate" shall have the meaning given under the 1940 Act.
1.3 "Assets Under Management" shall mean the total value of the Company's
assets managed by Eudaimonia under this Agreement, less any cash balances and
cash equivalent investments of the Company which are not invested in debt or
equity securities of Portfolio Companies in accordance with the Company's
investment objectives, calculated as of the end of each month during the term of
this Agreement.
1.4 "Capital Losses" are those which are placed, consistent with generally
accepted accounting principles, on the books of the Company and which occur
when:
(a) An actual or realized loss is sustained owing to Portfolio Company
or investment events including, but not limited to, liquidation, sale or
bankruptcy; or
(b) The Board of Directors of the Company determines that a loss or
depreciation in value from the value on the date of this Agreement should
be taken by the Company in accordance with generally accepted accounting
principles ("GAAP") and the Company's Valuation Policy then in effect and
is shown on its books as a part of the periodic valuation of the Portfolio
Companies by the Board of Directors ("Unrealized Depreciation").
For purposes of this definition, in any case where the Board of Directors of the
Company writes down the value of any investment in the Company's portfolio (in
accordance with the standards set forth in subsection 1.4(b) above), (i) such
reduction in value shall result in a new cost basis for such investment and (ii)
the most recent cost basis for such investment shall thereafter be used in the
determination of any Realized Capital Gains or Capital Losses in the Company's
portfolio (i.e., there shall be no double-counting of losses when a security
(whose value has declined in a prior period) is ultimately sold at a price below
its historical cost).
1.5 The "Company" shall mean MACC Private Equities Inc., a Delaware
corporation.
1.6 "Eudaimonia" shall mean Eudaimonia Asset Management, LLC, a California
limited liability company.
1.7 "Existing Portfolio Company" or "Existing Portfolio Companies" shall
mean any Portfolio Company in which the Company or MorAmerica has made an
investment prior to the Effective Date.
1.8 "MorAmerica" shall mean the Company's wholly-owned subsidiary,
MorAmerica Capital Corporation, an Iowa corporation.
1.9 "Net Capital Gains" shall mean Realized Capital Gains net of Capital
Losses determined in accordance with GAAP.
1.10 "New Portfolio Company" or "New Portfolio Companies" shall mean any
Portfolio Company, other than an Existing Portfolio Company, in which the
Company may make an investment after the Effective Date.
1.11 "Other Venture Capital Funds" has the meaning set forth in subsection
3.2.
1.12 "Portfolio Company" or "Portfolio Companies" shall mean any entity in
which the Company may make an investment and with respect to which Eudaimonia
will be providing services pursuant hereto, which investments may include
ownership of capital stock, loans, receivables due from a Portfolio Company or
other debtor on sale of assets acquired in liquidation and assets acquired in
liquidation of any Portfolio Company.
1.13 "Realized Capital Gains" shall mean capital gains after deducting the
cost and expenses necessary to achieve the gain (e.g., broker's fees). For
purposes of this Agreement, capital gains are Realized Capital Gains upon the
cash sale of the capital stock or assets of a Portfolio Company or any other
asset or item of property managed by Eudaimonia pursuant to the terms hereof or
any Realized Capital Gain has occurred in accordance with GAAP which is
not cash as described in the following sentence. Realized Capital Gains other
than cash gains, shall be recorded and calculated in the period the gain is
realized; however in determining payment of any incentive fee, the payment shall
be made when the cash is received. The amount of the fee earned on gains other
than cash shall be recorded as incentive fees payable on the financial
statements of the Company.
1.14 "SEC" shall mean the United States Securities and Exchange Commission.
Section 2. Investment Advisory Engagement. The Company hereby engages
Eudaimonia as its investment advisor.
2.1 As such, Eudaimonia will:
(a) Manage, render advice with respect to, and make decisions
regarding the acquisition and disposition of securities in accordance with
applicable law and the Company's investment policies as set forth in
writing by the Board of Directors, to include (without limitation) the
search and marketing for investment leads, screening and research of
investment opportunities, maintenance and expansion of a co-investor
network, review of appropriate investment legal documentation,
presentations of investments to the Company's Board of Directors (when and
as required), closing of investments, monitoring and management of
investments and exits, preparation of valuations, management of
relationships with the SEC, shareholders, outside auditors, and the
provision of other services appropriate to the management of a BDC;
(b) Make available and, if requested by Portfolio Companies or
entities in which the Company is proposing to invest, render managerial
assistance to, and exercise management rights in, such Portfolio Companies
and entities as appropriate to maximize return for the Company and to
comply with regulations;
(c) Maintain office space and facilities to the extent required by
Eudaimonia to provide adequate management services to the Company;
(d) Maintain the books of account and other records and files for the
Company, but not to include auditing services; and
(e) Report to the Company's Board of Directors, or to any committee or
officers acting pursuant to the authority of the Board, at such reasonable
times and in such reasonable detail as the Board deems appropriate in order
to enable the Company to determine that investment policies are being
observed and implemented and that the obligations of Eudaimonia hereunder
are being fulfilled. Any investment program undertaken by Eudaimonia
pursuant hereto and any other activities undertaken by Eudaimonia on behalf
of the Company shall at all times be subject to applicable law and any
directives of the Company's Board of Directors or any duly constituted
committee or officer acting pursuant to the authority of the Company's
Board of Directors.
2.2 Eudaimonia will be responsible for the following expenses: its staff
salaries and fringe benefits, office space, office equipment and furniture,
communications, travel, meals and entertainment, conventions, seminars, office
supplies, dues and subscriptions, hiring fees, moving expenses, repair and
maintenance, employment taxes, in-house accounting expenses and minor
miscellaneous expenses.
Eudaimonia will pay for its own account all expenses incurred in rendering
the services to be rendered hereunder. Without limiting the generality of the
foregoing, Eudaimonia will pay the salaries and other employee benefits of the
persons in its organization whom it may engage to render such services,
including without limitation, persons in its organization who may from time to
time act as officers of the Company.
Notwithstanding the foregoing, Eudaimonia will earn incentive compensation
on a quarterly basis, which shall not be deemed part of compensation or other
employee benefits for the purpose of this paragraph.
2.3 In connection with the services provided, Eudaimonia will not be
responsible for the following expenses which shall be the sole responsibility of
the Company and will be paid promptly by the Company: auditing fees; all legal
expenses; legal fees normally paid by Portfolio Companies; appropriate trade
association fees; brochures, advertising, marketing and publicity costs;
interest on debt; fees to the Company and its directors and Board fees; any fees
owed or paid to the Company or fund managers; any and all expenses associated
with property of a Portfolio Company taken or received by the Company or on its
behalf as a result of its investment in any Portfolio Company; all
reorganization and registration expenses of the Company; the fees and
disbursements of the Company's counsel, accountants, custodian, transfer agent
and registrar; fees and expenses incurred in producing and effecting filings
with federal and state securities administrators; costs of periodic reports to,
and other communications with the Company's shareholders; fees and expenses of
members of the Company's Board of Directors who are not directors, officers,
employees or Affiliates of Eudaimonia or of any entity which is an Affiliate of
Eudaimonia; premiums for the fidelity bond, if any, maintained by Eudaimonia
pursuant to Section 17 of the 1940 Act; premiums for directors and officers
insurance maintained by the Company; all transaction costs incident to the
acquisition, management and protection of and disposition of securities by the
Company; and any other expenses incurred by or on behalf of the Company that are
not expressly payable by Eudaimonia under Section 2.2. above.
2.4 Subject to approval by the Board of Directors of the Company and in
accordance with the 1940 Act, Eudaimonia may retain one or more subadvisors to
assist it in performance of its duties hereunder.
Section 3. Nonexclusive Obligations; Co-investments.
3.1 The obligations of Eudaimonia to the Company are not exclusive.
Eudaimonia and its Affiliates, may in their discretion, manage other venture
capital funds and render the same or similar services to any other person or
persons who may be making the same or similar investments. The parties
acknowledge that Eudaimonia may offer the same investment
opportunities as may be offered to the Company to other persons for whom
Eudaimonia is providing services. Neither Eudaimonia nor any of its Affiliates
shall in any manner be liable to the Company by reason of the activities of
Eudaimonia or its Affiliates on behalf of other persons and funds as described
in this paragraph and any conflict of interest arising therefrom is hereby
expressly waived.
3.2 Should Eudaimonia or any of its Affiliates agree to perform or
undertake any investment management services described in Section 3.1 for any
registered or unregistered investment company in addition to the Company,
Eudaimonia will notify the Company, in writing, not later than the commencement
of such agreement or the initial provision of such services.
3.3 Any such investment management services and any co-investments shall at
all times be provided in strict accordance with rules and regulations under the
1940 Act, Eudamonia's asset allocation policy required thereunder and any
exemptive order thereunder applicable to the Company.
Section 4. Services to Portfolio Companies.
4.1 It is acknowledged that as a part of the services to be provided by
Eudaimonia hereunder, certain of its employees, representatives and agents will
act as members of the board of directors of individual Portfolio Companies, will
vote the shares of the capital stock of Portfolio Companies, and make other
decisions which may effect the near-and the long-term direction of a Portfolio
Company. Unless otherwise restricted hereafter by the Company in writing, in
regard to such actions and decisions the Company hereby appoints Eudaimonia (and
such officers, directors, employees, representatives and agents is it shall
designate) as its proxy, as a result of which Eudaimonia shall have the
authority, in its performance of this Agreement, to make decisions and to take
such actions, without specific authority from the Board of Directors of the
Company, as to all matters which are not hereby restricted.
4.2 All fees, including director's fees that may be paid by or for the
account of an entity in which the Company has invested or in which the Company
is proposing to invest in connection with an investment transaction in which the
Company participates or provides managerial assistance, will be treated as
commitment fees or management fees and will be received by the Company, pro rata
to its participation in such transaction. Eudaimonia will be allowed to be
reimbursed by Portfolio Companies for all direct expenses associated with due
diligence and management of portfolio investments or investment opportunities
(travel, meals, lodging, etc.).
4.3 The sole and exclusive compensation to Eudaimonia for its services to
be rendered hereunder will be in the form of a management fee and a separate
incentive fee as provided in Section 5. Should any officer, director, employee
or Affiliate of Eudaimonia serve as a member of the Board of Directors of the
Company, such officer, director, employee or Affiliate of Eudaimonia shall not
receive compensation as a member of the Board of Directors of the Company.
Section 5. Management and Incentive Fees.
5.1 During the term of this Agreement, the Company will pay Eudaimonia
monthly in arrears a management fee equal to 2.0% per annum of the Assets Under
Management attributable to Existing Portfolio Companies.
5.2 During the term of this Agreement, the Company will pay Eudaimonia
monthly in arrears a management fee equal to 2.0% per annum of the Assets Under
Management attributable to New Portfolio Companies.
5.3 During the term of this Agreement the Company shall pay to Eudaimonia
incentive fees determined as specified in this Section 5.3; provided, however,
that the amount of the incentive fee paid by the Company and all incentive
compensation, in any fiscal year, may not exceed the limit prescribed by Section
205(b)(3) of the Investment Advisers Act of 1940.
(a) The incentive fee attributable to Existing Portfolio Companies
shall be calculated as follows:
(i) The amount of the fee shall be 13.4% of the Net Capital
Gains, before taxes, resulting from the disposition of investments in
Existing Portfolio Companies or resulting from the disposition of
other assets or property of the Company acquired prior to the
Effective Date and managed by Eudaimonia pursuant to the terms hereof.
(ii) Net Capital Gains, before taxes, shall be calculated
annually at the end of each fiscal year for the purpose of determining
the earned incentive fee, unless this Agreement is terminated prior to
the completion of any fiscal year, then such calculation shall be made
at the end of such shorter period. A preliminary calculation shall be
made on the last business day of each of the three fiscal quarters
preceding the end of each fiscal year for the purpose of determining
the incentive fee payable under Section 5.2(d)(i) below. Capital
Losses and Realized Capital Gains shall not be cumulative (i.e., no
Capital Losses nor Realized Capital Gains are carried forward into any
subsequent fiscal year).
(b) The incentive fee attributable to New Portfolio Companies shall be
calculated as follows:
(i) The amount of the fee shall be 20.0% of the Net Capital
Gains, before taxes, resulting from the disposition of investments in
New Portfolio Companies or resulting from the disposition of other
assets or property of the Company acquired after the Effective Date
and managed by Eudaimonia pursuant to the terms hereof.
(ii) Net Capital Gains, before taxes, shall be calculated
annually at the end of each fiscal year for the purpose of determining
the earned incentive fee, unless this Agreement is terminated prior to
the completion of any fiscal year, then such calculation shall be made
at the end of such shorter period. A preliminary calculation shall be
made on the last business day of each of the three fiscal quarters
preceding the end of each fiscal year for the purpose of determining
the incentive fee payable under Section 5.2(d)(i) below. Capital
Losses
and Realized Capital Gains shall not be cumulative (i.e., no Capital
Losses nor Realized Capital Gains are carried forward into any
subsequent fiscal year).
(c) Net Capital Gains with respect to Existing Portfolio Companies or
resulting from the disposition of other assets or property of the Company
acquired prior to the Effective Date under 5.3(a) shall be calculated and
paid independently from Net Capital Gains with respect to New Portfolio
Companies or resulting from the disposition of other assets or property of
the Company acquired after the Effective Date under 5.3(b).
(d) Upon termination of this Agreement, all earned but unpaid
incentive fees shall be immediately due and payable.
(e) Payment of incentive fees shall be made as follows:
(i) To the extent payable, incentive fees shall be paid, in cash,
in arrears on the last business day of each fiscal quarter in the
fiscal year.
(ii) The incentive fee shall be retroactively adjusted as soon as
practicable following completion of the valuations at the end of each
fiscal year in which this Agreement is in effect to reflect the actual
incentive fee due and owing to Eudaimonia, and if such adjustment
reveals that Eudaimonia has received more incentive fee income than it
is entitled to hereunder, Eudaimonia shall promptly reimburse the
Company for the amount of the excess.
Section 6. Liability and Indemnification of Eudaimonia.
6.1 Neither Eudaimonia, nor any of its officers, directors, shareholders,
employees, agents or Affiliates, whether past, present or future (collectively,
the "Indemnified Parties"), shall be liable to the Company, or any of its
Affiliates for any error in judgment or mistake of law made by the Indemnified
Parties in connection with any investment made by or for the Company, provided
such error or mistake was not made in bad faith or as a result of gross
negligence or willful misconduct of the Indemnified Parties. The Company
confirms that in performing services hereunder, Eudaimonia will be an agent of
the Company for the purpose of the indemnification provisions of the Bylaws of
the Company subject, however, to the same limitations as though Eudaimonia were
a director or officer of the Company. Eudaimonia shall not be liable to the
Company, its shareholders or its creditors, except for violations of law or for
conduct which would preclude Eudaimonia from being indemnified under such
provisions. The provisions of this Section 6.1 shall survive termination of this
Agreement.
6.2 Individuals who are Affiliates of Eudaimonia and are also officers or
directors of the Company as well as other Eudaimonia officers performing duties
within the scope of this Agreement on behalf of the Company will be covered by
any directors and officers insurance policy maintained by the Company.
Section 7. Shareholder Approval; Term.
This Agreement is subject to approval by the shareholders of the Company in
the manner set forth in Section 15(a) of the 1940 Act. The Company represents
that this Agreement has been approved by the Company's Board of Directors. This
Agreement shall continue in effect for two (2) years from the Effective Date,
unless sooner terminated as provided for herein. Thereafter, this Agreement
shall continue in effect so long as such continuance is specifically approved at
least annually by the Company's Board of Directors, including a majority of its
members who are not interested persons of Eudaimonia, or by vote of the holders
of a majority, as defined in the 1940 Act, of the Company's outstanding voting
securities. The foregoing notwithstanding, this Agreement may be terminated by
the Company at any time, without payment of any penalty, on sixty (60) days'
written notice to Eudaimonia if the decision to terminate has been made by the
Board of Directors or by vote of the holders of a majority, as defined in the
1940 Act, of the Company's outstanding voting securities.
Eudaimonia may also terminate this Agreement on sixty (60) days' written
notice to the Company; provided, however, that Eudaimonia may not so terminate
this Agreement unless another investment advisory agreement has been approved by
the vote of a majority, as defined in the 1940 Act, of the Company's outstanding
shares and by the Board of Directors, including a majority of members who are
not parties to such agreement or interested persons of any such party. Upon
receipt of any such notice from Eudaimonia, the Company will in good faith use
its best efforts to cause an advisory agreement to be entered into by the
Company with a suitable investment adviser.
Section 8. Assignment.
This Agreement may not be assigned by any party without the written consent
of the other and any assignment, as defined in the 1940 Act, by Eudaimonia shall
automatically terminate this Agreement.
Section 9. Amendments.
This Agreement may be amended only by an instrument in writing executed by
all parties and otherwise in accordance with the 1940 Act.
Section 10. Governing Law.
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to
be effective as of the date first above written.
THE COMPANY:
MACC PRIVATE EQUITIES, INC.
A Delaware corporation
By: /s/ Xxxxx X. Xxxxxxxx
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Xxxxx X. Xxxxxxxx
President
By: /s/ Xxxxxx X. Xxxxx
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Xxxxxx X. Xxxxx
Executive Vice President
EUDAIMONIA:
EUDAIMONIA ASSET MANAGEMENT, LLC
A California limited liability company
By: /s/ Xxxxxx X. Xxxxxxxx
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Name: Xxxxxx X. Xxxxxxxx
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Title: President and CEO
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