(Name of Registrant as Specified in Its Charter)
August [•], 2017
(312) 281-6270
Company’s independent registered public accounting firm for the fiscal year ending December 31, 2019.
THE COMPANY’S BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” APPROVAL OF THE AMENDED ADVISORY AGREEMENT.
Sincerely yours,/s/ R. David SprengR. David SprengChairman of the Board of Directors,President and Chief Executive Officer
| | | | Sincerely yours, | |
| | | | /s/ R. David Spreng | |
| | | | R. David Spreng Chairman of the Board of Directors, President and Chief Executive Officer | |
MAY 2, 2019
THESE PROPOSALS.
(312) 281-6270.
By Order of the Board of Directors,/s/ Thomas B. RatermanThomas B. RatermanChief Financial Officer, Secretary and Treasurer
| | | | By Order of the Board of Directors, | |
| | | | /s/ Thomas B. Raterman | |
| | | | Thomas B. Raterman Chief Financial Officer, Secretary and Treasurer | |
April 2, 2019
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April 2, 2019.
FOR the ratification of RSM US LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2019.
THURSDAY, MAY 2, 2019:
other agent, your broker or other agent is not permitted to vote your shares on any proposal properly presented at the Special Meeting. You are also invited to attend the SpecialAnnual Meeting. However, since you are not the stockholder of record, you may not vote your shares in person at the SpecialAnnual Meeting unless you request and obtain a valid legal proxy from your broker or other agent.
appraisal.
The Amended Advisory Agreement must be approved by the affirmative vote of “a majority of the outstanding voting securities” of the Company entitled to vote at the Special Meeting. For this purpose, the Investment Company Act of 1940, as amended (the “1940 Act”) defines “a majority of the outstanding voting securities” as (a) 67% or more of the shares of common stock present or represented by proxy at the Special Meeting if the holders of more than 50% of the outstanding shares of common stock are present or represented by proxy, or (b) 50% of the outstanding shares of common stock, whichever is less. For the purpose of determining whether a majority of our shares of common stock approved this proposal, abstentions and broker non-votes, if any, recorded by record owners will have the effect of a vote against the proposal.If approved by the Company’s stockholders at the Special Meeting, the Amended Advisory Agreement will be effective as of the date of the Special Meeting.
Proposal | | | Vote Required | | | Broker Discretionary Voting Allowed | | | Effect of Abstentions and Broker Non-Votes | |
Proposal 1 — To elect two directors of the Company nominated by the Board and named in this proxy statement who will serve for a term of three years and until their successors are elected and qualify | | | Affirmative vote of a plurality of all the votes cast at the Annual Meeting | | | No | | | Broker non-votes are not counted as votes cast for purposes of the election of directors and, therefore, will have no effect on the outcome of such election. A proxy marked “withhold” with respect to a director nominee will result in such director nominee receiving one fewer “FOR” vote that would count towards a plurality. | |
Proposal | | | Vote Required | | | Broker Discretionary Voting Allowed | | | Effect of Abstentions and Broker Non-Votes | |
Proposal 2 — To ratify the selection of RSM US LLP to serve as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2019 | | | Affirmative vote of a majority of the votes cast at the Annual Meeting | | | Yes | | | Abstentions will not be included in determining the number of votes cast and, as a result, will not have any effect on the result of the vote on this proposal. | |
March 22, 2019. Percentage of ownership is based on 15,401,559 shares of common stock outstanding as of March 22, 2019.
Name and Address of Beneficial Owner | | | Number of Shares Owned Beneficially(1) | | | Percentage of Class | | ||||||
Interested Directors: | | | | ||||||||||
R. David Spreng | | | | | 26,790(4) | | | | | | * | | |
Brian Laibow | | | | | — | | | | | | * | | |
Independent Directors: | | | | ||||||||||
Gary Kovacs | | | | | 28,181 | | | | | | * | | |
Julie Persily | | | | | 8,454 | | | | | | * | | |
Lewis W. Solimene, Jr. | | | | | 8,454 | | | | | | * | | |
Executive Officers Who Are Not Directors: | | | | ||||||||||
Thomas B. Raterman | | | | | 7,105(5) | | | | | | * | | |
Carl M. Rizzo | | | | | — | | | | | | * | | |
Executive officers and directors as a group | | | | | 78,985 | | | | | | * | | |
5% or More Holders: | | | | ||||||||||
OCM Growth Holdings, LLC(2) | | | | | 7,815,569 | | | | | | 50.75% | | |
Carilion Clinic(3) | | | | | 1,409,038 | | | | | | 9.15% | | |
Retirement Plan of Carilion Clinic(3) | | | | | 1,409,038 | | | | | | 9.15% | | |
Name and Address of Beneficial Owner | Number of Shares Owned Beneficially(1) | Percentage of Class | ||||||
Interested Directors: | ||||||||
R. David Spreng | 8,316 | * | ||||||
Brian Laibow | — | * | ||||||
Independent Directors: | ||||||||
Gary Kovacs | 6,649 | * | ||||||
Julie Persily | 665 | * | ||||||
Lewis W. Solimene, Jr. | 665 | * | ||||||
Executive Officers Who Are Not Directors: | ||||||||
Thomas B. Raterman | 665 | * | ||||||
Carl M. Rizzo | — | * | ||||||
Executive officers and directors as a group | 16,960 | * | ||||||
5% or More Holders: | ||||||||
OCM Growth Holdings, LLC(2) | 1,662,223 | 55.37 | % | |||||
Carilion Clinic(3) | 332,445 | 11.08 | % | |||||
Retirement Plan of Carilion Clinic(4) | 332,445 | 11.08 | % |
Name | | | Dollar Range of Equity | | ||
Interested Directors: | | | ||||
R. David Spreng | | | | |||
Brian Laibow | | | None | | ||
Independent Directors: | | | ||||
Gary Kovacs | | | | |||
Julie Persily | | | | |||
Lewis W. Solimene, Jr. | | | |
Name | | | Age | | | Position | | | Expiration of Term | | | Director Since | |
R. David Spreng | | | 57 | | | Chairman of the Board (Interested), Chief Executive Officer and President | | | 2019 | | | 2015 | |
Brian Laibow | | | 41 | | | Director (Interested) | | | 2019 | | | 2017 | |
Name | | | Age | | | Position | | | Expiration of Term | | | Director Since | |
Gary Kovacs | | | 55 | | | Director (Independent) | | | 2020 | | | 2016 | |
Council.
Name | | | Age | | | Position | | | Expiration of Term | | | Director Since | |
Julie Persily | | | 53 | | | Director (Independent) | | | 2021 | | | 2017 | |
Lewis W. Solimene, Jr. | | | 59 | | | Director (Independent) | | | 2021 | | | 2017 | |
Name | | | Age | | | Position | | | Officer Since | |
Thomas B. Raterman | | | 59 | | | Chief Financial Officer, Treasurer and Secretary | | | 2015 | |
Carl Rizzo | | | 67 | | | Chief Compliance Officer | | | 2015 | |
Name | | | Fees Earned or Paid in Cash(1) | | | All Other Compensation(2) | | | Total | | |||||||||
Interested Directors | | | | | |||||||||||||||
R. David Spreng | | | | | — | | | | | | — | | | | | | — | | |
Brian Laibow | | | | | — | | | | | | — | | | | | | — | | |
Independent Directors | | | | | |||||||||||||||
Gary Kovacs | | | | $ | 71,000 | | | | | | — | | | | | $ | 71,000 | | |
Julie Persily | | | | $ | 66,000 | | | | | | — | | | | | $ | 66,000 | | |
Lewis W. Solimene, Jr. | | | | $ | 71,000 | | | | | | — | | | | | $ | 71,000 | | |
Under the Existing Advisory Agreement, the Adviser2018.
For purposes of the Existing Advisory Agreement and the Amended Advisory Agreement, “Capital Commitments” is defined to mean the aggregate amount of capital committed to us by investors as of the end of the most recently completed calendar quarter.
The base management fee under the Existing Advisory Agreement is payable on the first day of each calendar quarter. Until the earlier of (1) the consummation of an initial public offering (“IPO”) of the Public Fund (defined below) in connection with a Spin-Off transaction (defined below) and (2) the earliest date at which (a) all Capital Commitments have been called for investments or expenses and (b) we hold no more than 10.0% of our total assets in cash, the base management fee will be the lesser of (i) an amount equal to 0.4375% (1.75% annualized) of the average amount of Capital Commitments and assets purchased with borrowed funds or other forms of leverage during the most recently completed calendar quarter and (ii) the actual operating expenses incurred by the Adviser during such calendar quarter.
Following the earlier of (A) consummation of an IPO of (ii) the Public Fund in connection with a Spin-Off transaction and (B) the earliest date at which (1) all Capital Commitments have been called for investments and/or expenses and (2) we hold not more than 10.0% of our total assets in cash, the base management fee under the Existing Advisory Agreement will be an amount equal to 0.4375% (1.75% annualized) of the average amount of our Capital Commitments and assets purchased with borrowed funds or other forms of leverage during the most recently completed calendar quarter for so long as the aggregate amount of our Capital Commitments and assets purchased with borrowed funds or other forms of leverage as of the end of the most recently completed calendar quarter is less than $500,000,000. If the aggregate amount of our Capital Commitments and assets purchased with borrowed funds or other forms of leverage as of the end of the most recently completed calendar quarter is equal to or greater than $500,000,000, but less than $1,000,000,000, the base management fee will be an amount equal to 0.40% (1.60% annualized) of the average amount of our Capital Commitments and assets purchased with borrowed funds or other forms of leverage for the most recently completed calendar quarter. If the aggregate amount of our Capital Commitments and assets purchased with borrowed funds or other forms of leverage as of the end of the most recently completed calendar quarter is equal to or greater than $1,000,000,000, the Base Management Fee will be an amount equal to 0.375% (1.50% annualized) of the average amount of our Capital Commitments and assets purchased with borrowed funds or other forms of leverage for the most recently completed calendar quarter.
Under the Existing Advisory Agreement, the incentive fee, which provides the Adviser with a share of the income that the Adviser generates for us, consists of an investment-income component and a capital-gains component, which are largely independent of each other, with the result that one component may be payable even if the other is not. We pay the Adviser an investment-income incentive fee quarterly in arrears based on the pre-incentive fee net investment income for the immediately preceding fiscal quarter as follows: (1) no investment-income incentive fee in any calendar quarter in which our pre-incentive fee net investment income does not exceed the hurdle rate of 2.0%; (2) 80% of our 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 2.667% in any calendar quarter (10.668% annualized); and (3) 20.0% of the amount of our pre-incentive fee net investment income, if any, that exceeds 2.667% in any calendar quarter (10.668% annualized) payable
to the Adviser (once the hurdle is reached and the catch-up is achieved, 20.0% of all pre-incentive fee net investment income thereafter is allocated to the Adviser).
Under the Existing Advisory Agreement, until the consummation of an IPO of the Public Fund in connection with a Spin-Off transaction, in the event that the sum of our cumulative net realized losses since the date of our election to be regulated as a business development company (“BDC”) exceeds 2.0% of the total non-control/non-affiliate investments made by us since the date of our election to be regulated as a BDC as of the end of the quarter, the investment-income component of the incentive fee will not be payable for such quarter until the first subsequent quarter in which the sum of our cumulative net realized losses since the date of our election to be regulated as a BDC is less than 2.0% of the total non-control/non-affiliate investments made by us since the date of our election to be regulated as a BDC as of the end of such subsequent quarter; provided, however, that in no event will any investment-income component of the incentive fee be paid for any prior quarter after the three-year anniversary of the end of such quarter.
Under the Existing Advisory Agreement, after the consummation of an IPO of the Public Fund in connection with a Spin-Off transaction, in the event that the sum of our cumulative net realized losses for the previous four fiscal quarters or, if fewer than four fiscal quarters have passed since such IPO, that number of fiscal quarters since such IPO (the “Look-Back Period”), exceeds 2.0% of the total non-control/non-affiliate investments (i) made by us during the Look-Back Period or (ii) transferred to the Public Fund in connection with a Spin-Off transaction during the Look-Back Period, the investment-income component of the incentive fee will not be payable for such quarter until the first subsequent quarter in which the sum of our cumulative net realized losses for the Look-Back Period is less than 2.0% of the total non-control/non-affiliate investments (i) made by us during the Look-Back Period or (ii) transferred to the Public Fund in connection with a Spin-Off transaction during the Look-Back Period; provided, however, that in no event will any investment-income component of the incentive fee be payable for any prior quarter after the three-year anniversary of the end of such quarter.
Regarding the capital-gains component of the incentive fee, the Existing Advisory Agreement provides that we will pay the Adviser as of the end of each calendar year 20.0% of our aggregate cumulative realized capital gains from the date of our election to be regulated as a BDC through the end of that year, computed net of our aggregate cumulative realized capital losses and aggregate cumulative unrealized depreciation through the end of such year, less the aggregate amount of any previously paid capital-gains incentive fee; provided, however, that we will not pay the capital-gains component of the incentive fee to the Adviser for any calendar year in which the sum of our (i) pre-incentive fee net investment income and (ii) realized gains less realized losses and unrealized capital depreciation from the date of our election to be regulated as a BDC through the end of such calendar year, expressed as a rate of return on the value of our net assets (defined as total assets less liabilities) atinvestments and, therefore, there may be a conflict of interest when personnel of Runway Growth Capital LLC are involved in the end of such calendar year is less than 8.0% untilvaluation process for our portfolio investments. See the first subsequent calendar quarter in which the sum“Risk Factors” sections of our (i) pre-incentive fee net investment income and (ii) realized gains less realized losses and unrealized capital depreciation from the datepublic SEC filings for more information about these potential conflicts of our election to be regulated as a BDC through, and including, the end of such subsequent calendar quarter, expressed as a rate of return on the value of our net assets (defined as total assets less liabilities) at the end of such calendar quarter is equal to or exceeds 8.0%; provided, further, that in no event will any capital-gains component of the incentive fee be paid for any prior year after the three-year anniversary of the end of such year. For the foregoing purpose, our “aggregate cumulative realized capital gains” will not include any unrealized appreciation.
For purposes of the Existing Advisory Agreement and the Amended Advisory Agreement, a “Spin-Off transaction” includes a transaction whereby we offers our stockholders the option to elect to either (i) retain their ownership of shares of our common stock; (ii) exchange their shares of our common stock for shares of common stock in a newly formed entity (the “Public Fund”) that will elect to be regulated as a BDC under the 1940 Act and treated as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended, and will use its commercially reasonable best efforts to complete an IPO of shares of its common stock not later than three years after the final closing of our private placement of shares of our common stock, which closing will occur no later than December 31, 2017; or (iii) exchange their shares of our common stock for interests of one or more newly formed entities (each, a “Liquidating Fund”) that will each be organized as a limited liability company, and which will, among other things, seek to complete an
orderly wind down and/or liquidation of any such Liquidating Fund. The investment-income component of the incentive fee and the capital-gains component of the incentive fee will be payable in respect of the exchanged shares of common stock in a Spin-Off transaction.
David Spreng, our President and Chief Executive Officer and Chairman of the Board, and Thomas Raterman, our Chief Financial Officer, are executive officers of the Adviser, and Mr. Spreng also serves on the board of managers of the Adviser. Messrs. Spreng and Raterman may be deemed to beneficially own, in the aggregate, directly and indirectly, approximately 18.14% of the membership interests of the Adviser.
The executive officers and managers of the Adviser and their principal occupations are listed below. The address of each is the same as the Adviser.
Pursuant to the Administration Agreement, we pay the Administrator an amount equal to our allocable portion (subject to the review of the Board) of the Administrator’s overhead resulting from its obligations under the Administration Agreement, including rent and the allocable portion of the cost of our Chief Compliance Officer and Chief Financial Officer and their respective staffs associated with performing compliance functions. Pursuant to the terms of the Administration Agreement, the amounts payable to the Administrator from us in any fiscal year will not exceed the greater of (i) 0.75% of the aggregate capital commitments as of the end of the most recently completed fiscal year and (ii) $1 million. We reimbursed the Administrator $527,843$614,405 and accrued a payable of $648,805$116,697 due to the Administrator for the year ended December 31, 2016,2018, which includes amounts reimbursable to the Administrator for organizational and offering costs, professional fees and other expenses.
Stockholderssuch equity securities and any subsequent changes in that ownership to the SEC. Such executive officers, directors and stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based solely on a review of the Company are being askedwritten statements and copies of such reports furnished to considerus by our executive officers, directors and vote ongreater-than-10% beneficial owners, we believe that during fiscal year 2018, all Section 16(a) filing requirements applicable to the executive officers, directors and stockholders were timely satisfied.
| | | Fiscal Year Ended December 31, 2018 | | | Fiscal Year Ended December 31, 2017 | | ||||||
Audit Fees | | | | $ | 300,000 | | | | | $ | 330,514 | | |
Audit-Related Fees | | | | | 18,469 | | | | | | 19,428 | | |
Tax Fees | | | | | 19,250 | | | | | | 18,000 | | |
All Other Fees | | | | | — | | | | | | 7,300 | | |
Total Fees: | | | | $ | 337,719 | | | | | $ | 375,242 | | |
|
If the Amended Advisory Agreement is approvedwritten disclosures from RSM US LLP required by the Company’s stockholders,applicable Public Company Accounting Oversight Board (United States) (the “PCAOB”) rule regarding the Amended Advisory Agreement is expected to become effective as ofindependent registered public accounting firm’s communications with audit committees concerning independence, and has discussed with RSM US LLP its independence. The Audit Committee has reviewed the date on which such approval is received. If the Amended Advisory Agreement is not approved by the Company’s stockholders, the Existing Advisory Agreement will continue in effect, and the Board will consider various alternatives, including seeking subsequent approval of a new investment advisory agreement by the Company’s stockholders.
The Board has approved, and recommends to the stockholders of the Company that they approve, the Amended Advisory Agreement between the Company and the Adviser. You should refer to the form of the Amended Advisory Agreement attached hereto asExhibit A for its complete terms.
The Amended Advisory Agreement is substantially similar to the Existing Advisory Agreement, except as follows:
No other provisions of the Existing Advisory Agreement will change materially. See “Certain Relationships and Related Transactions” for a summary of the other provisions of the Existing Advisory Agreement.
If the Amended Advisory Agreement had been in effect as of January 1, 2016, replacing the Existing Advisory Agreement, and all other factors remained the same, it is estimated that the management and incentiveaudit fees paid by the Company would have been as follows (in thousands of dollars):
Fees paid under the Amended Advisory Agreement | Fees paid under the Existing Advisory Agreement | Decrease/ (Increase) | Per Share Decrease/ (Increase) | Percentage Decrease/ (Increase) | ||||||||||||||||
Year Ended December 31, 2016: | ||||||||||||||||||||
Base management fee | $ | 169,684 | $ | 169,684 | — | — | — | |||||||||||||
Income incentive fee | — | — | — | — | — | |||||||||||||||
Total | $ | 169,684 | $ | 169,684 | — | — | — | |||||||||||||
Six Months Ended June 30, 2017: | ||||||||||||||||||||
Base management fee | $ | 1,483,843 | $ | 1,483,843 | — | — | — | |||||||||||||
Income incentive fee | — | — | — | — | — | |||||||||||||||
Total | $ | 1,483,843 | $ | 1,483,843 | — | — | — |
On August 3, 2017, at an in-person meeting,Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board including a majority of Directors that the directors who wereCompany’s financial statements as of and for the year ended December 31, 2018 be included in the 2018 Form 10-K, for filing with the SEC. The Audit Committee also recommended the selection of RSM US LLP to serve as the Company’s independent registered public accounting firm for the year ending December 31, 2018 and the Board approved such recommendation.
In its considerationratification of the approvalappointment of the Amended Advisory Agreement, the Board focused on information it had received relating to, among other things:
Nature, Extent and Quality of Services. The Board considered the nature, quality and extent of the advisory and other services provided to us by the Adviser, including the flow of transaction opportunities resulting from the Adviser’s investment professionals’ financial expertise, the employment of the Adviser’s investment philosophy, diligence procedures, credit recommendation process, investment structuring, and monitoring of portfolio companies, in light of the investment objectives of the Company. The Board also considered the Adviser’s personnel and their prior experience in connection with the types of investments proposed to be made by the Company, including such personnel’s network of relationships with intermediaries focused on middle-market companies. In addition, the Board considered the other terms and conditions of the Amended Advisory Agreement. The Board concluded that the substantive terms of the Amended Advisory Agreement, including the services to be provided, are generally the same as those of comparable BDCs described in the market data then available and that it would be difficult to obtain similar services from other third-party service providers. In addition, the Board considered the fact that we have the ability to terminate the Amended Advisory Agreement without penalty upon 60 days’ written notice to the Adviser.
Costs of the Services Provided to the Company and the Profits Realized by the Adviser. The Board considered comparative data based on publicly available information with respect to services rendered and the advisory fees (including the management fees and incentive fees) of other BDCs with similar investment objectives, our projected operating expenses and expense ratio compared to other BDCs with similar investment objectives, as well as the administrative services that the Adviser will provide to us. Based upon its review, the Board believes that the fees to be paid under the Amended Advisory Agreement would be generally comparable to or more favorable than those payable under agreements of comparable BDCs described in the market data then available.
Economies of Scale. The Board considered the extent to which economies of scale would be realized as the Company grows, and whether the fees payable under the Amended Advisory Agreement will reflect these economies of scale for the benefit of our stockholders.
Conclusions. In view of the wide variety of factors that the Board considered in connection with its evaluation of the Amended Advisory Agreement, it is not practical to quantify, rank or otherwise assign relative weights to the specific factors it considered in reaching its decision. The Board did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was
favorable or unfavorable to the ultimate determination of the Board. Rather, the Board based its approval on the totality of information presented to, and the investigation conducted by, it. In considering the factors discussed above, individual directors may have given different weights to different factors. Based on its review of the above-mentioned factors and discussion of the Amended Advisory Agreement, the Board approved the Amended Advisory Agreement as being in the best interestsindependent registered public accounting firm of the Company and its stockholders. The Board then directed thatfor the Amended Advisory Agreement be submitted to stockholders for approval with the Board’s recommendation that stockholders of the Company vote to approve the Amended Advisory Agreement.
fiscal year ending December 31, 2019.
We will furnish, without charge, a copy of the most recent annual report to stockholders, upon request. Please direct any requests for copies of annual reports to our Corporate Secretary, Thomas B. Raterman, at 205 N. Michigan Ave., Suite 930, Chicago, IL 60601, or by calling (650) 206-4604 or via email at tr@runwaygrowth.com.
Set forth below are the names and addresses of the Adviser and the Administrator as of the date of this proxy statement:
By Order of the Board of Directors,/s/ Thomas B. RatermanThomas B. RatermanChief Financial Officer,Secretary and Treasurer
| | | | By Order of the Board of Directors, | |
| | | | /s/ Thomas B. Raterman | |
| | | | Thomas B. Raterman Chief Financial Officer, Secretary and Treasurer | |
This Amended and Restated Investment Advisory Agreement (the “Agreement”) is made this [ ] day Proxy for Annual Meeting of September, 2017, by and between RUNWAY GROWTH CREDIT FUND INC., a Maryland corporation (the “Company”), and RUNWAY GROWTH CAPITAL LLC, a Delaware limited liability company (the “Adviser”).
WHEREAS, the Company is organized as a closed-end management investment fund 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”);and
WHEREAS, the Adviser is an investment adviser that is registered under the Investment Advisers Act of 1940, as amended (the “Advisers Act”);and
WHEREAS, the Company desires to retain the Adviser to furnish investment advisory services to the CompanyShareholders on the terms and conditions hereinafter set forth, and the Adviser wishes 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:
(a) The Company hereby retains 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 supervisionMay 2, 2019 Solicited on Behalf 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 objective, policies and restrictions that are set forth in the Company’s registration statement on Form 10 (File No. 000-55544) initially filed on February 12, 2016 (as the same shall be amended from time to time); (ii) in accordance with all other applicable federal and state laws, rules and regulations, and the Company’s charter and bylaws as the same shall be amended from time to time; and (iii) in accordance with the Investment Company Act. 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 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, close and monitor the Company’s investments; (iv) determine the securities and other assets that the Company will 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. Subject to the supervision of the Board, the Adviser shall have 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 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).
(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) 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.
(d) 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 Company and shall specifically maintain all books and records in accordance with Section 31(a) of the Investment Company Act, and the rules and regulations promulgated thereunder, 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. 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, provided that the Adviser may retain a copy of such records.
All investment professionals of the Adviser and their respective staffs, when and to the extent engaged in providing investment advisory and management 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. The Company shall bear all other costs and expenses of its operations, administration and transactions, including (without limitation) those relating to: organization and offering (in an amount of up to $1,000,000); provided that the amount of initial organizational and offering expenses in excess of $1,000,000 shall be paid by the Adviser); the Company’s pro-rata portion of fees and expenses related to a Spin-Off transaction (as defined below); calculating the Company’s net asset value (including the cost and expenses of any independent valuation firm); fees and expenses payable to third parties, including agents, consultants or other advisers, in connection with monitoring financial and legal affairs for the Company and in providing administrative services, monitoring the Company’s investments and performing due diligence on the Company’s prospective portfolio companies or otherwise relating to, or associated with, evaluating and making investments; interest payable on debt, if any, incurred to finance the Company’s investments; sales and purchases of shares of the Company’s common stock and other securities; investment advisory and management fees; administration fees, if any, payable under the administration agreement between the Company and the Company’s administrator, Runway Administrator Services LLC (f/k/a GSV Credit Service Company, LLC) (the “Administrator”), dated as of December 15, 2016 (the “Administration Agreement”) (as the same shall be amended from time to time); transfer agent and custodial fees; federal and state registration fees; all costs of registration and listing the Company’s securities on any securities exchange; U.S. federal, state and local taxes; fees and expenses of 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 or an affiliate thereof (the “Independent Directors”); costs of preparing and filing reports or other documents required by the Securities and Exchange Commission (the “SEC”), the Financial Industry Regulatory Authority or other regulators; costs of any reports, proxy statements or other notices to stockholders, including printing costs; the Company’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, copying, secretarial and other staff, independent auditors and outside legal costs; and all other expenses incurred by the Company, the Adviser or the Administrator in connection with administering the Company’s business, including payments under the Administration Agreement between the Company and the Administrator, based upon the Company’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 Company’s chief compliance officer and chief financial officer and their respective staffs.
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 cost of both the Base Management Fee and the Incentive Fee will ultimately be borne by the Company’s common stockholders. The Company shall make any payments due hereunder to the Adviser or to the Adviser’s designee as the Adviser may otherwise direct.
(a) The Base Management Fee shall be payable on the first day of each calendar quarter and calculated as follows, based on the Capital Commitments (as defined below) and assets purchased with borrowed funds or other forms of leverage (collectively, the “Pre-Spin-Off Gross Assets”) during the preceding calendar quarter:
For purposes of this Agreement, “Capital Commitments” shall mean the aggregate amount of capital committed to the Company by investors as of the end of the most recently completed calendar quarter. The Base Management Fee shall be payable for the first partial quarter in which the initial closing of the Company’s private placement of shares of its common stock occurs based on the aggregate amount of Capital Commitments as of the initial closing of the private placement, and shall be appropriately prorated for any partial month or quarter.
For purposes of this Agreement, a “Spin-Offtransaction” includes a transaction whereby the Company offers its stockholders the option to elect to either (i) retain their ownership of shares of the Company’s common stock; (ii) exchange their shares of the Company’s common stock for shares of common stock in a newly formed entity (the “Public Fund”) that shall elect to be regulated as a BDC under the Investment Company Act and treated as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended, and shall use its commercially reasonable best efforts to complete an IPO of shares of its common stock not later than three years
after the Company’s final closing of its private placement of shares of its common stock, which closing shall occur no later than December 31, 2017; or (iii) exchange their shares of the Company’s common stock for interests of one or more newly formed entities (each, a “Liquidating Fund”) that shall each be organized as a limited liability company, and which shall, among other things, seek to complete an orderly wind down and/or liquidation of any such Liquidating Fund.
(b) The Incentive Fee shall consist of two parts, as follows:
(B) Pre-Incentive Fee net investment income, expressed as a rate of return on the value of the Company’s net assets (defined as total assets less liabilities) at the end of the immediately preceding fiscal quarter, shall be compared to a “hurdle rate” of 2.0% per quarter (8.0% annualized). The Company shall pay the Adviser an Income Incentive Fee with respect to the Company’s Pre-Incentive Fee net investment income in each calendar quarter as follows: (1) no Income Incentive Fee in any calendar quarter in which the Company’s Pre-Incentive Fee net investment income does not exceed the hurdle rate of 2.0%; (2) 80% of the Company’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 2.667% in any calendar quarter (10.668% annualized) (the portion of the Company’s Pre-Incentive Fee net investment income that exceeds the hurdle but is less than 2.667% is referred to as the “catch-up”; the “catch-up” is meant to provide the Adviser with 20.0% of the Company’s Pre-Incentive Fee net investment income as if a hurdle did not apply if the Company’s Pre-Incentive Fee net investment income exceeds 2.667% in any calendar quarter (10.668% annualized)); and (3) 20.0% of the amount of the Company’s Pre-Incentive Fee net investment income, if any, that exceeds 2.667% in any calendar quarter (10.668% annualized) payable to the Adviser (once the hurdle is reached and the catch-up is achieved, 20.0% of all Pre-Incentive Fee net investment income thereafter is allocated to the Adviser);
provided that, until the consummation of an IPO of the Public Fund in connection with a Spin-Off transaction, in the event that (a) the sum of the Company’s cumulative net realized losses since the date of the Company’s election to be regulated as a BDC exceeds 2.0% of the total non-control/non-affiliate investments made by the Company since the date of the Company’s election to be regulated as a BDC through the end of the quarter and (b) the Pre-Incentive Fee net investment income adjusted to include any realized capital gains and losses (“Adjusted Pre-Incentive Fee net investment income”), expressed as an annualized rate of return on the value of the Company’s average daily net assets (defined as total assets less liabilities), since the Company’s election to be regulated as a BDC through the end of the quarter is less than 10%, no Income Incentive Fee shall be payable for such quarter until the first subsequent quarter in which either (x) the sum of the Company’s cumulative net realized losses since the date of the Company’s election to be regulated as a BDC is equal to or less than 2.0% of the total non-control/non-affiliate investments made by the Company since the date of the Company’s election to be regulated as a BDC through the end of such subsequent quarter or (y) the Adjusted Pre-Incentive Fee net investment income, expressed as an annualized rate of return on the value of the Company’s average daily net assets (defined as total assets less liabilities), since the Company’s election to be regulated as a BDC through the of the end of the quarter equals or exceeds 10%;provided,however, that in no event shall any Income Incentive Fee be payable for any prior quarter after the three-year anniversary of the end of such quarter; and
provided further that, after the consummation of an IPO of the Public Fund in connection with a Spin-Off transaction, in the event that (a) the sum of the Company’s cumulative net realized losses for the previous four fiscal quarters or, if fewer than four fiscal quarters have passed since such IPO, that number of fiscal quarters since such IPO (the “Look-Back Period”), exceeds 2.0% of the total non-control/non-affiliate investments (i) made by the Company during the Look-Back Period or (ii) transferred to the Public Fund in connection with a Spin-Off transaction during the Look-Back Period and (b) the Adjusted Pre-Incentive Fee net investment income, expressed as an annualized rate of return on the value of the Company’s average daily net assets (defined as total assets less liabilities), during the Look-Back Period is less than 10%, no Income Incentive Fee shall be payable for such quarter until the first subsequent quarter in which (x) the sum of the Company’s cumulative net realized losses for the Look-Back Period is equal to or less than 2.0% of the total non-control/non-affiliate investments (i) made by the Company during the Look-Back Period or (ii) transferred to the Public Fund in connection with a Spin-Off transaction during the Look-Back Period or (y) the Adjusted Pre-Incentive Fee net investment income, expressed as an annualized rate of return on the value of the Company’s average daily net assets (defined as total assets less liabilities), during the Look-Back Period equals or exceeds 10%;provided, however, that in no event shall any Income Incentive Fee be payable for any prior quarter after the three-year anniversary of the end of such quarter.
(C) The Income Incentive Fee shall be payable in connection with a Spin-Off transaction. The Income Incentive Fee shall be calculated as of the date of the completion of each Spin-Off transaction and shall equal the amount of Income Incentive Fee that would be payable to the Adviser if (1) all of the Company’s investments were liquidated for their current value and any unamortized deferred portfolio investment-related fees would be deemed accelerated, (2) the proceeds from such liquidation were used to pay all of the Company’s outstanding liabilities, and (3) the remainder were distributed to the Company’s stockholders and paid as Incentive Fee in accordance with the Income Incentive Fee described in clauses (1) and (2) above for determining the amount of the Income Incentive Fee;provided, however, that in no event shall the Income Incentive Fee paid in connection with the completion of a Spin-Off transaction (x) include the portion of the Income Incentive Fee attributable to deferred interest features of a particular investment that is not transferred pursuant to a Spin-Off transaction until such time as the deferred interest is received in cash, or (y) exceed 20% of the Company’s Pre-Incentive Fee net investment income accrued by the Company for the fiscal quarter as of the date of the completion of the Spin-Off transaction. The Company shall make the payment of the Income Incentive Fee paid in connection with the completion of a Spin-Off transaction in cash on or immediately following the date of the completion of a Spin-Off transaction.
After a Spin-Off transaction, all calculations relating to the Incentive Fee payable shall be made beginning on the day immediately following the completion of the Spin-Off transaction without taking into account the exchanged shares of the Company’s common stock (or contributions, distributions or proceeds relating thereto).
(B) The Capital Gains Fee shall be payable in respect of the exchanged shares of the Company’s common stock in connection with a Spin-Off transaction and shall be calculated as of the date of the completion of a Spin-Off transaction as if such date were a calendar year-end for purposes of calculating and paying the Capital Gains Fee.
(c) No Income Incentive Fee or Capital Gains Fee shall be payable in connection with a Spin-Off transaction unless, on the date of the completion of a Spin-Off transaction, the sum of the Company’s (i) Pre-Incentive Fee net investment income and (ii) realized capital gains less realized capital losses and unrealized capital depreciation from the date of the Company’s election to be regulated as a BDC through, and including, the date of the completion of such Spin-Off transaction, is greater than 8% of the cumulative net investments made by the Company since its election to be regulated as a BDC.
The Adviser covenants that it shall remain registered as an investment adviser under the Advisers Act so long as the Company maintains its election to be regulated as a BDC under the Investment Company Act. The Adviser agrees that its activities shall at all times be in compliance in all material respects with all applicable federal and state laws governing its operations and investments.
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, 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). So long as this Agreement or any extension, renewal or amendment remains in effect, the Adviser shall be the only investment adviser for the Company, 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 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.
If any person who is a manager, partner, officer or employee of the Adviser or the Administrator 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, officer and/or employee of the Adviser or the Administrator shall be deemed to be acting in such capacity solely for the Company, and not as a 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.
The Adviser (and its officers, managers, partners, agents, employees, controlling persons, members and any other person or entity affiliated with the Adviser, including without limitation its sole member) 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, agents, employees, controlling persons, members and any other person or entity affiliated with the Adviser, including without limitation its members and the Administrator, 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. Notwithstanding the preceding sentence of this Section 7 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 security holders to which the Indemnified Parties would otherwise be subject by reason of criminal conduct, willful misfeasance, bad faith or gross negligence in the performance of the Adviser’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).
(a) This Agreement shall become effective as of the first date above written. The provisions of Section 7 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 set forth in this Section 8, the Adviser shall be entitled to any amounts owed under Section 3 through the date of termination or expiration and Section 7 shall continue in force and effect and apply to the Adviser and its representatives as and to the extent applicable.
(b) The Agreement shall continue in effect for two years from the date hereof and thereafter shall continue automatically for successive annual periods, provided that such continuance is specifically approved at least annually by (A) the affirmative vote of a majority of the Board, or by the affirmative vote of a majority of the outstanding voting securities of the Company, and (B) the affirmative vote of a majority of the Company’s Independent Directors, in accordance with the requirements of the Investment Company Act.
(c) This Agreement may be terminated at any time, without the payment of any penalty, upon not more than 60 days’ written notice, by: (i) the affirmative vote of a majority of the outstanding voting securities of the Company, (ii) the affirmative vote of a majority of the Board, including a majority of the Independent Directors, or (iii) the Adviser.
(d) 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).
(e) The provisions of Section 7 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 under Section 3 through the date of termination or expiration and Section 7 shall continue in force and effect and apply to the Adviser and its representatives as and to the extent applicable.
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.
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.
This Agreement contains the entire agreement of the parties and supersedes all prior agreements, understandings and arrangements with respect to the subject matter hereof. This Agreement shall be construed in accordance with the laws of the State of New York and in accordance with the applicable provisions of the Investment Company Act. 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.
The captions in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. This Agreement shall be binding on, and shall inure to the benefit of the parties hereto and their respective successors.
This Agreement may be executed in counterparts by the parties hereto, each of which shall constitute an original counterpart, and all of which, together, shall constitute one Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed on the date above written.
RUNWAY GROWTH CREDIT FUND INC.
RUNWAY GROWTH CAPITAL LLC
X1Y1 = 0.4375% of Pre-Spin-Off Gross Assets as of December 31, 2016
X2Y1 = 0.4375% of Pre-Spin-Off Gross Assets as of March 31, 2017
X3Y1 = 0.4375% of Pre-Spin-Off Gross Assets as of June 30, 2017
X4Y1 = 0.4375% of Pre-Spin-Off Gross Assets as of September 30, 2017
X1Y2 = 0.4375% of Pre-Spin-Off Gross Assets as of December 31, 2017
X2Y2 = 0.4375% of Pre-Spin-Off Gross Assets as of March 31, 2018
XY1 = X1Y1 + X2Y1 + X3Y1 + X4Y1
YY1 = Actual Operating Expenses of Adviser for the year ended December 31, 2017
Z = XY1 – YY1
IF/THEN ON APRIL 1ST:
The undersigned stockholder of Runway Growth Credit Fund Inc. (the “Company”) acknowledges receipt of the Notice of Special Meeting of Stockholders of the Company and hereby appoints R. David Spreng and Thomas B. Raterman, and each of them, and each with full power of substitution and power to act alone, as attorneys and proxies for the undersigned to vote all the shares of common stock of the CompanyCommon Stock which the undersigned iswould be entitled to vote if personally present and acting at the SpecialAnnual Meeting of Stockholders of the CompanyRUNWAY GROWTH CREDIT FUND INC., to be held at the offices of the Company, 205 N. Michigan Avenue, Suite 930, Chicago, IL 60601, on September [ ], 2017 at [1:00] P.M., local time,May 2, 2019, and at allany adjournments or postponements or adjournments thereof, as indicated on this proxy. The undersigned hereby revokes any proxies previously given.
THIS PROXY IS REVOCABLE AND WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED ON THE REVERSE SIDE; where no choice is specified, it will be voted FOR Proposal 1 and in the discretion of the proxies with respect to any other matters that may come before the meeting on which action can properly be taken, including any adjournment thereof. Please vote, sign and date this proxy on the reverse side and return it promptly in the enclosed envelope.
Important Notice Regardingside.) 1.1
The Noticefiscal year ending December 31, 2019 Note: In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting or any adjournment thereof, including procedural matters and Proxy Statement are available atwww.runwaygrowth.com.
matters relating to the conduct of the meeting. In order for your securities to be represented at the meeting, it will be necessary for us to have your specific voting instructions. Please complete and submit the voting instruction form (ballot). It is understood that if you submit the ballot without otherwise marking it, the securities will be voted as recommended by the Board of Directors on all matters to be considered at the meeting.
Note: In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting or any adjournment thereof, including procedural matters and matters relating to the conduct Signature of the meeting.
IMPORTANT:Shareholder Date: Signature of Shareholder Date: Note: Please sign exactly as the exact legalyour name of the investing entity. For joint accounts,or names appear on this Proxy. When shares are held jointly, each joint ownerholder should sign. When signing as attorney, executor, administrator, attorney, trustee or guardian, please give your full title as such. If the signatorysigner is a corporation, orplease sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in full corporate or partnership name by a duly authorized officerperson. To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” and fill in the circle next to each nominee you wish to withhold, as shown here: JOHN SMITH 1234 MAIN STREET APT. 203 NEW YORK, NY 10038 INTERNET - Access “www.voteproxy.com” and follow the on-screen instructions or partner.