PROSPECT CAPITAL CORPORATION Up to Shares of Common Stock EQUITY DISTRIBUTION AGREEMENT
Exhibit h2
PROSPECT CAPITAL CORPORATION
Up to
Shares of Common Stock
Ladies and Gentlemen:
Prospect Capital Corporation, a corporation organized under the laws of Maryland (the
“Company”), Prospect Capital Management LLC, a Delaware limited liability company
registered as an investment adviser (the “Adviser”) and Prospect Administration LLC, a
Delaware limited liability company (the “Administrator”), confirm their agreement (this
“Agreement”) with (the “Agent”), as follows:
1. Issuance and Sale of Shares. The Company proposes to issue and sell through the
Agent, as sales agent up to shares (the “Shares”) of the Company’s common stock, par
value $.001 per share (the “Common Stock”), on the terms set forth in Section 4 of
this Agreement. The issuance and sale of Shares through the Agent will be effected pursuant to the
Registration Statement (as defined below) filed by the Company and declared effective by the
Securities and Exchange Commission (the “Commission”).
The Company, the Adviser and the Administrator have also entered into an equity distribution
agreement in substantially similar form to this Agreement (the “ Agreement”) dated of
even date herewith, with (“ ”). The aggregate number of Shares that may be sold
collectively pursuant to this Agreement and the Agreement shall not exceed .
The Company has entered into an investment advisory and management agreement, dated as of June
24, 2004, as renewed on June 15, 2010 by the Board (the “Investment Advisory Agreement”),
with the Adviser under the Advisers Act. The Company has entered into an administration agreement,
dated as of June 24, 2004, as renewed on June 15, 2010 by the Board (the “Administration
Agreement”), with the Administrator.
The Company has filed, pursuant to the 1933 Act, with the Commission a registration statement
on Form N-2 (File No. 333-170724), which registers the offer and sale of certain securities to be
issued from time to time by the Company, including the Shares. The Company filed a Form N-54A
“Notification of Election to be Subject to Sections 55 through 65 of the 1940 Act Filed Pursuant to
Section 54(a) of the 1940 Act” (File No. 814-00659) with the Commission on April 16, 2004, under
the 1940 Act.
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The registration statement as amended, including the exhibits and schedules thereto, at the
time it became effective and any post-effective amendment thereto, is hereinafter referred to as
the “Registration Statement.” The prospectus included in the Registration Statement at the
time it became effective is hereinafter referred to as the “Base Prospectus.” The Company has
prepared and will file with the Commission in accordance with Rule 497 under the 1933 Act, a
prospectus supplement (the “Prospectus Supplement”) supplementing the Base Prospectus in
connection with offers and sales of the Shares. The Base Prospectus and the most recent Prospectus
Supplement filed with the Commission pursuant to Rule 497 under the 1933 Act at each Applicable
Time and each Settlement Date are hereinafter referred to collectively as the “Prospectus.”
All references in this Agreement to financial statements and schedules and other information
which is “contained,” “disclosed,” “included,” “filed as part of” or “stated” in the Registration
Statement or the Prospectus (and all other references of like import) shall be deemed to mean and
include all such financial statements and schedules and other information which are or are deemed
to be incorporated by reference in the Registration Statement or the Prospectus, as the case may
be; and all references in this Agreement to amendments or supplements to the Registration Statement
or the Prospectus shall be deemed to mean and include the filing of any document under the Exchange
Act which is or is deemed to be incorporated by reference in the Registration Statement or the
Prospectus, as the case may be. All references in this Agreement to the Registration Statement,
the Prospectus or any amendments or supplements to any of the foregoing, shall include any copy
thereof filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval
System (“▇▇▇▇▇”).
2. Representations and Warranties of the Company. The Company represents and warrants
to and agrees with the Agent, and the Adviser and the Administrator, jointly and severally,
represent and warrant to and agree with the Agent, as of the date hereof, as of each Applicable
Time, and as of each Settlement Date (as such term is defined in Section 4 hereof), as
follows:
(a) Compliance with Registration Requirements.
(i) The Company meets the requirements for use of Form N-2 under the 1933 Act. The
Registration Statement has become effective under the 1933 Act and no stop order
suspending the effectiveness of the Registration Statement has been issued under the
1933 Act, and no proceedings for any such purpose, have been instituted or are pending
or, to the knowledge of the Company, are contemplated by the Commission, and any request
on the part of the Commission for additional information has been complied with.
(ii) At the respective times the Registration Statement, and any post-effective
amendment thereto, became effective, the Registration Statement, and all post-effective
amendments thereto complied and will comply in all material respects with the
requirements of the 1933 Act, and (excluding any post-effective amendment for the
purpose of filing exhibits thereto) did not and will not contain an untrue statement of
a material fact or omit to state a material fact required to be stated
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therein or necessary to make the statements therein not misleading. Neither the
Prospectus nor any amendment or supplement thereto, at the respective times the
Prospectus or any such amendment or supplement was issued, and as of the date hereof, as
of each Applicable Time and as of each Settlement Date, included or will include an
untrue statement of a material fact or omitted or will omit to state a material fact
necessary in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The representations and warranties in this
subsection shall not include statements in or omissions from the Registration Statement
or Prospectus made in reliance upon and in conformity with information furnished to the
Company by or on behalf of the Agent for use in the Registration Statement or Prospectus
it being understood and agreed that the only such information furnished to the Company
in writing by the Agent consists of the information described in Section 8(b)
below.
(iii) At the respective times the Prospectus was filed, as of the date hereof, as
of each Applicable Time and as of each Settlement Date, it complied and will comply in
all material respects with the 1933 Act, and if filed by electronic transmission
pursuant to ▇▇▇▇▇ (except as may be permitted by Regulation S-T under the 1933 Act),
will be substantially identical to the copy thereof delivered to the Agent for use in
connection with the applicable offering.
(b) Independent Accountant. BDO USA, LLP, which has expressed its opinion with respect to
certain of the financial statements (which term as used in this Agreement includes the related
notes thereto) and supporting schedules filed with the Commission as a part of the Registration
Statement and included in the Prospectus, is an independent registered public accounting firm as
required by the 1933 Act and Exchange Act.
(c) Preparation of the Financial Statements. The financial statements (together with the
related schedules and notes) filed with the Commission as a part of the Registration Statement and
included in the Prospectus present fairly the consolidated financial position of the Company as of
and at the dates indicated and the results of its operations and cash flows for the periods
specified. Such financial statements have been prepared in conformity with accounting principles
generally accepted in the United States (“GAAP”) applied on a consistent basis throughout
the periods involved, except as may be expressly stated in the related notes thereto. The
consolidated selected financial data included in the Prospectus presents fairly in all material
respects the information shown therein and has been compiled on a basis consistent with the
consolidated financial statements included or incorporated by reference in the Registration
Statement. All disclosures contained in the Registration Statement or the Prospectus regarding
“non-GAAP financial measures” (as such term is defined by the rules and regulations of the
Commission) comply with Regulation G under the Exchange Act and Item 10 of Regulation S-K of the
1933 Act Regulations, to the extent applicable.
(d) Internal Control Over Financial Reporting. The Company maintains a system of internal
control over financial reporting sufficient to provide reasonable assurances that financial
reporting is reliable and financial statements for external purposes are prepared in accordance
with GAAP and includes policies and procedures that (i) pertain to the maintenance
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of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with GAAP, and
that receipts and expenditures of the Company are being made only in accordance with the
authorizations of management and directors of the Company; and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use or disposition of the
Company’s assets that could have a material effect on the financial statements.
(e) Disclosure Controls. The Company has established and maintains disclosure controls and
procedures (as such term is defined in Rule 13a-15 and 15d-15 under the Exchange Act); such
disclosure controls and procedures are designed to ensure that material information relating to the
Company, including material information pertaining to the Company’s operations and assets managed
by the Adviser, is made known to the Company’s Chief Executive Officer and Chief Financial Officer
by others within the Company and the Adviser, and such disclosure controls and procedures are
effective to perform the functions for which they were established.
(f) No Material Adverse Change. Except as otherwise disclosed in the Prospectus, subsequent
to the respective dates as of which information is given in the Prospectus: (i) there has been no
material adverse change, or any development that could reasonably be expected to result in a
material adverse change, in the condition, financial or otherwise, or in the earnings, net asset
value, prospects, business or operations, whether or not arising from transactions in the ordinary
course of business, of the Company and its subsidiaries, considered as one entity (any such change
or effect, where the context so requires is called a “Material Adverse Change” or a
“Material Adverse Effect”); (ii) the Company and its subsidiaries, considered as one
entity, have not incurred any material liability or obligation, indirect, direct or contingent, not
in the ordinary course of business or entered into any material transaction or agreement not in the
ordinary course of business; and (iii) except for regular periodic dividends on the Common Stock,
there has been no dividend or distribution of any kind declared, paid or made by the Company or,
except for dividends paid to the Company or other subsidiaries, any of its subsidiaries on any
class of capital stock or repurchase or redemption by the Company or any of its subsidiaries of any
class of capital stock.
(g) Good Standing of the Company and its Subsidiaries. The Company and each subsidiary that
is a corporation have been duly incorporated and are validly existing as corporations in good
standing under the laws of the jurisdiction of their incorporation and have the corporate power and
authority to own, lease and operate their properties and to conduct their business as described in
the Prospectus and, in the case of the Company, to enter into and perform its obligations under
this Agreement. Each of the Company and each subsidiary that is a corporation is duly qualified as
a foreign corporation to transact business and is in good standing in each jurisdiction in which
such qualification is required, whether by reason of the ownership or leasing of property or the
conduct of business, except for such jurisdictions where the failure to so qualify or to be in good
standing would not, individually or in the aggregate, result in a Material Adverse Change. All of
the issued and outstanding capital stock of each subsidiary that is a corporation has been duly
authorized and validly issued, is fully paid and non-assessable and is owned by the Company,
directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien,
encumbrance or claim.
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(h) Subsidiaries of the Company. The Company does not own, directly or indirectly, any shares
of stock or any other equity or long-term debt securities of any corporation or other entity other
than (i) 100% of the equity interests in Prospect Capital Funding, LLC and Patriot Capital Funding
LLC I and (ii) those corporations or other entities described in the Prospectus under the caption
“Portfolio Companies” (each a “Portfolio Company” and collectively, the “Portfolio
Companies”). Except as otherwise disclosed in the Prospectus, the Company does not control (as
such term is defined in Section 2(a)(9) of the ▇▇▇▇ ▇▇▇) any of the Portfolio Companies. Except as
otherwise disclosed in the Prospectus, the Company is not required, in accordance with Article 6 of
Regulation S-X under the 1933 Act, to consolidate the financial statements of any corporation,
association or other entity with the Company’s financial statements other than Prospect Capital
Funding, LLC.
(i) Portfolio Companies. The Company has duly authorized, executed and delivered any
agreements pursuant to which it made the investments described in the Prospectus under the caption
“Portfolio Companies” (each a “Portfolio Company Agreement”). To the Company’s knowledge,
except as otherwise disclosed in the Prospectus, each Portfolio Company is current, in all material
respects, with all its obligations under the applicable Portfolio Company Agreements, no event of
default (or a default which with the giving of notice or the passage of time would become an event
of default) has occurred under such agreements, except to the extent that any such failure to be
current in its obligations and any such default would not reasonably be expected to result in a
Material Adverse Change.
(j) BDC Election; Regulated Investment Company. The Company has elected to be regulated as a
business development company under the 1940 Act and has filed with the Commission, pursuant to
Section 54(a) of the 1940 Act, a duly completed and executed Form N-54A (the “Company BDC
Election”); the Company has not filed with the Commission any notice of withdrawal of the BDC
Election pursuant to Section 54(c) of the 1940 Act; the Company’s BDC Election remains in full
force and effect, and, to the Company’s knowledge, no order of suspension or revocation of such
election under the 1940 Act has been issued or proceedings therefore initiated or threatened by the
Commission. The operations of the Company are in compliance in all material respects with the
provisions of the 1940 Act applicable to business development companies and the rules and
regulations of the Commission applicable to business development companies.
(k) Authorization and Description of Common Stock. The authorized, issued and outstanding
capital stock of the Company is as set forth in the Prospectus as of the date thereof under the
caption “Capitalization” and “Selected Condensed Financial Data.” The Common Stock (including the
Shares) conform in all material respects to the description thereof contained in the Prospectus.
All issued and outstanding shares of Common Stock of the Company have been duly authorized and
validly issued and are fully paid and non-assessable, and have been offered and sold or exchanged
by the Company in compliance with all applicable laws (including, without limitation, federal and
state securities laws). None of the outstanding Common Stock of the Company was issued in
violation of the preemptive or other similar rights of any security holder of the Company. No
shares of preferred stock of the Company have been designated, offered, sold or issued and none of
such shares of preferred stock are currently outstanding. The description of the Company’s stock
option, stock bonus and other stock plans or arrangements, if
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any, and the options or other rights granted thereunder, set forth in the Prospectus
accurately and fairly presents the information required to be shown with respect to such plans,
arrangements, options and rights. The Shares to be offered and sold by the Company through the
Agent have been duly authorized for issuance and sale pursuant to this Agreement and, when issued
and delivered by the Company pursuant to this Agreement against payment of the consideration set
forth herein, will be validly issued, fully paid and non-assessable.
(l) Non-Contravention of Existing Instruments; No Further Authorizations or Approvals
Required. Neither the Company nor any subsidiary is in violation of or default under its (i)
charter, articles or certificate of incorporation, by-laws, or similar organizational documents;
(ii) under any indenture, mortgage, loan or credit agreement, note, contract, franchise, lease or
other instrument, including any Portfolio Company Agreement, the Investment Advisory Agreement and
the Administration Agreement, to which the Company or any of its subsidiaries is a party or bound
or to which any of the property or assets of the Company or any of its subsidiaries is subject; or
(iii) any statute, law, rule, regulation, judgment, order or decree of any court, regulatory body,
administrative agency, governmental body, arbitrator or other authority having jurisdiction over
the Company or such subsidiary or any of its properties, as applicable, except for such violations
or defaults as would not, individually or in the aggregate, have a Material Adverse Effect. The
Company’s execution, delivery and performance of this Agreement and consummation of the
transactions contemplated hereby and by the Prospectus (i) have been duly authorized by all
necessary corporate action, have been effected in accordance with the 1940 Act and will not result
in any violation of the provisions of the charter, articles or certificate of incorporation or
by-laws of the Company or similar organizational documents of any subsidiary, (ii) will not
conflict with or constitute a breach of, or default under, or result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of the Company or any of its
subsidiaries pursuant to, or require the consent of any other party to, any existing instrument,
except for such conflicts, breaches, defaults, liens, charges or encumbrances as would not,
individually or in the aggregate, result in a Material Adverse Effect and (iii) will not result in
any violation of any law, administrative regulation or administrative or court decree applicable to
the Company or any subsidiary. No consent, approval, authorization or other order of, or
registration or filing with, any court or other governmental or regulatory authority or agency, is
required for the Company’s execution, delivery and performance of this Agreement or consummation of
the transactions contemplated hereby and by the Prospectus, except such as have already been
obtained or made under the 1933 Act and the 1940 Act and such as may be required under any
applicable state securities or blue sky laws or from the Financial Industry Regulatory Authority,
Inc. (“FINRA”).
(m) Intellectual Property Rights. The Company and its subsidiaries own or possess sufficient
trademarks, trade names, patent rights, copyrights, domain names, licenses, approvals, trade
secrets and other similar rights (collectively, “Intellectual Property Rights”) reasonably
necessary to conduct their businesses as described in the Prospectus; and the expected expiration
of any of such Intellectual Property Rights would not result in a Material Adverse Effect. Neither
the Company nor any of its subsidiaries has received any notice of infringement or conflict with
asserted Intellectual Property Rights of others, which infringement or conflict, if the subject of
an unfavorable decision, would result in a Material Adverse Effect. To the Company’s knowledge,
none of the technology employed by the Company has been obtained or
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is being used by the Company in violation of any contractual obligation binding on the Company
or any of its officers, directors or employees or otherwise in violation of the rights of any
persons.
(n) Compliance with Environmental Law. To the knowledge of the Company, the Advisor and the
Administrator, the Company, its subsidiaries and each controlled Portfolio Company (i) are in
compliance with any and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants (“Environmental Laws”); (ii) have received
all permits, licenses or other approvals required of them under applicable Environmental Laws to
conduct their respective businesses; and (iii) are in compliance with all terms and conditions of
any such permit, license or approval, except where such noncompliance with Environmental Laws,
failure to receive required permits, licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals would not, singly or in the aggregate,
have a Material Adverse Effect.
(o) All Necessary Permits, etc. The Company and each subsidiary possess such valid and
current certificates, authorizations or permits issued by the appropriate state, federal or foreign
regulatory agencies or bodies necessary to conduct their respective businesses, and the Company has
not received any notice of proceedings relating to the revocation or modification of, or
non-compliance with, any such certificate, authorization or permit which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, could result in a Material
Adverse Effect.
(p) Investment Advisory Agreement. (i) The terms of the Investment Advisory Agreement,
including compensation terms, comply in all material respects with all applicable provisions of the
1940 Act and the Advisers Act and (ii) the approvals by the board of directors and the stockholders
of the Company of the Investment Advisory Agreement have been made in accordance with the
requirements of Section 15 of the 1940 Act applicable to companies that have elected to be
regulated as business development companies under the 1940 Act.
(q) Absence of Proceedings. There is no action, suit, proceeding, inquiry or investigation
before or brought by any court or governmental agency or body, domestic or foreign, now pending,
or, to the knowledge of the Company, threatened, against the Company, which is required to be
disclosed in the Registration Statement or the Prospectus (other than as disclosed therein), or
which might reasonably be expected to result in a Material Adverse Effect, or which might
reasonably be expected to materially and adversely affect the consummation of the transactions
contemplated in this Agreement or the performance by the Company of its obligations hereunder. The
aggregate of all pending legal or governmental proceedings to which the Company is a party or of
which any of its property or assets is the subject which are not described in the Registration
Statement or the Prospectus, including ordinary routine litigation incidental to the business,
could not reasonably be expected to result in a Material Adverse Effect.
(r) Accuracy of Exhibits. Notwithstanding this Agreement or the Agreement, there are no
contracts or documents that are required to be described in the Registration
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Statement or the Prospectus or to be filed as exhibits thereto by the 1933 Act or the 1940 Act
that have not been so described and filed as required.
(s) Advertisements. As of the respective times of use, any advertising, sales literature or
other promotional material (including “prospectus wrappers,” “broker kits,” “road show slides” and
“road show scripts” and “electronic road show presentations”) authorized in writing by or prepared
by the Company used in connection with the public offering of the Shares (collectively, “Sales
Material”) does not contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein in light of the
circumstances under which they were made not misleading. Moreover, all Sales Material complied and
will comply in all material respects with the applicable requirements of the 1933 Act and the 1940
Act and the rules and interpretations of FINRA (except that this representation and warranty does
not include statements in or omissions from the Sales Material made in reliance upon and in
conformity with information relating to the Agent furnished to the Company by or on behalf of the
Agent expressly for use therein).
(t) Subchapter M. During the past fiscal year, the Company has been organized and operated,
and is currently organized and operates, in compliance in all material respects with the
requirements to be taxed as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (“Subchapter M of the Code” and the “Code,”
respectively). The Company intends to direct the investment of the proceeds of the offering
described in the Registration Statement in such a manner as to comply with the requirements of
Subchapter M of the Code.
(u) Tax Law Compliance. The Company and its subsidiaries have filed all necessary federal,
state and foreign income and franchise tax returns and have paid all taxes required to be paid by
any of them and, if due and payable, any related or similar assessment, fine or penalty levied
against any of them. The Company has made adequate charges, accruals and reserves in the
applicable financial statements referred to in the Prospectus in respect of all federal, state and
foreign income and franchise taxes for all periods as to which the tax liability of the Company or
any of its subsidiaries has not been finally determined. The Company is not aware of any tax
deficiency that has been or might be asserted or threatened against the Company or any subsidiary
that could result in a Material Adverse Effect.
(v) Distribution of Offering Materials. The Company has not distributed and will not
distribute any offering material in connection with the offering and sale of the Shares other than
the Registration Statement or the Prospectus or other materials, if any, permitted by the 1933 Act
or the 1940 Act.
(w) Registration Rights. Except as otherwise described in the Prospectus or the Registration
Statement, there are no persons with registration rights or other similar rights to have any
securities registered pursuant to the Registration Statement or otherwise registered by the Company
under the 1933 Act.
(x) Nasdaq Global Select Market. The Shares are registered pursuant to Section 12(b) or 12(g)
of the Exchange Act and will be approved for quotation on the Nasdaq Global
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Select Market (“NASDAQ”) upon notice of issuance, and the Company has taken no action
designed to, or likely to have the effect of, terminating the registration of the Common Stock
under the Exchange Act or delisting the Common Stock from the NASDAQ, nor has the Company received
any notification that the Commission or FINRA is contemplating terminating such registration or
listing. The Company has continued to satisfy, in all material respects, all requirements for
listing the Common Stock, including the Shares, for trading on the NASDAQ.
(y) No Price Stabilization or Manipulation. The Company has not taken and will not take,
directly or indirectly, any action designed to or that might be reasonably expected to cause or
result in stabilization or manipulation of the price of any security of the Company to facilitate
the sale or resale of the Common Stock (including the Shares).
(z) Compliance with the Exchange Act and the 1940 Act; Reports Filed. The documents filed by
the Company with the Commission under the Exchange Act and the 1940 Act, complied, and will comply
in all material respects, with the requirements of the Exchange Act and the 1940 Act, as
applicable, and, with respect to the Exchange Act documents, as of the date hereof, each Applicable
Time, and as of each Settlement Date, did not and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were made, not
misleading. The Company has filed all reports required to be filed pursuant to, the 1940 Act and
the Exchange Act.
(aa) Interested Persons. Except as disclosed in the Registration Statement or the Prospectus
(i) no person is serving or acting as an officer, director or investment adviser of the Company,
except in accordance with the provisions of the 1940 Act and the Advisers Act, and (ii) to the
knowledge of the Company, no director of the Company is an “interested person” (as defined in the
▇▇▇▇ ▇▇▇) of the Company or an “affiliated person” (as defined in the ▇▇▇▇ ▇▇▇) of the Agent except
as otherwise disclosed in the Registration Statement or the Prospectus.
(bb) No Unlawful Contributions or Other Payments. Neither the Company nor any of its
subsidiaries nor, to the Company’s knowledge, any employee or agent of the Company or any
subsidiary, has made any contribution or other payment to any official of, or candidate for, any
federal, state or foreign office in violation of any law or of the character required to be
disclosed in the Prospectus.
(cc) No Outstanding Loans or Other Indebtedness. There are no outstanding loans, advances
(except normal advances for business expenses in the ordinary course of business) or guarantees or
indebtedness by the Company to or for the benefit of any of the officers or directors of the
Company or any of the members of any of them, except as disclosed in the Prospectus.
(dd) Compliance with Laws. The Company has not been advised, and has no knowledge, that it
and each of its subsidiaries are not conducting business in compliance with all applicable laws,
rules and regulations of the jurisdictions in which it is conducting business, except where failure
to be so in compliance would not result, individually or in the aggregate, in a Material Adverse
Effect.
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(ee) Compliance with the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002. The Company has complied in all material
respects with Sections 302 and 906 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act and has made the evaluations of the
Company’s disclosure controls and procedures required under Rule 13a-15 under the Exchange Act.
(ff) FINRA Matters. All of the information provided to the Agent or to counsel for the Agent
by the Company and, to the knowledge of the Company, its officers and directors and the holders of
any securities of the Company in connection with letters, filings or other supplemental information
provided to FINRA pursuant to FINRA Corporate Financing Rule 5110 is true, complete and correct in
all material respects.
(gg) Foreign Corrupt Practices Act. Neither the Company nor any of its subsidiaries nor, to
the knowledge of the Company, any director, officer, agent, employee, affiliate or other person
acting on behalf of the Company or any of its subsidiaries is aware of or has taken any action,
directly or indirectly, that has resulted or would result in a violation by such persons of the
Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder
(collectively, the “FCPA”), including, without limitation, making use of the mails or any
means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment,
promise to pay or authorization of the payment of any money, or other property, gift, promise to
give, or authorization of the giving of anything of value to any “foreign official” (as such term
is defined in the FCPA) or any foreign political party or official thereof or any candidate for
foreign political office, in contravention of the FCPA.
(hh) Money Laundering Laws. The operations of the Company and its subsidiaries are and have
been conducted at all times in compliance with applicable financial recordkeeping and reporting
requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the
applicable money laundering statutes of all applicable jurisdictions, the rules and regulations
thereunder and any related or similar applicable rules, regulations or guidelines, issued,
administered or enforced by any governmental agency (collectively, “Money Laundering Laws”)
and no action, suit or proceeding by or before any court or governmental agency, authority or body
or any arbitrator involving the Company or any of its Subsidiaries with respect to the Money
Laundering Laws is pending or, to the knowledge of the Company, threatened
(ii) OFAC. Neither the Company nor any of its subsidiaries nor, to the knowledge of the
Company, any director, officer, agent, employee, affiliate or person acting on behalf of the
Company or any of its subsidiaries is currently subject to any U.S. sanctions administered by the
Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and the Company
will not directly or indirectly use any of the proceeds received by the Company from the sale of
Shares contemplated by this Agreement, or lend, contribute or otherwise make available any such
proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of
financing the activities of any person currently subject to any U.S. sanctions administered by
OFAC.
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(jj) Actively Traded Securities. The Shares are “actively traded securities” excepted from the
requirements of Rule 101 of Regulation M under the Exchange Act by subsection (c)(1) of such rule.
Any certificate signed by any officer of the Company or the Adviser and delivered to the Agent
or to counsel for the Agent shall be deemed a representation and warranty by the Company or the
Adviser (as applicable), to the Agent as to the matters covered thereby.
3. Representations and Warranties of the Adviser and the Administrator. The Adviser
and the Administrator, jointly and severally, represent and warrant to the Agent as of the date
hereof, as of each Applicable Time and as of each Settlement Date, and agree with the Agent as
follows:
(a) No Material Adverse Change in Business. Since the respective dates as of which
information is given in the Registration Statement and the Prospectus, except as otherwise stated
therein, there has been no material adverse change in the financial condition, or in the earnings,
business affairs, operations or regulatory status of the Adviser or the Administrator or any of
their respective subsidiaries, whether or not arising in the ordinary course of business, that
would reasonably be expected to result in a Material Adverse Effect, or would otherwise reasonably
be expected to prevent the Adviser or the Administrator from carrying out its obligations under the
Investment Advisory Agreement (an “Adviser Material Adverse Change” or an “Adviser
Material Adverse Effect,” where the context so requires) or the Administration Agreement (an
“Administrator Material Adverse Change” or an “Administrator Material Adverse
Effect,” where the context so requires)
(b) Good Standing. Each of the Adviser and the Administrator (and each of their subsidiaries)
has been duly organized and is validly existing and in good standing under the laws of the State of
Delaware, with full power and authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus and to enter into and perform its obligations under this
Agreement; the Adviser has full power and authority to execute and deliver and perform its
obligations under the Investment Advisory Agreement; the Administrator has full power and authority
to execute and deliver the Administration Agreement; and each of the Adviser and the Administrator
is duly qualified to do business as a foreign entity and is in good standing in each jurisdiction
where the ownership or leasing of its properties or the conduct of its business requires such
qualification, except where the failure to qualify or be in good standing would not otherwise
reasonably be expected to result in an Adviser Material Adverse Effect or an Administrator Material
Adverse Effect, as applicable.
(c) Registration Under Advisers Act. The Adviser is duly registered with the Commission as an
investment adviser under the Advisers Act and is not prohibited by the Advisers Act or the 1940 Act
from acting under the Investment Advisory Agreement for the Company as contemplated by the
Prospectus. There does not exist any proceeding or, to the Adviser’s knowledge, any facts or
circumstances the existence of which could lead to any proceeding, which might adversely affect the
registration of the Adviser with the Commission.
11
(d) Absence of Proceedings. There is no action, suit or proceeding or, to the knowledge of
the Adviser or the Administrator, inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Adviser
or the Administrator, threatened, against or affecting either the Adviser or the Administrator,
which is required to be disclosed in the Registration Statement or the Prospectus (other than as
disclosed therein), or which would reasonably be expected to result in an Adviser Material Adverse
Effect, or which would reasonably be expected to materially and adversely affect the consummation
of the transactions contemplated in this Agreement, the Investment Advisory Agreement or the
Administration Agreement; the aggregate of all pending legal or governmental proceedings to which
the Adviser or the Administrator is a party or of which any of its respective property or assets is
the subject which are not described in the Registration Statement, including ordinary routine
litigation incidental to their business, would not reasonably be expected to result in an Adviser
Material Adverse Effect.
(e) Absence of Defaults and Conflicts. Neither the Adviser nor the Administrator is in
violation of its certificate of formation or limited liability company operating agreement or in
default in the performance or observance of any obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note,
lease or other agreement or instrument to which the Adviser or the Administrator is a party or by
which it or any of them may be bound, or to which any of the property or assets of the Adviser or
the Administrator is subject, or in violation of any law, statute, rule, regulation, judgment,
order or decree except for such violations or defaults that would not reasonably be expected to
result in an Adviser Material Adverse Effect or an Administrator Material Adverse Effect, as
applicable; and the execution, delivery and performance of this Agreement, the Investment Advisory
Agreement and the Administration Agreement and the consummation of the transactions contemplated
herein and therein and in the Registration Statement (including the issuance and sale of the Shares
and the use of the proceeds from the sale of the Shares as described in the Prospectus under the
caption “Use of Proceeds”) and compliance by the Adviser with its obligations hereunder and under
the Investment Advisory Agreement and by the Administrator with its obligations hereunder and under
the Administration Agreement do not and will not, whether with or without the giving of notice or
passage of time or both, conflict with or constitute a breach of, or default under, or result in
the creation or imposition of any lien, charge or encumbrance upon any property or assets of the
Adviser or the Administrator pursuant to such Agreement except for such violations or defaults that
would not reasonably be expected to result in an Adviser Material Adverse Effect or an
Administrator Material Adverse Effect, as applicable, nor will such action result in any violation
of the provisions of the limited liability company operating agreement of the Adviser or
Administrator, respectively; nor will such action result in any violation of any applicable law,
statute, rule, regulation, judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over the Adviser, the
Administrator, or any of their respective assets, properties or operations except for such
violations that would not reasonably be expected to result in an Adviser Material Adverse Effect or
an Administrator Material Adverse Effect, as applicable.
(f) Authorization of Agreements. This Agreement has been duly authorized, executed and
delivered by the Adviser and the Administrator; the Investment Advisory Agreement has been duly
authorized, executed and delivered by the Adviser; and the
12
Administration Agreement has been duly authorized, executed and delivered by the
Administrator; the Investment Advisory Agreement and the Administration Agreement constitute valid
and legally binding agreements of the Adviser and the Administrator, respectively, except as (i)
the enforceability thereof may be limited by bankruptcy, insolvency (including, without limitation,
all laws relating to fraudulent transfers) or similar laws affecting creditors’ rights generally
and (ii) rights to indemnification and contribution may be limited to equitable principles of
general applicability or by state or federal securities laws or the policies underlying such law.
(g) Absence of Further Requirements. No filing with, or authorization, approval, consent,
license, order, registration, qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Adviser or the Administrator of its
obligations hereunder, in connection with the offering, issuance or sale of the Shares hereunder or
the consummation of the transactions contemplated by this Agreement, the Investment Advisory
Agreement, the Administration Agreement or the Prospectus (including the use of the proceeds from
the sale of the Shares as described in the Prospectus under the caption “Use of Proceeds”), except
(i) such as have been already obtained under the 1933 Act and the 1940 Act, (ii) such as may be
required under state securities laws and (iii) the filing of the Notification of Election under the
1940 Act, which has been effected.
(h) Description of the Adviser and the Administrator. The description of the Adviser and the
Administrator contained in the Prospectus does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading.
(i) Possession of Licenses and Permits. Each of the Adviser and the Administrator possesses
such valid and current certificates, authorizations or permits issued by the appropriate federal,
state, local or foreign regulatory agencies or bodies necessary to conduct the business now
operated by it (collectively, “Governmental Licenses”), except where the failure so to
possess would not reasonably be expected to, singly or in the aggregate, result in an Adviser
Material Adverse Effect or an Administrator Material Adverse Effect, as applicable; each of the
Adviser and Administrator is in compliance with the terms and conditions of all such Governmental
Licenses, except where the failure so to comply would not, singly or in the aggregate, result in an
Adviser Material Adverse Effect or an Administrator Material Adverse Effect, as applicable; all of
the Governmental Licenses are valid and in full force and effect, except when the invalidity of
such Governmental Licenses or the failure of such Governmental Licenses to be in full force and
effect would not, singly or in the aggregate, result in an Adviser Material Adverse Effect or an
Administrator Material Adverse Effect, as applicable; and neither the Adviser nor the Administrator
has received any notice of proceedings relating to the revocation or modification of any such
Governmental Licenses which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would reasonably be expected to result in an Adviser Material Adverse Effect or
an Administrator Material Adverse Effect, as applicable.
(j) Employment Status. The Adviser is not aware that (i) any executive, key employee or
significant group of employees of the Company, if any, the Adviser or the
13
Administrator, as applicable, plans to terminate employment with the Company, the Adviser or
the Administrator or (ii) any such executive or key employee is subject to any non-compete,
nondisclosure, confidentiality, employment, consulting or similar agreement that would be violated
by the present or proposed business activities of the Company or the Adviser except where such
termination or violation would not reasonably be expected to have an Adviser Material Adverse
Effect.
4. Sale and Delivery of Shares.
(a) Subject to the terms and conditions set forth herein, the Company agrees to issue and sell
through the Agent acting as sales agent and the Agent agrees to use its commercially reasonable
efforts to sell as sales agent for the Company, the Shares. The Agent hereby covenants and agrees
not to make any sales of the Shares on behalf of the Company other than (A) by means of ordinary
brokers’ transactions that qualify for delivery of a Prospectus to NASDAQ in accordance with Rule
153 under the 1933 Act (such transactions are hereinafter referred to as “At the Market
Offerings”) and (B) such other sales of the Shares on behalf of the Company in its capacity as
agent of the Company as shall be agreed by the Company and the Agent. The Agent covenants and
agrees that it shall not engage in a sale of Shares on the Company’s behalf that would constitute
the sale of a “block” under Rule 10b-18(a)(5) under the Exchange Act or a “distribution” within the
meaning of Rule 100 of Regulation M under the Exchange Act without the Company’s prior written
consent. Subject to the previous sentence, the Company acknowledges and agrees that in the event a
sale of Shares on behalf of the Company would constitute the sale of a “block” under Rule
10b-18(a)(5) under the Exchange Act or a “distribution” within the meaning of Rule 100 of
Regulation M under the Exchange Act or the Agent reasonably believes it may be deemed an
“underwriter” under the 1933 Act in a transaction that is not an At the Market Offering and the
Company consents to such sale, the Company will provide to the Agent, at the Agent’s request and
upon reasonable advance notice to the Company, on or prior to the Settlement Date (as defined
below) for such transaction, the opinions of counsel, accountants’ letters and officers’
certificates pursuant to Section 6 hereof, each dated the Settlement Date, and such other documents
and information as the Agent shall reasonably request. Solely with respect to such sales that
would constitute a “block” or a “distribution,” the Agent shall use commercially reasonable efforts
to assist the Company in obtaining performance of its obligations by each purchaser whose offer to
purchase Shares has been solicited by the Agent and accepted by the Company.
Each time that the Company wishes to issue and sell Shares hereunder (each, a “Placement”),
it will notify the Agent by email notice (or other method mutually agreed to in writing by the
parties) containing the parameters in accordance with which it desires Shares to be sold, which
shall at a minimum include the number of Shares to be offered, the time period during which sales
are requested to be made, any limitation on the number of Shares that may be sold in any one day
and any minimum price below which sales may not be made (a “Placement Notice”), a form of
which containing such minimum sales parameters necessary is attached hereto as Schedule I.
The Placement Notice shall originate from any of the individuals from the Company set forth on
Schedule II (with a copy to each of the other individuals from the Company listed on such
schedule), and shall be addressed to each of the individuals from the Agent set forth on
Schedule II, as such Schedule II may be amended from time to time. If the Agent
wishes to
14
accept such proposed terms included in the Placement Notice (which it may decline to do so for any
reason in its sole discretion) or, following discussion with the Company, wishes to propose
modified terms, the Agent will, prior to 4:30 p.m. (New York City time) or, if later, within three
hours after receipt of the Placement Notice, on the same Business Day on which such Placement
Notice is delivered to the Agent, issue to the Company a notice by email (or other method mutually
agreed to in writing by the parties) addressed to all of the individuals from the Company and the
Agent set forth on Schedule II) accepting such terms (the “Agent Acceptance”) or
setting forth the terms that the Agent is willing to accept. Where the terms provided in the
Placement Notice are proposed to be modified as provided for in the immediately preceding sentence,
such terms will not be binding on the Company or the Agent until the Company delivers to the Agent
an acceptance by email (or other method mutually agreed to in writing by the parties) of all of the
terms of such Placement Notice, as proposed to be modified (the “Company Acceptance” and,
whichever of it or the Agent Acceptance becomes effective, the “Acceptance”), which email
or other communication shall be addressed to all of the individuals from the Company and the Agent
set forth on Schedule II and must be delivered not later than 6:00 p.m. (New York City
time) or, if later, within three hours after receipt of the modified terms proposed by the Agent,
on the same Business Day. The Placement Notice shall be effective upon receipt by the Company of
the Agent Acceptance or, if modified as provided above, upon receipt by the Agent of the Company
Acceptance, as the case may be, unless and until (i) the entire amount of the Shares covered by the
Acceptance have been sold, (ii) in accordance with the notice requirements set forth in Section
4(c), the Company suspends or terminates the Placement Notice, (iii) the Company issues a
subsequent Placement Notice with parameters superseding those on the earlier dated Placement
Notice, or (iv) the Agreement has been terminated under the provisions of Section 9. It is
expressly acknowledged and agreed that neither the Company nor the Agent will have any obligation
whatsoever with respect to a Placement unless and until the Company delivers a Placement Notice to
the Agent and there occurs with respect thereto either (i) an Agent Acceptance or (ii) a Company
Acceptance pursuant to the terms set forth above, and then only upon the terms specified in the
relevant Acceptance and herein. In the event of a conflict between the terms of this Agreement and
the terms of an Acceptance, the terms of the Acceptance will control. Subject to the terms and
conditions hereof, upon the existence of an Acceptance, the Agent shall use its commercially
reasonable efforts to sell as sales agent Shares designated in the Acceptance up to the amount
specified, and otherwise in accordance with the terms of such Acceptance. The Company and the Agent
each acknowledge and agree that (A) there can be no assurance that the Agent will be successful in
selling Shares and (B) the Agent will incur no liability or obligation to the Company or any other
person or entity if it does not sell Shares for any reason other than a failure by the Agent to use
its commercially reasonable efforts consistent with its normal trading and sales practices and
applicable law and regulations to sell such Shares as required by this Agreement.
(b) Notwithstanding the foregoing, the Company shall not authorize the issuance and sale of,
and the Agent as sales agent shall not be obligated to use its commercially reasonable efforts to
sell, any Shares (i) at a price lower than the minimum price therefor authorized from time to time,
or (ii) in a number in excess of the number of Shares authorized from time to time to be issued and
sold under this Agreement, in each case, by the Board, or a
15
duly authorized committee thereof, and as set forth in the applicable Acceptance. In
addition, the Company or the Agent may, upon notice to the other party hereto by telephone
(confirmed promptly by telecopy or email to all of the individuals of the other party set forth on
Schedule II, which confirmation will be promptly acknowledged by the receiving party)
suspend or refuse to undertake any sale of Shares designated in such Acceptance for any reason and
at any time; provided, however, that such suspension or termination shall not affect or impair the
parties’ respective obligations with respect to Shares sold hereunder prior to the giving of such
notice. Each of the parties hereto agrees that no such notice shall be effective against the other
unless it originates from an individual named on Schedule II and is made to the individuals
of the other party named on Schedule II hereto in accordance with this Section 4,
as such Schedule may be amended from time to time.
(c) The gross sales price of any Shares sold pursuant to this Agreement by the Agent acting as
sales agent of the Company shall be the market price prevailing at the time of sale for shares of
the Company’s Common Stock sold by the Agent on NASDAQ or otherwise, at prices relating to
prevailing market prices or at negotiated prices. The compensation payable to the Agent for sales
of Shares with respect to which the Agent acts as sales agent shall be equal to 2% of the gross
sales price of the Shares for amounts of Shares sold pursuant to this Agreement. The remaining
proceeds, after further deduction for any transaction fees imposed by any governmental, regulatory
or self-regulatory organization in respect of such sales, shall constitute the net proceeds to the
Company for such Shares (the “Net Proceeds”). The Agent shall notify the Company as
promptly as practicable if any deduction referenced in the preceding sentence will be required.
(d) The Agent shall provide written confirmation to the Company following the close of trading
on NASDAQ each day in which Shares are sold under this Agreement setting forth the number of Shares
sold on such day, the aggregate gross sales proceeds of the Shares, the Net Proceeds to the Company
and the compensation payable by the Company to the Agent with respect to such sales. For the
avoidance of doubt, such written confirmation will be provided to the Company no later than the
opening of trading on the immediately following trading day on NASDAQ.
(e) Under no circumstances shall the aggregate offering price or number, as the case may be,
of Shares sold pursuant to this Agreement exceed the aggregate offering price or number, as the
case may be, of Shares of Common Stock (i) set forth in Section 1 of this Agreement, (ii)
available for issuance under the Prospectus and the then currently effective Registration Statement
or (iii) authorized from time to time to be issued and sold under this Agreement and the
Agreement by the Board, or a duly authorized committee thereof, and notified to the Agent in
writing. In addition, under no circumstances shall any Shares with respect to which the Agent acts
as sales agent be sold at a price lower than the minimum price therefor authorized from time to
time by the Company’s Board, or a duly authorized committee thereof, and notified to the Agent in
writing as set forth in the applicable Placement Notice. If either party has reason to believe
that the exemptive provisions set forth in Rule 101(c)(1) of Regulation M under the Exchange Act
are not satisfied with respect to the Shares, it shall promptly notify the other party and sales of
the Shares under this Agreement shall be suspended until that or other exemptive provisions have
been satisfied in the judgment of each party. The
16
Agent shall calculate and provide in writing to the Company, on a monthly basis, the average
daily trading volume (as defined in Rule 100 of Regulation M under the Exchange Act) of the Common
Stock.
(f) Settlement for sales of Shares pursuant to this Section 4 and made in accordance
with the terms of the applicable Acceptance will occur on the third business day that is also a
trading day for NASDAQ (other than a day on which NASDAQ is scheduled to close prior to its regular
weekday closing time) following the trade date on which such sales are made, unless another date
shall be agreed to by the Company and the Agent (each such day, a “Settlement Date”). On
each Settlement Date, the Shares sold through the Agent for settlement on such date shall be
delivered by the Company or its transfer agent to the Agent against payment of the Net Proceeds
from the sale of such Shares. Settlement for all Shares shall be effected by book-entry delivery
of Shares to the Agent’s account at The Depository Trust Company against payments by the Agent of
the Net Proceeds from the sale of such Shares in same day funds delivered to an account designated
by the Company. If the Company shall default on its obligation to deliver Shares on any Settlement
Date, the Company shall (i) indemnify and hold the Agent harmless against any loss, claim or damage
arising from or as a result of such default by the Company and (ii) pay the Agent any commission to
which it would otherwise be entitled absent such default.
(g) At each Applicable Time, each Settlement Date and each Representation Date (as such term
is defined in Section 6(n) herein), the Company, the Adviser and the Administrator shall be
deemed to have affirmed each representation and warranty contained in this Agreement. The
obligation of the Agent to use its commercially reasonable efforts to sell the Shares on behalf of
the Company as sales agent shall be subject to the continuing accuracy of the representations and
warranties of the Company herein, to the performance by the Company of its obligations hereunder
and to the continuing satisfaction of the additional conditions specified in Section 4 of
this Agreement.
(h) The Company agrees that any offer to sell, any solicitation of an offer to buy, or any
sales of Common Stock or any other equity security of the Company pursuant to this Agreement shall
only be effected by or through only one of Agent or on any single given day, but in no event
by more than one of them, and the Company shall in no event request that more than one of Agent or
sell shares of Common Stock on the same day; provided, however, that (i) the foregoing
limitation shall not apply to sales solely to employees of the Company, the Adviser, the
Administrator or their respective affiliates, or to a trustee or other person acquiring such
securities for the accounts of such persons and (ii) such limitation shall not apply on any day
during which no sales are made pursuant to this Agreement.
(i) Except as may be mutually agreed by the Company and the Agent the Company and the Agent
agree that no sales of Shares shall take place, and the Company shall not request the sale of any
Shares that would be sold, and the Agent shall not be obligated to sell, (i) with respect to the
Company’s quarterly filings on Form 10-Q, during any period commencing upon the 30th day
following the end of each fiscal quarter and ending on the date on which the Company files with the
Commission a Prospectus Supplement under Rule 497 relating to the Shares that includes updated
financial information as of the end of the Company’s most recent
17
quarterly period (the “10-Q Filing”) and (ii) with respect to the Company’s annual
report filings on Form 10-K, during any period commencing upon the 50th day following
the end of the Company’s fiscal year and ending on the date on which the Company files with the
Commission a Prospectus Supplement under Rule 497 relating to the Shares that includes updated
audited financial information as of the end of the Company’s most recent fiscal year (the “10-K
Filing”) (each of a 10-Q Filing and/or a 10-K Filing shall also be referred to herein as a
“Quarterly 497 Filing”). To the extent the Company releases its earnings for its most
recent quarterly period or fiscal year, as applicable (an “Earnings Release”) before it
files with the Commission its quarterly report on Form 10-Q for such quarterly period or annual
report on Form 10-K for such fiscal year, as applicable, then the Agent and the Company agree that
no sales of Shares shall take place for the period beginning on the date of the Earnings Release
and ending on the date of the applicable Quarterly 497 Filing. Notwithstanding the foregoing,
without the prior written consent of each of the Company and the Agent, no sales of Shares shall
take place, and the Company shall not request the sale of any Shares that would be sold, and the
Agent shall not be obligated to sell, during any period in which the Company is in possession of
material non-public information.
5. Expenses. The Company agrees to pay the reasonable costs and expenses relating to
the following matters: (i) the preparation, printing or reproduction and filing with the Commission
of the Registration Statement (including financial statements and exhibits thereto), and the
Prospectus, and each amendment or supplement to any of them; (ii) the printing (or reproduction)
and delivery (including postage, air freight charges and charges for counting and packaging) of
such copies of the Registration Statement and the Prospectus, and all amendments or supplements to
any of them, as may, in each case, be reasonably requested for use in connection with the offering
and sale of the Shares; (iii) the preparation, printing, authentication, issuance and delivery of
certificates for the Shares, including any stamp or transfer taxes in connection with the original
issuance and sale of the Shares; (iv) the printing (or reproduction) and delivery of this
Agreement, any blue sky memorandum and all closing documents printed (or reproduced) and delivered
in connection with the offering of the Shares; (v) the registration of the Shares under the
Exchange Act and the listing of the Shares on the NASDAQ; (vi) any registration or qualification of
the Shares for offer and sale under the securities or blue sky laws of the several states
(including filing fees and the reasonable fees and expenses of counsel for the Agent relating to
such registration and qualification); (vii) any filings required to be made with FINRA (including
filing fees and the reasonable fees and expenses of counsel for the Agent relating to such
filings); (viii) the fees and expenses of the Company’s accountants and the fees and expenses of
counsel (including local and special counsel) for the Company; (ix) the reasonable fees and
expenses of the Agent and one counsel for the Agent or (provided that the reasonable fees and
expenses of such counsel shall not exceed an aggregate of $ in connection with this Agreement
without the prior written approval of the Company) and (x) all other costs and expenses incident to
the performance by the Company of its obligations hereunder. For the avoidance of doubt, the
Company may refuse to approve fees and expenses of the Agent (or its counsel) if the Company
determines, in its reasonable discretion, that such fees and expenses of the Agent (or its counsel)
are not reasonable, in which case the Agent shall bear such fees and/or expenses.
6. Agreements of the Company. The Company agrees with the Agent that:
18
(a) The Company, subject to Section 6(a)(ii), will comply with the requirements of
Rule 497, and will notify the Agent as soon as practicable, and, in the cases of Sections
6(a)(ii)-(iv), confirm the notice in writing, (i) when, at any time when a prospectus
relating to the Shares is required to be delivered under the 1933 Act, any post-effective amendment
to the Registration Statement shall become effective, or any supplement to the Prospectus or any
amended Prospectus shall have been filed in relation to the Shares, (ii) of the receipt of any
comments from the Commission relating to the Registration Statement, (iii) of any request by the
Commission for any amendment to the Registration Statement or any amendment or supplement to the
Prospectus or for additional information in each case in relation to the Shares, and (iv) of the
issuance by the Commission of any stop order suspending the effectiveness of the Registration
Statement or of any order preventing or suspending the use of the Prospectus, or of the suspension
of the qualification of the Shares for offering or sale in any jurisdiction, or of the initiation
or threatening of any proceedings for any of such purposes. The Company will promptly effect the
filings necessary pursuant to Rule 497 and will take such steps as it deems necessary to ascertain
promptly whether the form of prospectus transmitted for filing under Rule 497 was received for
filing by the Commission and, in the event that it was not, it will promptly file such prospectus.
The Company will make every reasonable effort to prevent the issuance of any stop order suspending
the effectiveness of the Registration Statement pursuant to Section 8(d) of the 1933 Act, and, if
any such stop order is issued, to obtain the lifting thereof at the earliest possible moment.
(b) The Company will give the Agent notice of its intention to file or prepare any amendment
to the Registration Statement, or any supplement or revision to either the Base Prospectus included
in the Registration Statement at the time a post-effective amendment thereto most recently became
effective or to the Prospectus Supplement, and will furnish the Agent with copies of any such
documents a reasonable amount of time prior to such proposed filing or use, as the case may be, and
will, in good faith, consider any reasonable comments of the Agent or Agent’s counsel.
(c) If, at any time when a prospectus relating to the Shares is required to be delivered under
the 1933 Act, any event occurs as a result of which the Prospectus as then supplemented would
include any untrue statement of a material fact or omit to state any material fact necessary to
make the statements therein in the light of the circumstances under which they were made at such
time not misleading, or if it shall be necessary to amend the Registration Statement, file a new
registration statement or supplement the Prospectus to comply with the 1933 Act or the Exchange
Act, in each case in relation to the Shares including in connection with use or delivery of the
Prospectus, the Company promptly will (i) promptly notify the Agent of any such event so that any
use of the Prospectus may cease or be suspended until it is amended or supplemented or it otherwise
complies with the 1933 Act or the Exchange Act, (ii) prepare and file with the Commission, subject
to the second sentence of paragraph (a) of this Section 6, an amendment or supplement or
new registration statement which will correct such statement or omission or effect such compliance,
(iii) use its commercially reasonable efforts to have any amendment to the Registration Statement
or new registration statement declared effective as soon as practicable in order to avoid any
disruption in use of the Prospectus and (iv) supply any supplemented Prospectus to the Agent in
such quantities as the Agent may reasonably request.
19
(d) As soon as practicable after furnishing with the Commission, the Company will make
generally available to its security holders and to the Agent an earnings statement or statements of
the Company and its subsidiaries which will satisfy the provisions of Section 11(a) of the 1933 Act
and Rule 158.
(e) The Company will furnish to the Agent, without charge, so long as delivery of a prospectus
by the Agent or dealer may be required by the 1933 Act, as many copies of the Prospectus and any
supplement thereto as the Agent may reasonably request. Except as otherwise described herein, the
Company will pay the expenses of printing or other production of all documents relating to the
offering.
(f) The Company will arrange, if necessary, for the qualification of the Shares for sale under
the laws of such states and jurisdictions as the Agent may designate and the Company agrees to and
will maintain such qualifications in effect so long as required to complete the distribution and
sale of the Shares; provided that in no event shall the Company be obligated to qualify to do
business in any jurisdiction where it is not now so qualified or to take any action that would
subject it to service of process in suits, other than those arising out of the offering or sale of
the Shares, in any jurisdiction where it is not now so subject.
(g) The Company will use the Net Proceeds in the manner specified in the Prospectus under “Use
of Proceeds.”
(h) The Company, during the period when the Prospectus is required to be delivered under the
1933 Act or the Exchange Act, will file all documents required to be filed with the Commission
pursuant to the 1940 Act and the Exchange Act within the time periods required by the 1940 Act and
the Exchange Act and the rules and regulations of the Commission thereunder, respectively.
(i) The Company will use its best efforts to maintain its qualification as a regulated
investment company under Subchapter M of the Code.
(j) The Company will not take, directly or indirectly, any action designed to or that would
constitute or that might reasonably be expected to cause or result in, under the Exchange Act or
otherwise, stabilization or manipulation of the price of any security of the Company to facilitate
the sale or resale of the Securities, except as may be allowed by law.
(k) In connection with the offering and sale of the Shares, the Company will file with NASDAQ
all documents and notices, and make all certifications, required of companies that have securities
that are listed on NASDAQ and will maintain such listing.
(l) The Company will cooperate with any reasonable due diligence review conducted by the Agent
(or its counsel or other representatives), including, without limitation, providing information and
making available documents and senior corporate officers, as the Agent may reasonably request;
provided, however, that the Company shall be required to make available documents and senior
corporate officers only (i) at the Company’s principal offices and (ii) during the Company’s
ordinary business hours. The parties acknowledge that the due
20
diligence review contemplated by this Section 6(l) will include, without limitation,
during the term of this Agreement a quarterly diligence conference to occur within five Business
Days after each Quarterly 497 Filing whereby the Company will make its senior corporate officers
available to address diligence inquiries of the Agent and will provide such additional information
and documents as the Agent may reasonably request.
(m) The Company agrees that on such dates as the 1933 Act shall require, the Company will file
a Prospectus Supplement with the Commission pursuant to Rule 497 under the 1933 Act, or otherwise
include in a filed annual report on Form 10-K or quarterly report on Form 10-Q, which Prospectus
Supplement, Form 10-K or Form 10-Q, as applicable, will set forth, within the relevant quarterly or
other period, the amount of Shares sold through the Agent, the Net Proceeds to the Company and the
compensation payable by the Company to the Agent with respect to such Shares. To the extent the
information set forth in this Section 6(m) is filed in a Prospectus Supplement, the Company
agrees to deliver such number of copies of each such Prospectus Supplement to each exchange or
market on which such sales were effected as may be required by the rules or regulations of such
exchange or market.
(n) Upon the commencement of the offering of Shares under this Agreement and each time the
Company files a Prospectus relating to the Shares or amends or supplements the Registration
Statement or the Prospectus relating to the Shares, in connection with a Quarterly 497 Filing or
otherwise, (other than a prospectus supplement filed in accordance with Section 6(m) of
this Agreement) by means of a post-effective amendment, sticker, or supplement (each such event
shall be deemed a “Representation Date”), the Company and the Adviser shall each furnish
the Agent with a certificate, in the form attached hereto as Exhibit 6(n). The requirement
to provide a certificate under this Section 6(n) shall be waived for any Representation
Date occurring during a fiscal quarter during which the Company does not intend to sell Shares
prior to the next occurring Representation Date. Notwithstanding the foregoing, if the Company
subsequently decides to sell Shares following a Representation Date when the Company relied on such
waiver and did not provide the Agent with a certificate under this Section 6(n), then
before the Agent resumes sales of any Shares, the Company shall provide the Agent with a
certificate, in the form attached hereto as Exhibit 6(n).
(o) Upon the commencement of the offering of Shares under this Agreement, the Company shall
cause to be furnished to the Agent (i) a written opinion of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇
LLP, counsel for the Company, or of such other law firm who may be counsel for the Company from
time to time, (the “Company Counsel”) and (ii) a written opinion of the General Counsel of
the Company (“General Counsel”), each dated the commencement of the offering of Shares
hereunder in substantially the forms attached hereto as Exhibit 6(o)(1) and Exhibit
6(o)(2), respectively. Thereafter, within five Business Days after each Representation Date,
the Company shall cause to be furnished to the Agent (i) a written opinion of Company Counsel and
(ii) a written opinion of General Counsel, in substantially the forms attached hereto as
Exhibit 6(o)(3) and Exhibit 6(o)(4), respectively, but modified, as necessary, to
relate to the Registration Statement and the Prospectus as then amended or supplemented.
Notwithstanding the foregoing, the requirement to provide such opinions shall be waived for any
Representation Date occurring during a fiscal quarter during which the Company does not intend to
sell Shares prior to the next occurring Representation Date. In the event the Company subsequently
decides
21
to sell Shares following a Representation Date when the Company relied on such waiver and did
not provide the Agent with an opinion from Company Counsel under this Section 6(o), then
before the Agent resumes sales of any Shares, the Company shall cause to be furnished to the Agent
the opinions of Company Counsel and General Counsel contemplated in this Section 6(o).
(p) Upon the commencement of the offering of Shares under this Agreement, the Company shall
cause to be furnished to the Agent a written opinion of ▇▇▇▇▇▇▇ LLP, Maryland counsel for the
Company (“Maryland Counsel”), dated the commencement of the offering of Shares hereunder,
in substantially the form attached hereto as Exhibit 6(p).
(q) Upon the commencement of the offering of Shares under this Agreement and thereafter within
five Business Days after the end of each fiscal quarter, or any period in which the Prospectus
relating to the Shares is required to be delivered by the Agent, each time that the Registration
Statement is amended or the Prospectus supplemented to include additional amended financial
information, the Company shall cause its independent accountants to furnish the Agent letters,
dated the commencement of the offering of Shares hereunder or the date of each Representation Date,
as applicable, in form and substance reasonably satisfactory to the Agent, (i) confirming that they
are independent public accountants within the meaning of the 1933 Act and are in compliance with
the applicable requirements relating to the qualification of accountants under Rule 2-01 of
Regulation S-X of the Commission, (ii) stating, as of such date, the conclusions and findings of
such firm with respect to the financial information and other matters ordinarily covered by
accountants’ “comfort letters” to underwriters in connection with registered public offerings (the
“Comfort Letter”). The requirement to provide a Comfort Letter under this Section
6(p) shall be waived for any Representation Date occurring during a fiscal quarter during which
the Company does not intend to sell Shares prior to the next occurring Representation Date.
Notwithstanding the foregoing, if the Company subsequently decides to sell Shares following a
Representation Date when the Company relied on such waiver and did not provide the Agent with a
Comfort Letter under this Section 6(p), then before the Agent resumes sales of any Shares,
the Company shall provide the Agent with a Comfort Letter.
(r) Upon the commencement of the offering of Shares under this Agreement and thereafter within
five Business Days after each Representation Date, the Company and the Adviser shall each furnish
the Agent with a certificate of its Secretary, in form and substance reasonably satisfactory to the
Agent. The requirement to provide certificates under this Section 6(r) shall be waived for
any Representation Date occurring during a fiscal quarter during which the Company does not intend
to sell Shares prior to the next occurring Representation Date. Notwithstanding the foregoing, if
the Company subsequently decides to sell Shares following a Representation Date when the Company
relied on such waiver and did not provide the Agent with the certificates under this Section
6(r), then before the Agent resumes sales of any Shares, the Company shall provide the Agent
with such certificates.
(s) Upon the commencement of the offering of Shares under this Agreement and thereafter within
five Business Days after each Representation Date, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP, counsel for the Agent
shall furnish to the Agent a written opinion (“Agent Counsel”), dated the commencement of
the offering of Shares hereunder, or the Representation Date, as applicable, in form and substance
reasonably satisfactory to the Agent, but modified, as necessary, to relate to
22
the Registration Statement and the Prospectus as then amended or supplemented; provided,
however, that in lieu of such opinion, counsel may furnish the Agent with a letter to the effect
that the Agent may rely on a prior opinion delivered under this Section 6(s) to the same
extent as if it were dated the date of such letter (except that statements in such prior opinion
shall be deemed to relate to the Registration Statement and the Prospectus as amended or
supplemented at such Representation Date). The Company agrees to furnish to Agent Counsel such
documents as they may reasonably request for the purpose of enabling them to deliver their opinion
under this Section 6(s). Notwithstanding the foregoing, the requirement to provide such
opinion shall be waived for any Representation Date occurring during a fiscal quarter during which
the Company does not intend to sell Shares prior to the next occurring Representation Date. In the
event the Company subsequently decides to sell Shares following a Representation Date when the
Company relied on such waiver and Agent Counsel did not provide the Agent with its opinion under
this Section 6(s), then before the Agent resumes sales of any Shares, Agent Counsel shall
furnish to the Agent its opinion contemplated in this Section 6(s).
(t) At each Representation Date, the Company will conduct a due diligence session, in form and
substance reasonably satisfactory to the Agent, which shall include representatives of the
management and the accountants of the Company. The requirement to conduct due diligence sessions
under this Section 6(t) shall be waived for any Representation Date occurring during a
fiscal quarter during which the Company does not intend to sell Shares prior to the next occurring
Representation Date. Notwithstanding the foregoing, if the Company subsequently decides to sell
Shares following a Representation Date when the Company relied on such waiver and did not conduct a
due diligence session under this Section 6(t), then before the Agent resumes sales of any
Shares, the Company shall conduct a due diligence session as contemplated in this Section
6(t).
(u) Except by means of the Prospectus or as otherwise agreed by the parties, the Company
(including its agents and representatives, other than the Agent in its capacity as such) will not
make, use, prepare, authorize, approve or refer to any written communication (as defined in Rule
405 under the 1933 Act and including without limitation any (i) advertisement as defined in Rule
482 under the 1933 Act and (ii) Sales Material), required to be filed with the Commission, that
constitutes an offer to sell or solicitation of an offer to buy Shares hereunder.
(v) The Company will comply with all requirements imposed upon it by the 1933 Act, the 1940
Act and the Exchange Act as from time to time in force, so far as necessary to permit the
continuance of sales of, or dealings in, the Shares as contemplated by the provisions hereof and
the Prospectus.
(w) The Company will not, without (i) giving the Agent at least two business days’ prior
written notice specifying the nature of the proposed sale and the date of such proposed sale and
(ii) the Agent suspending activity under this program for such period of time as requested by the
Company as part of such prior written notice or as deemed appropriate by the Agent in light of the
proposed sale, (A) pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant for the sale of, lend
or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or
securities convertible into or exchangeable or exercisable for or repayable with Common Stock
23
and involving a number of shares of Common Stock in excess of 5% of the then outstanding
shares or file any registration statement under the 1933 Act with respect to any of the foregoing
(other than a shelf registration statement under Rule 415 under the 1933 Act, a registration
statement on Form S-8 or Form N-14 or a post-effective amendment to the Registration Statement) or
(B) enter into any swap or other agreement or any transaction that transfers in whole or in part,
directly or indirectly, any of the economic consequence of ownership of the Common Stock, or any
securities convertible into or exchangeable or exercisable for or repayable with Common Stock and
involving a number of shares of Common Stock in excess of 5% of the then outstanding shares,
whether any such swap or transaction described in clause (A) or (B) above is to be settled by
delivery of Common Stock or such other securities, in cash or otherwise. The foregoing sentence
shall not apply to (w) the Shares to be offered and sold through the Agent pursuant to this
Agreement or through pursuant to the Agreement, (x) securities issued under Form N-14,
(y) Common Stock issuable pursuant to the Company’s dividend reinvestment plan as it may be amended
or replaced from time to time and (z) equity incentive awards approved by the Board or the
compensation committee thereof or the issuance of Common Stock upon exercise thereof.
(x) Other than the Agreement, during the term of this Agreement, the Company will not
enter into another agreement for an At the Market Offering program with any other party, other than
the Agent.
(y) The Company acknowledges and agrees that the Agent has informed the Company that the Agent
may, to the extent permitted under the 1933 Act and the Exchange Act, purchase and sell Shares for
its own account at the same time as Shares are being sold by the Company pursuant to this
Agreement.
7. Conditions to the Agent’s Obligations. The obligations of the Agent hereunder
shall be subject to the continuing accuracy and completeness of the representations and warranties
made by the Company, the Adviser and the Administrator herein, to the due performance by the
Company of its obligations hereunder, and to the continuing satisfaction (or waiver by the Agent in
its sole discretion) of the following additional conditions:
(a) The Registration Statement shall have become effective and shall be available for the sale
of all Shares to be issued and sold hereunder.
(b) None of the following events shall have occurred and be continuing: (i) receipt by the
Company of any request for additional information from the Commission or any other federal or state
governmental authority during the period of effectiveness of the Registration Statement, the
response to which would require any amendments or supplements to the Registration Statement or the
Prospectus relating to or affecting the Shares; (ii) the issuance by the Commission or any other
federal or state governmental authority of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose, including any notice
objecting to the use of the Registration Statement or order pursuant to Section 8(e) of the
Investment Company Act having been issued and proceedings therefor initiated, or to the knowledge
of the Company, threatened by the Commission; (iii) receipt by the Company of any notification with
respect to the suspension of the qualification or
24
exemption from qualification of any of the Shares for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; (iv) the occurrence of any event that
makes any statement made in the Registration Statement or the Prospectus untrue in any material
respect or that requires the making of any changes in the Registration Statement or Prospectus so
that, in the case of the Registration Statement, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein or necessary to make
the statements therein not misleading and, that in the case of the Prospectus, it will not contain
any untrue statement of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the circumstances under which
they were made, not misleading; and (v) the Company’s reasonable determination that a
post-effective amendment to the Registration Statement would be appropriate.
(c) There shall not have been any change, or any development involving a prospective change,
in or affecting the condition (financial or otherwise), earnings, business or properties of the
Company and its subsidiaries taken as a whole, whether or not arising from transactions in the
ordinary course of business, except as set forth in or contemplated in the Prospectus (after giving
effect to any amendment or supplement thereto) the effect of which, is, in the reasonable judgment
of the Agent, so material and adverse as to make it impractical or inadvisable to proceed with the
offering or delivery of the Shares as contemplated by the Registration Statement (after giving
effect to any amendment thereof) and the Prospectus Supplement (after giving effect to any
amendment or supplement thereto).
(d) The Agent shall have received the opinions of Company Counsel and General Counsel required
to be delivered pursuant Section 6(o) on or before the date on which such delivery of such
opinions is required pursuant to Section 6(o).
(e) The Agent shall have received the opinion of Maryland Counsel required to be delivered
pursuant Section 6(p) on or before the date on which such delivery of such opinion is
required pursuant to Section 6(p).
(f) The Agent shall have received the Comfort Letter required to be delivered pursuant
Section 6(q) on or before the date on which such delivery of such letter is required
pursuant to Section 6(q).
(g) The Agent shall have received the certificates required to be delivered pursuant to
Section 6(n) and Section 6(r) on or before the date on which delivery of such
certificate is required pursuant to Section 6(n) and Section 6(r), respectively.
(h) The Agent shall have received the opinion of Agent Counsel required to be delivered
pursuant Section 6(s) on or before the date on which such delivery of such opinion is
required pursuant to Section 6(s).
(i) Trading in the Common Stock shall not have been suspended on NASDAQ and the Shares shall
have been approved for listing on NASDAQ, subject only to notice of issuance.
25
(j) All filings with the Commission required by Rule 497 under the 1933 Act to have been filed
prior to the sale of Shares hereunder shall have been made within the applicable time period
prescribed for such filing by Rule 497.
(k) FINRA shall have confirmed that it has no objection with respect to the fairness and
reasonableness of the placement terms and arrangements set forth herein.
8. Indemnification and Contribution. (a) The Company agrees to indemnify and hold
harmless the Agent, the directors, officers, employees and agents of the Agent and each person who
controls the Agent within the meaning of either the 1933 Act, the Exchange Act or the 1940 Act
against any and all losses, claims, damages or liabilities, joint or several, to which they or any
of them may become subject under the 1933 Act, the Exchange Act, the 1940 Act or other Federal or
state statutory law or regulation, at common law or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the Registration Statement,
the Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and agrees to reimburse each
such indemnified party, as incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such untrue statement or
alleged untrue statement or omission or alleged omission made therein in reliance upon and in
conformity with written information furnished to the Company by or on behalf of the Agent
specifically for inclusion therein. This indemnity agreement will be in addition to any liability
which the Company may otherwise have. Any indemnification by the Company pursuant to this
Agreement shall be subject to the requirements and limitations of Section 17(i) of the ▇▇▇▇ ▇▇▇.
(b) The Agent agrees to indemnify and hold harmless the Company, each of its directors, each
of its officers who signs the Registration Statement, and each person who controls the Company
within the meaning of either the 1933 Act, the Exchange Act or the 1940 Act, to the same extent as
the foregoing indemnity from the Company to the Agent, but only with reference to written
information relating to the Agent furnished to the Company by or on behalf of the Agent
specifically for inclusion in the documents referred to in the foregoing indemnity. The Agent
agrees to reimburse each such indemnified party, as incurred, for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any loss, claim, damage,
liability or action to which they are entitled to indemnification pursuant to this Section
8(b). This indemnity agreement will be in addition to any liability which the Agent may
otherwise have.
(c) Promptly after receipt by an indemnified party under this Section 8 of notice of
the commencement of any action, such indemnified party will, if a claim in respect thereof is to be
made against the indemnifying party under this Section 8, notify the indemnifying party in
writing of the commencement thereof; but the failure so to notify the indemnifying party (i) will
not relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not
26
otherwise learn of such action and such failure results in the forfeiture by the indemnifying
party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying
party from any obligations to any indemnified party other than the indemnification obligation
provided in paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint
counsel of the indemnifying party’s choice at the indemnifying party’s expense to represent the
indemnified party in any action for which indemnification is sought (in which case the indemnifying
party shall not thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below); provided, however, that
such counsel shall be reasonably satisfactory to the indemnified party. Notwithstanding the
indemnifying party’s election to appoint counsel to represent the indemnified party in an action,
the indemnified party shall have the right to employ separate counsel (including local counsel),
and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate
counsel if (i) the use of counsel chosen by the indemnifying party to represent the indemnified
party would present such counsel with a conflict of interest, (ii) the actual or potential
defendants in, or targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded that there may be
legal defenses available to it and/or other indemnified parties which are different from or
additional to those available to the indemnifying party, (iii) the indemnifying party shall not
have employed counsel satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after notice of the institution of such action or (iv) the indemnifying
party shall authorize the indemnified party to employ separate counsel at the expense of the
indemnifying party. An indemnifying party will not, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any judgment with respect to
any pending or threatened claim, action, suit or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified parties are actual or
potential parties to such claim or action) unless such settlement, compromise or consent includes
an unconditional release of each indemnified party from all liability arising out of such claim,
action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a), (b) or (c) of this Section
8 is unavailable to or insufficient to hold harmless an indemnified party for any reason, the
Company and the Agent severally agree to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection with investigating
or defending the same) (collectively “Losses”) to which the Company and the Agent may be
subject in such proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and by the Agent on the other from the offering of the Shares; provided,
however, that in no case shall the Agent be responsible for any amount in excess of the total
commissions received by the Agent pursuant to Section 2(d) hereunder. If the allocation
provided by the immediately preceding sentence is unavailable for any reason, the Company and the
Agent shall contribute in such proportion as is appropriate to reflect not only such relative
benefits but also the relative fault of the Company on the one hand and of the Agent on the other
in connection with the statements or omissions which resulted in such Losses as well as any other
relevant equitable considerations. Benefits received by the Company shall be deemed to be equal to
the total net proceeds from the offering (before deducting expenses) received by it, and benefits
received by the Agent shall be deemed to be equal to the total commissions received by the Agent
pursuant to Section 2(d). Relative fault shall be determined by reference to, among other
things, whether any untrue or any alleged untrue statement of a material fact or the
27
omission or alleged omission to state a material fact relates to information provided by the
Company on the one hand or the Agent on the other, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such untrue statement or
omission. The Company and the Agent agree that it would not be just and equitable if contribution
were determined by pro rata allocation or any other method of allocation which does not take
account of the equitable considerations referred to above. Notwithstanding the provisions of this
paragraph (d), no person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the ▇▇▇▇ ▇▇▇) shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 8, each person who controls the
Agent within the meaning of either the 1933 Act or the Exchange Act and each director, officer,
employee and agent of the Agent shall have the same rights to contribution as the Agent, and each
person who controls the Company within the meaning of either the 1933 Act or the Exchange Act, each
officer of the Company who shall have signed the Registration Statement and each director of the
Company shall have the same rights to contribution as the Company, subject in each case to the
applicable terms and conditions of this paragraph (d).
9. Termination.
(a) The Company shall have the right, by giving notice as hereinafter specified to terminate
this Agreement in its sole discretion at any time. Any such termination shall be without liability
of any party to any other party except that the provisions of Section 5, Section 8,
Section 10, Section 13, Section 15 and Section 16 hereof shall
remain in full force and effect notwithstanding such termination.
(b) The Agent shall have the right, by giving notice as hereinafter specified to terminate
this Agreement in its sole discretion at any time. Any such termination shall be without liability
of any party to any other party except that the provisions of Section 5, Section 8,
Section 10, Section 13, Section 15 and Section 16 hereof shall
remain in full force and effect notwithstanding such termination.
(c) This Agreement shall remain in full force and effect unless terminated pursuant to
Sections 9(a) or (b) above or otherwise by mutual agreement of the parties;
provided, however, that any such termination by mutual agreement shall in all cases be deemed to
provide that Section 5, Section 8, Section 10, Section 13,
Section 15 and Section 16 shall remain in full force and effect.
(d) Except as otherwise provided in Sections 9(a) and 9(b), any termination of
this Agreement shall be effective on the date specified in such notice of termination; provided,
however, that such termination shall not be effective until the close of business on the date of
receipt of such notice by the Agent or the Company, as the case may be. If such termination shall
occur on or after a trade date and prior to the Settlement Date for any sale of Shares, such Shares
shall settle in accordance with the provisions of this Agreement.
10. Representations and Indemnities to Survive. The respective agreements,
representations, warranties, indemnities and other statements of the Company or its officers and of
the Agent set forth in or made pursuant to this Agreement will remain in full force and effect,
28
regardless of any investigation made by or on behalf of the Agent or the Company or any of the
officers, directors, employees, agents or controlling persons referred to in Section 8
hereof, and will survive delivery of and payment for the Shares. The provisions of Section
5, Section 8, Section 10, Section 13, Section 15 and
Section 16 shall survive the termination or cancellation of this Agreement.
11. Notices. All communications hereunder will be in writing and effective only on
receipt, and, if sent to the Agent, will be mailed, delivered or telefaxed to (i) BB&T Capital
Markets, a division of ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇▇, LLC, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, fax no. (▇▇▇) ▇▇▇-▇▇▇▇, Attention: G. ▇▇▇▇▇ ▇▇▇▇▇▇, III, and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP,
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, fax no. (▇▇▇) ▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇;
or, if sent to the Company or the Adviser, will be mailed, delivered or telefaxed to it at (▇▇▇)
▇▇▇-▇▇▇▇ and confirmed to it at Prospect Capital Corporation, ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, attention ▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
12. Successors. This Agreement will inure to the benefit of and be binding upon the
parties hereto and their respective successors and the officers, directors, employees, agents and
controlling persons referred to in Section 8 hereof, and no other person will have any
right or obligation hereunder.
13. No Fiduciary Duty. The Company hereby acknowledges that (a) the offering and sale
of the Shares pursuant to this Agreement is an arm’s-length commercial transaction between the
Company, on the one hand, and the Agent and any affiliate through which it may be acting, on the
other, (b) the Agent has not assumed an advisory or fiduciary responsibility in favor of the
Company with respect to the offering contemplated hereby or the process leading thereto
(irrespective of whether the Agent has advised or is currently advising the Company on related or
other matters), and (c) the Company’s engagement of the Agent in connection with the offering and
the process leading up to the offering is as independent contractors and not in any other capacity.
Furthermore, the Company agrees that it is solely responsible for making its own judgments in
connection with the offering (irrespective of whether the Agent has advised or is currently
advising the Company on related or other matters). The Company agrees that it will not claim that
the Agent has rendered advisory services of any nature or respect, or owe an agency, fiduciary or
similar duty to the Company, in connection with such transaction or the process leading thereto.
14. Integration. This Agreement supersedes all prior agreements and understandings
(whether written or oral) between the Company and the Agent with respect to the subject matter
hereof.
15. Applicable Law. This Agreement will be governed by and construed in accordance
with the laws of the State of New York applicable to contracts made and to be performed within the
State of New York.
16. Waiver of Jury Trial. The Company hereby irrevocably waives, to the fullest
extent permitted by applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Agreement or the transactions contemplated hereby.
29
17. Counterparts. This Agreement may be signed in one or more counterparts, each of
which shall constitute an original and all of which together shall constitute one and the same
agreement.
18. Headings. The section headings used herein are for convenience only and shall not
affect the construction hereof
19. Partial Unenforceability. The invalidity or unenforceability of any Section,
paragraph or provision of this Agreement shall not affect the validity or enforceability of any
other Section, paragraph or provision hereof. If any Section, paragraph or provision of this
Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be
made such minor changes (and only such minor changes) as are necessary to make it valid and
enforceable.
20. Adjustments for Stock Splits. The parties acknowledge and agree that all share
related numbers contained in this Agreement shall be adjusted to take into account any stock split,
stock dividend or similar event effected with respect to the Shares.
21. No Joint Venture. The Company, the Adviser, the Administrator and the Agent
expressly acknowledge, understand and agree that the Agent and are not, and shall not be deemed
for any purpose, to be acting as an agent, joint venture or partner of one another and that neither
the Agent nor assumes responsibility or liability, express or implied, for any actions or
omissions of, or the performance of services by, or the Agent, respectively, in connection
with the offering of the Shares pursuant to this Agreement or the Agreement or otherwise. The
obligations of the Agent hereunder and of under the Agreement shall be several and not
joint.
22. Definitions. The terms that follow, when used in this Agreement, shall have the
meanings indicated.
“1933 Act” shall mean the Securities Act of 1933, as amended, and the rules and
regulations of the Commission promulgated thereunder.
“1940 Act” shall mean the Investment Company Act of 1940, as amended, and the rules
and regulations promulgated thereunder.
“Advisers Act” shall mean the Investment Advisers Act of 1940, as amended, and the
rules and regulations thereunder.
“Applicable Time” shall mean the time of each sale of the applicable Shares pursuant
to this Agreement.
“Board” shall mean the Board of Directors of the Company.
“Business Day” shall mean any day other than a Saturday, a Sunday or a legal holiday
or a day on which banking institutions or trust companies are authorized or obligated by law to
close in New York City.
30
“Commission” shall mean the Securities and Exchange Commission.
“Effective Date” shall mean each date and time that the Registration Statement, any
post-effective amendment or amendments thereto and any Rule 462(b) Registration Statement became or
becomes effective.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Commission promulgated thereunder.
“Rule 158”, “Rule 430A”, “Rule 430C”, “Rule 436” and “Rule
492” refer to such rules under the 1933 Act.
[Remainder of Page Intentionally Blank]
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If the foregoing is in accordance with your understanding of our agreement, please sign and
return to us the enclosed duplicate hereof, whereupon this letter and your acceptance shall
represent a binding agreement among the Company, the Adviser, the Administrator and the Agent.
| Very truly yours, Prospect Capital Corporation |
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| By: | ||||
| Name: | ||||
| Title: | ||||
| Prospect Capital Management LLC |
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| By: | ||||
| Name: | ||||
| Title: | ||||
| Prospect Administration LLC |
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| By: | ||||
| Name: | ||||
| Title: | ||||
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The foregoing Agreement is
hereby confirmed and accepted
as of the date first-written above.
hereby confirmed and accepted
as of the date first-written above.
| By: | Title: |
33
SCHEDULE I
FORM OF PLACEMENT NOTICE
From: |
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Cc:
|
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To:
|
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Subject:
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Equity Distribution Agreement — Placement Notice |
Gentlemen:
Pursuant to the terms and subject to the conditions contained in the Equity Distribution Agreement
between Prospect Capital Corporation (the “Company”), Prospect Capital Management, LLC,
Prospect Administration, LLC and , a division of ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇▇, LLC (the
“Agent”) dated (the “Agreement”), I hereby request on behalf of the Company
that the Agent sell up to shares of the Company’s common stock, par value $0.001 per share, at
a minimum market price of $ per share.
The time period during which sales are requested to be made shall be .
[No more than shares may be sold in any one trading day.]
ADDITIONAL SALES PARAMETERS MAY BE ADDED, SUCH AS SPECIFIC DATES THE SHARES MAY NOT BE SOLD ON,
AND/OR THE MANNER IN WHICH SALES ARE TO BE MADE BY THE AGENT.
THE COMPANY MAY CANCEL THIS PLACEMENT NOTICE AT ANY TIME IN ITS SOLE DISCRETION SUBJECT TO THE
PROVISIONS OF SECTION 4(b) OF THE AGREEMENT.