UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE
14A
(Rule 14a-101)
INFORMATION
REQUIRED IN
PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the
Securities Exchange Act of 1934
Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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CORPORATE
CAPITAL TRUST, INC.
(Name of Registrant as Specified
in its Charter)
Payment of Filing Fee (Check the appropriate box):
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No fee required
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Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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Fee paid previously with preliminary materials
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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Date Filed:
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CORPORATE CAPITAL TRUST, INC.
555 California Street
50th Floor
San Francisco, California 94104
January 23, 2018
Dear Fellow Stockholders:
We invite you to attend
a Special Meeting of Stockholders (the “Special Meeting”) of Corporate Capital Trust, Inc. (the “Company”),
which will be held at Dechert LLP, 1095 Avenue of the Americas, 28th Floor, New York, New York 10036 on March 26, 2018 at
3:00 p.m., Eastern Time.
On December 11, 2017,
the Company’s existing investment adviser, KKR Credit Advisors (US) LLC (“KKR Credit”), and Franklin Square Holdings,
L.P. (“FS Investments”) announced that they had entered into agreements to form a joint venture to create an $18 billion
middle market alternative lending platform. In connection with those agreements, the Company is seeking stockholder approval for
the appointment of the joint venture as investment adviser, replacing the Company’s existing investment advisory agreement
with KKR Credit.
The proposals require
the holders of at least 50% of the Company’s outstanding shares, par value $0.001 per share (the “Shares”), to
be present at the Special Meeting in order for the proposals to be voted upon. In addition, the proposals require the affirmative
vote of the holders of (a) 67% or more of the Shares present at the Special Meeting if the holders of more than 50% of the
outstanding Shares are present or represented by proxy or (b) more than 50% of the outstanding Shares, whichever is less.
Your vote is very important. Your immediate response will help avoid potential
delays.
The proposals you
will be asked to consider at the Special Meeting are detailed briefly below and are explained in the enclosed Notice of Special
Meeting of Stockholders and proxy statement. At the Special Meeting, you will be asked to:
(i) approve a new
investment advisory agreement, by and between the Company and KKR Credit (the “KKR Investment Co-Advisory Agreement”),
and a new investment advisory agreement, by and between the Company and an affiliate of FS Investments (“FS Adviser”)
(the “FS Adviser Investment Co-Advisory Agreement” and, together with the KKR Investment Co-Advisory Agreement, the
“Investment Co-Advisory Agreements”), pursuant to which KKR Credit and FS Adviser will act as investment co-advisers
to the Company; and
(ii) approve a new
investment advisory agreement, by and between the Company and FS/KKR Advisor, LLC, a newly-formed investment adviser jointly operated
by KKR Credit and an affiliate of FS Investments (the “Joint Advisor”) (the “Joint Advisor Investment Advisory
Agreement”), pursuant to which the Joint Advisor will act as investment adviser to the Company.
A chart setting forth
the various steps of the proposed transition of advisory services is included on page 4 of the proxy statement.
You are being asked
to approve both the Investment Co-Advisory Agreements and the Joint Advisor Investment Advisory Agreement because there are different
conditions that must be satisfied before either the Investment Co-Advisory Agreements or the Joint Advisor Investment Advisory
Agreement can go into effect. The Investment Co-Advisory Agreements and the Joint Advisor Investment Advisory Agreement would not
be in effect simultaneously, and the Company ultimately intends to receive investment advisory services from the Joint Advisor
pursuant to the Joint Advisor Investment Advisory Agreement. If approved by stockholders and the other conditions described in
the enclosed proxy statement are satisfied or (to the extent permitted) waived, the Company plans to enter into the Investment
Co-Advisory Agreements, and the Company will receive investment advisory services in accordance with the terms of such agreements
pending receipt of exemptive relief from the U.S. Securities and Exchange Commission to permit certain business development companies
managed by affiliates of FS Investments, following the effectiveness of the Joint Advisor Investment Advisory Agreement, to co-invest
in privately negotiated investment transactions with the Company, Corporate Capital Trust II and certain other accounts managed
by KKR Credit (“Exemptive Relief”) and satisfaction of the other conditions to the effectiveness of the Joint Advisor
Investment Advisory Agreement described in the enclosed proxy statement. If Exemptive Relief is obtained and the other conditions
to effectiveness of the Joint Advisor Investment Advisory Agreement are satisfied or (to the extent permitted) waived, the Investment
Co-Advisory Agreements will terminate and the Company will receive investment advisory services in accordance with the terms of
the Joint Advisor Investment Advisory Agreement. The Company’s stockholders are not being asked to vote on Exemptive Relief
or the Company’s decision to seek Exemptive Relief. Exemptive Relief is related to the Joint Advisor Investment Advisory
Agreement and is an integral part of the effectiveness of the Joint Advisor Investment Advisory Agreement.
The Company’s
board of directors unanimously recommends that you vote FOR each of the proposals to be considered and voted on at the Special
Meeting. No other business will be presented at the Special Meeting.
Again, it is important
that your Shares be represented and voted at the Special Meeting. Therefore, we urge you to promptly vote and submit your proxy
via the Internet or by phone, or by signing, dating and returning the enclosed proxy card or voting instruction form in the enclosed
envelope. If you attend the Special Meeting, you can vote in person, even if you have previously submitted your proxy. Your vote
and participation in the governance of the Company are very important to us.
On behalf of the
Company’s board of directors, we would like to express our appreciation for your investment in Corporate Capital Trust,
Inc. We look forward to greeting as many of you as possible at the Special Meeting.
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Sincerely,
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/s/ Todd C. Builione
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Todd C. Builione
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Chief Executive Officer and Director
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YOUR VOTE IS IMPORTANT
PLEASE SUBMIT YOUR PROXY PROMPTLY
Please help reduce corporate expenses by
submitting your vote via the Internet at www.proxyvote.com.
CORPORATE CAPITAL TRUST, INC.
555 California Street
50th Floor
San Francisco, California 94104
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
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Date:
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March 26, 2018
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Time:
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3:00 p.m., Eastern Time
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Place:
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Dechert LLP, 1095 Avenue of the Americas, 28th Floor, New York, New York 10036
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Record Date:
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January 22, 2018. Only stockholders of record as of the close of business on the record date are entitled to notice of, to attend and to vote at the Special Meeting.
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Items of Business:
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To approve a new investment advisory agreement, by and between the Company and KKR Credit Advisors (US) LLC (“KKR
Credit”) (the “KKR Investment Co-Advisory Agreement”), and a new investment advisory agreement, by and between
the Company and an affiliate of Franklin Square Holdings, L.P. (“FS Investments” and, such adviser, “FS Adviser”)
(the “FS Adviser Investment Co-Advisory Agreement” and, together with the KKR Investment Co-Advisory Agreement, the
“Investment Co-Advisory Agreements”), pursuant to which KKR Credit and FS Adviser will act as investment co-advisers
to the Company; and
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To approve a new investment advisory agreement, by and between the Company and FS/KKR Advisor, LLC, a newly-formed investment
adviser jointly operated by KKR Credit and an affiliate of FS Investments (the “Joint Advisor”) (the “Joint
Advisor Investment Advisory Agreement”), pursuant to which the Joint Advisor will act as investment adviser to the Company.
You are being asked to approve both the
Investment Co-Advisory Agreements and the Joint Advisor Investment Advisory Agreement because there are different conditions that
must be satisfied before either the Investment Co-Advisory Agreements or the Joint Advisor Investment Advisory Agreement can go
into effect. The Investment Co-Advisory Agreements and the Joint Advisor Investment Advisory Agreement would not be in effect simultaneously,
and the Company ultimately intends to receive investment advisory services from the Joint Advisor pursuant to the Joint Advisor
Investment Advisory Agreement. If approved by stockholders and the other conditions described in the enclosed proxy statement are
satisfied or (to the extent permitted) waived, the Company plans to enter into the Investment Co-Advisory Agreements, and the Company
will receive investment advisory services in accordance with the terms of such agreements pending receipt of exemptive relief from
the U.S. Securities and Exchange Commission to permit certain business development companies managed by affiliates of FS Investments,
following the effectiveness of the Joint Advisor Investment Advisory Agreement, to co-invest in privately negotiated investment
transactions with the Company, Corporate Capital Trust II and certain other accounts managed by KKR Credit (“Exemptive Relief”)
and satisfaction of the other conditions to the effectiveness of the Joint Advisor Investment Advisory Agreement described in the
enclosed proxy statement. If Exemptive Relief is obtained and the other conditions to effectiveness of the Joint Advisor Investment
Advisory Agreement are satisfied or (to the extent permitted) waived, the Investment Co-Advisory Agreements will terminate and
the Company will receive investment advisory services in accordance with the terms of the Joint Advisor Investment Advisory Agreement.
The Company’s stockholders are not being asked to vote on Exemptive Relief or the Company’s decision to seek Exemptive
Relief. Exemptive Relief is related to the Joint Advisor Investment Advisory Agreement and is an integral part of the effectiveness
of the Joint Advisor Investment Advisory Agreement.
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Proxy Voting:
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Important.
Please authorize your
proxy to vote your shares promptly to ensure the presence of a quorum at the Special Meeting. You may execute the proxy card using
the methods described in the proxy card. Submitting your proxy now will not prevent you from voting your shares in person at the
Special Meeting, as your proxy is revocable at your option. Proxies may be revoked at any time before they are exercised by submitting
a written notice of revocation or a subsequently executed proxy, or by attending the Special Meeting and voting in person.
For Assistance.
If you
have any questions or need assistance voting, please call our proxy solicitor, Broadridge Investor Communication Solutions, Inc.,
at (833) 868-3374.
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The Company has enclosed a copy of the
proxy statement and the proxy card. The Company’s Proxy Statement, the Notice of Special Meeting of Stockholders and the
proxy card are available at www.corporatecapitaltrust.com/investor-resources.
If you plan to attend the Special Meeting
and vote your Shares in person, you will need to bring photo identification in order to be admitted to the Special Meeting.
To obtain directions to the Special Meeting,
please call the Company at (415) 315-3620.
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By Order of the Board of Directors,
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/s/ Philip Davidson
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Philip Davidson
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General Counsel and Secretary
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San Francisco, California
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January 23, 2018
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The use of cameras (for still or video
recording) at the Special Meeting is prohibited and will not be allowed into the meeting or any other adjacent areas, except by
credentialed media. We realize that many mobile phones have built-in cameras; while these phones may be brought into the venue,
the camera function may not be used at any time.
CORPORATE CAPITAL TRUST, INC.
555 California Street
50th Floor
San Francisco, California 94104
SPECIAL MEETING OF STOCKHOLDERS
To Be Held On March 26, 2018
PROXY STATEMENT
INFORMATION ABOUT THE SPECIAL MEETING
AND THE VOTE
Corporate Capital
Trust, Inc. (the “Company”) has made these proxy materials available to you on the Internet or has delivered printed
versions of these materials to you by mail in connection with the solicitation of proxies by the board of directors of the Company
(the “Board”) for use at the Special Meeting of Stockholders to be held on March 26, 2018, at 3:00 p.m., Eastern Time,
and any postponements or adjournments thereof (the “Special Meeting”). The Special Meeting will be held at Dechert
LLP, 1095 Avenue of the Americas, 28th Floor, New York, New York 10036. You are invited to attend the Special Meeting and requested
to vote on the proposals described in this proxy statement (this “Proxy Statement”).
The Company’s
proxy materials for the Special Meeting, including this Proxy Statement and the Notice of Special Meeting of Stockholders (the
“Notice of Special Meeting”) were first sent or made available to stockholders on or about January 23, 2018. In addition,
the Company filed with the U.S. Securities and Exchange Commission (the “SEC”) on December 15, 2017 Definitive Additional
Materials on Schedule 14A (the “Definitive Additional Materials”) relating to the proposals to be considered and voted
on at the Special Meeting. Accordingly, stockholders are encouraged to read this Proxy Statement and the accompanying materials
in conjunction with such Definitive Additional Materials carefully and in their entirety.
Items of Business
The Company is requesting
that stockholders vote on two items at the Special Meeting:
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(i)
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the proposal to approve a new investment advisory agreement, by and between the Company and KKR
Credit Advisors (US) LLC (“KKR Credit”) (the “KKR Investment Co-Advisory Agreement”), and a new investment
advisory agreement, by and between the Company and an affiliate of Franklin Square Holdings, L.P. (“FS Investments”
and, such adviser, “FS Adviser”) (the “FS Adviser Investment Co-Advisory Agreement” and, together with
the KKR Investment Co-Advisory Agreement, the “Investment Co-Advisory Agreements”), pursuant to which KKR Credit and
FS Adviser will act as investment co-advisers to the Company (such proposal, the “Investment Co-Advisory Agreements Proposal”);
and
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the proposal to approve a new investment advisory agreement, by and between the Company and FS/KKR
Advisor, LLC, a newly-formed investment adviser jointly operated by KKR Credit and an affiliate of FS Investments (the “Joint
Advisor”) (the “Joint Advisor Investment Advisory Agreement”), pursuant to which the Joint Advisor will act as
investment adviser to the Company (such proposal, the “Joint Advisor Investment Advisory Agreement Proposal”).
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You are being asked
to approve both the Investment Co-Advisory Agreements and the Joint Advisor Investment Advisory Agreement because there are different
conditions that must be satisfied before either the Investment Co-Advisory Agreements or the Joint Advisor Investment Advisory
Agreement can go into effect. The Investment Co-Advisory Agreements and the Joint Advisor Investment Advisory Agreement would not
be in effect simultaneously, and the Company ultimately intends to receive investment advisory services from the Joint Advisor
pursuant to the Joint Advisor Investment Advisory Agreement. If approved by stockholders and the other conditions described herein
are satisfied or (to the extent permitted) waived, the Company plans to enter into the Investment Co-Advisory Agreements, and the
Company will receive investment advisory services in accordance with the terms of such agreements pending receipt of Exemptive
Relief (as defined herein) from the SEC to permit certain business development companies (“BDCs”) managed by affiliates
of FS Investments, following the effectiveness of the Joint Advisor Investment Advisory Agreement, to co-invest in privately negotiated
investment transactions with the Company, Corporate Capital Trust II (“CCT II”) and certain other accounts managed
by KKR Credit and satisfaction of the other conditions to the effectiveness of the Joint Advisor Investment Advisory Agreement
described herein. If Exemptive Relief is obtained and the other conditions to effectiveness of the Joint Advisor Investment Advisory
Agreement are satisfied or (to the extent permitted) waived, the Investment Co-Advisory Agreements will terminate and the Company
will receive investment advisory services in accordance with the terms of the Joint Advisor Investment Advisory Agreement. The
Company’s stockholders are not being asked to vote on Exemptive Relief or the Company’s decision to seek Exemptive
Relief. Exemptive Relief is related to the Joint Advisor Investment Advisory Agreement and is an integral part of the effectiveness
of the Joint Advisor Investment Advisory Agreement.
KKR Credit and FS
Adviser, as participants in the solicitation of the approvals sought pursuant to this Proxy Statement, are paying all costs associated
with the solicitation of proxies for the Special Meeting.
Background
The Company currently
receives investment advisory services from KKR Credit pursuant to the Investment Advisory Agreement, dated November 14, 2017, by
and between the Company and KKR Credit (the “Current Investment Advisory Agreement”). The Company also currently receives
administrative services from KKR Credit pursuant to the Administrative Services Agreement, dated November 14, 2017, by and between
the Company and KKR Credit (the “Current Administrative Services Agreement”).
As the Company announced
on December 11, 2017, the Company desires to enter into new investment advisory relationships with KKR Credit and FS Adviser pursuant
to the Investment Co-Advisory Agreements or with the Joint Advisor pursuant to the Joint Advisor Investment Advisory Agreement.
The Company’s Current Investment Advisory Agreement and the Current Administrative Services Agreement will be terminated
upon the effectiveness of the Investment Co-Advisory Agreements or the Joint Advisor Investment Advisory Agreement (the date of
such termination, the “Current Agreement End Date”). KKR Credit and certain affiliates of FS Investments have entered
into a master transaction agreement (the “Master Transaction Agreement”) setting out the terms of the relationship
between KKR Credit and FS Adviser. In addition, another BDC that KKR Credit sub-advises, CCT II, and certain BDCs that FS Investments
sponsors, FS Investment Corporation (“FSIC”), FS Investment Corporation II (“FSIC II”), FS Investment Corporation
III (“FSIC III”) and FS Investment Corporation IV (“FSIC IV” and together with FSIC, FSIC II and FSIC III,
the “FSIC Funds”), are each seeking stockholder approval to enter into a new investment advisory relationship with
KKR Credit, affiliates of FS Investments and the Joint Advisor, as applicable. The Board, including a majority of the members of
the Board who are not parties to the Investment Co-Advisory Agreements or the Joint Advisor Investment Advisory Agreement, or “interested
persons,” as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended (the “1940 Act”),
of any such party (the “Independent Directors”), has approved the Investment Co-Advisory Agreements and the Joint Advisor
Investment Advisory Agreement, and has deemed entry into such agreements to be in the best interests of the Company and its stockholders.
The Board is seeking, as required by the 1940 Act, the approval by the stockholders of the Company of the Investment Co-Advisory
Agreements Proposal and the Joint Advisor Investment Advisory Agreement Proposal.
Consequences of Approval
If the stockholders
of the Company approve the Investment Co-Advisory Agreements Proposal, KKR Credit and FS Adviser would serve as investment co-advisers
to the Company pursuant to the Investment Co-Advisory Agreements, effective as of the later of the date of such approval and the
Closing Date (as defined in the following sentence). The “Closing Date” means the first day of the month following
the occurrence of the last of the following:
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(i)
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the stockholders of FSIC II approve (a) an investment advisory and administrative services agreement
with the Joint Advisor (the “FSIC II Joint Advisor Investment Advisory Agreement”) and (b) investment advisory and
administrative services agreements with each of FSIC II Advisor, LLC, the current investment adviser to FSIC II (“FSIC II
Advisor”), and KKR Credit (the “FSIC II Investment Co-Advisory Agreements”); and
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either (a) the stockholders of FSIC approve (1) an investment advisory agreement with the Joint
Advisor (the “FSIC Joint Advisor Investment Advisory Agreement”) and (2) investment advisory agreements with each of
FB Income Advisor, LLC, the current investment adviser to FSIC (“FB Income Advisor”), and KKR Credit (the “FSIC
Investment Co-Advisory Agreements”); or (b) the stockholders of FSIC III approve (1) an investment advisory and administrative
services agreement with the Joint Advisor (the “FSIC III Joint Advisor Investment Advisory Agreement”) and (2) investment
advisory and administrative services agreements with each of FSIC III Advisor, LLC, the current investment adviser to FSIC III
(“FSIC III Advisor”), and KKR Credit (the “FSIC III Investment Co-Advisory Agreements”).
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We refer herein to the approvals required
by stockholders of other BDCs described in the preceding sentence as the “FS BDC Closing Date Stockholder Approvals.”
The effectiveness of the Investment Co-Advisory Agreements is contingent upon the FS BDC Closing Date Stockholder Approvals, unless
such condition is (to the extent permitted) waived.
If the stockholders
of the Company approve the Joint Advisor Investment Advisory Agreement Proposal, then the Joint Advisor would serve as investment
adviser to the Company pursuant to the Joint Advisor Investment Advisory Agreement from and after the Joint Advisor Effective Date
(as defined in the following sentence). The “Joint Advisor Effective Date” means such date that (i) the stockholders
of the Company, CCT II and each of the FSIC Funds approve their respective investment advisory agreements with the Joint Advisor,
and (ii) Exemptive Relief has been obtained. We refer herein to the approvals required by stockholders of BDCs other than the Company
described in clause (i) of the preceding sentence as the “Other BDC Joint Advisor Investment Advisory Agreement Stockholder
Approvals.” Furthermore, if the Investment Co-Advisory Agreements are in effect and the Joint Advisor Effective Date does
not occur, either because Exemptive Relief has not been obtained or because any of the Other BDC Joint Advisor Investment Advisory
Agreement Stockholder Approvals has not been obtained (unless such condition is (to the extent permitted) waived), the Investment
Co-Advisory Agreements will remain in full force and effect in accordance with their terms.
The Company ultimately
intends to receive investment advisory services from the Joint Advisor pursuant to the Joint Advisor Investment Advisory Agreement.
However, due to the various conditions required for the Investment Co-Advisory Agreements and the Joint Advisor Investment Advisory
Agreement to each become effective, the Company is seeking, as required by the 1940 Act, stockholder approval of each of the Investment
Co-Advisory Agreements and the Joint Advisor Investment Advisory Agreement in order to ensure the continuous provision of investment
advisory services to the Company by KKR Credit, FS Adviser and/or the Joint Advisor, as applicable. If the Joint Advisor Effective
Date occurs on the same day as or prior to the Closing Date, then the Joint Advisor would serve as investment adviser to the Company
pursuant to the Joint Advisor Investment Advisory Agreement and the Investment Co-Advisory Agreements would not become effective.
If the Joint Advisor Effective Date occurs after the Closing Date, then KKR Credit and FS Adviser would serve as investment co-advisers
to the Company pursuant to the Investment Co-Advisory Agreements from the later of the date approval of such agreements is obtained
and the Closing Date until the Joint Advisor Effective Date, and the Investment Co-Advisory Agreements would automatically terminate
upon the effectiveness of the Joint Advisor Investment Advisory Agreement. Accordingly, the Investment Co-Advisory Agreements and
the Joint Advisor Investment Advisory Agreement would not be simultaneously effective at any time.
In order for KKR Credit
and FS Adviser to serve as investment co-advisers to the Company pursuant to the Investment Co-Advisory Agreements, the stockholders
of the Company must approve the Investment Co-Advisory Agreements Proposal and the other conditions to the Closing Date, which
consist of the FS BDC Closing Date Stockholder Approvals, must be satisfied or (to the extent permitted) waived prior to the Joint
Advisor Effective Date. In order for the Joint Advisor to serve as investment adviser to the Company pursuant to the Joint Advisor
Investment Advisory Agreement, the stockholders of the Company must approve the Joint Advisor Investment Advisory Agreement Proposal
and the other conditions to the Joint Advisor Effective Date, which consist of (i) the Other BDC Joint Advisor Investment Advisory
Agreement Stockholder Approvals and (ii) Exemptive Relief having been obtained, must be satisfied or (to the extent permitted)
waived. As such, even if the Company’s stockholders approve the Investment Co-Advisory Agreements, such agreements will not
go into effect unless each of the FS BDC Closing Date Stockholder Approvals has been obtained, unless such condition is (to the
extent permitted) waived. In addition, even if the Company’s stockholders approve the Joint Advisor Investment Advisory Agreement,
such agreement will not go into effect unless each of the Other BDC Joint Advisor Investment Advisory Agreement Stockholder Approvals
has been obtained, unless such condition is (to the extent permitted) waived.
KKR Credit and FB
Income Advisor, FSIC II Advisor, FSIC III Advisor and FSIC IV Advisor, LLC, the current investment adviser to FSIC IV (collectively,
the “FS Advisor Entities”), have agreed to coordinate their activities during the period in which the Investment Co-Advisory
Agreements and the Joint Advisor Investment Advisory Agreement would be in effect to avoid duplication of efforts and ensure a
balanced and effective allocation of responsibilities and net fee revenue earned by KKR Credit, the FS Advisor Entities and the
Joint Advisor, and efficiency in the provision of the required services to the Company thereunder.
Because the Company
ultimately intends to receive advisory services from the Joint Advisor pursuant to the Joint Advisor Investment Advisory Agreement
and considering the length of time that it may take for such agreement to become effective, the Company expects that the approval
by its stockholders of the Investment Co-Advisory Agreements Proposal and/or the Joint Advisor Investment Advisory Agreement Proposal
will remain valid indefinitely. However, even if the Company’s stockholders have approved the Investment Co-Advisory Agreements
Proposal and the Joint Advisor Investment Advisory Agreement Proposal, KKR Credit, together with FS Investments and the FS Advisor
Entities, will each have the right to terminate the Master Transaction Agreement and the proposed relationship described herein
if the Closing Date does not occur by January 10, 2019.
The Investment Co-Advisory
Agreements Proposal and the Joint Advisor Investment Advisory Agreement Proposal are not contingent on one another. However, if
the stockholders of the Company do not approve both the Investment Co-Advisory Agreements Proposal and the Joint Advisor Investment
Advisory Agreement Proposal, then the Board will consider and evaluate its options to determine what alternatives are in the Company’s
best interests and that of the Company’s stockholders, such as resubmitting the Investment Co-Advisory Agreements Proposal
and/or the Joint Advisor Investment Advisory Agreement Proposal for approval by the Company’s stockholders.
The below chart sets
forth the various stages of the proposed transition of investment advisory services:
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(1)
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As described herein, concurrently with seeking stockholder approval of the Investment Co-Advisory
Agreements and the Joint Advisor Investment Advisory Agreement, KKR Credit is seeking exemptive relief in the form of either interpretive
guidance from the SEC confirming that KKR Credit’s current co-investment relief order will extend to the FSIC Funds or a
new co-investment exemptive relief order issued by the SEC to KKR Credit that will cover the FSIC Funds, in each case that would
permit the FSIC Funds, together with the Company and CCT II, following the effectiveness of the Joint Advisor Investment Advisory
Agreement, to co-invest in privately negotiated investment transactions with certain accounts managed by KKR Credit.
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The Company will not enter into either the Investment Co-Advisory Agreements or the Joint Advisor
Investment Advisory Agreement unless and until approved by the Company’s stockholders.
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(3)
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“FS BDC Closing Date Stockholder Approvals” is defined as approvals by the stockholders
of (i) FSIC II of (a) the FSIC II Joint Advisor Investment Advisory Agreement and (b) the FSIC II Investment Co-Advisory Agreements
and (ii) either (a) FSIC of (1) the FSIC Joint Advisor Investment Advisory Agreement and (2) the FSIC Investment Co-Advisory Agreements
or (b) FSIC III of (1) the FSIC III Joint Advisor Investment Advisory Agreement and (2) the FSIC III Investment Co-Advisory Agreements.
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(4)
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“Other BDC Joint Advisor Investment Advisory Agreement Stockholder Approvals” is defined
as approvals by the stockholders of each of CCT II and the FSIC Funds of their respective investment advisory agreements with the
Joint Advisor.
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Management Fee and Incentive
Fee Under the Agreements
The management fee
is 1.50% under the Current Investment Advisory Agreement and will remain unchanged under the Investment Co-Advisory Agreements
(in the aggregate) and the Joint Advisor Investment Advisory Agreement.
Under the Current
Investment Advisory Agreement (i) the hurdle rate is 1.75% per quarter and (ii) the “catch-up” feature begins at 2.1875%.
Under the Investment Co-Advisory Agreements (in the aggregate) and the Joint Advisor Investment Advisory Agreement, the hurdle
rate and the “catch-up” feature will remain unchanged. However, the Investment Co-Advisory Agreements and the Joint
Advisor Investment Advisory Agreement will incorporate certain incremental advisory fee arrangements currently being provided under
a temporary waiver agreement with KKR Credit. Specifically, (a) the “look back period” will be defined as the most
recently completed quarter and the 11 preceding calendar quarters and (b) the “cumulative net increase in net assets resulting
from operations” will be defined to remove the addition of management fees paid following November 14, 2017 for purposes
of calculating the incentive fee.
Under the Current
Investment Advisory Agreement, the subordinated incentive fee on income is subject to a total return requirement, which provides
generally that no incentive fee will be payable except to the extent that 20.0% of the cumulative net increase in net assets resulting
from operations over the then-current and three preceding calendar quarters (or for periods before December 31, 2017, the period
that commences on January 1, 2017 and ends on the last day of the most recently completed quarter) exceeds the cumulative incentive
fees accrued and/or paid for the same period. Accordingly, any subordinated incentive fee on income that is payable under the Current
Investment Advisory Agreement in a calendar quarter will be limited to the lesser of (1) 20.0% of all of the Company’s pre-incentive
fee net investment income when the Company’s pre-incentive fee net investment income exceeds the applicable quarterly hurdle
rate for such calendar quarter, subject to the catch-up provision, and (2) (A) 20.0% of the cumulative net increase in net assets
resulting from operations for the then-current and three preceding calendar quarters or the period that commences on January 1,
2017 and ends on the last day of the most recently completed quarter, whichever period is shorter, minus (B) the cumulative incentive
fees accrued and/or paid for the three preceding calendar quarters or the period that commences on January 1, 2017 and ends on
the last day of the prior calendar quarter, whichever period is shorter. For the foregoing purpose, the “cumulative net increase
in net assets resulting from operations” is the sum of the Company’s pre-incentive fee net investment income, management
fees, realized gains and losses and unrealized appreciation and depreciation.
Under the Investment
Co-Advisory Agreements (in the aggregate) and the Joint Advisor Investment Advisory Agreement, the subordinated incentive fee on
income will continue to be subject to a total return requirement, but differs from the Current Investment Advisory Agreement in
that the total return requirement will be calculated based on the Company’s reported income per share over the most recently
completed quarter and the 11 preceding calendar quarters (the “look-back period”). Specifically, the subordinated incentive
fee in any quarter will not exceed (A) the aggregate sum of, for each calendar quarter of the look-back period, (a) (x) 20.0%
of the cumulative net increase in net assets resulting from operations for such quarter less (y) the subordinated incentive fees
on income accrued by the Company for such quarter (not including for the current quarter for which the subordinated incentive fees
on income is being calculated), divided by (b) the weighted average number of Shares outstanding during such calendar quarter,
multiplied by (B) the weighted average number of Shares outstanding during the calendar quarter for which the subordinated incentive
fee on income is being calculated. For the foregoing purpose, the “cumulative net increase in net assets resulting from operations”
is the sum of the Company’s pre-incentive fee net investment income, management fees payable with respect to the periods
prior to November 14, 2017, realized gains and losses and unrealized appreciation and depreciation.
The incentive fee
under the Investment Co-Advisory Agreements (in the aggregate) and the Joint Advisor Investment Advisory Agreement will otherwise
remain substantially consistent with the Current Investment Advisory Agreement. See “Proposal 1—Terms of the KKR Investment
Co-Advisory Agreement—Fees and Expenses,” “Proposal 1—Terms of the FS Adviser Investment Co-Advisory Agreement—Fees
and Expenses” and “Proposal 2—Terms of the Joint Advisor Investment Advisory Agreement—Fees and Expenses.”
Composition of the Board
Following Entry into the Agreements
On the date that is
the later of the Closing Date and the date on which the stockholders of the Company approve either or both of the Investment Co-Advisory
Agreements Proposal and the Joint Advisor Investment Advisory Agreement Proposal (such applicable date, the “Board Appointment
Date”), then, subject to nomination by and approval of the Board, KKR Credit and the FS Advisor Entities (acting collectively)
have agreed that they will each be entitled to recommend the appointment of one “interested” director to the Board,
to the extent that the applicable party does not have an appointee on the Board at such time. KKR Credit currently has one appointee,
Todd C. Builione, serving as an “interested” director to the Board. In addition, the FS Advisor Entities will be entitled
to recommend, subject to approval by the Board, the appointment of one “independent” director to the Board on the Board
Appointment Date. Recommendations for the appointment of directors to the Board will be considered and evaluated by the nominating
and governance committee of the Board pursuant to the procedures set forth in such committee’s charter. If such appointments
are approved by the nominating and governance committee of the Board and the Board, then the composition of the Board will change,
which the Company expects will result in approximately 33% of the directors serving on the Board being “interested,”
as compared to approximately 25% of the directors serving on the Board being “interested” as of the date of this Proxy
Statement, although the Board may consider adding additional “independent” directors to maintain a 75% independent
Board.
Record Date
Only stockholders
of record as of the close of business on January 22, 2018 (the “Record Date”) are entitled to notice of, to attend
and to vote at, the Special Meeting and any postponements and/or adjournments thereof. As of the Record Date, there were 127,130,589
issued and outstanding Shares.
Proxy and Voting Procedures
Stockholders are entitled
to one vote for each Share held, and may vote in person at the Special Meeting or by proxy in accordance with the instructions
provided below.
Your vote is
important. By authorizing a proxy promptly, the expense of a second mailing and/or additional solicitations by other means, including,
in person and by telephone, facsimile, and email may be avoided.
Voting by Stockholders
of Record
If your Shares are
registered directly in your name with the Company’s transfer agent, DST Systems, Inc., you are considered the stockholder
of record with respect to those Shares, and the Notice of Special Meeting and other proxy materials were furnished directly to
you by the Company. If you are a stockholder of record, there are four ways to vote:
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In person.
You may vote in person at the Special Meeting by requesting a ballot when you arrive. You must bring valid picture identification such as a driver’s license or passport and may be requested to provide proof of Share ownership as of the Record Date.
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Via the Internet.
You may vote by proxy via the Internet by visiting
www.proxyvote.com
and entering the control number found on the proxy card. After inputting the control number, you may direct your proxy how to vote on each proposal. You will have an opportunity to review your directions and make any necessary changes before submitting your directions.
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By Telephone.
You may vote by proxy by calling the toll free number and entering the control number located on the proxy card. After inputting the control number, you may direct your proxy how to vote on each proposal. You will have an opportunity to review your directions and make any necessary changes before submitting your directions.
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By Mail.
If you receive or request printed copies of the proxy materials by mail, you will receive a proxy card; and you may vote by proxy by filling out the enclosed proxy card and returning it in the envelope provided. Allow sufficient time for your proxy card to be timely received by 5:00 p.m., Eastern Time, the day before the Special Meeting.
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Voting by Beneficial Owners
of Shares
If your Shares are
held by a broker or other custodian, the proxy materials were furnished to the broker or other custodian that holds your Shares.
If you are the beneficial owner of Shares, there are four ways you can vote:
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In person.
If you are the beneficial owner of Shares held by a broker or other custodian and you wish to vote your Shares in person at the Special Meeting, you must obtain a “legal proxy” from the broker or other custodian that holds your Shares. A legal proxy is a written document that will authorize you to vote your Shares held by a broker or other custodian at the Special Meeting. Please contact the broker or other custodian that holds your Shares for instructions regarding obtaining a legal proxy.
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You
must bring a copy of the legal proxy to the Special Meeting and request a ballot when you arrive. You must also bring valid picture
identification, such as a driver’s license or passport. In order for your votes to be counted, you must hand both the copy
of the legal proxy and your completed ballot to a Company representative to be provided to the inspector of election.
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Via the Internet.
You may vote by proxy via the Internet by visiting
www.proxyvote.com
and entering the control number found on the voting instruction form. The availability of Internet voting may depend on the voting process of the broker or other custodian that holds your Shares.
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By Telephone.
If you request printed copies of the proxy materials by mail, you will receive a voting instruction form; and you may vote by proxy by calling the toll free number and entering the control number found on the voting instruction form. The availability of telephone voting may depend on the voting process of the organization that holds your Shares.
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By Mail.
If you request printed copies of the proxy materials by mail, you will receive a voting instruction form; and you may vote by proxy by filling out the voting instruction form and returning it in the envelope provided. Please allow sufficient time for the proxy card to be timely received by 5:00 p.m., Eastern Time, the day before the Special Meeting.
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Shares represented
by valid proxies at the Special Meeting will be voted in accordance with the directions given. If the enclosed proxy card is signed
and returned without any directions given, the Shares will be voted “FOR” both of the proposals described in this Proxy
Statement.
Quorum; Adjournments
The presence in person
or by proxy of the stockholders of the Company entitled to cast 50% of the votes entitled to be cast at the Special Meeting will
constitute a quorum for the transaction of business. Your Shares will be counted for purposes of determining if there is a quorum,
if you:
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are entitled to vote and you are present in person at the Special Meeting; or
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have properly voted by proxy via the Internet, by telephone or by mail.
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Abstentions will be
included when determining the presence of a quorum. Shares for which brokers have not received voting instructions from the beneficial
owner of the Shares and do not have discretionary authority to vote the Shares on the Investment Co-Advisory Agreements Proposal
or the Joint Advisor Investment Advisory Agreement Proposal, as the case may be (which are considered “broker non-votes”
with respect to such proposals), will not be treated as Shares present for quorum purposes. If a quorum is not present, the Company
may adjourn the Special Meeting to a date not more than 120 days after the Record Date without further notice, other than announcement
at the Special Meeting, to solicit additional proxies. The persons named as proxies will vote those proxies “FOR” such
adjournment. Any business that might have been transacted at the Special Meeting as originally noticed may be transacted at any
adjourned meeting(s) at which a quorum is present.
If sufficient votes
in favor of one proposal have been received by the time of the Special Meeting, such proposal will be acted upon and such actions
will be final, regardless of any subsequent adjournments to consider the other proposal.
Vote Required; Broker Non-Votes; Effect
of Abstentions
Approval of each of
the Investment Co-Advisory Agreements Proposal and the Joint Advisor Investment Advisory Agreement Proposal requires the affirmative
vote of the holders of a majority of the outstanding Shares entitled to vote at the Special Meeting. The 1940 Act defines “a
majority of the outstanding Shares” as (a) 67% or more of the Shares present at the Special Meeting if the holders of
more than 50% of the outstanding Shares are present or represented by proxy or (b) more than 50% of the outstanding Shares,
whichever is less. You may vote for or against or abstain on each of the Investment Co-Advisory Agreements Proposal and the Joint
Advisor Investment Advisory Agreement Proposal. Abstentions and broker non-votes will not count as affirmative votes cast and will
therefore have the same effect as votes against the Investment Co-Advisory Agreements Proposal and the Joint Advisor Investment
Advisory Agreement Proposal. Proxies received will be voted “FOR” the Investment Co-Advisory Agreements Proposal and
the Joint Advisor Investment Advisory Agreement Proposal unless stockholders designate otherwise.
Stockholders of Record
If you are a stockholder
of record, your properly executed proxy received prior to the Special Meeting, and not duly revoked, will be voted in accordance
with your instructions marked thereon. However, if you sign and return a proxy card without giving specific voting instructions,
then the proxy holders will vote your Shares in the manner recommended by the Board on all matters presented in this Proxy Statement.
Beneficial Owners of Shares
If you are a beneficial
owner of Shares held by a broker or other custodian, you may instruct the broker or other custodian that holds your Shares as to
how to vote your Shares via the voting instruction form included with this Proxy Statement. All voting instruction forms timely
received by the broker or other custodian that holds your Shares, and not duly revoked, will be voted in accordance with the instructions
marked thereon. However, if you do not provide your broker or other custodian of your Shares with specific voting instructions,
then your Shares are referred to as “uninstructed shares;” and whether your broker or other custodian has the discretion
to vote such uninstructed shares on your behalf depends on the ballot item. Generally, the organization that holds your Shares
may vote them in its discretion on “routine” matters. However, the broker or other custodian cannot vote uninstructed
Shares on “non-routine” matters, such as the Investment Co-Advisory Agreements Proposal or the Joint Advisor Investment
Advisory Agreement Proposal, and will inform the inspector of election that it does not have the authority to vote on such matters
with respect to your Shares. This is referred to as a “broker non-vote.” For your vote to be counted on either the
Investment Co-Advisory Agreements Proposal or the Joint Advisor Investment Advisory Agreement Proposal, you must submit your voting
instruction form to your broker or other custodian.
Revocation of Proxies
You may revoke your
proxy and change your vote before the proxies are voted at the Special Meeting. You may change your vote using the Internet or
telephone methods described herein, prior to the applicable cutoff time before the Special Meeting, in which case only your latest
Internet or telephone proxy will be counted. Alternatively, you may revoke your proxy and change your vote by signing and returning
a new proxy dated as of a later date, or by attending the Special Meeting and voting in person. However, your attendance at the
Special Meeting will not automatically revoke your proxy, unless you properly vote at the Special Meeting, or specifically request
that your prior proxy be revoked by delivering a written notice of revocation to the Company prior to the Special Meeting at the
following address: Corporate Capital Trust, Inc., 555 California Street, 50th Floor, San Francisco, California 94104, Attention:
Philip Davidson, General Counsel and Secretary.
Announcement of Voting Results
Preliminary voting
results regarding the Company and, to the extent available, CCT II and the FSIC Funds, will be announced at the Special Meeting.
Final voting results regarding the Company will be published in a current report on Form 8-K within four business days after the
date of the Special Meeting. Final voting results for CCT II and the FSIC Funds will be published when available after the date
of the special meeting of the stockholders of each of CCT II and the FSIC Funds.
Information Regarding this Solicitation
KKR Credit and FS
Adviser, as participants in the solicitation of the approvals sought pursuant to this Proxy Statement, are paying all costs associated
with the solicitation of proxies for the Special Meeting. Broadridge Investor Communication Solutions, Inc., which we refer to
as “Broadridge,” has been retained to assist in the solicitation of proxies at a cost that the Company anticipates
will not exceed $302,925 plus out-of-pocket expenses.
In addition, KKR Credit
and FS Adviser must pay brokers or other custodians representing beneficial owners of Shares certain fees associated with forwarding
the printed proxy materials by mail to beneficial owners who specifically request them, and obtaining beneficial owners’
voting instructions. KKR Credit and FS Adviser will reimburse such persons for their reasonable expenses in so doing.
In addition to the
solicitation of proxies by mail, proxies may be solicited by other means, including, in person and by telephone, facsimile, and
email, by Broadridge and/or by directors, officers and employees of the Company and its affiliates, none of whom will receive any
additional compensation for their services.
Notice of Internet Availability of Proxy
Materials
In accordance with
regulations of the SEC, the Company has made this Proxy Statement and the Notice of Special Meeting available to stockholders on
the Internet. Stockholders may (i) access and review the Company’s proxy materials, (ii) authorize their proxies, as described
in “
Proxy and Voting Procedures,
” below, and/or (iii) elect to receive future proxy materials by electronic
delivery, via the Internet address provided below.
This Proxy Statement
and the Notice of Special Meeting are available at www.proxyvote.com.
Electronic Delivery of Proxy Materials
Pursuant to the rules
adopted by the SEC, the Company furnishes proxy materials by email to those stockholders who have elected to receive their proxy
materials electronically. While the Company encourages stockholders to take advantage of electronic delivery of proxy materials,
which helps to reduce the environmental impact of special meetings and the cost associated with the physical printing and mailing
of materials, stockholders who have elected to receive proxy materials electronically by email, as well as beneficial owners of
Shares held by a broker or custodian, may request a printed set of proxy materials. Instructions on how to request a printed set
of the proxy materials are provided in the section entitled “
Proxy and Voting Procedures
.”
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table
presents certain information as of the Record Date, with respect to the beneficial ownership of the Company’s Shares by (i)
each director, (ii) each executive officer, and (iii) all of the Company’s directors and executive officers as a group. Based
upon information furnished by the Company’s transfer agent and other information available to the Company, there are no persons
known to the Company to beneficially own 5% or more of the outstanding Shares. As of the Record Date, there were 127,130,589 Shares
issued and outstanding.
Beneficial ownership
has been determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
and includes voting or investment power with respect to the Shares. There are no Shares subject to options that are currently exercisable
or exercisable within 60 days of the Record Date.
Unless otherwise indicated,
to the Company’s knowledge, all persons named in the table below have sole voting power and sole investment power with respect
to the Shares indicated as beneficially owned. In addition, unless otherwise indicated, the address for each person named below
is c/o Corporate Capital Trust, Inc., 555 California Street, 50th Floor, San Francisco, California 94104.
Name and Address of Beneficial Owner:
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Number of Shares
Beneficially Owned
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Percentage
of
Class
(1)
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Interested Directors:
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Todd C. Builione
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—
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*
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Independent Directors:
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Frederick Arnold
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—
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*
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James H. Kropp
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5,905
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*
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Laurie Simon Hodrick
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—
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*
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Executive Officers:
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Todd C. Builione
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—
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*
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Daniel Pietrzak
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—
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*
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Ryan L.G. Wilson
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—
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*
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Thomas N. Murphy
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—
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*
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Philip Davidson
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—
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*
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Executive Officers and Directors as a group (9 persons)
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5,905
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*
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(1)
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Based on 127,130,589 Shares issued and outstanding as of January 22, 2018.
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HOUSEHOLDING
The Company combines
mailings for multiple accounts going to a single household by delivering to that address, in a single envelope, a copy of the documents
(annual reports, prospectuses, proxy statements, etc.) or other communications for all accounts who have consented or are deemed
to have consented to receiving such communications in such manner in accordance with the rules promulgated by the SEC. If you do
not want the Company to continue consolidating your Company mailings and would prefer to receive separate mailings of Company communications,
please contact the Company’s transfer agent, DST Systems, Inc. at (877) 628-8575 or by mail to Corporate Capital Trust,
Inc., c/o DST Systems, Inc., 430 W. 7th Street, Kansas City, Missouri 64105-1594.
SUBMISSION OF STOCKHOLDER
PROPOSALS
Requirements for Stockholder Proposals
to Be Considered for Inclusion in the Company’s Proxy Materials
Proposals that a stockholder
intends to present at the Company’s 2018 annual meeting of stockholders, which we refer to as the “2018 Annual Meeting,”
and wishes to be considered for inclusion in the Company’s proxy statement and form of proxy for the 2018 Annual Meeting
must be received no later than 5:00 p.m., Eastern Time, on March 3, 2018. All proposals must comply with SEC Rule 14a-8 under
the Exchange Act, which lists the requirements for the inclusion of stockholder proposals in company-sponsored proxy materials.
Stockholder proposals must be delivered to the Company’s Secretary by mail at the address provided below. As the rules of
the SEC make clear, simply submitting a timely proposal does not guarantee that the proposal will be included in the Company’s
proxy statement and form of proxy for the 2018 Annual Meeting.
Requirements for Other Stockholder Proposals
to Be Brought Before the 2018 Annual Meeting of Stockholders and Director Nominations
Pursuant to the provisions
of the Company’s Second Amended and Restated Bylaws, which we refer to as the “Bylaws,” notice of any proposal
that a stockholder intends to present at the 2018 Annual Meeting, but does not intend to have included in the Company’s proxy
statement and form of proxy for the 2018 Annual Meeting, as well as any director nominations, must be delivered to the Company’s
Secretary by mail at the address provided below and must be received by the Company’s Secretary at the address provided below
not less than 90 days nor more than 120 days prior to the first anniversary of the date of the mailing of the Notice of Annual
Meeting for the 2017 Annual Meeting of Stockholders. Accordingly, any notice given by a stockholder must be received no earlier
than 5:00 p.m., Eastern Time, on February 1, 2018, and not later than the close of business on March 3, 2018. To be in proper form,
the notice must be submitted by a stockholder of record and must include the information required by the current Bylaws with respect
to each director nomination or proposal that the stockholder intends to present at the 2018 Annual Meeting. If you are a beneficial
owner of Shares held by a broker or other custodian, you should contact the broker or other custodian that holds your Shares for
information about how to register your Shares directly in your name as a stockholder of record.
Notices of intention
to present proposals at the 2018 Annual Meeting and/or director nominations must be addressed to Corporate Capital Trust, Inc.,
555 California Street, 50th Floor, San Francisco, California 94104, Attention: Philip Davidson, Secretary. The Company will not
consider any proposal or nomination that is not timely. The Company reserves the right to reject, rule out of order, or take other
appropriate action with respect to any proposal that does not comply with or otherwise does not meet the Bylaws or SEC requirements
for submitting a proposal or nomination, or other applicable requirements. A stockholder who wishes to submit a proposal or nomination
is encouraged to seek independent counsel about the Bylaws and SEC requirements.
INVESTMENT ADVISER AND ADMINISTRATOR
AND SUB-ADMINISTRATOR
Set forth below are
the names and addresses of the Company’s investment adviser and administrator and sub-administrator:
INVESTMENT
ADVISER AND ADMINISTRATOR
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SUB-ADMINISTRATOR
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KKR Credit Advisors (US) LLC
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State Street Bank and Trust Company
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555 California Street,
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State Street Financial Center
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50th Floor
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One Lincoln Street
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San Francisco, California 94104
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Boston, Massachusetts 02111
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PROPOSALS
Proposal No. 1 – Approval of Investment
Co-Advisory Agreements
Background
The Company currently
receives investment advisory services and administrative services from KKR Credit pursuant to the Current Investment Advisory Agreement
and the Current Administrative Services Agreement, respectively. As the Company announced on December 11, 2017, the Company and
KKR Credit desire to enter into new investment advisory relationships with KKR Credit and FS Adviser to replace the Current Investment
Advisory Agreement and the Current Administrative Services Agreement on the Current Agreement End Date. Accordingly, KKR Credit,
the FS Advisor Entities and certain other parties have entered into the Master Transaction Agreement setting out the terms of the
relationship between KKR Credit and the FS Advisor Entities whereby KKR Credit, FS Adviser and/or the Joint Advisor (as applicable)
would provide certain advisory services to the Company pursuant to the Investment Co-Advisory Agreements and/or the Joint Advisor
Investment Advisory Agreement, and KKR Credit, FS Adviser and/or the Joint Advisor (as applicable) would provide certain administrative
services to the Company pursuant to administrative services agreements.
In
addition, KKR Credit and the FS Advisor Entities agreed to operate the Joint Advisor for the purpose of advising the Company pursuant
to the Joint Advisor Investment Advisory Agreement and providing
certain administrative services to the Company pursuant
to an administrative services agreement.
To effectuate the
proposed investment advisory relationships with KKR Credit, the Company is seeking, as required by the 1940 Act, stockholder approval
to enter into the Investment Co-Advisory Agreements and the Joint Advisor Investment Advisory Agreement, each of which would replace
the Current Investment Advisory Agreement as described herein. In addition, another BDC that KKR Credit sub-advises, CCT II, and
certain BDCs that FS Investments sponsors, the FSIC Funds, are each seeking stockholder approval to enter into a new investment
advisory relationship with KKR Credit, affiliates of FS Investments and the Joint Advisor, as applicable.
The Board, including
a majority of the Independent Directors, unanimously approved each of the Investment Co-Advisory Agreements and the Joint Advisor
Investment Advisory Agreement, and has deemed entry into such agreements to be in the best interests of the Company and its stockholders,
as described in the sections entitled “Board Consideration” and “Factors Considered by the Board” in this
Proposal 1 and “Proposal 2: Approval of Joint Advisor Investment Advisory Agreement Proposal.”
Concurrently with
seeking stockholder approval of the Investment Co-Advisory Agreements and the Joint Advisor Investment Advisory Agreement, KKR
Credit is seeking exemptive relief in the form of either interpretive guidance from the SEC confirming that KKR Credit’s
current co-investment relief order will extend to the FSIC Funds or a new co-investment exemptive relief order issued by the SEC
to KKR Credit that will cover the FSIC Funds (the “Exemptive Relief”), in each case that would permit the FSIC Funds,
together with the Company and CCT II, following the effectiveness of the Joint Advisor Investment Advisory Agreement, to co-invest
in privately negotiated investment transactions with certain accounts managed by KKR Credit. There can be no assurance of the timing
of the approval of the application or whether the requested Exemptive Relief will be granted. As described herein, receipt of Exemptive
Relief is one of the conditions to the effectiveness of the Joint Advisor Investment Advisory Agreement. The Company’s stockholders
are not being asked to vote on Exemptive Relief or the Company’s decision to seek Exemptive Relief. Exemptive Relief is related
to the Joint Advisor Investment Advisory Agreement and is an integral part of the effectiveness of the Joint Advisor Investment
Advisory Agreement.
If the stockholders
of the Company approve the Investment Co-Advisory Agreements Proposal, KKR Credit and FS Adviser would serve as investment co-advisers
to the Company pursuant to the Investment Co-Advisory Agreements from the later of the date of such approval and the Closing Date
until the Joint Advisor Effective Date. The effectiveness of the Investment Co-Advisory Agreements is contingent upon the FS BDC
Closing Date Stockholder Approvals, unless such condition is (to the extent permitted) waived.
If the stockholders
of the Company approve the Joint Advisor Investment Advisory Agreement Proposal, then the Joint Advisor would serve as investment
adviser to the Company pursuant to the Joint Advisor Investment Advisory Agreement from and after the Joint Advisor Effective Date.
Furthermore, if the Investment Co-Advisory Agreements are in effect and the Joint Advisor Effective Date does not occur, either
because Exemptive Relief has not been obtained or because any of the Other BDC Joint Advisor Investment Advisory Agreement Stockholder
Approvals has not been obtained (unless such condition is (to the extent permitted) waived), the Investment Co-Advisory Agreements
will remain in full force and effect in accordance with their terms.
The Company ultimately
intends to receive investment advisory services from the Joint Advisor pursuant to the Joint Advisor Investment Advisory Agreement.
However, due to the various conditions required for the Investment Co-Advisory Agreements and the Joint Advisor Investment Advisory
Agreement to each become effective, the Company is seeking, as required by the 1940 Act, stockholder approval of each of the Investment
Co-Advisory Agreements and the Joint Advisor Investment Advisory Agreement in order to ensure the continuous provision of investment
advisory services to the Company by KKR Credit, FS Adviser and/or the Joint Advisor, as applicable. If the Joint Advisor Effective
Date occurs on the same day as or prior to the Closing Date, then the Joint Advisor would serve as investment adviser to the Company
pursuant to the Joint Advisor Investment Advisory Agreement and the Investment Co-Advisory Agreements would not become effective.
If the Joint Advisor Effective Date occurs after the Closing Date, then KKR Credit and FS Adviser would serve as investment co-advisers
to the Company pursuant to the Investment Co-Advisory Agreements from the later of the date approval of such agreements is obtained
and the Closing Date until the Joint Advisor Effective Date, and the Investment Co-Advisory Agreements would automatically terminate
upon the effectiveness of the Joint Advisor Investment Advisory Agreement. Accordingly, the Investment Co-Advisory Agreements and
the Joint Advisor Investment Advisory Agreement would not be simultaneously effective at any time.
In order for KKR Credit
and FS Adviser to serve as investment co-advisers to the Company pursuant to the Investment Co-Advisory Agreements, the stockholders
of the Company must approve the Investment Co-Advisory Agreements Proposal and the other conditions to the Closing Date, which
consist of the FS BDC Closing Date Stockholder Approvals, must be satisfied or (to the extent permitted) waived prior to the Joint
Advisor Effective Date. In order for the Joint Advisor to serve as investment adviser to the Company pursuant to the Joint Advisor
Investment Advisory Agreement, the stockholders of the Company must approve the Joint Advisor Investment Advisory Agreement Proposal
and the other conditions to the Joint Advisor Effective Date, which consist of (i) the Other BDC Joint Advisor Investment Advisory
Agreement Stockholder Approvals and (ii) Exemptive Relief having been obtained, must be satisfied or (to the extent permitted)
waived. As such, even if the Company’s stockholders approve the Investment Co-Advisory Agreements, such agreements will not
go into effect unless each of the FS BDC Closing Date Stockholder Approvals has been obtained, unless such condition is (to the
extent permitted) waived. In addition, even if the Company’s stockholders approve the Joint Advisor Investment Advisory Agreement,
such agreement will not go into effect unless each of the Other BDC Joint Advisor Investment Advisory Agreement Stockholder Approvals
has been obtained, unless such condition is (to the extent permitted) waived.
KKR Credit and the
FS Advisor Entities have agreed to coordinate their activities during the period in which the Investment Co-Advisory Agreements
and the Joint Advisor Investment Advisory Agreement would be in effect to avoid duplication of efforts and ensure a balanced and
effective allocation of responsibilities and net fee revenue earned by KKR Credit, the FS Advisor Entities and the Joint Advisor,
and efficiency in the provision of the required services to the Company thereunder.
KKR Credit and the
FS Advisor Entities have agreed that at the request of KKR Credit, the FS Advisor Entities may enter into an administrative services
agreement with KKR Credit during the time period prior to the effectiveness of the Investment Co-Advisory Agreements or the Joint
Advisor Investment Advisory Agreement pursuant to which, among other things, the FS Advisor Entities would provide certain administrative
services to KKR Credit with respect to the Company.
Because the Company
ultimately intends to receive advisory services from the Joint Advisor pursuant to the Joint Advisor Investment Advisory Agreement
and considering the length of time that it may take for such agreement to become effective, the Company expects that the approval
by its stockholders of the Investment Co-Advisory Agreements Proposal and/or the Joint Advisor Investment Advisory Agreement Proposal
will remain valid indefinitely. However, even if the Company’s stockholders have approved the Investment Co-Advisory Agreements
Proposal and the Joint Advisor Investment Advisory Agreement Proposal, KKR Credit, together with FS Investments and the FS Advisor
Entities, will each have the right to terminate the Master Transaction Agreement and the proposed relationship described herein
if the Closing Date does not occur by January 10, 2019.
The Investment Co-Advisory
Agreements Proposal and the Joint Advisor Investment Advisory Agreement Proposal are not contingent on one another. However, if
the stockholders of the Company do not approve both the Investment Co-Advisory Agreements Proposal and the Joint Advisor Investment
Advisory Agreement Proposal, then the Board will consider and evaluate its options to determine what alternatives are in the Company’s
best interests and that of the Company’s stockholders, such as resubmitting the Investment Co-Advisory Agreements Proposal
and/or the Joint Advisor Investment Advisory Agreement Proposal for approval by the Company’s stockholders.
About KKR Credit
KKR Credit is a Delaware
limited liability company, located at 555 California Street, 50th Floor, San Francisco, CA 94104, registered as an investment adviser
with the SEC under the Advisers Act of 1940, as amended (the “Advisers Act”). It had over $41 billion of assets
under management as of September 30, 2017 across investment funds, structured finance vehicles, specialty finance companies and
separately managed accounts that invest capital in both liquid and illiquid credit strategies on behalf of some of the largest
public and private pension plans, global financial institutions, university endowments and other institutional and public market
investors. Its investment professionals utilize an industry and thematic approach to investing and benefit from access, where appropriate,
to the broader resources and intellectual capital of KKR & Co. L.P. (“KKR & Co.”). KKR Credit is a subsidiary
of KKR & Co., a leading global investment firm with over $153 billion in assets under management as of September 30, 2017 that
manages investments across multiple asset classes including private equity, energy, infrastructure, real estate, credit and hedge
funds. KKR & Co. aims to generate attractive investment returns by following a patient and disciplined investment approach,
employing world-class people, and driving growth and value creation in the assets it manages. KKR & Co. invests its own capital
alongside the capital it manages for fund investors and brings debt and equity investment opportunities to others through its capital
markets business.
KKR & Co.’s
business offers a broad range of investment management services to its fund investors and provides capital markets services to
KKR & Co., its portfolio companies and third parties. Throughout KKR & Co.’s history, KKR & Co. has consistently
been a leader in the private equity industry. KKR & Co. has grown its firm by expanding its geographical presence and building
businesses in new areas, such as credit, special situations, hedge funds, collateralized loan obligations, capital markets, infrastructure,
energy and real estate. These efforts build on KKR & Co.’s core principles and industry expertise, allowing KKR &
Co. to leverage the intellectual capital and synergies in its businesses, and to capitalize on a broader range of the opportunities
it sources. Additionally, KKR & Co. has increased its focus on meeting the needs of its existing fund investors and in developing
relationships with new investors in its funds.
KKR & Co. conducts
its business with offices throughout the world, providing it with a pre-eminent global platform for sourcing transactions, raising
capital and carrying out capital markets activities. KKR & Co.’s growth has been driven by value that it has created
through its operationally focused investment approach, the expansion of its existing businesses, its entry into new lines of business,
innovation in the products that it offers investors in its funds, an increased focus on providing tailored solutions to its clients
and the integration of capital markets distribution activities.
KKR & Co. has
also used its balance sheet as a significant source of capital to further grow and expand its business, increase its participation
in its existing businesses and further align its interests with those of its fund investors and other stakeholders.
KKR & Co.’s
address is 9 West 57th Street, Suite 4200, New York, NY 10019. The business address of each of KKR Credit’s executive officers
and directors is 555 California Street, 50th Floor, San Francisco, CA 94104.
Fees Paid in the
Most Recent Fiscal Year
. From January 1, 2017 until November 14, 2017, the date on which the Current Investment Advisory Agreement
became effective, the Company’s previous investment adviser paid an aggregate of approximately $40.3 million in management
and incentive fees to KKR Credit pursuant to the investment sub-advisory agreement pursuant to which KKR Credit acted as investment
sub-adviser to the Company.
For the period from
November 15, 2017 through November 30, 2017, KKR Credit received approximately $2.7 million in management and incentive fees from
the Company pursuant to the Current Investment Advisory Agreement. Because the management and incentive fees under the Current
Investment Advisory Agreement are calculated and payable in arrears on a monthly basis, the amount of such fees accrued and payable
to KKR Credit by the Company for any period following November 30, 2017 is not available as of the date of this Proxy Statement.
Other than the foregoing
fees and expenses, no other material payments in respect of the Company were made by the Company or the Company’s previous
investment adviser to KKR Credit or any affiliated person of KKR Credit in 2017.
During the nine months
ended September 30, 2017, CNL Fund Advisors II, LLC (“CNL”), CCT II’s current investment adviser, paid an
aggregate of approximately $760,000 in management fees to KKR Credit pursuant to the investment sub-advisory agreement pursuant
to which KKR Credit acts as investment sub-adviser to CCT II (the “CCT II Current Investment Sub-Advisory Agreement”).
Management fees payable to KKR Credit under the CCT II Current Investment Sub-Advisory Agreement are offset by expense support
payments made by KKR Credit to CCT II, which totaled approximately $439,000 for the year ended December 31, 2017. No incentive
fees are payable to KKR Credit under the CCT II Current Investment Sub-Advisory Agreement. The amount of management fees payable
by CNL to KKR Credit under the CCT II Current Investment Sub-Advisory Agreement for the three months ended December 31, 2017
is not available as of the date of this Proxy Statement.
Other than the foregoing
fees and expenses, no other material payments in respect of CCT II were made by CCT II or CNL to KKR Credit or any affiliated person
of KKR Credit in 2017.
Similar Investment
Strategy
. Below are the management fee rate and gross assets of the other BDC sub-advised by KKR Credit, which has a similar
investment objective to that of the Company.
Fund Name
|
Management Fee (as a
percentage of gross assets)
|
Gross Assets as of
September 30, 2017
|
Applicable Fee Waiver/Expense Reimbursement
|
|
|
|
|
CCT II
|
2.00%
|
$157.4 million
|
Yes
(1)
|
|
(1)
|
$606,252 for the quarter ended September 30, 2017.
|
About FS Adviser
FS Adviser will be
a newly-formed Delaware limited liability company, located at 201 Rouse Boulevard, Philadelphia, PA 19112. Prior to the effectiveness
of the FS Adviser Investment Co-Advisory Agreement, FS Adviser will register as an investment adviser with the SEC under the Advisers
Act. FS Adviser will be formed by FS Investments or one of its affiliates to serve as the Company’s investment co-adviser,
and will be led by substantially the same personnel as the senior management teams of the investment advisers to certain other
BDCs, open and closed-end management investment companies and a real estate investment trust sponsored by FS Investments (the “FS
Non-BDC Funds” and together with the BDCs managed by affiliates of FS Investments, the “FS Fund Complex”).
FS Adviser’s
senior management team will have significant experience in private lending and private equity investing, and will have developed
an expertise in using all levels of a firm’s capital structure to produce income-generating investments, while focusing on
risk management. The team will also have extensive knowledge of the managerial, operational and regulatory requirements of publicly
registered alternative asset entities, such as BDCs. The Company believes that the active and ongoing participation by FS Investments
and its affiliates in the credit markets, and the depth of experience and disciplined investment approach of FS Adviser’s
management team, will allow FS Adviser to successfully execute the Company’s investment strategies.
Management of the Investment Co-Advisors
The management of
the Company’s investment portfolio will be the responsibility of a joint investment committee, which will be comprised of
three appointees of KKR Credit (initially Todd Builione, Daniel Pietrzak and Ryan Wilson) and three appointees of FS Investments
or one of its affiliates (initially Sean Coleman, Brian Gerson and Michael Kelly). A team of dedicated investment professionals
consisting of personnel from KKR Credit and FS Adviser will provide services to the Company. Below is biographical information
relating to certain key personnel involved in rendering such services:
Todd C. Builione
is a member of the Board of Directors of the Company and the Company’s Chief Executive Officer, and also a trustee of CCT
II. Mr. Builione joined KKR & Co. in 2013 and is a Member of KKR & Co. and President of KKR Credit & Capital Markets.
Mr. Builione also serves on the KKR Global Risk Committee. Prior to joining KKR & Co., Mr. Builione served as President of
Highbridge Capital Management, CEO of Highbridge’s Hedge Fund business and a member of the Investment and Risk Committees.
Mr. Builione began his career at the Goldman Sachs Group, where he was predominantly focused on capital markets and mergers and
acquisitions for financial institutions. He received a B.S., summa cum laude, Merrill Presidential Scholar, from Cornell University
and a J.D., cum laude, from Harvard Law School. Mr. Builione serves on the Board of Directors of Marshall Wace, a liquid alternatives
provider which formed a strategic partnership with KKR & Co. in 2015. Mr. Builione also serves on the Board of Directors of
Harlem RBI (a community-based youth development organization located in East Harlem, New York), on the Advisory Council of Cornell
University’s Dyson School of Applied Economics and Management, and on the Board of Directors of the Pingry School.
Daniel Pietrzak
currently serves as CCT’s Chief Investment Officer. Mr. Pietrzak joined KKR Credit in 2016 and is a Member of KKR & Co.
and the Co-Head of Private Credit. Mr. Pietrzak is a portfolio manager for KKR Credit’s private credit funds and portfolios
and a member of the Global Private Credit Investment Committee, Europe Direct Lending Investment Committee and KKR Credit Portfolio
Management Committee. Prior to joining KKR Credit, Mr. Pietrzak was a Managing Director and the Co-Head of Deutsche Bank’s
Structured Finance business across the Americas and Europe. Previously, Mr. Pietrzak was based in New York and held various roles
in the structured finance and credit businesses of Société Générale and CIBC World Markets. Mr. Pietrzak
started his career at Price Waterhouse in New York and is a Certified Public Accountant. Mr. Pietrzak holds an M.B.A. in Finance
from The Wharton School of the University of Pennsylvania and a B.S. in Accounting from Lehigh University.
Ryan L.G. Wilson
currently serves as CCT’s Chief Operating Officer and Associate Portfolio Manager. Mr. Wilson joined KKR Credit in 2006
and is a Director. Prior to joining KKR Credit, Mr. Wilson was with PricewaterhouseCoopers, serving a variety of clients across
industries. Mr. Wilson holds a B.A. in Economics with honors from Wilfrid Laurier University and a MAcc in Accounting from the
University of Waterloo. He also is a CFA charterholder, Chartered Professional Accountant and a Chartered Accountant.
Sean Coleman
serves as a managing director of FSIC and as managing director of investment management of FS Investments and its affiliated
investment advisers. Mr. Coleman also serves on the investment committee of the investment advisers to the funds in the FS Fund
Complex. Mr. Coleman is primarily responsible for reviewing and assessing the fit of potential investments within each fund’s
investment portfolio, performing due diligence on the same and monitoring existing investments. Before joining FS Investments and
its affiliated investment advisers in October 2013, Mr. Coleman worked at Golub Capital, where he served in various capacities,
including as a managing director in the direct lending group and as chief financial officer and treasurer of its BDC. Before he
joined Golub Capital in September 2005, Mr. Coleman worked in merchant and investment banking, including at Goldman, Sachs &
Co. and Wasserstein Perella & Co. Mr. Coleman earned a B.A. in History from Princeton University and an M.B.A. with Distinction
from Harvard Business School, where he received the Loeb Award for academic excellence in finance.
Brian Gerson
joined FS Investments in November 2017 as its Head of Private Credit and has more than 20 years of experience in credit investing
and corporate lending, with specific expertise in lending through BDCs. Prior to joining FS Investments, he most recently served
as Group Head and Managing Director at LStar Capital, the credit affiliate of Lone Star Funds, from April 2015 to November 2017.
At LStar, Mr. Gerson developed and maintained deep relationships with the financial sponsor community and middle market intermediaries
while significantly expanding LStar’s corporate credit business. Prior to joining LStar, Mr. Gerson was a founding member
of Solar Capital Partners, which serves as investment adviser to two yield-oriented BDCs. At Solar Capital, he spent seven years
from January 2007 to September 2014 in various credit, origination, management, and business development roles, most recently serving
as Executive Vice President of Solar Capital Limited. Prior to joining Solar Capital, Mr. Gerson spent 12 years in various positions,
including Managing Director at CIBC World Markets in its Leveraged Finance and Financial Sponsors Group. Mr. Gerson graduated summa
cum laude and Phi Beta Kappa from Tufts University where he earned a Bachelor of Arts in Mathematics.
Michael Kelly
currently serves as president of FS Investments and has presided in such role since July 2017. Mr. Kelly also serves as chief
investment officer of FS Investments and executive vice president of its affiliated investments advisers, and has presided in such
roles since January 2015. Among other things, Mr. Kelly oversees the investment management function at FS Investments and its affiliated
investment advisers. Before joining FS Investments and its affiliated investment advisers, Mr. Kelly was the chief executive
officer of ORIX USA Asset Management (“ORIX”), where he led the company’s acquisition of Robeco, a $250 billion
global asset management company and the largest acquisition in ORIX’s 50-year history. Mr. Kelly started his career on Wall
Street at Salomon Brothers and went on to join hedge fund pioneers Omega Advisors and Tiger Management. Mr. Kelly then helped build
and lead the hedge fund firm, FrontPoint Partners, where he first served as chief investment officer and eventually co-chief executive
officer. Mr. Kelly is a graduate of Cornell University and earned his M.B.A. at Stanford University. Mr. Kelly is a co-founder
and board member of the Spotlight Foundation, and serves as a trustee of the Tiger Foundation and the Stanford Business School
Trust.
In performing their
duties under the Investment Co-Advisory Agreements, KKR Credit and the FS Advisor Entities will provide the Company with services
to facilitate the conduct of its business, including but not limited to: (a) sourcing, structuring, underwriting, performing diligence,
executing and monitoring investments; (b) researching, selecting, trading and underwriting new investment opportunities; (c) investor
account management; (d) legal, compliance, finance, accounting, operations and human resources services; and (e) risk management
functions. KKR Credit and the FS Advisor Entities are collectively responsible for providing appropriate assets, resources, time
and personnel in order to provide to the Company the services required under the Investment Co-Advisory Agreements. KKR Credit
and the FS Advisor Entities have agreed to coordinate their activities during the period in which the Investment Co-Advisory Agreements
would be in effect to avoid duplication of efforts and ensure a balanced and effective allocation of responsibilities and net fee
revenue earned by the KKR Credit and the FS Advisor Entities, and efficiency in the provision of the required services to the Company
thereunder.
Terms of the KKR Investment Co-Advisory
Agreement
The terms of the KKR
Investment Co-Advisory Agreement are substantially similar to those of the Current Investment Advisory Agreement, except for, among
other things, the calculation of the subordinated incentive fee on income and total return requirement applied to the subordinated
incentive fee and the date of effectiveness. Furthermore, the terms of the KKR Investment Co-Advisory Agreement are substantially
similar to those of the FS Adviser Investment Co-Advisory Agreement. The description of the KKR Investment Co-Advisory Agreement
that follows is a summary only and is qualified by reference to the more complete information contained in the copy of the form
of the KKR Investment Co-Advisory Agreement included in Exhibit A hereto.
Duties
. Subject
to the overall supervision of the Board, KKR Credit, in coordination with FS Adviser, will oversee the Company’s day-to-day
operations and provide the Company with investment advisory services. Under the terms of the KKR Investment Co-Advisory Agreement,
KKR Credit will, in coordination with FS Adviser:
|
(i)
|
determine the composition and allocation of the Company’s investment portfolio, the nature
and timing of any changes therein and the manner of implementing such changes;
|
|
(ii)
|
identify, evaluate and negotiate the structure of the investments made by the Company;
|
|
(iii)
|
perform due diligence on prospective portfolio companies;
|
|
(iv)
|
execute, close, service and monitor the Company’s investments;
|
|
(v)
|
determine the securities and other assets that the Company shall purchase, retain or sell;
|
|
(vi)
|
provide the Company with such other investment advisory, research and related services as the Company
may, from time to time, reasonably require for the investment of its funds; and
|
|
(vii)
|
to the extent permitted under the 1940 Act and the Advisers Act, on the Company’s behalf,
and in coordination with any sub-adviser and any administrator, provide significant managerial assistance to those portfolio companies
to which the Company is required to provide such assistance under the 1940 Act, including utilizing appropriate personnel of KKR
Credit to, among other things, monitor the operations of the Company’s portfolio companies, participate in board and management
meetings, consult with and advise officers of portfolio companies and provide other organizational and financial consultation.
|
Notwithstanding the
foregoing, KKR Credit and FS Adviser may, from time to time, designate one or the other as being primarily responsible for certain
investments. The duties to be provided under the KKR Investment Co-Advisory Agreement are substantially the same as those under
the Current Investment Advisory Agreement. KKR Credit shall have no obligation to supervise FS Adviser’s provision of services
under the FS Adviser Investment Co-Advisory Agreement.
Fees and Expenses
.
The Company will pay KKR Credit a fee for its services under the KKR Investment Co-Advisory Agreement consisting of two components—a
management fee based on the average value of the Company’s gross assets and an incentive fee based on the Company’s
performance. The cost of both the management fee payable to KKR Credit and any incentive fees it earns will ultimately be borne
by the Company’s stockholders.
The management fee
will be calculated at an annual rate of 0.75% of the average value of the Company’s gross assets. The management fee will
be payable monthly in arrears and will be calculated based on the simple average value of the Company’s gross assets (excluding
cash and cash equivalents) at the end of the two most recently completed calendar months. The management fee may or may not be
taken in whole or in part at the discretion of KKR Credit. All or any part of the management fee not taken as to any month will
be deferred without interest and may be taken in such other month as KKR Credit shall determine. The management fee for any partial
month will be appropriately prorated. The other terms of the management fee are the same as those under the Current Investment
Advisory Agreement.
The KKR Investment
Co-Advisory Agreement will incorporate certain incremental advisory fee arrangements currently being provided under a temporary
waiver agreement with KKR Credit. Specifically, (a) the “look back period” will be defined as the most recently completed
quarter and the 11 preceding calendar quarters and (b) the “cumulative net increase in net assets resulting from operations”
will be defined to remove the addition of management fees paid following November 14, 2017 for purposes of calculating the incentive
fee.
Accordingly, the incentive
fee will consist of two parts. The first part of the incentive fee, which is referred to as the subordinated incentive fee on income,
will be calculated and payable quarterly in arrears, will equal 10.0% of the Company’s “pre-incentive fee net investment
income” for the immediately preceding quarter and will be subject to a hurdle rate, expressed as a rate of return on average
net assets, equal to 1.75% per quarter, or an annualized hurdle rate of 7.0%. As a result, KKR Credit will not earn this incentive
fee for any quarter until the Company’s pre-incentive fee net investment income for such quarter exceeds the hurdle rate
of 1.75%. Once the Company’s pre-incentive fee net investment income in any quarter exceeds the hurdle rate, KKR Credit will
be entitled to a “catch-up” fee equal to 50.0% of the amount of the Company’s pre-incentive fee net investment
income in excess of the hurdle rate, until the Company’s pre-incentive fee net investment income for such quarter equals
2.1875%, or 8.75% annually, of average net assets. This “catch-up” feature will allow KKR Credit to recoup the fees
foregone as a result of the existence of the hurdle rate. Thereafter, KKR Credit will be entitled to receive 10.0% of the Company’s
pre-incentive fee net investment income.
However, under the
KKR Investment Co-Advisory Agreement, the subordinated incentive fee on income will continue to be subject to a total return requirement,
but differs from the Current Investment Advisory Agreement in that the total return requirement will be calculated based on the
Company’s reported income per share over the most recently completed quarter and the 11 preceding calendar quarters (the
“look back period”). Specifically, the subordinated incentive fee on income will not exceed 50.0% of (A) the aggregate
sum of, for each calendar quarter of the look-back period, (a) (x) 20.0% of the cumulative net increase in net assets resulting
from operations for such quarter less (y) the subordinated incentive fees on income accrued by the Company for such quarter (not
including for the current quarter for which the subordinated incentive fees on income is being calculated), divided by (b) the
weighted average number of Shares outstanding during such calendar quarter, multiplied by (B) the weighted average number of Shares
outstanding during the calendar quarter for which the subordinated incentive fee on income is being calculated. For the foregoing
purpose, the “cumulative net increase in net assets resulting from operations” is the sum of the Company’s pre-incentive
fee net investment income, management fees payable with respect to the periods prior to November 14, 2017, realized gains and losses
and unrealized appreciation and depreciation.
The second part of
the incentive fee, which is referred to as the incentive fee on capital gains, will be determined and payable in arrears as of
the end of each calendar year (or upon termination of the KKR Investment Co-Advisory Agreement). Under the KKR Investment Co-Advisory
Agreement, the fee will equal (i) 10.0% of the Company’s incentive fee capital gains (i.e., the Company’s realized
capital gains on a cumulative basis from inception, calculated as of the end of the applicable period, computed net of all realized
capital losses and unrealized capital depreciation on a cumulative basis), less (ii) 50.0% of the aggregate amount of any previously
paid incentive fees on capital gains. The Company will accrue the incentive fee on capital gains, which, if earned, will be paid
annually. The Company will accrue the incentive fee on capital gains based on net realized and unrealized gains; however, under
the terms of the KKR Investment Co-Advisory Agreement, the fee payable to KKR Credit will be based on realized gains and no such
fee will be payable with respect to unrealized gains unless and until such gains are actually realized.
The incentive fee
may or may not be taken in whole or in part at the discretion of KKR Credit. All or any part of the incentive fee not taken as
to any quarter will be deferred without interest and may be taken in such other quarter as KKR Credit shall determine. The other
terms of the incentive fee are substantially the same as those under the Current Investment Advisory Agreement.
All personnel of KKR
Credit, when and to the extent engaged in providing services under the KKR Investment Co-Advisory Agreement, and the compensation
and routine overhead expenses of such personnel allocable to such services, shall be provided and paid for by KKR Credit or its
affiliates and not by the Company. The treatment of expenses is the same under the Current Investment Advisory Agreement.
Term
. The KKR
Investment Co-Advisory Agreement will remain in effect initially for two years, and thereafter will continue automatically for
successive annual periods, provided that such continuance is specifically approved at least annually by (i) the vote of the Board,
or by the vote of a majority of the outstanding voting securities of the Company (as “majority” is defined in Section
2(a)(42) of the 1940 Act) and (ii) the vote of a majority of the Independent Directors in accordance with the requirements of the
1940 Act. The KKR Investment Co-Advisory Agreement may be terminated at any time, without the payment of any penalty, upon 60 days’
written notice by the Company to KKR Credit, (i) upon the vote of a majority of the outstanding voting securities of the Company,
or (ii) by the vote of the Board, or upon 120 days’ written notice by KKR Credit to the Company. The KKR Investment Co-Advisory
Agreement will automatically terminate in the event of (x) its “assignment” (as such term is defined for purposes of
Section 15(a)(4) of the 1940 Act), or (y) the effectiveness of the Joint Advisor Investment Advisory Agreement. Upon termination
or expiration of the KKR Investment Co-Advisory Agreement, KKR Credit will be entitled to any amounts owed to it through the date
of termination or expiration.
Indemnification
.
The KKR Investment Co-Advisory Agreement provides that KKR Credit and any sub-adviser (and their directors, trustees, officers,
stockholders or members (and their stockholders or members, including the owners of their stockholders or members), agents, employees,
controlling persons (as defined in the 1940 Act) and any other person or entity affiliated with, or acting on behalf of, KKR Credit
or any such sub-adviser) (collectively, the “KKR Indemnified Parties”), will not be liable to the Company for any action
taken or omitted to be taken by any such KKR Indemnified Party in connection with the performance of any of its duties or obligations
under the KKR Investment Co-Advisory Agreement or otherwise as an investment adviser of the Company (except to the extent specified
in Section 36(b) of the 1940 Act concerning loss resulting from a breach of fiduciary duty with respect to the receipt of compensation
for services), and the Company will indemnify, defend and protect the KKR Indemnified Parties (each of whom shall be deemed a third
party beneficiary thereof) and hold them harmless from and against all damages, liabilities, costs and expenses (including reasonable
attorneys’ fees and amounts reasonably paid in settlement) (“Losses”) incurred by the KKR Indemnified Parties
in or by reason of any pending, threatened or completed action, suit, investigation or other proceeding (including an action or
suit by or in the right of the Company or its security holders) arising out of or otherwise based upon the performance of any of
KKR Credit’s duties or obligations under the KKR Investment Co-Advisory Agreement or otherwise as an investment adviser of
the Company, to the extent such Losses are not fully reimbursed by insurance, and to the extent that such indemnification would
not be inconsistent with the Company’s articles of incorporation, the 1940 Act, the laws of the State of Maryland or other
applicable law. Notwithstanding the preceding sentence, nothing contained in the KKR Investment Co-Advisory Agreement will protect
or be deemed to protect the KKR Indemnified Parties against or entitle or be deemed to entitle the KKR Indemnified Parties to indemnification
in respect of any Losses to the Company or its stockholders to which the KKR Indemnified Parties would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in the performance of KKR Credit’s duties or by reason of the
reckless disregard of KKR Credit’s duties and obligations under the KKR Investment Co-Advisory Agreement.
Brand Usage
.
The KKR Investment Co-Advisory Agreement provides, subject to certain limitations, that KKR Credit grants a non-exclusive, non-transferrable,
non-sublicensable and royalty-free license to the Company for use of the trademark “KKR” and the “KKR”
design in connection with the Company’s public filings, requests for information from state and federal regulators, offering
materials and advertising materials and investor communications.
Terms of the FS Adviser Investment Co-Advisory
Agreement
The terms of the FS
Adviser Investment Co-Advisory Agreement are substantially similar to those of the Current Investment Advisory Agreement, except
for, among other things, the name of the investment adviser and the date of effectiveness. Furthermore, the terms of the FS Adviser
Investment Co-Advisory Agreement are substantially similar to those of the KKR Investment Co-Advisory Agreement. The description
of the FS Adviser Investment Co-Advisory Agreement that follows is a summary only and is qualified by reference to the more complete
information contained in the copy of the form of the FS Adviser Investment Co-Advisory Agreement included in Exhibit B hereto.
Duties
. Subject
to the overall supervision of the Board, FS Adviser, in coordination with KKR Credit, will oversee the Company’s day-to-day
operations and provide the Company with investment advisory services. Under the terms of the FS Adviser Investment Co-Advisory
Agreement, FS Adviser will, in coordination with KKR Credit:
|
(i)
|
determine the composition and allocation of the Company’s investment portfolio, the nature
and timing of any changes therein and the manner of implementing such changes;
|
|
(ii)
|
identify, evaluate and negotiate the structure of the investments made by the Company;
|
|
(iii)
|
perform due diligence on prospective portfolio companies;
|
|
(iv)
|
execute, close, service and monitor the Company’s investments;
|
|
(v)
|
determine the securities and other assets that the Company shall purchase, retain or sell;
|
|
(vi)
|
provide the Company with such other investment advisory, research and related services as the Company
may, from time to time, reasonably require for the investment of its funds; and
|
|
(vii)
|
to the extent permitted under the 1940 Act and the Advisers Act, on the Company’s behalf,
and in coordination with any sub-adviser and any administrator, provide significant managerial assistance to those portfolio companies
to which the Company is required to provide such assistance under the 1940 Act, including utilizing appropriate personnel of FS
Adviser to, among other things, monitor the operations of the Company’s portfolio companies, participate in board and management
meetings, consult with and advise officers of portfolio companies and provide other organizational and financial consultation.
|
Notwithstanding the
foregoing, KKR Credit and FS Adviser may, from time to time, designate one or the other as being primarily responsible for certain
investments. The duties to be provided under the FS Adviser Investment Co-Advisory Agreement are substantially the same as those
under the Current Investment Advisory Agreement. FS Adviser has no obligation to supervise KKR Credit’s provision of services
under the KKR Investment Co-Advisory Agreement.
Fees and Expenses
.
The Company will pay FS Adviser a fee for its services under the FS Adviser Investment Co-Advisory Agreement consisting of two
components—a management fee based on the average value of the Company’s gross assets and an incentive fee based on
the Company’s performance. The cost of both the management fee payable to FS Adviser and any incentive fees it earns will
ultimately be borne by the Company’s stockholders.
The management fee
will be calculated at an annual rate of 0.75% of the average value of the Company’s gross assets. The management fee will
be payable monthly in arrears and will be calculated based on the simple average value of the Company’s gross assets (excluding
cash and cash equivalents) at the end of the two most recently completed calendar months. The management fee may or may not be
taken in whole or in part at the discretion of FS Adviser. All or any part of the management fee not taken as to any month will
be deferred without interest and may be taken in such other month as FS Adviser shall determine. The management fee for any partial
month will be appropriately prorated. The other terms of the management fee are the same as those under the Current Investment
Advisory Agreement.
The FS Adviser Investment
Co-Advisory Agreement will incorporate certain incremental advisory fee arrangements currently being provided under a temporary
waiver agreement with KKR Credit. Specifically, (a) the “look back period” will be defined as the most recently completed
quarter and the 11 preceding calendar quarters and (b) the “cumulative net increase in net assets resulting from operations”
will be defined to remove the addition of management fees paid following November 14, 2017 for purposes of calculating the incentive
fee.
Accordingly, the incentive
fee will consist of two parts. The first part of the incentive fee, which is referred to as the subordinated incentive fee on income,
will be calculated and payable quarterly in arrears, will equal 10.0% of the Company’s “pre-incentive fee net investment
income” for the immediately preceding quarter and will be subject to a hurdle rate, expressed as a rate of return on average
net assets, equal to 1.75% per quarter, or an annualized hurdle rate of 7.0%. As a result, FS Adviser will not earn this incentive
fee for any quarter until the Company’s pre-incentive fee net investment income for such quarter exceeds the hurdle rate
of 1.75%. Once the Company’s pre-incentive fee net investment income in any quarter exceeds the hurdle rate, FS Adviser will
be entitled to a “catch-up” fee equal to 50.0% of the amount of the Company’s pre-incentive fee net investment
income in excess of the hurdle rate, until the Company’s pre-incentive fee net investment income for such quarter equals
2.1875%, or 8.75% annually, of average net assets. This “catch-up” feature will allow FS Adviser to recoup the fees
foregone as a result of the existence of the hurdle rate. Thereafter, FS Adviser will be entitled to receive 10.0% of the Company’s
pre-incentive fee net investment income.
However, under the
FS Adviser Investment Co-Advisory Agreement, the subordinated incentive fee on income will continue to be subject to a total return
requirement, but differs from the Current Investment Advisory Agreement in that the total return requirement will be calculated
based on the Company’s reported income per share over the most recently completed quarter and the 11 preceding calendar quarters
(the “look back period”). Specifically, the subordinated incentive fee on income will not exceed 50.0% of (A) the aggregate
sum of, for each calendar quarter of the look-back period, (a) (x) 20.0% of the cumulative net increase in net assets resulting
from operations for such quarter less (y) the subordinated incentive fees on income accrued by the Company for such quarter (not
including for the current quarter for which the subordinated incentive fees on income is being calculated), divided by (b) the
weighted average number of Shares outstanding during such calendar quarter, multiplied by (B) the weighted average number of Shares
outstanding during the calendar quarter for which the subordinated incentive fee on income is being calculated. For the foregoing
purpose, the “cumulative net increase in net assets resulting from operations” is the sum of the Company’s pre-incentive
fee net investment income, management fees payable with respect to the periods prior to November 14, 2017, realized gains and losses
and unrealized appreciation and depreciation.
The second part of
the incentive fee, which is referred to as the incentive fee on capital gains, will be determined and payable in arrears as of
the end of each calendar year (or upon termination of the FS Adviser Investment Co-Advisory Agreement). Under the FS Adviser Investment
Co-Advisory Agreement, the fee will equal (i) 10.0% of the Company’s incentive fee capital gains (i.e., the Company’s
realized capital gains on a cumulative basis from inception, calculated as of the end of the applicable period, computed net of
all realized capital losses and unrealized capital depreciation on a cumulative basis), less (ii) 50.0% of the aggregate amount
of any previously paid incentive fees on capital gains. The Company will accrue the incentive fee on capital gains, which, if earned,
will be paid annually. The Company will accrue the incentive fee on capital gains based on net realized and unrealized gains; however,
under the terms of the FS Adviser Investment Co-Advisory Agreement, the fee payable to FS Adviser will be based on realized gains
and no such fee will be payable with respect to unrealized gains unless and until such gains are actually realized.
The incentive fee
may or may not be taken in whole or in part at the discretion of FS Adviser. All or any part of the incentive fee not taken as
to any quarter will be deferred without interest and may be taken in such other quarter as FS Adviser shall determine. The other
terms of the incentive fee are substantially the same as those under the Current Investment Advisory Agreement.
All personnel of FS
Adviser, when and to the extent engaged in providing advisory services under the FS Adviser Investment Co-Advisory Agreement, and
the compensation of such personnel allocable to such advisory services, shall be provided and paid for by the FS Adviser or its
affiliates and not by the Company. The treatment of expenses is the same under the Current Investment Advisory Agreement.
Term
. The FS
Adviser Investment Co-Advisory Agreement will remain in effect initially for two years, and thereafter will continue automatically
for successive annual periods, provided that such continuance is specifically approved at least annually by (i) the vote of the
Board, or by the vote of a majority of the outstanding voting securities of the Company (as “majority” is defined in
Section 2(a)(42) of the 1940 Act) and (ii) the vote of a majority of the Independent Directors in accordance with the requirements
of the 1940 Act. The FS Adviser Investment Co-Advisory Agreement may be terminated at any time, without the payment of any penalty,
upon 60 days’ written notice by the Company to FS Adviser, (i) upon the vote of a majority of the outstanding voting securities
of the Company, or (ii) by the vote of the Board, or upon 120 days’ written notice by FS Adviser to the Company. The FS Adviser
Investment Co-Advisory Agreement will automatically terminate in the event of (x) its “assignment” (as such term is
defined for purposes of Section 15(a)(4) of the 1940 Act), or (y) the effectiveness of the Joint Advisor Investment Advisory Agreement.
Upon termination or expiration of the FS Adviser Investment Co-Advisory Agreement, FS Adviser will be entitled to any amounts owed
to it through the date of termination or expiration.
Indemnification
.
The FS Adviser Investment Co-Advisory Agreement provides that FS Adviser and any sub-adviser (and their directors, officers, stockholders
or members (and their stockholders or members, including the owners of their stockholders or members), agents, employees, controlling
persons (as defined in the 1940 Act) and any other person or entity affiliated with, or acting on behalf of, FS Adviser or any
such sub-adviser) (collectively, the “FS Adviser Indemnified Parties”), will not be liable to the Company for any action
taken or omitted to be taken by any such FS Adviser Indemnified Party in connection with the performance of any of its duties or
obligations under the FS Adviser Investment Co-Advisory Agreement or otherwise as an investment adviser of the Company (except
to the extent specified in Section 36(b) of the 1940 Act concerning loss resulting from a breach of fiduciary duty with respect
to the receipt of compensation for services), and the Company will indemnify, defend and protect the FS Adviser Indemnified Parties
(each of whom shall be deemed a third party beneficiary thereof) and hold them harmless from and against all Losses incurred by
the FS Adviser Indemnified Parties in or by reason of any pending, threatened or completed action, suit, investigation or other
proceeding (including an action or suit by or in the right of the Company or its security holders) arising out of or otherwise
based upon the performance of any of FS Adviser’s duties or obligations under the FS Adviser Investment Co-Advisory Agreement
or otherwise as an investment adviser of the Company, to the extent such Losses are not fully reimbursed by insurance, and to the
extent that such indemnification would not be inconsistent with the laws of the Company’s articles of incorporation, the
1940 Act, the laws of the State of Maryland or other applicable law. Notwithstanding the preceding sentence, nothing contained
in the FS Adviser Investment Co-Advisory Agreement will protect or be deemed to protect the FS Adviser Indemnified Parties against
or entitle or be deemed to entitle the FS Adviser Indemnified Parties to indemnification in respect of any Losses to the Company
or its stockholders to which the FS Adviser Indemnified Parties would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of FS Adviser’s duties or by reason of the reckless disregard of FS Adviser’s
duties and obligations under the FS Adviser Investment Co-Advisory Agreement.
Brand Usage
.
The FS Adviser Investment Co-Advisory Agreement provides, subject to certain limitations, that FS Adviser grants a non-exclusive,
non-transferrable, non-sublicensable and royalty-free license to the Company for use of FS Adviser’s trademark and design
in connection with the Company’s public filings, requests for information from state and federal regulators, offering materials
and advertising materials and investor communications.
Administrative Services
Concurrently with
entering into the Investment Co-Advisory Agreements, the Company expects to enter into administrative services agreements with
each of KKR Credit and FS Adviser. The terms of these administrative services agreements, including the services to be provided
by KKR Credit and FS Adviser, respectively, and the amount of reimbursements to be paid by the Company for certain administrative
expenses, would be substantially the same as those of the Current Administrative Services Agreement, which would terminate upon
the effectiveness of the administrative services agreements with KKR Credit and FS Adviser.
Board Consideration
At a meeting of the
Board held on December 4, 2017, the Board, including a majority of the Independent Directors, approved each of the Investment Co-Advisory
Agreements as being in the best interests of the Company and its stockholders. Representatives of KKR Credit and FS Investments
were present at that meeting to answer questions and discuss the structure of the proposed advisory services, the nature and type
of services to be provided and the ways in which the two advisers would work together as investment co-advisers to the Company.
The Board then directed that both Investment Co-Advisory Agreements be submitted to the Company’s stockholders for approval
with the Board’s recommendation that the stockholders of the Company vote to approve the Investment Co-Advisory Agreements.
Prior to that meeting,
the Independent Directors Committee of the Board met formally on three separate occasions, and informally on many additional occasions,
to discuss the materials provided by KKR Credit and FS Investments and to ask questions. At two of those meetings, members of KKR
Credit were present and answered numerous questions posed by the Board, and members of FS Investments who are expected to become
members of FS Adviser were also present at one of those meetings. The third meeting was an executive session in advance of the
Board meeting to discuss the information provided by KKR Credit and FS Investments. All three meetings were attended by counsel
to the Independent Directors.
The Investment Co-Advisory
Agreements Proposal and the Joint Advisor Investment Advisory Agreement Proposal are not contingent on one another. However, if
the stockholders of the Company do not approve both the Investment Co-Advisory Agreements Proposal and the Joint Advisor Investment
Advisory Agreement Proposal, then the Board will consider and evaluate its options to determine what alternatives are in the Company’s
best interests and that of the Company’s stockholders, such as resubmitting the Investment Co-Advisory Agreements Proposal
and/or the Joint Advisor Investment Advisory Agreement Proposal for approval by the Company’s stockholders.
Factors Considered by the Board
The Board, in approving
and recommending the approval of each Investment Co-Advisory Agreement, considered a number of factors. Such approval was made
in accordance with, and on the basis of an evaluation satisfactory to the Board as required by Section 15(c) of the 1940 Act and
applicable rules and regulations thereunder, including a consideration of, among other factors, (i) the nature, quality, complexity
and extent of the advisory and other services to be performed by each of KKR Credit and FS Adviser, (ii) the costs of providing
services to the Company, (iii) any ancillary financial benefits to each of KKR Credit and FS Adviser because of their relationship
with the Company, (iv) comparative information on fees and expenses borne by other comparable BDCs or regulated investment companies
(“RICs”) and other advised accounts, in each case, as applicable, (v) comparative BDCs’ or RICs’ performance
and other competitive factors, (vi) the extent to which economies of scale may be realized as the Company grows and if there is
potential for economies of scale, (vii) whether fee levels reflect these economies of scale for the benefit of the Company’s
stockholders, (viii) the experience and qualifications of the personnel from KKR Credit and FS Adviser providing such services,
and (ix) the fee structure, expense ratios and expected costs and expenses to the Company under each of the KKR Investment Co-Advisory
Agreement and the FS Adviser Investment Co-Advisory Agreement. The Board considered all factors and no one factor alone was deemed
dispositive.
In connection with
its consideration of whether to approve each of the KKR Investment Co-Advisory Agreement and the FS Adviser Investment Co-Advisory
Agreement, the Board also reviewed, among other materials, (i) comparative data with respect to advisory fees or similar expenses,
(ii) estimates of the profitability of KKR Credit and FS Investments and its affiliates for certain past and future periods presented
with and without certain pro forma adjustments for compensation and expenses, (iii) data regarding the impact of each of the KKR
Investment Co-Advisory Agreement and the FS Adviser Investment Co-Advisory Agreement on advisory fees that would be received by
KKR Credit and FS Adviser, respectively, under various hypothetical return scenarios, and (iv) copies of each of the KKR Investment
Co-Advisory Agreement and the FS Adviser Investment Co-Advisory Agreement.
The Board also took
into consideration the fact that it had considered KKR Credit’s role as investment adviser previously in March 2017 in connection
with the annual renewal of KKR Credit’s then-current investment sub-advisory agreement and in April 2017 in connection with
the Current Investment Advisory Agreement entered into in connection with KKR Credit becoming sole investment adviser to the Company.
Specifically, the Board considered that it negotiated favorable changes with KKR Credit, including a reduction of the management
fee after December 31, 2017 from 2.0% to 1.75% of the Company’s average gross assets, if any, with respect to the amount
of average gross assets in excess of $4.0 billion, followed by a further reduction of the management fee to 1.50% of the Company’s
average gross assets in connection with the listing of the Shares on The New York Stock Exchange (the “Listing”) under
the Current Investment Advisory Agreement. Predicated upon the review of the special committee of the Board responsible for the
negotiation and these proposed changes, the committee recommended to the full Board the approval of the Current Investment Advisory
Agreement, which the Board, including a majority of the Independent Directors, approved in April 2017. With respect to the nature,
quality and extent of the advisory and other services, and the services to be performed and the personnel performing such services
under the KKR Investment Co-Advisory Agreement, the Board noted that generally the same KKR Credit personnel who provide the services
under the Current Investment Advisory Agreement would also provide the services under the KKR Investment Co-Advisory Agreement.
The Board considered the fact that the personnel at KKR Credit who would continue to perform the services for the Company under
the KKR Investment Co-Advisory Agreement are familiar with the Company’s existing investment portfolio. The Board also considered
that it would have access to the employees and resources of FS Adviser under the FS Adviser Investment Co-Advisory Agreement to
work together with the KKR Credit personnel to provide complementary services. Based on these considerations, the Board concluded,
within the context of its overall determination to approve the Investment Co-Advisory Agreements, that the Company would continue
to benefit from the services to be provided by KKR Credit under the KKR Credit Investment Co-Advisory Agreement, and that the Company
would also benefit from the services of FS Adviser under the FS Adviser Investment Co-Advisory Agreement.
Regarding investment
performance, the Board took note of the Company’s historical investment performance results, including access to KKR Credit’s
network of proprietary sourced transactions, as presented to the Board, in light of the Company’s investment objective, strategies
and risks. The Board also considered the FS Advisor Entities’ track record managing BDCs. Based on these considerations,
the Board concluded, within the context of its overall determinations regarding the Investment Co-Advisory Agreements, that the
Company’s historical investment performance and activity, including proprietary sourced transactions, supported a determination
to approve the Investment Co-Advisory Agreements so that the Company could continue to benefit from KKR Credit’s services
and expertise pursuant to the KKR Investment Co-Advisory Agreement, as well as FS Adviser’s services and expertise pursuant
to the FS Adviser Investment Co-Advisory Agreement.
In considering the
fees and expenses of the Company, the Board reviewed comparative data with respect to advisory fees or similar expenses paid by
other BDCs, including BDCs listed on a national securities exchange (“Listed BDCs”), investment companies and other
accounts of KKR Credit and FS Investments and its affiliates with similar investment objectives. The Board noted that that the
aggregate proposed advisory fees under the Investment Co-Advisory Agreements would be in line with the Current Investment Advisory
Agreement and continue to be lower than the fee arrangements under the investment advisory agreements in place prior to the Listing.
The Board also noted that the incentive fee premium in the Investment Co-Advisory Agreements would make permanent the three-year
portion of the “look-back” provision and the removal of the add-back of management fees in the calculation of the incentive
fee that started at the Listing, rather than having those terms continue in a separate fee waiver letter. Together, the Board believed
that these features would better align the interests of the Company’s stockholders with the formulae for determining incentive
fees paid to KKR Credit and FS Adviser under the Investment Co-Advisory Agreements.
The Board also considered
the fact that KKR Credit is a subsidiary of KKR & Co., a global investment firm that manages investments across multiple asset
classes including private equity, energy, infrastructure, real estate, credit and hedge funds, and that KKR Credit’s ability
to leverage the intellectual capital and synergies of KKR & Co., subject to information barriers, would be beneficial to the
Company. The Board also favorably considered the fact that KKR Credit had over $41 billion of assets under management as of September
30, 2017 across investment funds, structured finance vehicles, specialty finance companies and separately managed accounts, representing
the credit strategies under its management, and also has experience as an adviser to KKR Income Opportunities Fund, which is a
closed-end management investment company. After considering all of the relevant factors, the Board concluded that the Company’s
advisory fees, as set forth in the Investment Co-Advisory Agreements, are reasonable, both as compared to other Listed BDCs and
also in relation to the services to be provided by KKR Credit and FS Adviser.
With respect to FS
Adviser, the Board considered the materials FS Investments provided, including information relating to the FS Advisor Entities’
overall experience overseeing the activities of the FSIC Funds and the FS Advisor Entities’ role in, among other things,
setting investment guidelines for the FSIC Funds’ respective portfolios, determining the composition and allocation of the
FSIC Funds’ respective portfolios, and identifying, evaluating, and negotiating the structure of, the FSIC Funds’ respective
investments, overseeing risk management and operational capabilities. In addition, the Board discussed these materials and other
items with representatives of FS Investments that attended the Board meeting on December 4, 2017. The Board discussed that it had
followed the franchise of funds advised by affiliates of FS Investments for more than six years and took into consideration that
affiliates of FS Investments (i) advise the largest group of BDCs in the marketplace, including Listed and non-Listed BDCs with
approximately $18.1 billion in assets under management as of September 30, 2017 and (ii) have developed the infrastructure and
technology and have over 300 personnel to help continue the Company’s growth and support KKR Credit in providing best in
class services to the Company.
The Board and the
Independent Directors determined that they were satisfied with the nature, quality and extent of the services to be provided by
KKR Credit and FS Adviser to the Company, the expertise and capabilities of KKR Credit’s and FS Adviser’s personnel,
KKR Credit’s and FS Adviser’s financial strength and their anticipated allocation of resources necessary to manage
the Company’s portfolio.
Economies of Scale
.
The Board considered the extent to which economies of scale might be realized as the Company grows and whether the Company’s
fee levels reflect these economies of scale for the benefit of Company stockholders. The Board considered the fact that such economies
are less likely to be significant given the Company’s structure and focus on loans to private middle-market U.S. companies
which generally require loan by loan negotiation and monitoring, as well as KKR Credit’s and FS Adviser’s commitment
to monitor economies of scale on an ongoing basis.
Other Benefits
.
The Board considered other benefits that may accrue to KKR Credit, FS Adviser, and their affiliates from their relationships with
the Company, including that KKR Credit and FS Adviser may potentially benefit from the success of the Company, which could attract
other business to KKR Credit and FS Adviser.
Overall Conclusions
.
As part of its consideration of the Investment Co-Advisory Agreements, the Board considered that if the Investment Co-Advisory
Agreements become effective, until the Joint Advisor Investment Advisory Agreement becomes effective, the Board will technically
be responsible for overseeing two investment advisers that provide advisory services to the Company, as opposed to the sole investment
advisory arrangement currently in place with KKR Credit, which could result in additional complexity for the Board as well as potential
disruption for stockholders due to having two investment advisers. The Board also considered the fact that effective upon the Listing,
KKR Credit has served as the sole investment adviser to the Company, as compared to its pre-Listing role as investment sub-adviser.
In addition, the Board considered KKR Credit’s and FS Adviser’s ability to identify and execute on sufficient investment
opportunities for the Company, given their proposed investment advisory roles to the Company, CCT II and the FSIC Funds and the
aggregate amount of assets that would be advised. KKR Credit provided responses to these items, including by noting they were already
in the process of hiring additional origination resources to help meet the growing investor demand. Taking these factors and the
other factors described above into consideration, the Board concluded that adding FS Adviser as an investment adviser under the
FS Adviser Investment Co-Advisory Agreement and entering into the KKR Investment Co-Advisory Agreement, which will not increase
the advisory fees payable by the Company, is in the best interest of the Company and its stockholders, given the complementary
services that FS Adviser will provide.
No single factor was
determinative of the Board’s and the Independent Directors’ decisions to approve the Investment Co-Advisory Agreements,
but rather, the members of the Board based their determination on the total mix of information available to them. After considering
the factors described above, the Board and the Independent Directors concluded separately that the terms of the Investment Co-Advisory
Agreements are fair and reasonable to the Company in light of the services to be provided by KKR Credit and FS Adviser, their costs
and reasonably foreseeable Company asset levels, and that the Company’s stockholders are expected to receive reasonable value
in return for the advisory fees paid. The Board and the Independent Directors also concluded separately that the approval of the
Investment Co-Advisory Agreements is supported by reasonable and impartial records and information, the competitive expense structure
and that the approval of the Investment Co-Advisory Agreements would be in the best interest of the Company and its stockholders.
Accordingly, on December 4, 2017, the Board, including a majority of the Independent Directors, approved the Investment Co-Advisory
Agreements.
Vote Required
Approval of the Investment
Co-Advisory Agreements Proposal requires the affirmative vote of the holders of a majority of the outstanding Shares entitled to
vote at the Special Meeting. The 1940 Act defines “a majority of the outstanding Shares” as (a) 67% or more of
the Shares present at the Special Meeting if the holders of more than 50% of the outstanding Shares are present or represented
by proxy or (b) more than 50% of the outstanding Shares, whichever is less. You may vote for or against or abstain on the
Investment Co-Advisory Agreements Proposal. Abstentions and broker non-votes will not count as affirmative votes cast and will
therefore have the same effect as votes against the Investment Co-Advisory Agreements Proposal. Proxies received will be voted
“FOR” the Investment Co-Advisory Agreements Proposal unless stockholders designate otherwise.
THE BOARD UNANIMOUSLY RECOMMENDS THAT
YOU VOTE “FOR” THE INVESTMENT CO-ADVISORY AGREEMENTS PROPOSAL.
Proposal No. 2 – Approval of the
Joint Advisor Investment Advisory Agreement
Background
The information set
forth under the heading “Background” in “Proposal 1: Approval of Investment Co-Advisory Agreements Proposal”
is incorporated herein by reference.
About the Joint Advisor
The Joint Advisor
will be a newly-formed Delaware limited liability company, located at 201 Rouse Boulevard, Philadelphia, PA 19112. Prior to the
effectiveness of the Joint Advisor Investment Advisory Agreement, the Joint Advisor will register as an investment adviser with
the SEC under the Advisers Act. The Joint Advisor will be formed by FS Investments or one of its affiliates (the “FS Joint
Advisor Member”), to serve as the Company’s investment adviser. Upon receipt of Exemptive Relief, stockholder approval
of the Joint Advisor Investment Advisory Agreement and, unless otherwise waived by KKR Credit and the FS Advisor Entities, stockholder
approval of each investment advisory agreement between the Joint Advisor and each of FSIC, FSIC II, FSIC III, FSIC IV and CCT II,
KKR Credit will become a member of the Joint Advisor, which will be jointly controlled by KKR Credit and the FS Joint Advisor Member.
Michael C. Forman,
the chairman and chief executive officer of FS Investments, will serve as the Joint Advisor’s chairman and chief executive
officer, and Todd C. Builione, the president of KKR Credit, will serve as the Joint Advisor’s president.
The Joint Advisor’s
senior management team will have significant experience in private lending and private equity investing, and will have developed
an expertise in using all levels of a firm’s capital structure to produce income-generating investments, while focusing on
risk management. The team will also have extensive knowledge of the managerial, operational and regulatory requirements of publicly
registered alternative asset entities, such as BDCs. The Company believes that the active and ongoing participation by KKR Credit,
FS Investments and their respective affiliates in the credit markets, and the depth of experience and disciplined investment approach
of the Joint Advisor’s management team, will allow the Joint Advisor to successfully execute the Company’s investment
strategies.
The Joint Advisor’s
investment committee will initially be comprised of Todd Builione, Sean Coleman, Brian Gerson, Michael Kelly, Daniel Pietrzak and
Ryan Wilson. See “Proposal 1: Approval of Investment Co-Advisory Agreements Proposal—Management of the Investment Co-Advisors”
for additional information. The Board, including a majority of the Independent Directors, will oversee and monitor the Company’s
investment performance and will review the Joint Advisor Investment Advisory Agreement as required by the 1940 Act, to determine,
among other things, whether the fees payable under such agreement are reasonable in light of the services provided.
About KKR Credit
The information set
forth under the heading “About KKR Credit” in “Proposal 1: Approval of Investment Co-Advisory Agreements Proposal”
is incorporated herein by reference.
About FS Investments
FS Investments is
a leading asset manager dedicated to helping individuals, financial professionals and institutions design better portfolios. The
firm provides access to alternative sources of income and growth and focuses on setting the industry standards for investor education
and transparency.
FS Investments is
headquartered in Philadelphia with offices in Orlando, FL and Washington, D.C. The firm had more than $20 billion in assets
under management as of September 30, 2017.
Management of the Joint Advisor
The management of
the Company’s investment portfolio will be the responsibility of the Joint Advisor’s investment committee which will
be comprised of three appointees of KKR Credit (initially Todd Builione, Daniel Pietrzak and Ryan Wilson) and three appointees
of the FS Joint Advisor Member (initially Sean Coleman, Brian Gerson and Michael Kelly). A team of dedicated investment professionals
consisting of personnel from KKR Credit and FS Investments will provide services to the Company on behalf of the Joint Advisor.
The investment committee will be responsible for establishing and monitoring the Company’s investment program, developing
the portfolio, setting the risk parameters for the Company and approving all Company investments. In all matters in which a vote
of the investment committee is required, the unanimous vote of all members of the investment committee present at a meeting where
a quorum is present (which requires the presence of one designee of KKR Credit and one designee of the FS Joint Advisor Member)
is required to authorize or approve such matters.
In performing its
duties under the Joint Advisor Investment Advisory Agreement, the Joint Advisor will provide the Company with services to facilitate
the conduct of its business, including but not limited to: (a) sourcing, structuring, underwriting, performing diligence, executing
and monitoring investments; (b) researching, selecting, trading and underwriting new investment opportunities; (c) investor account
management; (d) legal, compliance, finance, accounting, operations and human resources services; and (e) risk management functions.
KKR Credit and the FS Joint Advisor Member will be collectively responsible for providing appropriate assets, resources, time and
personnel to allow the Joint Advisor to provide to the Company the services required under the Joint Advisor Investment Advisory
Agreement. KKR Credit and the FS Joint Advisor Member will coordinate their activities during the period in which the Joint Advisor
Investment Advisory Agreement would be in effect to avoid duplication of efforts and ensure a balanced and effective allocation
of responsibilities and net fee revenue earned by the Joint Advisor, and efficiency in the provision of the required services to
the Company thereunder.
The FS Joint Advisor
Member, subject to the reasonable consent of KKR Credit and appointment by the board of the Joint Advisor, will designate the Joint
Advisor’s chairman and chief executive officer and chief compliance officer. KKR Credit, subject to the reasonable consent
of the FS Joint Advisor Member and appointment by the board of the Joint Advisor, will designate the Joint Advisor’s president
and chief credit officer.
The biographical information
set forth under the heading “Management of the Investment Co-Advisors” in “Proposal 1: Approval of Investment
Co-Advisory Agreements Proposal” is incorporated herein by reference.
Terms of the Joint Advisor Investment
Advisory Agreement
The terms of the Joint
Advisor Investment Advisory Agreement are substantially similar to those of the Current Investment Advisory Agreement, except for,
among other things, the fees payable thereunder, the name of the investment adviser and the date of effectiveness. The description
of the Joint Advisor Investment Advisory Agreement that follows is a summary only and is qualified by reference to the more complete
information contained in the copy of the form of the Joint Advisor Investment Advisory Agreement included in Exhibit C hereto.
Duties
. Subject
to the overall supervision of the Board, the Joint Advisor will oversee the Company’s day-to-day operations and provide the
Company with investment advisory services. Under the terms of the Joint Advisor Investment Advisory Agreement, the Joint Advisor
will:
|
(i)
|
determine the composition and allocation of the Company’s investment portfolio, the nature
and timing of any changes therein and the manner of implementing such changes;
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(ii)
|
identify, evaluate and negotiate the structure of the investments made by the Company, including
executing transactions on behalf of the Company;
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(iii)
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perform due diligence on prospective portfolio companies;
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(iv)
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execute, close, service and monitor the Company’s investments;
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(v)
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determine the securities and other assets that the Company shall purchase, retain or sell;
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(vi)
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provide the Company with such other investment advisory, research and related services as the Company
may, from time to time, reasonably request or require for the investment of its funds; and
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(vii)
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to the extent permitted under the 1940 Act and the Advisers Act, on the Company’s behalf,
and in coordination with any sub-adviser and any administrator, provide significant managerial assistance to those portfolio companies
to which the Company is required to provide such assistance under the 1940 Act, including utilizing appropriate personnel of the
Joint Advisor to, among other things, monitor the operations of the Company’s portfolio companies, participate in board and
management meetings, consult with and advise officers of portfolio companies and provide other organizational and financial consultation.
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The duties to be provided
under the Joint Advisor Investment Advisory Agreement are substantially the same as those under the Current Investment Advisory
Agreement.
Fees and Expenses
.
The Company will pay the Joint Advisor a fee for its services under the Joint Advisor Investment Advisory Agreement consisting
of two components—a management fee based on the average value of the Company’s gross assets and an incentive fee based
on the Company’s performance. The cost of both the management fee payable to the Joint Advisor and any incentive fees it
earns will ultimately be borne by the Company’s stockholders.
The management fee
will be calculated at an annual rate of 1.50% of the average value of the Company’s gross assets. The management fee will
be payable monthly in arrears and will be calculated based on the simple average value of the Company’s gross assets (excluding
cash and cash equivalents) at the end of the two most recently completed calendar months. The management fee may or may not be
taken in whole or in part at the discretion of the Joint Advisor. All or any part of the management fee not taken as to any month
will be deferred without interest and may be taken in such other month as Joint Advisor shall determine. The management fee for
any partial month will be appropriately prorated. The other terms of the management fee are the same as those under the Current
Investment Advisory Agreement.
The Joint Advisor
Investment Advisory Agreement will incorporate certain incremental advisory fee arrangements currently being provided under a temporary
waiver agreement with KKR Credit. Specifically, (a) the “look back period” will be defined as the most recently completed
quarter and the 11 preceding calendar quarters and (b) the “cumulative net increase in net assets resulting from operations”
will be defined to remove the addition of management fees paid following November 14, 2017 for purposes of calculating the incentive
fee.
Accordingly, the incentive
fee will consist of two parts. The first part of the incentive fee, which is referred to as the subordinated incentive fee on income,
will be calculated and payable quarterly in arrears, will equal 20.0% of the Company’s “pre-incentive fee net investment
income” for the immediately preceding quarter and will be subject to a hurdle rate, expressed as a rate of return on average
net assets, equal to 1.75% per quarter, or an annualized hurdle rate of 7.0%. As a result, the Joint Advisor will not earn this
incentive fee for any quarter until the Company’s pre-incentive fee net investment income for such quarter exceeds the hurdle
rate of 1.75%. Once the Company’s pre-incentive fee net investment income in any quarter exceeds the hurdle rate, the Joint
Advisor will be entitled to a “catch-up” fee equal to the amount of the Company’s pre-incentive fee net investment
income in excess of the hurdle rate, until the Company’s pre-incentive fee net investment income for such quarter equals
2.1875%, or 8.75% annually, of average net assets. This “catch-up” feature will allow the Joint Advisor to recoup the
fees foregone as a result of the existence of the hurdle rate. Thereafter, the Joint Advisor will be entitled to receive 20.0%
of the Company’s pre-incentive fee net investment income.
However, under the
Joint Advisor Investment Advisory Agreement, the subordinated incentive fee on income will continue to be subject to a total return
requirement, but differs from the Current Investment Advisory Agreement in that the total return requirement will be calculated
based on the Company’s reported income per share over the most recently completed quarter and the 11 preceding calendar quarters
(the “look back period”). Specifically, the subordinated incentive fee on income will not exceed (A) the aggregate
sum of, for each calendar quarter of the look-back period, (a) (x) 20.0% of the cumulative net increase in net assets resulting
from operations for such quarter less (y) the subordinated incentive fees on income accrued by the Company for such quarter (not
including for the current quarter for which the subordinated incentive fees on income is being calculated), divided by (b) the
weighted average number of Shares outstanding during such calendar quarter, multiplied by (B) the weighted average number of Shares
outstanding during the calendar quarter for which the subordinated incentive fee on income is being calculated. For the foregoing
purpose, the “cumulative net increase in net assets resulting from operations” is the sum of the Company’s pre-incentive
fee net investment income, management fees payable with respect to the periods prior to November 14, 2017, realized gains and losses
and unrealized appreciation and depreciation.
The second part of
the incentive fee, which is referred to as the incentive fee on capital gains, will be determined and payable in arrears as of
the end of each calendar year (or upon termination of the Joint Advisor Investment Advisory Agreement). Under the Joint Advisor
Investment Advisory Agreement, the fee will equal 20.0% of the Company’s incentive fee capital gains (i.e., the Company’s
realized capital gains on a cumulative basis from inception, calculated as of the end of the applicable period, computed net of
all realized capital losses and unrealized capital depreciation on a cumulative basis), less the aggregate amount of any previously
paid incentive fees on capital gains. The Company will accrue the incentive fee on capital gains, which, if earned, will be paid
annually. The Company will accrue the incentive fee on capital gains based on net realized and unrealized gains; however, under
the terms of the Joint Advisor Investment Advisory Agreement, the fee payable to the Joint Advisor will be based on realized gains
and no such fee will be payable with respect to unrealized gains unless and until such gains are actually realized.
The incentive fee
may or may not be taken in whole or in part at the discretion of Joint Advisor. All or any part of the incentive fee not taken
as to any quarter will be deferred without interest and may be taken in such other quarter as the Joint Advisor shall determine.
The other terms of the incentive fee are substantially the same as those under the Current Investment Advisory Agreement.
All personnel of the
Joint Advisor, when and to the extent engaged in providing services under the Joint Advisor Investment Advisory Agreement, and
the compensation and routine overhead expenses of such personnel allocable to such services, shall be provided and paid for by
the Joint Advisor or its affiliates and not by the Company. The treatment of expenses is the same under the Current Investment
Advisory Agreement.
Term
. The Joint
Advisor Investment Advisory Agreement will remain in effect initially for two years, and thereafter will continue automatically
for successive annual periods, provided that such continuance is specifically approved at least annually by (i) the vote of the
Board, or by the vote of a majority of the outstanding voting securities of the Company (as “majority” is defined in
Section 2(a)(42) of the 1940 Act) and (ii) the vote of a majority of the Independent Directors in accordance with the requirements
of the 1940 Act. The Joint Advisor Investment Advisory Agreement may be terminated at any time, without the payment of any penalty,
upon 60 days’ written notice by the Company to the Joint Advisor, (i) upon the vote of a majority of the outstanding voting
securities of the Company, or (ii) by the vote of the Board, or upon 120 days’ written notice by the Joint Advisor to the
Company. The Joint Advisor Investment Advisory Agreement will automatically terminate in the event of its “assignment”
(as such term is defined for purposes of Section 15(a)(4) of the 1940 Act).
Indemnification
.
The Joint Advisor Investment Advisory Agreement provides that the Joint Advisor and any sub-adviser (and their trustees, directors,
officers, stockholders or members (and their stockholders or members, including the owners of their stockholders or members), agents,
employees, controlling persons (as defined in the 1940 Act) and any other person or entity affiliated with, or acting on behalf
of, the Joint Advisor or any such sub-adviser) (collectively, the “Joint Advisor Indemnified Parties”), will not be
liable to the Company for any action taken or omitted to be taken by any such Joint Advisor Indemnified Party in connection with
the performance of any of its duties or obligations under the Joint Advisor Investment Advisory Agreement or otherwise as an investment
adviser of the Company (except to the extent specified in Section 36(b) of the 1940 Act concerning loss resulting from a breach
of fiduciary duty with respect to the receipt of compensation for services), and the Company will indemnify, defend and protect
the Joint Advisor Indemnified Parties (each of whom shall be deemed a third party beneficiary thereof) and hold them harmless from
and against all Losses incurred by the Joint Advisor Indemnified Parties in or by reason of any pending, threatened or completed
action, suit, investigation or other proceeding (including an action or suit by or in the right of the Company or its security
holders) arising out of or otherwise based upon the performance of any of Joint Advisor’s duties or obligations under the
Joint Advisor Investment Advisory Agreement or otherwise as an investment adviser of the Company, to the extent such Losses are
not fully reimbursed by insurance, and to the extent that such indemnification would not be inconsistent with the Company’s
articles of incorporation, the 1940 Act, the laws of the State of Maryland or other applicable law. Notwithstanding the preceding
sentence, nothing contained in the Joint Advisor Investment Advisory Agreement will protect or be deemed to protect the Joint Advisor
Indemnified Parties against or entitle or be deemed to entitle the Joint Advisor Indemnified Parties to indemnification in respect
of any Losses to the Company or its stockholders to which the Joint Advisor Indemnified Parties would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of Joint Advisor’s duties or by reason of the reckless
disregard of the Joint Advisor’s duties and obligations under the Joint Advisor Investment Advisory Agreement.
Brand Usage
.
The Joint Advisor Investment Advisory Agreement provides, subject to certain limitations, that the Joint Advisor grants a non-exclusive,
non-transferrable, non-sublicensable and royalty-free license to the Company for use of the trademark “FS/KKR Advisor”
in connection with the Company’s public filings, requests for information from state and federal regulators, offering materials
and advertising materials and investor communications.
Third Party Beneficiaries
.
The Joint Advisor Investment Advisory Agreement provides that except for any Joint Advisor Indemnified Party, the Joint Advisor
Investment Advisory Agreement is for the sole benefit of the parties thereto and their permitted assigns.
Insurance
.
The Joint Advisor Investment Advisory Agreement provides that the Company shall acquire and maintain a directors and officers liability
insurance policy or similar policy with reasonable coverage from a reputable insurer.
Administrative Services
Concurrently with
entering into the Joint Advisor Investment Advisory Agreement, the Company expects to enter into an administrative services agreement
with the Joint Advisor. The terms of this administrative services agreement, including the services to be provided by the Joint
Advisor, and the amount of reimbursements to be paid by the Company for certain administrative expenses, would be substantially
the same as those of the Current Administrative Services Agreement. Upon the effectiveness of the administrative services agreement
with the Joint Advisor, the administrative services agreements with KKR Credit and FS Adviser described under “Proposal No.
1 – Approval of Investment Co-Advisory Agreements –Administrative Services” would terminate.
Board Consideration
At a meeting of the
Board held on December 4, 2017, the Board, including a majority of the Independent Directors, approved the Joint Advisor Investment
Advisory Agreement as being in the best interests of the Company and its stockholders. Representatives of KKR Credit and FS Investments
were present at that meeting to answer questions and discuss the structure of the proposed advisory services and the nature and
type of services to be provided under the Joint Advisor Investment Advisory Agreement. The Board then directed that the Joint Advisor
Investment Advisory Agreement be submitted to the Company’s stockholders for approval with the Board’s recommendation
that the stockholders of the Company vote to approve the Joint Advisor Investment Advisory Agreement.
Prior to that meeting,
the Independent Directors Committee of the Board met formally on three separate occasions, and informally on many additional occasions,
to discuss the materials provided by KKR Credit and FS Investments and to ask questions. At two of those meetings, members of KKR
Credit were present and answered numerous questions posed by the Board, and members of FS Investments who are expected to become
members of the FS Joint Advisor Member were also present at one of those meetings. The third meeting was an executive session in
advance of the Board meeting to discuss the information provided by KKR Credit and FS Investments. All three meetings were attended
by counsel to the Independent Directors.
The Investment Co-Advisory
Agreements Proposal and the Joint Advisor Investment Advisory Agreement Proposal are not contingent on one another. However, if
the stockholders of the Company do not approve both the Investment Co-Advisory Agreements Proposal and the Joint Advisor Investment
Advisory Agreement Proposal, then the Board will consider and evaluate its options to determine what alternatives are in the Company’s
best interests and that of the Company’s stockholders, such as resubmitting the Investment Co-Advisory Agreements Proposal
and/or the Joint Advisor Investment Advisory Agreement Proposal for approval by the Company’s stockholders.
Factors Considered by the Board
The Board, in approving
and recommending the approval of the Joint Advisor Investment Advisory Agreement, considered a number of factors. Such approval
was made in accordance with, and on the basis of an evaluation satisfactory to the Board as required by Section 15(c) of the 1940
Act and applicable rules and regulations thereunder, including a consideration of, among other factors, (i) the nature, quality,
complexity and extent of the advisory and other services to be performed by the Joint Advisor, (ii) the costs of providing services
to the Company, (iii) any ancillary financial benefits the Joint Advisor because of its relationship with the Company, (iv) comparative
information on fees and expenses borne by other comparable BDCs or RICs and other advised accounts, in each case, as applicable,
(v) comparative BDCs’ or RICs’ performance and other competitive factors, (vi) the extent to which economies of scale
may be realized as the Company grows and if there is potential for economies of scale, (vii) whether fee levels reflect these economies
of scale for the benefit of the Company’s stockholders, (viii) the experience and qualifications of the personnel from the
Joint Advisor providing such services, and (ix) the fee structure, expense ratios and expected costs and expenses to the Company
under the Joint Advisor Investment Advisory Agreement. The Board considered all factors and no one factor alone was deemed dispositive.
In connection with
its consideration of whether to approve the Joint Advisor Investment Advisory Agreement, the Board also reviewed, among other materials,
(i) comparative data with respect to advisory fees or similar expenses, (ii) estimates of the profitability of KKR Credit
and FS Investments and its affiliates for certain past and future periods presented with and without certain pro forma adjustments
for compensation and expenses, (iii) data regarding the impact of the Joint Advisor Investment Advisory Agreement on advisory fees
that would be received by the Joint Advisor and, indirectly, KKR Credit and the FS Joint Advisor Member, under various hypothetical
return scenarios, and (iv) a copy of the Joint Advisor Investment Advisory Agreement.
The Board also took
into consideration the fact that it had considered KKR Credit’s role as investment adviser previously in March 2017 in connection
with the annual renewal of KKR Credit’s then-current investment sub-advisory agreement and in April 2017 in connection with
the Current Investment Advisory Agreement entered into in connection with KKR Credit becoming sole investment adviser to the Company.
Specifically, the Board considered that it negotiated favorable changes with KKR Credit, including a reduction of the management
fee after December 31, 2017 from 2.0% to 1.75% of the Company’s average gross assets, if any, with respect to the amount
of average gross assets in excess of $4.0 billion, followed by a further reduction of the management fee to 1.50% of the Company’s
average gross assets in connection with the Listing under the Current Investment Advisory Agreement. Predicated upon the review
of the special committee of the Board responsible for the negotiation and these proposed changes, the committee recommended to
the full Board the approval of the Current Investment Advisory Agreement, which the Board, including a majority of the Independent
Directors, approved in April 2017. With respect to the nature, quality and extent of the advisory and other services, and the services
to be performed and the personnel performing such services under the Joint Advisor Investment Advisory Agreement, the Board noted
that generally the same KKR Credit personnel who provide the services under the Current Investment Advisory Agreement would also
provide the services on behalf of the Joint Advisor under the Joint Advisor Investment Advisory Agreement. The Board considered
the fact that the personnel at KKR Credit who would continue to perform the services for the Company on behalf of the Joint Advisor
under the Joint Advisor Investment Advisory Agreement are familiar with the Company’s existing investment portfolio. The
Board also considered that it would have access to the employees and resources of the FS Joint Advisor Member under the Joint Advisor
Investment Advisory Agreement to work together with the KKR Credit personnel to provide complementary services. Based on these
considerations, the Board concluded, within the context of its overall determination to approve the Joint Advisor Investment Advisory
Agreement, that the Company would continue to benefit from the services to be provided by KKR Credit on behalf of the Joint Advisor
under the Joint Advisor Investment Advisory Agreement, and that the Company would also benefit from the services of the FS Joint
Advisor Member on behalf of the Joint Advisor.
Regarding investment
performance, the Board took note of the Company’s historical investment performance results, including access to KKR Credit’s
network of proprietary sourced transactions, as presented to the Board, in light of the Company’s investment objective, strategies
and risks. The Board also considered the FS Advisor Entities’ track record managing BDCs. Based on these considerations,
the Board concluded, within the context of its overall determinations regarding the Joint Advisor Investment Advisory Agreement,
that the Company’s historical investment performance and activity, including proprietary sourced transactions, supported
a determination to approve the Joint Advisor Investment Advisory Agreement so that the Company could continue to benefit from KKR
Credit’s services and expertise on behalf of the Joint Advisor, as well as the FS Joint Advisor Member’s services and
expertise.
In considering the
fees and expenses of the Company, the Board reviewed comparative data with respect to advisory fees or similar expenses paid by
other BDCs, including Listed BDCs, investment companies and other accounts of KKR Credit and FS Investments and its affiliates
with similar investment objectives. The Board noted that that the aggregate proposed advisory fees under the Joint Advisor Investment
Advisory Agreement would be in line with the Current Investment Advisory Agreement and continue to be lower than the fee arrangements
under the investment advisory agreements in place prior to the Listing. The Board also noted that the incentive fee premium in
the Joint Advisor Investment Advisory Agreement would make permanent the three-year portion of the “look-back” provision
and the removal of the add-back of management fees in the calculation of the incentive fee that started at the Listing, rather
than having those terms continue in a separate fee waiver letter. Together, the Board believed that these features would better
align the interests of the Company’s stockholders with the formulae for calculating the incentive fees paid to the Joint
Advisor under the Joint Advisor Investment Advisory Agreement.
The Board also considered
the fact that KKR Credit, as a member of the Joint Advisor, is a subsidiary of KKR & Co., a global investment firm that manages
investments across multiple asset classes including private equity, energy, infrastructure, real estate, credit and hedge funds,
and that KKR Credit’s ability to leverage the intellectual capital and synergies of KKR & Co., subject to information
barriers, would be beneficial to the Company. The Board also favorably considered the fact that KKR Credit had over $41 billion
of assets under management as of September 30, 2017 across investment funds, structured finance vehicles, specialty finance companies
and separately managed accounts, representing the credit strategies under its management, and also has experience as an adviser
to KKR Income Opportunities Fund, which is a closed-end management investment company. After considering all of the relevant factors,
the Board concluded that the Company’s advisory fees, as set forth in the Joint Advisor Investment Advisory Agreement, are
reasonable, both as compared to other Listed BDCs and also in relation to the services to be provided by the Joint Advisor.
With respect to the
FS Joint Advisor Member, the Board considered the materials FS Investments provided, including information relating to the FS Advisor
Entities’ overall experience overseeing the activities of the FSIC Funds and the FS Advisor Entities’ role in, among
other things, setting investment guidelines for the FSIC Funds’ respective portfolios, determining the composition and allocation
of the FSIC Funds’ respective portfolios, and identifying, evaluating, and negotiating the structure of, the FSIC Funds’
respective investments, overseeing risk management and operational capabilities. In addition, the Board discussed these materials
and other items with representatives of FS Investments that attended the Board meeting on December 4, 2017. The Board discussed
that it had followed the franchise of funds advised by affiliates of FS Investments for more than six years and took into consideration
that affiliates of FS Investments (i) advise the largest group of BDCs in the marketplace, including Listed and non-Listed BDCs
with approximately $18.1 billion in assets under management as of September 30, 2017 and (ii) have developed the infrastructure
and technology and have over 300 personnel to help continue the Company’s growth and support KKR Credit in providing best
in class services to the Company.
The Board and the
Independent Directors determined that they were satisfied with the nature, quality and extent of the services to be provided by
the Joint Advisor to the Company, the expertise and capabilities of KKR Credit’s and FS Investments’ and its affiliates’
personnel, KKR Credit’s and FS Investments’ and its affiliates’ financial strength and their anticipated allocation
of resources necessary to manage the Company’s portfolio.
Economies of Scale
.
The Board considered the extent to which economies of scale might be realized as the Company grows and whether the Company’s
fee levels reflect these economies of scale for the benefit of Company stockholders. The Board considered the fact that such economies
are less likely to be significant given the Company’s structure and focus on loans to private middle-market U.S. companies
which generally require loan by loan negotiation and monitoring, as well as KKR Credit’s and the FS Joint Advisor Member’s
commitment to monitor economies of scale on an ongoing basis.
Other Benefits
.
The Board considered other benefits that may accrue to KKR Credit, the FS Joint Advisor Member and their affiliates from their
relationships with the Company, including that KKR Credit and the FS Joint Advisor Member may potentially benefit from the success
of the Company, which could attract other business to KKR Credit and the FS Joint Advisor Member.
Overall Conclusions
.
As part of its consideration of the Joint Advisor Investment Advisory Agreement, the Board considered the fact that effective upon
the Listing, KKR Credit has served as the sole investment adviser to the Company, as compared to its pre-Listing role as investment
sub-adviser. The Board also considered the Joint Advisor’s ability to identify and execute on sufficient investment opportunities
for the Company, given its proposed investment advisory role to the Company, CCT II and the FSIC Funds and the aggregate amount
of assets that would be advised. KKR Credit provided responses to these items, including by noting they were already in the process
of hiring additional origination resources that will be made available to the Joint Advisor to help meet the growing investor demand.
Taking these factors and the other factors described above into consideration, the Board concluded that entering into an investment
advisory arrangement with the Joint Advisor, which will not increase the advisory fees payable by the Company, is in the best interest
of the Company and its stockholders, given the additional resources that the FS Joint Advisor Member will provide.
No single factor was
determinative of the Board’s and the Independent Directors’ decisions to approve the Joint Advisor Investment Advisory
Agreement, but rather, the members of the Board based their determination on the total mix of information available to them. After
considering the factors described above, the Board and the Independent Directors concluded separately that the terms of the Joint
Advisor Investment Advisory Agreement are fair and reasonable to the Company in light of the services to be provided by the Joint
Advisor, its costs and reasonably foreseeable Company asset levels, and that the Company’s stockholders are expected to receive
reasonable value in return for the advisory fees paid. The Board and the Independent Directors also concluded separately that the
approval of the Joint Advisor Investment Advisory Agreement is supported by reasonable and impartial records and information, the
competitive expense structure and that the approval of the Joint Advisor Investment Advisory Agreement would be in the best interest
of the Company and its stockholders. Accordingly, on December 4, 2017, the Board, including a majority of the Independent Directors,
approved the Joint Advisor Investment Advisory Agreement.
Vote Required
Approval of the Joint
Advisor Investment Advisory Agreement Proposal requires the affirmative vote of the holders of a majority of the outstanding Shares
entitled to vote at the Special Meeting. The 1940 Act defines “a majority of the outstanding Shares” as (a) 67% or
more of the Shares present at the Special Meeting if the holders of more than 50% of the outstanding Shares are present or represented
by proxy or (b) more than 50% of the outstanding Shares, whichever is less. You may vote for or against or abstain on the Joint
Advisor Investment Advisory Agreement Proposal. Abstentions and broker non-votes will not count as affirmative votes cast and will
therefore have the same effect as votes against the Joint Advisor Investment Advisory Agreement Proposal. Proxies received will
be voted “FOR” the Joint Advisor Investment Advisory Agreement Proposal unless stockholders designate otherwise.
THE BOARD UNANIMOUSLY RECOMMENDS THAT
YOU VOTE “FOR” THE JOINT ADVISOR INVESTMENT ADVISORY AGREEMENT PROPOSAL.
WHERE
YOU CAN FIND MORE INFORMATION
The SEC allows the
Company to “incorporate by reference” information into this Proxy Statement, which means that the Company can disclose
important information to you by referring you to other documents filed separately with the SEC. The information incorporated by
reference into this Proxy Statement is considered part of this Proxy Statement. This Proxy Statement incorporates by reference
the following filings with the SEC:
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Amendment No. 1 to the Company’s Annual Report on Form 10-K for the year ended December 31,
2016, as filed with the SEC on April 6, 2017;
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the Company’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2017, June
30, 2017 and September 30, 2017, as filed with the SEC on May 12, 2017, August 11, 2017 and November 9, 2017, respectively;
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the Company’s Current Reports on Form 8-K, as filed with the SEC on April 18, 2017, May 4,
2017, June 23, 2017, July 6, 2017, July 10, 2017, August 3, 2017, September 1, 2017, September 6, 2017, September 26, 2017,
October 5, 2017, November 1, 2017, November 9, 2017, November 14, 2017, December 4, 2017, December 11, 2017 and January 19, 2018
(excluding, with respect to each such Current Report on Form 8-K, those portions that are not deemed “filed” pursuant
to the General Instructions of Form 8-K); and
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the Company’s Definitive Additional Materials on Schedule 14A, as filed with the SEC on December
15, 2017.
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These documents contain
important information about the Company that is not expressly included in this Proxy Statement. Stockholders may obtain a free
copy of this Proxy Statement as well as the filings incorporated by reference herein, without charge, at the SEC’s website
(www.sec.gov). Copies of this Proxy Statement as well as the filings incorporated by reference herein may also be obtained, without
charge, by directing a request to the Company at Corporate Capital Trust, Inc., 555 California Street, 50th Floor, San Francisco,
California, 94104, Attention: Philip Davidson, General Counsel and Secretary, or calling the Company at (415) 315-3620.
PLEASE
VOTE PROMPTLY BY SIGNING AND DATING THE ENCLOSED PROXY CARD AND RETURNING IT IN THE ACCOMPANYING POSTAGE PAID RETURN ENVELOPE OR
BY FOLLOWING THE INSTRUCTIONS PRINTED ON THE PROXY CARD, WHICH PROVIDES INSTRUCTIONS FOR AUTHORIZING A PROXY BY TELEPHONE OR THROUGH
THE INTERNET. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
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Corporate
Capital Trust, Inc.
555
California Street
50th
Floor
San
Francisco, California 94104
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AUTHORIZE
A PROXY VIA THE INTERNET –
www.proxyvote.com
Use
the Internet to transmit your voting instructions and for electronic delivery of information up until 5:00 p.m., Eastern
Time, the day before the meeting date. Please have your proxy card in hand when you access the web site and follow the
instructions to obtain your records and to create an electronic voting instruction form.
AUTHORIZE
A PROXY BY PHONE – 1-800-690-6903
Use
any touch-tone telephone to transmit your voting instructions up until 5:00 p.m., Eastern Time, the day before the meeting
date. Please have your proxy card in hand when you call and then follow the instructions.
AUTHORIZE
A PROXY BY MAIL
Mark,
sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing,
c/o Broadridge Investor Communication Solutions, Inc., 51 Mercedes Way, Edgewood, NY 11717. Your completed proxy must
be received prior to 5:00 p.m., Eastern Time, the day before the meeting date.
ELECTRONIC
DELIVERY OF FUTURE PROXY MATERIALS
Sign
up today to receive next year’s annual report and proxy materials via the Internet rather than by mail. Additional mailings,
such as distribution statements and tax forms, are also available electronically. Electronic delivery helps the Company reduce
corporate expenses such as printing and postage. To sign up to receive these mailings electronically, or to review or change your
current delivery preferences, visit our website at
www.corporatecapitaltrust.com/gopaperless
.
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KEEP
THIS PORTION FOR YOUR RECORDS
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TO VOTE,
MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: ☒
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DETACH
AND RETURN THIS PORTION ONLY
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THIS
PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
CORPORATE
CAPITAL TRUST, INC. (the “Company”)
THE
COMPANY’S BOARD OF DIRECTORS RECOMMENDS A VOTE
“FOR” THE FOLLOWING PROPOSALS:
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For
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Against
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Abstain
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1.
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To approve a new
investment advisory agreement by and between the Company and KKR Credit Advisors (US) LLC (“KKR Credit”) (the
“KKR Investment Co-Advisory Agreement”) and a new investment advisory agreement by and between the Company and
an affiliate of Franklin Square Holdings, L.P. (“FS Investments” and, such adviser, “FS Adviser”)
(the “FS Adviser Investment Co-Advisory Agreement” and, together with the KKR Investment Co-Advisory Agreement,
the “Investment Co-Advisory Agreements”), pursuant to which KKR Credit and FS Adviser will act as investment co-advisers
to the Company.
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☐
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☐
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☐
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2.
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To approve a new
investment advisory by and between the Company and FS/KKR Advisor, LLC, a newly-formed investment adviser jointly operated
by KKR Credit and an affiliate of FS Investments (the “Joint Advisor”) (the “Joint Advisor Investment Advisory
Agreement”), pursuant to which the Joint Advisor will act as investment adviser to the Company.
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☐
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☐
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☐
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The
Investment Co-Advisory Agreements and the Joint Advisor Investment Advisory Agreement would not be in effect simultaneously. The
Company ultimately intends to receive investment advisory services from the Joint Advisor pursuant to the Joint Advisor Investment
Advisory Agreement.
The
undersigned hereby acknowledge(s) receipt of a copy of the accompanying notice of special meeting and the proxy statement with
respect thereto, and hereby revoke(s) any proxy or proxies heretofore given with respect to the meeting. This proxy may be revoked
at any time before it is exercised.
IN
THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
For
address changes and/or comments, please check this box and write them on the back where indicated. ☐
Important:
Please sign exactly as name appears hereon. Joint owners should each sign personally. Trustees and others signing in a representative
or fiduciary capacity should indicate their full titles in such capacity.
Signature
(PLEASE SIGN WITHIN BOX)
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Date
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Signature
(Joint Owners)
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IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY
MATERIALS FOR SPECIAL MEETING OF STOCKHOLDERS
The
Proxy Statement is available at:
www.proxyvote.com
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PROXY
CORPORATE CAPITAL TRUST, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The
undersigned stockholder of Corporate Capital Trust, Inc., a Maryland corporation (the “Company”), hereby appoints
Todd C. Builione and Philip Davidson, and each of them, as proxies, with full power of substitution in each, to attend
the special meeting of stockholders of the Company (the “Special Meeting”) to be held at Dechert LLP, 1095
Avenue of the Americas, 28th Floor, New York, New York 10036 on March 26, 2018 at 3:00p.m., Eastern Time, and any adjournments
or postponements thereof, to cast on behalf of the undersigned all votes that the undersigned is entitled to cast at such
meeting and otherwise to represent the undersigned at the Special Meeting with all powers possessed by the undersigned
if personally present at the meeting. The proxy statement and the accompanying materials are being mailed to stockholders
of record on or about January 23, 2018 and are available on the Company’s website at www.corporatecapitaltrust.com.
All properly executed proxies representing Shares received prior to 5:00 p.m., Eastern Time, on the day before the Special
Meeting will be voted in accordance with the instructions marked thereon.
The
votes entitled to be cast by the undersigned will be cast as directed.
If this proxy is executed but no direction is
given, the votes entitled to be cast by the undersigned will be cast “FOR” each of the proposals. The votes
entitled to be cast by the undersigned will be cast in the discretion of the proxy holder on any other matter that may
properly come before the Special Meeting or any adjournment or postponement thereof.
As of the date of the proxy statement,
the Company’s board of directors knows of no other business to be presented at the Special Meeting. Any stockholder
who has given a proxy has the right to revoke it at any time prior to its exercise. Stockholders who execute proxies may
revoke them with respect to a proposal by attending the Special Meeting and voting his or her Shares in person or by submitting
a letter of revocation or a later-dated proxy to the Company at the above address prior to 5:00 p.m., Eastern Time, on
the day before the Special Meeting.
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Address Changes/Comments:
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(If
you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)
Continued
and to be signed on reverse side
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Exhibit
A
KKR
Investment Co-Advisory Agreement
[
see
attached
]
INVESTMENT
ADVISORY AGREEMENT
BETWEEN
CORPORATE CAPITAL TRUST, INC.
AND
KKR CREDIT ADVISORS (US) LLC
This
Investment Advisory Agreement (this “
Agreement
”) is made as of [ ], by and between CORPORATE CAPITAL TRUST,
INC., a Maryland corporation (the “
Company
”), and KKR CREDIT ADVISORS (US) LLC, a Delaware limited liability
company (the “
Adviser
”).
WHEREAS,
the Company is a non-diversified, closed-end management investment company that has elected to be treated as a business development
company (“
BDC
”) under the Investment Company Act of 1940, as amended (together with the rules promulgated thereunder,
the “
1940 Act
”);
WHEREAS,
the Adviser is registered as an investment adviser under the Investment Advisers Act of 1940, as amended (together with the rules
promulgated thereunder, the “
Advisers Act
”);
WHEREAS,
the Company desires to retain the Adviser to provide investment advisory services to the Company in the manner and on the terms
and conditions hereinafter set forth;
WHEREAS,
the Adviser is willing to provide investment advisory services to the Company in the manner and on the terms and conditions hereinafter
set forth; and
WHEREAS,
the Company is simultaneously entering into an Investment Advisory Agreement with [FS ADVISER ENTITY] (the “
Co-Adviser
”),
dated as of the date hereof (the “
Investment Co-Advisory Agreement
”), pursuant to which the Co-Adviser will,
as a co-adviser with the Adviser, furnish investment advisory services to the Company on the terms and conditions identical to
those set forth herein.
NOW,
THEREFORE, in consideration of the premises and the covenants hereinafter contained and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the Company and the Adviser hereby agree as follows:
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1.
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Duties
of the Adviser
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(a)
Retention
of Adviser
. The Company hereby appoints the Adviser to act as co-adviser to the Company and to manage, in coordination with
the Co-Adviser, the investment and reinvestment of the assets of the Company, subject to the supervision of the board of directors
of the Company (the “
Board of Directors
”), for the period and upon the terms herein set forth in accordance
with:
(i) the
investment objective, policies and restrictions that are set forth in the Company’s filings with the Securities and Exchange
Commission (the “
SEC
”), as supplemented, amended or superseded from time to time;
(ii) during
the term of this Agreement, all other applicable federal and state laws, rules and regulations, and the Company’s articles
of incorporation, as amended from time to time (“
Articles of Incorporation
”);
(iii) such
investment policies, directives, regulatory restrictions as the Company may from time to time establish or issue and communicate
to the Adviser in writing; and
(iv) the
Company’s compliance policies and procedures as applicable to the Adviser and as administered by the Company’s chief
compliance officer.
(b)
Responsibilities
of Adviser
. Without limiting the generality of the foregoing, the Adviser shall, in coordination with the Co-Adviser, during
the term and subject to the provisions of this Agreement:
(i) determine
the composition and allocation of the Company’s investment portfolio, the nature and timing of any changes therein and the
manner of implementing such changes;
(ii) identify,
evaluate and negotiate the structure of the investments made by the Company;
(iii) perform
due diligence on prospective portfolio companies;
(iv) execute,
close, service and monitor the Company’s investments;
(v) determine
the securities and other assets that the Company shall purchase, retain or sell;
(vi) provide
the Company with such other investment advisory, research and related services as the Company may, from time to time, reasonably
require for the investment of its funds; and
(vii) to
the extent permitted under the 1940 Act and the Advisers Act, on the Company’s behalf, and in coordination with any Sub-Adviser
(as defined below) and any administrator, provide significant managerial assistance to those portfolio companies to which the
Company is required to provide such assistance under the 1940 Act, including utilizing appropriate personnel of the Adviser to,
among other things, monitor the operations of the Company’s portfolio companies, participate in board and management meetings,
consult with and advise officers of portfolio companies and provide other organizational and financial consultation.
The
Company acknowledges that the Adviser and Co-Adviser, may from time to time, designate one or the other as being primarily responsible
for certain investments. The Adviser shall have no obligation hereunder to supervise the Co-Adviser’s provision of services
under the Investment Co-Advisory Agreement.
(c)
Power
and Authority
. To facilitate the Adviser’s performance of these undertakings, but subject to the restrictions contained
herein, the Company hereby delegates to the Adviser (which power and authority may be delegated by the Adviser to one or more
Sub-Advisers), and the Adviser hereby accepts, the power and authority to act on behalf of the Company, in coordination with the
Co-Adviser, to effectuate investment decisions for the Company, including the negotiation, execution and delivery of all documents
relating to the Company’s investments and the placing of orders for other purchase or sale transactions on behalf of the
Company. In the event that the Company determines to acquire debt or other financing (or to refinance existing debt or other financing),
the Adviser, in coordination with the Co-Adviser, shall use commercially reasonable efforts to arrange for such financing on the
Company’s behalf, subject to the oversight and approval of the Board of Directors. If it is necessary for the Adviser to
make investments on behalf of the Company through a special purpose vehicle, the Adviser, in coordination with the Co-Adviser,
shall have authority to create, or arrange for the creation of, such special purpose vehicle and to make investments through such
special purpose vehicle in accordance with applicable law. The Company also grants to the Adviser power and authority to, in coordination
with the Co-Adviser, engage in all activities and transactions (and anything incidental thereto) that the Adviser, in coordination
with the Co-Adviser, deems appropriate, necessary or advisable to carry out its duties pursuant to this Agreement.
(d)
Acceptance
of Appointment
. The Adviser hereby accepts such appointment and agrees during the term hereof to render the services described
herein for the compensation provided herein, subject to the limitations contained herein.
(e)
Sub-Advisers
.
The Adviser, subject to the prior written consent of the Co-Adviser, is hereby authorized to enter into one or more sub-advisory
agreements (each a “
Sub-Advisory Agreement
”) with other investment advisers (each a “
Sub-Adviser
”)
pursuant to which the Adviser may obtain the services of the Sub-Adviser(s) to assist the Adviser in fulfilling its responsibilities
hereunder, subject to the oversight of the Adviser and/or the Company, with the scope of such services and oversight to be set
forth in each Sub-Advisory Agreement.
(i) The
Adviser and/or Co-Adviser, and not the Company, shall be responsible for any compensation payable to any Sub-Adviser; provided,
however, that the Adviser shall have the right to direct the Company to pay directly any Sub-Adviser the amounts due and payable
to such Sub-Adviser from the fees and expenses otherwise payable to the Adviser under this Agreement.
(ii) Any
Sub-Advisory Agreement entered into by the Adviser shall be in accordance with the requirements of the 1940 Act and the Advisers
Act, including the requirements of the 1940 Act relating to Board of Directors and Company shareholder approval thereunder, and
other applicable federal and state law.
(iii) Any
Sub-Adviser shall be subject to the same fiduciary duties as are imposed on the Adviser pursuant to this Agreement, the 1940 Act
and the Advisers Act, as well as other applicable federal and state law.
(f)
Independent
Contractor Status
. The Adviser shall, for all purposes herein provided, be deemed to be an independent contractor and, except
as expressly provided or authorized herein, shall have no authority to act for or represent the Company in any way or otherwise
be deemed an agent of the Company.
(g)
Record
Retention
. Subject to review by and the overall control of the Board of Directors, the Adviser shall maintain and keep all
books, accounts and other records of the Adviser that relate to activities performed by the Adviser hereunder as required under
the 1940 Act and the Advisers Act. The Adviser agrees that all records that it maintains and keeps for the Company shall at all
times remain the property of the Company, shall be readily accessible during normal business hours, and shall be promptly surrendered
to the Company upon the termination of this Agreement or otherwise on written request by the Company. The Adviser further agrees
that the records that it maintains and keeps for the Company shall be preserved in the manner and for the periods prescribed by
the 1940 Act, unless any such records are earlier surrendered as provided above. The Adviser shall have the right to retain copies,
or originals where required by Rule 204-2 promulgated under the Advisers Act, of such records to the extent required by applicable
law. The Adviser, in coordination with the Co-Adviser, shall maintain records of the locations where books, accounts and records
are maintained among the persons and entities providing services directly or indirectly to the Adviser or the Company.
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2.
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Expenses
Payable by the Company
.
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(a)
Adviser
Personnel
. Other than as set forth in Section 2(b)(iii), all investment personnel of the Adviser, when and to the extent engaged
in providing investment advisory services and managerial assistance hereunder, and the compensation and routine overhead expenses
of such personnel allocable to such services, shall be provided and paid for by the Adviser and not by the Company.
(b)
Company’s
Costs
. Subject to the limitations on expense reimbursement of the Adviser as set forth in Sections 2(a) and 2(c), the Company,
either directly or through reimbursement to the Adviser, shall bear all costs and expenses of its investment operations and its
investment transactions, including costs and expenses relating to:
(i) the
making of investments, including third party fees and expenses with respect to or associated with identifying, negotiating, evaluating,
including due diligence, and investing in, portfolio companies and securities;
(ii) monitoring
investments, including expenses and fees payable to third parties with respect to performance, operational and legal review and
compliance and investment oversight and reporting;
(iii) direct
costs associated with managerial assistance provided or otherwise made available to the Company’s portfolio companies;
(iv) valuing
investments, including expenses and fees payable to third parties with respect to the valuation of the Company’s investments;
(v) liquidating
investments, including expenses and fees payable to third parties in connection with identifying and evaluating purchasers, and
negotiating and finalizing terms of liquidation; and
(vi) portfolio
expenses, including expenses and fees associated with the holding of or investment in the portfolio company or security.
(c)
Portfolio
Company Compensation
. In certain circumstances the Adviser, the Co-Adviser, any Sub-Adviser, or any of their respective Affiliates,
may receive compensation from a portfolio company, in connection with the Company’s investment in such portfolio company.
Any compensation received by the Adviser, the Co-Adviser, Sub-Adviser, or any of their respective Affiliates, attributable to
the Company’s investment in any portfolio company, in excess of any of the limitations in or exemptions granted from the
1940 Act, any interpretation thereof by the staff of the SEC, or the conditions set forth in any exemptive relief granted to the
Adviser, Co-Adviser, any Sub-Adviser or the Company by the SEC, shall be delivered promptly to the Company and the Company will
retain such excess compensation for the benefit of its shareholders, subject to (i) applicable law and (ii) maintaining the Company’s
compliance with Subchapter M of the Internal Revenue Code of 1986, as amended.
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3.
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Compensation
of the Adviser
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The
Company agrees to pay, and the Adviser agrees to accept, as compensation for the services provided by the Adviser hereunder, a
management fee (“
Management Fee
”) and an incentive fee (“
Incentive Fee
”) as hereinafter
set forth. Any of the fees payable to the Adviser under this Agreement for any partial month or calendar quarter shall be appropriately
prorated. The fees payable to the Adviser as set forth in this Agreement shall be calculated using a detailed calculation policy
and procedures approved by the Adviser and the Board of Directors, including a majority of the Company’s directors who are
not parties to this Agreement or “interested persons” (as such term is defined in Section 2(a)(19) of the 1940 Act)
of any such party (“
Independent Directors
”), and shall be consistent with the calculation of such fees as set
forth in this Section. The base management fee and incentive fee under the Investment Co-Advisory Agreement are equal to the Management
Fee and Incentive Fee payable to the Adviser hereunder.
(a)
Management
Fee
. The Management Fee is calculated at an annual rate of 0.75% of the Company’s average gross assets, is payable monthly
in arrears and is calculated based on the simple average value of the Company’s gross assets at the end of the two most
recently completed calendar months. The determination of gross assets will reflect changes in the fair market value of portfolio
investments reflecting both realized and unrealized capital appreciation. For purposes of computing the Management Fee, cash and
cash equivalents are excluded from the definition of gross assets.
(b)
Incentive
Fee
. The Incentive Fee is divided into two parts: (1) a subordinated incentive fee on income and (2) an incentive fee on capital
gains.
(i) The
subordinated incentive fee on income is earned on pre-incentive fee net investment income and shall be determined and payable
in arrears as of the end of each calendar quarter during which this Agreement is in effect. In the case of a liquidation or if
this Agreement is terminated, the fee will also become payable as of the effective date of the event. For purposes of calculating
the subordinated incentive fee on income, (A) “
pre-incentive fee net investment income
” is defined as interest
income, dividend income and any other income accrued during the calendar quarter, minus operating expenses for the quarter, including
the Management Fee under this Agreement and the Investment Co-Advisory Agreement, expenses payable under any Administrative Services
Agreements, any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding (x) incentive
fees and (y) any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation, (B) “
cumulative
net increase in net assets resulting from operations
” is defined as the sum of the pre-incentive fee net investment
income, management fees payable with respect to the periods prior to November 14, 2017, realized gains and losses and unrealized
appreciation and depreciation, and (C) “
look-back period
” is defined as the most recently completed quarter
and the eleven (11) preceding calendar quarters. The subordinated incentive fee on income for each quarter will be calculated
as follows:
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no
subordinated incentive fee on income will be payable in any calendar quarter in which the pre-incentive fee net investment income
does not exceed the preferred return rate to shareholders of 1.75% (7.00% annualized) (the “
preferred return
”)
of average net assets;
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50%
of pre-incentive fee net investment income, if any, that exceeds the preferred return, but is less than or equal to 2.1875% in
any quarter (8.75% annualized), will be payable to the Adviser (the “
catch up provision
”), which is intended
to provide the Adviser with an incentive fee of 10% on all of the pre-incentive fee net investment income when the pre-incentive
fee net investment income reaches 2.1875% in any quarter (8.75% annualized) of average net assets; and
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for
any quarter in which pre-incentive fee net investment income exceeds 2.1875% (8.75% annualized) of average net assets, the subordinated
incentive fee on income shall equal 10% of pre-incentive fee net investment income;
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provided
that the subordinated incentive fee on income for the current quarter will not exceed 50% of (A) the sum for each calendar quarter
of the look-back period of (a) (x) 20% of the cumulative net increase in net assets resulting from operations for such quarter
less (y) the subordinated incentive fee on income paid or accrued by the Company for such quarter (in the case of (y) only, not
including for the current quarter for which the subordinated incentive fee on income is being calculated), divided by (b) the
weighted average number of shares of common stock of the Company outstanding during such calendar quarter, multiplied by (B) the
weighted average number of shares of common stock of the Company outstanding during the calendar quarter for which the subordinated
incentive fee on income is being calculated.
(ii) The
incentive fee on capital gains will be earned on liquidated investments and shall be determined and payable in arrears as of the
end of each calendar year during which this Agreement is in effect. In the case of a liquidation, or if this Agreement is terminated,
the fee will also become payable as of the effective date of such event. The fee is equal to (i) 10% of realized capital gains,
less (ii) 50% of the aggregate amount of any previously paid incentive fees on such capital gains. The incentive fee on capital
gains is equal to realized capital gains on a cumulative basis from inception, computed net of all realized capital losses and
unrealized capital depreciation on a cumulative basis.
(c)
Waiver
or Deferral of Fees
.
The
Adviser shall have the right to elect to waive or defer all or a portion of the Management Fee and/or Incentive Fee that would
otherwise be paid to it. Prior to the payment of any fee to the Adviser, the Company shall obtain written instructions from the
Adviser with respect to any waiver or deferral of any portion of such fees. Any portion of a deferred fee payable to the Adviser
and not paid over to the Adviser with respect to any month, calendar quarter or year shall be deferred without interest and may
be paid over in any such other month prior to the termination of this Agreement, as the Adviser may determine upon written notice
to the Company.
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4.
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Covenant
of the Adviser
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The
Adviser is registered as an investment adviser under the Advisers Act on the effective date of this Agreement as set forth in
Section 10, and shall maintain such registration until the expiration or termination of this Agreement. The Adviser agrees that
its activities shall at all times comply in all material respects with all applicable federal and state laws governing its operations
and investments. The Adviser agrees to observe and comply with applicable provisions of the code of ethics adopted by the Company
pursuant to Rule 17j-1 under the 1940 Act, as such code of ethics may be amended from time to time.
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5.
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Brokerage
Commissions
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The
Adviser, in coordination with the Co-Adviser, is hereby authorized, to the fullest extent now or hereafter permitted by law, to
cause the Company to pay a member of a national securities exchange, broker or dealer an amount of commission for effecting a
securities transaction in excess of the amount of commission another member of such exchange, broker or dealer would have charged
for effecting that transaction, if the Adviser, in coordination with the Co-Adviser, determines in good faith, taking into account
factors, including price (including the applicable brokerage commission or dealer spread), size of order, difficulty of execution,
and operational facilities of the firm and the firm’s risk and skill in positioning blocks of securities, that such amount
of commission is reasonable in relation to the value of the brokerage and/or research services provided by such member, broker
or dealer, viewed in terms of either that particular transaction or its overall responsibilities with respect to the Company’s
portfolio, and is consistent with the Adviser’s and Co-Adviser’s duty to seek the best execution on behalf of the
Company. Notwithstanding the foregoing, with regard to transactions with or for the benefit of the Company, the Adviser may not
pay any commission or receive any rebates or give-ups, nor participate in any business arrangements which would circumvent this
restriction.
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6.
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Other
Activities of the Adviser
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The
services of the Adviser to the Company are not exclusive, and the Adviser may engage in any other business or render similar or
different services to others including the direct or indirect sponsorship or management of other investment-based accounts or
commingled pools of capital, however structured, having investment objectives similar to or different from those of the Company,
and nothing in this Agreement shall limit or restrict the right of any officer, director, shareholder (and their shareholders
or members, including the owners of their shareholders or members), officer or employee of the Adviser to engage in any other
business or to devote his or her time and attention in part to any other business, whether of a similar or dissimilar nature,
or to receive any fees or compensation in connection therewith (including fees for serving as a director of, or providing consulting
services to, one or more of the Company’s portfolio companies, subject to applicable law). The Adviser assumes no responsibility
under this Agreement other than to render the services set forth herein.
During
the term of this Agreement and for a period of one year following any termination or nonrenewal of this Agreement for any reason,
the Company shall not, directly or indirectly on behalf of itself or any other person or entity: (a) solicit the employment of
or employ any partners, shareholders, directors, officers, employees, consultants and/or associated persons (each, an “
Associate
”)
of the Adviser, the Co-Adviser, any Sub-Adviser or any of their respective Affiliates (collectively, “
Adviser Persons
”)
or any person or entity who was an Associate of an Adviser Person during the one-year period preceding such proposed solicitation
or employment, or (b) induce, persuade or attempt to induce or persuade the discontinuation of, or in any way interfere or attempt
to interfere with, the relationship between an Adviser Person and any Associate of such Adviser Person or any person or entity
who was an Associate of such Adviser Person during the one-year period preceding such proposed inducement, persuasion or interference
or attempted inducement, persuasion or interference. The parties intend that any provision of this Section 6 held invalid, illegal
or unenforceable only in part or degree because of the duration or geographic scope thereof shall remain in full force to the
extent not held invalid, illegal or unenforceable.
For
purposes of this Agreement, “
Affiliate
” or “
Affiliated
” or any derivation thereof means
with respect to any individual, corporation, partnership, trust, joint venture, limited liability company or other entity or association
(“
Person
”): (a) any Person directly or indirectly owning, controlling, or holding, with the power to vote,
10% or more of the outstanding voting securities of such other Person; (b) any Person 10% or more of whose outstanding voting
securities are directly or indirectly owned, controlled or held, with the power to vote, by such other Person; (c) any Person
directly or indirectly controlling, controlled by or under common control with such other Person; (d) any executive officer, director,
trustee or general partner of such other Person; or (e) any legal entity for which such Person acts as an executive officer, director,
trustee or general partner.
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7.
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Responsibility
of Dual Directors, Officers and/or Employees
.
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If
any person who is a director, officer, shareholder or employee of the Adviser is or becomes a director, officer, shareholder and/or
employee of the Company and acts as such in any business of the Company, then such director, officer, shareholder and/or employee
of the Adviser shall be deemed to be acting in such capacity solely for the Company, and not as a director, officer, shareholder
or employee of the Adviser or under the control or direction of the Adviser, even if paid by the Adviser.
(a)
Indemnification
.
Subject to Section 9, the Adviser, any Sub-Adviser, each of their directors, officers, shareholders or members (and their shareholders
or members, including the owners of their shareholders or members), agents, employees, controlling persons (as determined under
the 1940 Act (“
Controlling Persons
”)) and any other person or entity Affiliated with, or acting on behalf of,
the Adviser or Sub-Adviser (each an “
Indemnified Party
” and, collectively, the “
Indemnified Parties
”)
shall not be liable to the Company for any action taken or omitted to be taken by any such Indemnified Party in connection with
the performance of any of its duties or obligations under this Agreement or otherwise as an investment adviser of the Company
(except to the extent specified in Section 36(b) of the 1940 Act concerning loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation for services), and the Company shall indemnify, defend and protect the Indemnified Parties
(each of whom shall be deemed a third party beneficiary hereof) and hold them harmless from and against all losses, damages, liabilities,
costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) (“
Losses
”)
incurred by the Indemnified Parties in or by reason of any pending, threatened or completed action, suit, investigation or other
proceeding (including an action or suit by or in the right of the Company or its security holders) arising out of or otherwise
based upon the performance of any of the Indemnified Parties’ duties or obligations under this Agreement, any Sub-Advisory
Agreement, or otherwise as an investment adviser of the Company to the extent such Losses are not fully reimbursed by insurance
and otherwise to the fullest extent such indemnification would not be inconsistent with the Articles of Incorporation, the 1940
Act, the laws of the State of Maryland and other applicable law.
(b) The
Adviser shall indemnify the Company, and its Affiliates and Controlling Persons, for any Losses that the Company or its Affiliates
and Controlling Persons may sustain as a result of the Adviser’s willful misfeasance, bad faith, gross negligence, reckless
disregard of its duties hereunder or violation of applicable law, including the federal and state securities laws.
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9.
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Limitation
on Indemnification
.
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Notwithstanding
Section 8(a) to the contrary, nothing contained herein shall protect or be deemed to protect any of the Indemnified Parties against,
or entitle or be deemed to entitle any of the Indemnified Parties to indemnification in respect of, any Losses to the Company
or its security holders to which the Indemnified Parties would otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence in the performance of the Adviser’s or Sub-Adviser’s duties or by reason of the reckless disregard
of the Adviser’s or Sub-Adviser’s duties and obligations under this Agreement or any Sub-Advisory Agreement (to the
extent applicable, as the same shall be determined in accordance with the 1940 Act and any interpretations or guidance by the
SEC or its staff thereunder).
In
addition, notwithstanding any of the foregoing to the contrary, the provisions of Section 8 and this Section 9 shall not be construed
so as to provide for the indemnification of any Indemnified Party for any liability (including liability under federal securities
laws which, under certain circumstances, impose liability even on persons that act in good faith), to the extent (but only to
the extent) that such indemnification would be in violation of applicable law, but shall be construed so as to effectuate the
provisions of Section 8 and this Section 9 to the fullest extent permitted by law.
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10.
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Effectiveness,
Duration and Termination of Agreement
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(a)
Term
and Effectiveness
. This Agreement shall become effective as of the first date written above. Once effective, this Agreement
shall remain in effect for two years, and thereafter shall continue automatically for successive one-year periods; provided that
such continuance is specifically approved at least annually by: (i) the vote of the Board of Directors, or by the vote of a majority
of the outstanding voting securities of the Company and (ii) the vote of a majority of the Independent Directors, in accordance
with the requirements of the 1940 Act.
(b)
Termination
.
This Agreement may be terminated at any time, without the payment of any penalty: (i) by the Company upon 60 days’ prior
written notice to the Adviser upon: (A) the vote of a majority of the outstanding voting securities of the Company (as “majority”
is defined in Section 2(a)(42) of the 1940 Act) or (B) the vote of the Board of Directors or (ii) by the Adviser upon not less
than 120 days’ prior written notice to the Company. This Agreement shall automatically terminate in the event of (x) its
“assignment” (as such term is defined for purposes of construing Section 15(a)(4) of the 1940 Act), or (y) the effectiveness
of an Investment Advisory Agreement by and between the Company and FS/KKR Advisor, LLC. The provisions of Sections 8 and 9 shall
remain in full force and effect, and the Adviser shall remain entitled to the benefits thereof, notwithstanding any termination
of this Agreement. Further, notwithstanding the termination or expiration of this Agreement as aforesaid, the Adviser shall be
entitled to any amounts owed to it under Section 3 through the date of termination or expiration and Sections 8 and 9 shall continue
in force and effect and apply to the Adviser and its representatives as and to the extent applicable.
(c)
Duties
of Adviser Upon Termination
. The Adviser shall promptly upon termination:
(i) deliver
to the Board of Directors a full accounting, including a statement showing all payments collected by it and a statement of all
money held by it, covering the period following the date of the last accounting furnished to the Board of Directors;
(ii) deliver
to the Board of Directors all assets and documents of the Company then in custody of the Adviser; and
(iii) cooperate
with the Company to provide an orderly transition of services.
The
Adviser, in coordination with the Co-Adviser, will exercise voting rights on any assets held in the portfolio securities of portfolio
companies. The Adviser is obligated to furnish to the Company, in a timely manner, a record of all proxies voted in such form
and format that complies with applicable federal statutes and regulations.
Any
notice under this Agreement shall be given in writing, addressed and delivered or mailed, postage prepaid, to the other party
at the address listed below or at such other address for a party as shall be specified in a notice given in accordance with this
Section 12.
This
Agreement may be amended by mutual written consent of the parties; provided that the consent of the Company is required to be
obtained in conformity with the requirements of the 1940 Act.
If
any provision of this Agreement shall be declared illegal, invalid or unenforceable in any jurisdiction, then such provision shall
be deemed to be severable from this Agreement (to the extent permitted by law) and in any event such illegality, invalidity or
unenforceability shall not affect the remainder hereof.
This
Agreement may be executed in counterparts, each of which shall be deemed to be an original copy and all of which together shall
constitute one and the same instrument binding on all parties hereto, notwithstanding that all parties shall not have signed the
same counterpart.
Notwithstanding
the place where this Agreement may be executed by any of the parties hereto and the provisions of Sections 8 and 9, this Agreement
shall be construed in accordance with the laws of the State of New York, without giving effect to any conflicts of laws principles
thereof. For so long as the Company is regulated as a BDC under the 1940 Act, this Agreement shall also be construed in accordance
with the applicable provisions of the 1940 Act and the Advisers Act. In such case, to the extent the applicable laws of the State
of New York or any of the provisions herein conflict with the provisions of the 1940 Act or the Advisers Act, the 1940 Act and
the Advisers Act shall control.
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17.
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Third
Party Beneficiaries
.
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Except
for any Sub-Adviser (with respect to Sections 6 and 8) and any Indemnified Party, such Sub-Adviser and the Indemnified Parties
each being an intended beneficiary of this Agreement, this Agreement is for the sole benefit of the parties hereto and their permitted
assigns and nothing herein express or implied shall give or be construed to give to any person, other than the parties hereto
and such assigns, any legal or equitable rights hereunder.
This
Agreement contains the entire agreement of the parties and supersedes all prior agreements, understandings and arrangements with
respect to the subject matter hereof.
The
provisions of Sections 2(c), 8, 9, 10(b), 16, 17 and this Section 19 shall survive termination of this Agreement.
The
Company shall acquire and maintain a directors and officers liability insurance policy or similar insurance policy, which may
name the Adviser, Co-Adviser and any Sub-Adviser each as an additional insured party (each an “
Additional Insured Party
”
and collectively the “
Additional Insured Parties
”). Such insurance policy shall include reasonable coverage
from a reputable insurer. The Company shall make all premium payments required to maintain such policy in full force and effect;
provided, however, each Additional Insured Party, if any, shall pay to the Company, in advance of the due date of such premium,
its allocated share of the premium. Irrespective of whether the Adviser, Co-Adviser and any Sub-Adviser is a named Additional
Insured Party on such policy, the Company shall provide the Adviser, Co-Adviser and any Sub-Adviser with written notice upon receipt
of any notice of: (a) any default under such policy; (b) any pending or threatened termination, cancellation or non-renewal of
such policy or (c) any coverage limitation or reduction with respect to such policy. The foregoing provisions of this Section
20 notwithstanding, the Company shall not be required to acquire or maintain any insurance policy to the extent that the same
is not available upon commercially reasonable pricing terms or at all, as determined in good faith by the required majority (as
defined in Section 57(o) of the 1940 Act) of the Board of Directors.
The
Adviser conducts its investment advisory business under, and owns all rights to, the trademark “KKR” and the “KKR”
design (collectively, the “
Brand
”). In connection with the Company’s (a) public filings; (b) requests
for information from state and federal regulators; (c) offering materials and advertising materials; and (d) investor communications,
the Company may state in such materials that investment advisory services are being provided by the Adviser to the Company under
the terms of this Agreement. The Adviser hereby grants a non-exclusive, non-transferable, non-sublicensable and royalty-free license
(the “
License
”) to the Company for the use of the Brand solely as permitted in the foregoing sentence. Prior
to using the Brand in any manner, the Company shall submit all proposed uses to the Adviser for prior written approval solely
to the extent the Company’s use of the Brand or any combination or derivation thereof has materially changed from the Company’s
use of the Brand previously approved by the Adviser. The Adviser reserves the right to terminate the License immediately upon
written notice for any reason, including if the usage is not in compliance with its standards and policies. Notwithstanding the
foregoing, the term of the License granted under this Section 21 shall be for the term of this Agreement only, including renewals
and extensions, and the right to use the Brand as provided herein shall terminate immediately upon the termination of this Agreement.
The Company agrees that the Adviser is the sole owner of the Brand, and any and all goodwill in the Brand arising from the Company’s
use shall inure solely to the benefit of the Adviser. Without limiting the foregoing, the License shall have no effect on the
Company’s ownership rights of the works within which the Brand shall be used.
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed on the date above written.
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CORPORATE CAPITAL TRUST, INC.
a Maryland corporation
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555 California Street
50th Floor
San Francisco, California 94104
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By:
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Name: Thomas N. Murphy
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Title: Chief Financial Officer
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KKR
Credit Advisors (US) LLC
a Delaware limited liability company
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555
California Street
50th Floor
San Francisco, California 94104
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By:
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Name: Todd C. Builione
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Title:
President
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[
Signature Page to Investment Advisory Agreement
]
Exhibit
B
FS
Adviser Investment Co-Advisory Agreement
[
see
attached
]
INVESTMENT
ADVISORY AGREEMENT
BETWEEN
CORPORATE CAPITAL TRUST, INC.
AND
[FS ADVISER]
This
Investment Advisory Agreement (this “
Agreement
”) is made as of [ ],
by and between CORPORATE CAPITAL TRUST, INC., a Maryland corporation (the “
Company
”), and [FS ADVISER] a Delaware
limited liability company (the “
Adviser
”).
WHEREAS,
the Company is a non-diversified, closed-end management investment company that has elected to be treated as a business development
company (“
BDC
”) under the Investment Company Act of 1940, as amended (together with the rules promulgated thereunder,
the “
1940 Act
”);
WHEREAS,
the Adviser is registered as an investment adviser under the Investment Advisers Act of 1940, as amended (together with the rules
promulgated thereunder, the “
Advisers Act
”);
WHEREAS,
the Company desires to retain the Adviser to provide investment advisory services to the Company in the manner and on the terms
and conditions hereinafter set forth;
WHEREAS,
the Adviser is willing to provide investment advisory services to the Company in the manner and on the terms and conditions hereinafter
set forth; and
WHEREAS,
the Company is simultaneously entering into an Investment Advisory Agreement with KKR CREDIT ADVISORS (US) LLC (the “
Co-Adviser
”),
dated as of the date hereof (the “
Investment Co-Advisory Agreement
”), pursuant to which the Co-Adviser will,
as a co-adviser with the Adviser, furnish investment advisory services to the Company on the terms and conditions identical to
those set forth herein.
NOW,
THEREFORE, in consideration of the premises and the covenants hereinafter contained and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the Company and the Adviser hereby agree as follows:
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1.
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Duties
of the Adviser
.
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(a)
Retention
of Adviser
. The Company hereby appoints the Adviser to act as co-adviser to the Company and to manage, in coordination with
the Co-Adviser, the investment and reinvestment of the assets of the Company, subject to the supervision of the board of directors
of the Company (the “
Board of Directors
”), for the period and upon the terms herein set forth in accordance
with:
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(i)
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the
investment objective, policies and restrictions that are set forth in the Company’s
filings with the Securities and Exchange Commission (the “
SEC
”), as
supplemented, amended or superseded from time to time;
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(ii)
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during
the term of this Agreement, all other applicable federal and state laws, rules and regulations,
and the Company’s articles of incorporation, as amended from time to time (“
Articles
of Incorporation
”);
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(iii)
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such
investment policies, directives, regulatory restrictions as the Company may from time
to time establish or issue and communicate to the Adviser in writing; and
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(iv)
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the
Company’s compliance policies and procedures as applicable to the Adviser and as
administered by the Company’s chief compliance officer.
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(b)
Responsibilities
of Adviser
. Without limiting the generality of the foregoing, the Adviser shall, in coordination with the Co-Adviser, during
the term and subject to the provisions of this Agreement:
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(i)
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determine
the composition and allocation of the Company’s investment portfolio, the nature
and timing of any changes therein and the manner of implementing such changes;
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(ii)
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identify,
evaluate and negotiate the structure of the investments made by the Company;
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(iii)
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perform
due diligence on prospective portfolio companies;
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(iv)
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execute,
close, service and monitor the Company’s investments;
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(v)
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determine
the securities and other assets that the Company shall purchase, retain or sell;
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(vi)
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provide
the Company with such other investment advisory, research and related services as the
Company may, from time to time, reasonably require for the investment of its funds; and
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(vii)
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to
the extent permitted under the 1940 Act and the Advisers Act, on the Company’s
behalf, and in coordination with any Sub-Adviser (as defined below) and any administrator,
provide significant managerial assistance to those portfolio companies to which the Company
is required to provide such assistance under the 1940 Act, including utilizing appropriate
personnel of the Adviser to, among other things, monitor the operations of the Company’s
portfolio companies, participate in board and management meetings, consult with and advise
officers of portfolio companies and provide other organizational and financial consultation.
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The
Company acknowledges that the Adviser and Co-Adviser, may from time to time, designate one or the other as being primarily responsible
for certain investments. The Adviser shall have no obligation hereunder to supervise the Co-Adviser’s provision of services
under the Investment Co-Advisory Agreement.
(c)
Power
and Authority
. To facilitate the Adviser’s performance of these undertakings, but subject to the restrictions contained
herein, the Company hereby delegates to the Adviser (which power and authority may be delegated by the Adviser to one or more
Sub-Advisers), and the Adviser hereby accepts, the power and authority to act on behalf of the Company, in coordination with the
Co-Adviser, to effectuate investment decisions for the Company, including the negotiation, execution and delivery of all documents
relating to the Company’s investments and the placing of orders for other purchase or sale transactions on behalf of the
Company. In the event that the Company determines to acquire debt or other financing (or to refinance existing debt or other financing),
the Adviser, in coordination with the Co-Adviser, shall use commercially reasonable efforts to arrange for such financing on the
Company’s behalf, subject to the oversight and approval of the Board of Directors. If it is necessary for the Adviser to
make investments on behalf of the Company through a special purpose vehicle, the Adviser, in coordination with the Co-Adviser,
shall have authority to create, or arrange for the creation of, such special purpose vehicle and to make investments through such
special purpose vehicle in accordance with applicable law. The Company also grants to the Adviser power and authority to, in coordination
with the Co-Adviser, engage in all activities and transactions (and anything incidental thereto) that the Adviser, in coordination
with the Co-Adviser, deems appropriate, necessary or advisable to carry out its duties pursuant to this Agreement.
(d)
Acceptance
of Appointment
. The Adviser hereby accepts such appointment and agrees during the term hereof to render the services described
herein for the compensation provided herein, subject to the limitations contained herein.
(e)
Sub-Advisers
.
The Adviser, subject to the prior written consent of the Co-Adviser, is hereby authorized to enter into one or more sub-advisory
agreements (each a “
Sub-Advisory Agreement
”) with other investment advisers (each a “
Sub-Adviser
”)
pursuant to which the Adviser may obtain the services of the Sub-Adviser(s) to assist the Adviser in fulfilling its responsibilities
hereunder, subject to the oversight of the Adviser and/or the Company, with the scope of such services and oversight to be set
forth in each Sub-Advisory Agreement.
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(i)
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The
Adviser and/or Co-Adviser, and not the Company, shall be responsible for any compensation
payable to any Sub-Adviser; provided, however, that the Adviser shall have the right
to direct the Company to pay directly any Sub-Adviser the amounts due and payable to
such Sub-Adviser from the fees and expenses otherwise payable to the Adviser under this
Agreement.
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(ii)
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Any
Sub-Advisory Agreement entered into by the Adviser shall be in accordance with the requirements
of the 1940 Act and the Advisers Act, including the requirements of the 1940 Act relating
to Board of Directors and Company shareholder approval thereunder, and other applicable
federal and state law.
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(iii)
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Any
Sub-Adviser shall be subject to the same fiduciary duties as are imposed on the Adviser
pursuant to this Agreement, the 1940 Act and the Advisers Act, as well as other applicable
federal and state law.
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(f)
Independent
Contractor Status
. The Adviser shall, for all purposes herein provided, be deemed to be an independent contractor and, except
as expressly provided or authorized herein, shall have no authority to act for or represent the Company in any way or otherwise
be deemed an agent of the Company.
(g)
Record
Retention
. Subject to review by and the overall control of the Board of Directors, the Adviser shall maintain and keep all
books, accounts and other records of the Adviser that relate to activities performed by the Adviser hereunder as required under
the 1940 Act and the Advisers Act. The Adviser agrees that all records that it maintains and keeps for the Company shall at all
times remain the property of the Company, shall be readily accessible during normal business hours, and shall be promptly surrendered
to the Company upon the termination of this Agreement or otherwise on written request by the Company. The Adviser further agrees
that the records that it maintains and keeps for the Company shall be preserved in the manner and for the periods prescribed by
the 1940 Act, unless any such records are earlier surrendered as provided above. The Adviser shall have the right to retain copies,
or originals where required by Rule 204-2 promulgated under the Advisers Act, of such records to the extent required by applicable
law. The Adviser, in coordination with the Co-Adviser, shall maintain records of the locations where books, accounts and records
are maintained among the persons and entities providing services directly or indirectly to the Adviser or the Company.
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2.
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Expenses
Payable by the Company
.
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(a)
Adviser Personnel
. Other than as set forth in Section 2(b)(iii), all investment personnel of the Adviser, when and to the
extent engaged in providing investment advisory services and managerial assistance hereunder, and the compensation and routine
overhead expenses of such personnel allocable to such services, shall be provided and paid for by the Adviser and not by the Company.
(b)
Company’s
Costs
. Subject to the limitations on expense reimbursement of the Adviser as set forth in Sections 2(a) and 2(c), the Company,
either directly or through reimbursement to the Adviser, shall bear all costs and expenses of its investment operations and its
investment transactions, including costs and expenses relating to:
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(i)
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the
making of investments, including third party fees and expenses with respect to or associated
with identifying, negotiating, evaluating, including due diligence, and investing in,
portfolio companies and securities;
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(ii)
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monitoring
investments, including expenses and fees payable to third parties with respect to performance,
operational and legal review and compliance and investment oversight and reporting;
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(iii)
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direct
costs associated with managerial assistance provided or otherwise made available to the
Company’s portfolio companies;
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(iv)
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valuing
investments, including expenses and fees payable to third parties with respect to the
valuation of the Company’s investments;
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(v)
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liquidating
investments, including expenses and fees payable to third parties in connection with
identifying and evaluating purchasers, and negotiating and finalizing terms of liquidation;
and
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(vi)
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portfolio
expenses, including expenses and fees associated with the holding of or investment in
the portfolio company or security.
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(c)
Portfolio Company Compensation
. In certain circumstances the Adviser, the Co-Adviser, any Sub-Adviser, or any of their
respective Affiliates, may receive compensation from a portfolio company, in connection with the Company’s investment in
such portfolio company. Any compensation received by the Adviser, the Co-Adviser, Sub-Adviser, or any of their respective Affiliates,
attributable to the Company’s investment in any portfolio company, in excess of any of the limitations in or exemptions
granted from the 1940 Act, any interpretation thereof by the staff of the SEC, or the conditions set forth in any exemptive relief
granted to the Adviser, Co-Adviser, any Sub-Adviser or the Company by the SEC, shall be delivered promptly to the Company and
the Company will retain such excess compensation for the benefit of its shareholders, subject to (i) applicable law and (ii) maintaining
the Company’s compliance with Subchapter M of the Internal Revenue Code of 1986, as amended.
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3.
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Compensation
of the Adviser
.
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The
Company agrees to pay, and the Adviser agrees to accept, as compensation for the services provided by the Adviser hereunder, a
management fee (“
Management Fee
”) and an incentive fee (“
Incentive Fee
”) as hereinafter
set forth. Any of the fees payable to the Adviser under this Agreement for any partial month or calendar quarter shall be appropriately
prorated. The fees payable to the Adviser as set forth in this Agreement shall be calculated using a detailed calculation policy
and procedures approved by the Adviser and the Board of Directors, including a majority of the Company’s directors who are
not parties to this Agreement or “interested persons” (as such term is defined in Section 2(a)(19) of the 1940 Act)
of any such party (“
Independent Directors
”), and shall be consistent with the calculation of such fees as set
forth in this Section. The base management fee and incentive fee under the Investment Co-Advisory Agreement are equal to the Management
Fee and Incentive Fee payable to the Adviser hereunder.
(a)
Management
Fee
. The Management Fee is calculated at an annual rate of 0.75% of the Company’s average gross assets, is payable monthly
in arrears and is calculated based on the simple average value of the Company’s gross assets at the end of the two most
recently completed calendar months. The determination of gross assets will reflect changes in the fair market value of portfolio
investments reflecting both realized and unrealized capital appreciation. For purposes of computing the Management Fee, cash and
cash equivalents are excluded from the definition of gross assets.
(b)
Incentive
Fee
. The Incentive Fee is divided into two parts: (1) a subordinated incentive fee on income and (2) an incentive
fee on capital gains.
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(i)
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The
subordinated incentive fee on income is earned on pre-incentive fee net investment income
and shall be determined and payable in arrears as of the end of each calendar quarter
during which this Agreement is in effect. In the case of a liquidation or if this Agreement
is terminated, the fee will also become payable as of the effective date of the event.
For purposes of calculating the subordinated incentive fee on income, (A) “
pre-incentive
fee net investment income
” is defined as interest income, dividend income and
any other income accrued during the calendar quarter, minus operating expenses for the
quarter, including the Management Fee under this Agreement and the Investment Co-Advisory
Agreement, expenses payable under any Administrative Services Agreements, any interest
expense and dividends paid on any issued and outstanding preferred stock, but excluding
(x) incentive fees and (y) any realized capital gains, realized capital losses
or unrealized capital appreciation or depreciation, (B) “
cumulative net
increase in net assets resulting from operations
” is defined as the sum of
the pre-incentive fee net investment income, management fees payable with respect to
the periods prior to November 14, 2017, realized gains and losses and unrealized appreciation
and depreciation, and (C) “
look-back period
” is defined as the
most recently completed quarter and the eleven (11) preceding calendar quarters. The
subordinated incentive fee on income for each quarter will be calculated as follows:
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no
subordinated incentive fee on income will be payable in any calendar quarter in which
the pre-incentive fee net investment income does not exceed the preferred return rate
to shareholders of 1.75% (7.00% annualized) (the “
preferred return
”)
of average net assets;
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50%
of pre-incentive fee net investment income, if any, that exceeds the preferred return,
but is less than or equal to 2.1875% in any quarter (8.75% annualized), will be payable
to the Adviser (the “
catch up provision
”), which is intended to provide
the Adviser with an incentive fee of 10% on all of the pre-incentive fee net investment
income when the pre-incentive fee net investment income reaches 2.1875% in any quarter
(8.75% annualized) of average net assets; and
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for
any quarter in which pre-incentive fee net investment income exceeds 2.1875% (8.75% annualized)
of average net assets, the subordinated incentive fee on income shall equal 10% of pre-incentive
fee net investment income;
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provided
that the subordinated incentive fee on income for the current quarter will not exceed 50% of (A) the sum for each calendar quarter
of the look-back period of (a) (x) 20% of the cumulative net increase in net assets resulting from operations for such quarter
less (y) the subordinated incentive fee on income paid or accrued by the Company for such quarter (in the case of (y) only, not
including for the current quarter for which the subordinated incentive fee on income is being calculated), divided by (b) the
weighted average number of shares of common stock of the Company outstanding during such calendar quarter, multiplied by (B) the
weighted average number of shares of common stock of the Company outstanding during the calendar quarter for which the subordinated
incentive fee on income is being calculated.
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(ii)
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The
incentive fee on capital gains will be earned on liquidated investments and shall be
determined and payable in arrears as of the end of each calendar year during which this
Agreement is in effect. In the case of a liquidation, or if this Agreement is terminated,
the fee will also become payable as of the effective date of such event. The fee is equal
to (i) 10% of realized capital gains, less (ii) 50% of the aggregate amount of any previously
paid incentive fees on such capital gains. The incentive fee on capital gains is equal
to realized capital gains on a cumulative basis from inception, computed net of all realized
capital losses and unrealized capital depreciation on a cumulative basis.
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(c)
Waiver or Deferral of Fees
.
The
Adviser shall have the right to elect to waive or defer all or a portion of the Management Fee and/or Incentive Fee that would
otherwise be paid to it. Prior to the payment of any fee to the Adviser, the Company shall obtain written instructions from the
Adviser with respect to any waiver or deferral of any portion of such fees. Any portion of a deferred fee payable to the Adviser
and not paid over to the Adviser with respect to any month, calendar quarter or year shall be deferred without interest and may
be paid over in any such other month prior to the termination of this Agreement, as the Adviser may determine upon written notice
to the Company.
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4.
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Covenant
of the Adviser
.
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The
Adviser is registered as an investment adviser under the Advisers Act on the effective date of this Agreement as set forth in
Section 10, and shall maintain such registration until the expiration or termination of this Agreement. The Adviser agrees
that its activities shall at all times comply in all material respects with all applicable federal and state laws governing its
operations and investments. The Adviser agrees to observe and comply with applicable provisions of the code of ethics adopted
by the Company pursuant to Rule 17j-1 under the 1940 Act, as such code of ethics may be amended from time to time.
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5.
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Brokerage
Commissions
.
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The
Adviser, in coordination with the Co-Adviser, is hereby authorized, to the fullest extent now or hereafter permitted by law, to
cause the Company to pay a member of a national securities exchange, broker or dealer an amount of commission for effecting a
securities transaction in excess of the amount of commission another member of such exchange, broker or dealer would have charged
for effecting that transaction, if the Adviser, in coordination with the Co-Adviser, determines in good faith, taking into account
factors, including price (including the applicable brokerage commission or dealer spread), size of order, difficulty of execution,
and operational facilities of the firm and the firm’s risk and skill in positioning blocks of securities, that such amount
of commission is reasonable in relation to the value of the brokerage and/or research services provided by such member, broker
or dealer, viewed in terms of either that particular transaction or its overall responsibilities with respect to the Company’s
portfolio, and is consistent with the Adviser’s and Co-Adviser’s duty to seek the best execution on behalf of the
Company. Notwithstanding the foregoing, with regard to transactions with or for the benefit of the Company, the Adviser may not
pay any commission or receive any rebates or give-ups, nor participate in any business arrangements which would circumvent this
restriction.
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6.
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Other
Activities of the Adviser
.
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The
services of the Adviser to the Company are not exclusive, and the Adviser may engage in any other business or render similar or
different services to others including the direct or indirect sponsorship or management of other investment-based accounts or
commingled pools of capital, however structured, having investment objectives similar to or different from those of the Company,
and nothing in this Agreement shall limit or restrict the right of any officer, director, shareholder (and their shareholders
or members, including the owners of their shareholders or members), officer or employee of the Adviser to engage in any other
business or to devote his or her time and attention in part to any other business, whether of a similar or dissimilar nature,
or to receive any fees or compensation in connection therewith (including fees for serving as a director of, or providing consulting
services to, one or more of the Company’s portfolio companies, subject to applicable law). The Adviser assumes no responsibility
under this Agreement other than to render the services set forth herein.
During
the term of this Agreement and for a period of one year following any termination or nonrenewal of this Agreement for any reason,
the Company shall not, directly or indirectly on behalf of itself or any other person or entity: (a) solicit the employment of
or employ any partners, shareholders, directors, officers, employees, consultants and/or associated persons (each, an “
Associate
”)
of the Adviser, the Co-Adviser, any Sub-Adviser or any of their respective Affiliates (collectively, “
Adviser Persons
”)
or any person or entity who was an Associate of an Adviser Person during the one-year period preceding such proposed solicitation
or employment, or (b) induce, persuade or attempt to induce or persuade the discontinuation of, or in any way interfere or attempt
to interfere with, the relationship between an Adviser Person and any Associate of such Adviser Person or any person or entity
who was an Associate of such Adviser Person during the one-year period preceding such proposed inducement, persuasion or interference
or attempted inducement, persuasion or interference. The parties intend that any provision of this Section 6 held invalid, illegal
or unenforceable only in part or degree because of the duration or geographic scope thereof shall remain in full force to the
extent not held invalid, illegal or unenforceable.
For
purposes of this Agreement, “
Affiliate
” or “
Affiliated
” or any derivation thereof means
with respect to any individual, corporation, partnership, trust, joint venture, limited liability company or other entity or association
(“
Person
”): (a) any Person directly or indirectly owning, controlling, or holding, with the power to vote,
10% or more of the outstanding voting securities of such other Person; (b) any Person 10% or more of whose outstanding voting
securities are directly or indirectly owned, controlled or held, with the power to vote, by such other Person; (c) any Person
directly or indirectly controlling, controlled by or under common control with such other Person; (d) any executive officer, director,
trustee or general partner of such other Person; or (e) any legal entity for which such Person acts as an executive officer,
director, trustee or general partner.
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7.
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Responsibility
of Dual Directors, Officers and/or Employees
.
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If
any person who is a director, officer, shareholder or employee of the Adviser is or becomes a director, officer, shareholder and/or
employee of the Company and acts as such in any business of the Company, then such director, officer, shareholder and/or employee
of the Adviser shall be deemed to be acting in such capacity solely for the Company, and not as a director, officer, shareholder
or employee of the Adviser or under the control or direction of the Adviser, even if paid by the Adviser.
(a)
Indemnification
.
Subject to Section 9, the Adviser, any Sub-Adviser, each of their directors, officers, shareholders or members (and their shareholders
or members, including the owners of their shareholders or members), agents, employees, controlling persons (as determined under
the 1940 Act (“
Controlling Persons
”)) and any other person or entity Affiliated with, or acting on behalf of,
the Adviser or Sub-Adviser (each an “
Indemnified Party
” and, collectively, the “
Indemnified Parties
”)
shall not be liable to the Company for any action taken or omitted to be taken by any such Indemnified Party in connection with
the performance of any of its duties or obligations under this Agreement or otherwise as an investment adviser of the Company
(except to the extent specified in Section 36(b) of the 1940 Act concerning loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation for services), and the Company shall indemnify, defend and protect the Indemnified Parties
(each of whom shall be deemed a third party beneficiary hereof) and hold them harmless from and against all losses, damages, liabilities,
costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) (“
Losses
”)
incurred by the Indemnified Parties in or by reason of any pending, threatened or completed action, suit, investigation or other
proceeding (including an action or suit by or in the right of the Company or its security holders) arising out of or otherwise
based upon the performance of any of the Indemnified Parties’ duties or obligations under this Agreement, any Sub-Advisory
Agreement, or otherwise as an investment adviser of the Company to the extent such Losses are not fully reimbursed by insurance
and otherwise to the fullest extent such indemnification would not be inconsistent with the Articles of Incorporation, the 1940
Act, the laws of the State of Maryland and other applicable law.
(b) The
Adviser shall indemnify the Company, and its Affiliates and Controlling Persons, for any Losses that the Company or its Affiliates
and Controlling Persons may sustain as a result of the Adviser’s willful misfeasance, bad faith, gross negligence, reckless
disregard of its duties hereunder or violation of applicable law, including the federal and state securities laws.
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9.
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Limitation
on Indemnification
.
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Notwithstanding
Section 8(a) to the contrary, nothing contained herein shall protect or be deemed to protect any of the Indemnified Parties against,
or entitle or be deemed to entitle any of the Indemnified Parties to indemnification in respect of, any Losses to the Company
or its security holders to which the Indemnified Parties would otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence in the performance of the Adviser’s or Sub-Adviser’s duties or by reason of the reckless disregard
of the Adviser’s or Sub-Adviser’s duties and obligations under this Agreement or any Sub-Advisory Agreement (to the
extent applicable, as the same shall be determined in accordance with the 1940 Act and any interpretations or guidance by the
SEC or its staff thereunder).
In
addition, notwithstanding any of the foregoing to the contrary, the provisions of Section 8 and this Section 9 shall not be construed
so as to provide for the indemnification of any Indemnified Party for any liability (including liability under federal securities
laws which, under certain circumstances, impose liability even on persons that act in good faith), to the extent (but only to
the extent) that such indemnification would be in violation of applicable law, but shall be construed so as to effectuate the
provisions of Section 8 and this Section 9 to the fullest extent permitted by law.
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10.
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Effectiveness,
Duration and Termination of Agreement
.
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(a)
Term
and Effectiveness
. This Agreement shall become effective as of the first date written above. Once effective, this Agreement
shall remain in effect for two years, and thereafter shall continue automatically for successive one-year periods; provided that
such continuance is specifically approved at least annually by: (i) the vote of the Board of Directors, or by the vote of
a majority of the outstanding voting securities of the Company and (ii) the vote of a majority of the Independent Directors,
in accordance with the requirements of the 1940 Act.
(b)
Termination
.
This Agreement may be terminated at any time, without the payment of any penalty: (i) by the Company upon 60 days’
prior written notice to the Adviser upon: (A) the vote of a majority of the outstanding voting securities of the Company
(as “majority” is defined in Section 2(a)(42) of the 1940 Act) or (B) the vote of the Board of Directors
or (ii) by the Adviser upon not less than 120 days’ prior written notice to the Company. This Agreement shall automatically
terminate in the event of (x) its “assignment” (as such term is defined for purposes of construing Section 15(a)(4)
of the 1940 Act), or (y) the effectiveness of an Investment Advisory Agreement by and between the Company and FS/KKR Advisor,
LLC. The provisions of Sections 8 and 9 shall remain in full force and effect, and the Adviser shall remain entitled to the benefits
thereof, notwithstanding any termination of this Agreement. Further, notwithstanding the termination or expiration of this Agreement
as aforesaid, the Adviser shall be entitled to any amounts owed to it under Section 3 through the date of termination or
expiration and Sections 8 and 9 shall continue in force and effect and apply to the Adviser and its representatives as and
to the extent applicable.
(c)
Duties
of Adviser Upon Termination
. The Adviser shall promptly upon termination:
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(i)
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deliver
to the Board of Directors a full accounting, including a statement showing all payments
collected by it and a statement of all money held by it, covering the period following
the date of the last accounting furnished to the Board of Directors;
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(ii)
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deliver
to the Board of Directors all assets and documents of the Company then in custody of
the Adviser; and
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(iii)
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cooperate
with the Company to provide an orderly transition of services.
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The
Adviser, in coordination with the Co-Adviser, will exercise voting rights on any assets held in the portfolio securities of portfolio
companies. The Adviser is obligated to furnish to the Company, in a timely manner, a record of all proxies voted in such form
and format that complies with applicable federal statutes and regulations.
Any
notice under this Agreement shall be given in writing, addressed and delivered or mailed, postage prepaid, to the other party
at the address listed below or at such other address for a party as shall be specified in a notice given in accordance with this
Section 12.
This
Agreement may be amended by mutual written consent of the parties; provided that the consent of the Company is required to be
obtained in conformity with the requirements of the 1940 Act.
If
any provision of this Agreement shall be declared illegal, invalid or unenforceable in any jurisdiction, then such provision shall
be deemed to be severable from this Agreement (to the extent permitted by law) and in any event such illegality, invalidity or
unenforceability shall not affect the remainder hereof.
This
Agreement may be executed in counterparts, each of which shall be deemed to be an original copy and all of which together shall
constitute one and the same instrument binding on all parties hereto, notwithstanding that all parties shall not have signed the
same counterpart.
Notwithstanding
the place where this Agreement may be executed by any of the parties hereto and the provisions of Sections 8 and 9, this Agreement
shall be construed in accordance with the laws of the State of New York, without giving effect to any conflicts of laws principles
thereof. For so long as the Company is regulated as a BDC under the 1940 Act, this Agreement shall also be construed in accordance
with the applicable provisions of the 1940 Act and the Advisers Act. In such case, to the extent the applicable laws of the State
of New York or any of the provisions herein conflict with the provisions of the 1940 Act or the Advisers Act, the 1940 Act and
the Advisers Act shall control.
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17.
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Third
Party Beneficiaries
.
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Except
for any Sub-Adviser (with respect to Sections 6 and 8) and any Indemnified Party, such Sub-Adviser and the Indemnified Parties
each being an intended beneficiary of this Agreement, this Agreement is for the sole benefit of the parties hereto and their permitted
assigns and nothing herein express or implied shall give or be construed to give to any person, other than the parties hereto
and such assigns, any legal or equitable rights hereunder.
This
Agreement contains the entire agreement of the parties and supersedes all prior agreements, understandings and arrangements with
respect to the subject matter hereof.
The
provisions of Sections 2(c), 8, 9, 10(b), 16, 17 and this Section 19 shall survive termination of this Agreement.
The
Company shall acquire and maintain a directors and officers liability insurance policy or similar insurance policy, which may
name the Adviser, Co-Adviser and any Sub-Adviser each as an additional insured party (each an “
Additional Insured Party
”
and collectively the “
Additional Insured Parties
”). Such insurance policy shall include reasonable coverage
from a reputable insurer. The Company shall make all premium payments required to maintain such policy in full force and effect;
provided, however, each Additional Insured Party, if any, shall pay to the Company, in advance of the due date of such premium,
its allocated share of the premium. Irrespective of whether the Adviser, Co-Adviser and any Sub-Adviser is a named Additional
Insured Party on such policy, the Company shall provide the Adviser, Co-Adviser and any Sub-Adviser with written notice upon receipt
of any notice of: (a) any default under such policy; (b) any pending or threatened termination, cancellation or non-renewal of
such policy or (c) any coverage limitation or reduction with respect to such policy. The foregoing provisions of this Section
20 notwithstanding, the Company shall not be required to acquire or maintain any insurance policy to the extent that the same
is not available upon commercially reasonable pricing terms or at all, as determined in good faith by the required majority (as
defined in Section 57(o) of the 1940 Act) of the Board of Directors.
The
Adviser conducts its investment advisory business under, and owns all rights to, the trademark “[FS Adviser]” and
the “[FS Adviser]” design (collectively, the “
Brand
”). In connection with the Company’s (a)
public filings; (b) requests for information from state and federal regulators; (c) offering materials and advertising materials;
and (d) investor communications, the Company may state in such materials that investment advisory services are being provided
by the Adviser to the Company under the terms of this Agreement. The Adviser hereby grants a non-exclusive, non-transferable,
non-sublicensable and royalty-free license (the “
License
”) to the Company for the use of the Brand solely as
permitted in the foregoing sentence. Prior to using the Brand in any manner, the Company shall submit all proposed uses to the
Adviser for prior written approval solely to the extent the Company’s use of the Brand or any combination or derivation
thereof has materially changed from the Company’s use of the Brand previously approved by the Adviser. The Adviser reserves
the right to terminate the License immediately upon written notice for any reason, including if the usage is not in compliance
with its standards and policies. Notwithstanding the foregoing, the term of the License granted under this Section 21 shall be
for the term of this Agreement only, including renewals and extensions, and the right to use the Brand as provided herein shall
terminate immediately upon the termination of this Agreement. The Company agrees that the Adviser is the sole owner of the Brand,
and any and all goodwill in the Brand arising from the Company’s use shall inure solely to the benefit of the Adviser. Without
limiting the foregoing, the License shall have no effect on the Company’s ownership rights of the works within which the
Brand shall be used.
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed on the date above written.
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CORPORATE CAPITAL TRUST, INC.
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a Maryland corporation
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555 California Street
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50th Floor
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San Francisco, California 94104
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By:
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Name: Thomas N. Murphy
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Title: Chief
Financial Officer
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[FS ADVISER]
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a Delaware limited liability company
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201 Rouse Boulevard
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Philadelphia, Pennsylvania 19112
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By:
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Name:
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Title:
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[
Signature
Page to Investment Advisory Agreement
]
Exhibit
C
Joint
Advisor Investment Advisory Agreement
[
see
attached
]
INVESTMENT
ADVISORY AGREEMENT
BETWEEN
CORPORATE CAPITAL TRUST, INC.
AND
FS/KKR ADVISOR, LLC
This
Investment Advisory Agreement (this “
Agreement
”) is made as of [ ], by and between CORPORATE CAPITAL TRUST,
INC., a Maryland corporation (the “
Company
”), and FS/KKR ADVISOR, LLC, a Delaware limited liability company
(the “
Adviser
”).
WHEREAS,
the Company is a non-diversified, closed-end management investment company that has elected to be treated as a business development
company (“
BDC
”) under the Investment Company Act of 1940, as amended (together with the rules promulgated thereunder,
the “
1940 Act
”);
WHEREAS,
the Adviser is a newly registered investment adviser under the Investment Advisers Act of 1940, as amended (together with the
rules promulgated thereunder, the “
Advisers Act
”);
WHEREAS,
the Company desires to retain the Adviser to provide investment advisory services to the Company in the manner and on the terms
and conditions hereinafter set forth; and
WHEREAS,
the Adviser is willing to provide investment advisory services to the Company in the manner and on the terms and conditions hereinafter
set forth.
NOW,
THEREFORE, in consideration of the premises and the covenants hereinafter contained and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the Company and the Adviser hereby agree as follows:
1.
Duties of the Adviser
.
(a)
Retention of Adviser
. The Company hereby appoints the Adviser to act as the investment adviser to the Company and to manage
the investment and reinvestment of the assets of the Company, subject to the supervision of the board of directors of the Company
(the “
Board of Directors
”), for the period and upon the terms herein set forth in accordance with:
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(i)
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the
investment objective, policies and restrictions that are set forth in the Company’s
filings with the Securities and Exchange Commission (the “
SEC
”), as
supplemented, amended or superseded from time to time;
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(ii)
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during
the term of this Agreement, all other applicable federal and state laws, rules and regulations,
and the Company’s articles of incorporation, as amended from time to time (“
Articles
of Incorporation
”);
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(iii)
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such
investment policies, directives, regulatory restrictions as the Company may from time
to time establish or issue and communicate to the Adviser in writing; and
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(iv)
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the
Company’s compliance policies and procedures as applicable to the Adviser and as
administered by the Company’s chief compliance officer.
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(b)
Responsibilities of Adviser
. Without limiting the generality of the foregoing, the Adviser shall, during the term and subject
to the provisions of this Agreement:
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(i)
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determine
the composition and allocation of the Company’s investment portfolio, the nature
and timing of any changes therein and the manner of implementing such changes;
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(ii)
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identify,
evaluate and negotiate the structure of the investments made by the Company;
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(iii)
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perform
due diligence on prospective portfolio companies;
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(iv)
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execute,
close, service and monitor the Company’s investments;
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(v)
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determine
the securities and other assets that the Company shall purchase, retain or sell;
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(vi)
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provide
the Company with such other investment advisory, research and related services as the
Company may, from time to time, reasonably require for the investment of its funds; and
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(vii)
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to
the extent permitted under the 1940 Act and the Advisers Act, on the Company’s
behalf, and in coordination with any Sub-Adviser (as defined below) and any administrator,
provide significant managerial assistance to those portfolio companies to which the Company
is required to provide such assistance under the 1940 Act, including utilizing appropriate
personnel of the Adviser to, among other things, monitor the operations of the Company’s
portfolio companies, participate in board and management meetings, consult with and advise
officers of portfolio companies and provide other organizational and financial consultation.
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(c)
Power and Authority
. To facilitate the Adviser’s performance of these undertakings, but subject to the restrictions
contained herein, the Company hereby delegates to the Adviser (which power and authority may be delegated by the Adviser to one
or more Sub-Advisers), and the Adviser hereby accepts, the power and authority to act on behalf of the Company to effectuate investment
decisions for the Company, including the negotiation, execution and delivery of all documents relating to the Company’s
investments and the placing of orders for other purchase or sale transactions on behalf of the Company. In the event that the
Company determines to acquire debt or other financing (or to refinance existing debt or other financing), the Adviser shall use
commercially reasonable efforts to arrange for such financing on the Company’s behalf, subject to the oversight and approval
of the Board of Directors. If it is necessary for the Adviser to make investments on behalf of the Company through a special purpose
vehicle, the Adviser shall have authority to create, or arrange for the creation of, such special purpose vehicle and to make
investments through such special purpose vehicle in accordance with applicable law. The Company also grants to the Adviser power
and authority to engage in all activities and transactions (and anything incidental thereto) that the Adviser deems appropriate,
necessary or advisable to carry out its duties pursuant to this Agreement.
(d)
Acceptance of Appointment
. The Adviser hereby accepts such appointment and agrees during the term hereof to render the
services described herein for the compensation provided herein, subject to the limitations contained herein.
(e)
Sub-Advisers
. The Adviser is hereby authorized to enter into one or more sub-advisory agreements (each a “
Sub-Advisory
Agreement
”) with other investment advisers (each a “
Sub-Adviser
”) pursuant to which the Adviser may
obtain the services of the Sub-Adviser(s) to assist the Adviser in fulfilling its responsibilities hereunder, subject to the oversight
of the Adviser and/or the Company, with the scope of such services and oversight to be set forth in each Sub-Advisory Agreement.
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(i)
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The
Adviser and not the Company shall be responsible for any compensation payable to any
Sub-Adviser; provided, however, that the Adviser shall have the right to direct the Company
to pay directly any Sub-Adviser the amounts due and payable to such Sub-Adviser from
the fees and expenses otherwise payable to the Adviser under this Agreement.
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(ii)
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Any
Sub-Advisory Agreement entered into by the Adviser shall be in accordance with the requirements
of the 1940 Act and the Advisers Act, including the requirements of the 1940 Act relating
to Board of Directors and Company shareholder approval thereunder, and other applicable
federal and state law.
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(iii)
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Any
Sub-Adviser shall be subject to the same fiduciary duties as are imposed on the Adviser
pursuant to this Agreement, the 1940 Act and the Advisers Act, as well as other applicable
federal and state law.
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(f)
Independent Contractor Status
. The Adviser shall, for all purposes herein provided, be deemed to be an independent contractor
and, except as expressly provided or authorized herein, shall have no authority to act for or represent the Company in any way
or otherwise be deemed an agent of the Company.
(g)
Record Retention
. Subject to review by and the overall control of the Board of Directors, the Adviser shall maintain and
keep all books, accounts and other records of the Adviser that relate to activities performed by the Adviser hereunder as required
under the 1940 Act and the Advisers Act. The Adviser agrees that all records that it maintains and keeps for the Company shall
at all times remain the property of the Company, shall be readily accessible during normal business hours, and shall be promptly
surrendered to the Company upon the termination of this Agreement or otherwise on written request by the Company. The Adviser
further agrees that the records that it maintains and keeps for the Company shall be preserved in the manner and for the periods
prescribed by the 1940 Act, unless any such records are earlier surrendered as provided above. The Adviser shall have the right
to retain copies, or originals where required by Rule 204-2 promulgated under the Advisers Act, of such records to the extent
required by applicable law. The Adviser shall maintain records of the locations where books, accounts and records are maintained
among the persons and entities providing services directly or indirectly to the Adviser or the Company.
2.
Expenses
Payable by the Company
.
(a)
Adviser Personnel
. Other than as set forth in Section 2(b)(iii), all investment personnel of the Adviser, when and to the
extent engaged in providing investment advisory services and managerial assistance hereunder, and the compensation and routine
overhead expenses of such personnel allocable to such services, shall be provided and paid for by the Adviser and not by the Company.
(b)
Company’s Costs
. Subject to the limitations on expense reimbursement of the Adviser as set forth in Sections 2(a)
and 2(c), the Company, either directly or through reimbursement to the Adviser, shall bear all costs and expenses of its investment
operations and its investment transactions, including costs and expenses relating to:
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(i)
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the
making of investments, including third party fees and expenses with respect to or associated
with identifying, negotiating, evaluating, including due diligence, and investing in,
portfolio companies and securities;
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(ii)
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monitoring
investments, including expenses and fees payable to third parties with respect to performance,
operational and legal review and compliance and investment oversight and reporting;
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(iii)
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direct
costs associated with managerial assistance provided or otherwise made available to the
Company’s portfolio companies;
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(iv)
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valuing
investments, including expenses and fees payable to third parties with respect to the
valuation of the Company’s investments;
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(v)
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liquidating
investments, including expenses and fees payable to third parties in connection with
identifying and evaluating purchasers, and negotiating and finalizing terms of liquidation;
and
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(vi)
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portfolio
expenses, including expenses and fees associated with the holding of or investment in
the portfolio company or security.
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(c)
Portfolio Company Compensation
. In certain circumstances the Adviser, any Sub-Adviser, or any of their respective Affiliates,
may receive compensation from a portfolio company, in connection with the Company’s investment in such portfolio company.
Any compensation received by the Adviser, Sub-Adviser, or any of their respective Affiliates, attributable to the Company’s
investment in any portfolio company, in excess of any of the limitations in or exemptions granted from the 1940 Act, any interpretation
thereof by the staff of the SEC, or the conditions set forth in any exemptive relief granted to the Adviser, any Sub-Adviser or
the Company by the SEC, shall be delivered promptly to the Company and the Company will retain such excess compensation for the
benefit of its shareholders, subject to (i) applicable law and (ii) maintaining the Company’s compliance with Subchapter
M of the Internal Revenue Code of 1986, as amended.
3.
Compensation of the Adviser
.
The
Company agrees to pay, and the Adviser agrees to accept, as compensation for the services provided by the Adviser hereunder, a
management fee (“
Management Fee
”) and an incentive fee (“
Incentive Fee
”) as hereinafter
set forth. Any of the fees payable to the Adviser under this Agreement for any partial month or calendar quarter shall be appropriately
prorated. The fees payable to the Adviser as set forth in this Agreement shall be calculated using a detailed calculation policy
and procedures approved by the Adviser and the Board of Directors, including a majority of the Company’s directors who are
not parties to this Agreement or “interested persons” (as such term is defined in Section 2(a)(19) of the 1940 Act)
of any such party (“
Independent Directors
”), and shall be consistent with the calculation of such fees as set
forth in this Section.
(a)
Management Fee
. The Management Fee is calculated at an annual rate of 1.5% of the Company’s average gross assets,
is payable monthly in arrears and is calculated based on the simple average value of the Company’s gross assets at the end
of the two most recently completed calendar months. The determination of gross assets will reflect changes in the fair market
value of portfolio investments reflecting both realized and unrealized capital appreciation. For purposes of computing the Management
Fee, cash and cash equivalents are excluded from the definition of gross assets.
(b)
Incentive Fee
. The Incentive Fee is divided into two parts: (1) a subordinated incentive fee on income and (2) an
incentive fee on capital gains.
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(i)
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The
subordinated incentive fee on income is earned on pre-incentive fee net investment income
and shall be determined and payable in arrears as of the end of each calendar quarter
during which this Agreement is in effect. In the case of a liquidation or if this Agreement
is terminated, the fee will also become payable as of the effective date of the event.
For purposes of calculating the subordinated incentive fee on income, (A) “
pre-incentive
fee net investment income
” is defined as interest income, dividend income and
any other income accrued during the calendar quarter, minus operating expenses for the
quarter, including the Management Fee, expenses payable under any Administrative Services
Agreements, any interest expense and dividends paid on any issued and outstanding preferred
stock, but excluding (x) incentive fees and (y) any realized capital gains,
realized capital losses or unrealized capital appreciation or depreciation, (B) “
cumulative
net increase in net assets resulting from operations
” is defined as the sum
of the pre-incentive fee net investment income, management fees payable with respect
to the periods prior to November 14, 2017, realized gains and losses and unrealized appreciation
and depreciation, and (C) “
look-back period
” is defined as the
most recently completed quarter and the eleven (11) preceding calendar quarters. The
subordinated incentive fee on income for each quarter will be calculated as follows:
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–
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no
subordinated incentive fee on income will be payable in any calendar quarter in which
the pre-incentive fee net investment income does not exceed the preferred return rate
to shareholders of 1.75% (7.00% annualized) (the “
preferred return
”)
of average net assets;
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–
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100%
of pre-incentive fee net investment income, if any, that exceeds the preferred return,
but is less than or equal to 2.1875% in any quarter (8.75% annualized), will be payable
to the Adviser (the “
catch up provision
”), which is intended to provide
the Adviser with an incentive fee of 20% on all of the pre-incentive fee net investment
income when the pre-incentive fee net investment income reaches 2.1875% in any quarter
(8.75% annualized) of average net assets; and
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–
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for
any quarter in which pre-incentive fee net investment income exceeds 2.1875% (8.75% annualized)
of average net assets, the subordinated incentive fee on income shall equal 20% of pre-incentive
fee net investment income;
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provided
that the subordinated incentive fee on income for the current quarter will not exceed (A) the sum for each calendar quarter of
the look-back period of (a) (x) 20.0% of the cumulative net increase in net assets resulting from operations for such quarter
less (y) the subordinated incentive fee on income paid or accrued by the Company for such quarter (in the case of (y) only, not
including for the current quarter for which the subordinated incentive fee on income is being calculated), divided by (b) the
weighted average number of shares of common stock of the Company outstanding during such calendar quarter, multiplied by (B) the
weighted average number of shares of common stock of the Company outstanding during the calendar quarter for which the subordinated
incentive fee on income is being calculated.
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(ii)
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The
incentive fee on capital gains will be earned on liquidated investments and shall be
determined and payable in arrears as of the end of each calendar year during which this
Agreement is in effect. In the case of a liquidation, or if this Agreement is terminated,
the fee will also become payable as of the effective date of such event. The fee is equal
to 20% of realized capital gains, less the aggregate amount of any previously paid incentive
fees on such capital gains. The incentive fee on capital gains is equal to realized capital
gains on a cumulative basis from inception, computed net of all realized capital losses
and unrealized capital depreciation on a cumulative basis.
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(c)
Waiver or Deferral of Fees
.
The
Adviser shall have the right to elect to waive or defer all or a portion of the Management Fee and/or Incentive Fee that would
otherwise be paid to it. Prior to the payment of any fee to the Adviser, the Company shall obtain written instructions from the
Adviser with respect to any waiver or deferral of any portion of such fees. Any portion of a deferred fee payable to the Adviser
and not paid over to the Adviser with respect to any month, calendar quarter or year shall be deferred without interest and may
be paid over in any such other month prior to the termination of this Agreement, as the Adviser may determine upon written notice
to the Company.
4.
Covenant of the Adviser
.
The
Adviser is registered as an investment adviser under the Advisers Act on the effective date of this Agreement as set forth in
Section 10, and shall maintain such registration until the expiration or termination of this Agreement. The Adviser agrees
that its activities shall at all times comply in all material respects with all applicable federal and state laws governing its
operations and investments. The Adviser agrees to observe and comply with applicable provisions of the code of ethics adopted
by the Company pursuant to Rule 17j-1 under the 1940 Act, as such code of ethics may be amended from time to time.
5.
Brokerage Commissions
.
The
Adviser is hereby authorized, to the fullest extent now or hereafter permitted by law, to cause the Company to pay a member of
a national securities exchange, broker or dealer an amount of commission for effecting a securities transaction in excess of the
amount of commission another member of such exchange, broker or dealer would have charged for effecting that transaction, if the
Adviser determines in good faith, taking into account factors, including price (including the applicable brokerage commission
or dealer spread), size of order, difficulty of execution, and operational facilities of the firm and the firm’s risk and
skill in positioning blocks of securities, that such amount of commission is reasonable in relation to the value of the brokerage
and/or research services provided by such member, broker or dealer, viewed in terms of either that particular transaction or its
overall responsibilities with respect to the Company’s portfolio, and is consistent with the Adviser’s duty to seek
the best execution on behalf of the Company. Notwithstanding the foregoing, with regard to transactions with or for the benefit
of the Company, the Adviser may not pay any commission or receive any rebates or give-ups, nor participate in any business arrangements
which would circumvent this restriction.
6.
Other Activities of the Adviser
.
The
services of the Adviser to the Company are not exclusive, and the Adviser may engage in any other business or render similar or
different services to others including the direct or indirect sponsorship or management of other investment-based accounts or
commingled pools of capital, however structured, having investment objectives similar to or different from those of the Company,
and nothing in this Agreement shall limit or restrict the right of any officer, director, shareholder (and their shareholders
or members, including the owners of their shareholders or members), officer or employee of the Adviser to engage in any other
business or to devote his or her time and attention in part to any other business, whether of a similar or dissimilar nature,
or to receive any fees or compensation in connection therewith (including fees for serving as a director of, or providing consulting
services to, one or more of the Company’s portfolio companies, subject to applicable law). The Adviser assumes no responsibility
under this Agreement other than to render the services set forth herein.
During
the term of this Agreement and for a period of one year following any termination or nonrenewal of this Agreement for any reason,
the Company shall not, directly or indirectly on behalf of itself or any other person or entity: (a) solicit the employment of
or employ any partners, shareholders, directors, officers, employees, consultants and/or associated persons (each, an “
Associate
”)
of the Adviser, any Sub-Adviser or any of their respective Affiliates (collectively, “
Adviser Persons
”) or
any person or entity who was an Associate of an Adviser Person during the one-year period preceding such proposed solicitation
or employment, or (b) induce, persuade or attempt to induce or persuade the discontinuation of, or in any way interfere or attempt
to interfere with, the relationship between an Adviser Person and any Associate of such Adviser Person or any person or entity
who was an Associate of such Adviser Person during the one-year period preceding such proposed inducement, persuasion or interference
or attempted inducement, persuasion or interference. The parties intend that any provision of this Section 6 held invalid, illegal
or unenforceable only in part or degree because of the duration or geographic scope thereof shall remain in full force to the
extent not held invalid, illegal or unenforceable.
For
purposes of this Agreement, “
Affiliate
” or “
Affiliated
” or any derivation thereof means
with respect to any individual, corporation, partnership, trust, joint venture, limited liability company or other entity or association
(“
Person
”): (a) any Person directly or indirectly owning, controlling, or holding, with the power to vote,
10% or more of the outstanding voting securities of such other Person; (b) any Person 10% or more of whose outstanding voting
securities are directly or indirectly owned, controlled or held, with the power to vote, by such other Person; (c) any Person
directly or indirectly controlling, controlled by or under common control with such other Person; (d) any executive officer, director,
trustee or general partner of such other Person; or (e) any legal entity for which such Person acts as an executive officer,
director, trustee or general partner.
7.
Responsibility of Dual Directors, Officers and/or Employees
.
If
any person who is a director, officer, shareholder or employee of the Adviser is or becomes a director, officer, shareholder and/or
employee of the Company and acts as such in any business of the Company, then such director, officer, shareholder and/or employee
of the Adviser shall be deemed to be acting in such capacity solely for the Company, and not as a director, officer, shareholder
or employee of the Adviser or under the control or direction of the Adviser, even if paid by the Adviser.
8.
Indemnification
.
(a)
Indemnification
. Subject to Section 9, the Adviser, any Sub-Adviser, each of their directors, officers, shareholders or
members (and their shareholders or members, including the owners of their shareholders or members), agents, employees, controlling
persons (as determined under the 1940 Act (“
Controlling Persons
”)) and any other person or entity Affiliated
with, or acting on behalf of, the Adviser or Sub-Adviser (each an “
Indemnified Party
” and, collectively, the
“
Indemnified Parties
”) shall not be liable to the Company for any action taken or omitted to be taken by any
such Indemnified Party in connection with the performance of any of its duties or obligations under this Agreement or otherwise
as an investment adviser of the Company (except to the extent specified in Section 36(b) of the 1940 Act concerning loss resulting
from a breach of fiduciary duty with respect to the receipt of compensation for services), and the Company shall indemnify, defend
and protect the Indemnified Parties (each of whom shall be deemed a third party beneficiary hereof) and hold them harmless from
and against all losses, damages, liabilities, costs and expenses (including reasonable attorneys’ fees and amounts reasonably
paid in settlement) (“
Losses
”) incurred by the Indemnified Parties in or by reason of any pending, threatened
or completed action, suit, investigation or other proceeding (including an action or suit by or in the right of the Company or
its security holders) arising out of or otherwise based upon the performance of any of the Indemnified Parties’ duties or
obligations under this Agreement, any Sub-Advisory Agreement, or otherwise as an investment adviser of the Company to the extent
such Losses are not fully reimbursed by insurance and otherwise to the fullest extent such indemnification would not be inconsistent
with the Articles of Incorporation, the 1940 Act, the laws of the State of Maryland and other applicable law.
(b)
The Adviser shall indemnify the Company, and its Affiliates and Controlling Persons, for any Losses that the Company or its Affiliates
and Controlling Persons may sustain as a result of the Adviser’s willful misfeasance, bad faith, gross negligence, reckless
disregard of its duties hereunder or violation of applicable law, including the federal and state securities laws.
9.
Limitation on Indemnification
.
Notwithstanding
Section 8(a) to the contrary, nothing contained herein shall protect or be deemed to protect any of the Indemnified Parties against,
or entitle or be deemed to entitle any of the Indemnified Parties to indemnification in respect of, any Losses to the Company
or its security holders to which the Indemnified Parties would otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence in the performance of the Adviser’s or Sub-Adviser’s duties or by reason of the reckless disregard
of the Adviser’s or Sub-Adviser’s duties and obligations under this Agreement or any Sub-Advisory Agreement (to the
extent applicable, as the same shall be determined in accordance with the 1940 Act and any interpretations or guidance by the
SEC or its staff thereunder).
In
addition, notwithstanding any of the foregoing to the contrary, the provisions of Section 8 and this Section 9 shall not be construed
so as to provide for the indemnification of any Indemnified Party for any liability (including liability under federal securities
laws which, under certain circumstances, impose liability even on persons that act in good faith), to the extent (but only to
the extent) that such indemnification would be in violation of applicable law, but shall be construed so as to effectuate the
provisions of Section 8 and this Section 9 to the fullest extent permitted by law.
10.
Effectiveness, Duration and Termination of Agreement
.
(a)
Term and Effectiveness
. This Agreement shall become effective as of the first date written above. Once effective, this
Agreement shall remain in effect for two years, and thereafter shall continue automatically for successive one-year periods; provided
that such continuance is specifically approved at least annually by: (i) the vote of the Board of Directors, or by the vote
of a majority of the outstanding voting securities of the Company and (ii) the vote of a majority of the Independent Directors,
in accordance with the requirements of the 1940 Act.
(b)
Termination
. This Agreement may be terminated at any time, without the payment of any penalty: (i) by the Company
upon 60 days’ prior written notice to the Adviser upon: (A) the vote of a majority of the outstanding voting securities
of the Company (as “majority” is defined in Section 2(a)(42) of the 1940 Act) or (B) the vote of the Board
of Directors or (ii) by the Adviser upon not less than 120 days’ prior written notice to the Company. This Agreement
shall automatically terminate in the event of its “assignment” (as such term is defined for purposes of construing
Section 15(a)(4) of the 1940 Act). The provisions of Sections 8 and 9 shall remain in full force and effect, and the Adviser shall
remain entitled to the benefits thereof, notwithstanding any termination of this Agreement. Further, notwithstanding the termination
or expiration of this Agreement as aforesaid, the Adviser shall be entitled to any amounts owed to it under Section 3 through
the date of termination or expiration and Sections 8 and 9 shall continue in force and effect and apply to the Adviser and
its representatives as and to the extent applicable.
(c)
Duties of Adviser Upon Termination
. The Adviser shall promptly upon termination:
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(i)
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deliver
to the Board of Directors a full accounting, including a statement showing all payments
collected by it and a statement of all money held by it, covering the period following
the date of the last accounting furnished to the Board of Directors;
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(ii)
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deliver
to the Board of Directors all assets and documents of the Company then in custody of
the Adviser; and
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(iii)
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cooperate
with the Company to provide an orderly transition of services.
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11.
Proxy Voting.
The
Adviser will exercise voting rights on any assets held in the portfolio securities of portfolio companies. The Adviser is obligated
to furnish to the Company, in a timely manner, a record of all proxies voted in such form and format that complies with applicable
federal statutes and regulations.
12.
Notices
.
Any
notice under this Agreement shall be given in writing, addressed and delivered or mailed, postage prepaid, to the other party
at the address listed below or at such other address for a party as shall be specified in a notice given in accordance with this
Section 12.
13.
Amendments
.
This
Agreement may be amended by mutual written consent of the parties; provided that the consent of the Company is required to be
obtained in conformity with the requirements of the 1940 Act.
14.
Severability
.
If
any provision of this Agreement shall be declared illegal, invalid or unenforceable in any jurisdiction, then such provision shall
be deemed to be severable from this Agreement (to the extent permitted by law) and in any event such illegality, invalidity or
unenforceability shall not affect the remainder hereof.
15.
Counterparts
.
This
Agreement may be executed in counterparts, each of which shall be deemed to be an original copy and all of which together shall
constitute one and the same instrument binding on all parties hereto, notwithstanding that all parties shall not have signed the
same counterpart.
16.
Governing Law
.
Notwithstanding
the place where this Agreement may be executed by any of the parties hereto and the provisions of Sections 8 and 9, this Agreement
shall be construed in accordance with the laws of the State of New York, without giving effect to any conflicts of laws principles
thereof. For so long as the Company is regulated as a BDC under the 1940 Act, this Agreement shall also be construed in accordance
with the applicable provisions of the 1940 Act and the Advisers Act. In such case, to the extent the applicable laws of the State
of New York or any of the provisions herein conflict with the provisions of the 1940 Act or the Advisers Act, the 1940 Act and
the Advisers Act shall control.
17.
Third Party Beneficiaries
.
Except
for any Sub-Adviser (with respect to Sections 6 and 8) and any Indemnified Party, such Sub-Adviser and the Indemnified Parties
each being an intended beneficiary of this Agreement, this Agreement is for the sole benefit of the parties hereto and their permitted
assigns and nothing herein express or implied shall give or be construed to give to any person, other than the parties hereto
and such assigns, any legal or equitable rights hereunder.
18.
Entire Agreement
.
This
Agreement contains the entire agreement of the parties and supersedes all prior agreements, understandings and arrangements with
respect to the subject matter hereof.
19.
Survival
.
The
provisions of Sections 2(c), 8, 9, 10(b), 16, 17 and this Section 19 shall survive termination of this Agreement.
20.
Insurance
.
The
Company shall acquire and maintain a directors and officers liability insurance policy or similar insurance policy, which may
name the Adviser and any Sub-Adviser each as an additional insured party (each an “
Additional Insured Party
”
and collectively the “
Additional Insured Parties
”). Such insurance policy shall include reasonable coverage
from a reputable insurer. The Company shall make all premium payments required to maintain such policy in full force and effect;
provided, however, each Additional Insured Party, if any, shall pay to the Company, in advance of the due date of such premium,
its allocated share of the premium. Irrespective of whether the Adviser and any Sub-Adviser is a named Additional Insured Party
on such policy, the Company shall provide the Adviser and any Sub-Adviser with written notice upon receipt of any notice of: (a)
any default under such policy; (b) any pending or threatened termination, cancellation or non-renewal of such policy or (c) any
coverage limitation or reduction with respect to such policy. The foregoing provisions of this Section 20 notwithstanding, the
Company shall not be required to acquire or maintain any insurance policy to the extent that the same is not available upon commercially
reasonable pricing terms or at all, as determined in good faith by the required majority (as defined in Section 57(o) of
the 1940 Act) of the Board of Directors.
21.
Brand Usage
.
The
Adviser conducts its investment advisory business under, and owns all rights to, the trademark “FS/KKR Advisor” and
the “FS/KKR Advisor” design (collectively, the “Brand”). In connection with the Company’s (a) public
filings; (b) requests for information from state and federal regulators; (c) offering materials and advertising materials; and
(d) investor communications, the Company may state in such materials that investment advisory services are being provided by the
Adviser to the Company under the terms of this Agreement. The Adviser hereby grants a non-exclusive, non-transferable, non-sublicensable
and royalty-free license (the “
License
”) to the Company for the use of the Brand solely as permitted in the
foregoing sentence. Prior to using the Brand in any manner, the Company shall submit all proposed uses to the Adviser for prior
written approval solely to the extent the Company’s use of the Brand or any combination or derivation thereof has materially
changed from the Company’s use of the Brand previously approved by the Adviser. The Adviser reserves the right to terminate
the License immediately upon written notice for any reason, including if the usage is not in compliance with its standards and
policies. Notwithstanding the foregoing, the term of the License granted under this Section 21 shall be for the term of this Agreement
only, including renewals and extensions, and the right to use the Brand as provided herein shall terminate immediately upon the
termination of this Agreement. The Company agrees that the Adviser is the sole owner of the Brand, and any and all goodwill in
the Brand arising from the Company’s use shall inure solely to the benefit of the Adviser. Without limiting the foregoing,
the License shall have no effect on the Company’s ownership rights of the works within which the Brand shall be used.
[Remainder
of page left intentionally blank]
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed on the date above written.
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CORPORATE CAPITAL TRUST, INC.
a Maryland corporation
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555 California Street
50th Floor
San Francisco, California 94104
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By:
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Name: Thomas N. Murphy
Title: Chief Financial Officer
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FS/KKR ADVISOR, LLC
a Delaware limited liability company
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[ ]
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By:
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Name: [ ]
Title: [ ]
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[
Signature Page to Investment Advisory Agreement
]
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