STOCKPURCHASE AGREEMENT by andamong GSCINVESTMENT CORP., SARATOGAINVESTMENT ADVISORS, LLC and CLOPARTNERS LLC dated asof April 14,2010 TABLEOF CONTENTS

 

 

 

Section 1.01. Certain Defined Terms	2
Section 1.02. Index of Other Defined Terms	9
Section 1.03. Other Definitional and Interpretative Provisions	10
ARTICLE 2
AGREEMENT TO PURCHASE AND SELL STOCK AND TAKE OTHER ACTIONS
Section 2.01. Agreement to Purchase and Sell	11
Section 2.02. Replacement Financing and Other Actions	11
Section 2.03. Repayment of Indebtedness	12
ARTICLE 3
RESTRICTIONS ON TRANSFER
Section 3.01. General Restrictions on Transfer	12
Section 3.02. Permitted Transferees	12
Section 3.03. Restrictions on Transfers by the Investors	12
Section 3.04. Notice of Transfers	13
ARTICLE 4
CLOSING; DELIVERY
Section 4.01. The Closing	13
Section 4.02. Delivery and Other Actions	13
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 5.01. Corporate Existence and Power	13
Section 5.02. Corporate Authorization	14
Section 5.03. Governmental Authorization	14
Section 5.04. Non-contravention	15
Section 5.05. Capitalization	15
Section 5.06. Subsidiaries	16
Section 5.07. SEC Filings and the Sarbanes-Oxley Act	16
Section 5.08. Financial Statements	18
Section 5.09. Disclosure Documents	18
Section 5.10. Absence of Certain Changes	18

 

Section 5.11. No Undisclosed Material Liabilities	19
Section 5.12. Compliance With Laws and Court Orders	19
Section 5.13. Litigation	20
Section 5.14. Material Contracts	20
Section 5.15. Intellectual Property	21
Section 5.16. Taxes	21
Section 5.17. Related Party Transactions	24
Section 5.18. Registered Investment Company Status	24
Section 5.19. Anti-money Laundering	25
Section 5.20. Finders’ Fees	25
Section 5.21. Opinion of Financial Advisor	25
Section 5.22. Rights Agreement; Takeover Statutes	25
Section 5.23. Environmental Matters	25
Section 5.24. Insurance	26
Section 5.25. Investment Securities	26
Section 5.26. CDO and CLO Activities	26
Section 5.27. No Additional Representations	29
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Section 6.01. Corporate Existence; Power and Authority; Enforceability	30
Section 6.02. Governmental Authorization	30
Section 6.03. Non-contravention	30
Section 6.04. Compliance with Laws and Court Orders	31
Section 6.05. Financing	31
Section 6.06. Litigation	31
Section 6.07. Purchase for Own Account	32
Section 6.08. Accredited Investor	32
Section 6.09. Exempt from Registration; Restricted Securities	32
Section 6.10. Restrictive Legends	32
Section 6.11. Removal of Restrictive Legend	33
Section 6.12. Money Laundering Laws	33
Section 6.13. Disclosure Documents	33
Section 6.14. Investment Adviser and Administrator	33
Section 6.15. Finders’ Fees	34
Section 6.16. No Additional Representations	34
ARTICLE 7
COVENANTS OF THE COMPANY
Section 7.01. Conduct of the Company	34
Section 7.02. Company Stockholder Meeting	36
Section 7.03. No Solicitation; Other Offers	36
Section 7.04. Tax Matters	38

 

Section 7.05. Stock Split and Ticker Symbol Change	39
ARTICLE 8
COVENANTS OF THE INVESTORS
Section 8.01. Voting of Shares	39
Section 8.02. Amendment of Saratoga Commitment Letter	39
Section 8.03. Transfer of Shares to Permitted Transferees	39
ARTICLE 9
COVENANTS OF THE INVESTORS AND THE COMPANY
Section 9.01. Reasonable Best Efforts	40
Section 9.02. Proxy Statement	40
Section 9.03. Public Announcements	41
Section 9.04. Access to Information	42
Section 9.05. Notices of Certain Events	42
Section 9.06. Director and Officer Liability	43
Section 9.07. Confidentiality	43
Section 9.08. Takeover Statutes	44
ARTICLE 10
CONDITIONS TO THE OBLIGATIONS OF THE PARTIES
Section 10.01. Conditions to the Obligations of Each Party	44
Section 10.02. Conditions to the Obligations of the Investors	45
Section 10.03. Conditions to the Obligations of the Company	46
ARTICLE 11
TERMINATION
Section 11.01. Termination	47
Section 11.02. Effect of Termination	48
Section 11.03. Termination Fees and Expense Reimbursement	49
ARTICLE 12
MISCELLANEOUS
Section 12.01. Notices	51
Section 12.02. Survival of Representations and Warranties	52
Section 12.03. Amendments and Waivers	52
Section 12.04. Expenses	52
Section 12.05. Disclosure Schedule and SEC Document References	52
Section 12.06. Binding Effect; Benefit; Assignment	53
Section 12.07. Governing Law	53
Section 12.08. Submission to Jurisdiction; Selection of Forum	53

Exhibit A	Termination and Release Agreement
Exhibit B Exhibit C Exhibit D	Replacement Advisory Agreement Replacement Administration Agreement Assignment, Assumption and Novation Agreement; Commitment Letter; and Replacement Facility
Exhibit E Exhibit F	Voting and Support Agreement Registration Rights Agreement
Exhibit G Exhibit H Exhibit I	Joinder Agreement Saratoga Commitment Letter License Agreement

Schedule I    Schedule of Certain Permitted Transferees

 

This Stock Purchase Agreement (the “Agreement”) is entered into as of April 14, 2010 by and among GSC INVESTMENT CORP., a Maryland corporation (the “Company”), SARATOGA INVESTMENT ADVISORS, LLC, a Delaware limited liability company (“Saratoga”), and CLO Partners LLC, a Delaware limited liability company (“CLO Partners” and, together with Saratoga, each an “Investor” and collectively, the “Investors”).

WHEREAS, the Board of Directors of the Company (the “Board”) has approved this Agreement and recommended that the stockholders of the Company approve (i) the issuance and sale by the Company to the Investors, in a private transaction that is exempt from registration under Section 4(2) of the 1933 Act (as defined herein) and Regulation D thereunder, of up to $15,000,000 in aggregate purchase price of the Company’s common stock on the terms and subject to the conditions set forth in this Agreement and (ii) the other transactions contemplated hereby;

WHEREAS, as a condition to the consummation of the Investment (as defined herein) and subject to the terms and conditions herein, GSCP (NJ), L.P., a Delaware limited partnership (the “Company Adviser”), desires to withdraw, effective as of the Closing (as defined herein), as the Company’s investment adviser and administrator pursuant to the Termination and Release Agreement in the form attached hereto as Exhibit A and the Company desires to retain Saratoga to be the Company’s new investment adviser and administrator;

WHEREAS, the Board has approved the termination of the Company Management Agreements (as defined herein) and approved the investment advisory and management agreement between the Company and Saratoga in the form attached hereto as Exhibit B (the “Replacement Advisory Agreement”) and the administration agreement between the Company and Saratoga Administrator LLC in the form attached hereto as Exhibit C (the “ Replacement Administration Agreement” and, collectively with the Replacement Advisory Agreement, the “Replacement Management Agreements”) and the Board has recommended that the stockholders of the Company approve the Replacement Advisory Agreement;

WHEREAS, the Company desires to sell to the Investors, and the Investors desire to purchase from the Company, all of the Shares (as defined herein), and the parties desire to make certain representations, warranties, covenants and agreements in connection with this Agreement and the transactions contemplated hereby, and to prescribe certain conditions with respect to the consummation of the Investment and the other transactions contemplated by this Agreement;

WHEREAS, (i) contemporaneously herewith, the Company is entering into an assignment, assumption and novation agreement, in the form attached hereto as Exhibit D-1 (the “Assignment Agreement”), with the Replacement Lender (as defined herein) and an Affiliate (as defined herein) of Saratoga, pursuant to which the Affiliate of Saratoga is assigning the commitment letter agreement and fee letter agreement, each of which is dated as of April 14, 2010 and issued and executed by the Replacement Lender and attached hereto as part of Exhibit D-2 (collectively, the “Commitment Letter”), to the Company and the Company is assuming all

of the rights and obligations of the Affiliate of Saratoga under the Commitment Letter, except as expressly provided in the Assignment Agreement, (ii) as of the Closing, the Company or a Subsidiary of the Company shall, subject to the satisfaction of the conditions to the Closing set forth herein and the closing set forth therein, enter into the Replacement Facility (as defined herein) with the Replacement Lender substantially in the form attached hereto as Exhibit D-3, and (iii) as of, and as a condition to, the Closing hereunder the proceeds of the Investment and a portion of the funds available under the Replacement Facility will be used by the Company to repay all amounts outstanding under the Company Securitization Documents (as defined herein); and

WHEREAS, contemporaneously herewith, an Affiliate of Saratoga is entering into a voting and support agreement with GSCP (NJ), L.P., its Affiliates and their senior employees and each of the members of the Board, substantially in the form attached hereto as Exhibit E and pursuant to which GSCP (NJ), L.P., its Affiliates and their senior employees and each of the members of the Board, are agreeing to vote any shares of Common Stock (as defined herein) held by them in favor of the Company Stockholder Proposals (as defined herein) at the Company Stockholder Meeting (as defined herein).

NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants, conditions and agreements contained herein, the parties hereto agree as follows:

Section 1.01. Certain Defined Terms. As used in this Agreement, the following terms shall have the following respective meanings:

“Acquisition Proposal” means, other than the transactions contemplated by this Agreement, any Third Party offer, proposal or inquiry relating to, or any Third Party indication of interest in, (i) any acquisition or purchase, direct or indirect, of 10% or more of the consolidated assets of the Company or 10% or more of any class of equity or voting securities of the Company, (ii) any tender offer or exchange offer that, if consummated, would result in such Third Party beneficially owning 10% or more of any class of equity or voting securities of the Company, (iii) a merger, consolidation, share exchange, business combination, sale of all or substantially all of the assets, reorganization, recapitalization, liquidation, dissolution or other similar transaction involving the Company or (iv) any other transaction (including without limitation a refinancing of the amounts outstanding under the Company Securitization Documents) the consummation of which could reasonably be expected to impede, interfere with, prevent or materially delay the Investment or that could reasonably be expected to dilute materially the benefits to the Investors of the transactions contemplated hereby.

“Advisers Act” means the Investment Advisers Act of 1940.

 

“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person.

“Applicable Law” means, with respect to any Person, any federal, state or local law (statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling or other similar requirement enacted, adopted, promulgated or applied by a Governmental Authority that is binding upon or applicable to such Person, as amended unless expressly specified otherwise.

“Business Day” means a day, other than Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by Applicable Law to close.

“CLO Agreements” means, collectively, each contract relating to the operation of the Funds to which the Company, its Subsidiary, any Affiliate of the Company or any Fund is a party, including without limitation any Collateral Management Agreement, indenture, subordinated note paying agency agreement, preferred share paying agency agreement, warehouse agreement, indemnity agreement, collateral administration agreement or collateral acquisition agreement in effect on the date of this Agreement.

“Code” means the Internal Revenue Code of 1986.

“Collateral Management Agreements” means, collectively, the collateral management, investment advisory, limited partnership, limited liability or similar agreement pursuant to which the Company or any Subsidiary acts as collateral manager (or the equivalent thereof) to any Fund.

“Common Stock” shall mean the Company’s common stock, par value $0.0001 per share.

“Company Balance Sheet” means the consolidated balance sheet of the Company as of November 30, 2009 and the notes thereto set forth in the Company 10-Q.

“Company Balance Sheet Date” means November 30, 2009.

“Company Disclosure Schedule” means the disclosure schedule dated as of the date hereof regarding this Agreement that has been provided by the Company to the Investors and delivered contemporaneously herewith.

“Company Management Agreements” means the Investment Advisory and Management Agreement dated as of March 21, 2007 between GSCP (NJ), L.P. and the Company and the Administration Agreement dated as of March 21, 2007 between GSCP (NJ), L.P. and the Company.

“Company Securitization Documents” means the Credit Agreement dated as of April 11, 2007 among the Company, GSC Sub, GSCP (NJ), L.P., the financial institutions from time to time party thereto, the commercial paper lenders from time to time party thereto and Lender,

together with the following agreements and arrangements entered into in connection therewith: (i) Amendment No. 1 to Credit Agreement, dated as of May 1, 2007, entered into by and among the Company, GSC Sub and Lender, (ii) Amendment No. 2 to Credit Agreement, dated as of October 3, 2007, entered into by and among the Company, GSC Sub and Lender, (iii) Amendment No. 3 to Credit Agreement, dated as of August 8, 2008, entered into by and among the Company, GSC Sub and Lender, (iv) Amendment No. 4 to Credit Agreement, dated as of September 8, 2008, entered into by and among the Company, GSC Sub and Lender and (v) Amendment No. 5 to Credit Agreement, dated as of March 23, 2009, entered into by and among the Company, GSC Sub, GSCP (NJ), L.P., Lender and U.S. Bank National Association, as Trustee and Backup Servicer.

“Company 10-K” means the Company’s annual report on Form 10-K, as amended by Form 10-K/A filed with the SEC on July 9, 2009, for the fiscal year ended February 28, 2009.

“Company 10-Q” means the Company’s quarterly report on Form 10-Q filed on January 14, 2010, for the fiscal quarter ended November 30, 2009.

“Confidentiality Agreement” means the confidentiality agreement dated December 11, 2009 between the Company and an Affiliate of Saratoga.

“Contract” means all contracts, agreements, arrangements, understandings, guarantees, mortgages, indentures, leases or licenses.

“Funds” means, collectively, GSC CLO and any other investment vehicle for which the Company or an Subsidiary acts as collateral manager, collateral administrator, asset manager, investment adviser or in any similar capacity.

“GAAP” means generally accepted accounting principles in the United States.

“Governmental Authority” means any transnational, domestic or foreign federal, state or local governmental, regulatory (including stock exchanges), self-regulatory or administrative authority, department, court, commission, arbitral authority, agency, official, or any other governmental body, including any political subdivision thereof.

“Governmental Authorization” means any approval, consent, license, permit, waiver, or other authorization issued, granted, given, or otherwise made available by or under the authority of any Governmental Authority or pursuant to any Applicable Law.

“GSC CLO” means GSC Investment Corp. CLO 2007, Ltd., a Cayman Islands exempted company.

“GSCIC Collateral Management Agreement” means that certain Collateral Management Agreement dated as of January 22, 2008 by and between GSC CLO and the Company.

 

“Intellectual Property” means (i) trademarks, trade names, service marks, brand names, certification marks, trade dress, domain names and other indications of origin, the goodwill associated with the foregoing and registrations in any jurisdiction of, and applications in any jurisdiction to register, the foregoing, including any extension, modification or renewal of any such registration or application, (ii) inventions and discoveries, whether patentable or not, in any jurisdiction, patents, applications for patents (including divisions, continuations, continuations in part and renewal applications), and any renewals, extensions or reissues thereof, in any jurisdiction, (iii) Trade Secrets, (iv) writings and other works, whether copyrightable or not, in any jurisdiction, and any and all copyright rights, whether registered or not, and registrations or applications for registration of copyrights in any jurisdiction, and any renewals or extensions thereof, (v) moral rights, database rights, design rights, industrial property rights, publicity rights and privacy rights, (vi) licenses and approvals, and (vii) any similar intellectual property or proprietary rights.

“Investment Company Act” means the Investment Company Act of 1940.

“IT Assets” means computers, computer software, firmware, middleware, servers, workstations, routers, hubs, switches, data communications lines and all other information technology equipment, and all associated documentation owned by any Person or licensed or leased by any Person or its Subsidiaries pursuant to written agreement (excluding any public networks).

“knowledge” of any Person that is not an individual means the knowledge of such Person’s officers and directors and the officers and directors of such Person’s investment adviser, in each case including the knowledge that would have been gained after reasonable inquiry.

“Lender” means Deutsche Bank AG, New York Branch.

“Lien” means, with respect to any property or asset, any mortgage, lien, pledge, charge, security interest, encumbrance, option, right of first refusal, right of first offer, license or other adverse claim of any kind in respect of such property or asset. For purposes of this Agreement, a Person shall be deemed to own subject to a Lien any property or asset that it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such property or asset.

“Maryland Law” means the Maryland General Corporation Law.

“Material Adverse Effect” means (a) with respect to any Person, a material adverse effect on the condition (financial or otherwise), business, assets, liabilities or results of operations of such Person and its Subsidiaries, taken as a whole, excluding any effect resulting from (i) changes in the financial or securities markets or general economic or political conditions in the United States not having a materially disproportionate effect on such Person and its Subsidiaries, taken as a whole, relative to other participants in the industry in which such Person and its Subsidiaries operate, (ii) changes (including changes of Applicable Law) or conditions generally affecting the industry in which such Person and its Subsidiaries operate and not

specifically relating to or having a materially disproportionate effect on such Person and its Subsidiaries, taken as a whole, (iii) any current, ongoing or future events of default under the Company Securitization Documents resulting from any downgrades, defaults, further deterioration of the Company’s investment portfolio or other events (it being understood, however, that this clause (iii) shall not prevent a party from asserting that the events underlying such events of default (including any payment default on collateral pledged under the Company Securitization Documents, downgrade, further deterioration of the Company’s investment portfolio or other event) independently constitutes or contributes to a Material Adverse Effect) and, subject in all cases to clause (b) below, the actions taken by the Lender with respect to such events of default, (iv) acts of war, sabotage or terrorism or natural disasters involving the United States of America not having a materially disproportionate effect on such Person and its Subsidiaries, taken as a whole, relative to other participants in the industry in which such Person and its Subsidiaries operate, (v) the announcement or consummation of the transactions contemplated by this Agreement or the taking of any actions required to be taken under this Agreement relating to the consummation thereof, or (vi) any failure by such Person and its Subsidiaries to meet any internal or published budgets, projections, forecasts or predictions of financial performance for any period (it being understood that this clause (vi) shall not prevent a party from asserting that any fact, change, event, occurrence or effect that may have contributed to such failure independently constitutes or contributes to a Material Adverse Effect), and (b) with respect to the Company, in addition to the matters set forth in the foregoing clause (a), (i) the Lender foreclosing upon, taking possession of, selling, taking over servicing rights or otherwise exercising any material remedy of a similar nature and effect under the Company Securitization Documents with respect to the collateral securing the Company’s and its Subsidiary’s obligations under the Company Securitization Documents, or (ii) the occurrence of any event constituting “Cause” under the GSCIC Collateral Management Agreement or any notice delivered under Section 12(c) of the GSCIC Collateral Management Agreement with respect to the removal of the Company as Collateral Manager thereunder.

“Noteholders” means, collectively, any holder of a note or other debt instrument issued by a Fund.

“NYSE” means the New York Stock Exchange, Inc.

“Organizational Documents” means, with respect to a Person other than a natural person, (i) the charter, articles or certificate of incorporation and the bylaws of a corporation; (ii) the certificate of formation and operating agreement of a limited liability company, (iii) the partnership agreement and any statement of partnership of a general partnership; (iv) the limited partnership agreement and the certificate of limited partnership of a limited partnership; (v) any charter or similar document adopted or filed in connection with the creation, formation, or organization of any other Person; and (vi) any amendment to any of the foregoing.

“Preferred Shareholders” means, collectively, any holder of a preferred share or other equity interest issued by a Fund.

 

“Permitted Liens” means Liens (i) for Taxes or other governmental charges not yet due and payable; (ii) carriers, warehousemen, mechanics, laborers or other similar Liens created by statute and incurred in the ordinary course of business for sums not yet due; and (iii) Liens involving restrictions on transfer arising under federal or state securities laws.

“Permitted Transferee” means

“Person” means an individual, corporation, partnership, limited liability company, association, trust, sole proprietorship, unincorporated organization, other entity, organization, group (as defined in Section 13(d) of the 1934 Act), or any other business entity or any Governmental Authority, including a government or political subdivision or an agency or instrumentality thereof.

“Proceeding” means any action, arbitration, audit, hearing, investigation, litigation, or suit (whether civil, criminal, administrative, investigative, or informal) commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental Authority or arbitrator.

“Sarbanes-Oxley Act” means the Sarbanes-Oxley Act of 2002.

“SEC” means the Securities and Exchange Commission.

“Subsidiary” means, with respect to any Person, any corporation, partnership, limited liability company, joint venture or other entity in which such Person (a) owns, directly or indirectly, more than fifty percent (50%) of the outstanding voting power, equity securities, profits interest or capital interest, (b) is entitled to elect at least a majority of the board of directors, the board of trustees, the board of managers or other persons performing similar

functions or (c) in the case of a limited partnership, limited liability company or joint venture, is a general partner, managing member or joint venturer, respectively.

“Superior Proposal ” means a bona fide, unsolicited written Acquisition Proposal that (a) relates to (i) any acquisition or purchase, direct or indirect, of 35% or more of the consolidated assets of the Company or 35% or more of any class of equity or voting securities of the Company, (ii) any tender offer or exchange offer that, if consummated, would result in such Third Party beneficially owning 35% or more of any class of equity or voting securities of the Company, or (iii) a merger, consolidation, share exchange, business combination, sale of all or substantially all of the assets, reorganization, recapitalization, liquidation, dissolution or other similar transaction involving the Company, (b) is legally binding on the Third Party but not on the Company; (c) is fully financed, includes an obligation to pay in full all amounts outstanding under the Company Securitization Documents and contains no financing contingency or obligation to obtain consent from a lender or equity source (other than any consents of the Lender required in connection with the Company Securitization Documents); (d) contains no condition to closing materially more burdensome on the Company, or, in the reasonable and good faith judgment of the Board, by a majority vote (after consultation with a financial advisor of nationally recognized reputation and outside legal counsel), making it less likely that the conditions to the closing of such transaction would be satisfied than, the conditions to Closing set forth herein (with, for the avoidance of doubt, a condition for a vote of the Third Party’s equityholders on any matter being materially more burdensome and making it materially less likely that all conditions to such Acquisition Proposal will be satisfied); (e) which is otherwise on terms which the Board determines in its reasonable good faith judgment (after consultation with its financial advisor of nationally recognized reputation and outside legal counsel), taking into account, among other things, all legal, financial, regulatory and other aspects of the Acquisition Proposal and the Third Party making the Acquisition Proposal, as well as any termination fees, expense reimbursement provisions, limitations on tax benefits, conditions to consummation and related matters, that the Acquisition Proposal, (A) if consummated would result in a transaction that is more favorable, from a financial point of view, to the Company and its stockholders than the transactions contemplated hereby and (B) is reasonably certain of being completed.

“Third Party” means any Person, including as defined in Section 13(d) of the 1934 Act, other than any Investor, the Company or any of their respective Affiliates (including, for the avoidance of doubt, GSC Group and any Affiliates thereof).

“Trade Secrets” means trade secrets and confidential information and rights in any jurisdiction to limit the use or disclosure thereof by any Person.

“Transfer” means, with respect to any Shares, (i) when used as a verb, to sell, assign, dispose of, exchange, pledge, encumber, hypothecate or otherwise transfer such Shares or any economic participation or interest therein, whether directly or indirectly, or agree or commit to do any of the foregoing and (ii) when used as a noun, a direct or indirect sale, assignment, disposition, exchange, pledge, encumbrance, hypothecation or other transfer of such Shares or any participation or interest therein or any agreement or commitment to do any of the foregoing.

“1933 Act” means the Securities Act of 1933.

“1934 Act” means the Securities Exchange Act of 1934.

Section 1.02. Index of Other Defined Terms. In addition to the terms defined above, the following terms shall have the respective meanings given thereto in the sections indicated below:

 

Section 1.03. Other Definitional and Interpretative Provisions. The words “hereof”, “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. References to Articles, Sections, Exhibits and Schedules are to Articles, Sections, Exhibits and Schedules of this Agreement unless otherwise specified. All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized terms used in any Exhibit or Schedule but not otherwise defined therein, shall have the meaning as defined in this Agreement. Any singular term in this Agreement shall be deemed to include the plural, and any plural term the

singular. The neuter pronoun, as used herein, includes the masculine, feminine and neuter gender. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”, whether or not they are in fact followed by those words or words of like import. “Writing”, “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. References to any statute shall be deemed to refer to such statute as amended from time to time and to any rules or regulations promulgated thereunder. References to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof; provided that with respect to any agreement or contract included in this Agreement or listed on any schedules hereto, all such amendments, modifications or supplements must also be included in this Agreement and listed in the appropriate schedule, respectively. References to any Person include the successors and permitted assigns of that Person. References from or through any date mean, unless otherwise specified, from and including or through and including, respectively. References to “law”, “laws” or to a particular statute or law shall be deemed also to include any Applicable Law.

Section 2.01. Agreement to Purchase and Sell. Subject to the terms and conditions hereof, at the Closing, the Company will sell to the Investors, and the Investors shall purchase from the Company, 9,868,422 shares of Common Stock (the “Shares”) at a price of $1.52 per share for an aggregate purchase price of $15,000,001.44 (the “Investment”). The purchase price for the Shares shall be paid by wire transfer of funds to a designated account of the Company, provided that wire transfer instructions are delivered to Saratoga at least one Business Day prior to the Closing. Simultaneously with the Closing, the Investors shall Transfer, or cause to be Transferred, to each of the Permitted Transferees set forth on Schedule I hereto the number of Shares set forth therein.

Section 2.02. Replacement Financing and Other Actions. Concurrently with the Closing, the Company, either directly or through a Subsidiary of the Company, shall (i) enter into a $40 million senior secured revolving credit facility (the “Replacement Facility”) with Madison Capital Funding LLC (the “Replacement Lender”) substantially in the form attached hereto as Exhibit D -3; (ii) change its name from “GSC Investment Corp.” to “Saratoga Investment Corp.”; (iii) enter into the Replacement Management Agreements; (iv) enter into a trademark license agreement (the “License Agreement”) with Saratoga or one of its Affiliates substantially in the form attached hereto as Exhibit I; (v) have procured the resignations, to be effective as of the date of Closing, of Robert F. Cummings, Jr. and Richard M. Hayden as members of the Board; (vi) have elected, effective as of the date of Closing, Christian L. Oberbeck and Richard A. Petrocelli as members of the Board (the “Saratoga Directors”); and (vii) enter into a registration rights agreement with the Investors (the “Registration Rights Agreement”) substantially in the form attached hereto as Exhibit F.

 

Section 2.03. Repayment of Indebtedness. At the Closing, and as a condition to the occurrence thereof, and contemporaneously with the Investment and the Company’s or a Subsidiary of the Company’s entry into the Replacement Facility with the Replacement Lender, the Company shall use the monies received by it in connection with the Investment and the required portion of the funds available to it under the Replacement Facility to (i) pay the full amount of principal and accrued interest, including default interest (as such term is defined in the Company Securitization Documents) outstanding under the Company Securitization Documents as of the Closing date, and (ii) pay any and all of the fees, costs, expenses, penalties and other amounts due and payable as of the date of Closing under the Company Securitization Documents (collectively, the “Loan Repayment”). The Loan Repayment shall occur in the manner reasonably required by Lender and other parties to whom any portion of the Loan Repayment is owed, and the Company agrees to cooperate with, and take all such actions reasonably requested by, Lender and such other parties in connection therewith.

Section 3.01. General Restrictions on Transfer. (a) Each Investor agrees that it shall not Transfer any Shares (or solicit any offers in respect of any Transfer of any Shares), except in compliance with the 1933 Act, any other applicable securities or “blue sky” laws, and the terms and conditions of this Agreement.

(b) Any attempt to Transfer any Shares not in compliance with this Agreement shall be null and void, and the Company shall not, and shall cause any transfer agent not to, give any effect in the Company’s stock records to such attempted Transfer.

Section 3.02. Permitted Transferees. Notwithstanding anything in this Agreement to the contrary, each Investor may at any time Transfer any or all of its Shares to one or more of its Permitted Transferees without the consent of the Company so long as (a) such Permitted Transferee shall have agreed in writing to be bound by the terms of this Agreement by executing a Joinder Agreement substantially in the form of Exhibit G attached hereto, and (b) the Transfer to such Permitted Transferee is in compliance with the 1933 Act and any other applicable securities or “blue sky” laws.

Section 3.03. Restrictions on Transfers by the Investors. From and after the Closing,

(a) each Investor hereby agrees that it shall not Transfer 33.33% of the Shares it acquires as part of the Investment until the first anniversary of the Closing (the “Transfer Restrictions”); provided that each Investor shall be permitted to Transfer such Shares to one or more of its Permitted Transferees in accordance with Section 3.02; and

(b) each Investor hereby acknowledges that the remaining 66.67% of the Shares it acquires as part of the Investment shall not be subject to the Transfer Restrictions and are generally transferable;

provided, however, that, in each case, each Investor acknowledges that the Shares are restricted securities within the meaning of Rule 144 under the 1933 Act and may not be Transferred except in compliance with the 1933 Act and any other applicable securities or “blue sky” laws.

Section 3.04. Notice of Transfers. Each Investor shall give the Company prompt written notice of any transactions relating to the Shares in reliance on Section 3.02 or 3.03.

Section 4.01. The Closing. Subject to the provisions of Article 10, the consummation of the purchase by the Investors of the Shares, and, simultaneous with the Closing, the Transfer of the Shares to each of the Permitted Transferees set forth on Schedule I hereto in the amounts set forth therein, as contemplated herein (the “Closing”) shall take place in New York City at the offices of Davis Polk & Wardwell LLP, 450 Lexington Avenue, New York, New York 10017 as soon as reasonably practicable, but in any event no later than 2 Business Days after the date the conditions set forth in Article 10 (other than conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or, to the extent permissible, waiver of those conditions at Closing) have been satisfied or, to the extent permissible, waiver of those conditions by the party or parties entitled to the benefit of such conditions, or at such other place, at such other time or on such other date as the Investors and the Company may mutually agree in writing.

Section 4.02. Delivery and Other Actions. At the Closing, the Company will deliver to the Investors certificates representing the Shares to be purchased by the Investors hereunder and to be simultaneously Transferred to each of the Permitted Transferees set forth on Schedule I hereto in the amounts set forth therein, against payment of the full purchase price therefor by wire transfer and the parties shall cause the other actions discussed in Article 2 to occur.

Subject to Section 12.05, except as disclosed in any Company SEC Document filed after January 14, 2010 and before the date of this Agreement or as set forth in the Company Disclosure Schedule, the Company represents and warrants to the Investors as follows:

Section 5.01. Corporate Existence and Power. The Company is a corporation duly incorporated and validly existing under the laws of the State of Maryland and is in good standing with the Maryland State Department of Assessments and Taxation (the “SDAT”). The Company has the requisite corporate power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted, and is duly licensed or qualified to do business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or

qualification necessary, except where the failure to be so licensed or so qualified would not, individually or in the aggregate, be material to the Company. The Company has heretofore made available to the Investors true, complete and correct copies of the charter and bylaws of the Company as currently in effect.

Section 5.02. Corporate Authorization. (a) The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby are within the Company’s corporate powers and have been duly authorized by all necessary corporate action on the part of the Company and, except for the Company Stockholder Approvals, no other corporate proceedings on the part of the Company are necessary. The Company Stockholder Approvals (none of which require the affirmative vote of shares of Common Stock representing more than a majority of the issued and outstanding Common Stock) are the only votes or consents of the holders of any class or series of the Company’s stock necessary to approve the Investment and to consummate the other transactions contemplated hereby. This Agreement constitutes a valid and binding agreement of the Company enforceable against the Company in accordance with its terms (subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws affecting creditors’ rights generally and general principles of equity). The Shares, when issued in compliance with the provisions of this Agreement, will be validly issued and will be fully paid and nonassessable, free of any Liens, and will not be subject to any preemptive rights, whether arising under Maryland Law or the charter or bylaws of the Company, as amended or restated, or any Contract, other than this Agreement or any other Contracts to be executed in connection herewith, to which or by which the Company or any of its Subsidiaries is a party or otherwise subject or bound or to which or by which any property, business, operation or right of the Company or any of its Subsidiaries is subject or bound.

(b) At a meeting duly called and held, the Board has (i) unanimously determined that this Agreement, the Investment, Replacement Advisory Agreement and the other transactions contemplated hereby are in the best interests of the Company, (ii) unanimously approved this Agreement, the Investment, the Replacement Advisory Agreement and the other transactions contemplated hereby and (iii) subject to Section 7.03, unanimously recommended approval of the Company Stockholder Proposals (such recommendation, the “Company Board Recommendation”) and has adopted a resolution to the foregoing effect.

(c) As of the date hereof, and subject in all cases to Section 7.03 hereafter, the Company Board Recommendation has not been rescinded or modified in any respect.

Section 5.03. Governmental Authorization. The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby require no action by or in respect of, or filing with, any Governmental Authority other than (i) the filing with the SEC of a proxy statement relating to the meeting of the Company’s stockholders to be held in connection with the Investment and other transactions contemplated by this Agreement, (ii) compliance with any applicable requirements of the 1933 Act, the 1934 Act, the Investment Company Act and any other applicable state or federal

securities laws and (iii) any actions or filings the absence of which would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

Section 5.04. Non-contravention. The execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby do not and will not (i) contravene, conflict with, or result in any violation or breach of any provision of the charter or bylaws of the Company, as amended or restated, (ii) assuming compliance with the matters referred to in Section 5.03 and receipt of the Company Stockholder Approvals, contravene, conflict with or result in a material violation or material breach of any provision of any Applicable Law, (iii) other than any consents required under the Company Securitization Documents, require any consent or other action by any Person under, constitute a default, or an event that, with or without notice or lapse of time or both, would constitute a default, under, or cause or permit the termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit to which the Company is entitled under any provision of any Contract or other instrument binding upon the Company or any license, franchise, permit, certificate, approval or other similar authorization affecting, or relating in any way to, the assets or business of the Company or (iv) result in the creation or imposition of any Lien, other than a Permitted Lien, on any asset of the Company, with only such exceptions, in the case of each of clauses (iii) and (iv), as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

Section 5.05. Capitalization. (a) The authorized stock of the Company consists of 100,000,000 shares of Common Stock. As of April 14, 2010, there were 16,940,109 shares of Common Stock outstanding. All outstanding shares of stock of the Company have been duly authorized and validly issued, are fully paid and nonassessable and are free of preemptive rights, whether arising under Maryland Law or the charter or bylaws of the Company, as amended or restated, or any Contract to which or by which the Company or any of its Subsidiaries is a party or otherwise subject or bound or to which or by which any property, business, operation or right of the Company or any of its Subsidiaries is subject or bound.

(b) Except as set forth on Section 5.05(b) of the Company Disclosure Schedule, (i) there are no outstanding bonds, debentures, notes or other indebtedness for borrowed money of the Company, and (ii) there are no issued, reserved for issuance or outstanding (A) shares of stock or other voting securities of or ownership interests in the Company other than the Common Stock, (B) securities of the Company convertible into or exchangeable for shares of stock or other voting securities of or ownership interests in the Company, (C) warrants, calls, options or other rights to acquire from the Company, or other obligation of the Company to issue, any stock, voting securities or securities convertible into or exchangeable for stock or voting securities of the Company or (D) restricted shares, stock appreciation rights, performance units, contingent value rights, “phantom” stock or similar securities or rights that are derivative of, or provide economic benefits based, directly or indirectly, on the value or price of, any stock of or voting securities of the Company (the items in the foregoing clauses (i) and (ii), together with the Common Stock, being referred to collectively as the “Company Securities”). There are no outstanding obligations of the Company to repurchase, redeem or otherwise acquire any of the

Company Securities. The Company is not a party to any voting agreement with respect to the voting of any Company Securities.

(c) Except as set forth in Section 5.05(c) of the Company Disclosure Schedule, all of the issued and outstanding member interests in GSC Investment Funding, LLC (“GSC Sub”) are owned by the Company, free and clear of any Liens (excluding any Liens or other such restrictions relating to the Company Securitization Documents), and all of such member interests are duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights. GSC Sub is not bound by any subscriptions, options, warrants, calls, commitments or agreements of any character calling for the purchase or issuance of any member interests or any other equity security of GSC Sub or any securities representing the right to purchase or otherwise receive any member interests or any other equity security of GSC Sub.

(d) Section 5.05(d) of the Company Disclosure Schedule contains, as of the date hereof, a detailed calculation of the total amount of the Loan Repayment that would be due if the Loan Repayment were to be made on the date of this Agreement.

Section 5.06. Subsidiaries. The Company has no Subsidiaries other than GSC Sub. GSC Sub is duly formed and validly existing and in good standing under the laws of the State of Delaware, has the requisite limited liability company power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted, and is duly licensed or qualified to do business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed or so qualified would not, individually or in the aggregate, be material to the Company. The certificate of formation and operating agreement of GSC Sub, copies of which have previously been made available to the Investors, are true, complete and correct copies of such documents as currently in effect.

Section 5.07. SEC Filings and the Sarbanes-Oxley Act.

(a) The Company has filed with or furnished to the SEC, and made available to Saratoga, all final reports, schedules, forms, statements, prospectuses, registration statements and other documents required to be filed or furnished by the Company since October 18, 2006 (collectively, together with any exhibits and schedules thereto and other information incorporated therein, the “Company SEC Documents”).

(b) As of its filing date (and as of the date of any amendment), each Company SEC Document complied, and each Company SEC Document filed subsequent to the date hereof will comply, as to form in all material respects with the applicable requirements of the 1933 Act, the 1934 Act and the Investment Company Act, as the case may be.

(c) As of its filing date (or, if amended or superseded by a filing prior to the date hereof, on the date of such filing), each Company SEC Document filed pursuant to the 1934 Act did not, and each Company SEC Document filed subsequent to the date hereof will not, contain

any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.

(d) Each Company SEC Document that is a registration statement, as amended or supplemented, if applicable, filed pursuant to the 1933 Act, as of the date such registration statement or amendment became effective, did not, and each Company SEC Document that is a registration statement filed subsequent to the date hereof will not, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading.

(e) The Company has established and maintains disclosure controls and procedures (as defined in Rule 13a-15 under the 1934 Act). Such disclosure controls and procedures are designed to ensure that material information relating to the Company is made known to the Company’s principal executive officer and its principal financial officer by others within the Company, particularly during the periods in which the periodic reports required under the 1934 Act are being prepared. Such disclosure controls and procedures are effective in timely alerting the Company’s principal executive officer and principal financial officer to material information required to be included in the Company’s periodic and current reports required under the 1934 Act. For purposes of this Agreement, “principal executive officer” and “principal financial officer” shall have the meanings given to such terms in the Sarbanes-Oxley Act.

(f) The Company has established and maintains a system of internal control over financial reporting (as defined in Rule 13a-15 under the 1934 Act) sufficient to provide reasonable assurance regarding the reliability of the Company’s financial reporting and the preparation of the Company financial statements for external purposes in accordance with GAAP applied on a consistent basis. The Company has disclosed, based on its most recent evaluation of internal control over financial reporting prior to the date hereof, to the Company’s auditors and audit committee (i) any significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in internal control over financial reporting. The Company has made available to Investor a summary of any such disclosure made by management to the Company’s auditors and audit committee since October 18, 2006.

(g) There are no outstanding loans or other extensions of credit made by the Company or any of its Subsidiaries to any executive officer (as defined in Rule 3b-7 under the 1934 Act) or director of the Company. The Company has not, since the enactment of the Sarbanes-Oxley Act, taken any action prohibited by Section 402 of the Sarbanes-Oxley Act.

(h) No attorney representing the Company, whether or not employed by the Company, has reported to the Company’s chief legal counsel or chief executive officer evidence of a material violation of securities laws, breach of fiduciary duty or similar violation by the

Company or any of its officers, directors, employees or agents pursuant to Section 307 of the Sarbanes-Oxley Act.

(i) Since March 23, 2007, except as set forth in Section 5.07(i) of the Company Disclosure Schedule, the Company has complied in all material respects with the applicable listing and corporate governance rules and regulations of the NYSE (the “NYSE Rules”).

(j) Each of the principal executive officer and principal financial officer of the Company (or each former principal executive officer and principal financial officer of the Company, as applicable) have made all certifications required by Rule 13a-14 under the 1934 Act and Sections 302 and 906 of the Sarbanes-Oxley Act and any related rules and regulations promulgated by the SEC and the NYSE, and the statements contained in any such certifications are complete and correct as of the date of this Agreement as though made as of the date of this Agreement.

Section 5.08. Financial Statements. The audited consolidated financial statements and unaudited consolidated interim financial statements of the Company included or incorporated by reference in the Company SEC Documents (including the related notes, where applicable) have been prepared from, and are in accordance with, the books and records of Company, fairly present in all material respects, in conformity with GAAP applied on a consistent basis (except as may be indicated in the notes thereto), the consolidated financial position of the Company as of the dates thereof and the consolidated results of operations and cash flows for the periods then ended (subject to, in the case of any unaudited interim financial statements, year-end audit adjustments that are normal in nature and amount).

Section 5.09. Disclosure Documents. The information supplied by the Company for inclusion in the proxy statement, or any amendment or supplement thereto, to be sent to the Company stockholders in connection with the Investment and the other transactions contemplated by this Agreement (the “Proxy Statement”) shall not, on the date the Proxy Statement, and any amendments thereto, is first mailed to the stockholders of the Company or at the time of the Company Stockholder Approvals, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

Section 5.10. Absence of Certain Changes. (a) Since the Company Balance Sheet Date,

(i) except as it relates to the Company Securitization Documents and any ongoing or future events of default thereunder, the business of the Company has been conducted in the ordinary course of business in a manner that is consistent with past practice and (ii) there has not been any event, occurrence, development or state of circumstances or facts that has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(b) Since June 1, 2009, each confidentiality agreement that the Company has entered into relating to its exploration and evaluation of strategic opportunities and alternatives contains a standstill provision, and neither the Company nor any of its Affiliates or Representatives have granted any waiver or release under, or failed to enforce any material term of, any such

confidentiality, standstill or similar agreements or arrangements with respect to any class of equity securities or assets of the Company.

(c) From the Company Balance Sheet Date until the date hereof, there has not been any action taken by the Company that, if taken during the period from the date of this Agreement through the Closing without Saratoga’s consent, would constitute a breach of Section 7.01.

Section 5.11. No Undisclosed Material Liabilities. There are no material liabilities or obligations of the Company of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, other than: (i) liabilities or obligations disclosed and provided for in the Company Balance Sheet or in the notes thereto; or (ii) liabilities or obligations incurred in the ordinary course of business in a manner that is consistent with past practice since the Company Balance Sheet Date.

Section 5.12. Compliance With Laws and Court Orders. (a) The Company is in compliance with, and to the knowledge of the Company is not under investigation with respect to and has not been threatened to be charged with or given notice of any violation of, any Applicable Law, except for failures to comply or violations that have not resulted in, and would not reasonably be expected to result in, a material liability of the Company or materially impede the business of the Company. There is no judgment, decree, injunction, rule or order of any arbitrator or Governmental Authority outstanding against the Company that has resulted in, or would reasonably be expected to result in, a material liability of the Company or that would materially impede the business of the Company or that in any manner seeks to prevent, enjoin, alter or materially delay the Investment or any of the other transactions contemplated hereby. Neither the Company nor its Subsidiary has any knowledge as of the date hereof of any investigations, charges or proceedings that has resulted in, or would reasonably be expected to result in, a material liability of the Company or that would materially impede the business of the Company or that in any manner seeks to prevent, enjoin, alter or materially delay the Investment or any of the other transactions contemplated hereby.

(b) Section 5.12(b) of the Company Disclosure Schedule contains a complete and accurate list of each Governmental Authorization that is held by the Company or any Subsidiary or that otherwise relates to the business of, or to any of the assets owned or used by, any the Company or any Subsidiary. Each Governmental Authorization listed or required to be listed in Section 5.12(b) of the Company Disclosure Schedule is valid and in full force and effect. Except as set forth in Section 5.12(b) of the Company Disclosure Schedule: