SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant | |
Check the appropriate box:
|X| Preliminary Proxy Statement
___ Confidential, for Use of the Commission Only (as
permitted by Rule 14A-6(e)(2))
___ Definitive Proxy Statement
___ Definitive Additional Materials
___ Soliciting Material Pursuant to ss.240.14a-12
MACC PRIVATE EQUITIES INC.
(Name of Registrant as Specified In Its Charter)
---------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than
the Registrant)
Payment of Filing Fee (Check the appropriate box)
|X| No fee required
___ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
1) Title of each class of securities to which transaction
applies:________________________________.
2) Aggregate number of securities to which transaction applies:
_______________________________ .
3) 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):__________________________________________.
4) Proposed maximum aggregate value of transaction:______________ .
5) Total fee paid:___________________________________________.
___ Fee paid previously with preliminary materials
___ 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.
1) Amount Previously Paid: _______________________.
2) Form, Schedule or Registration Statement No.:_______________________
3) Filing Party: _______________________________________.
4) Date Filed:__________________________________________.
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February ___, 2008
To the Shareholders of MACC Private Equities Inc.:
The Annual Meeting of Shareholders of our Corporation will be held on
Tuesday, March 25, 2008, at 10:00 a.m. Pacific Standard Time at 24 Corporate
Plaza Drive, Newport Beach, CA 92660.
A Notice of the meeting, a Proxy and Proxy Statement containing
information about matters to be acted upon are enclosed. In addition, the MACC
Private Equities Inc. Annual Report for the fiscal year ended September 30,
2007, is enclosed and provides information regarding the financial results of
the Corporation for the year. Holders of Common Stock are entitled to vote at
the Annual Meeting on the basis of one vote for each share held. If you attend
the Annual Meeting in March, you retain the right to vote in person even though
you previously mailed the enclosed Proxy.
It is important that your shares be represented at the meeting whether
or not you are personally in attendance, and I urge you to review carefully the
Proxy Statement and sign, date and return the enclosed Proxy at your earliest
convenience. I look forward to meeting you and, together with our Directors and
Officers, reporting our activities and discussing the Corporation's business and
its prospects. I hope you will be present.
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Very truly yours,
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Geoffrey T. Woolley
Chairman of the Board |
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 25, 2008
To the Shareholders of MACC Private Equities Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of
MACC Private Equities Inc., a Delaware corporation (the "Corporation"), will be
held on Tuesday, March 25, 2008, 10:00 a.m. Pacific Standard Time at 24
Corporate Plaza Drive, Newport Beach, CA 92660, for the following purposes:
1. To elect five directors to serve until the 2009 Annual Shareholders
Meeting or until their respective successors shall be elected and qualified;
2. To approve an Investment Advisory Agreement between the Corporation
and Eudaimonia Asset Management, LLC;
3. To approve an Investment Subadvisory Agreement among the
Corporation, Eudaimonia and InvestAmerica Investment Advisors, Inc.;
4. To authorize the Corporation to issue rights to acquire any
authorized shares of Common Stock of the Corporation;
5. To ratify the appointment of KPMG LLP as independent auditors of the
Corporation for fiscal year 2008; and
6. To transact such other business as may properly come before the
meeting and any adjournment thereof.
Only holders of Common Stock of the Corporation of record at the close
of business on January 31, 2008, will be entitled to notice of, and to vote at,
the meeting and any adjournment thereof.
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By Order of the Board of Directors
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David R. Schroder, Secretary
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Your Officers and Directors desire that all shareholders be present or
represented at the Annual Meeting. Even if you plan to attend in person, please
date, sign and return the enclosed proxy in the enclosed postage-prepaid
envelope at your earliest convenience so that your shares may be voted. If you
do attend the meeting in March, you retain the right to vote even though you
mailed the enclosed proxy. The proxy must be signed by each registered holder
exactly as the stock is registered.
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PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 25, 2008
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of MACC Private Equities Inc., a Delaware corporation
(the "Corporation"), of proxies to be voted at the Annual Meeting of
Shareholders to be held on March 25, 2008, or any adjournment thereof (the "2008
Annual Meeting"). The date on which this Proxy Statement and the enclosed form
of proxy are first being sent or given to shareholders of the Corporation is on
or about [February 29], 2008.
PURPOSES OF THE MEETING
The 2008 Annual Meeting is to be held for the purposes of:
(1) electing five persons to serve as Directors of the Corporation to
serve until the 2009 Annual Shareholders Meeting or until their respective
successors shall be elected and qualified;
(2) approving an Investment Advisory Agreement (the "New Advisory
Agreement") between the Corporation and Eudaimonia Asset Management, LLC
("Eudaimonia");
(3) approving an Investment Subadvisory Agreement (the "Subadvisory
Agreement") among the Corporation, Eudaimonia and InvestAmerica Investment
Advisors, Inc. ("InvestAmerica");
(4) authorizing the Corporation to issue rights to acquire any
authorized shares of Common Stock of the Corporation ("Common Stock");
(5) ratifying the appointment by the Board of Directors of KPMG LLP as
independent auditors of the Corporation for the fiscal year ending September 30,
2008 ("Fiscal Year 2008"); and
(6) transacting such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors unanimously recommends that the shareholders
vote FOR the election as Directors of the persons named under ELECTION OF
DIRECTORS, FOR the approval of the new Investment Advisory Agreement, FOR the
approval of the Investment Subadvisory Agreement, FOR the authorization to issue
rights to acquire any authorized shares of Common Stock of the Corporation and
FOR the ratification of the appointment of KPMG LLP as independent auditors.
1
RECENT DEVELOPMENTS - BACKGROUND FOR PROPOSALS
Given the Corporation's relatively small size and limited shareholder base,
trading in the Corporation's stock has been historically limited. In addition,
the financial performance of the Corporation has been disappointing for the past
several years. The Board of Directors believes that companies with a relatively
low market capitalization, such as the Corporation (approximately $7.0 million
at December 31, 2007), do not attract sufficient investor or analyst interest to
provide market recognition of value. At the same time, the expenses associated
with operating as a public company are very high for a company of such
relatively small size.
The Corporation's wholly-owned subsidiary, MorAmerica Capital Corporation
("MorAmerica") currently comprises approximately 99% of the Corporation's
assets. MorAmerica has utilized the small business investment company ("SBIC")
borrowing program, which is administered by the United States Small Business
Administration ("SBA"), as its chief source of capital. Accordingly, MorAmerica
had been subject to regulations applicable to SBICs. Consistent with the SBA's
goal of fostering investment in small businesses, SBA regulations limit the
extent to which an SBIC's capital may be impaired, impose certain standards upon
an SBIC's investment advisor, and limit the type of portfolio company an SBIC
may invest in and the nature of such investments. One effect of this SBA
regulation and certain agreements with the SBA had been to limit the flexibility
of the Corporation to make new investments through MorAmerica, which had served
to limit the Corporation's opportunities for growth.
On February 7, 1995, the Securities and Exchange Commission ("SEC") issued
an order (the "Order") which modifies the application of certain provisions of
the Investment Company Act of 1940, as amended (the "1940 Act") to the
Corporation and MorAmerica. Additionally, the Order imposed certain restrictions
on the assets the Corporation could own as a condition to its grant of exemptive
relief under the Securities Exchange Act of 1934 (the "1934 Act") to MorAmerica.
In order to address the Corporation's market capitalization challenges, the
Board of Directors has explored various alternatives to improve the
Corporation's performance over the past several years, including reevaluating
the appropriateness of MorAmerica maintaining its SBIC license, raising enough
capital to enhance market recognition, going private, and liquidation through
dividend payments to stockholders over time. As a means to enhance the
Corporation's growth opportunities, the Board of Directors authorized and
directed MorAmerica to voluntarily surrender its SBIC license, which the SBA
approved in December, 2007. As a result, MorAmerica and the Corporation are no
longer subject to regulation by the SBA and will therefore have greater
flexibility in making new investments going forward.
In September, 2007, to replace the SBA borrowing programs MorAmerica
entered into a term loan, which has a current balance of $6,059,845, and a
revolving loan permitting MorAmerica to borrow up to $500,000, with Cedar Rapids
Bank & Trust Company. MorAmerica utilized amounts borrowed under the term loan,
in addition to cash on hand, to repay all of its outstanding SBA-guaranteed
debentures.
Because MorAmerica is no longer an SBIC, the Board of Directors has
determined that there is no longer any need to operate MorAmerica as a separate
company. Prior to the voluntary surrender of its SBIC license, MorAmerica
existed as a wholly owned subsidiary of the Corporation primarily in order to
comply with SBA regulations that prohibited MorAmerica from holding certain
assets that were held by the Corporation. Further, in addition to limits
respecting the Corporation's investments imposed by the 1940 Act, certain
conditions contained in the Order restricted the Corporation's ability to invest
in certain types of assets. Because the reasons for having two separate
companies are no longer present, and in an effort to operate going forward more
efficiently and without the restrictions imposed by the Order, the Board of
Directors, at its meeting on January 16, 2008, authorized the merger of
MorAmerica with and into the Corporation, with the merger anticipated to be
effective immediately following the 2008 Annual Meeting.
In order to capitalize on the increased opportunities for growth afforded
to the Corporation following the surrender of MorAmerica's SBIC license, and in
an effort to increase the Corporation's assets, the Board of Directors sought to
enlist the services of a new investment advisory team which could modify and
expand the universe of portfolio company investments made by the Corporation and
enhance market interest in the
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Corporation's stock. To that end, the Board has identified Eudaimonia to serve
as the Corporation's investment adviser.
Eudaimonia was founded in 2007 by Travis Prentice, Montie L. Weisenberger
and Joshua M. Moss. Roth Capital Partners, LLC ("RCP") contributed the operating
capital to fund the founders' business plan and holds a 49% interest in
Eudaimonia.
Gordon J. Roth, who has served on the Corporation's Board of Directors
since 2000, is the Chief Financial Officer of RCP and serves on the Board of
Managers of Eudaimonia. In addition to shareholder approval, the 1940 Act
requires any investment advisory agreement to be approved by the affirmative
vote of a majority of the directors who are not parties to the transaction or
"interested persons" within the meaning of Section 2(a)(19) of the 1940 Act,
cast in person at a meeting called for the purpose of voting on such approval.
In light of Mr. Roth's interests in Eudaimonia, Mr. Roth recused himself from
the Board's consideration of the appointment of Eudaimonia as the Corporation's
investment adviser and the approval of the terms of the New Advisory Agreement
and the Subadvisory Agreement (together, the "Advisory Agreements").
RCP has expressed interest in supporting the growth of the Corporation. No
agreements are in place, but subject to the 1940 Act, RCP's support may include
serving as standing purchaser of any rights not purchased by existing
shareholders in connection with a rights offering, as further described under
PROPOSAL 4, and serving as placement agent or underwriter for future capital
offerings of the Corporation.
As previously reported, on January 16, 2008, Ms. Jasja Kotterman resigned
as a Director, due to here travel schedule and location in Hong Kong. Prior to
the Board's January 16, 2008 meeting, the Corporate Governance/Nominating
Committee ("Nominating Committee") considered the appointment of Mr. James Eiler
to serve as an independent Director. The Nominating Committee reviewed Mr.
Eiler's background and qualifications, and recommended that the Board of
Directors nominate Mr. Eiler to serve on the Board as an independent director to
replace the vacancy created by Ms. Kotterman's resignation. Mr. Eiler was
elected to the Board at that time.
Representatives of Eudaimonia attended the meetings of the Board on
December 12, 2007 and January 16, 2008, and gave presentations to the Board of
Directors regarding Eudaimonia's plans for the Corporation, including its plans
to increase the Corporation's assets and the terms of the New Advisory
Agreement. The principal components of the plan are to build shareholder value
by increasing the size of the Corporation, in addition to expanding the universe
of portfolio companies in which the Corporation invests.
Also during these meetings, the Board of Directors approved and recommended
to the shareholders the approval of the Advisory Agreements. The Current
Investment Advisory Agreements (as defined below) with InvestAmerica would be
terminated upon the effectiveness of the Advisory Agreements. The terms of all
of these agreements are summarized under PROPOSAL 2 and PROPOSAL 3.
During these meetings, Eudaimonia outlined for the Board of Directors a
long-term strategy that includes the following elements:
* Investing in small promising companies not traded on major exchanges
which may not have access to traditional means of financing through
private investments in public equities (so-called "Pipes") and
registered direct offerings permissible for investment by a business
development company ("BDC") under the 1940 Act;
* Investing up to a maximum of 30% of the portfolio in equity positions
of promising companies that are publicly listed;
* Investing on a limited basis (up to maximum of 10% of the portfolio)
in private companies;
* Recruiting for the coming year and future years directors with diverse
and broad financial and business experience;
3
* Moving the corporate headquarters to Encinitas, California;
* Undertaking an investor relations strategy to obtain better market
understanding of the Corporation;
* Diligently focusing on growing the size of the Corporation over time
through internal growth and equity capital to reduce fixed expenses
per share, and increase shareholder liquidity and maximize shareholder
value; and
* Retaining InvestAmerica on a transitional basis as a subadviser to
efficiently liquidate and maximize the value of MorAmerica's existing
portfolio of investments.
The Board of Directors reviewed recent financial performance of the
Corporation and evaluated information regarding the prior business experience of
the Eudaimonia principals. The Board of Directors also examined data regarding
peer group business development companies and each of the elements of the
Eudaimonia long-range plan described above. In light of these factors, the Board
of Directors approved, and determined to recommend to the shareholders for their
approval, the slate of Directors described under PROPOSAL 1, the New Advisory
Agreement as summarized in PROPOSAL 2 and the Subadvisory Agreement summarized
in PROPOSAL 3.
Also on January 16, 2008, the Board of Directors examined and approved a
proposal to issue rights to acquire shares of the Corporation's Common Stock as
a means by which the Corporation may raise additional equity capital. This
proposal is further described under PROPOSAL 4. The Board of Directors has
determined to recommend this proposal to the shareholders for their approval.
VOTING AT THE MEETING
The record date for holders of Common Stock entitled to notice of, and to
vote at, the 2008 Annual Meeting is the close of business on January 31, 2008
(the "Record Date"). As of the Record Date, the Corporation had outstanding and
entitled to vote at the 2008 Annual Meeting 2,464,621 shares of Common Stock.
The presence, in person or by proxy, of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the 2008 Annual
Meeting is necessary to constitute a quorum. Abstentions and shares held by
brokers, banks, other institutions and nominees that are voted on any matter at
the 2008 Annual Meeting are included in determining the presence of a quorum for
the transaction of business at the commencement of the 2008 Annual Meeting and
on those matters for which the broker, nominee or fiduciary has authority to
vote. In deciding all questions, a shareholder shall be entitled to one vote, in
person or by proxy, for each share of Common Stock held in the shareholder's
name at the close of business on the record date.
To be elected a Director, each nominee under PROPOSAL 1 must receive the
favorable vote of the holders of a plurality of the shares of Common Stock
entitled to vote and represented at the 2008 Annual Meeting.
In order to approve the New Investment Advisory Agreement and the
Subadvisory Agreement under PROPOSALS 2 and 3, respectively, each proposal must
receive the favorable vote of a majority of the outstanding shares of Common
Stock entitled to vote at the 2008 Annual Meeting. For purposes of these three
proposals, Section 2(a)(42) of the 1940 Act defines "a majority of the
outstanding shares" as (i) 67% or more of the voting securities present at such
meeting if the holders of more than 50% of the outstanding voting securities of
such company are present or represented by proxy; or (ii) 50% of the outstanding
voting securities of such company, whichever is less.
In order to authorize the Corporation to issue rights to acquire any
authorized shares of Common Stock of the Corporation, PROPOSAL 4, the proposal
must receive the favorable vote of a majority of the outstanding shares of
Common Stock entitled to vote at the 2008 Annual Meeting.
4
In order to ratify the appointment of KPMG LLP as independent auditors for
the Corporation for the fiscal year ending September 30, 2008 under PROPOSAL 5,
this proposal must receive the favorable vote of a majority of the outstanding
shares of Common Stock entitled to vote at the 2008 Annual Meeting.
Each proxy delivered to the Corporation, unless the shareholder otherwise
specifies therein, will be voted:
>> FOR the election as Directors of the persons named under ELECTION OF
DIRECTORS--NOMINEES;
>> FOR the approval of the New Advisory Agreement described under
APPROVAL OF NEW ADVISORY AGREEMENT;
>> FOR the approval of the Subadvisory Agreement described under APPROVAL
OF SUBADVSIORY AGREEMENT;
>> FOR the authorization to issue rights to acquire any authorized shares
of Common Stock of the Corporation; and
>> FOR the ratification of the appointment by the Board of Directors of
KPMG LLP as independent auditors.
In each case where the shareholder has appropriately specified how the
proxy is to be voted, it will be voted in accordance with this specification. As
to any other matter or business which may be brought before the meeting, a vote
may be cast pursuant to the accompanying proxy in accordance with the judgment
of the person or persons voting the same, but neither the Corporation's
management nor the Board of Directors knows of any such other matter or
business. Any shareholder has the power to revoke his proxy at any time insofar
as it is then not exercised by giving notice of such revocation, either
personally at the meeting or in writing, to the Secretary of the Corporation or
by the execution and delivery to the Corporation of a new proxy dated subsequent
to the original proxy.
PROPOSAL 1
ELECTION OF DIRECTORS
All Director nominees elected at the 2008 Annual Meeting will serve until
the 2009 Annual Meeting of shareholders or until their respective successors
shall be elected and qualified. The persons named in the accompanying form of
proxy intend to vote such proxy for the election of the nominees named below as
Directors of the Corporation to serve until the next Annual Meeting of
shareholders or until their respective successors shall be elected and
qualified, unless otherwise properly indicated on such proxy. If any nominee
shall become unavailable for any reason, the persons named in the accompanying
form of proxy are expected to consult with the Board of Directors in voting the
shares represented by them at the 2008 Annual Meeting. The Board of Directors
has no reason to doubt the availability of any of the nominees and no reason to
believe that any of the nominees will be unable or unwilling to serve the entire
term for which election is sought.
Proxies may not be voted for more than the five Director nominees set forth
below. To be elected a Director, each nominee must receive the favorable vote of
the holders of a plurality of the shares of Common Stock entitled to vote and
represented at the 2008 Annual Meeting. The names of the nominees, along with
certain information concerning them, are set forth below.
Nominees
In the chart below, "Interested Director" indicates the director nominee
who does not meet the definition of "independent director" provided in the rules
applicable to companies listed on the NASDAQ Capital Market. In
5
contrast, "Independent Directors" do meet such qualification. The address for
all Director nominees is 101 Second Street SE, Suite 800, Cedar Rapids, Iowa
52401.
Interested Directors
Number of
Portfolios
Position(s) Term of in Fund Other
Held with Office and Principal Occupation(s) Complex Directorships
Name the Length of During Past 5 Years Overseen by Held by
and Age Corporation Time Served Nominee (1) Nominee (2)
Benjamin Director Since President and CEO, Central Proteina One None
Jiaravanon, 37 February, Prima (manufacturer of animal,
(3) 2004 poultry and fish feeds), since
2004; President, Strategic Planning
Group, Charoen Pokphand Indonesia
(agribusiness conglomerate), 2002 -
2004; Associate, Direct Investments
Group, Merrill Lynch, 1996 - 2002.
Mr. Jiaravanon received his
Bachelor of Science degree in
industrial management from Carnegie
Mellon University.
Gordon J. Roth,
53(4) Director Since 2000 CFO and Chief One None
Operating Officer, Roth 53(4)
Capital Partners, LLC (independent
investment banking firm
specializing in small-cap
companies), 2000-present; Chairman,
Roth & Company, P.C. (public
accounting firm located in Des
Moines, Iowa), 1990-2000. Prior to
that, Mr. Roth was a partner at
Deloitte & Touche, a public
accounting firm, in Des Moines.
(1) As the Corporation presently conducts all of its investments through
MorAmerica, the Corporation and MorAmerica are deemed one "fund."
(2) "Other Directorships" indicate other companies which (i) have a class of
securities registered under section 12 of the 1934 Act, (ii) are subject to
section 15(d) of the 1934 Act, or (iii) are registered investment companies
under the 1940 Act.
(3) To the extent that Bridgewater International Group, LLC ("BIG") may be
deemed to be in control of the Corporation as a result of its beneficial
ownership of the Corporation's Common Stock, Mr. Jiaravanon, as the sole
Managing Member of BIG, may be an "interested person" of the Corporation, as
that term is defined in Section 2(a)(19) of the 1940 Act.
(4) As a member of the Board of Managers of Eudaimonia and because of RCP's
ownership interest in Eudaimonia, Mr. Roth would be an "interested person" of
the Corporation, as that as that term is defined in Section 2(a)(19) of the 1940
Act, upon effectiveness of the New Advisory Agreement.
6
Independent Directors
Number of
Portfolios
Position(s) Term of in Fund Other
Held with Office and Principal Occupation(s) Complex Directorships
Name the Length of During Past 5 Years Overseen by Held by
and Age Corporation Time Served Nominee (1) Nominee (2)
Geoffrey T. Director Director Executive Chairman, Kreos Capital One None
Woolley, and since Limited (founded in 1997 by Mr.
48 Chairman 2003, Woolley to introduce "venture
of the elected leasing," an asset-backed debt
Board Chairman instrument with equity
April, 2004 participation to the European and
Israeli markets); Founding Partner,
Dominion Ventures, Inc.; Managing
Member, Hild Partners, LLC;
Director: BH Thermal Corp,
University Opportunity Fund and
Utah Capital Investment
Corporation; Chairman of the Board:
MorAmerica, University Venture
Fund, Hild Assets, Ltd. and Unitus
Equity Fund; Advisor: Polaris
Ventures and Von Braun & Schreiber
Private Equity. Mr. Woolley holds
an M.B.A. from the University of
Utah and a B.S. in Business
Management with a Minor in
Economics from Brigham Young
University.
James W. Director Since Principal, Eiler Capital Advisors One None
Eiler, 56 January, (Investment Banking), since 2007;
2008 Managing Director, First National
Investment Bank (Investment
Banking), 2007; Managing Partner,
Cybus Capital Markets (Investment
banking), 2004-2007; Senior Vice
President, John Deere Credit
(Agricultural Financial Services),
1999-2004. Mr. Eiler holds an M.S.
in Ag Economics and a B.S. in Ag
Business from Iowa State
University.
Michael W. Director Since 1994 Director, MorAmerica since 1994; One None
Dunn, C.E.O. (since 1980), President and
58 CEO and Director (since 1983),
Farmers & Merchants Savings Bank of
Manchester, Iowa.
(1) As the Corporation presently conducts all of its investments through
MorAmerica, the Corporation and MorAmerica are deemed one "fund."
(2) "Other Directorships" indicate other companies which (i) have a class of
securities registered under section 12 of the 1934 Act, (ii) are subject to
section 15(d) of the 1934 Act, or (iii) are registered investment companies
under the 1940 Act.
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Corporation Stock Ownership of Director Nominees
The following table represents, as of December 31, 2007 and based upon the
closing price as reported by NASDAQ on December 31, 2007, the dollar range value
of equity securities beneficially owned (as that term is defined in Rule
16a-1(a)(2) of the 1934 Act) by each nominee for Director of the Corporation
pursuant to this PROPOSAL 1. In the table, "Interested Director Nominee"
indicates Director nominees who do not meet the definition of "independent
director" provided in the rules applicable to companies listed on the NASDAQ
Capital Market. In contrast, "Independent Directors" do meet such qualification.
DOLLAR RANGE AGGREGATE DOLLAR RANGE+
NAME OF INDEPENDENT DIRECTOR OF EQUITY SECURITIES OF EQUITY SECURITIES IN ALL FUNDS IN
NOMINEE IN THE CORPORATION CORPORATION COMPLEX
Michael W. Dunn Over $100,000 Over $100,000
James W. Eiler None None
Geoffrey T. Woolley Over $100,000 Over $100,000
DOLLAR RANGE AGGREGATE DOLLAR RANGE+
NAME OF INTERESTED DIRECTOR OF EQUITY SECURITIES OF EQUITY SECURITIES IN ALL FUNDS IN
NOMINEE IN THE CORPORATION CORPORATION COMPLEX
Benjamin Jiaravanon Over $100,000 Over $100,000
Gordon J. Roth $10,001 - $50,000 $10,001 - $50,000
------------------------------------
+ There are no other funds in the Corporation's complex.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR THE ELECTION AS DIRECTORS OF THE PERSONS NAMED UNDER "ELECTION OF
DIRECTORS--NOMINEES" TO THEIR RESPECTIVE TERMS.
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INTRODUCTION TO PROPOSALS 2 AND 3
Background
The Corporation is currently party to the MACC Private Equities Inc.
Investment Advisory Agreement (the "Current Corporation Advisory Agreement")
with InvestAmerica dated of July 21, 2005, as extended by the Annual
Continuation of Investment Advisory Agreement dated of July 21, 2007 (extending
the Current Corporation Advisory Agreement for an additional one-year term
ending July 20, 2008).
MorAmerica is currently party to the MorAmerica Capital Investment Advisory
Agreement (the "Current MorAmerica Advisory Agreement") with InvestAmerica dated
of July 21, 2005, as extended by the Annual Continuation of Investment Advisory
Agreement dated of July 21, 2007 (extending the Current MorAmerica Advisory
Agreement for an additional one-year term ending July 20, 2008) (the Current
Corporation Advisory Agreement and the Current MorAmerica Advisory Agreement
together, the "Current Advisory Agreements").
The Current Advisory Agreements were approved by a vote of the shareholders
at the 2005 Annual Meeting. No person currently serves as an investment adviser
to the Corporation or MorAmerica, other than InvestAmerica pursuant to the
Current Advisory Agreements. In addition, other than pursuant to the Current
Advisory Agreements, the Corporation and MorAmerica did not pay any fees to
InvestAmerica, its affiliated persons or affiliated persons of such persons
during the fiscal year ended September 30, 2007 ("Fiscal Year 2007").
Current Advisory Agreements
The Current Advisory Agreements provide that InvestAmerica manages all
assets of the Corporation and MorAmerica (together, the "Companies") and
generally provides all facilities, personnel, and other means necessary for the
Companies to operate. Except to the extent of acquisitions or dispositions of
portfolio securities that, in accordance with the Companies' co-investment
guidelines require specific Board approval, InvestAmerica makes all new and
follow-on investments and all asset dispositions and other investment decisions
in InvestAmerica's discretion.
Under the Current Advisory Agreements, InvestAmerica generally is
responsible for expenses relating to staff salaries, office space and supplies,
and the Companies are generally responsible for auditing fees, all legal
expenses and other expenses associated with being a public company, fees to the
directors of the Companies, and any and all expenses associated with property of
a portfolio company taken or received by the Companies or on their behalf as a
result of its investment in any portfolio company.
The Current Advisory Agreements provide that InvestAmerica receives a
management fee and an incentive fee. With respect to the Corporation, the
management fee is paid monthly in arrears and is equal to 1.5% per annum of
Assets Under Management (as that term is defined in the Current Corporation
Advisory Agreement), which means the total value of the Corporation's assets.
With respect to MorAmerica, the management fee is paid monthly in arrears and is
equal to the lesser of 1.5% per annum of (i) Combined Capital (as that term is
defined in the Current MorAmerica Advisory Agreement), which has the meaning
under SBA regulations, or (ii) Assets Under Management (as that term is defined
in the Current MorAmerica Advisory Agreement), which means the total value of
MorAmerica's assets.
In addition, InvestAmerica is entitled to an incentive fee under the
Current Advisory Agreements. Under each of the Current Advisory Agreements, the
amount of the incentive fee is 13.4% of the Net Capital Gains (as defined in the
Current Advisory Agreements), before taxes, on portfolio investments and from
the disposition of other assets or property managed by InvestAmerica.
The amount of the incentive fee was limited in any period by applicable SBA
regulations with respect to the fee paid by MorAmerica, although the amount
which may not be paid in one period may be an incentive fee payable, or may be
in escrow payable, and disbursed in later periods. In addition, the amount of
the incentive fee and all incentive compensation, in any fiscal year, may not
exceed the limit prescribed by Section 205(b)(3)(A) of
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the Investment Advisers Act of 1940, as amended (the "Advisers Act"). This
section provides that the total incentive fee may not exceed 20% of the realized
capital gains upon the funds computed net of all realized capital losses and
unrealized capital depreciation.
Management fees under the Current Advisory Agreements on a consolidated
basis amounted to $331,625 for Fiscal Year 2007. No incentive fees were earned
under the Current Corporation Advisory Agreement during Fiscal Year 2007.
Incentive fees under the Current MorAmerica Advisory Agreement for Fiscal Year
2007 amounted to $143,732 earned and $0 paid. Included in the incentive fee
earned of $143,732 are approximately $27,617 of incentive fees related to
noncash gains which are being deferred.
New Advisory Agreement and Subadvisory Agreement
As described above under "RECENT DEVELOPMENTS - BACKGROUND OF PROPOSALS"
the Board of Directors of the Corporation has recently approved a number of
measures designed to improve the performance of the Corporation. Among those
measures were the approval of the New Advisory Agreement and the Subadvisory
Agreement. Information concerning the terms of the New Advisory Agreement and
the Subadvisory Agreement can be found under "PROPOSAL 2 - APPROVAL OF NEW
ADVISORY AGREEMENT" and "PROPOSAL 3 - APPROVAL OF SUBADVISORY AGREEMENT,"
respectively.
Fee Table
The following table sets forth (i) the aggregate amount of InvestAmerica's
fees during Fiscal Year 2007; (ii) the amount that Eudaimonia would have
received had the New Advisory Agreement been in effect during Fiscal Year
2007(1); and (iii) the difference between these two amounts as a percentage of
the amount of InvestAmerica's fees during Fiscal Year 2007:
Aggregate Amount of Fiscal Fees Under New Difference Between
Year 2007 Fees Advisory Agreement Amounts
-------------- ------------------ -------
$475,357 $585,794 23.23%
As described under "PROPOSAL 2 - APPROVAL OF NEW ADVISORY AGREEMENT" the
higher incentive fee under the New Advisory Agreement will affect the amount of
incentive fees payable to Eudaimonia in a given period to the extent that the
Corporation realizes net capital gains, before taxes, on new portfolio
investments made after the effectiveness of the New Advisory Agreement (the "New
Portfolio") or to the extent that the Corporation disposes of other assets or
property managed by Eudaimonia. The New Advisory Agreement provides that
Eudaimonia will earn the same amount of incentive fees as InvestAmerica would
have earned under the Current Advisory Agreements with respect to MorAmerica's
legacy assets existing as of the effective date of the Advisory Agreements (the
"Existing Portfolio"). Thus, if the New Advisory Agreement had been in effect
for Fiscal Year 2007, Eudaimonia would have earned $143,732, which is the same
amount as was actually earned by InvestAmerica in Fiscal Year 2007 under the
Current Advisory Agreements. In addition, as described under "PROPOSAL 3 -
APPROVAL OF SUBADVISORY AGREEMENT," incentive fees payable to InvestAmerica
under the Subadvisory Agreement are payable by Eudaimonia out of the incentive
fees attributable to the Existing Portfolio paid by the Corporation to
Eudaimonia under the New Advisory Agreement. If the Subadvisory Agreement had
been in effect for Fiscal Year 2007, InvestAmerica's earned incentive fee would
have been $143,732, which is 100% of the incentive fee that would have been
earned by Eudaimonia and the same amount as was actually earned by InvestAmerica
in Fiscal Year 2007.
---------------------------
(1) Fees under the New Advisory Agreement are based on the combined assets
of the Corporation and those held by MorAmerica, as presently managed by
InvestAmerica under the MorAmerica Advisory Agreement. Following the 2008
Shareholders' Meeting, MorAmerica will be merged into the Corporation, and the
Corporation will then directly hold all of the assets now held by MorAmerica.
10
Also, as described under "PROPOSAL 3 - APPROVAL OF SUBADVISORY AGREEMENT,"
management fees payable to InvestAmerica under the Subadvisory Agreement are
payable by Eudaimonia out of management fees paid by the Corporation to
Eudaimonia under the New Advisory Agreement. If the Subadvisory Agreement had
been in effect for Fiscal Year 2007, InvestAmerica's management fee would have
been $249,592.
In approving Eudaimonia as investment adviser to the Corporation under the
New Advisory Agreement and the resulting higher aggregate amount of fees that
would be payable to Eudaimonia thereunder, the Board concluded that the higher
fees were justified given that Eudaimonia will implement and oversee an entirely
new long-term strategy for the Corporation, as further described above under the
caption, RECENT DEVELOPMENTS - BACKGROUND FOR PROPOSALS, which includes
additional capital for investment in the New Portfolio. Eudaimonia will not earn
any higher incentive fee unless and until the Corporation realizes Net Capital
Gains, before taxes, on the New Portfolio.
11
PROPOSAL 2
APPROVAL OF NEW
INVESTMENT ADVISORY AGREEMENT
Upon shareholder approval at the 2008 Annual Meeting, the Current Advisory
Agreements will be terminated under the terms of a Termination and Waiver
Agreement among the Corporation, MorAmerica and InvestAmerica. The Corporation
proposes to enter into the New Advisory Agreement between the Corporation and
Eudaimonia, whose address is 580 2nd Street, Suite 102, Encinitas, California
92024. The New Advisory Agreement was approved on January 16, 2008 by the vote
of a majority of the members of the Board of Director of the Corporation who are
not parties to the transaction or "interested persons" within the meaning of
Section 2(a)(19) of the 1940 Act, cast in person at a meeting called for the
purpose of voting on such approval.
Under the New Advisory Agreement, Eudaimonia will manage all new portfolio
company investments made by the Corporation. As described below under PROPOSAL 3
- APPROVAL OF SUBADVISORY AGREEMENT, InvestAmerica will continue to manage the
Existing Portfolio under the Subadvisory Agreement. The following are the
remaining key provisions of the New Advisory Agreement, which are substantially
the same as the provisions of the Current Advisory Agreements except as to the
amount of management fees and incentive fees payable thereunder:
(1) Management Responsibilities: Eudaimonia will manage all assets of the
Corporation and generally provide all facilities, personnel, and other
means necessary for the Corporation to operate. Eudaimonia will make all
new and follow-on acquisitions or dispositions of the Corporation's
portfolio securities and other investment decisions respecting the
Corporation's assets (which will include MorAmerica's assets upon
consummation of the merger) in Eudaimonia's discretion, except (i) where
specific board approval is required in accordance with the Corporation's
co-investment guidelines, or (ii) that relate to the Existing Portfolio.
(2) Operating Expenses: Eudaimonia generally will be responsible for
expenses relating to staff salaries, office space and supplies, and the
Corporation will generally responsible for auditing fees, all legal
expenses and other expenses associated with being a public company, fees to
the Directors, and any and all expenses associated with property of a
portfolio company taken or received by the Corporation or on its behalf as
a result of its investment in any portfolio company.
(3) Advisory Fees: The Corporation will pay Eudaimonia, monthly in arrears,
a management fee equal to 2.0% per annum of Assets Under Management (as
defined in the New Advisory Agreement) attributable to each of the Existing
Portfolio and the New Portfolio. In addition, the New Advisory Agreement
provides that the Corporation will pay Eudaimonia an incentive fee in an
amount equal to 20.0% of the net capital gains, before taxes, attributable
to the New Portfolio and 13.4% of the net capital gains, before taxes,
attributable to the Existing Portfolio (together, the New Portfolio and
Existing Portfolio are hereinafter referred to as the "Total Portfolio").
Net capital gains, as defined in the New Advisory Agreement, are calculated
as gross realized gains, minus the sum of capital losses, less any
unrealized depreciation, including reversals of previously recorded
unrealized depreciation, recorded during the year. Capital losses and
realized capital gains are not cumulative under the incentive fee
computation. Payments for incentive fees resulting from noncash gains are
deferred until the assets are sold.
The amount of the incentive fee and all incentive compensation, in any
fiscal year, may not exceed the limit prescribed by Section 205(b)(3)(A) of
the Advisers Act. This section provides that the total fees will not exceed
20% of the realized capital gains upon the assets of the Corporation over a
specified period, computed net of all realized capital losses and
unrealized capital depreciation. Under Section 5.2(a)(ii) of the New
Advisory Agreement, the specified period is one year.
(4) Term, Termination and Other Matters: The New Advisory Agreement has a
term of two years, unless sooner terminated as described below. After the
initial two-year term, the New Advisory Agreement
12
will continue in effect so long as such continuance is specifically
approved at least annually by the Board of Directors, including a majority
of its Directors who are not interested persons of Eudaimonia, or by the
vote of the holders of a majority, as defined in the 1940 Act, of the
outstanding shares of the Corporation. The New Advisory Agreement may be
terminated by the Corporation at any time, without payment of any penalty,
on 60 days' written notice to Eudaimonia if the decision to terminate has
been made by the Board of Directors or by the vote of a majority, as
defined in the 1940 Act, of the holders of a majority of the outstanding
shares of the Corporation.
Eudaimonia may also terminate the New Advisory Agreement on 60 days'
written notice to the Corporation provided that another investment advisory
agreement with a suitable investment adviser has been approved by the vote
of the holders of a majority, as defined in the 1940 Act, of the
outstanding shares of the Corporation, and by a majority of Directors who
are not parties to such agreement or interested persons of any such party.
The terms of the New Advisory Agreement relating to the amount of
management fees and incentive fees payable thereunder are different from the
Current Advisory Agreements. The Corporation will pay Eudaimonia a management
fee equal to 2.0% of Assets Under Management (as defined in the New Advisory
Agreement) attributable to the Total Portfolio, as compared to 1.5% payable
under the Current Corporation Advisory Agreement of Assets Under Management (as
defined in the Current Advisory Agreements) and the lesser of 1.5% payable under
the Current MorAmerica Advisory Agreement of Assets Under Management or Combined
Capital (as defined in the Current MorAmerica Advisory Agreement). The incentive
fee payable to Eudaimonia would be 20.0%, as compared to the 13.4% paid to
InvestAmerica under the Current Advisory Agreements, of the Net Capital Gains
(as defined in the Current Advisory Agreements), before taxes, attributable to
New Portfolio investments and from the disposition of other assets or property
managed by Eudaimonia. With respect to the Existing Portfolio, the incentive fee
payable to Eudaimonia under the New Advisory Agreement will be the same 13.4% of
the Net Capital Gains, before taxes, as would have been payable to InvestAmerica
under the Current Advisory Agreements.
As noted above, management and incentive fees of $475,357 were paid to
InvestAmerica in Fiscal Year 2007 under the Current Advisory Agreements. Under
the terms of the New Advisory Agreement, Eudaimonia would have earned $585,794
in management and incentive fees in fiscal year 2007, or 23.23% more than what
InvestAmerica was paid pursuant to the Current Advisory Agreements in fiscal
year 2007. The proposed New Advisory Agreement is attached hereto as Appendix A.
Material Factors an Conclusions Relating to the Board of Director's Selection of
Eudaimonia and Approval of Fees under the New Advisory Agreement
At its meeting on January 16, 2008, the Board evaluated, among other
things, written information provided by Eudaimonia as required under Section
15(c) of the 1940 Act (the "Eudaimonia 15(c) Materials"), and answers to
questions posed by the Board to representatives of Eudaimonia. The Eudaimonia
15(c) Materials consisted of, among other things, a management fee comparison
versus a peer group of substantially similar funds (the "Peer Group"), and a
comparison of the total expense ratios versus the Peer Group's expense ratios.
Specifically, the Board noted that the total management fees contemplated in the
New Advisory Agreement and the Subadvisory Agreement and the estimated expense
ratio of the Corporation compared favorably to the Peer Group's advisory fees
and expense ratios.
The Board also noted that Eudaimonia does not contemplate employing
breakpoints in its fee arrangement, which would benefit shareholders as the
Corporation grows, because as investments in new portfolio companies grow,
Eudaimonia will be required to expend greater resources to manage the
Corporation's portfolio, including hiring additional staff. The Board carefully
evaluated Eudaimonia 15(c) Materials, and was advised by legal counsel with
respect to its deliberations. The Directors discussed the Eudaimonia 15(c)
Materials and Eudaimonia's oral presentation and any other information that the
Board received at the meeting, and deliberated on the appointment of Eudaimonia
as investment adviser to the Corporation and the terms of the New Advisory
Agreement in light of this information. In its deliberations, the Board did not
identify any single piece of information that was all-important, controlling or
determinative of its decisions. Based on its review of the Eudaimonia 15(c)
Materials
13
and the discussions with Eudaimonia, the Board determined that the terms of the
New Advisory Agreement are consistent with the best interests of the Corporation
and its shareholders, and would enable the Corporation to receive high quality
services at a cost that is appropriate, reasonable, and in the best interests of
the Corporation and its shareholders. The Board made these determinations on the
basis of the following factors and conclusions:
o The advisory fees payable to and profits to be realized by Eudaimonia
under the New Advisory Agreement, which the Board concluded (i) were
reasonable in comparison to the fees charged by other portfolio
managers of funds of similar size having similar investment
strategies, and (ii) were in the middle range of the comparisons to
the Peer Group identified for the Board;
o The nature, quality and extent of the advisory services to be provided
by Eudaimonia, including its reputation, expertise and resources in
domestic financial markets, especially the small and micro-cap stocks
that are intended to comprise the New Portfolio, which the Board
concluded would benefit the Corporation by achieving above-average
performance (as compared to other portfolio managers of similar asset
classes using similar strategies for portfolios of similar size) and
would assist in raising new assets and creating shareholder value;
o The potential to generate investor and market enthusiasm through the
appointment of Eudaimonia to serve as adviser to the Corporation,
which the Board concluded would benefit the Corporation and its
shareholders;
o A description of Eudaimonia's business, which the Board concluded
demonstrated the appropriate level of expertise and size, which would
benefit the Corporation by providing the level of service the Board
expects to receive from its portfolio manager;
o Biographical information respecting Eudaimonia's personnel, which the
Board concluded demonstrated the appropriate level of experience and
qualification of Eudaimonia's personnel;
o Eudaimonia's financial condition, including its balance sheet, which
the Board concluded demonstrated that Eudaimonia is able to perform
its obligations under the New Advisory Agreement and otherwise service
the needs of its clients;
o The investment performance of Eudaimonia's principals with respect to
all accounts with similar investment strategies, which the Board
concluded demonstrated that such investment strategies and principles
have shown superior performance over time;
o Eudaimonia's brokerage practices (including any soft dollar
arrangements), which the Board concluded that (i) Eudaimonia will not
utilize directed brokerage in its management of the Corporation, (ii)
Eudaimonia does not inappropriately concentrate its brokerage
allocation, and (iii) Eudaimonia pays commission rates which are
comparable to industry custom;
o Eudaimonia's portfolio transaction practices, which the Board
concluded demonstrated that Eudaimonia appropriately allocates
investment opportunities among its clients and seeks to treat its
clients fairly;
o The overall high quality of the personnel, operations, financial
condition, investment management capabilities, methodologies, and
performance of Eudaimonia, which the Board concluded demonstrated that
Eudaimonia will be able to perform as it anticipates, which will
enable the Corporation to attract and enhance assets;
o A description of Eudaimonia's internal compliance program, which the
Board concluded demonstrated that (i) Eudaimonia devotes an
appropriate level of time and resources to detecting, preventing and
remedying violations of the federal securities laws, and (ii)
Eudaimonia intends to appropriately utilize outside auditors to audit
its compliance functions;
14
o Any possible conflicts of interest arising out a relationship with
Eudaimonia, which the Board concluded that that Eudaimonia does not
now have, and does not anticipate having in the future, any revenue
sharing arrangements, but that to the extent RCP participates in any
transactions concerning the Corporation, such participation will be
subject to limitations imposed by the 1940 Act;
o The benefits to be realized by Eudaimonia as a result of its
management of the New Portfolio, which the Board concluded would be
limited to its receipt of the management fee and incentive fee
described above, and would not provide other benefits such as soft
dollars to Eudaimonia; and
o The terms of the New Advisory Agreement, which the Board concluded
were at least or more beneficial to the Corporation as compared to
agreements respecting similar levels of service for similar levels of
advisory fees.
Information Regarding Eudaimonia:
The following table sets forth the name, address and principal occupation
of the principal executive officers and each manager of Eudaimonia. Unless
otherwise provided, the address for all officers and managers is 580 2nd Street,
Suite 102, Encinitas, California 92024.
Name and Address Status Principal Occupation
---------------- ------ --------------------
Travis Prentice Principal Executive President and Chief Investment Officer of Eudaimonia
Officer, Manager
Montie L. Weisenberger Principal Executive Vice President and Portfolio Manager of Eudaimonia
Officer,
Manager
Derek Gaertner Principal Executive Vice President, Chief Operating Officer and Chief
Officer Compliance Officer of Eudaimonia
Joshua M. Moss Principal Executive Vice President and Portfolio Manager of Eudaimonia
Officer
Byron Roth Manager Chairman, CEO and Manager of Roth Capital Partners,
24 Corporate Plaza-200 LLC (independent investment banking firm
Newport Beach, California 92660 specializing in small-cap companies)
Gordon J. Roth Manger CFO and Chief Operating Officer, Roth Capital
24 Corporate Plaza-200 Partners, LLC
Newport Beach, California 92660
Other than Gordon Roth, no other director or officer of the Corporation or
of MorAmerica currently is either a member or manager of Eudaimonia or owns
securities of, or has any other material direct or indirect interest in,
Eudaimonia.
Eudaimonia does not act as investment adviser with respect to any other
registered investment company, and the Corporation's Board of Directors is not
aware of any financial condition of Eudaimonia that is reasonably likely to
impair the financial ability of Eudaimonia to fulfill its commitment to the
Corporation under the New Advisory Agreement. No commission has been paid to,
nor does the Corporation have, any Affiliated Broker, as that term is defined in
Item 22(a)(1)(ii) of Schedule 14A adopted under the 1934 Act.
15
In connection with the New Advisory Agreement, the parties understand that
representatives of Eudaimonia will serve as the executive officers of the
Corporation during the term of the New Advisory Agreement, as further described
below under the heading "Executive Officers of the Corporation." There are no
other arrangements or understandings in connection with the New Advisory
Agreement with respect to composition of the Board of Directors of the
Corporation or the Board of Managers of Eudaimonia or with respect to the
appointment of any person to any office with Eudaimonia.
RCP has expressed interest in supporting the growth of the Corporation. No
agreements are in place, but, subject to the 1940 Act, RCP's support may include
serving as standing purchaser of any rights not purchased by existing
shareholders in connection with a rights offering, as further described under
PROPOSAL 4, and serving as placement agent or underwriter for future capital
offerings of the Corporation.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
APPROVAL OF THE NEW ADVISORY AGREEMENT.
16
PROPOSAL 3
APPROVAL OF SUBADVISORY AGREEMENT
The Corporation and Eudaimonia propose to enter into an the Subadvisory
Agreement with InvestAmerica in the form attached hereto as Appendix B. The
Subadvisory Agreement was approved on January 16, 2008 by the vote of a majority
of the members of the Board of Directors who are not parties to the transaction
or "interested persons" within the meaning of Section 2(a)(19) of the 1940 Act,
cast in person at a meeting called for the purpose of voting on such approval.
Under the Subadvisory Agreement, InvestAmerica would be retained to monitor
and manage the Existing Portfolio, including exits, preparation of valuations
and other portfolio management matters. Under the Subadvisory Agreement,
Eudaimonia would pay InvestAmerica management fees and incentive fees based on a
portion of the management fees and incentive fees paid to Eudaimonia by the
Corporation under the New Advisory Agreement attributable to the Existing
Portfolio. The Subadvisory Agreement would not result in any additional expense
to the Corporation beyond the expenses associated with the New Advisory
Agreement.
During the first three months of the term of the Subadvisory Agreement,
Eudaimonia will pay InvestAmerica a management equal to 75% of the management
fee received by Eudaimonia under the New Advisory Agreement attributable to the
Existing Portfolio. For the remainder of the term of the Subadvisory Agreement,
Eudaimonia will pay InvestAmerica a management fee equal to 50% of the
management fee received by Eudaimonia under the New Advisory Agreement
attributable to the Existing Portfolio
The amount of the incentive fee payable by Eudaimonia to InvestAmerica
under the Subadvisory Agreement is 100% of the incentive fee received by
Eudaimonia under the New Advisory Agreement attributable to the Existing
Portfolio.
The Subadvisory Agreement has a term of two years, unless sooner terminated
as described below. After the initial two-year term, the Subadvisory Agreement
will continue in effect so long as such continuance is specifically approved at
least annually by Eudaimonia and the Board of Directors, including a majority of
the Directors who are not interested persons of Eudaimonia or InvestAmerica, or
by vote of the holders of a majority, as defined in the 1940 Act, of the
outstanding voting securities of the Corporation. The Subadvisory Agreement may
be terminated by Eudaimonia or the Corporation at any time, without payment of
any penalty, on 60 days written notice to InvestAmerica if the decision to
terminate has been made by Eudaimonia or by the Board of Directors of the
Corporation or by vote of the holders of a majority, as defined in the 1940 Act,
of the outstanding voting securities of the Corporation. The Subadvisory
Agreement also may be terminated by InvestAmerica at any time, without payment
of any penalty, on 60 days' written notice to Eudaimonia and the Corporation.
Material Factors and Conclusions Relating to the Board of Director's Selection
of InvestAmerica and Approval of Fees under the Subadvisory Agreement
The Board evaluated, among other things, written information provided by
InvestAmerica as required under Section 15(c) of the 1940 Act (the
"InvestAmerica 15(c) Materials"), and answers to questions posed by the Board to
representatives of InvestAmerica. The Board noted that InvestAmerica has served
as investment adviser or subadviser to the Companies since 1995 and is uniquely
familiar with the Existing Portfolio--the assets for which InvestAmerica will
render investment subadvisory services under the Subadvisory Agreement.
The Board carefully evaluated InvestAmerica 15(c) Materials, and was
advised by legal counsel with respect to its deliberations. The Directors
discussed the InvestAmerica 15(c) Materials and InvestAmerica's oral
presentation and any other information that the Board received at the meeting,
and deliberated on the appointment of InvestAmerica as investment subadviser to
the Corporation and the terms of the Subadvisory Agreement in light of this
information. In its deliberations, the Board did not identify any single piece
of information that was all-important, controlling or determinative of its
decisions. Based on its review of the InvestAmerica 15(c) Materials and the
discussions with InvestAmerica and Eudaimonia, the Board determined that the
terms of the Subadvisory Agreement are consistent with the best interests of the
Corporation and its shareholders, and would enable the
17
Corporation to receive high quality services at a cost that is appropriate,
reasonable, and in the best interests of the Corporation and its shareholders.
The Board made these determinations on the basis of the following factors:
o A description of InvestAmerica's business, which the Board concluded
demonstrated the appropriate level of expertise and size, which would
benefit the Corporation by providing the level of service the Board
expects to continue to receive from the portfolio manager of the
Existing Portfolio;
o Biographical information respecting InvestAmerica's personnel, which
the Board concluded demonstrated the appropriate level of experience
and qualification of InvestAmerica's personnel;
o InvestAmerica's financial condition, including its balance sheet,
which the Board concluded demonstrated that InvestAmerica is able to
perform its obligations under the Subadvisory Agreement and otherwise
service the needs of its clients;
o The nature, quality and extent of the advisory services to be provided
by InvestAmerica, including its reputation, expertise and resources in
domestic financial markets, especially with respect to the Existing
Portfolio, which the Board concluded would benefit the Corporation by
continuing the management of the Existing Portfolio in the same
fashion;
o The advisory fees payable to and profits to be realized by
InvestAmerica under the Subadvisory Agreement, which the Board
concluded (i) were reasonable in comparison to the fees charged by
other portfolio managers of funds of similar size having similar
investment strategies (ii) were in the low to middle range of the
comparisons to the Peer Group identified for the Board and (iii) would
not result in any added expense to the Corporation;
o InvestAmerica's brokerage practices (including any soft dollar
arrangements), which the Board concluded that (i) InvestAmerica will
not utilize directed brokerage in its management of the corporation,
(ii) InvestAmerica does not inappropriately concentrate its brokerage
allocation, and (iii) InvestAmerica pays commission rates which are
comparable to industry custom;
o InvestAmerica's portfolio transaction practices, which the Board
concluded demonstrated that InvestAmerica appropriately allocates
investment opportunities among its clients and seeks to treat its
clients fairly;
o The overall high quality of the personnel, operations, financial
condition, investment management capabilities, methodologies, and
performance of InvestAmerica, which the Board concluded demonstrated
will enable the Corporation to achieve shareholder value with respect
to the Existing Portfolio;
o A description of InvestAmerica's internal compliance program, which
the Board concluded demonstrated that InvestAmerica devotes an
appropriate level of time and resources to detecting, preventing and
remedying violations of the federal securities laws;
o Any possible conflicts of interest arising out a relationship with
InvestAmerica, which the Board concluded that that InvestAmerica does
not now have, and does not anticipate having in the future, any
problematic conflicts of interest;
o The benefits to be realized by InvestAmerica as a result of its
management of the Existing Portfolio, which the Board concluded would
be limited to its receipt of the management fee and incentive fee
described above, and would not provide other benefits such as soft
dollars to InvestAmerica; and
o The terms of the Subadvisory Agreement which the Board concluded were
at least or more beneficial to the Corporation as compared to
agreements respecting similar levels of service for similar levels of
advisory fees.
18
Information Regarding InvestAmerica:
The following sets forth the name and principal occupation of the principal
executive officers and each director of InvestAmerica:
Mr. Robert Comey, the Chief Financial Officer, Executive Vice President,
Treasurer, Assistant Secretary and Chief Compliance Officer of both the
Corporation and MorAmerica, is the Executive Vice President, Treasurer,
Assistant Secretary and a Director of InvestAmerica. Mr. Kevin Mullane, Senior
Vice President of both the Corporation and MorAmerica, is the Senior Vice
President, Assistant Secretary and a Director of InvestAmerica. Mr. David
Schroder, President and Secretary of both the Corporation and MorAmerica, is the
President, Secretary and a Director of InvestAmerica. Mr. Michael Reynoldson,
Vice President of both the Corporation and MorAmerica, is the Vice President of
InvestAmerica. The address for Messrs. Comey, Mullane, Schroder and Reynoldson
is 101 Second Street S.E., Suite 800, Cedar Rapids IA 52401. Each of Messrs.
Schroder, Comey and Mullane own 10% or more of InvestAmerica's stock.
As further described below under the heading "Executive Officers of the
Corporation," all executive officers of InvestAmerica who currently serve as
officers of the Corporation will resign their respective positions as officers
of the Corporation following the effectiveness of the New Advisory Agreement.
InvestAmerica does not act as investment advisor with respect to any other
registered investment company, and the Corporation's Board of Directors is not
aware of any financial condition of InvestAmerica that is reasonably likely to
impair the financial ability of InvestAmerica to fulfill its commitment to the
Corporation under the Subadvisory Agreement. No commission has been paid to, nor
does the Corporation have, any Affiliated Broker, as that term is defined in
Item 22(a)(1)(ii) of Schedule 14A adopted under the 1934 Act.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
APPROVAL OF THE SUBADVISORY AGREEMENT.
19
PROPOSAL 4
AUTHORITY FOR RIGHTS OFFERING
Introduction
The Corporation's Board of Directors is evaluating means to raise
additional equity capital for the Corporation. The Corporation's shareholders
approved a rights offering at the 2004 Annual Shareholders Meeting and the
Corporation subsequently filed a registration statement to effect a rights
offering, but the Corporation's Board determined not to pursue that rights
offering in light of certain litigation and regulatory issues facing the Company
in the at that time, as previously disclosed. At its meeting on January 16,
2008, the Board authorized the Corporation, with shareholder approval of this
PROPOSAL 4, to again pursue a rights offering as described below. In order to
determine when and if to undertake such rights offering, and to negotiate and
fix the terms, including the exercise price of the rights and the number of the
rights to be sold, the Board at its meeting on January 16, 2008 also appointed a
special committee of the Board of Directors (the "Pricing Committee") consisting
of Geoffrey T. Woolley, Michael W. Dunn and James W. Eiler.
Rights Offering
The Corporation has elected treatment as a BDC. As such, the Corporation is
permitted to issue shares of its Common Stock in connection with a rights
offering under Section 18(d) of the 1940 Act. In a rights offering, each
shareholder receives the right to purchase a specified number of additional
shares of the Corporation's Common Stock, pro-rata, based on the number of
shares held as of a specified record date. Also, rights offerings may be
non-transferable (in which case the rights may only be exercised by existing
holders) or transferable (in which case rights not exercised by existing holders
may be separately transferred).
Under rules of the NASDAQ Stock Market, Inc. ("NASDAQ"), shareholder
approval is required for rights offerings that are deemed to be other than
"public offerings" and which involve the sale of more than 20% of the
outstanding shares at a price less than the greater of net asset value or market
value. Thus, if shareholders approve this PROPOSAL 4, the Corporation will be
authorized to conduct one or more rights offerings for which shareholder
approval is required under NASDAQ rules.
However, no shareholder approval is required under NASDAQ rules with
respect to rights that are either (i) deemed to be public offerings or (ii)
involve the sale of less than 20% of the outstanding shares of the Corporation's
Common Stock. Thus, if the shareholders do not approve this PROPOSAL 4, the
Corporation may nonetheless effect a rights offering, so long as such rights
offering does not require shareholder approval under NASDAQ rules.
Shareholders should consider that if they do not exercise their rights
under a rights offering, at the completion of any such rights offering they will
own a smaller proportional interest in the Corporation than they would if they
had exercised. In addition, because the subscription price per share of Common
Stock will be less than the net asset value per share, shareholders will
experience an immediate dilution, which could be significant, of the aggregate
net asset value of their shares. For example, based upon figures as December 31,
2007, assuming that 821,540 rights are issued (one right issued for each three
outstanding shares), all rights are exercised at an estimated subscription price
of $2.61 per share (or 95% of the closing market bid price of the Common Stock
on December 31, 2007), expenses of the offering are $75,000 and the
Corporation's net asset value otherwise remained constant, the Corporation's net
asset value per share of $4.36 would be reduced by approximately $0.46 per share
(or 10.6%) to $3.90 per share. This dilution may disproportionately affect those
shareholders who do not exercise their rights in full.
The Corporation cannot state precisely the extent of any such dilution at
this time because the Board of Directors has not considered any specific
transactions and does not know what the net asset value per share will be, what
the subscription price will be or what proportion of any rights will be
exercised at the time any rights offerings are effected in the future.
20
Shares of the Corporation's stock have historically traded at a substantial
discount to net asset value. At December 31, 2007, the closing market bid price
per share of the Corporation's Common Stock was $2.75, or 63.1% of the net asset
value per share at that date of $4.36. Accordingly, it is likely that in order
to induce existing shareholders or others to exercise rights to purchase shares,
the exercise price of the rights must be less than net asset value and/or market
value. In addition, given the number of shares outstanding and market
capitalization of the Corporation, in order to raise a material amount of money,
issuing a substantial number of rights may be appropriate.
Accordingly, the Board of Directors requests approval of the shareholders
to conduct one or more rights offerings for which shareholder approval is
required under NASDAQ rules, on such terms and conditions as may be determined
by the Board of Directors, for up to the total number of authorized but unissued
shares. At this date, 2,464,621 shares are issued and outstanding, and
10,000,000 shares are currently authorized. If the shareholders approve this
PROPOSAL 4, the Board of Directors will be authorized to conduct rights
offerings for up to a maximum of 7,535,379 shares based on the number of
currently authorized and unissued shares.
Any transaction will be undertaken only with the approval of the Board of
Directors on the basis that any such transaction is in the best interest of the
Corporation and its shareholders. Further, because the terms of any such
offering are not known at this time, the terms of such an offering, and the
securities issued thereunder, such as the price, voting rights and maturity
dates would be determined by the Corporation's Board of Directors and the
Pricing Committee.
If the Corporation issues additional securities as contemplated in this
PROPOSAL 4, those securities would be listed on the NASDAQ.
Representatives of KPMG LLP, the Corporation's principal accountants for
Fiscal Year 2008 and Fiscal Year 2007, are expected to be present at the 2008
Annual Meeting. These representatives will have the opportunity to make a
statement if they desire to do so and are expected to be available to respond to
appropriate questions.
Information Incorporated by Reference from Periodic Reports
With respect to PROPOSAL 4, the Corporation's financial statements and
related financial information required by Item 13(a) of Schedule 14A adopted
under the 1934 Act are incorporated hereby by this reference to: the
Corporation's Annual Report to Shareholders for Fiscal Year 2007, included as
exhibit 13 to the Corporation's report on Form 10-K filed with the SEC on
December 29, 2007, (the "Annual Report"). The Report accompanies this proxy
statement, but is not deemed a part of the proxy soliciting material, except to
the extent that portions thereof have been incorporated herein pursuant to the
preceding sentence.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR
AUTHRORIZING THE CORPORATION TO ISSUE RIGHTS TO ACQUIRE ANY AUTHORIZED SHARES OF
COMMON STOCK OF THE CORPORATION.
21
PROPOSAL 5
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
As recommended by the Audit Committee of the Corporation's Board of
Directors, on December 11, 2007, a majority of those members of the Board of
Directors of the Corporation who are not "interested persons" of the Corporation
(as defined in Section 2(a)(19) of the 1940 Act) voted in favor of the
appointment of KPMG LLP to serve as the Corporation's independent auditors for
the fiscal year ending September 30, 2008.
The appointment of KPMG LLP as independent auditors is subject to
ratification by the shareholders. If the shareholders ratify the selection of
KPMG LLP as the Corporation's auditors, they will also serve as independent
auditors for MorAmerica. A representative of KPMG LLP is expected to be present
at the 2008 Annual Meeting with an opportunity to make a statement, and will be
available to respond to appropriate questions.
In order to ratify the appointment of KPMG LLP as independent auditors for
the Corporation for the fiscal year ending September 30, 2008, the proposal must
receive the favorable vote of a majority of the shares entitled to vote and
represented at the 2008 Annual Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR THE RATIFICATION OF KPMG LLP AS THE INDEPENDENT AUDITORS FOR THE CORPORATION
FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 2008.
OTHER BUSINESS
The Board of Directors knows of no other business to be presented for
action at the 2008 Annual Meeting. If any matters do come before the 2008 Annual
Meeting on which action can properly be taken, it is intended that the proxies
shall vote in accordance with the judgment of the person or persons exercising
the authority conferred by the proxy at the 2008 Annual Meeting.
ADDITIONAL INFORMATION
Section 16(a) Beneficial Ownership Reporting Compliance
Pursuant to Section 16(a) of the 1934 Act, officers and directors of the
Corporation and persons beneficially owning 10% or more of the Corporation's
Common Stock (collectively, "reporting persons") must file reports on Forms 3, 4
and 5 regarding changes in their holdings of the Corporation's equity securities
with the SEC. Based solely upon a review of copies of these reports sent to the
Secretary of the Corporation and/or written representations from reporting
persons that no Form 5 was required to be filed with respect to Fiscal Year
2007, the Corporation believes that all Forms 3, 4, and 5 required to be filed
by all reporting persons have been properly and timely filed with the SEC.
Common Stock Ownership
As of January 31, 2008, there were 2,464,621 shares of Common Stock issued
and outstanding. The following table sets forth certain information as of
January 31, 2008, with respect to the Common Stock ownership of: (i) those
persons or groups (as that term is used in Section 13(d)(3) of the 1934 Act) who
beneficially own more than 5% of the Common Stock, (ii) each Director and
nominee for Director of the Corporation, and (iii) all Officers and Directors of
the Corporation, nine in number, as a group. Unless otherwise provided, the
address of those in the following table is 101 Second Street S.E., Suite 800,
Cedar Rapids IA 52401.
22
Name and Address of Amount and Nature Percent of Class of
Beneficial Owner Of Beneficial Ownership Voting Common Stock
---------------- ----------------------- -------------------
Atlas Management Partners, LLC(1) 804,689 Shares 32.65%
One South Main Street, Suite 1660, Salt Lake
City, Utah 84133
Bridgewater International Group, LLC(1) 804,689 Shares 32.65%
10500 South 1300 West, South Jordan, Utah
84095
Timothy A. Bridgewater(1) 809,689 Shares 32.85%
10500 South 1300 West
South Jordan, Utah 84095
James W. Eiler 0 Shares --
Michael W. Dunn 46,584 Shares 1.89%
Benjamin Jiaravanon(2) 804,689 Shares 32.65%
Ancol Barat, J1 Ancol VIII, No.1
Jakarta 14430 Indonesia
Gordon J. Roth(3) 5,151 Shares 0.21%
David R. Schroder(4) 77,416 Shares 3.14%
Kevin F. Mullane(4) 11,264 Shares 0.46%
Robert A. Comey(4) 57,019 Shares 2.31%
Michael H. Reynoldson(5) 0 Shares --
Geoffrey T. Woolley 151,314 Shares 6.14%
All Officers and Directors as a Group 1,159,437 Shares 47.04%
------------------------------------
(1) Information with respect to Atlas, BIG and Mr. Bridgewater is based
upon Amendment No. 1 to Schedule 13D, dated September 30, 2003, as subsequently
amended February 13, 2004, April 28, 2005 and April 30, 2005, filed by Atlas,
BIG and others with the SEC (collectively, the "Atlas Group 13D"). The Atlas
Group 13D disclosed that control over 804,689 shares of Common Stock owned by
BIG (the "BIG Shares") is governed by a Shareholder and Voting Agreement dated
September 29, 2003 among Atlas, BIG and Kent Madsen (the "Shareholder
Agreement"). The term of the Shareholder Agreement extends to March 1, 2010 and
may be extended in certain circumstances; however, the Shareholder Agreement may
also be terminated at any time by any party.
Under the Shareholder Agreement, BIG appointed Atlas as its limited proxy
to vote the BIG Shares, but BIG retains all other incidents of ownership of the
stock, including beneficial ownership and dispositive power. The Shareholder
Agreement also provides Atlas with certain rights of first refusal respecting
the BIG Shares and limits BIG's ability to otherwise dispose of the BIG Shares.
Pursuant to a Mutual Release and Waiver of Claims and Termination of Shareholder
and Voting Agreements among Atlas, BIG and the former managers of Atlas dated
23
April 28, 2005 and filed as part of the Atlas Group 13D, certain former managers
of Atlas, including Geoffrey Woolley and Kent Madsen, no longer have any
interests in Atlas and have no voting rights respecting the BIG Shares.
As voting Managing Director of Atlas, Mr. Bridgewater has shared control
over the voting power granted to Atlas under the Shareholder Agreement
respecting the BIG Shares, subject to the parties' rights under the Shareholder
Agreement. Mr. Bridgewater is also Managing Director of BIG and in that capacity
has shared control over the voting power granted to Atlas under the Shareholder
Agreement respecting the BIG Shares, subject to the parties' rights under the
Shareholder Agreement. Mr. Bridgewater also individually owns 5,000 shares of
Common Stock.
(2) Information with respect to Mr. Jiaravanon is based upon the Atlas
Group 13D. As the sole Managing Member of BIG, Mr. Jiaravanon has shared control
over the voting power granted to Atlas under the Shareholder Agreement
respecting the BIG Shares, subject to the parties' rights under the Shareholder
Agreement. To the extent that BIG may be deemed to be in control of the
Corporation as a result of beneficial ownership of the Company's Common Stock,
Mr. Jiaravanon, as the sole Managing Member of BIG, may be an "interested
person" of the Company, as that term is defined in Section 2(a)(19) of the 1940
Act.
(3) As a member of the Board of Managers of Eudaimonia, Mr. Roth will be an
"interested person" of the Corporation, as that as that term is defined in
Section 2(a)(19) of the 1940 Act, upon effectiveness of the New Advisory
Agreement.
(4) As principals, officers and directors of InvestAmerica, and as officers
of the Corporation and of MorAmerica, Messrs. Schroder, Mullane and Comey are
"interested persons" of the Corporation, as that term is defined in Section
2(a)(19) of the 1940 Act.
(5) As an officer of the Corporation and of MorAmerica, and as an officer
or director of several companies affiliated with InvestAmerica, Mr. Reynoldson
is an "interested person" of the Corporation, as that term is defined in Section
2(a)(19) of the 1940 Act.
Executive Officers of the Corporation
Current Officers
As affiliated persons of InvestAmerica, the current officers of the
Corporation listed in the chart below (the "Current Officers") are "interested
persons," as that term is defined in Section 2(a)(19) of the 1940 Act, of the
Corporation. The address for all Current Officers is 101 Second Street SE, Suite
800, Cedar Rapids, Iowa 52401.
The Current Officers also serve in similar capacities with MorAmerica and
serve in various capacities with the following companies which are under common
control with or are affiliated with InvestAmerica: InvestAmerica Venture Group,
Inc. (provides management and investment services to a private investment
partnership, the Iowa Venture Capital Fund, L.P.); InvestAmerica N.D.
Management, Inc. (provides management and investment services to NDSBIC, L.P.,
an SBIC); InvestAmerica ND, L.L.C. (general partner of NDSBIC, L.P.);
InvestAmerica L&C Management, Inc. (provides management and investment services
to Lewis & Clark Private Equities, L.P., an SBIC ("Lewis")); InvestAmerica L&C,
LLC (general partner of Lewis); InvestAmerica NW Management, Inc. (provides
management and investment services to Invest Northwest, L.P. ("NWLP") (private
venture capital fund); and InvestAmerica NW, LLC (general partner of NWLP).
As representatives of InvestAmerica and its affiliates, the Current
Officers also serve on the boards of directors of several of the Corporation's
portfolio companies and the portfolio companies of other managed funds.
24
Term of Number of
Office Portfolios
Position(s) and in Fund Other
Held with Length Complex Directorships
Name the of Time Principal Occupation(s) Overseen by Held by
and Age Corporation Served During Past 5 Years Officer (1) Officer (2)
David R. President Since Chief Compliance Officer and Treasurer of the One None
Schroder, 65 and April, Corporation, March, 2004-April, 2005; President,
Secretary 2005 Secretary and a Director of the Corporation,
1994-2004. Mr. Schroder also serves as
President, Assistant Secretary and Director of
InvestAmerica. He received a B.S.F.S. from
Georgetown University and an M.B.A. from the
University of Wisconsin.
Robert A. Chief Since Chief Financial Officer, Executive Vice One None
Comey, 62 Financial April, President, Treasurer and a Director of the
Officer, 2005 Corporation, 1994-2004; Director of MorAmerica,
Executive 1989-2004; Executive Vice President and
Vice Assistant Secretary of MorAmerica, 1994-2004;
President, Treasurer of MorAmerica, 1994-April, 2005. Mr.
Chief Comey has been the Executive Vice President,
Compliance Treasurer, Assistant Secretary and a Director of
Officer, InvestAmerica since 1994. He received an A.B. in
Treasurer Economics from Brown University and an M.B.A.
and from Fordham University.
Assistant
Secretary
Kevin F. Senior Vice Since Vice President of the Corporation, 1994-1999; One None
Mullane, 52 President April, Vice President of MorAmerica, 1994-1998; Senior
2005 Vice President of the Corporation, 2000-2004;
Senior Vice President of MorAmerica, 1999-2004.
Mr. Mullane is a Senior Vice President,
Assistant Secretary and a Director of
InvestAmerica. He received an M.B.A. and an M.S.
in Business Administration, Emphasis in
Accounting, from Rockhurst Jesuit University.
Michael H. Vice Since Vice President of MorAmerica since 2002. Mr. One None
Reynoldson, 42 President April, Reynoldson is Vice President of InvestAmerica.
2005 He received an M.B.A. from the University of
Iowa and a B.A. in Business Administration from
Washington State University.
(1) As the Corporation conducts all of its investments through MorAmerica, the
Corporation and MorAmerica are deemed one "fund."
(2) "Other Directorships" indicate other companies which (i) have a class of
securities registered under section 12 of the 1934 Act, (ii) are subject to
section 15(d) of the 1934 Act, or (iii) are registered investment companies
under the 1940 Act.
Proposed Officers
Following shareholder approval of the New Advisory Agreement, all of the
Current Officers will resign their respective positions as officers of the
Corporation and in their place the individuals listed in the chart below
25
(the "Proposed Officers") will become executive officers of the Corporation. As
affiliated persons of Eudaimonia, the Proposed Officers will be "interested
persons," as that term is defined in Section 2(a)(19) of the 1940 Act, of the
Corporation. The address for all Proposed Officers is 580 2nd Street, Suite 102,
Encinitas, California 92024.
Number of
Term of Portfolios
Office in Fund
Position(s) and Complex to Other
Held with Length be Overseen Directorships
Name the of Time Principal Occupation(s) by Officer Held by
and Age Corporation Served During Past 5 Years (1) Officer (2)
Travis Prentice, President President and Chief Investment Officer of One None
32 and CEO Eudaimonia Asset Management, a firm he
co-founded in 2007. In addition, he serves as
portfolio manager for the firm's Micro Cap
Growth and Ultra Micro Cap Growth investment
strategies. Prior to founding Eudaimonia Asset
Management, Mr. Prentice was a Partner,
Managing Director and Portfolio Manager with
Nicholas-Applegate Capital Management where he
had lead portfolio management responsibilities
for their Micro and Ultra Micro Cap investment
strategies and a senior role in the firm's US
Micro/Emerging Growth team. He brings ten
years of institutional investment experience
from Nicholas Applegate where he originally
joined in 1997. He holds a Masters in Business
Administration from San Diego State University
and a Bachelor of Arts in Economics and a
Bachelor of Arts in Psychology from the
University of Arizona.
Derek Gaertner, Chief Vice President and Chief One None
36 Financial Operating/Compliance Officer of Eudaimonia
Officer and Asset Management. Prior to joining
Chief Eudaimonia Asset Management in 2007, Mr.
Compliance Gaertner was the Chief Financial Officer of
Officer Torrey Pines Capital Management, a global
long/short equity hedge fund located in San
Diego, California. He was also responsible for
overseeing the firm's regulatory compliance
and operations functions. Prior to joining
Torrey Pines Capital Management in 2004, Mr.
Gaertner was a Tax Manager with
PricewaterhouseCoopers LLP. He has over 8
years of public accounting experience in both
the audit and tax departments. Mr. Gaertner is
a Certified Public Accountant and has a
Bachelors of Science in Accounting from the
University of Southern California and Masters
of Science in Taxation from Golden Gate
University, San Francisco.
26
Number of
Term of Portfolios
Office in Fund
Position(s) and Complex to Other
Held with Length be Overseen Directorships
Name the of Time Principal Occupation(s) by Officer Held by
and Age Corporation Served During Past 5 Years (1) Officer (2)
Montie L. Treasurer Senior Vice President and Portfolio Manager One None
Weisenberger, and Secretary of Eudaimonia, a firm he co-founded in
40 2007. Mr. Weisenberger has primary
portfolio management responsibilities for the
firm's Small Cap Growth investment strategy.
Prior to founding Eudaimonia Asset Management,
Mr. Weisenberger was a Senior Vice President
and Portfolio Manager at Nicholas Applegate
Capital Management where he had lead portfolio
management responsibilities for the firm's
Traditional Small-to-Mid Cap Growth strategy
and was a senior member of the firm's US Micro
/ Emerging Growth team since 2001. Prior to
joining Nicholas Applegate Capital Management,
Montie was a research analyst at Adams,
Harkness & Hill, now Cannacord Adams, an
emerging growth investment bank located in
Boston, MA. Mr. Weisenberger also spent more
than five years as a finance and strategic
management consultant, most recently as a
manager with KPMG, LLP. Mr. Weisenberger
brings more than twelve years of combined
investment management and financial analysis
experience to Eudaimonia Asset Management. He
holds a Masters in Business Administration and
a Masters in Health Administration from
Georgia State University and a Bachelor of
Arts in Business Administration from Flagler
College.
Meetings and Committees of the Board of Directors
The Audit Committee and the Corporate Governance/Nominating Committee
operated during Fiscal Year 2007 to assist the Board of Directors in carrying
out its duties. During Fiscal Year 2007, seven meetings of the Board of
Directors were held. In addition, four meetings of the Audit Committee and two
meetings of the Corporate Governance/Nominating Committee were held. Each of the
Directors who are nominated for election at the 2008 Annual Meeting, except
Benjamin Jiaravanon, attended at least 75% of the aggregate meetings of the
Board of Directors and the meetings held by the committees of the Board of
Directors on which each Director served during fiscal year 2007.
The Corporation strongly encourages its Directors to attend all annual
meetings, and all Directors attended the Corporation's 2007 Annual Meeting of
shareholders.
27
Audit Committee
The Audit Committee makes recommendations to the Board of Directors
regarding the engagement of the independent auditors for audit and non-audit
services; evaluates the independence of the auditors and reviews with the
independent auditors the fee, scope and timing of audit and non-audit services.
The Audit Committee also is charged with monitoring the Corporation's Policy
Against Insider Trading and Prohibited Transactions and its Code of Conduct. The
Audit Committee presently consists of Michael W. Dunn (Chair), Geoffrey T.
Woolley and James W. Eiler. Each member of the Audit Committee is considered
"independent" under applicable NASDAQ listing standards. The Board of Directors
has determined that James W. Eiler is an Audit Committee financial expert.
Corporate Governance/Nominating Committee
The Corporate Governance/Nominating Committee was appointed by the Board of
Directors to identify and recommend approval of all Director nominees to be
voted on at the Annual Shareholders' Meetings, to recommend corporate governance
guidelines for the Corporation, to lead the Board of Directors in its annual
review of the Board's performance, and to recommend to the Board of Directors
nominees for each committee of the Board. On December 22, 2003, the Board of
Directors approved the Corporate Governance/Nominating Committee Charter, which
was subsequently revised on February 28, 2006 and was attached as an appendix to
the Proxy Statement in Fiscal Year 2006.
The Corporate Governance/Nominating Committee may seek input from other
Directors or senior management in identifying candidates. Shareholders may
propose nominees for Director by following the procedures set forth in the
section of this Proxy Statement entitled "SHAREHOLDER PROPOSALS FOR 2009 ANNUAL
MEETING."
The qualifications used in evaluating Director candidates include but are
not limited to: independence, time commitments, attendance, business judgment,
management, accounting, finance, industry and technology knowledge, as well as,
personal and professional ethics, integrity and values. In addition, as set
forth in its Charter, the Corporate Governance/Nominating Committee believes
that having directors with relevant experience in business and industry,
government, finance and other areas is beneficial to the Board of Directors as a
whole. The Corporate Governance/Nominating Committee further reviews the
qualifications of any candidate in the context of the current composition of the
Board of Directors and the needs of the Corporation. The same identifying and
evaluating procedures apply to all candidates for director nomination, whether
nominated by shareholders or by the Corporate Governance/Nominating Committee.
The Corporate Governance/Nominating Committee has approved all of the nominees
for Director identified above.
The Corporate Governance/Nominating Committee also: (i) oversees the
formulation of, and recommends for adoption to the Board of Directors, a set of
corporate governance guidelines; (ii) periodically reviews and reassesses the
corporate governance guidelines and recommends appropriate changes to the Board
of Directors for approval; (iii) reviews and approves annually the Corporation's
compensation program for service on the Board of Directors or any of its
committees; (iv) performs an annual assessment of the Board's performance and
periodically reports its Board assessments to the Board; (v) annually reviews
and assesses its Charter and makes recommendations of appropriate changes to the
Board; (vi) performs periodic reviews of all Board committee structure and
governance charters; (vii) recommends appropriate changes to Board committee
composition and responsibility to the Board; and (viii) reviews any conflicts of
interest.
The Corporate Governance/Nominating Committee consists of James W. Eiler
and Michael Dunn. All members of the Corporate Governance/Nominating Committee
are considered "independent" under applicable NASDAQ listing standards.
28
Investment and Valuation Committee
The Investment and Valuation Committee assists the full Board of Directors
with the periodic valuation of the Companies' investment securities and with
oversight of the Corporation's investment portfolio and evaluates any proposed
revisions to the Corporation's investment policy. The Investment and Valuation
Committee also assures compliance with the Corporation's valuation policy and
policies regarding investments made in participation with other funds managed by
InvestAmerica, with entities controlling, controlled by or under common control
with InvestAmerica, and with other affiliates. The voting members of the
Investment and Valuation Committee presently include Michael W. Dunn and James
W. Eiler. Both members are independent under NASDAQ listing standards. The
Investment and Valuation Committee did not hold any meetings in Fiscal Year
2007.
Audit Committee Report
The Audit Committee of the Board of Directors of the Corporation was
established as a separately designated committee in accordance with section
3(a)(58)(A) of the 1934 Act and is composed of three directors. It operates
under a written charter which was approved by the Board of Directors and
subsequently amended by the Audit Committee on February 25, 2003, and was
attached as an appendix to the Proxy Statement in the Corporation's fiscal Year
ended September 30, 2006 ("Fiscal Year 2006"). The members of the Audit
Committee during Fiscal Year 2007 were Michael W. Dunn (Chair), Jasja Kotterman
and Gordon J. Roth. Mr. Roth was considered the Audit Committee's financial
expert during Fiscal Year 2007. Under the terms of the charter and the listing
standards applicable to companies listed on the NASDAQ Capital Market, all of
the Audit Committee members were considered to be independent.
Management is responsible for the Corporation's internal controls and the
financial reporting process. The independent accountants are responsible for
performing an independent audit of the Corporation's consolidated financial
statements in accordance with generally accepted auditing standards and to issue
a report thereon. The Audit Committee's responsibility is to monitor and oversee
these processes.
In this regard, the Audit Committee has reviewed and discussed the audited
financial statements for Fiscal Year 2007 with management and discussed other
matters related to the audit with the independent auditors. Management
represented to the Audit Committee that the Corporation's consolidated financial
statements were prepared in accordance with accounting principles generally
accepted in the United States of America. The Audit Committee met with the
independent auditors, with and without management present, and discussed with
the independent auditors matters required to be discussed by Statement on
Auditing Standards No. 61, as amended (Communication with Audit Committees). The
independent auditors also provided to the Audit Committee the written
disclosures and the letter required by Independence Standards Board Standard No.
1 (Independence Discussions with Audit Committees), and the Audit Committee
discussed with the independent auditors the firm's independence.
The Corporation paid KPMG LLP ("KPMG"), the Corporation's independent
auditors for Fiscal Year 2007, the following amounts during Fiscal Year 2007:
Audit Fees (including quarterly reviews, security counts, and audit of Form 468): $ 71,225
Audit-related services $ -0-
Financial Information Systems Design and Implementation:
Non-Audit Fees:
Preparation of federal and state income tax returns $ 22,700
Other tax research, consultation, correspondence and advice $ -0-
The Audit Committee has considered whether KPMG has maintained its
independence during Fiscal Year 2007.
29
Based upon the Audit Committee's discussions with management and the
independent auditors, and the Audit Committee's review of representations of
management and the report of the independent auditors to the Audit Committee,
the Audit Committee recommended that the Corporation's Board of Directors
include the audited consolidated financial statements in the Corporation's
Annual Report on Form 10-K for Fiscal Year 2007, filed with the SEC.
AUDIT COMMITTEE:
Michael W. Dunn, Chair
Jasja Kotterman
Gordon J. Roth
Independent Auditor Fees and Services
The following table presents fees paid for professional services rendered
by KPMG for the Fiscal Year 2007 and Fiscal Year 2006:
Fee Category Fiscal Year 2007 Fees Fiscal Year 2006 Fees
----------------------------------- ---------------------------- ----------------------------
$71,225 $67,800
Audit Fees
-0- -0-
Audit-Related Fees
$22,700 $25,900
Tax Fees
-0- -0-
All Other Fees
---------------------------- ----------------------------
$93,925 $93,700
Total Fees
Audit Fees were for professional services rendered for the audit of the
Corporation's consolidated financial statements and review of the interim
consolidated financial statements included in quarterly reports and services
that are normally provided by KPMG in connection with statutory and regulatory
filings or engagements and include quarterly reviews, security counts and audit
of SBA Form 468.
Audit-Related Fees were for assurance and related services that are
reasonably related to the performance of the audit or review of the
Corporation's consolidated financial statements and are not reported under
"Audit Fees." These services include accounting consultations in connection with
acquisitions, consultations concerning financial accounting and reporting
standards.
Tax Fees were for professional services for federal, state and
international tax compliance, tax advice and tax planning and include
preparation of federal and state income tax returns, and other tax research,
consultation, correspondence and advice.
All Other Fees are for services other than the services reported above. The
Corporation did not pay any fees for such other services in Fiscal Year 2007 or
Fiscal Year 2006.
The Audit Committee has concluded the provision of the non-audit services
listed above is compatible with maintaining the independence of KPMG. KPMG did
not bill the Corporation's investment advisor, InvestAmerica, for any non-audit
services in either Fiscal Year 2007 or Fiscal Year 2006.
30
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit
Services of Independent Auditors
The Audit Committee pre-approves all audit and permissible non-audit
services provided by the independent auditors. These services may include audit
services, audit-related services, tax services and other services. Pre-approval
is generally provided for up to one year and any pre-approval is detailed as to
the particular service or category of services and is generally subject to a
specific budget. The independent auditors and management are required to
periodically report to the Audit Committee regarding the extent of services
provided by the independent auditors in accordance with this pre-approval, and
the fees for the services performed to date. The Audit Committee may also
pre-approve particular services on a case-by-case basis.
Compensation of Directors and Executive Officers
Compensation Committee
The Corporation does not have a separate compensation committee utilized to
determine the appropriate compensation payable to the Directors due to the size
of the Corporation. The Corporate Governance/Nominating Committee, however, is
responsible for, among other things, annually reviewing and approving the
Corporation's compensation policies, and operates under a Charter attached as an
appendix to the Proxy Statement in Fiscal Year 2006. The Charter provides that
the Corporate Governance/Nominating Committee may form subcommittees and
delegate its responsibilities to subcommittees where appropriate. The
Corporation's executive officers do not participate in determining or
recommending the compensation for the Directors or the executive officers;
however, at the time the Compensation Policy discussed below was initially
adopted by the Board of Directors, certain of the Corporation's officers did
serve on the Board of Directors. Accordingly, the Compensation Policy provided
that no Director would be compensated by the Corporation if the Director also
served as an officer of an investment adviser of the Corporation. The Corporate
Governance/Nominating Committee has not engaged consultants to assist it in
these determinations.
Compensation Committee Interlocks and Insider Participation
The Corporate Governance/Nominating Committee presently consists of James
W. Eiler and Michael Dunn. The members of the Corporate Governance/Nominating
Committee during Fiscal Year 2007 were Jasja Kotterman (Chair) and Michael Dunn.
All members of the Corporate Governance/Nominating Committee are considered
"independent" under applicable NASDAQ listing standards. No members of the
Committee have ever served as officers or employees of the Corporation. However,
at the time the Compensation Policy was adopted by the Board of Directors,
certain of the Corporation's executive officers did serve on the Board of
Directors. No executive officers of the Corporation served, during Fiscal Year
2007: (i) on a compensation committee of another entity which had an executive
officer serving on the Corporate Governance/Nominating Committee; (ii) as a
director of another entity which had an executive officer serving on the
Corporate Governance/Nominating Committee; or (iii) as a member of a
compensation committee of another entity which had an executive officer who
served as a Director of the Corporation.
31
Compensation Committee Report
The Corporate Governance/Nominating Committee has not reviewed or discussed
with the Corporation's management the compensation indicated below under the
caption of "Summary Compensation Table" because the Corporation's standing
policy is to not compensate executive officers, and because compensation of the
Board and its committees is determined only by the Board of Directors and the
Corporate Governance/Nominating Committee. The Corporate Governance/Nominating
Committee did recommend to the Board of Directors that the information provided
below under the caption "Summary Compensation Table" be included in this Proxy
Statement.
CORPORATE GOVERNANCE /
NOMINATING COMMITTEE:
Jasja Kotterman, Chair
Michael W. Dunn
Compensation of Directors
The compensation of the Corporation's Directors is governed by a
compensation policy adopted via resolution of the Board of Directors on February
24, 2004 and amended on July 18, 2006 (as amended, the "Compensation Policy").
The Compensation Policy provides that: (i) Directors of the Corporation and of
MorAmerica who are also officers or directors of any investment advisor of
either the Corporation or of MorAmerica receive no compensation for serving on
the Boards of Directors of the Corporation and of MorAmerica; (ii) the Chairman
of the Board receives an annual retainer of $24,000; (iii) all other outside
Directors receive an annual retainer of $8,000; (iv) all outside Directors other
than the Chairman of the Board receive $1,000 for each Board of Directors
meeting attended (whether such attendance is in person or by telephone) if the
meeting is scheduled as an in-person meeting and $500 for each Board of
Directors meeting attended by telephone if the meeting is scheduled to be held
by teleconference; (v) all Directors other than the Chairman of the Board
receive $250 for each committee meeting attended (whether such attendance is in
person or by telephone) if the committee meeting is scheduled as an in-person
meeting and $250 for each committee meeting attended by telephone if the meeting
is scheduled to be held by teleconference; (vi) the Directors do not receive
separate compensation for serving on the Board of Directors of MorAmerica; and
(vii) the Corporation reimburses all reasonable expenses of the Directors and
the Chairman of the Board in attending Board of Directors and committee
meetings. Directors' meetings are normally held on a quarterly basis, with
additional meetings held as needed. All Director compensation is payable
quarterly, in arrears.
Summary Compensation Table
The following table sets forth the details of the compensation paid to
Directors during Fiscal Year 2007, which includes compensation for serving on
the Boards of Directors of the Corporation and MorAmerica (the only wholly owned
subsidiary of the Corporation). The Corporation does not compensate its
executive officers. For purposes of the following table, the Fund Complex (as
that term is defined in Item 22(a)(1)(v) of Schedule 14A adopted under the 1934
Act) consists solely of the Corporation and MorAmerica. The Corporation
presently maintains no pension or retirement plans for its Directors.
Aggregate Compensation
Name and Position From Corporation and Fund Complex(1)
----------------- ------------------------------------
Geoffrey T. Woolley $24,000
Chairman of the Board
Benjamin Jiaravanon, Director $0
Jasja De Smedt Kotterman, Director(2) $14,000
32
Michael W. Dunn, Director $14,000
Gordon J. Roth, Director $13,750
------------------------------------
1 Consists only of directors' fees and does not include reimbursed
expenses. The Corporation presently maintains no pension or retirement plans for
its Directors.
2 Ms. Kotterman is not standing for re-election at the 2008 Annual Meeting.
Compensation of Executive Officers
The Corporation has no employees and does not pay any compensation to any
of its officers. The Corporation has not compensated its executive officers in
any of the last three fiscal years. The Corporation does not provide any of
bonus, stock options, stock appreciation rights, non-equity incentive plans,
non-qualified deferred compensation or pension benefits to its executive
officers. Further, the Corporation has no agreements with any officer pertaining
to change in control payments. All of the Corporation's current officers and
staff are employed by InvestAmerica, which pays all of their cash compensation.
Upon the effectiveness of the New Investment Advisory Agreement, all of the
Corporation's officers and staff will be employed by Eudaimonia, which will pay
all of their cash compensation.
SHAREHOLDER PROPOSALS FOR 2009 ANNUAL MEETING
Under the rules of the SEC, any shareholder proposal to be considered by
the Corporation for inclusion in the proxy material for the February, 2009
Annual Meeting of shareholders must be received by the Secretary of the
Corporation, 101 Second Street, S.E., Suite 800, Cedar Rapids, Iowa 52401, no
later than [October 31, 2008]. The submission of a proposal does not guarantee
its inclusion in the proxy statement or presentation at the annual meeting
unless certain securities laws requirements are met.
In addition, under the Corporation's Amended and Restated Bylaws,
shareholders desiring to nominate persons for election as Directors or to
propose other business for consideration at an annual meeting must notify the
Secretary of the Corporation in writing not less than 60 days, nor more than 90
days, prior to the date on which the Corporation first mailed its proxy
materials for the prior year's annual meeting. Accordingly, shareholders
desiring to submit a proposal for consideration at the 2009 Annual Meeting of
shareholders must give written notice of the proposal to the Secretary of the
Corporation not earlier than [November 30, 2008], and not later than [December
30, 2008]. The Corporation's proxies will have discretionary authority to vote
with respect to any shareholder proposal that may be presented at an annual
meeting which does not comply with these notice requirements. Shareholders'
notices must contain the specific information set forth in the Corporation's
Amended and Restated Bylaws. A copy of the Corporation's Amended and Restated
Bylaws will be furnished to shareholders without charge upon written request to
the Secretary of the Corporation.
SHAREHOLDER COMMUNICATION
Pursuant to the policy adopted by the Board of Directors on February 28,
2006, any shareholder wishing to communicate with any of the Corporation's
Directors regarding matters related to the Corporation may provide
correspondence to the Director in care of Secretary, MACC Private Equities Inc.,
101 Second Street S.E., Suite 800, Cedar Rapids IA 52401. The Chairman of the
Corporate Governance/Nominating Committee will review and determine the
appropriate response to questions from shareholders, including whether to
forward communications to individual Directors. The independent members of the
Board of Directors review and approve the shareholder's communication process
periodically to ensure effective communication with the shareholders.
33
EXPENSES OF SOLICITATION OF PROXIES
In addition to the use of the mails, proxies may be solicited by personal
interview and telephone by directors, officers and other employees of the
Corporation, who will not receive additional compensation for such services. The
Corporation has employed Mellon Investor Services, LLC ("Mellon") to aid in the
solicitation of proxies at an estimated fee of $5,000. The Corporation's
agreement with Mellon to solicit proxies generally provides that Mellon will:
(i) assist the Corporation in its planning and organization of proxy
solicitation matters, (ii) establish communications with banks, brokers and
other parties for purposes of the solicitation, (iii) disseminate all proxy
materials in a timely manner, (iv) solicit and collect proxies according to
Mellon's calling and reporting procedures.
The Corporation will also request brokerage houses, nominees, custodians
and fiduciaries to forward soliciting materials to the beneficial owners of
stock held of record by them and will reimburse such persons for forwarding
materials. The cost of soliciting proxies will be borne by the Corporation.
PERIODIC REPORTS
The Corporation's financial statements and related financial information
required by Item 13(a) of Schedule 14A under the 1934 Act are incorporated
herein by this reference to the Annual Report. The Annual Report accompanies
this proxy statement, but is not deemed a part of the proxy soliciting material,
except to the extent that portions thereof have been incorporated herein
pursuant to the preceding sentence.
A copy of the Fiscal Year 2007 Form 10-K report to the SEC, excluding
exhibits, will be mailed to shareholders without charge upon written request to
Secretary, MACC Private Equities Inc., 101 Second Street, S.E., Suite 800, Cedar
Rapids, Iowa 52401 or by calling (319) 363-8249. Such requests must set forth a
good faith representation that the requesting party was either a holder of
record or a beneficial owner of Common Stock of the Corporation on January 31,
2008. Exhibits to the Form 10-K will be mailed upon similar request and payment
of specified fees.
Please date, sign and return the proxy at your earliest convenience in the
enclosed envelope. No postage is required for mailing in the United States. A
prompt return of your proxy will be appreciated as it will save the expense of
further mailings and telephone solicitations.
|
By Order of the Board of Directors
|
|
|
|
David R. Schroder, Secretary
|
Cedar Rapids, Iowa
___________, 2008
34
APPENDIX A
New Investment Advisory Agreement
1
INVESTMENT ADVISORY AGREEMENT
This INVESTMENT ADVISORY AGREEMENT (this "Agreement") is entered into
as of ___________, 2008 by and between MACC PRIVATE EQUITIES INC., a corporation
organized under the laws of the State of Delaware (the "Company"), and
EUDAIMONIA ASSET MANAGMENT, LLC, a limited liability company organized under the
laws of the State of California ("Eudaimonia").
R E C I T A L S
WHEREAS, the Company is a closed-end investment company that has elected to
be regulated as a business development company (a "BDC") under the Investment
Company Act of 1940, as amended (the "1940 Act");
WHEREAS, Eudaimonia is qualified to provide investment advisory services to
the Company and is registered as an investment advisor under the Investment
Advisors Act of 1940, as amended; and
WHEREAS, this Agreement is subject to approval by the holders of a
majority, as defined in the 1940 Act, of the Company's outstanding voting
securities and will become effective as of the date of such approval (the
"Effective Date").
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the parties hereto agree as follows:
Section 1. Definitions.
1.1 The "1940 Act" has the meaning set forth in the first recital hereof.
1.2 "Affiliate" shall have the meaning given under the 1940 Act.
1.3 "Assets Under Managemient" shall mean the total value of the Company's
assets managed by Eudaimonia under this Agreement, less any cash balances and
cash equivalent investments of the Company which are not invested in debt or
equity securities of Portfolio Companies in accordance with the Company's
investment objectives, calculated as of the end of each month during the term of
this Agreement.
1.4 "Capital Losses" are those which are placed, consistent with generally
accepted accounting principles, on the books of the Company and which occur
when:
(a) An actual or realized loss is sustained owing to Portfolio Company
or investment events including, but not limited to, liquidation, sale or
bankruptcy;
1
(b) The Board of Directors of the Company determines that a loss or
depreciation in value from the value on the date of this Agreement should
be taken by the Company in accordance with generally accepted accounting
principles ("GAAP") and the Company's Valuation Policy then in effect and
is shown on its books as a part of the periodic valuation of the Portfolio
Companies by the Board of Directors ("Unrealized Depreciation"); or
(c) Capital Losses are adjusted for reverses of depreciation when the
Board of Directors determines that a value should be adjusted upward and
the investment value remains at or below original cost.
For purposes of this definition, in any case where the Board of Directors of the
Company writes down the value of any investment in the Company's portfolio (in
accordance with the standards set forth in subsection 1.4(b) above), (i) such
reduction in value shall result in a new cost basis for such investment and (ii)
the most recent cost basis for such investment shall thereafter be used in the
determination of any Realized Capital Gains or Capital Losses in the Company's
portfolio (i.e., there shall be no double-counting of losses when a security
(whose value has declined in a prior period) is ultimately sold at a price below
its historical cost).
1.5 The "Company" shall mean MACC Private Equities Inc., a Delaware
corporation.
1.6 "Eudaimonia" shall mean Eudaimonia Asset Management, LLC, a California
limited liability company.
1.7 "Existing Portfolio Company" or "Existing Portfolio Companies" shall
mean any Portfolio Company in which the Company or MorAmerica has made an
investment prior to the Effective Date.
1.8 "MorAmerica" shall mean the Company's wholly-owned subsidiary,
MorAmerica Capital Corporation, an Iowa corporation.
1.9 "Net Capital Gains" shall mean Realized Capital Gains net of Capital
Losses determined in accordance with GAAP.
1.10 "New Portfolio Company" or "New Portfolio Companies" shall mean any
Portfolio Company, other than an Existing Portfolio Company, in which the
Company may make an investment after the Effective Date.
1.11 "Other Venture Capital Funds" has the meaning set forth in subsection
3.2.
1.12 "Portfolio Company" or "Portfolio Companies" shall mean any entity in
which the Company may make an investment and with respect to which Eudaimonia
will be providing services pursuant hereto, which investments may include
ownership of capital stock, loans, receivables due from a Portfolio Company or
other debtor on sale of assets acquired in liquidation and assets acquired in
liquidation of any Portfolio Company.
2
1.13 "Realized Capital Gains" shall mean capital gains after deducting the
cost and expenses necessary to achieve the gain (e.g., broker's fees). For
purposes of this Agreement, capital gains are Realized Capital Gains upon the
cash sale of the capital stock or assets of a Portfolio Company or any other
asset or item of property managed by Eudaimonia pursuant to the terms hereof or
any Realized Capital Gain has occurred in accordance with GAAP which is not cash
as described in the following sentence. Realized Capital Gains other than cash
gains, shall be recorded and calculated in the period the gain is realized;
however in determining payment of any incentive fee, the payment shall be made
when the cash is received. The amount of the fee earned on gains other than cash
shall be recorded as incentive fees payable on the financial statements of the
Company.
1.14 "SEC" shall mean the United States Securities and Exchange Commission.
Section 2. Investment Advisory Engagement. The Company hereby engages
Eudaimonia as its investment advisor.
2.1 As such, Eudaimonia will:
(a) Manage, render advice with respect to, and make decisions
regarding the acquisition and disposition of securities in accordance with
applicable law and the Company's investment policies as set forth in
writing by the Board of Directors, to include (without limitation) the
search and marketing for investment leads, screening and research of
investment opportunities, maintenance and expansion of a co-investor
network, review of appropriate investment legal documentation,
presentations of investments to the Company's Board of Directors (when and
as required), closing of investments, monitoring and management of
investments and exits, preparation of valuations, management of
relationships with the SEC, shareholders, outside auditors, and the
provision of other services appropriate to the management of a BDC;
(b) Make available and, if requested by Portfolio Companies or
entities in which the Company is proposing to invest, render managerial
assistance to, and exercise management rights in, such Portfolio Companies
and entities as appropriate to maximize return for the Company and to
comply with regulations;
(c) Maintain office space and facilities to the extent required by
Eudaimonia to provide adequate management services to the Company;
(d) Maintain the books of account and other records and files for the
Company, but not to include auditing services; and
(e) Report to the Company's Board of Directors, or to any committee or
officers acting pursuant to the authority of the Board, at such reasonable
times and in such reasonable detail as the Board deems appropriate in order
to enable the Company to determine that investment policies are being
observed and implemented and that the obligations of Eudaimonia hereunder
are being fulfilled. Any investment program undertaken by Eudaimonia
pursuant
3
hereto and any other activities undertaken by Eudaimonia on behalf of the
Company shall at all times be subject to applicable law and any directives
of the Company's Board of Directors or any duly constituted committee or
officer acting pursuant to the authority of the Company's Board of
Directors.
2.2 Eudaimonia will be responsible for the following expenses: its staff
salaries and fringe benefits, office space, office equipment and furniture,
communications, travel, meals and entertainment, conventions, seminars, office
supplies, dues and subscriptions, hiring fees, moving expenses, repair and
maintenance, employment taxes, in-house accounting expenses and minor
miscellaneous expenses.
Eudaimonia will pay for its own account all expenses incurred in
rendering the services to be rendered hereunder. Without limiting the generality
of the foregoing, Eudaimonia will pay the salaries and other employee benefits
of the persons in its organization whom it may engage to render such services,
including without limitation, persons in its organization who may from time to
time act as officers of the Company.
Notwithstanding the foregoing, Eudaimonia will earn incentive compensation
on a quarterly basis, which shall not be deemed part of compensation or other
employee benefits for the purpose of this paragraph.
2.3 In connection with the services provided, Eudaimonia will not be
responsible for the following expenses which shall be the sole responsibility of
the Company and will be paid promptly by the Company: auditing fees; all legal
expenses; legal fees normally paid by Portfolio Companies; appropriate trade
association fees; brochures, advertising, marketing and publicity costs;
interest on debt; fees to the Company and its directors and Board fees; any fees
owed or paid to the Company or fund managers; any and all expenses associated
with property of a Portfolio Company taken or received by the Company or on its
behalf as a result of its investment in any Portfolio Company; all
reorganization and registration expenses of the Company; the fees and
disbursements of the Company's counsel, accountants, custodian, transfer agent
and registrar; fees and expenses incurred in producing and effecting filings
with federal and state securities administrators; costs of periodic reports to,
and other communications with the Company's shareholders; fees and expenses of
members of the Company's Board of Directors who are not directors, officers,
employees or Affiliates of Eudaimonia or of any entity which is an Affiliate of
Eudaimonia; premiums for the fidelity bond, if any, maintained by Eudaimonia
pursuant to Section 17 of the 1940 Act; premiums for directors and officers
insurance maintained by the Company; all transaction costs incident to the
acquisition, management and protection of and disposition of securities by the
Company; and any other expenses incurred by or on behalf of the Company that are
not expressly payable by Eudaimonia under Section 2.2. above.
2.4 Subject to approval by the Board of Directors of the Company and in
accordance with the 1940 Act, Eudaimonia may retain one or more subadvisors to
assist it in performance of its duties hereunder.
4
Section 3. Nonexclusive Obligations; Co-investments.
3.1 The obligations of Eudaimonia to the Company are not exclusive.
Eudaimonia and its Affiliates, may in their discretion, manage other venture
capital funds and render the same or similar services to any other person or
persons who may be making the same or similar investments. The parties
acknowledge that Eudaimonia may offer the same investment opportunities as may
be offered to the Company to other persons for whom Eudaimonia is providing
services. Neither Eudaimonia nor any of its Affiliates shall in any manner be
liable to the Company by reason of the activities of Eudaimonia or its
Affiliates on behalf of other persons and funds as described in this paragraph
and any conflict of interest arising therefrom is hereby expressly waived.
3.2 Should Eudaimonia or any of its Affiliates agree to perform or
undertake any investment management services described in Section 3.1 for any
registered or unregistered investment company in addition to the Company,
Eudaimonia will notify the Company, in writing, not later than the commencement
of such agreement or the initial provision of such services.
3.3 Any such investment management services and any co-investments shall at
all times be provided in strict accordance with rules and regulations under the
1940 Act, Eudamonia's asset allocation policy required thereunder and any
exemptive order thereunder applicable to the Company.
Section 4. Services to Portfolio Companies.
4.1 It is acknowledged that as a part of the services to be provided by
Eudaimonia hereunder, certain of its employees, representatives and agents will
act as members of the board of directors of individual Portfolio Companies, will
vote the shares of the capital stock of Portfolio Companies, and make other
decisions which may effect the near-and the long-term direction of a Portfolio
Company. Unless otherwise restricted hereafter by the Company in writing, in
regard to such actions and decisions the Company hereby appoints Eudaimonia (and
such officers, directors, employees, representatives and agents is it shall
designate) as its proxy, as a result of which Eudaimonia shall have the
authority, in its performance of this Agreement, to make decisions and to take
such actions, without specific authority from the Board of Directors of the
Company, as to all matters which are not hereby restricted.
4.2 All fees, including director's fees that may be paid by or for the
account of an entity in which the Company has invested or in which the Company
is proposing to invest in connection with an investment transaction in which the
Company participates or provides managerial assistance, will be treated as
commitment fees or management fees and will be received by the Company, pro rata
to its participation in such transaction. Eudaimonia will be allowed to be
reimbursed by Portfolio Companies for all direct expenses associated with due
diligence and management of portfolio investments or investment opportunities
(travel, meals, lodging, etc.).
5
4.3 The sole and exclusive compensation to Eudaimonia for its services to
be rendered hereunder will be in the form of a management fee and a separate
incentive fee as provided in Section 5. Should any officer, director, employee
or Affiliate of Eudaimonia serve as a member of the Board of Directors of the
Company, such officer, director, employee or Affiliate of Eudaimonia shall not
receive compensation as a member of the Board of Directors of the Company.
Section 5. Management and Incentive Fees.
5.1 During the term of this Agreement, the Company will pay Eudaimonia
monthly in arrears a management fee equal to 2.0% per annum of the Assets Under
Management attributable to Existing Portfolio Companies.
5.2 During the term of this Agreement, the Company will pay Eudaimonia
monthly in arrears a management fee equal to 2.0% per annum of the Assets Under
Management attributable to New Portfolio Companies.
5.3 During the term of this Agreement the Company shall pay to Eudaimonia
incentive fees determined as specified in this Section 5.3.
(a) The incentive fee attributable to Existing Portfolio Companies
shall be calculated as follows:
(i) The amount of the fee shall be 13.4% of the Net Capital
Gains, before taxes, resulting from the disposition of investments in
Existing Portfolio Companies or resulting from the disposition of
other assets or property of the Company acquired prior to the
Effective Date and managed by Eudaimonia pursuant to the terms hereof.
(ii) Net Capital Gains, before taxes, shall be calculated
annually at the end of each fiscal year for the purpose of determining
the earned incentive fee, unless this Agreement is terminated prior to
the completion of any fiscal year, then such calculation shall be made
at the end of such shorter period. A preliminary calculation shall be
made on the last business day of each of the three fiscal quarters
preceding the end of each fiscal year for the purpose of determining
the incentive fee payable under Section 5.2(d)(i) below. Capital
Losses and Realized Capital Gains shall not be cumulative (i.e., no
Capital Losses nor Realized Capital Gains are carried forward into any
subsequent fiscal year).
(b) The incentive fee attributable to New Portfolio Companies shall be
calculated as follows:
(i) The amount of the fee shall be 20.0% of the Net Capital
Gains, before taxes, resulting from the disposition of investments in
New Portfolio Companies or resulting from the disposition of other
assets or property of the Company acquired after to the Effective Date
and managed by Eudaimonia pursuant to the terms hereof.
6
(ii) Net Capital Gains, before taxes, shall be calculated
annually at the end of each fiscal year for the purpose of determining
the earned incentive fee, unless this Agreement is terminated prior to
the completion of any fiscal year, then such calculation shall be made
at the end of such shorter period. A preliminary calculation shall be
made on the last business day of each of the three fiscal quarters
preceding the end of each fiscal year for the purpose of determining
the incentive fee payable under Section 5.2(d)(i) below. Capital
Losses and Realized Capital Gains shall not be cumulative (i.e., no
Capital Losses nor Realized Capital Gains are carried forward into any
subsequent fiscal year).
(c) Net Capital Gains with respect to Existing Portfolio Companies or
resulting from the disposition of other assets or property of the Company
acquired prior to the Effective Date under 5.3(a) shall be calculated and
paid independently from Net Capital Gains with respect to New Portfolio
Companies or resulting from the disposition of other assets or property of
the Company acquired after the Effective Date under 5.3(b).
(d) Upon termination of this Agreement, all earned but unpaid
incentive fees shall be immediately due and payable.
(e) Payment of incentive fees shall be made as follows:
(i) To the extent payable, incentive fees shall be paid, in cash,
in arrears on the last business day of each fiscal quarter in the
fiscal year.
(ii) The incentive fee shall be retroactively adjusted as soon as
practicable following completion of the valuations at the end of each
fiscal year in which this Agreement is in effect to reflect the actual
incentive fee due and owing to Eudaimonia, and if such adjustment
reveals that Eudaimonia has received more incentive fee income than it
is entitled to hereunder, Eudaimonia shall promptly reimburse the
Company for the amount of the excess.
Section 6. Liability and Indemnification of Eudaimonia.
6.1 Neither Eudaimonia, nor any of its officers, directors, shareholders,
employees, agents or Affiliates, whether past, present or future (collectively,
the "Indemnified Parties"), shall be liable to the Company, or any of its
Affiliates for any error in judgment or mistake of law made by the Indemnified
Parties in connection with any investment made by or for the Company, provided
such error or mistake was not made in bad faith or as a result of gross
negligence or willful misconduct of the Indemnified Parties. The Company
confirms that in performing services hereunder, Eudaimonia will be an agent of
the Company for the purpose of the indemnification provisions of the Bylaws of
the Company subject, however, to the same limitations as though Eudaimonia were
a director or officer of the Company. Eudaimonia shall not be liable to the
Company, its shareholders or its creditors, except for violations of law or for
conduct which would preclude Eudaimonia from being indemnified under such
provisions. The provisions of this Section 6.1 shall survive termination of this
Agreement.
7
6.2 Individuals who are Affiliates of Eudaimonia and are also officers
or directors of the Company as well as other Eudaimonia officers performing
duties within the scope of this Agreement on behalf of the Company will be
covered by any directors and officers insurance policy maintained by the
Company.
Section 7. Shareholder Approval; Term.
This Agreement is subject to approval by the shareholders of the Company in
the manner set forth in Section 15(a) of the 1940 Act. The Company represents
that this Agreement has been approved by the Company's Board of Directors. This
Agreement shall continue in effect for two (2) years from the Effective Date,
unless sooner terminated as provided for herein. Thereafter, this Agreement
shall continue in effect so long as such continuance is specifically approved at
least annually by the Company's Board of Directors, including a majority of its
members who are not interested persons of Eudaimonia, or by vote of the holders
of a majority, as defined in the 1940 Act, of the Company's outstanding voting
securities. The foregoing notwithstanding, this Agreement may be terminated by
the Company at any time, without payment of any penalty, on sixty (60) days'
written notice to Eudaimonia if the decision to terminate has been made by the
Board of Directors or by vote of the holders of a majority, as defined in the
1940 Act, of the Company's outstanding voting securities.
Eudaimonia may also terminate this Agreement on sixty (60) days' written
notice to the Company; provided, however, that Eudaimonia may not so terminate
this Agreement unless another investment advisory agreement has been approved by
the vote of a majority, as defined in the 1940 Act, of the Company's outstanding
shares and by the Board of Directors, including a majority of members who are
not parties to such agreement or interested persons of any such party. Upon
receipt of any such notice from Eudaimonia, the Company will in good faith use
its best efforts to cause an advisory agreement to be entered into by the
Company with a suitable investment adviser.
Section 8. Assignment.
This Agreement may not be assigned by any party without the written consent
of the other and any assignment, as defined in the 1940 Act, by Eudaimonia shall
automatically terminate this Agreement.
Section 9. Amendments.
This Agreement may be amended only by an instrument in writing executed by
all parties and otherwise in accordance with the 1940 Act.
Section 10. Governing Law.
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Delaware.
8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
effective as of the date first above written.
THE COMPANY:
MACC PRIVATE EQUITIES, INC.
A Delaware corporation
By:
---------------------------------
David R. Schroder
President
By:
---------------------------------
Robert A. Comey
Executive Vice President
EUDAMONIA:
EUDAIMONIA ASSET MANAGEMENT, LLC
A California limited liability company
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
9
APPENDIX B
Subadvisory Agreement
1
INVESTMENT SUBADVISORY
AGREEMENT
This INVESTMENT SUBADVISORY AGREEMENT (this "Agreement") is made and
entered into by and among MACC PRIVATE EQUITIES INC., a Delaware corporation
("MACC"), EUDAIMONIA ASSET MANAGEMENT, LLC, a California limited liability
company ("Eudaimonia") and INVESTAMERICA INVESTMENT ADVISORS, INC., a Delaware
corporation ("InvestAmerica"), dated as of the ___ day of _________, 2008.
RECITALS
WHEREAS, MACC is a closed-end management investment company that has
elected to be regulated as business development company under the Investment
Company Act of 1940, as amended (the "1940 Act");
WHEREAS, MACC is subject to the terms of certain exemptive orders granted
by the United States Securities and Exchange Commission ("SEC") which govern,
among other things, co-investments by MACC and other investment funds managed by
any investment advisor to MACC (the "Exemptive Orders");
WHEREAS, Eudaimonia and InvestAmerica are both registered investment
advisors under the Investment Advisers Act of 1940, as amended (the "Advisers
Act");
WHEREAS, concurrently with the execution of this Agreement, Eudaimonia has
agreed to serve as the investment advisor to MACC pursuant to an Investment
Advisory agreement between Eudaimonia and MACC (the "Eudaimonia Advisory
Agreement");
WHEREAS, prior to the execution of this Agreement, InvestAmerica was the
investment advisor to MACC and its wholly-owned subsidiary, MorAmerica Capital
Corporation ("MorAmerica"), with respect to Existing Portfolio Company (as
defined below) investments;
WHEREAS, this Agreement is subject to approval by the holders of a
majority, as defined in the 1940 Act, of MACC's outstanding voting securities
and will become effective as of the date of such approval (the "Effective
Date");
WHEREAS, effective on the Effective Date, the investment advisory
agreements previously governing the investments in Existing Portfolio Companies
are terminated;
WHEREAS, Eudaimonia desires to obtain the support and assistance of
InvestAmerica in carrying out Eudaimonia's duties and obligations as the
investment advisor to MACC, and InvestAmerica desires to provide such support
and assistance as sub-advisor on the terms and conditions set forth herein; and
WHEREAS, this Agreement has been approved in accordance with the provisions
of the 1940 Act.
NOW, THEREFORE, in consideration of the mutual agreements and covenants
set forth in this Agreement, the parties agree as follows:
1. Existing Porfolio Company, Defined. "Existing Portfolio Company" or
"Existing Portfolio Companies" shall mean any entity in which MACC or MorAmerica
has made an investment prior to the Effective Date and with respect to which
InvestAmerica will be providing services pursuant hereto, which investments may
include ownership of capital stock, loans, receivables due from an Existing
Portfolio Company or other debtor on sale of assets acquired in liquidation and
assets acquired in liquidation of any Existing Portfolio Company.
2. Services.
2.1 Transitional Services. During the first three (3) months of the
term of this Agreement (the "Transitional Period"), InvestAmerica will
provide those financial, business and investment advisory services
specified on Schedule A (collectively referred to as the "Transitional
Services") to, or for the benefit of, MACC, subject to the oversight and
supervision of Eudaimonia and the direction and control of the Board of
Directors of MACC. Notwithstanding the foregoing, Eudaimonia and
InvestAmerica may agree to extend the Transitional Period for an additional
period of three (3) months.
2.2 Ongoing Services. For the remainder of the term of this Agreement
after the Transitional Period (as the same may be extended pursuant to
Section 2.1 above), InvestAmerica will provide those financial, business
and investment advisory services specified on Schedule B (collectively
referred to as the "Ongoing Services" and, together with the Transitional
Services, the "Services") to, or for the benefit of, MACC, subject to the
oversight and supervision of Eudaimonia and the direction and control of
the Board of Directors of MACC.
3. Term. This Agreement shall continue in effect for two (2) years from the
Effective Date, unless sooner terminated as provided for herein. Thereafter,
this Agreement shall continue in effect so long as such continuance is
specifically approved at least annually by Eudaimonia and the Board of Directors
of MACC, including a majority of its members who are not interested persons of
InvestAmerica or Eudaimonia, or by vote of the holders of a majority, as defined
in the 1940 Act, of MACC's outstanding voting securities. The foregoing
notwithstanding, this Agreement may be terminated by Eudaimonia or MACC at any
time, without payment of any penalty, on sixty (60) days' written notice to
InvestAmerica if the decision to terminate has been made by Eudaimonia or by
MACC's Board of Directors or by vote of the holders of a majority, as defined in
the 1940 Act, of MACC's outstanding voting securities. This Agreement also may
be terminated by InvestAmerica at any time, without payment of any penalty, on
sixty (60) days' written notice to Eudaimonia and MACC.
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4. Portfolio Board Service and Asset Management.
4.1 It is acknowledged that as a part of the Services to be provided
by InvestAmerica hereunder, (i) certain of its employees, representatives
and agents ("InvestAmerica Representatives") may serve as members of the
boards of directors and board committees of individual Portfolio Companies
and (ii) InvestAmerica will monitor and manage investments in Existing
Portfolio Companies, including exits, preparation of valuations and other
portfolio management matters. InvestAmerica and InvestAmerica
Representatives serving on the boards of directors and board committees of
individual Existing Portfolio Companies shall conduct the Services in
accordance with applicable law and all investment policies as set forth in
writing by Eudiamonia and the Board of Directors of MACC with respect to
such Services, provided that at all times the InvestAmerica Representatives
shall act in accordance with their fiduciary duties as members of Existing
Portfolio Company boards. In regard to such actions and decisions, MACC
hereby appoints InvestAmerica (and such officers, directors, employees,
representatives and agents is it shall designate) as its proxy, as a result
of which InvestAmerica shall have the authority, in its performance of this
Agreement, to make decisions and to take such actions, without specific
authority from Eudaimonia or the Board of Directors of MACC, as to all
matters which are not hereby restricted.
4.2 All fees, including director's fees that may be paid to
InvestAmerica by or for the account of an Existing Portfolio Company shall
be paid to MACC. Notwithstanding the foregoing, InvestAmerica will be
allowed to be reimbursed by Existing Portfolio Companies for all direct
expenses associated with due diligence and management of portfolio
investments or investment opportunities, including expenses of attending
board and management meetings, and such expenses (travel, meals, lodging,
etc.) will not be payable to, or by, Eudaimonia or credited against the
Management Fee.
4.3 Except for expense reimbursement provided in Section 4.2 above and
4.4 below, InvestAmerica's sole and exclusive compensation for all of its
services to be rendered hereunder will be in the form of a Management Fee
and a separate Incentive Fee as provided in Section 5.
4.4 InvestAmerica will be responsible for the following expenses: its
staff salaries and fringe benefits, office space, office equipment and
furniture, communications, travel, meals and entertainment, conventions,
seminars, office supplies, dues and subscriptions, hiring fees, moving
expenses, repair and maintenance, employment taxes, in-house accounting
expenses and minor miscellaneous expenses. InvestAmerica will pay for its
own account all expenses incurred in rendering the services to be rendered
hereunder. Without limiting the generality of the foregoing, InvestAmerica
will pay the salaries and other employee benefits of the persons in its
organization whom it may engage to render such services, including without
limitation, persons in its organization who may from time to time agree to
act as officers of MACC. Eudaimonia or MACC, however, will be responsible
for all reasonable expenses for
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travel at the direction of Eudaimonia or MACC, including for board or other
management meetings, which expenses shall be reimbursed promptly upon being
invoiced therefor by InvestAmerica. Without limiting the foregoing,
InvestAmerica will not be responsible for any expenses: (i) required to be
paid by MACC pursuant to the Eudaimonia Advisory Agreement (including,
without limitation, Section 2.3 thereof), (ii) any expenses related to
transferring management of MACC to Eudaimonia, including expenses of moving
records to the offices of Eudaimonia, (iii) expenses of duplicating files
necessary for performance of the Services; or (iv) any other expenses
incurred in connection with the services that are not expressly payable by
InvestAmerica under this Agreement.
4.5 The obligations of InvestAmerica to Eudaimonia and MACC are not
exclusive.
(a) InvestAmerica and its affiliates may, in their discretion,
manage other venture capital funds and render the same or similar
services to any other person or persons who may be making the same or
similar investments. Neither InvestAmerica nor any of its affiliates
shall in any manner be liable to Eudaimonia, MACC or their affiliates
by reason of the activities of InvestAmerica or its affiliates on
behalf of other persons and funds as described in this paragraph and
any conflict of interest arising therefrom is hereby expressly waived.
(b) The scope of the Services does not include presentation of
investment opportunities to MACC or making new investments for MACC,
but rather is limited to management of the Existing Portfolio
Companies. Accordingly, InvestAmerica is not required to present to
MACC investments being considered by other funds managed by
InvestAmerica or its affiliates.
(c) With respect to follow-on investments made by InvestAmerica
pursuant to this Agreement, any such investment management services
and all co-investments shall at all times be provided in strict
accordance with rules and regulations under the 1940 Act and the
Exemptive Orders.
5. Management and Incentive Fees.
5.1 During the Transitional Period, Eudaimonia will pay InvestAmerica
monthly in arrears a management fee (the "Transitional Management Fee")
equal to seventy-five percent (75%) of the management fee actually paid by
MACC to Eudaimonia pursuant to the Eudaimonia Advisory Agreement
attributable to Existing Portfolio Companies as of the Effective Date. For
the remainder of the term of this Agreement and to the extent the Agreement
is extended pursuant to the terms of this Agreement and the terms of the
1940 Act, Eudaimonia will pay InvestAmerica monthly in arrears a management
fee (the "Management Fee") equal to fifty percent (50%) of the management
fee actually paid by MACC to Eudaimonia pursuant to the Eudaimonia Advisory
Agreement attributable to Existing Portfolio Companies as of the Effective
Date.
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Eudaimonia shall arrange for the Transitional Management Fee or the
Management Fee, as applicable, to be paid to InvestAmerica directly by MACC
on the same day as MACC pays Eudaimonia its management fee under the
Eudaimonia Advisory Agreement, provided that Eudaimonia has received
payment of its management fee from MACC pursuant to the terms of the
Eudamonia Advisory Agreement. Payments of Transitional Management Fees or
Management Fees that are delayed because of failure of MACC to pay a
management fee to Eudaimonia for the corresponding period shall be made
promptly upon Eudaimonia receiving such management fee from MACC. The
Transitional Management Fee shall stop accruing as of the last day of the
Transitional Period. The Management Fee shall stop accruing on the date
that this Agreement expires or is terminated. Upon expiration or
termination of this Agreement, all earned but unpaid Transitional
Management Fees and Management Fees shall be immediately due and payable.
5.2 During the term of this Agreement Eudaimonia shall pay to
InvestAmerica an incentive fee determined as specified in this Section 5.2
(the "Incentive Fee").
(a) The Incentive Fee to be paid to InvestAmerica shall consist
of one hundred percent (100%) of the incentive fee actually paid by
MACC to Eudaimonia pursuant to the Eudaimonia Advisory Agreement
attributable to Existing Portfolio Companies as of the Effective Date.
(b) Upon termination of this Agreement, all earned but unpaid
Incentive Fees shall be immediately due and payable.
(c) Payment of Incentive Fees shall be made as follows:
(i) To the extent payable, Incentive Fees shall be paid, in
cash, in arrears on the last business day of each fiscal quarter
in the fiscal year.
(ii) The Incentive Fee shall be retroactively adjusted as
soon as practicable following completion of the valuations at the
end of each fiscal year in which this Agreement is in effect to
reflect the actual Incentive Fee due and owing to InvestAmerica,
and if such adjustment reveals that InvestAmerica has received
more Incentive Fee income than it is entitled to hereunder,
InvestAmerica shall promptly reimburse Eudaimonia for the amount
of the excess.
(d) The Incentive Fee shall stop accruing effective as of the
date of the expiration (subject, however, to annual continuance as
provided in Section 3 above) or termination of this Agreement. Upon
the expiration or termination of this Agreement, all earned but unpaid
Incentive Fees shall be immediately due and payable; provided,
however, that Incentive Fees earned with respect to non-cash Realized
Capital Gains (as
6
defined in the Eudaimonia Advisory Agreement) shall not be due and
payable to InvestAmerica until the cash is received by MACC.
(e) To the extent payable, Eudaimonia shall arrange for the
Incentive Fee to be paid to InvestAmerica directly by MACC, on the
same date as MACC pays Eudaimonia its incentive fee under the
Eudaimonia Advisory Agreement, and in no event less than annually.
6. Personnel. All employee wages, benefits and other related costs for
employees and personnel of InvestAmerica shall be the sole responsibility of
InvestAmerica, and InvestAmerica shall have sole control of the payment of wages
and benefits to such employees. The individuals providing the Services shall at
all times be considered to be in the employ of InvestAmerica and under the
direction and control of InvestAmerica, and they shall not be considered to be
in the employ of Eudaimonia. No InvestAmerica personnel shall be required to
relocate. Without the prior written consent of InvestAmerica (which consent
InvestAmerica may grant or withhold in its sole and absolute discretion),
Eudaimonia agrees that it shall not, for a period of three (3) years from the
date of termination of this Agreement, either alone or in conjunction with any
other person, or directly or indirectly through its present or future
affiliates, employ, engage or seek to employ or engage any person who is an
employee of InvestAmerica.
7. Accounts and Records. InvestAmerica will maintain books of account and
other records and files with respect to the Services provided hereunder.
InvestAmerica shall make such records available for inspection by Eudaimonia
upon reasonable notice at mutually convenient times at the place where such
records are kept in the ordinary course of business.
8. Confidentiality. InvestAmerica agrees that it will come into possession
of information regarding the Portfolio Companies and information regarding other
companies, the securities of which are owned by other funds managed by one of
the parties ("Confidential Portfolio Information"), and information concerning
the business of the other parties to this Agreement ("Confidential Business
Information") (collectively, the Confidential Portfolio Information and
Confidential Business Information are referred to herein as "Confidential
Information"). Confidential Information shall not include information
independently developed by a party without reliance on the Confidential
Information of the other party, information obtained from a third party, which
third party is under no restriction with respect to the use and disclosure of
such information, or information approved for unrestricted release by a party
without violating a provision of this agreement.
InvestAmerica agrees that the Confidential Information is highly
confidential, private and of a sensitive nature. Eudaimonia and InvestAmerica
agree that each will handle the Confidential Information of the other with the
same degree of care that it uses to handle its own Confidential Information, and
will, at all times, handle the Confidential Information of the other in a manner
reasonably calculated to maintain its confidentiality. Each party understands
that the other may disclose Confidential Information as reasonably necessary:
(i) in the normal course of managing existing portfolios, (ii) in performing the
Services, (iii) in the performance of tasks by InvestAmerica as requested by
Eudaimonia and (iv) in communicating with shareholders,
7
investors, and regulatory agencies, including the SEC. Eudaimonia and
InvestAmerica also agree that the parties may disclose Confidential Portfolio
Information to banks, financing sources, investment banks, brokers, auditors,
law firms and other service providers (i) as reasonably necessary in connection
with the management of an investment in a Portfolio Company, (ii) at the request
of the Portfolio Company who directs disclosure to third parties and (iii) as
reasonably necessary in connection with service as a director of a Portfolio
Company. InvestAmerica may also use and disclose information regarding IRR, cash
flow and other performance data for the Existing Portfolio and all other
historical performance data relating to the Existing Portfolio and prior
investments during the time InvestAmerica managed MACC. In addition, a party may
use and disclose the Confidential Information of the other party where required
by law, provided that it shall first notify the other party in writing of such
requirement and cooperate with respect to any reasonable steps available for the
further protection of such Confidential Information.
Except as otherwise provided herein, InvestAmerica agrees that it will use
the Confidential Information solely in the management of MACC or the management
of other funds that have co-investments with MACC.
InvestAmerica agrees that, in the event of any breach of any provision
hereof, the aggrieved party will not have an adequate remedy in money or damages
and that, in such event, the aggrieved party shall be entitled to obtain
injunctive relief against such breach in any court of competent jurisdiction,
without the necessity of posting a bond even if otherwise normally required.
Such injunctive relief will in no way limit the aggrieved party's right to
obtain other remedies available under applicable law.
9. Compliance with Laws; Cooperation.
9.1 InvestAmerica shall use diligent effort to cause all Services to
be performed in strict compliance with all laws, regulations and
requirements of any federal, state, municipal or other governmental entity
having jurisdiction respecting either of the parties and/or the Services
being rendered, including the 1940 Act, the Advisers Act and all Exemptive
Orders.
9.2 Eudaimonia shall cooperate fully with InvestAmerica's efforts to
perform the Services effectively and in compliance with applicable law,
including providing InvestAmerica with files and records necessary for the
performance of the Services.
10. Indemnification; Fidelity Bond, Directors and Officers Insurance.
10.1 Eudaimonia shall not be liable or responsible for any action or
omission on the part of InvestAmerica or its employees, representatives or
agents arising out of their respective service on the board of directors of
individual Portfolio Companies or provision of other Services pursuant to
this Agreement, except to the extent that such action or omission was
specifically directed by Eudaimonia, in writing. InvestAmerica shall
indemnify and hold Eudaimonia harmless from any claims or liabilities
arising out
8
of the service of InvestAmerica and its employees, representatives and
agents on the boards of directors of individual Portfolio Companies or the
provision of other Services pursuant to this Agreement, except to the
extent that InvestAmerica or its employees, representatives or agents were
carrying out the express written instructions of Eudaimonia in connection
with the action or omission complained of.
10.2 InvestAmerica shall not be liable or responsible for any action
or omission on the part of Eudaimonia or its employees, representatives or
agents arising out of this Agreement or the Eudaimonia Advisory Agreement.
Eudaimonia shall indemnify and hold InvestAmerica harmless from any claims
or liabilities arising out of Eudaimonia's actions or omissions with
respect to this Agreement or the Eudaimonia Advisory Agreement.
10.3 During the term of this Agreement, InvestAmerica and its
officers, directors and employees, with respect to performance of the
Services under this Agreement and as officers or employees of MACC, if
applicable, shall be covered at all times by a (i) directors and officers
insurance policy and (ii) a joint fidelity bond, in each case at least as
extensive in amount, scope and coverage as required by law and as presently
in force (as long as reasonable commercially available), and at no cost to
InvestAmerica.
10.4 Neither InvestAmerica, nor any of its officers, directors,
shareholders, employees, agents or Affiliates, whether past, present or
future (collectively, the "Indemnified Parties"), shall be liable to
Eudaimonia or MACC, or any of their affiliates for any error in judgment or
mistake of law made by the Indemnified Parties in connection with any
investment made by or for MACC, provided such error or mistake was not made
in bad faith or as a result of gross negligence or willful misconduct of
the Indemnified Parties. MACC confirms that in performing services
hereunder Eudaimonia will be an agent of MACC for the purpose of the
indemnification provisions of the Bylaws of MACC subject, however, to the
same limitations as though the Indemnified Parties were a director or
officer of MACC. InvestAmerica shall not be liable to Eudaimonia, MACC,
their shareholders or their creditors, except for violations of law or for
conduct which would preclude the Indemnified Parties from being indemnified
under such Bylaw provisions. The indemnification provisions of this Section
9 are applicable to the entire period for which InvestAmerica has provided
advisory services to MACC or its predecessors, beginning in 1985. The
provisions of this Section 9(d) shall survive termination of this
Agreement.
11. Notices. All notices or other communications given pursuant to this
Agreement shall be in writing and shall be given by personal delivery, by United
States mail or an established, commercial express delivery service (such as
Federal Express), postage or delivery charge prepaid, return receipt requested,
addressed to the person and address designated below:
9
InvestAmerica: InvestAmerica Investment Advisors, Inc.
101 Second Street S.E., Suite 800
Cedar Rapids IA 52401
Fax (319) 363-9683
Attn: David R. Schroder, President
Eudaimonia: Eudaimonia Asset Management, LLC
580 2nd Street, Suite 102
Encinitas, California 92024
Attn: Travis Prentice, President
A notice or other communication shall be deemed received on the earliest of
the following: (i) the date of its delivery to the address specified above, (ii)
the date of its actual receipt by the person or entity specified above, or (iii)
in the case of refusal to accept or inability to deliver the notice or other
communication, the earliest of (a) the date of the attempted delivery or refusal
to accept delivery, (b) the date of the postmark on the return receipt, or (c)
the date of receipt of notice of refusal or notice of non-delivery by the
sending party.
Either party may designate any other address in substitution of the
foregoing address(es) at any time by giving the other party ten (10) days
written notice, as provided herein, of the new address.
12. Severability. If any term, covenant or condition of this Agreement or
the application thereof to any person or circumstance shall be invalid or
unenforceable, the remainder of this Agreement or such other documents, or the
application of such term, covenant or condition to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each term, covenant or condition of this Agreement or such
other documents shall be valid and shall be enforced.
13. No Joint Venture, Partnership or Alter Ego; Independent Contractor.
Nothing contained in this Agreement, any document executed in connection
herewith or any other agreement with any other party shall be construed as
making InvestAmerica and Eudaimonia partners, joint venturers or alter egos of
each other or of any other entity. InvestAmerica shall at all times remain an
independent contractor of Eudaimonia with respect to the Services.
14. Additional Documents. The parties hereby agree to execute and deliver
such other documents and instruments as may be necessary or desirable to give
effect to the terms and intent of this Agreement.
15. Waiver. The failure of any party to insist upon strict performance of
any of the provisions contained herein shall not be deemed a waiver of any
rights or remedies that such party may have, and shall not be deemed a waiver of
any subsequent breach or default.
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16. Captions and Headings. The captions and headings in this Agreement are
for ease of reference only and shall not be deemed to define or limit the scope
or intent of any of the terms, covenants, conditions or agreements contained
herein.
17. Entire Agreement. This Agreement contains the entire agreement between
and among the parties hereto and supersedes all prior negotiations and
agreements, oral or written, with respect to the subject matter hereof or with
respect to any of the Services.
18. Arm's-Length Agreement; Construction. The parties mutually acknowledge
that the provisions of this Agreement are the product of arm's-length
negotiations with parties having essentially equal bargaining strength, legal
representation and opportunity to determine the language used herein. Therefore,
the provisions of this Agreement shall not be construed for or against any
party.
19. No Third-Party Beneficiary Rights. This Agreement is not intended to
create, nor shall it be in any way construed to create any third-party
beneficiary rights in any person not a party hereto.
20. Successors and Assigns. This Agreement shall inure to the benefit of
and bind the respective parties' successors and assigns.
21. Applicable Law. This Agreement is made and delivered in, and shall be
construed and interpreted in accordance with the laws (without reference to the
choice-of-law provisions) of, the State of Delaware.
22. Amendment. This Agreement may be amended only in writing executed by
all parties.
[signature page immediately follows]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
EUDAIMONIA:
EUDAIMONIA ASSET MANAGEMENT, LLC
A California limited liability company
By: ______________________________
Name:_____________________________
Title:____________________________
INVESTAMERICA:
INVESTAMERICA INVESTMENT ADVISORS, INC.
A Delaware corporation
By: ________________________________
David R. Schroder
President
By: ________________________________
Robert A. Comey
Executive Vice President
MACC:
MACC PRIVATE EQUITIES, INC.
A Delaware corporation
By: ________________________________
David R. Schroder
President
By: ________________________________
Robert A. Comey
Executive Vice President
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Schedule A
TRANSITIONAL SERVICES
To Be Provided by InvestAmerica and by Eudaimonia
I. EXISTING PORTFOLIO COMPANY MANAGEMENT TASKS
1. Gather, review, file, summarize monthly financials relating to
portfolio investments existing as of the Existing Date (the
"Existing Portfolio").
2. Report sales, pre tax, EBITDA actual vs. budget monthly. 3. Attend
Existing Portfolio company board meetings. 4. Review and file
projections.
5. Review and file annual audits. 6. Review covenant compliance.
7. Explore ways to add value i.e. explore growth and acquisition
opportunities and plans, assess management and new management
candidates.
8. Work to execute exit projections.
9. Communicate and work with co-investors to assess and add value.
10. Analyze and recommend investment opportunities for the Existing
Portfolio companies. 11. Support senior capital and venture
capital acquisition as required for Existing Portfolio companies.
12. File all company monitoring information.
13. File all investment documentation.
14. In Existing Portfolio board roles, act in accord with proper
corporate governance guidelines, all in the interest of the
Existing Portfolio company and its shareholders.
15. Make available and, if requested by Existing Portfolio companies,
render managerial assistance to, and exercise management rights
in, Existing Portfolio companies and entities as appropriate to
maximize return for MACC and to comply with applicable SEC
regulations.
II. SEC EXAMINATIONS; SECURITIES CUSTODY
1. Eudaimonia is responsible as investment advisor of MACC;
InvestAmerica provides SEC exam assistance on any inquiries
related to pre-Effective Date or Existing Portfolio activities.
2. Eudaimonia is responsible for custody of all assets (cash,
securities, et al) which are subject to SEC custody rules under
the 1940 Act and the Advisers Act. InvestAmerica to provide
custody support as long as assets are held at CRBT.
III. ACCOUNTING FOR MACC
1. Prepare monthly financial statements and quarterly report for MACC and
MorAmerica during the Transition Period.
2. Eudaimonia will be responsible for controls, check writing, wire
instructions and approval of expenses. These tasks will be
transitioned by InvestAmerica to Eudaimonia over the Transition
Period.
3. Prepare quarterly and annual valuation reports, provide valuation
analysis and support to MACC board of directors.
4. Monthly Existing Portfolio accounting and bookkeeping records.
5. Audit support for the Existing Portfolio records and for pre-Effective
Date Activities.
6. Prepare quarterly management letter on Existing Portfolio.
7. Prepare monthly performance report with respect to Existing Portfolio.
8. Prepare cashflows projection (1 year out) for Existing Portfolio
IV. SHAREHOLDER RELATIONS / ANNUAL REPORT
1. Eudaimonia responsible for all shareholder relations, communications
and inquiries.
2. Eudaimonia will prepare Annual Reports, with Existing Portfolio
financial input from InvestAmerica.
V. EXISTING PORTFOLIO FOLLOW-ON INVESTMENTS
1. InvestAmerica responsible for analysis, presentation, proposal,
gathering, filing investment documentation.
2. Eudaimonia responsible for investment decisions.
3. MACC Board responsible for any co-investment split decisions.
VI. BOARD MEETINGS
1. Eudaimonia responsible.
2. InvestAmerica will provide Existing Portfolio;
o Quarterly Management Letter
o Monthly Portfolio Performance Report
o Quarterly Valuations
InvestAmerica is not responsible for out-of-pocket expenses (travel, meals,
etc.) associated with the administration of this Agreement that are not
associated with managing the Existing Portfolio. InvestAmerica is not
responsible for the cost of travel to the offices of Eudamonia required under
the Agreement.
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VII. FINANCIAL PROJECTIONS
1. InvestAmerica responsible for annual projection inputs with regard to
the Existing Portfolio and expenses under its control and for interim
projection inputs as reasonably required.
2. Eudaimonia responsible for MACC financial projections.
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Schedule B
ONGOING SERVICES
To Be Provided by InvestAmerica and by Eudaimonia
I. EXISTING PORTFOLIO COMPANY MANAGEMENT TASKS
1. Gather, review, file, summarize monthly financials relating to
portfolio investments existing as of the Existing Date (the "Existing
Portfolio").
2. Report sales, pre tax, EBITDA actual vs. budget monthly.
3. Attend Existing Portfolio company board meetings.
4. Review and file projections.
5. Review and file annual audits.
6. Review covenant compliance.
7. Explore ways to add value i.e. explore growth and acquisition
opportunities and plans, assess management and new management
candidates.
8. Work to execute exit projections.
9. Communicate and work with co-investors to assess and add value.
10. Analyze and recommend investment opportunities for the Existing
Portfolio companies.
11. Support senior capital and venture capital acquisition as required for
Existing Portfolio companies.
12. File all company monitoring information.
13. File all investment documentation.
14. In Existing Portfolio board roles, act in accord with proper corporate
governance guidelines, all in the interest of the Existing Portfolio
company and its shareholders.
15. Make available and, if requested by Existing Portfolio companies,
render managerial assistance to, and exercise management rights in,
Existing Portfolio companies and entities as appropriate to maximize
return for MACC and to comply with applicable SEC regulations.
II. SEC EXAMINATIONS; SECURITIES CUSTODY
1. Eudaimonia is responsible as investment advisor of MACC; InvestAmerica
provides SEC exam assistance on any inquiries related to pre-Effective
Date or Existing Portfolio activities.
2. Eudaimonia responsible for custody of all assets (cash, securities, et
al) which are subject to SEC custody rules under the 1940 Act and the
Advisers Act. InvestAmerica to provide custody support as long as
assets are held at CRBT.
III. ACCOUNTING FOR MACC
1. Eudaimonia will be responsible for controls, check writing, wire
instructions and approval of expenses. These tasks will be
transitioned by InvestAmerica to Eudaimonia over the Transition
Period.
2. Prepare quarterly and annual valuation reports, provide valuation
analysis and support to MACC board of directors.
3. Monthly Existing Portfolio accounting and bookkeeping records.
4. Audit support for the Existing Portfolio records and for
pre-Effective Date Activities.
IV. SHAREHOLDER RELATIONS / ANNUAL REPORT
1. Eudaimonia responsible for all shareholder relations, communications
and inquiries.
2. Eudaimonia will prepare Annual Reports, with Existing Portfolio
financial input from InvestAmerica.
V. EXISTING PORTFOLIO FOLLOW-ON INVESTMENTS
1. InvestAmerica responsible for analysis, presentation, proposal,
gathering, filing investment documentation.
2. Eudaimonia responsible for investment decisions.
3. MACC Board responsible for any co-investment split decisions.
VI. BOARD MEETINGS
1. Eudaimonia responsible.
2. InvestAmerica will provide Existing Portfolio;
o Quarterly Management Letter
o Monthly Portfolio Performance Report
o Quarterly Valuations
InvestAmerica is not responsible for out-of-pocket expenses (travel, meals,
etc.) associated with the administration of this Agreement that are not
associated with managing the Existing Portfolio. InvestAmerica is not
responsible for the cost of travel to the offices of Eudamonia required under
the Agreement.
VII. FINANCIAL PROJECTIONS
1. InvestAmerica responsible for annual projection inputs with regard to
the Existing Portfolio and expenses under its control and for interim
projection inputs as reasonably required.
2. Eudaimonia responsible for MACC financial projections.
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2
PRELIMINARY COPY
PROXY CARD
MACC Private Equities Inc.
Proxy Solicited on Behalf of the Board of Directors
for Annual Meeting of Shareholders
March 25, 2008
The undersigned hereby appoints Geoffrey T. Woolley, David R. Schroder
and Robert A. Comey and each of them, with full power of substitution, and
hereby authorizes them to represent the undersigned and to vote all of the
shares of Common Stock of MACC PRIVATE EQUITIES INC. (the "Corporation") held of
record by the undersigned on January 31, 2008, at the Annual Meeting of
Shareholders of the Corporation to be held on March 25, 2008 and any
adjournment(s) thereof.
The proxy when properly executed will be voted as directed by the
undersigned shareholder. If directors are not indicated, the proxy will be voted
to elect the nominees described in item 1 and for the proposals described in
item 2, item 3, item 4 and item 5. The proxies, in their discretion, are further
authorized to vote (a) on matters which the Board of Directors did not know
would be presented at the Annual Meeting within the time period specified in the
Corporation's Amended and Restated Bylaws; and (b) on other matters which may
properly come before the Annual Meeting and any adjournments or postponements
thereof.
(continued, and to be signed on reverse side)
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- Address Change/Comments (Mark the corresponding box on the reverse side) -
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- -
- -
- -
- -
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PRELIMINARY COPY
PROXY CARD
Please Mark
Here for |__|
Address
Change or
Comments
SEE REVERSE
SIDE
--------------------------------------------------------------- ---------------------------------------- ---------- ----------
1. To elect five Directors to serve until the 2009 FOR AGAINST ABSTAIN
Annual Meeting of Shareholders or until their
respective successors shall be elected and qualified;
FOR WITHHOLD Authority 2. To approve an Investment |__| |__| |__|
Director Nominees: all nominees for all nominees Advisory Agreement between the
01 Michael W. Dunn |__| |__| Corporation and Eudaimonia
02 James W. Eiler Asset Management, LLC;
03 Benjamin Jiaravanon
04 Gordon J. Roth 3. To approve an Investment |__| |__| |__|
05 Geoffrey T. Woolley Subadvisory Agreement among the
(INSTRUCTIONS: To withhold authority for any individual Corporation, Eudaimonia and
nominee, write that nominee's name on the space provided InvestAmerica Investment Advisors,
below.) Inc.;
-------------------------------------------------------------- 4. To authorize the Corporation |__| |__| |__|
to issue rights to acquire any
-------------------------------------------------------------- authorized shares of Common Stock
of the Corporation;
5. To ratify the appointment of |__| |__| |__|
KPMG LLP as independent
auditors; and
6. To transact such other |__| |__| |__|
business that may properly
come before the meeting and any
adjournment thereof.
PLEASE SIGN, DATE AND RETURN THIS PROXY USING THE ENCLOSED ENVELOPE.
Signature _____________________________ Signature _____________________________ Date _______________
Please sign your name exactly as it appears hereon. If signing for estates,
trusts, corporations or partnerships, title or capacity should be stated. If
shares are held jointly, each holder should sign.
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