Item 1.01.
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Entry into a Material Definitive Agreement.
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Merger Agreement
On August 12, 2019,
Alcentra Capital Corporation (the “Company”) entered into a definitive merger agreement (the “Merger Agreement”)
with Crescent Capital BDC, Inc., a Delaware corporation (“Crescent BDC”), one of its wholly-owned owned subsidiaries
(the “Acquisition Sub”) and, solely for limited purposes, Crescent BDC’s investment adviser, CBDC Advisors, LLC
(“CBDC Advisors”), pursuant to which Crescent BDC will acquire all of the outstanding shares of the Company in a stock
and cash transaction. Pursuant to the Merger Agreement, Acquisition Sub will merge with and into the Company, with the Company
surviving the merger as a wholly-owned subsidiary of Crescent BDC (the “First Merger”). Immediately thereafter and
as a single integrated transaction, the Company will merge with and into Crescent BDC, with Crescent BDC surviving the merger (the
“Second Merger” and, together with the First Merger, the “Mergers”). The Committee of Independent Directors
of the Company’s board of directors (the “Company Board”), the Company Board and the board of directors of Crescent
BDC, including all of the respective independent directors, have unanimously approved the Merger Agreement and the transactions
contemplated therein.
Upon completion of
the Mergers, the Company’s stockholders will have the right to receive the following in exchange for each share of Company
common stock outstanding immediately prior to the effective time of the First Merger, in accordance with the Merger Agreement:
(1) $3.1784 in cash (“Cash Consideration”) to be paid by a combination of Crescent BDC and CBDC Advisors (subject to
certain adjustments pursuant to the Merger Agreement), and (2) stock consideration at the fixed exchange ratio of 0.4041 shares
of Crescent BDC common stock, par value $0.001 per share (the “Exchange Ratio”). The Exchange Ratio was fixed on the
date of the Merger Agreement and is not subject to adjustment based on changes in the trading price of the Company’s common
stock before the closing of the Mergers. Based on the number of Company shares outstanding on the date of the Merger Agreement,
the above would result in approximately 5.2 million shares of Crescent BDC common stock being exchanged for approximately 12.9
million outstanding shares of Company common stock, subject to adjustment in certain limited circumstances. As part of the aggregate
consideration, CBDC Advisors will provide $21.6 million, or $1.6761 per share, of the Cash Consideration to be paid to the
Company’s stockholders at closing. Any final tax dividend that the Company must pay in connection with the closing of the
transaction to comply with applicable tax requirements that is in excess of the Company’s regular quarterly dividends will
reduce the portion of the Cash Consideration to be paid by Crescent BDC on a dollar-for-dollar basis.
Prior to the transaction,
Crescent BDC will convert from a Delaware corporation to a Maryland corporation, and as a result, the combined company will be
incorporated in Maryland. As part of the conversion process, Crescent BDC will adopt a new charter that will, among other things,
generally restrict all Crescent BDC stockholders (other than those Company stockholders receiving Crescent BDC shares in connection
with the Mergers) from trading their respective shares for at least six months following the closing of the transaction, subject
to a modified lock-up schedule thereafter (lock-up restrictions on 50% of the affected Crescent BDC stockholders’ shares
will lapse after nine months, and lock-up restrictions on the remaining shares will lapse after 12 months).
Crescent BDC will apply
for listing on the NASDAQ under the ticker “CCAP” in connection with the closing of the Mergers. All of Crescent BDC’s
officers and directors in office immediately prior to the closing will remain in their current roles after the closing of the Mergers.
Consummation of the
Mergers is subject to certain conditions, including, among others, the approvals of the Company’s and Crescent BDC’s
stockholders, the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and other customary closing conditions. While there can be no assurances as to the exact timing, or that the Mergers will be completed
at all, the Company expects that the Mergers and other transactions contemplated by the Merger Agreement will be completed as early
as the fourth quarter of 2019.
During the period prior
to the closing of the Mergers, the Company has agreed to, and will cause its subsidiaries, its investment adviser, Alcentra NY,
LLC, and the Company’s controlled representatives, and will instruct and use commercially reasonable efforts to cause its
non-controlled representatives, to, immediately cease and cause to be terminated any existing solicitation of, or discussions or
negotiations with, any third party relating to any Competing Proposal (as defined in the Merger Agreement) or any inquiry, discussion,
offer or request that could reasonably be expected to lead to a Competing Proposal, and not to initiate, solicit or knowingly encourage
the making of any Competing Proposal or engage in negotiations or substantive discussions with, or furnish any nonpublic information
to, or enter into any agreement, arrangement or understanding with, any third party relating to a Competing Proposal or any inquiry.
However, the Company is permitted under the Merger Agreement to grant a waiver of or terminate any “standstill” or
similar obligation of any third party with respect to the Company or any of its subsidiaries solely for the purpose of allowing
such third party to submit a Competing Proposal.
If the Company receives
a Competing Proposal from a third party, and the Company Board determines in good faith after consultation with its financial advisors
and outside legal counsel that the inquiry or Competing Proposal (1) either constitutes or would reasonably be expected to lead
to a Superior Proposal (as defined in the Merger Agreement) and (2) failure to consider such proposal would reasonably be expected
to be inconsistent with the duties of the Company’s directors under applicable law, then the Company may engage in discussions
and negotiations with such third party so long as certain notice and other procedural requirements are satisfied. The Company may
terminate the Merger Agreement and enter into an agreement with a third party who makes a Superior Proposal, subject to certain
procedural requirements and the payment to Crescent BDC of a $4,281,720 termination fee. The Merger Agreement also contains certain
other termination rights, including among others, in favor of Crescent BDC if the requisite approval of the Company’s stockholders
is not obtained and in favor of each of the Company and Crescent BDC if the Mergers are not completed on or before March 31,
2020. Upon termination of the Merger Agreement under certain specified circumstances, the Company may be required to pay Crescent
BDC a termination fee of $4,281,720. The Merger Agreement also provides that each party to the Merger Agreement is entitled
to specific performance in the event of any breach or to prevent breaches of the Merger Agreement and to enforce specifically the
terms and provisions of the Merger Agreement.
In connection with
the transaction, CBDC Advisors has agreed to implement the following changes to the Crescent BDC investment advisory agreement
following the closing of the Mergers: (1) reduce the base management fee from 1.50% to 1.25%, (2) waive a portion of the base management
fee for the six quarters following the First Merger so that only 0.75% will be charged for such time period, (3) waive the income-based
portion of the incentive fee for the six quarters following the First Merger and (4) increase the hurdle rate under the income-based
portion of the incentive fee from 1.50% to 1.75% per quarter (or from 6.00% to 7.00% annualized).
The foregoing description
of the Mergers and the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the Merger
Agreement, which is attached hereto as Exhibit 2.1 and is incorporated into this Current Report on Form 8-K by reference. The representations
and warranties and covenants set forth in the Merger Agreement have been made only for purposes of such agreement and as of specific
dates, were solely for the benefit of the parties to the Merger Agreement, may be subject to limitations agreed upon by the contracting
parties, including qualified by confidential disclosures made for purposes of allocating contractual risk between the parties to
the Merger Agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable
to the contracting parties that differ from those applicable to investors. Accordingly, the Merger Agreement is included with this
filing only to provide investors with information regarding the terms of the Merger Agreement, and not to provide investors with
any factual information regarding the parties to the Merger Agreement or their respective businesses.
Voting Agreements
Simultaneously with
the execution of the Merger Agreement, the Company entered into voting agreements (the “Voting Agreements”) with certain
of Crescent BDC’s stockholders (the “Supporting Crescent BDC Stockholders”), which collectively are beneficial
owners of approximately 70% of the currently outstanding shares of Crescent BDC’s common stock. The Voting Agreements require,
among other things, that the Supporting Crescent BDC Stockholders vote all shares of Crescent BDC common stock they beneficially
own in favor of (1) the adoption of the Merger Agreement and the transactions contemplated therein, including the Mergers, (2)
the issuance of Crescent BDC common stock in connection with the Mergers, (3) the approval of the Crescent BDC investment advisory
agreement amendment, (4) the conversion of Crescent BDC to a Maryland corporation in connection with the consummation of the Mergers
and (5) the adoption of the Crescent BDC articles of incorporation in substantially the form attached to the Merger Agreement.
The foregoing description
of the Voting Agreements does not purport to be complete and is qualified in its entirety by reference to the form of Voting Agreement,
which is attached hereto as Exhibit 10.1 and is incorporated into this Current Report on Form 8-K by reference.