INVESTMENT ADVISORY AGREEMENT

Exhibit 10.1

 

INVESTMENT ADVISORY AGREEMENT

 

Agreement dated as of November 9, 2004 (the “Agreement”), by and between NGP Capital Resources Company, a Maryland corporation (the “Company”), and NGP Investment Advisor, LP a Delaware limited partnership (the “Adviser”).

 

WHEREAS, the Company is a newly organized closed-end, non-diversified management investment company that intends to elected to be treated as a business development company under the Investment Company Act of 1940 (the “Investment Company Act”), and is in the business of making investments in securities issued in private placements, primarily in connection with structured finance investments consisting of a subordinate debt instrument or a combination of senior and subordinate debt instruments with some equity component;

 

WHEREAS, the Adviser is an investment adviser registered as such under the Investment Advisers Act of 1940, as amended (collectively, with the rules and regulations promulgated thereunder, the “Advisers Act”) and is engaged in the business of providing management and investment advisory services with respect to companies participating in structured finance transactions and making temporary short-term investments; and

 

WHEREAS, the Company deems it advisable to retain the Adviser to furnish certain management and investment advisory services to the Company, and the Adviser wishes to be retained to provide such services, on the terms and conditions hereinafter set forth;

 

NOW THEREFORE, in consideration of the premises and the mutual promises and covenants herein contained, it is agreed by and between the parties hereto as follows:

 

SECTION 1

 

DUTIES OF THE ADVISER

 

1.1 Engagement. Commencing on the date hereof, the Company hereby engages and retains the Adviser to act as the investment adviser to the Company and to manage the investment and reinvestment of the assets of the Company, subject to the supervision of the Board of Directors of the Company (the “Board”), for the period and upon the terms herein set forth, in accordance with (i) the investment objectives, policies, and restrictions that are set forth in the Company’s prospectus dated November 9, 2004 (the “Prospectus”), as such investment objectives, policies, and restrictions may be amended from time to time, (ii) the Investment Company Act, (iii) the policies adopted by the Board to the extent such policies do not conflict with any provisions of this Agreement, (iv) all other applicable federal and state securities and commodities laws, rules, and regulations, and (v) the Company’s articles of incorporation and by-laws, as such articles of incorporation and by-laws may be amended from time to time.

 

1.2 Services. Without limiting the generality of Section 1.1, the Adviser shall, during the term and subject to the provisions of this Agreement provide, or arrange for suitable third parties to provide, any and all management and investment advisory services necessary for the operation of the Company and the conduct of its business. Such management and investment advisory services shall include, but not be limited to, the following:

 

(a)

determining the composition of the portfolio of the Company, the nature and timing of the changes therein, and the manner of implementing such changes;

 

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(b)

identifying, evaluating, and negotiating the structure of the investments made by the Company;

 

(c)

monitoring the performance of, and managing the Company’s investments;

 

(d)

determining the securities and other assets that the Company will purchase, retain, or sell and the terms on which any such securities are purchased and sold;

 

(e)

arranging for the disposition of investments for the Company;

 

(f)

recommending to the Board the fair value of the Company’s investments that are not publicly traded debt or equity securities based upon the valuation guidelines adopted by the Board;

 

(g)

voting proxies in accordance with the proxy voting policies and procedures adopted by the Adviser; and

 

(h)

providing the Company with such other investment advice, research, and related services as the Company may, from time to time, reasonably require for the investment of the Company’s assets.

 

The Adviser shall have the power and authority on behalf of the Company to effect its investment decisions for the Company, including the execution and delivery of all documents relating to the Company’s investments and the placing of orders for purchase or sale transactions on behalf of the Company. In the event that the Company determines to acquire debt financing, the Adviser will arrange for such financing on the Company’s behalf, subject to the oversight and approval of the Board. If it is necessary for the Adviser to make investments or arrange financing on behalf of the Company through a special purpose vehicle, the Adviser shall have authority to create or arrange for the creation of such special purpose vehicle in accordance with the Investment Company Act.

 

1.3 Records. The Adviser shall keep and preserve for the period required by the Investment Company Act any books and records related to the provision of investment advisory services to the Company and required to be maintained under Rule 31a-2 under the Investment Company Act for an investment adviser to a business development company and shall maintain all books and records with respect to the Company’s portfolio transactions. The Adviser agrees that any records that it maintains for the Company as required under the Investment Company Act are the property of the Company and it will surrender promptly to the Company any such records upon the Company’s request, provided that (i) the Adviser may retain a copy of such records and (ii) nothing contained herein shall prevent the Adviser from using the performance track record of the Company following any termination of this Agreement.

 

1.4 Control and Supervision. The performance by the Adviser of its duties and obligations hereunder shall be subject to the control and supervision of the Board and the

 

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Adviser’s determination of what services are necessary or required for operation or to reasonably conduct the business of the Company shall be subject to review by the Board. The Adviser shall provide periodic and special reports to the Board of its performance of its obligations hereunder as the Board may request.

 

1.5 Acceptance. The Adviser hereby accepts such engagement and agrees during the term hereof, at its expense, to provide the services described herein and to assume the obligations herein set forth for the compensation provided herein.

 

1.6 Independent Contractor. The Adviser shall for all purposes herein provided be deemed to be an independent contractor and, except as expressly provided or authorized herein, shall have no authority to act for or represent the Company in any way or otherwise be deemed an agent of the Company.

 

1.7 Compliance. The Adviser represents that it is registered with the Securities and Exchange Commission (the “SEC”) as an investment adviser under the Advisers Act. The Adviser agrees that its activities with respect to the Company will at all times be in compliance in all material respects with applicable federal securities and state securities laws governing its operations and investments. The Adviser shall adopt and implement prior to October 5, 2004, written policies and procedures reasonably designed to prevent violation of the Federal Securities Laws (as defined in Rule 38a-1 under the Investment Company Act) by the Adviser. The Adviser shall provide the Company, at such times as the Company may reasonably request, with a copy of such policies and procedures and a written report that addresses the operation of the policies and procedures; such report shall be of sufficient scope and sufficient detail, as may reasonably be required to comply with Rule 38a-1 and to provide reasonable assurance that any weaknesses in the design or implementation of the policies and procedures would be disclosed by such examination, and, if there are no such weaknesses, the report shall so state.

 

1.8 Excess Brokerage Commissions. The Adviser is hereby authorized, to the fullest extent now or hereafter permitted by law, to cause the Company to pay a member of a national securities exchange, broker, or dealer an amount of commission for effecting a securities transaction in excess of the amount of commission another member of such exchange, broker, or dealer would have charged for effecting that transaction, if the Adviser determines in good faith, taking into account such factors as price (including the applicable brokerage commission or dealer spread), size of order, difficulty of execution, and operational facilities of the firm and the firm’s risk and skill in positioning blocks of securities, that such amount of commission is reasonable in relation to the value of the brokerage and/or research services provided by such member, broker or dealer, viewed in terms of either that particular transaction or its overall responsibilities with respect to the Company’s portfolio, and constitutes the best net results for the Company.

 

SECTION 2

 

USE OF SUB-INVESTMENT ADVISER

 

The Adviser may, subject to requirements of the Investment Company Act, employ one or more sub-investment advisers (each, a “Sub-Adviser”) to assist the Adviser in the

 

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performance of its duties under this Agreement. Specifically, the Adviser may retain a Sub-Adviser to recommend specific securities or other investments based upon the Company’s investment objectives and policies, and work, along with the Adviser, in structuring, negotiating, arranging or effecting the acquisition or disposition of such investments and monitoring investments on behalf of the Company, subject to the oversight of the Adviser and the Company. Such use of a Sub-Adviser does not relieve the Adviser of any duty or liability it would otherwise have under this Agreement. Compensation of any such Sub-Adviser for services provided and expenses assumed under any agreement between the Adviser and such Sub-Adviser permitted under this paragraph is the sole responsibility of the Adviser. Any sub-advisory agreement entered into by the Adviser shall be in accordance with the requirements of the Investment Company Act and other applicable federal and state law and shall contain a provision requiring any Sub-Adviser to comply with Sections 1.3 and 1.7.

 

SECTION 3

 

SERVICES OF THE ADVISER NOT EXCLUSIVE

 

3.1 Limitations on the Employment of the Adviser. The obligations of the Adviser to the Company and the services furnished by the Adviser hereunder are not exclusive. The Adviser and its Affiliates (as hereinafter defined) may engage in any other business or furnish the same or similar services to others, including businesses that may be in direct or indirect competition with the business of the Company and may be in direct competition with the Company for particular investments, so long as its services to the Company under this Agreement are not impaired thereby. It is contemplated that from time to time one or more Affiliates of the Adviser may serve as directors, officers, or employees of the Company or otherwise have an interest or affiliation with the Company or have the same or similar relationships with competitors of the Company. Nothing in this Agreement shall limit or restrict the right of any manager, partner, officer, agent, or employee of the Adviser or its Affiliates, who may also be a manager, officer, agent, or employee of the Company, to engage in any other business or to devote his or her time and attention in part to the management or other aspects of any other business, whether of a similar nature or dissimilar nature, or to receive fees or compensation in connection therewith (including fees for serving as a director of, or providing consulting services to, one or more of the Company’s portfolio companies, subject to applicable law). Neither the Adviser nor any of its Affiliates shall in any manner be liable to the Company by reason of the foregoing activities of the Adviser or such Affiliate. Within 60 days after the end of each calendar quarter of the Company, the Adviser will furnish the Board with information on a confidential basis, as to any investment within the investment objective of the Company made during such quarter by the Adviser or any Sub-Adviser for their own account or the account of others. So long as this Agreement remains in effect, the Adviser shall be the only investment adviser for the Company, subject to the Adviser’s right to enter into sub-advisory agreements. The Adviser assumes no responsibility under this Agreement other than to provide the services called for hereunder.

 

3.2 Responsibility of Dual Directors, Officers, and Employees. It is understood that directors, officers, employees, and stockholders of the Company are or may become interested in the Adviser and its Affiliates, as directors, officers, employees, partners, stockholders, members, and managers or otherwise, and that the Adviser and directors, officers, employees, partners, stockholders, members, and managers of the Adviser and its Affiliates are or may become similarly interested in the Company as stockholders or otherwise. If any person who is a

 

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manager, partner, officer, or employee of the Adviser is or becomes a director, officer, or employee of the Company and acts as such in any business of the Company, then such manager, partner, officer, or employee of the Adviser shall be deemed to be acting in such capacity for the Company, and not as a manager, partner, officer, or employee of the Adviser or under the control or direction of the Adviser, even if paid by the Adviser.

 

SECTION 4

 

ALLOCATION OF COSTS AND EXPENSES

 

4.1 Costs and Expenses Allocated to the Company. Except as otherwise expressly provided for in Section 4.2, during the term of this Agreement the Company will bear (and to the extent paid by the Adviser will reimburse the Adviser for) all of costs and expenses of the Company’s business, operations, and investments including, but not limited to, the following:

 

(a)

accounting, legal, printing, clerical, filing, and other expenses incurred in connection with the organization of the Company and the initial offering of its shares of its common stock (the “Offering”);

 

(b)

expenses with respect to acquisition and disposition of investments, including all costs and fees incident to the identification, selection, and investigation of prospective Company investments, including associated due diligence expenses such as travel expenses and professional fees:

 

(c)

brokerage and commission expense and other transaction costs incident to the acquisition and dispositions of investments;

 

(d)

federal, state, and local taxes and fees, including transfer taxes and filing fees, incurred by or levied upon the Company;

 

(e)

interest charges and other fees in connection with borrowings by the Company;

 

(f)

fees and expenses payable to the SEC and any fees and expenses of state securities regulatory authorities;