On September 15, 2009, Tortoise Capital Resources Corporation (the “Company”) entered into a new investment advisory agreement (the “New Advisory Agreement”) with its investment advisor, Tortoise Capital Advisors, L.L.C (the “Adviser”). Upon the closing of the transaction with Mariner Holdings, LLC (“Mariner”), which resulted in Mariner
acquiring a majority interest in the Adviser and a change in control of the Adviser (the “Transaction”), the prior investment advisory agreement with the Adviser (the “Prior Advisory Agreement”) automatically terminated.
The New Advisory Agreement was approved by the requisite vote of the Company’s stockholders under the Investment Company Act of 1940, as amended (the “1940 Act”). The terms of the New Advisory Agreement are substantially identical to the Prior Advisory Agreement, except for the effective and termination dates. Pursuant
to the terms of the New Advisory Agreement between the Company and the Adviser, the Company pays the Adviser a fee consisting of two components — a base management fee and an incentive fee. The base management fee is paid quarterly in arrears, and is equal to 0.375% (1.5% annualized) of the Company’s average monthly Managed Assets (total assets, including any assets purchased with or attributable to any borrowed funds, minus accrued liabilities other than (i) deferred taxes, and (ii) debt entered
into for the purpose of leverage) for such quarter.
The incentive fee consists of two parts. The first part, the investment income fee, is calculated and payable quarterly in arrears and will equal 15% of the excess, if any, of the Company’s net investment income for the fiscal quarter over a quarterly hurdle rate equal to 2% (8% annualized) of the Company’s average monthly net
assets for the quarter.
The second part of the incentive fee, the capital gains fee, will be determined and payable in arrears as of the end of each fiscal year (or, upon termination of the New Advisory Agreement, as of the termination date), and will equal (i) 15% of (a) the Company’s net realized capital gains on a cumulative basis from the commencement
of the Company’s operations on December 8, 2005 to the end of each fiscal year, less (b) any unrealized capital depreciation at the end of such fiscal year, less (ii) the aggregate amount of all capital gains fees paid to the Adviser in prior fiscal years. The calculation of the capital gains fee does not include any capital gains that result from that portion of any scheduled periodic distributions made possible by the normally recurring cash flow from the operations of portfolio companies (“Expected
Distributions”) that are characterized by the Company as return of capital for U.S. generally accepted accounting principles purposes. In that regard, any such return of capital will not be treated as a decrease in the cost basis of an investment for purposes of calculating the capital gains fee. This does not apply to any portion of any distribution from a portfolio company that is not an Expected Distribution.
In November 2008, the Adviser agreed that it would reimburse the Company for expenses incurred beginning January 1, 2009 and ending December 31, 2009 in an amount equal to an annual rate of 0.25% of the Company’s average monthly Managed Assets. This reimbursement will continue through December 31, 2009.
Employees of the Adviser serve as officers of the Company and the Chairman of the Board of the Company is an employee of the Adviser.
The description of the New Advisory Agreement does not purport to be complete and is qualified in its entirety by reference to the New Advisory Agreement that is filed hereto as Exhibit 10.1 and incorporated herein by reference.