Gladstone Capital Corporation, et al.; Notice of Application, 65939-65941 [E5-6015]
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Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. IC–27120; 812–12934]
Gladstone Capital Corporation, et al.;
Notice of Application
October 25, 2005.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of application for an
order under section 57(i) of the
Investment Company Act of 1940 (the
‘‘Act’’) and rule 17d-1 under the Act to
permit certain joint transactions
otherwise prohibited by section 57(a)(4)
of the Act and under section 17(d) of the
Act and rule 17d-1 under the Act
authorizing certain joint transactions.
AGENCY:
551–6813, or Mary Kay Frech, Branch
Chief, at (202) 551–6821 (Office of
Investment Company Regulation,
Division of Investment Management).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
application. The complete application
may be obtained for a fee at the
Commission’s Public Reference Branch,
100 F St., NE., Washington, DC 20549–
0102 (tel. 202–551–5850).
Applicants’ Representations
1. GCC is a closed-end management
investment company that has elected to
be regulated as a BDC under the Act.
GCC’s investment objective is to achieve
a high level of current income by
investing in debt securities, such as
senior notes, senior subordinated notes
and subordinated notes, with particular
Summary of Application: Applicants
emphasis on senior subordinated notes,
requests an order to permit Gladstone
of established private businesses that
Capital Corporation and Gladstone
are backed by leveraged buyout funds,
Investment Corporation, both business
venture capital funds or others. In
development companies (‘‘BDCs’’), and
certain registered closed-end investment connection with the transactions in
companies, to co-invest with an affiliate which GCC would purchase debt
securities, it would generally expect to
in portfolio companies.
receive interests, such as warrants or
Applicants: Gladstone Capital
conversion privileges, in the issuers’
Corporation (‘‘GCC’’), Gladstone
common equity, which offer the
Investment Corporation (‘‘GIC’’),
potential of long-term appreciation. GCC
Gladstone Partners Fund LP
has entered into a combined investment
(‘‘Partners’’), Gladstone Management
advisory and administration agreement
Corporation (‘‘GMC’’) and Gladstone
with GMC.
General Partner, LLC.
2. Partners will be organized as a
Filing Dates: The application was
filed on February 27, 2003 and amended limited liability company, limited
liability company interests of which
on October 24, 2005.
Hearing or Notification of Hearing: An will be placed privately with
institutional investors, and will be
order granting the requested relief will
be issued unless the Commission orders excluded from the definition of
investment company by section 3(c)(1)
a hearing. Interested persons may
of the Act. Partners’ investment
request a hearing by writing to the
objective will be similar to that of GCC.
Commission’s Secretary and serving
Gladstone General Partner, LLC, is the
applicants with a copy of the request,
general partner of Partners. Upon
personally or by mail. Hearing requests
completion of its private placement,
should be received by the Commission
by 5:30 p.m. on November 21, 2005, and Partners will enter into an advisory
agreement with GMC and an
should be accompanied by proof of
administration agreement with
service on applicants, in the form of an
Gladstone Administration, LLC
affidavit or, for lawyers, a certificate of
(‘‘Gladstone Administration’’), which is
service. Hearing requests should state
a wholly owned subsidiary of GMC.
the nature of the writer’s interest, the
3. GIC is a recently organized closedreason for the request, and the issues
end management investment company
contested. Persons who wish to be
that has elected to be regulated as a
notified of a hearing may request
BDC. GIC’s investment objective is to
notification by writing to the
generate both current income and
Commission’s Secretary.
capital gains through debt and equity
ADDRESSES: Secretary, U.S. Securities
investments. GIC has entered into an
and Exchange Commission, 100 F St.,
investment advisory agreement with
NE., Washington, DC 20549–9303.
GMC and has entered into an
Applicants: c/o R. Charles Miller, Esq.,
administration agreement with
Kirkpatrick & Lockhart Nicholson
Gladstone Administration.
Graham LLP, 1800 Massachusetts
4. GMC is an investment adviser
Avenue, NW., Suite 200, Washington,
registered under the Investment
DC 20036.
Advisers Act of 1940. The investment
advisory agreements between GMC and
FOR FURTHER INFORMATION CONTACT:
GCC and between GMC and GIC, among
Marilyn Mann, Senior Counsel, at (202)
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other things, require GMC to make
available significant managerial
assistance to the portfolio companies of
GCC and GIC. GMC may in the future
provide investment advisory services to
other closed-end management
investment companies that elect to be
regulated as BDCs or other registered
closed-end management investment
companies (the ‘‘Future Co-Investors’’
and together with GIC and GCC, the
‘‘Investors’’). The applicants request that
the relief apply to the Future CoInvestors, which will comply with the
terms and conditions of the application.
5. Applicants request relief permitting
GCC, GIC and any Future Co-Investor to
make co-investments with Partners
(‘‘Co-investment Transactions’’). The
requested order will not extend to any
transaction in which more than one
Investor is a participant.
Applicants’ Legal Analysis
1. Section 57(a)(4) of the Act prohibits
certain affiliated persons of a BDC from
participating in a joint transaction with
the BDC in contravention of rules as
prescribed by the Commission. In
addition, under section 57(b)(2) of the
Act, any person who is directly or
indirectly controlling, controlled by or
under common control with a BDC is
subject to section 57(a)(4). Applicants
state that Partners is under common
control with each of the Investors and
therefore is subject to section 57(a)(4).
Section 57(i) of the Act provides that,
until the Commission prescribes rules
under section 57(a)(4), the
Commission’s rules under section 17(d)
of the Act applicable to registered
closed-end investment companies will
be deemed to apply. Because the
Commission has not adopted any rules
under section 57(a)(4), rule 17d–1
applies.
2. Section 17(d) of the Act and rule
17d–1 under the Act prohibit affiliated
persons of a registered investment
company from participating in joint
transactions with the company unless
the Commission has granted an order
permitting such transactions. Because
certain of the Future Co–Investors may
be registered closed-end investment
companies, section 17(d) and rule 17d–
1 apply. In passing upon applications
under rule 17d–1, the Commission
considers whether the company’s
participation in the joint transactions is
consistent with the provisions, policies,
and purposes of the Act and the extent
to which such participation is on a basis
different from or less advantageous than
that of other participants.
3. Applicants state that allowing coinvestment between GCC or GIC and
Partners and the Future Co-Investors
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Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Notices
and Partners will provide a substantial
benefit to GCC’s, GIC’s and the Future
Co-Investors’ stockholders by making
available greater resources that will
allow applicants to obtain access to
more attractive investment
opportunities.
4. Applicants state that the terms and
conditions set forth in the application
ensure that the terms on which coinvestments may be made will be
identical, thus protecting the
stockholders of any Investor from being
disadvantaged. Applicants state that the
proposed relief is consistent with rule
17d–1 in that the participation of the
Investors will not be on a basis different
from or less advantageous than that of
Partners.
Applicants’ Conditions
Applicants agree that the order
granting the requested relief will be
subject to the following conditions:
1. The requested order will not extend
to any transaction in which more than
one Investor is a participant.
2.(a) If considering an investment
opportunity that may constitute a Coinvestment Transaction, GMC will make
an independent determination of the
appropriateness of the Investor’s
participation in such transaction in light
of the Investor’s then-current
circumstances.
(b) If GMC deems the Investor’s
participation in any such investment
opportunity to be appropriate for the
Investor, it will then determine an
appropriate level of investment for the
Investor. If the aggregate amount
recommended by GMC to be invested by
the Investor in such Co-investment
Transaction, together with the amount
proposed to be invested by Partners in
the same transaction, exceeds the
amount of the investment opportunity,
the amount proposed to be invested by
each such party will be allocated among
them pro rata based on the ratio of each
party’s total assets to the aggregated
total assets of both parties, up to the
amount proposed to be invested by
each. GMC will provide the required
majority (as defined in section 57(o) of
the Act) (‘‘Required Majority’’) with
information concerning Partners’ total
assets to assist the Required Majority
with their review of the Investor’s
investments for compliance with these
allocation procedures.
(c) After making the determinations
required in (a) and (b) above, GMC will
distribute written information
concerning the Co-investment
Transaction, including the amount
proposed to be invested by Partners, to
the non-interested directors for their
consideration. The Investor will co-
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invest with Partners only if, prior to the
Investor’s participation in the Coinvestment Transaction, a Required
Majority concludes that:
(i) The terms of the transaction,
including the consideration to be paid,
are reasonable and fair and do not
involve overreaching of the Investor or
its stockholders on the part of any
person concerned;
(ii) The transaction is consistent with
(A) The interests of the stockholders
of the Investor; and
(B) The Investor’s investment
objectives and strategies (as described in
the Investor’s registration statements on
Form N–2 and other filings made with
the Commission by the Investor under
the Securities Act of 1933, as amended,
any reports filed by the Investor with
the Commission under the Securities
Exchange Act of 1934, as amended, and
the Investor’s reports to stockholders);
(iii) The investment by Partners
would not disadvantage the Investor,
and participation by the Investor is not
on a basis different from or less
advantageous than that of Partners;
provided, that if Partners, but not the
Investor, gains the right to nominate a
director for election to a portfolio
company’s board of directors or the
right to have a board observer or any
similar right to participate in the
governance or management of the
portfolio company, such event shall not
be interpreted to prohibit the Required
Majority from reaching the conclusions
required by this condition (2)(c)(iii), if
(A) The Required Majority shall have
the right to ratify the selection of such
director or board observer, if any; and
(B) GMC agrees to, and does, provide,
periodic reports to the Investor’s Board
of Directors with respect to the actions
of such director or the information
received by such board observer or
obtained through the exercise of any
similar right to participate in the
governance or management of the
portfolio company; and
(iv) The proposed investment by the
Investor will not benefit GMC or
Partners or any affiliated person of
either of them (other than Partners),
except to the extent permitted under
sections 17(e) and 57(k) of the Act.
(d) The Investor has the right to
decline to participate in any Coinvestment Transaction or to invest less
than the amount proposed to the
Investor.
(e) GMC will present to the Board of
Directors, on a quarterly basis, a record
of all investments made by Partners
during the preceding quarter that fell
within the Investor’s then current
investment objectives that were not
made available to the Investor, and an
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explanation of why the investment
opportunities were not offered to the
Investor. All information presented to
the Board of Directors pursuant to this
condition will be kept for the life of the
Investor and at least two years
thereafter, and will be subject to
examination by the Commission and its
staff.
3. Except for follow-on investments
made pursuant to condition 6 below, the
Investor will not invest in any portfolio
company in which GMC or Partners or
any affiliated person of either of them is
an existing investor.
4. The Investor will not participate in
any Co-investment Transaction unless
the terms, conditions, price, class of
securities to be purchased, settlement
date, and registration rights will be the
same for the Investor and Partners. The
grant to Partners, but not the Investor,
of the right to nominate a director for
election to a portfolio company’s board
of directors, the right to have an
observer on the board of directors or
similar rights to participate in the
governance or management of the
portfolio company will not be
interpreted so as to violate this
condition 4, if conditions 2(c)(iii)(A)
and (B) are met.
5. If Partners elects to sell, exchange
or otherwise dispose of an interest in a
security that was acquired by the
Investor and Partners in a Coinvestment Transaction, GMC will
(a) Notify the Investor of the proposed
disposition at the earliest practical time;
and
(b) Formulate a recommendation as to
participation by the Investor in any such
disposition and provide a written
recommendation to the non-interested
directors.
The Investor will have the right to
participate in such disposition on a
proportionate basis, at the same price
and on the same terms and conditions
as those applicable to Partners. The
Investor will participate in such
disposition to the extent that a Required
Majority determines that it is in the
Investor’s best interests to do so. The
Investor and Partners will each bear its
own expenses in connection with any
such disposition.
6. If Partners desires to make a
‘‘follow-on investment’’ (i.e., an
additional investment in the same
entity) in a portfolio company whose
securities were acquired by the Investor
and Partners in a Co-investment
Transaction or to exercise warrants or
other rights to purchase securities of the
issuer, GMC will
(a) Notify the Investor of the proposed
transaction at the earliest practical time;
and
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Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Notices
(b) Formulate a recommendation as to
the proposed participation, including
the amount of the proposed follow-on
investment, by the Investor and provide
the recommendation to the noninterested directors.
The non-interested directors will
make their own determination with
respect to follow-on investments. To the
extent that
(i) The amount of a follow-on
investment opportunity is not based on
the Investor’s and Partners’ initial
investments; and
(ii) The aggregate amount
recommended by GMC to be invested by
the Investor in such follow-on
investment, together with the amount
proposed to be invested by Partners in
the same transaction, exceeds the
amount of the follow-on investment
opportunity, the amount invested by
each such party will be allocated among
them pro rata based on the ratio of each
party’s total assets to the aggregated
total assets of both parties, up to the
maximum amount to be invested by
each. The Investor will participate in
such investment to the extent that the
Required Majority determines that it is
in the Investor’s best interest. The
acquisition of follow-on investments as
permitted by this condition will be
subject to the other conditions set forth
in the application.
7. The non-interested directors will be
provided quarterly for review all
information concerning Co-investment
Transactions, including investments
made by Partners which the Investor
considered but declined to participate,
so that the non-interested directors may
determine whether all investments
made during the preceding quarter,
including those investments which the
Investor considered but declined to
participate, comply with the conditions
of the order. In addition, the noninterested directors will consider at
least annually the continued
appropriateness of the standards
established for co-investments by the
Investor, including whether the use of
the standards continues to be in the best
interests of the Investor and its
shareholders and does not involve
overreaching on the part of any person
concerned.
8. The Investor will maintain the
records required by section 57(f)(3) of
the Act as if each of the investments
permitted under these conditions were
approved by the non-interested
directors under section 57(f).
9. No non-interested director will also
be a director, general partner or
principal, or otherwise an ‘‘affiliated
person’’ (as defined in the Act) of,
Partners.
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10. The expenses, if any, associated
with acquiring, holding or disposing of
any securities acquired in a Coinvestment Transaction (including,
without limitation, the expenses of the
distribution of any such securities
registered for sale under the Securities
Act of 1933) shall, to the extent not
payable solely by GMC under its
investment advisory agreements with
the Investor and Partners, be shared by
the Investor and Partners in proportion
to the relative amounts of their
securities to be acquired or disposed of,
as the case may be, by the Investor and
Partners.
11. Any transaction fee (including
break-up or commitment fees but
excluding broker’s fees contemplated by
section 17(e)(2) of the Act) received in
connection with a Co-investment
Transaction will be distributed to the
Investor and Partners on a pro rata basis
based on the amount they invested or
committed, as the case may be, in such
Coinvestment Transaction. If any
transaction fee is to be held by GMC
pending consummation of the
transaction, the fee will be deposited
into an account maintained by GMC at
a bank or banks having the
qualifications prescribed in section
26(a)(1) of the Act, and the account will
earn a competitive rate of interest that
will also be divided pro rata between
the Investor and Partners based on the
amount they invest in such
Coinvestment Transaction. Partners,
GMC or any affiliated person of the
Investor will not receive additional
compensation or remuneration of any
kind (other than (i) the pro rata
transaction fees described above and (ii)
investment advisory fees paid in
accordance with investment advisory
agreements with the Investor and
Partners) as a result of or in connection
with a Co-investment Transaction.
12. The Board of Directors of each
Investor will satisfy the fund
governance standards as defined in rule
0–1(a)(7) under the Act by the
compliance date for the rule.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Jonathan G. Katz,
Secretary.
[FR Doc. E5–6015 Filed 10–31–05; 8:45 am]
BILLING CODE 8010–01–P
PO 00000
65941
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–52657; SR–Amex–2005–
047; SR–BSE–2005–39; SR–CBOE–2005–68;
SR–ISE–2005–42; SR–PCX–2005–104; SR–
Phlx–2005–27]
Self-Regulatory Organizations; Order
Approving a Proposed Rule Change
and Amendment No. 1 by the American
Stock Exchange LLC; a Proposed Rule
Change by the Boston Stock
Exchange, Inc.; a Proposed Rule
Change by the Chicago Board Options
Exchange, Incorporated; a Proposed
Rule Change and Amendment No. 1 by
the International Securities Exchange,
Inc.; a Proposed Rule Change by the
Pacific Exchange, Inc.; and a Proposed
Rule Change and Amendment No. 1 by
the Philadelphia Stock Exchange, Inc.
Relating to the Definition of Firm
Customer Quote Size and Limitations
on Sending Secondary P/A Orders
October 24, 2005.
I. Introduction
On April 26, 2005, April 28, 2005,
August 29, 2005, August 31, 2005,
September 7, 2005, and September 13,
2005, the Philadelphia Stock Exchange,
Inc. (‘‘Phlx’’), the American Stock
Exchange LLC (‘‘Amex’’), the Chicago
Board Options Exchange, Incorporated
(‘‘CBOE’’), the International Securities
Exchange, Inc. (‘‘ISE’’), the Pacific
Exchange, Inc. (‘‘PCX’’), and the Boston
Stock Exchange, Inc. (‘‘BSE’’)
(collectively, the ‘‘Options Exchanges’’),
respectively, filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 proposed rule changes to
amend each of their respective rules
governing the operation of the
intermarket option linkage (‘‘Linkage’’)
to conform with a proposed
amendment 3 to the Plan for the Purpose
of Creating and Operating an
Intermarket Option Linkage (‘‘Linkage
Plan’’).4 Each of the Exchanges is
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 52401
(September 9, 2005), 70 FR 54781 (September 16,
2005) (File No. 4–429) (‘‘Amendment No. 16’’).
4 On July 28, 2000, the Commission approved a
national market system plan for the purpose of
creating and operating an intermarket option market
linkage proposed by the Amex, CBOE, and ISE. See
Securities Exchange Act Release No. 43086 (July 28,
2000), 65 FR 48023 (August 4, 2000). Subsequently,
upon separate requests by the Phlx, PCX, and BSE,
the Commission issued orders to permit these
exchanges to participate in the Linkage Plan. See
Securities Exchange Act Release Nos. 43573
(November 16, 2000), 65 FR 70850 (November 28,
2 17
Continued
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]]>Agencies
[Federal Register Volume 70, Number 210 (Tuesday, November 1, 2005)]
[Notices]
[Pages 65939-65941]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-6015]
[[Page 65939]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-27120; 812-12934]
Gladstone Capital Corporation, et al.; Notice of Application
October 25, 2005.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of application for an order under section 57(i) of the
Investment Company Act of 1940 (the ``Act'') and rule 17d-1 under the
Act to permit certain joint transactions otherwise prohibited by
section 57(a)(4) of the Act and under section 17(d) of the Act and rule
17d-1 under the Act authorizing certain joint transactions.
-----------------------------------------------------------------------
Summary of Application: Applicants requests an order to permit
Gladstone Capital Corporation and Gladstone Investment Corporation,
both business development companies (``BDCs''), and certain registered
closed-end investment companies, to co-invest with an affiliate in
portfolio companies.
Applicants: Gladstone Capital Corporation (``GCC''), Gladstone
Investment Corporation (``GIC''), Gladstone Partners Fund LP
(``Partners''), Gladstone Management Corporation (``GMC'') and
Gladstone General Partner, LLC.
Filing Dates: The application was filed on February 27, 2003 and
amended on October 24, 2005.
Hearing or Notification of Hearing: An order granting the requested
relief will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving applicants with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on November 21, 2005, and should be accompanied by proof of
service on applicants, in the form of an affidavit or, for lawyers, a
certificate of service. Hearing requests should state the nature of the
writer's interest, the reason for the request, and the issues
contested. Persons who wish to be notified of a hearing may request
notification by writing to the Commission's Secretary.
ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
St., NE., Washington, DC 20549-9303. Applicants: c/o R. Charles Miller,
Esq., Kirkpatrick & Lockhart Nicholson Graham LLP, 1800 Massachusetts
Avenue, NW., Suite 200, Washington, DC 20036.
FOR FURTHER INFORMATION CONTACT: Marilyn Mann, Senior Counsel, at (202)
551-6813, or Mary Kay Frech, Branch Chief, at (202) 551-6821 (Office of
Investment Company Regulation, Division of Investment Management).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee at the
Commission's Public Reference Branch, 100 F St., NE., Washington, DC
20549-0102 (tel. 202-551-5850).
Applicants' Representations
1. GCC is a closed-end management investment company that has
elected to be regulated as a BDC under the Act. GCC's investment
objective is to achieve a high level of current income by investing in
debt securities, such as senior notes, senior subordinated notes and
subordinated notes, with particular emphasis on senior subordinated
notes, of established private businesses that are backed by leveraged
buyout funds, venture capital funds or others. In connection with the
transactions in which GCC would purchase debt securities, it would
generally expect to receive interests, such as warrants or conversion
privileges, in the issuers' common equity, which offer the potential of
long-term appreciation. GCC has entered into a combined investment
advisory and administration agreement with GMC.
2. Partners will be organized as a limited liability company,
limited liability company interests of which will be placed privately
with institutional investors, and will be excluded from the definition
of investment company by section 3(c)(1) of the Act. Partners'
investment objective will be similar to that of GCC. Gladstone General
Partner, LLC, is the general partner of Partners. Upon completion of
its private placement, Partners will enter into an advisory agreement
with GMC and an administration agreement with Gladstone Administration,
LLC (``Gladstone Administration''), which is a wholly owned subsidiary
of GMC.
3. GIC is a recently organized closed-end management investment
company that has elected to be regulated as a BDC. GIC's investment
objective is to generate both current income and capital gains through
debt and equity investments. GIC has entered into an investment
advisory agreement with GMC and has entered into an administration
agreement with Gladstone Administration.
4. GMC is an investment adviser registered under the Investment
Advisers Act of 1940. The investment advisory agreements between GMC
and GCC and between GMC and GIC, among other things, require GMC to
make available significant managerial assistance to the portfolio
companies of GCC and GIC. GMC may in the future provide investment
advisory services to other closed-end management investment companies
that elect to be regulated as BDCs or other registered closed-end
management investment companies (the ``Future Co-Investors'' and
together with GIC and GCC, the ``Investors''). The applicants request
that the relief apply to the Future Co-Investors, which will comply
with the terms and conditions of the application.
5. Applicants request relief permitting GCC, GIC and any Future Co-
Investor to make co-investments with Partners (``Co-investment
Transactions''). The requested order will not extend to any transaction
in which more than one Investor is a participant.
Applicants' Legal Analysis
1. Section 57(a)(4) of the Act prohibits certain affiliated persons
of a BDC from participating in a joint transaction with the BDC in
contravention of rules as prescribed by the Commission. In addition,
under section 57(b)(2) of the Act, any person who is directly or
indirectly controlling, controlled by or under common control with a
BDC is subject to section 57(a)(4). Applicants state that Partners is
under common control with each of the Investors and therefore is
subject to section 57(a)(4). Section 57(i) of the Act provides that,
until the Commission prescribes rules under section 57(a)(4), the
Commission's rules under section 17(d) of the Act applicable to
registered closed-end investment companies will be deemed to apply.
Because the Commission has not adopted any rules under section
57(a)(4), rule 17d-1 applies.
2. Section 17(d) of the Act and rule 17d-1 under the Act prohibit
affiliated persons of a registered investment company from
participating in joint transactions with the company unless the
Commission has granted an order permitting such transactions. Because
certain of the Future Co-Investors may be registered closed-end
investment companies, section 17(d) and rule 17d-1 apply. In passing
upon applications under rule 17d-1, the Commission considers whether
the company's participation in the joint transactions is consistent
with the provisions, policies, and purposes of the Act and the extent
to which such participation is on a basis different from or less
advantageous than that of other participants.
3. Applicants state that allowing co-investment between GCC or GIC
and Partners and the Future Co-Investors
[[Page 65940]]
and Partners will provide a substantial benefit to GCC's, GIC's and the
Future Co-Investors' stockholders by making available greater resources
that will allow applicants to obtain access to more attractive
investment opportunities.
4. Applicants state that the terms and conditions set forth in the
application ensure that the terms on which co-investments may be made
will be identical, thus protecting the stockholders of any Investor
from being disadvantaged. Applicants state that the proposed relief is
consistent with rule 17d-1 in that the participation of the Investors
will not be on a basis different from or less advantageous than that of
Partners.
Applicants' Conditions
Applicants agree that the order granting the requested relief will
be subject to the following conditions:
1. The requested order will not extend to any transaction in which
more than one Investor is a participant.
2.(a) If considering an investment opportunity that may constitute
a Co-investment Transaction, GMC will make an independent determination
of the appropriateness of the Investor's participation in such
transaction in light of the Investor's then-current circumstances.
(b) If GMC deems the Investor's participation in any such
investment opportunity to be appropriate for the Investor, it will then
determine an appropriate level of investment for the Investor. If the
aggregate amount recommended by GMC to be invested by the Investor in
such Co-investment Transaction, together with the amount proposed to be
invested by Partners in the same transaction, exceeds the amount of the
investment opportunity, the amount proposed to be invested by each such
party will be allocated among them pro rata based on the ratio of each
party's total assets to the aggregated total assets of both parties, up
to the amount proposed to be invested by each. GMC will provide the
required majority (as defined in section 57(o) of the Act) (``Required
Majority'') with information concerning Partners' total assets to
assist the Required Majority with their review of the Investor's
investments for compliance with these allocation procedures.
(c) After making the determinations required in (a) and (b) above,
GMC will distribute written information concerning the Co-investment
Transaction, including the amount proposed to be invested by Partners,
to the non-interested directors for their consideration. The Investor
will co-invest with Partners only if, prior to the Investor's
participation in the Co-investment Transaction, a Required Majority
concludes that:
(i) The terms of the transaction, including the consideration to be
paid, are reasonable and fair and do not involve overreaching of the
Investor or its stockholders on the part of any person concerned;
(ii) The transaction is consistent with
(A) The interests of the stockholders of the Investor; and
(B) The Investor's investment objectives and strategies (as
described in the Investor's registration statements on Form N-2 and
other filings made with the Commission by the Investor under the
Securities Act of 1933, as amended, any reports filed by the Investor
with the Commission under the Securities Exchange Act of 1934, as
amended, and the Investor's reports to stockholders);
(iii) The investment by Partners would not disadvantage the
Investor, and participation by the Investor is not on a basis different
from or less advantageous than that of Partners; provided, that if
Partners, but not the Investor, gains the right to nominate a director
for election to a portfolio company's board of directors or the right
to have a board observer or any similar right to participate in the
governance or management of the portfolio company, such event shall not
be interpreted to prohibit the Required Majority from reaching the
conclusions required by this condition (2)(c)(iii), if
(A) The Required Majority shall have the right to ratify the
selection of such director or board observer, if any; and
(B) GMC agrees to, and does, provide, periodic reports to the
Investor's Board of Directors with respect to the actions of such
director or the information received by such board observer or obtained
through the exercise of any similar right to participate in the
governance or management of the portfolio company; and
(iv) The proposed investment by the Investor will not benefit GMC
or Partners or any affiliated person of either of them (other than
Partners), except to the extent permitted under sections 17(e) and
57(k) of the Act.
(d) The Investor has the right to decline to participate in any Co-
investment Transaction or to invest less than the amount proposed to
the Investor.
(e) GMC will present to the Board of Directors, on a quarterly
basis, a record of all investments made by Partners during the
preceding quarter that fell within the Investor's then current
investment objectives that were not made available to the Investor, and
an explanation of why the investment opportunities were not offered to
the Investor. All information presented to the Board of Directors
pursuant to this condition will be kept for the life of the Investor
and at least two years thereafter, and will be subject to examination
by the Commission and its staff.
3. Except for follow-on investments made pursuant to condition 6
below, the Investor will not invest in any portfolio company in which
GMC or Partners or any affiliated person of either of them is an
existing investor.
4. The Investor will not participate in any Co-investment
Transaction unless the terms, conditions, price, class of securities to
be purchased, settlement date, and registration rights will be the same
for the Investor and Partners. The grant to Partners, but not the
Investor, of the right to nominate a director for election to a
portfolio company's board of directors, the right to have an observer
on the board of directors or similar rights to participate in the
governance or management of the portfolio company will not be
interpreted so as to violate this condition 4, if conditions
2(c)(iii)(A) and (B) are met.
5. If Partners elects to sell, exchange or otherwise dispose of an
interest in a security that was acquired by the Investor and Partners
in a Co-investment Transaction, GMC will
(a) Notify the Investor of the proposed disposition at the earliest
practical time; and
(b) Formulate a recommendation as to participation by the Investor
in any such disposition and provide a written recommendation to the
non-interested directors.
The Investor will have the right to participate in such disposition
on a proportionate basis, at the same price and on the same terms and
conditions as those applicable to Partners. The Investor will
participate in such disposition to the extent that a Required Majority
determines that it is in the Investor's best interests to do so. The
Investor and Partners will each bear its own expenses in connection
with any such disposition.
6. If Partners desires to make a ``follow-on investment'' (i.e., an
additional investment in the same entity) in a portfolio company whose
securities were acquired by the Investor and Partners in a Co-
investment Transaction or to exercise warrants or other rights to
purchase securities of the issuer, GMC will
(a) Notify the Investor of the proposed transaction at the earliest
practical time; and
[[Page 65941]]
(b) Formulate a recommendation as to the proposed participation,
including the amount of the proposed follow-on investment, by the
Investor and provide the recommendation to the non-interested
directors.
The non-interested directors will make their own determination with
respect to follow-on investments. To the extent that
(i) The amount of a follow-on investment opportunity is not based
on the Investor's and Partners' initial investments; and
(ii) The aggregate amount recommended by GMC to be invested by the
Investor in such follow-on investment, together with the amount
proposed to be invested by Partners in the same transaction, exceeds
the amount of the follow-on investment opportunity, the amount invested
by each such party will be allocated among them pro rata based on the
ratio of each party's total assets to the aggregated total assets of
both parties, up to the maximum amount to be invested by each. The
Investor will participate in such investment to the extent that the
Required Majority determines that it is in the Investor's best
interest. The acquisition of follow-on investments as permitted by this
condition will be subject to the other conditions set forth in the
application.
7. The non-interested directors will be provided quarterly for
review all information concerning Co-investment Transactions, including
investments made by Partners which the Investor considered but declined
to participate, so that the non-interested directors may determine
whether all investments made during the preceding quarter, including
those investments which the Investor considered but declined to
participate, comply with the conditions of the order. In addition, the
non-interested directors will consider at least annually the continued
appropriateness of the standards established for co-investments by the
Investor, including whether the use of the standards continues to be in
the best interests of the Investor and its shareholders and does not
involve overreaching on the part of any person concerned.
8. The Investor will maintain the records required by section
57(f)(3) of the Act as if each of the investments permitted under these
conditions were approved by the non-interested directors under section
57(f).
9. No non-interested director will also be a director, general
partner or principal, or otherwise an ``affiliated person'' (as defined
in the Act) of, Partners.
10. The expenses, if any, associated with acquiring, holding or
disposing of any securities acquired in a Co-investment Transaction
(including, without limitation, the expenses of the distribution of any
such securities registered for sale under the Securities Act of 1933)
shall, to the extent not payable solely by GMC under its investment
advisory agreements with the Investor and Partners, be shared by the
Investor and Partners in proportion to the relative amounts of their
securities to be acquired or disposed of, as the case may be, by the
Investor and Partners.
11. Any transaction fee (including break-up or commitment fees but
excluding broker's fees contemplated by section 17(e)(2) of the Act)
received in connection with a Co-investment Transaction will be
distributed to the Investor and Partners on a pro rata basis based on
the amount they invested or committed, as the case may be, in such
Coinvestment Transaction. If any transaction fee is to be held by GMC
pending consummation of the transaction, the fee will be deposited into
an account maintained by GMC at a bank or banks having the
qualifications prescribed in section 26(a)(1) of the Act, and the
account will earn a competitive rate of interest that will also be
divided pro rata between the Investor and Partners based on the amount
they invest in such Coinvestment Transaction. Partners, GMC or any
affiliated person of the Investor will not receive additional
compensation or remuneration of any kind (other than (i) the pro rata
transaction fees described above and (ii) investment advisory fees paid
in accordance with investment advisory agreements with the Investor and
Partners) as a result of or in connection with a Co-investment
Transaction.
12. The Board of Directors of each Investor will satisfy the fund
governance standards as defined in rule 0-1(a)(7) under the Act by the
compliance date for the rule.
For the Commission, by the Division of Investment Management,
under delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. E5-6015 Filed 10-31-05; 8:45 am]
BILLING CODE 8010-01-P
