Ridgewood Capital Energy Growth Fund, LLC, et al., 50849-50851 [E9-23730]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 74, Number 189 (Thursday, October 1, 2009)]
[Notices]
[Pages 50849-50851]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-23730]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-28931; File No. 812-13569]


Ridgewood Capital Energy Growth Fund, LLC, et al.; Notice of 
Application

September 25, 2009.
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.

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Summary of Application:  Applicants request an order to permit a 
business development company (``BDC'') to co-invest with certain 
affiliated investment funds in portfolio companies.

Applicants:  Ridgewood Capital Energy Growth Fund, LLC (the 
``Company''), Ridgewood Capital Fund IV, LLC, Ridgewood Capital Fund 
IV-B, LLC, Ridgewood Capital Fund IV-C, LLC, Ridgewood Capital QP Fund 
IV, LLC, Ridgewood Capital QP Fund IV-B, LLC, Ridgewood Capital QP Fund 
IV-C, LLC, Ridgewood QP Fund III LLC, and Ridgewood Venture Fund III 
LLC (each individually, a ``Fund'' and collectively, the ``Funds''), 
and Ridgewood Capital Management, LLC (the ``Adviser'').

Filing Dates:  The application was filed on August 25, 2008 and amended 
on February 6, 2009, June 4, 2009, and September 24, 2009.

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 October 20, 2009, 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 20549-1090. Applicants: c/o Daniel V. Gulino, 
Esq., Ridgewood Capital Energy Growth Fund, LLC, 947 Linwood Avenue, 
Ridgewood, New Jersey 07450.

FOR FURTHER INFORMATION CONTACT: Jill Ehrlich, Attorney Advisor, at 
(202) 551-6819, 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 via the 
Commission's Web site by searching for the file number, or an applicant 
using the Company name box, at https://www.sec.gov/search/search.htm or 
by calling (202) 551-8090.

Applicants' Representations

    1. The Company is an externally managed, non-diversified, closed-
end management investment company that intends to elect to be regulated 
as a BDC under the Act.\1\ The Company intends to operate as a 
specialty investment company focused on providing customized financing 
to a limited number of energy or renewable energy, technology, and 
growth-based companies from the early stages of development to the 
expansion and later stages of development. The Company's investment 
objective is to generate long-term capital appreciation from these 
equity-related investments. The Company will have a five-member board 
of directors (the ``Board'') of which three members are not 
``interested persons'' of the Company within the meaning of section 
2(a)(19) of the Act (the ``Independent Directors''). The Adviser is an 
investment adviser registered under the Investment Advisers Act of 1940 
and will manage the investment activities of the Company pursuant to an 
investment advisory agreement.
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    \1\ Section 2(a)(48) defines a BDC to be any closed-end 
investment company that operates for the purpose of making 
investments in securities described in sections 55(a)(1) through 
55(a)(3) of the Act and makes available significant managerial 
assistance with respect to the issuers of such securities.
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    2. Each of the Funds is a Delaware limited liability company of 
which the Adviser is the managing member and is a separate and distinct 
legal entity. Each is excluded from the definition of investment 
company by either section 3(c)(1) or 3(c)(7) of the Act. The Funds' 
investment objectives are essentially the same as those of the Company. 
Each Fund is operated in accordance with a limited liability company 
agreement (collectively, the ``Agreements''). The Agreements also serve 
effectively as the advisory contracts between the Adviser and each Fund 
and provide the Adviser with full, exclusive and complete discretion in 
the management and control of the Funds. The Adviser may in the future 
advise other entities that are affiliated persons of the Company as 
defined in section 2(a)(3)(C) of the Act (the ``Future Co-Investment 
Affiliates'').\2\
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    \2\ Sections 2(a)(3)(C) defines an ``affiliated person'' of 
another person as any person directly or indirectly controlling, 
controlled by, or under common control with, such other person.
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    3. Applicants request relief permitting the Company, the Funds and 
any Future Co-Investment Affiliate to co-invest in portfolio companies 
(the ``Co-Investment Program'' and each investment, a ``Co-Investment 
Transaction'').\3\ Each Co-Investment Transaction would be allocated 
among the Company, on the one hand, and the Funds, on the other hand. 
In selecting investments for the Company, the Adviser will consider 
only the investment objective, investment policies, investment 
position, capital available for investment, and other pertinent factors 
applicable to the Company. While co-investment would be the norm, each 
transaction and the proposed allocation of each investment opportunity 
would be approved prior to the actual investment by the required 
majority (within the meaning of section 57(o)) (the ``Required 
Majority'').\4\
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    \3\ All existing entities that currently intend to rely on the 
order have been named as applicants and any future entities that may 
rely on the order in the future will comply with its terms and 
conditions.
    \4\ The term ``Required Majority,'' when used with respect to 
the approval of a proposed transaction, plan, or arrangement, means 
both a majority of a BDC's directors or general partners who have no 
financial interest in such transaction, plan, or arrangement and a 
majority of such directors or general partners who are not 
interested persons of such company.
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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. 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).

[[Page 50850]]

Applicants state that each of the Funds could be deemed to be a person 
related to the Company in a manner described by section 57(b) by virtue 
of their being under common control with the Company. 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. Rule 17d-
1, as made applicable to BDCs by section 57(i), prohibits any person 
who is related to a BDC in a manner described in section 57(b), acting 
as principal, from participating in, or effecting any transaction in 
connection with, any joint enterprise or other joint arrangement or 
profit-sharing plan in which the BDC is a participant, absent an order 
from the Commission. In passing upon applications under rule 17d-1, the 
Commission considers whether the company's participation in the joint 
transaction 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 they expect that co-investment in 
portfolio companies by the Company and the Funds will increase 
favorable investment opportunities for the Company. The Co-Investment 
Program will be effected only if it is approved by the Required 
Majority on the basis that it would be advantageous for the Company to 
have the additional capital from the Funds available to meet the 
funding requirements of attractive investments in portfolio companies.
    4. Applicants submit that the fact that the Required Majority will 
approve each Co-Investment Transaction before investment, and other 
protective conditions set forth in the application, will ensure that 
the Company will be treated fairly. Applicants state that the Company's 
participation in the Co-Investment Transactions will be consistent with 
the provisions, policies, and purposes of the 1940 Act and on a basis 
that is not different from or less advantageous than that of other 
participants.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. Each time the Adviser considers an investment for the Funds and/
or the Company, it will make an independent determination of the 
appropriateness of the investment for the Company in light of the 
Company's then-current circumstances.
    2. (a) If the Adviser deems the Company's participation in any such 
investment opportunity to be appropriate for the Company, it will then 
determine an appropriate level of investment for the Company.
    (b) If the aggregate amount recommended by the Adviser to be 
invested in such Co-Investment Transaction by the Company, together 
with the amount proposed to be invested by the Funds, collectively, 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 the Company's total assets, 
on one hand, and the total assets of the Funds to be co-investing, on 
the other hand, to the aggregated total assets of the parties, up to 
the amount proposed to be invested by each. The Adviser will provide 
the Required Majority with information concerning the Funds' total 
assets to assist the Required Majority with their review of the 
Company's investments for compliance with these allocation procedures.
    (c) After making the determinations required in conditions 1 and 
2(a), the Adviser will distribute written information concerning the 
Co-Investment Transaction, including the amount proposed to be invested 
by the Funds, to the Independent Directors for their consideration. The 
Company will co-invest with the Funds only if, prior to the Company's 
and the Funds' 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 
Company or its unit-holders on the part of any person concerned;
    (ii) the transaction is consistent with
    (A) the interests of the unit-holders of the Company; and
    (B) the Company's investment objectives and strategies (as 
described in the Company's Form 10 and other filings made with the 
Commission by the Company under the Securities Act of 1933 (the ``1933 
Act''), any reports filed by the Company with the Commission under the 
Securities Exchange Act of 1934 and the Company's reports to unit-
holders);
    (iii) the investment by the Funds would not disadvantage the 
Company, and participation by the Company is not on a basis different 
from or less advantageous than that of the Funds; provided, that if the 
Funds, but not the Company, gain 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) the Adviser agrees to, and does, provide, periodic reports to 
the Company's Board 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 Company will not benefit the 
Adviser or the Funds or any affiliated person of either of them (other 
than the Company and the Funds), except to the extent permitted under 
sections 17(e) and 57(k) of the Act.
    3. The Company has the right to decline to participate in any Co-
Investment Transaction or to invest less than the amount proposed.
    4. The Adviser will present to the Board, on a quarterly basis, a 
record of all investments made by the Funds during the preceding 
quarter that fell within the Company's then-current investment 
objectives that were not made available to the Company, and an 
explanation of why the investment opportunities were not offered to the 
Company. All information presented to the Board pursuant to this 
condition will be kept for the life of the Company and at least two 
years thereafter, and will be subject to examination by the Commission 
and its staff.
    5. Except for follow-on investments made pursuant to condition 8 
below, the Company and the Funds will not invest in any portfolio 
company in which the Funds or any affiliated persons of the Funds are 
existing investors.
    6. The Company will not participate in any Co-Investment 
Transaction unless the terms, conditions, price, class of securities to 
be purchased, settlement

[[Page 50851]]

date, and registration rights will be the same for the Company as for 
the Funds. The grant to the Funds, but not the Company, 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 6, if conditions 2(c)(iii)(A) and (B) are met.
    7. If any of the Funds elects to sell, exchange or otherwise 
dispose of an interest in a security that was acquired by the Company 
and the Funds in a Co-Investment Transaction, the Adviser will:
    (a) notify the Company of the proposed disposition at the earliest 
practical time; and
    (b) formulate a recommendation as to participation by the Company 
in any such disposition and provide a written recommendation to the 
Independent Directors. The Company 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 the Funds. The 
Company will participate in such disposition to the extent that a 
Required Majority determines that it is in the Company's best interests 
to do so. The Company and each of the Funds will bear its own expenses 
in connection with any such disposition.
    8. If any of the Funds 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 Company and the Funds in 
a Co-Investment Transaction or to exercise warrants or other rights to 
purchase securities of the issuer, the Adviser will:
    (a) notify the Company of the proposed disposition at the earliest 
practical time; and
    (b) formulate a recommendation as to the proposed participation, 
including the amount of the proposed follow-on investment, by the 
Company and provide a written recommendation to the Independent 
Directors.
    The Independent Directors will make their own determination with 
respect to follow-on investments. To the extent that:
    (i) the amount of a follow-on investment is not based on the 
Company's and the Funds' initial investments; and
    (ii) the aggregate amount recommended by the Adviser to be invested 
by the Company in such follow-on investment, together with the amount 
proposed to be invested by the Funds 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 
Company will participate in such investment to the extent that the 
Required Majority determines that it is in the Company'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.
    9. The Independent Directors will be provided quarterly for review 
all information concerning Co-Investment Transactions, including 
investments made by the Funds that the Company considered but declined 
to participate in, so that the Independent Directors may determine 
whether all investments made during the preceding quarter, including 
those investments which the Company considered but declined to 
participate, comply with the conditions of the order. In addition, the 
Independent Directors will consider at least annually the continued 
appropriateness of the standards established for co-investments by the 
Company, including whether the use of the standards continues to be in 
the best interests of the Company and its unit-holders and does not 
involve overreaching on the part of any person concerned.
    10. The Company 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 Independent Directors under section 
57(f).
    11. No Independent Directors will also be a director, general 
partner, managing member or principal, or otherwise an ``affiliated 
person'' (as defined in the Act) of any of the Funds.
    12. 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 1933 Act) shall, to the 
extent not payable by the Adviser under the Funds' Agreements, be 
shared by the Company and the Funds in proportion to the relative 
amounts of their securities to be acquired or disposed of, as the case 
may be.
    13. 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 Company and the Funds on a pro rata basis based on 
the amount they invested or committed, as the case may be, in such Co-
Investment Transaction. If any transaction fee is to be held by the 
Adviser pending consummation of the transaction, the fee will be 
deposited into an account maintained by the Adviser 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 Company and the Funds based on the 
amount they invest in such Co-Investment Transaction. None of the 
Funds, nor any affiliated person of the Company will 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 the Funds' Agreements) as a result of or in 
connection with a Co-Investment Transaction.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-23730 Filed 9-30-09; 8:45 am]
BILLING CODE 8011-01-P