WhiteHorse Finance, Inc., et al.; Notice of Application, 34799-34803 [2014-14204]
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Federal Register / Vol. 79, No. 117 / Wednesday, June 18, 2014 / Notices
10. The Advisor will waive fees
otherwise payable to it by a Fund of
Funds in an amount at least equal to any
compensation (including fees received
pursuant to any plan adopted by an
Unaffiliated Investment Company
pursuant to rule 12b–1 under the 1940
Act) received from an Unaffiliated Fund
by the Advisor, or an affiliated person
of the Advisor, other than any advisory
fees paid to the Advisor or its affiliated
person by the Unaffiliated Investment
Company, in connection with the
investment by the Fund of Funds in the
Unaffiliated Fund. Any Sub-Adviser
will waive fees otherwise payable to the
Sub-Adviser, directly or indirectly, by
the Fund of Funds in an amount at least
equal to any compensation received by
the Sub-Adviser, or an affiliated person
of the Sub-Adviser, from an Unaffiliated
Fund, other than any advisory fees paid
to the Sub-Adviser or its affiliated
person by the Unaffiliated Investment
Company, in connection with the
investment by the Fund of Funds in the
Unaffiliated Fund made at the direction
of the Sub-Adviser. In the event that the
Sub-Adviser waives fees, the benefit of
the waiver will be passed through to the
Fund of Funds.
11. Any sales charges and/or service
fees charged with respect to shares of a
Fund of Funds will not exceed the
limits applicable to funds of funds set
forth in NASD Conduct Rule 2830.
12. No Underlying Fund will acquire
securities of any other investment
company or company relying on section
3(c)(1) or 3(c)(7) of the 1940 Act, in
excess of the limits contained in section
12(d)(1)(A) of the 1940 Act, except to
the extent that such Underlying Fund:
(a) Acquires such securities in
compliance with section 12(d)(1)(E) of
the 1940 Act and is either an Affiliated
Fund or is in the same ‘‘group of
investment companies’’ as its
corresponding master fund; (b) receives
securities of another investment
company as a dividend or as a result of
a plan of reorganization of a company
(other than a plan devised for the
purpose of evading section 12(d)(1) of
the 1940 Act); or (c) acquires (or is
deemed to have acquired) securities of
another investment company pursuant
to exemptive relief from the
Commission permitting such
Underlying Fund to: (i) Acquire
securities of one or more investment
companies for short-term cash
management purposes or (ii) engage in
inter-fund borrowing and lending
transactions.
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B. Other Investments by Section
12(d)(1)(G) Funds of Funds
In addition, Applicants agree that the
order granting the requested relief to
permit Section 12(d)(1)(G) Funds of
Funds to invest in Other Investments
shall be subject to the following
condition:
1. Applicants will comply with all
provisions of rule 12d1–2 under the
1940 Act, except for paragraph (a)(2) to
the extent that it restricts any Section
12(d)(1)(G) Fund of Funds from
investing in Other Investments as
described in the application.
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–14203 Filed 6–17–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. IC–31080; File No. 812–14120]
WhiteHorse Finance, Inc., et al.; Notice
of Application
June 12, 2014.
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 rule 17d-1 under the Act.
AGENCY:
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: WhiteHorse Finance, Inc.
(the ‘‘Company’’), WhiteHorse Finance
Warehouse, LLC (‘‘WhiteHorse
Warehouse’’), H.I.G. Bayside Debt &
LBO Fund II, L.P., H.I.G. Bayside Loan
Opportunity Fund II, L.P., H.I.G.
Bayside Loan Opportunity Fund III
(Europe-Euro), L.P., H.I.G. Bayside Loan
Opportunity Fund III (Europe-US$),
L.P., WhiteHorse VI, Ltd., WhiteHorse
VII, Ltd. and WhiteHorse VIII, Ltd.
(collectively with H.I.G. Bayside Debt &
LBO Fund II, L.P., H.I.G. Bayside Loan
Opportunity Fund II, L.P., H.I.G.
Bayside Loan Opportunity Fund III
(Europe-Euro), L.P. and H.I.G. Bayside
Loan Opportunity Fund III (EuropeUS$), L.P., the ‘‘Existing Private
Funds’’), H.I.G. WhiteHorse Advisers,
LLC (the ‘‘Company Adviser’’), Bayside
SUMMARY:
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34799
Capital, Inc. and H.I.G. WhiteHorse
Capital, LLC (each, a ‘‘Current Adviser
to Private Funds’’ and, collectively, the
‘‘Current Advisers to Private Funds’’
and, together with the Company
Adviser, each, an ‘‘Adviser’’ and,
together, the ‘‘Advisers’’) and H.I.G.
Capital, L.L.C. (collectively, the
‘‘Applicants’’).
Filing Dates: The application was
filed on February 5, 2013 and amended
on July 3, 2013, October 15, 2013 and
May 21, 2014.
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 July 7, 2014, 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 Richard Siegel, Esq.,
H.I.G. WhiteHorse Advisers, LLC, 1450
Brickell Avenue, 31st Floor, Miami, FL
33131.
FOR FURTHER INFORMATION CONTACT:
Emerson S. Davis, Senior Counsel, at
(202) 551–6868, or Daniele Marchesani,
Branch Chief, at (202) 551–6821
(Division of Investment Management,
Chief Counsel’s Office).
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 for an applicant using the
Company name box, at https://
www.sec.gov/search/search.htm or by
calling (202) 551–8090.
DATES:
Applicants’ Representations
1. The Company is an externally
managed, non-diversified, closed-end
management investment company that
has elected to be regulated as a BDC
under the Act.1 The Company’s
1 Section 2(a)(48) defines a BDC to be any closedend 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
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objectives is to generate current income
and capital appreciation by primarily
investing in private, small-capitalization
companies (generally in the range of $10
million to $50 million) through first
liens loans, second liens loans, senior
debt securities, mezzanine loans or
equity interests. The Company’s board
of directors currently consists of five
members (the ‘‘Board’’), three of whom
are not ‘‘interested persons’’ of the
Company within the meaning of section
2(a)(19) of the Act (the ‘‘Independent
Directors’’).
2. The Company Adviser, a Delaware
limited liability company, is registered
under the Investment Advisers Act of
1940 (‘‘Advisers Act’’) and is the
Company’s investment adviser. H.I.G
Capital, L.L.C. is an alternative
investment and asset management firm
and is registered under the Advisers
Act. WhiteHorse Capital, LLC serves as
the investment adviser for WhiteHorse
VI, Ltd., WhiteHorse VII, Ltd. and
WhiteHorse VIII. Ltd in its capacity as
the collateral manager to each of those
three entities.
3. The Existing Private Funds are
entities formed under the laws of
Delaware or under the laws of the
Cayman Islands. In reliance on the
exclusion from the definition of
‘‘Investment Company’’ provided by
section 3(c)(7) of the Act, none of the
Existing Private Funds will be registered
under the Act. Each Existing Private
Fund is managed by the Current
Advisers to Private Funds in accordance
with an investment advisory agreement
(collectively, the ‘‘Advisory
Agreements’’). The Company expects
that any portfolio company that is an
appropriate investment for a Private
Fund 2 may also be an appropriate
investment for the Company, with
certain exceptions based on available
capital or diversification.
4. Applicants seek an order
(‘‘Order’’) 3 to allow the Company, on
the one hand, and one or more Private
assistance with respect to the issuers of such
securities.
2 ‘‘Private Fund’’ means any Existing Private
Fund or any entity (i) whose investment adviser is
an Adviser, (b) that would be an investment
company but for section 3(c)(1) or 3(c)(7) of the Act,
and (c) that intends to participate in the CoInvestment Program. ‘‘Adviser’’ means (a) the
Company Adviser, (b) the Current Advisers to
Private Funds and (c) any future investment adviser
that controls, or is controlled by or is under
common control with any of the Company Adviser
or the Current Advisers to Private Funds and is
registered as an investment adviser under the
Adviser Act.
3 All existing entities that currently intend to rely
on the Order have been named as Applicants and
any entities that may rely on the Order in the future
will comply with the terms and conditions of the
application.
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Funds that may be prohibited from coinvesting with the Company by reason
of section 57 of the Act, on the other
hand, to co-invest in the same issuers of
securities. For purposes of the
application, a ‘‘Co-Investment
Transaction’’ means any transaction in
which the Company (or one of its
Wholly-Owned Investment
Subsidiaries) participated together with
a Private Fund in reliance on the
requested Order. ‘‘Potential CoInvestment Transaction’’ means any
investment opportunity in which the
Company (or a Wholly-Owned
Investment Subsidiary) could not
participate together with one or more
Private Funds without obtaining and
relying on the Order.
5. The Company may, from time to
time, form a special purpose subsidiary
(a ‘‘Wholly-Owned Investment
Subsidiary’’).4 Wholly-Owned
Investment Subsidiaries would be
prohibited from investing in a CoInvestment Transaction with any Private
Fund because the Wholly-Owned
Investment Subsidiary would be a
company controlled by the Company for
purposes of section 57(a)(4) and rule
17d–1. Applicants request that any
Wholly-Owned Investment Subsidiary
be permitted to participate in CoInvestment Transactions in lieu of the
Company and that any Wholly-Owned
Investment Subsidiary’s participation in
any such transaction be treated, for
purposes of the Order, as though the
Company were participating directly.
Applicants represent that this treatment
is justified because any Wholly-Owned
Investment Subsidiary would have no
purpose other than serving as a holding
vehicle for the Company’s investments
or debt and, therefore, no conflicts of
interest could arise between the
Company and any Wholly-Owned
Investment Subsidiary. The Board
would make all relevant determinations
under the conditions with regard to a
4 The term ‘‘Wholly-Owned Investment
Subsidiary’’ means an entity (a) whose sole
business purpose is to hold one or more
investments and issue debt on behalf of the
Company, to obtain debt financing for those
investments and, in the case of a Wholly-Owned
Investment Subsidiary organized as a small
business investment company under the Small
Business Investment Act of 1958 (‘‘SBA Act’’),
maintain a license under the SBA Act and issue
debentures guaranteed by the Small Business
Administration; (b) that is wholly-owned by the
Company (with the Company at all times directly
or indirectly holding, beneficially and of record,
100% of the voting and economic interests); (c)
with respect to which the Board has the sole
authority to make all determinations with respect
to the Wholly-Owned Investment Subsidiary’s
participation under the conditions of the
application; and (d) that is an entity that would be
an investment company but for section 3(c)(1) or
3(c)(7) of the Act.
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Wholly-Owned Investment Subsidiary’s
participation in a Co-Investment
Transaction, and the Board would be
informed of, and take into
consideration, any proposed use of any
Wholly-Owned Investment Subsidiary
in the Company’s place. If the Company
proposes to participate in the same CoInvestment Transaction with any of its
Wholly-Owned Investment Subsidiaries,
the Board will also be informed of, and
take into consideration, the relative
participation of the Company and any
Wholly-Owned Investment Subsidiary.
WhiteHorse Warehouse is a WhollyOwned Investment Subsidiary of the
Company formed for the special
purpose of providing liquidity support
through a credit facility.
6. Applicants represent that the
Current Advisers to Private Funds will
refer to the Company Adviser all
Potential Co-Investment Transactions
within the Company’s Objectives and
Strategies 5 that are considered for a
Private Fund, and such investment
opportunities may result in a CoInvestment Transaction. For each such
referral, the Company Adviser will
consider only the investment objective,
investment policies, investment
position, investment strategies,
investment restrictions, regulatory and
tax requirements, capital available for
investment and other pertinent factors
applicable to the Company. Likewise,
when selecting investments for a Private
Fund, the Adviser to the Private Fund
will select investments separately for
the Private Fund, considering only the
investment objective, investment
policies, investment position,
investment strategies, investment
restrictions, regulatory and tax
requirements, capital available for
investment and other pertinent factors
applicable to such Private Fund. Each
Co-Investment Transaction and the
proposed allocation of such CoInvestment Transaction would be
approved prior to the actual investment
by the required majority (within the
meaning of section 57(o) of the Act) of
the Board (the ‘‘Required Majority’’).
7. Other than pro rata dispositions
and Follow-On Investments 6 as
5 ‘‘Objectives and Strategies’’ means the
Company’s investment objectives and strategies, as
described in its registration statement on Form N–
2 and other filings made with the Commission by
the Company under the Securities Act of 1933 Act,
as amended (‘‘1933 Act’’), any reports filed by the
Company with the Commission under the
Securities Exchange Act of 1934, as amended, and
the Company’s reports to stockholders.
6 ‘‘Follow-On Investment’’ means any additional
investment in an existing portfolio company,
including through the exercise of warrants,
conversion privileges or other rights to acquire
securities of the portfolio company.
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provided in conditions 7 and 8, and
after making the determinations
required in conditions 1 and 2(a), the
Company Adviser will present each
Potential Co-Investment Transaction
and the proposed allocation to the
directors of the Board eligible to vote
under section 57(o) of the Act (‘‘Eligible
Directors’’), and the Required Majority
will approve each Co-Investment
Transaction prior to any investment by
the Company.
8. With respect to the pro rata
dispositions and Follow-On Investments
provided in conditions 7 and 8, the
Company may participate in a pro rata
disposition or Follow-On Investment
without obtaining prior approval of the
Required Majority if, among other
things: (i) The proposed participation of
the Company and each Private Fund in
such disposition or Follow-OnInvestment is proportionate to its
outstanding investments in the issuer
immediately preceding the disposition
or Follow-On Investment, as the case
may be; and (ii) the Board has approved
the Company’s participation in pro rata
dispositions or Follow-On Investments
as being in the best interests of the
Company. If the Board does not so
approve, any such disposition or
Follow-On Investment will be submitted
to the Company’s Eligible Directors. The
Board of the Company may at any time
rescind, suspend or qualify its approval
of pro rata dispositions and Follow-On
Investments with the result that all
dispositions and/or Follow-On
Investments must be submitted to the
Eligible Directors.
9. No Independent Director will have
any direct or indirect financial interest
in any Co-Investment Transaction or
any interest in any portfolio company,
other than through an interest (if any) in
the securities of the Company.
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. 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 to BDCs. Because the
Commission has not adopted any rules
under section 57(a)(4), rule 17d–1
applies to BDCs. The Company Adviser
and any Private Fund that it advises
could be deemed to be persons related
to the Company in a manner described
by section 57(b) and therefore
prohibited by section 57(a)(4) and rule
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17d–1 from participating in the CoInvestment Program. In addition,
because the other Advisers are
‘‘affiliated persons’’ of the Company
Adviser, such Advisers and Private
Funds advised by any of them could be
deemed to be persons related to the
Company in a manner described by
section 57(b) and also prohibited from
participating in the Co-Investment
Program. Finally, because WhiteHorse
Warehouse and any other WhollyOwned Investment Subsidiary are
controlled by the Company, they are
subject to section 57(a)(4), and thus also
subject to the provisions of rule 17d–1.
2. 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
Private Funds will increase favorable
investment opportunities for the
Company and the Private funds.
4. Applicants submit that the
Required Majority will approve each CoInvestment 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 CoInvestment Transactions will be
consistent with the provisions, policies,
and purposes of the 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 an investment adviser
considers a Potential Co-Investment
Transaction for a Private Fund that falls
within the Company’s then-current
Objectives and Strategies, the Company
Adviser will make an independent
determination of the appropriateness of
such investment for the Company in
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light of the Company’s then-current
circumstances.
2. (a) If the Company Adviser deems
the Company’s participation in any
Potential Co-Investment Transaction 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 Company Adviser
to be invested in such Potential CoInvestment Transaction by the
Company, together with the amount
proposed to be invested by the Private
Funds, collectively, in the same
transaction, exceeds the amount of the
investment opportunity, then the
investment opportunity will be
allocated among them pro rata based on
each such party’s capital available for
investment in the asset class being
allocated, up to the amount proposed to
be invested by each party. The Company
Adviser will provide the Eligible
Directors with information concerning
the Private Funds’ available capital to
assist the Eligible Directors with their
review of the Company’s investments
for compliance with these allocation
procedures; and
(c) After making the determinations
required in conditions 1 and 2(a), the
Company Adviser will then distribute
written information concerning the
Potential Co-Investment Transaction,
including the amount proposed to be
invested by the Company and any
Private Fund, to the Eligible Directors
for their consideration. The Company
will co-invest with the Private Funds
only if, prior to participating in such CoInvestment Transaction, the Required
Majority concludes that:
(i) The terms of the transaction,
including the consideration to be paid,
are reasonable and fair to the Company
and its stockholders and do not involve
overreaching in respect of the Company
or its stockholders on the part of any
person concerned;
(ii) the transaction is consistent with:
(A) the interests of the stockholders of
the Company; and
(B) the Company’s then-current
Objectives and Strategies;
(iii) the investment by the Private
Funds would not disadvantage the
Company, and participation by the
Company would not be on a basis
different from, or less advantageous
than, that of the Private Funds;
provided, that if any of the Private
Funds, but not the Company itself, 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,
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such event will not be interpreted to
prohibit the Required Majority from
reaching the conclusions required by
this condition (2)(c)(iii), if:
(A) The Eligible Directors will have
the right to ratify the selection of such
director or board observer, if any;
(B) the Advisers agree to, and do,
provide periodic reports to the
Company’s Board with respect to the
actions of the director or the
information received by the board
observer or obtained through the
exercise of any similar right to
participate in the governance or
management of the portfolio company;
and
(C) any fees or other compensation
that any Private Fund or any affiliated
person of any Private Fund receives in
connection with the right of the Private
Funds to nominate a director or appoint
a board observer or otherwise to
participate in the governance or
management of the portfolio company
will be shared proportionately among
the participating Private Funds (which
may, in turn, share their portion with
their affiliated persons) and the
Company in accordance with the
amount of each party’s investment; and
(iv) the proposed investment by the
Company will not benefit the Advisers
or the Private Funds, or any affiliated
person of any of them (other than the
parties to the Co-Investment
Transaction), except (a) to the extent
permitted by condition 13; (b) to the
extent permitted by sections 17(e) or
57(k) of the Act as applicable; (c)
indirectly, as a result of an interest in
the securities issued by one of the
parties to the Co-Investment
Transaction; or (d) in the case of fees or
other compensation described in
condition 2(c)(iii)(C).
3. The Company has the right to
decline to participate in any Potential
Co-Investment Transaction or to invest
less than the amount proposed.
4. The Company Adviser will present
to the Board, on a quarterly basis, a
record of all investments in Potential
Co-Investment Transactions made by
the Private Funds during the preceding
quarter that fell within the Company’s
then-current Objectives and Strategies
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 in accordance with condition 8,
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the Company will not invest in reliance
on the Order in any issuer in which any
Private Fund or any affiliated person of
the Private Funds is an existing
investor.
6. The Company will not participate
in any Potential 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 Company as for each participating
Private Fund. The grant to a Private
Fund, 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), (B) and (C) are met.
7. (a) If any Private Fund elects to sell,
exchange or otherwise dispose of an
interest in a security that was acquired
in a Co-Investment Transaction, the
Company Adviser will:
(i) Notify the Company of the
proposed disposition at the earliest
practical time; and
(ii) formulate a recommendation as to
participation by the Company in any
such disposition.
(b) 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 participating
Private Funds.
(c) The Company may participate in
such disposition without obtaining prior
approval of the Required Majority if: (i)
The proposed participation of the
Company and of each Private Fund in
such disposition is proportionate to its
outstanding investment in the issuer
immediately preceding the disposition;
(ii) the Board has approved as being in
the best interests of the Company the
ability to participate in such
dispositions on a pro rata basis (as
described in greater detail in this
application); and (iii) the Board is
provided on a quarterly basis with a list
of all dispositions made in accordance
with this condition. In all other cases,
the Company Adviser will provide its
written recommendation as to the
Company’s participation to the Eligible
Directors, and the Company will
participate in such disposition solely to
the extent that a Required Majority
determines that it is in the Company’s
best interests.
(d) The Company and each
participating Private Fund shall each
bear its own expenses in connection
with any such disposition.
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8. (a) If any Private Fund desires to
make a Follow-On Investment in a
portfolio company whose securities
were acquired in a Co-Investment
Transaction, the Company Adviser will:
(i) Notify the Company of the
proposed transaction at the earliest
practical time; and
(ii) formulate a recommendation as to
the proposed participation, including
the amount of the proposed Follow-On
investment, by the Company.
(b) The Company may participate in
such Follow-On Investment without
obtaining prior approval of the Required
Majority if: (i) The proposed
participation of the Company and each
Private Fund in such investment is
proportionate to its outstanding
investment in the issuer immediately
preceding the Follow-On Investment;
and (ii) the Board has approved as being
in the best interests of the Company the
ability to participate in Follow-On
Investments on a pro rata basis (as
described in greater detail in this
application). In all other cases, the
Company Adviser will provide its
written recommendation as to the
Company’s participation to the Eligible
Directors, and the Company will
participate in such Follow-On
Investment solely to the extent that a
Required Majority determines that it is
in the Company’s best interests.
(c) If with respect to any Follow-On
Investment:
(i) The amount of the opportunity is
not based on the Company’s and the
Private Funds’ outstanding investments
immediately preceding the Follow-On
Investment; and
(ii) the aggregate amount
recommended by the Company Adviser
to be invested by the Company in the
Follow-On Investment, together with
the amount proposed to be invested by
the participating Private Funds in the
same transaction, exceeds the amount of
the opportunity, then the amount
invested by each such party will be
allocated among them pro rata based on
the ratio of capital available for
investment in the asset class being
allocated of each party, up to the
amount proposed to be invested by
each.
(d) The acquisition of Follow-On
Investments as permitted by this
condition will be considered a CoInvestment Transaction for all purposes
and be subject to the other conditions
set forth in this application.
9. The Independent Directors will be
provided quarterly for review all
information concerning Potential CoInvestment Transactions and CoInvestment Transactions, including
investments made by the Private Funds
E:\FR\FM\18JNN1.SGM
18JNN1
emcdonald on DSK67QTVN1PROD with NOTICES
Federal Register / Vol. 79, No. 117 / Wednesday, June 18, 2014 / Notices
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
in, comply with the conditions of the
Order. In addition, the Independent
Directors will consider at least annually
the continued appropriateness for the
Company of participating in new and
existing Co-Investment Transactions.
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 Required Majority
under section 57(f) of the Act.
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 Private Fund.
12. 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 1933 Act)
will, to the extent not payable by an
Adviser under any agreement with the
Company or the Private Funds, be
shared by the Company and the Private
Funds in proportion to the relative
amounts of the securities held or being
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) or 57(k) of the Act or
received in connection with a CoInvestment Transaction will be
distributed to the Company and the
Private Funds on a pro rata basis, based
on the amounts they invested or
committed, as the case may be, in such
Co-Investment Transaction. If any
transaction fee is to be held by an
Adviser to a Private Fund pending
consummation of the Co-Investment
Transaction, the fee will be deposited
into an account maintained by such
Adviser at a bank or banks having the
qualifications prescribed in section
26(a)(I) of the Act, and such account
will earn a competitive rate of interest
that will also be divided pro rata among
the Company and the participating
Private Funds based on the amounts
they invest in such Co-Investment
Transaction. None of the Private Funds,
Advisers of the Private Funds nor any
affiliated person of the Company will
receive additional compensation or
remuneration of any kind as a result of,
or in connection with, a Co-Investment
VerDate Mar<15>2010
16:35 Jun 17, 2014
Jkt 232001
Transaction (other than (i) in the case of
the Company and the participating
Private Funds, the pro rata transaction
fees described above and fees or other
compensation described in condition
2(c)(iii)(C) and (ii) in the case of the
Advisers, investment advisory fees paid
in accordance with the Advisory
Agreements).
For the Commission, by the Division of
Investment Management, under delegated
authority.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–14204 Filed 6–17–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–72374; File No. SR–EDGX–
2014–16]
Self-Regulatory Organizations; EDGX
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Relating to Amendments
to the EDGX Exchange, Inc. Fee
Schedule
June 12, 2014.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on June 2,
2014, EDGX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGX’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II and III
below, which items have been prepared
by the self-regulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend its
fees and rebates applicable to Members 3
of the Exchange pursuant to EDGX Rule
15.1(a) and (c) (‘‘Fee Schedule’’) to: (i)
Delete Flag RC, which routes to the
National Stock Exchange, Inc. (‘‘NSX’’)
and adds liquidity; and (ii) make a
corrective change to the definition of
Average Daily Trading Volume (‘‘ADV’’)
to state that ADV includes shares routed
by the Exchange. The text of the
1 15
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 The term ‘‘Member’’ is defined as ‘‘any
registered broker or dealer, or any person associated
with a registered broker or dealer, that has been
admitted to membership in the Exchange. A
Member will have the status of a ‘‘member’’ of the
Exchange as that term is defined in Section 3(a)(3)
of the Act.’’ See Exchange Rule 1.5(n).
PO 00000
Frm 00089
Fmt 4703
Sfmt 4703
34803
proposed rule change is available on the
Exchange’s Internet Web site at
www.directedge.com, at the Exchange’s
principal office, and at the Public
Reference Room of the Commission.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of these statements may be examined at
the places specified in Item IV below.
The self-regulatory organization has
prepared summaries, set forth in
sections A, B and C below, of the most
significant aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend its
Fee Schedule to: (i) Delete Flag RC,
which routes to the NSX and adds
liquidity; and (ii) make a corrective
change to the definition of ADV to state
that ADV includes shared routed by the
Exchange.
Flag RC
The Exchange proposes to amend its
Fee Schedule to delete Flag RC, which
routes to the NSX and adds liquidity, in
response to the NSX’s announcement
that it will cease market operations and
its last day of trading will be Friday,
May 30, 2014.4 The Exchange currently
charges a fee of $0.0001 per share in
securities priced at or above $1.00 and
no fee in securities priced below $1.00
for Members’ orders that yield Flag RC.
The fee for orders that yield Flag RC
represents a pass through of the rate that
DE Route, the Exchange’s affiliated
routing broker-dealer, is charged for
routing orders that add liquidity to NSX.
As of June 1, 2014, the Exchange, via DE
Route, will no longer be able to route
orders to NSX because it ceased
operations, and, therefore, proposes to
remove Flag RC from its Fee Schedule.
ADV
The Exchange proposes to make a
corrective change to the definition of
ADV to state that a Member’s ADV does
4 See Securities Exchange Act Release No. 72107
(May 6, 2014), 79 FR 27017 (May 12, 2014) (SR–
NSX–2014–14) (Notice of Filing and Immediate
Effectiveness of Proposed Rule Change to Cease
Trading on Its Trading System).
E:\FR\FM\18JNN1.SGM
18JNN1
]]>Agencies
[Federal Register Volume 79, Number 117 (Wednesday, June 18, 2014)]
[Notices]
[Pages 34799-34803]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-14204]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-31080; File No. 812-14120]
WhiteHorse Finance, Inc., et al.; Notice of Application
June 12, 2014.
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 rule 17d-1 under the Act.
-----------------------------------------------------------------------
SUMMARY: 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: WhiteHorse Finance, Inc. (the ``Company''), WhiteHorse
Finance Warehouse, LLC (``WhiteHorse Warehouse''), H.I.G. Bayside Debt
& LBO Fund II, L.P., H.I.G. Bayside Loan Opportunity Fund II, L.P.,
H.I.G. Bayside Loan Opportunity Fund III (Europe-Euro), L.P., H.I.G.
Bayside Loan Opportunity Fund III (Europe-US$), L.P., WhiteHorse VI,
Ltd., WhiteHorse VII, Ltd. and WhiteHorse VIII, Ltd. (collectively with
H.I.G. Bayside Debt & LBO Fund II, L.P., H.I.G. Bayside Loan
Opportunity Fund II, L.P., H.I.G. Bayside Loan Opportunity Fund III
(Europe-Euro), L.P. and H.I.G. Bayside Loan Opportunity Fund III
(Europe-US$), L.P., the ``Existing Private Funds''), H.I.G. WhiteHorse
Advisers, LLC (the ``Company Adviser''), Bayside Capital, Inc. and
H.I.G. WhiteHorse Capital, LLC (each, a ``Current Adviser to Private
Funds'' and, collectively, the ``Current Advisers to Private Funds''
and, together with the Company Adviser, each, an ``Adviser'' and,
together, the ``Advisers'') and H.I.G. Capital, L.L.C. (collectively,
the ``Applicants'').
DATES: Filing Dates: The application was filed on February 5, 2013 and
amended on July 3, 2013, October 15, 2013 and May 21, 2014.
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 July 7, 2014, 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 Richard Siegel,
Esq., H.I.G. WhiteHorse Advisers, LLC, 1450 Brickell Avenue, 31st
Floor, Miami, FL 33131.
FOR FURTHER INFORMATION CONTACT: Emerson S. Davis, Senior Counsel, at
(202) 551-6868, or Daniele Marchesani, Branch Chief, at (202) 551-6821
(Division of Investment Management, Chief Counsel's Office).
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 for 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 has elected to be regulated as a
BDC under the Act.\1\ The Company's
[[Page 34800]]
objectives is to generate current income and capital appreciation by
primarily investing in private, small-capitalization companies
(generally in the range of $10 million to $50 million) through first
liens loans, second liens loans, senior debt securities, mezzanine
loans or equity interests. The Company's board of directors currently
consists of five members (the ``Board''), three of whom are not
``interested persons'' of the Company within the meaning of section
2(a)(19) of the Act (the ``Independent Directors'').
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
2. The Company Adviser, a Delaware limited liability company, is
registered under the Investment Advisers Act of 1940 (``Advisers Act'')
and is the Company's investment adviser. H.I.G Capital, L.L.C. is an
alternative investment and asset management firm and is registered
under the Advisers Act. WhiteHorse Capital, LLC serves as the
investment adviser for WhiteHorse VI, Ltd., WhiteHorse VII, Ltd. and
WhiteHorse VIII. Ltd in its capacity as the collateral manager to each
of those three entities.
3. The Existing Private Funds are entities formed under the laws of
Delaware or under the laws of the Cayman Islands. In reliance on the
exclusion from the definition of ``Investment Company'' provided by
section 3(c)(7) of the Act, none of the Existing Private Funds will be
registered under the Act. Each Existing Private Fund is managed by the
Current Advisers to Private Funds in accordance with an investment
advisory agreement (collectively, the ``Advisory Agreements''). The
Company expects that any portfolio company that is an appropriate
investment for a Private Fund \2\ may also be an appropriate investment
for the Company, with certain exceptions based on available capital or
diversification.
---------------------------------------------------------------------------
\2\ ``Private Fund'' means any Existing Private Fund or any
entity (i) whose investment adviser is an Adviser, (b) that would be
an investment company but for section 3(c)(1) or 3(c)(7) of the Act,
and (c) that intends to participate in the Co-Investment Program.
``Adviser'' means (a) the Company Adviser, (b) the Current Advisers
to Private Funds and (c) any future investment adviser that
controls, or is controlled by or is under common control with any of
the Company Adviser or the Current Advisers to Private Funds and is
registered as an investment adviser under the Adviser Act.
---------------------------------------------------------------------------
4. Applicants seek an order (``Order'') \3\ to allow the Company,
on the one hand, and one or more Private Funds that may be prohibited
from co-investing with the Company by reason of section 57 of the Act,
on the other hand, to co-invest in the same issuers of securities. For
purposes of the application, a ``Co-Investment Transaction'' means any
transaction in which the Company (or one of its Wholly-Owned Investment
Subsidiaries) participated together with a Private Fund in reliance on
the requested Order. ``Potential Co-Investment Transaction'' means any
investment opportunity in which the Company (or a Wholly-Owned
Investment Subsidiary) could not participate together with one or more
Private Funds without obtaining and relying on the Order.
---------------------------------------------------------------------------
\3\ All existing entities that currently intend to rely on the
Order have been named as Applicants and any entities that may rely
on the Order in the future will comply with the terms and conditions
of the application.
---------------------------------------------------------------------------
5. The Company may, from time to time, form a special purpose
subsidiary (a ``Wholly-Owned Investment Subsidiary'').\4\ Wholly-Owned
Investment Subsidiaries would be prohibited from investing in a Co-
Investment Transaction with any Private Fund because the Wholly-Owned
Investment Subsidiary would be a company controlled by the Company for
purposes of section 57(a)(4) and rule 17d-1. Applicants request that
any Wholly-Owned Investment Subsidiary be permitted to participate in
Co-Investment Transactions in lieu of the Company and that any Wholly-
Owned Investment Subsidiary's participation in any such transaction be
treated, for purposes of the Order, as though the Company were
participating directly. Applicants represent that this treatment is
justified because any Wholly-Owned Investment Subsidiary would have no
purpose other than serving as a holding vehicle for the Company's
investments or debt and, therefore, no conflicts of interest could
arise between the Company and any Wholly-Owned Investment Subsidiary.
The Board would make all relevant determinations under the conditions
with regard to a Wholly-Owned Investment Subsidiary's participation in
a Co-Investment Transaction, and the Board would be informed of, and
take into consideration, any proposed use of any Wholly-Owned
Investment Subsidiary in the Company's place. If the Company proposes
to participate in the same Co-Investment Transaction with any of its
Wholly-Owned Investment Subsidiaries, the Board will also be informed
of, and take into consideration, the relative participation of the
Company and any Wholly-Owned Investment Subsidiary. WhiteHorse
Warehouse is a Wholly-Owned Investment Subsidiary of the Company formed
for the special purpose of providing liquidity support through a credit
facility.
---------------------------------------------------------------------------
\4\ The term ``Wholly-Owned Investment Subsidiary'' means an
entity (a) whose sole business purpose is to hold one or more
investments and issue debt on behalf of the Company, to obtain debt
financing for those investments and, in the case of a Wholly-Owned
Investment Subsidiary organized as a small business investment
company under the Small Business Investment Act of 1958 (``SBA
Act''), maintain a license under the SBA Act and issue debentures
guaranteed by the Small Business Administration; (b) that is wholly-
owned by the Company (with the Company at all times directly or
indirectly holding, beneficially and of record, 100% of the voting
and economic interests); (c) with respect to which the Board has the
sole authority to make all determinations with respect to the
Wholly-Owned Investment Subsidiary's participation under the
conditions of the application; and (d) that is an entity that would
be an investment company but for section 3(c)(1) or 3(c)(7) of the
Act.
---------------------------------------------------------------------------
6. Applicants represent that the Current Advisers to Private Funds
will refer to the Company Adviser all Potential Co-Investment
Transactions within the Company's Objectives and Strategies \5\ that
are considered for a Private Fund, and such investment opportunities
may result in a Co-Investment Transaction. For each such referral, the
Company Adviser will consider only the investment objective, investment
policies, investment position, investment strategies, investment
restrictions, regulatory and tax requirements, capital available for
investment and other pertinent factors applicable to the Company.
Likewise, when selecting investments for a Private Fund, the Adviser to
the Private Fund will select investments separately for the Private
Fund, considering only the investment objective, investment policies,
investment position, investment strategies, investment restrictions,
regulatory and tax requirements, capital available for investment and
other pertinent factors applicable to such Private Fund. Each Co-
Investment Transaction and the proposed allocation of such Co-
Investment Transaction would be approved prior to the actual investment
by the required majority (within the meaning of section 57(o) of the
Act) of the Board (the ``Required Majority'').
---------------------------------------------------------------------------
\5\ ``Objectives and Strategies'' means the Company's investment
objectives and strategies, as described in its registration
statement on Form N-2 and other filings made with the Commission by
the Company under the Securities Act of 1933 Act, as amended (``1933
Act''), any reports filed by the Company with the Commission under
the Securities Exchange Act of 1934, as amended, and the Company's
reports to stockholders.
---------------------------------------------------------------------------
7. Other than pro rata dispositions and Follow-On Investments \6\
as
[[Page 34801]]
provided in conditions 7 and 8, and after making the determinations
required in conditions 1 and 2(a), the Company Adviser will present
each Potential Co-Investment Transaction and the proposed allocation to
the directors of the Board eligible to vote under section 57(o) of the
Act (``Eligible Directors''), and the Required Majority will approve
each Co-Investment Transaction prior to any investment by the Company.
---------------------------------------------------------------------------
\6\ ``Follow-On Investment'' means any additional investment in
an existing portfolio company, including through the exercise of
warrants, conversion privileges or other rights to acquire
securities of the portfolio company.
---------------------------------------------------------------------------
8. With respect to the pro rata dispositions and Follow-On
Investments provided in conditions 7 and 8, the Company may participate
in a pro rata disposition or Follow-On Investment without obtaining
prior approval of the Required Majority if, among other things: (i) The
proposed participation of the Company and each Private Fund in such
disposition or Follow-On-Investment is proportionate to its outstanding
investments in the issuer immediately preceding the disposition or
Follow-On Investment, as the case may be; and (ii) the Board has
approved the Company's participation in pro rata dispositions or
Follow-On Investments as being in the best interests of the Company. If
the Board does not so approve, any such disposition or Follow-On
Investment will be submitted to the Company's Eligible Directors. The
Board of the Company may at any time rescind, suspend or qualify its
approval of pro rata dispositions and Follow-On Investments with the
result that all dispositions and/or Follow-On Investments must be
submitted to the Eligible Directors.
9. No Independent Director will have any direct or indirect
financial interest in any Co-Investment Transaction or any interest in
any portfolio company, other than through an interest (if any) in the
securities of the Company.
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. 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 to BDCs. Because the Commission has not adopted any rules
under section 57(a)(4), rule 17d-1 applies to BDCs. The Company Adviser
and any Private Fund that it advises could be deemed to be persons
related to the Company in a manner described by section 57(b) and
therefore prohibited by section 57(a)(4) and rule 17d-1 from
participating in the Co-Investment Program. In addition, because the
other Advisers are ``affiliated persons'' of the Company Adviser, such
Advisers and Private Funds advised by any of them could be deemed to be
persons related to the Company in a manner described by section 57(b)
and also prohibited from participating in the Co-Investment Program.
Finally, because WhiteHorse Warehouse and any other Wholly-Owned
Investment Subsidiary are controlled by the Company, they are subject
to section 57(a)(4), and thus also subject to the provisions of rule
17d-1.
2. 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 Private Funds will increase
favorable investment opportunities for the Company and the Private
funds.
4. Applicants submit 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 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 an investment adviser considers a Potential Co-
Investment Transaction for a Private Fund that falls within the
Company's then-current Objectives and Strategies, the Company Adviser
will make an independent determination of the appropriateness of such
investment for the Company in light of the Company's then-current
circumstances.
2. (a) If the Company Adviser deems the Company's participation in
any Potential Co-Investment Transaction 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 Company Adviser to
be invested in such Potential Co-Investment Transaction by the Company,
together with the amount proposed to be invested by the Private Funds,
collectively, in the same transaction, exceeds the amount of the
investment opportunity, then the investment opportunity will be
allocated among them pro rata based on each such party's capital
available for investment in the asset class being allocated, up to the
amount proposed to be invested by each party. The Company Adviser will
provide the Eligible Directors with information concerning the Private
Funds' available capital to assist the Eligible Directors with their
review of the Company's investments for compliance with these
allocation procedures; and
(c) After making the determinations required in conditions 1 and
2(a), the Company Adviser will then distribute written information
concerning the Potential Co-Investment Transaction, including the
amount proposed to be invested by the Company and any Private Fund, to
the Eligible Directors for their consideration. The Company will co-
invest with the Private Funds only if, prior to participating in such
Co-Investment Transaction, the Required Majority concludes that:
(i) The terms of the transaction, including the consideration to be
paid, are reasonable and fair to the Company and its stockholders and
do not involve overreaching in respect of the Company or its
stockholders on the part of any person concerned;
(ii) the transaction is consistent with:
(A) the interests of the stockholders of the Company; and
(B) the Company's then-current Objectives and Strategies;
(iii) the investment by the Private Funds would not disadvantage
the Company, and participation by the Company would not be on a basis
different from, or less advantageous than, that of the Private Funds;
provided, that if any of the Private Funds, but not the Company itself,
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,
[[Page 34802]]
such event will not be interpreted to prohibit the Required Majority
from reaching the conclusions required by this condition (2)(c)(iii),
if:
(A) The Eligible Directors will have the right to ratify the
selection of such director or board observer, if any;
(B) the Advisers agree to, and do, provide periodic reports to the
Company's Board with respect to the actions of the director or the
information received by the board observer or obtained through the
exercise of any similar right to participate in the governance or
management of the portfolio company; and
(C) any fees or other compensation that any Private Fund or any
affiliated person of any Private Fund receives in connection with the
right of the Private Funds to nominate a director or appoint a board
observer or otherwise to participate in the governance or management of
the portfolio company will be shared proportionately among the
participating Private Funds (which may, in turn, share their portion
with their affiliated persons) and the Company in accordance with the
amount of each party's investment; and
(iv) the proposed investment by the Company will not benefit the
Advisers or the Private Funds, or any affiliated person of any of them
(other than the parties to the Co-Investment Transaction), except (a)
to the extent permitted by condition 13; (b) to the extent permitted by
sections 17(e) or 57(k) of the Act as applicable; (c) indirectly, as a
result of an interest in the securities issued by one of the parties to
the Co-Investment Transaction; or (d) in the case of fees or other
compensation described in condition 2(c)(iii)(C).
3. The Company has the right to decline to participate in any
Potential Co-Investment Transaction or to invest less than the amount
proposed.
4. The Company Adviser will present to the Board, on a quarterly
basis, a record of all investments in Potential Co-Investment
Transactions made by the Private Funds during the preceding quarter
that fell within the Company's then-current Objectives and Strategies
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 in accordance with
condition 8, the Company will not invest in reliance on the Order in
any issuer in which any Private Fund or any affiliated person of the
Private Funds is an existing investor.
6. The Company will not participate in any Potential 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 Company as for each participating Private Fund. The grant to a
Private Fund, 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), (B) and (C) are met.
7. (a) If any Private Fund elects to sell, exchange or otherwise
dispose of an interest in a security that was acquired in a Co-
Investment Transaction, the Company Adviser will:
(i) Notify the Company of the proposed disposition at the earliest
practical time; and
(ii) formulate a recommendation as to participation by the Company
in any such disposition.
(b) 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 participating Private
Funds.
(c) The Company may participate in such disposition without
obtaining prior approval of the Required Majority if: (i) The proposed
participation of the Company and of each Private Fund in such
disposition is proportionate to its outstanding investment in the
issuer immediately preceding the disposition; (ii) the Board has
approved as being in the best interests of the Company the ability to
participate in such dispositions on a pro rata basis (as described in
greater detail in this application); and (iii) the Board is provided on
a quarterly basis with a list of all dispositions made in accordance
with this condition. In all other cases, the Company Adviser will
provide its written recommendation as to the Company's participation to
the Eligible Directors, and the Company will participate in such
disposition solely to the extent that a Required Majority determines
that it is in the Company's best interests.
(d) The Company and each participating Private Fund shall each bear
its own expenses in connection with any such disposition.
8. (a) If any Private Fund desires to make a Follow-On Investment
in a portfolio company whose securities were acquired in a Co-
Investment Transaction, the Company Adviser will:
(i) Notify the Company of the proposed transaction at the earliest
practical time; and
(ii) formulate a recommendation as to the proposed participation,
including the amount of the proposed Follow-On investment, by the
Company.
(b) The Company may participate in such Follow-On Investment
without obtaining prior approval of the Required Majority if: (i) The
proposed participation of the Company and each Private Fund in such
investment is proportionate to its outstanding investment in the issuer
immediately preceding the Follow-On Investment; and (ii) the Board has
approved as being in the best interests of the Company the ability to
participate in Follow-On Investments on a pro rata basis (as described
in greater detail in this application). In all other cases, the Company
Adviser will provide its written recommendation as to the Company's
participation to the Eligible Directors, and the Company will
participate in such Follow-On Investment solely to the extent that a
Required Majority determines that it is in the Company's best
interests.
(c) If with respect to any Follow-On Investment:
(i) The amount of the opportunity is not based on the Company's and
the Private Funds' outstanding investments immediately preceding the
Follow-On Investment; and
(ii) the aggregate amount recommended by the Company Adviser to be
invested by the Company in the Follow-On Investment, together with the
amount proposed to be invested by the participating Private Funds in
the same transaction, exceeds the amount of the opportunity, then the
amount invested by each such party will be allocated among them pro
rata based on the ratio of capital available for investment in the
asset class being allocated of each party, up to the amount proposed to
be invested by each.
(d) The acquisition of Follow-On Investments as permitted by this
condition will be considered a Co-Investment Transaction for all
purposes and be subject to the other conditions set forth in this
application.
9. The Independent Directors will be provided quarterly for review
all information concerning Potential Co-Investment Transactions and Co-
Investment Transactions, including investments made by the Private
Funds
[[Page 34803]]
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 in, comply with the conditions
of the Order. In addition, the Independent Directors will consider at
least annually the continued appropriateness for the Company of
participating in new and existing Co-Investment Transactions.
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 Required Majority under section 57(f)
of the Act.
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 Private Fund.
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) will, to the
extent not payable by an Adviser under any agreement with the Company
or the Private Funds, be shared by the Company and the Private Funds in
proportion to the relative amounts of the securities held or being
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) or 57(k) of the
Act or received in connection with a Co-Investment Transaction will be
distributed to the Company and the Private Funds on a pro rata basis,
based on the amounts they invested or committed, as the case may be, in
such Co-Investment Transaction. If any transaction fee is to be held by
an Adviser to a Private Fund pending consummation of the Co-Investment
Transaction, the fee will be deposited into an account maintained by
such Adviser at a bank or banks having the qualifications prescribed in
section 26(a)(I) of the Act, and such account will earn a competitive
rate of interest that will also be divided pro rata among the Company
and the participating Private Funds based on the amounts they invest in
such Co-Investment Transaction. None of the Private Funds, Advisers of
the Private Funds nor any affiliated person of the Company will receive
additional compensation or remuneration of any kind as a result of, or
in connection with, a Co-Investment Transaction (other than (i) in the
case of the Company and the participating Private Funds, the pro rata
transaction fees described above and fees or other compensation
described in condition 2(c)(iii)(C) and (ii) in the case of the
Advisers, investment advisory fees paid in accordance with the Advisory
Agreements).
For the Commission, by the Division of Investment Management,
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-14204 Filed 6-17-14; 8:45 am]
BILLING CODE 8011-01-P
