SECOND AMENDED AND RESTATED INVESTMENT ADVISORY AGREEMENT BETWEEN WHITEHORSE FINANCE, INC. AND
Exhibit 10.5
SECOND AMENDED AND RESTATED
BETWEEN
AND
H.I.G. WHITEHORSE ADVISERS, LLC
This Second Amended and Restated Investment Advisory Agreement is made this 22 day of February, 2024 (this “Agreement”), by and between WHITEHORSE FINANCE, INC., a Delaware corporation (the “Corporation”), and H.I.G. WHITEHORSE ADVISERS, LLC, a Delaware limited liability company (the “Adviser”).
WHEREAS, the Corporation operates as a closed-end, non-diversified management investment company;
WHEREAS, the Corporation has elected to be treated as a business development company under the Investment Company Act of 1940, as amended (the “Investment Company Act”);
WHEREAS, the Corporation has acquired interests in senior secured loans and other debt obligations that comprise a portion of the Corporation’s portfolio;
WHEREAS, the Corporation owns, and may in the future own, subsidiaries that have acquired or may acquire and hold such interests in senior secured loans and other debt obligations;
WHEREAS, the Adviser is registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the “Investment Advisers Act”);
WHEREAS, the Corporation and the Adviser entered into the amended and restated investment advisory agreement (the “Prior Agreement”) on November 1, 2018; and
WHEREAS, the Corporation and the Adviser desire to amend and restate the Prior Agreement to set forth the terms and conditions pursuant to which the Adviser shall continue to provide comprehensive investment advisory services to the Corporation, including making available investment and other personnel to the Corporation so that it may effectively and efficiently manage the Corporation’s subsidiaries from time to time listed on Appendix A hereto (each a “Managed Subsidiary”) and fulfill any obligations and provide any services the Corporation may undertake as manager, adviser, collateral manager and/or servicer (collectively, “Management Services”) of such Managed Subsidiaries.
NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, each of the parties hereby agrees as follows:
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Pre-Incentive Fee Net Investment Income, expressed as a rate of return on the value of the Corporation’s net assets at the end of the immediately preceding calendar quarter, shall be
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compared to a “hurdle rate” of 1.75% per quarter (7.00% annualized). The Corporation will pay the Adviser an Incentive Fee with respect to the Corporation’s Pre-Incentive Fee Net Investment Income in each calendar quarter as follows: (1) no Incentive Fee in any calendar quarter in which the Corporation’s Pre-Incentive Fee Net Investment Income does not exceed the hurdle rate; (2) 100% of the Corporation’s Pre-Incentive Fee Net Investment Income with respect to that portion of such Pre-Incentive Fee Net Investment Income, if any, that exceeds the hurdle rate but is less than 2.1875% in any calendar quarter; and (3) 20% of the amount of the Corporation’s Pre-Incentive Fee Net Investment Income, if any, that exceeds 2.1875% in any calendar quarter.
The portion of such Incentive Fee that is attributable to deferred interest (such as payment-in-kind interest or original issue discount) shall be paid to the Adviser, together with interest accrued on the loan from the date of deferral to the date of payment, only if and to the extent the Corporation actually receives such interest in cash, and any accrual thereof shall be reversed if and to the extent such interest is reversed in connection with any write-off or similar treatment of the investment giving rise to any deferred interest accrual.
These calculations shall be appropriately pro-rated for any period of less than three months and adjusted for any share issuances or repurchases during the current quarter.
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Subject to any restrictions prescribed by law, by the provisions of the Code of Ethics of the Corporation and the Adviser and by the Adviser’s Allocation Policy, the Adviser and its members, officers, employees and agents shall be free from time to time to acquire, possess, manage and dispose of securities or other investment assets for their own accounts, for the accounts of their family members, for the account of any entity in which they have a beneficial interest or for the accounts of others for whom they may provide investment advisory, brokerage or other services (collectively, “Managed Accounts”), in transactions that may or may not correspond with transactions effected or positions held by the Corporation or to give advice and take action with respect to Managed Accounts that differ from advice given to, or action taken on behalf of, the Corporation; provided that the Adviser allocates investment opportunities to the Corporation over a period of time on a fair and equitable basis compared to investment opportunities extended to other Managed Accounts. The Adviser is not, and shall not be, obligated to initiate the purchase or sale for the Corporation of any security that the Adviser and its members, officers, employees or agents may purchase or sell for its or their own accounts or for the account of any other client if, in the opinion of the Adviser, such transaction or investment appears unsuitable or undesirable for the Corporation. Moreover, it is understood that when the Adviser determines that it would be appropriate for the Corporation and one or more Managed Accounts to participate in the same investment opportunity, the Adviser shall seek to execute orders for the Corporation and for such Managed Account(s) on a basis that the Adviser considers to be fair and equitable over time. In such situations, the Adviser may (but is not required to) place orders for the Corporation and each Managed Account simultaneously or on an aggregated basis. If all such orders are not filled at the same price, the Adviser may cause the Corporation and each Managed Account to pay or receive the average of the prices at which the orders were filled for the Corporation and all relevant Managed Accounts on each applicable day. If all such orders cannot be fully executed under prevailing market conditions, the Adviser may allocate the investment opportunities among participating accounts in a manner that the Adviser considers equitable, taking into account, among other things, the size of each account, the size of the order placed for each account and any other factors that the Adviser deems relevant.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed on the date above written.
By: /s/ Xxxxxx Xxxxxxx
Name:Xxxxxx Xxxxxxx
Title:Chief Executive Officer
H.I.G. WHITEHORSE ADVISERS, LLC
By: /s/ Xxxxxxx Xxxxxx
Name:Xxxxxxx Xxxxxx
Title:Chief Compliance Officer
[Signature Page to Second A&R Investment Advisory Agreement]
APPENDIX A
MANAGED SUBSIDIARIES
WhiteHorse Finance Warehouse, LLC
WhiteHorse Finance Credit I, LLC
WhiteHorse Finance (CA), LLC
WhiteHorse Crews of California Holding, Inc.
XxxxxXxxxx Xxxxxxxx & Associates Holding, Inc.
WhiteHorse Pinnacle Management Holding, Inc.
WHF PMA Holdco Blocker, LLC
WHF American Craft Blocker, LLC
WhiteHorse RCKC Holdings, LLC
WhiteHorse Finance Holdings, LLC