Main Street Capital Corporation, et al.; Notice of Application, 74366-74370 [E7-25357]
Download as PDF
<![CDATA[
74366
Federal Register / Vol. 72, No. 249 / Monday, December 31, 2007 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
28082; 812–13411]
Main Street Capital Corporation, et al.;
Notice of Application
December 21, 2007.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of an application for an
order under sections 6(c), 57(c) and 57(i)
of the Investment Company Act of 1940
(the ‘‘Act’’) for an exemption from
sections 18(a), 23(a), 23(b), 57(a)(1),
57(a)(2), 61(a) and 63 of the Act, and
under sections 57(a)(4) and 57(i) of the
Act and rule 17d–1 under the Act
permitting certain joint transactions
otherwise prohibited by section 57(a)(4)
of the Act.
sroberts on PROD1PC70 with NOTICES
AGENCY:
SUMMARY OF THE APPLICATION:
Applicants, Main Street Capital
Corporation (the ‘‘Company’’), Main
Street Mezzanine Fund, LP (‘‘MSMF’’),
Main Street Capital Partners, LLC (the
‘‘Investment Adviser’’), and Main Street
Mezzanine Management, LLC (the
‘‘General Partner’’), request an order to
permit: (1) A business development
company and its wholly-owned
subsidiaries to engage in certain
transactions that otherwise would be
permitted if the business development
company and its subsidiaries were one
company, (2) the business development
company to adhere to a modified asset
coverage requirement, and (3) the
business development company to issue
restricted shares of its common stock
under the terms of its employee and
director compensation plans.
FILING DATES: The application was filed
on July 27, 2007, and amended on
December 4, 2007. Applicants have
agreed to file an amendment during the
notice period, the substance of which is
reflected in this notice.
HEARING OR NOTIFICATION OF HEARING: An
order granting the application 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 January 15, 2008, and
should be accompanied by proof of
service on the 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
VerDate Aug<31>2005
20:08 Dec 28, 2007
Jkt 214001
notification by writing to the
Commission’s Secretary.
ADDRESSES: Secretary, U.S. Securities
and Exchange Commission, 100 F
Street, NE., Washington, DC 20549–
1090. Applicants, c/o Vincent D. Foster,
Chief Executive Officer, Main Street
Capital Corporation, 1300 Post Oak
Boulevard, Suite 800, Houston, TX
77056.
FOR FURTHER INFORMATION CONTACT: Jean
E. Minarick, Senior Counsel, at (202)
551–6811, or Nadya B. Roytblat,
Assistant Director, at (202) 551–6821,
(Division of Investment Management,
Office of Investment Company
Regulation).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
application. The complete application
may be obtained for a fee at the
Commission’s Public Reference Desk,
100 F Street, NE., Washington, DC
20549–0102 (tel. 202–551–5850).
Applicants’ Representations
1. The Company, a Maryland
corporation organized in March 2007, is
an internally managed, non-diversified,
closed-end investment company that
has elected to be regulated as a business
development company (‘‘BDC’’) under
the Act.1 The Company will operate as
a specialty investment company focused
on providing customized financing
solutions to companies with annual
revenues between $10 million and $100
million. The Company’s investment
objective is to maximize total return by
generating current income from debt
investments and realizing capital
appreciation from equity-related
investments. The Company’s
investments generally will range in size
from $2 million to $15 million. Shares
of the Company’s common stock are
traded on The NASDAQ Global Select
Market under the symbol ‘‘MAIN.’’ After
the IPO which was completed in
October 2007, there were 8,826,726
shares of the Company’s common stock
outstanding. As of October 2, 2007, the
Company had 13 employees.
2. The Company has a six member
board of directors (the ‘‘Board’’) of
whom two are ‘‘interested persons’’ of
the Company within the meaning of
section 2(a)(19) of the Act and four are
non-interested persons (‘‘Non-interested
Directors’’). The Company has four
directors who are neither employees nor
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
assistance with respect to the issuers of such
securities.
PO 00000
Frm 00101
Fmt 4703
Sfmt 4703
officers of the Company (the ‘‘NonEmployee Directors’’).
3. MSMF, a Delaware limited
partnership and an indirect whollyowned subsidiary of the Company, is a
small business investment company
(‘‘SBIC’’) licensed under the Small
Business Administration (‘‘SBA’’) to
operate under the Small Business
Investment Act of 1958 (‘‘SBIA’’).
MSMF relies on section 3(c)(7) of the
Act. The General Partner, which is a
wholly-owned subsidiary of the
Company, owns a 0.7% general
partnership interest in MSMF. The
Investment Adviser, a Delaware limited
liability company and a wholly-owned
subsidiary of the Company, is the
investment adviser to MSMF.
4. The Company may in the future
establish additional wholly-owned
subsidiaries (together with MSMF, the
‘‘Subsidiaries’’), including Subsidiaries
licensed by the SBA to operate under
the SBIA as SBICs (‘‘SBIC
Subsidiaries’’).
5. The Company believes that its
successful performance depends on its
ability to offer compensation packages
to its professionals that are competitive
with those offered by other investment
management businesses. The Company
believes its ability to offer compensation
plans providing for the periodic
issuance of shares of restricted stock
(i.e., stock that, at the time of issuance,
is subject to certain forfeiture
restrictions, and thus is restricted as to
its transferability until such forfeiture
restrictions have lapsed) (the
‘‘Restricted Stock’’) is vital to its future
growth and success. The Company
wishes to adopt equity-based
compensation plans for its NonEmployee Directors (the ‘‘Director
Plan’’) and its employees and employees
of its Subsidiaries (the ‘‘Employee
Plan’’, and together the ‘‘Plans’’) (the
‘‘Participants’’).
6. The Plans will authorize the
issuance of shares of Restricted Stock
subject to certain forfeiture restrictions.
These restrictions may relate to
continued employment or service on the
Company’s Board, as the case may be
(lapsing either on an annual or other
periodic basis or on a ‘‘cliff’’ basis, i.e.,
at the end of a stated period of time), the
performance of the Company, or other
restrictions deemed by the Board to be
appropriate. The Restricted Stock will
be subject to restrictions on
transferability and other restrictions as
required by the Board. Except to the
extent restricted under the terms of a
Plan, a Participant granted Restricted
Stock will have all the rights of any
other shareholder, including the right to
vote the Restricted Stock and the right
E:\FR\FM\31DEN1.SGM
31DEN1
Federal Register / Vol. 72, No. 249 / Monday, December 31, 2007 / Notices
sroberts on PROD1PC70 with NOTICES
to receive dividends. During the
restriction period, the Restricted Stock
generally may not be sold, transferred,
pledged, hypothecated, margined, or
otherwise encumbered by the
Participant. Except as the Board
otherwise determines, upon termination
of a Participant’s employment or service
on the Board during the applicable
restriction period, Restricted Stock for
which forfeiture restrictions have not
lapsed at the time of such termination
shall be forfeited.
7. The maximum number of shares
that may be issued under the Plans will
be 10% of the outstanding shares of the
Company’s common stock on the
effective date of the Plans plus 10% of
the number of shares of the Company’s
common stock issued or delivered by
the Company (other than pursuant to
compensation plans) during the term of
the Plans.2 The Employee Plan limits
the total number of shares that may be
awarded to any single Participant in a
single year to 500,000 shares. In
addition, no Participant may be granted
more than 25% of the shares reserved
for issuance under the Plans. The
Employee Plan will be administered by
the Board, which will award shares of
Restricted Stock to the Participants from
time to time as part of the Participants’
compensation based on a Participant’s
actual or expected performance and
value to the Company.
8. Under the Director Plan, the
Company’s Non-Employee Directors
will each receive a grant of $30,000
worth of shares of Restricted Stock at
the beginning of each one-year term of
service on the Board, for which
forfeiture restrictions will lapse at the
end of that year. The Director Plan will
be administered by the Board, and the
grants of Restricted Stock under the
Director Plan will be automatic and will
not be changed without Commission
approval.
9. The Plans have been approved by
the Board. The Plans will be submitted
for approval to the Company’s
shareholders, and will become effective
upon such approval, subject to the
issuance of the requested order.
2 For purposes of calculating compliance with
this limit, the Company will count as Restricted
Stock all shares of the Company’s common stock
that are issued pursuant to the Plans less any shares
that are forfeited back to the Company and
cancelled as a result of forfeiture restrictions not
lapsing.
VerDate Aug<31>2005
20:08 Dec 28, 2007
Jkt 214001
Applicants’ Legal Analysis
A. Relief for the Company and Its
Subsidiaries To Engage in Certain
Transactions and for the Company To
Adhere to a Modified Asset Coverage
Requirement
1. Applicants request an order
pursuant to sections 6(c), 57(c) and 57(i)
of the Act and rule 17d–1 under the Act
granting exemptions from sections 18(a),
57(a)(1), 57(a)(2) and 61(a) of the Act
and permitting certain transactions
otherwise prohibited by section 57(a)(4)
of the Act to permit the Company and
the Subsidiaries to engage in certain
transactions that otherwise would be
permitted if the Company and the
Subsidiaries were one company and to
permit the Company to adhere to a
modified asset coverage requirement.
2. Section 18(a) of the Act prohibits a
registered closed-end investment
company from issuing any class of
senior security or selling any such
security of which it is the issuer unless
the company complies with the asset
coverage requirements set forth in that
section. Section 61(a) of the Act makes
section 18 applicable to BDCs, with
certain modifications. Section 18(k)
exempts an investment company
operating as an SBIC from the asset
coverage requirements for senior
securities representing indebtedness
that are contained in section 18(a)(1)(A)
and (B).
3. Applicants state that a question
exists as to whether the Company must
comply with the asset coverage
requirements of section 18(a) (as
modified by section 61(a)) solely on an
individual basis or whether the
Company must also comply with the
asset coverage requirements on a
consolidated basis because the
Company may be deemed to be an
indirect issuer of any class of senior
securities issued by MSMF or another
SBIC Subsidiary. Applicants state that
they wish to treat MSMF and other SBIC
Subsidiaries as if each were a BDC
subject to sections 18 and 61 of the Act.
Applicants state that companies
operating under the SBIA, such as
MSMF, will be subject to the SBA’s
substantial regulation of permissible
leverage in its capital structure.
4. Section 6(c) of the Act, in relevant
part, permits the Commission to exempt
any transaction or class of transactions
from any provision of the Act if, and to
the extent that, such exemption is
necessary or appropriate in the public
interest and consistent with the
protection of investors and the purposes
fairly intended by the policy and
provisions of the Act. Applicants state
that the requested relief satisfies the
PO 00000
Frm 00102
Fmt 4703
Sfmt 4703
74367
section 6(c) standard. Applicants
contend that, to the extent that the
Company is entitled to rely on section
18(k) for an exemption from the asset
coverage requirements of section 18(a)
and 61(a), there is no policy reason to
deny the benefit of that exemption when
the Company consolidates its assets
with those of MSMF and other SBIC
Subsidiaries for the purpose of
compliance with those requirements.
5. Sections 57(a)(1) and (2) of the Act
generally prohibit, with certain
exceptions, sales or purchases or other
property between BDCs and certain of
their affiliates as described in section
57(b) of the Act. Section 57(b) includes
a person, directly or indirectly, either
controlling, controlled by or under
common control of the BDC. Applicants
state that the Company owns or will
directly or indirectly own more than
99.9% of the voting securities of each
Subsidiary and each Subsidiary is or
will be under the common control of the
Company. Applicants further state that
any purchase or sale between (a) the
Company and one or more subsidiaries,
(b) Subsidiaries and downstream
controlled affiliates of the Company and
another subsidiary and (c) the Company
and a controlled portfolio affiliate of a
Subsidiary may be prohibited.
Applicants submit that the requested
relief is to permit the Company and its
Subsidiaries, all of whom are owned,
directly or indirectly, by the
shareholders of the Company, to do that
which they would otherwise be
permitted to do if they were one
company.
6. Section 57(c) provides that the
Commission will exempt a proposed
transaction from the terms of the
proposed transactions, including the
consideration to be paid or received, if
they are reasonable and fair and do not
involve overreaching of any person
concerned, and the proposed
transaction is consistent with the policy
of the BDC concerned and the general
purposes of the Act. Applicants submit
that the requested relief meets this
standard.
7. Section 17(d) of the Act and rule
17d-1 under the Act prohibit affiliated
persons of a registered investment
company, or an affiliated person of such
person, acting as principal, from
participating in any joint transaction or
arrangement in which the registered
company or a company it controls is a
participant, unless the Commission has
issued an order authorizing the
arrangement. Section 57(a)(4) of the Act
imposes substantially the same
prohibitions on joint transactions
involving BDCs and certain affiliates of
their affiliates as described in section
E:\FR\FM\31DEN1.SGM
31DEN1
74368
Federal Register / Vol. 72, No. 249 / Monday, December 31, 2007 / Notices
57(b). Section 57(i) of the Act provides
that rules and regulations under
sections 17(a) and 17(d) and rule 17d1 will apply to transactions subject to
section 57(a)(4) in the absence of rules
under the section. The Commission has
not adopted rules under section 57(a)(4)
with respect to joint transactions and,
accordingly, the standard set forth in
rule 17d-1 governs applicants’ request
for relief.
8. Applicants state that a joint
transaction in which a Subsidiary and
the Company or another Subsidiary are
participants may be prohibited under
section 57(a)(4) because the Company
would not be a controlled affiliate of the
Subsidiaries. Applicants request relief
under sections 57(i) and rule 17d-1 to
permit joint transactions in which a
Subsidiary and the Company or another
Subsidiary participate to the extent that
such transactions would not be
prohibited if the Subsidiaries
participating in the transactions were
deemed to be part of the Company and
not separate companies.
9. In determining whether to grant an
order under section 57(i) and rule 17d1, the Commission considers whether
the participation of the BDC 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 in the transaction.
Applicants state that the standard is
satisfied because the requested relief
would be simply to permit the Company
and its Subsidiaries to conduct their
business as if they were one company.
B. Relief for the Company To Issue
Restricted Stock
sroberts on PROD1PC70 with NOTICES
Sections 23(a) and (b), Section 63
1. Under section 63 of the Act, the
provisions of section 23(a) of the Act
generally prohibiting a registered
closed-end investment company from
issuing securities for services or for
property other than cash or securities
are made applicable to BDCs. This
provision would prohibit the issuance
of Restricted Stock as a part of the Plans.
2. Section 23(b) generally prohibits a
closed-end investment company from
selling its common stock at a price
below its current net asset value
(‘‘NAV’’). Section 63(2) makes section
23(b) applicable to BDCs unless certain
conditions are met. Because Restricted
Stock that would be granted under the
Plans would not meet the terms of
section 63(2), sections 23(b) and 63
prohibit the issuance of the Restricted
Stock.
VerDate Aug<31>2005
20:08 Dec 28, 2007
Jkt 214001
3. Section 6(c) provides that the
Commission may, by order upon
application, conditionally or
unconditionally exempt any person,
security, or transaction, or any class or
classes of persons, securities or
transactions, from any provision of the
Act, if and to the extent that the
exemption is necessary or appropriate
in the public interest and consistent
with the protection of investors and the
purposes fairly intended by the policy
and provisions of the Act.
4. The Company requests an order
pursuant to section 6(c) of the Act
granting an exemption from the
provisions of sections 23(a) and (b) and
section 63 of the Act. The Company
states that the concerns underlying
those sections include: (i) Preferential
treatment of investment company
insiders and the use of options and
other rights by insiders to obtain control
of the investment company; (ii)
complication of the investment
company’s structure that makes it
difficult to determine the value of the
company’s shares; and (iii) dilution of
shareholders’ equity in the investment
company. The Company states that the
Plans do not raise the concern about
preferential treatment of the Company’s
insiders because the Plans are bona fide
compensation plans of the type that is
common among corporations generally.
In addition, section 61(a)(3)(B) of the
Act permits a BDC to issue to its
officers, directors and employees,
pursuant to an executive compensation
plan, warrants, options and rights to
purchase the BDC’s voting securities,
subject to certain requirements. The
Company states that, for reasons that are
unclear, section 61 and its legislative
history do not address the issuance by
a BDC of restricted stock as incentive
compensation. The Company states,
however, that the issuance of Restricted
Stock is substantially similar, for
purposes of investor protection under
the Act, to the issuance of warrants,
options, and rights as contemplated by
section 61. The Company also asserts
that the Plans would not become a
means for insiders to obtain control of
the Company because the number of
shares of the Company issuable under
the Plans would be limited as set forth
in the application. The Company’s
current intention is to issue only shares
of Restricted Stock as incentive
compensation; however, if the Company
issues stock options in the future, it will
do so pursuant to section 61. Moreover,
no individual Participant could be
issued more than 25% of the shares
reserved for issuance under the Plans.
5. The Company further states that the
Plans will not unduly complicate the
PO 00000
Frm 00103
Fmt 4703
Sfmt 4703
Company’s structure because equitybased employee compensation
arrangements are widely used among
corporations and commonly known to
investors. The Company notes that the
Plans will be submitted to the
Company’s shareholders for their
approval. The Company represents that
a concise, ‘‘plain English’’ description of
the Plans, including their potential
dilutive effect, will be provided in the
proxy materials that will be submitted
to the Company’s shareholders. The
Company also states that it will comply
with the proxy disclosure requirements
in Item 10 of Schedule 14A under the
Securities Exchange Act of 1934 (the
‘‘Exchange Act’’). The Company further
notes that the Plans will be disclosed to
investors in accordance with the
requirements of the Form N–2
registration statement for closed-end
investment companies, and pursuant to
the standards and guidelines adopted by
the Financial Accounting Standards
Board for operating companies. In
addition, the Company will comply
with the disclosure requirements for
executive compensation plans
applicable to operating companies
under the Exchange Act.3 The Company
thus concludes that the Plans will be
adequately disclosed to investors and
appropriately reflected in the market
value of the Company’s shares.
6. The Company acknowledges that,
while awards granted under the Plans
would have a dilutive effect on the
shareholders’ equity in the Company,
that effect would be outweighed by the
anticipated benefits of the Plans to the
Company and its shareholders. The
Company asserts that it needs the
flexibility to provide the requested
equity-based employee compensation in
order to be able to compete effectively
with other financial services firms for
talented professionals. These
professionals, the Company suggests, in
turn are likely to increase the
Company’s performance and
shareholder value. The Company also
asserts that equity-based compensation
would more closely align the interests of
the Company’s employees with those of
the Company’s shareholders. The
Company believes that the granting of
shares of Restricted Stock to NonEmployee Directors under the Director
Plan is fair and reasonable because of
3 In addition, Applicant will comply with the
amendments to the disclosure requirements for
executive and director compensation, related party
transactions, director independence and other
corporate governance matters, and security
ownership of officers and directors to the extent
adopted and applicable to BDCs. See Executive
Compensation and Related Party Disclosure,
Release No. 34–53185 (Jan. 27, 2006).
E:\FR\FM\31DEN1.SGM
31DEN1
Federal Register / Vol. 72, No. 249 / Monday, December 31, 2007 / Notices
sroberts on PROD1PC70 with NOTICES
the skills and experience that such
directors provide to the Company. Such
skills and experience are necessary for
the management and oversight of the
Company’s investments and operations.
The Company believes that granting the
shares of Restricted Stock will provide
significant incentives for Non-Employee
Directors to remain on the Board and to
devote their best efforts to the success
of the Company’s business in the future.
The issuance of shares of Restricted
Stock will also provide a means for the
Company’s Non-Employee Directors to
increase their ownership interest in the
Company, thereby helping to ensure a
close identification of their interests
with those of the Company and its
shareholders.
7. In addition, the Company states
that the Company’s shareholders will be
further protected by the conditions to
the requested order that assure
continuing oversight of the operation of
the Plans by the Company’s Board. The
full Board and the Committee will
review periodically the potential impact
that the issuance of Restricted Stock
could have on the Company’s earnings
and NAV per share, such review to take
place prior to any decisions to issue
Restricted Stock under the Plans, but in
no event less frequently than annually.
Adequate procedures and records will
be maintained to permit such review.
The Board will be authorized to take
appropriate steps to ensure that the
grant of Restricted Stock under the
Plans would not have an effect contrary
to the interests of the Company’s
shareholders. This authority will
include the authority to prevent or limit
the grant of additional Restricted Stock
under the Plans.
Section 57(a)(4), Rule 17d-1
8. Section 57(a) proscribes certain
transactions between a BDC and persons
related to the BDC in the manner
described in section 57(b) (‘‘57(b)
persons’’), absent a Commission order.
Section 57(a)(4) generally prohibits a
57(b) person from effecting a transaction
in which the BDC is a joint participant
absent such an order. Rule 17d-1, made
applicable to BDCs by section 57(i),
proscribes participation in a ‘‘joint
enterprise or other joint arrangement or
profit-sharing plan,’’ which includes a
stock option or purchase plan.
Employees and directors of a BDC are
57(b) persons. Thus, the issuance of
shares of Restricted Stock could be
deemed to involve a joint transaction
involving a BDC and a 57(b) person in
contravention of section 57(a)(4). Rule
17d-1(b) provides that, in considering
relief pursuant to the rule, the
Commission will consider (i) whether
VerDate Aug<31>2005
20:08 Dec 28, 2007
Jkt 214001
the participation of the BDC in a joint
enterprise is consistent with the Act’s
policies and purposes and (ii) the extent
to which that participation is on a basis
different from or less advantageous than
that of other participants.
9. The Company requests an order
pursuant to section 57(a)(4) and rule
17d-1 to permit the Plans. The Company
states that the Plans, although benefiting
the Participants and the Company in
different ways, are in the interests of the
Company’s shareholders because the
Plans will help the Company attract and
retain talented professionals, help align
the interests of the Company’s
employees with those of its
shareholders, and in turn help produce
a better return to the Company’s
shareholders. Thus, the Company
asserts that the Plans are consistent with
the policies and purposes of the Act and
that the Company’s participation in the
Plans will be on a basis no less
advantageous than that of other
participants.
Applicants’ Conditions
Applicants agree that the order
granting the requested relief will be
subject to the following conditions:
A. Relief for the Company and Its
Subsidiaries To Engage in Certain
Transactions and for the Company To
Adhere to a Modified Asset Coverage
Requirement
1. The Company will at all times be
the sole limited partner of any
Subsidiary and the sole owner of the
Subsidiary’s general partner, or
otherwise own and hold beneficially, all
of the outstanding voting securities or
other equity interests in the Subsidiary.
2. No person shall serve or act as
investment adviser to MSMF or another
Subsidiary unless the Company’s Board
and shareholders of the Company shall
have taken the action with respect
thereto also required to be taken by the
functional equivalent of the board of
directors of MSMF or another
Subsidiary and shareholders of MSMF
or another Subsidiary as if MSMF or
another Subsidiary were a BDC.
3. The managers of a Subsidiary will
be the Company, a Subsidiary of the
Company, or a person elected or
appointed by the Company.
4. The Company will not issue or sell
any senior security and the Company
will not cause or permit MSMF or any
other SBIC Subsidiary to issue or sell
any senior security of which the
Company, MSMF or any other SBIC
Subsidiary is the issuer except to the
extent permitted by section 18 (as
modified for BDCs by section 61) of the
Act; provided that immediately after
PO 00000
Frm 00104
Fmt 4703
Sfmt 4703
74369
issuance or sale by any of the Company,
MSMF or any other SBIC Subsidiary of
any such senior security, the Company
individually and on a consolidated
basis, shall have the asset coverage
required by section 18(a) of the Act (as
modified by section 61(a)), except that,
in determining whether the Company
on a consolidated basis has the asset
coverage required by section 18(a) of the
Act (as modified by section 61(a)), any
senior securities representing
indebtedness of MSMF or another SBIC
Subsidiary shall not be considered
senior securities and, for purposes of the
definition of ‘‘asset coverage’’ in section
18(h), will be treated as indebtedness
not represented by senior securities.
B. Relief for the Company To Issue
Restricted Stock
1. The Employee Plan will be
authorized in accordance with section
61(a)(3)(A)(iv) of the Act, and each Plan
will be approved by the Company’s
shareholders.
2. Each issuance of Restricted Stock to
employees, officers and Non-Employee
Directors will be approved by the
Required Majority, as defined in section
57(o) of the Act, of the Company’s
directors on the basis that such issuance
is in the best interests of the Company
and its shareholders.
3. The amount of voting securities
that would result from the exercise of all
of the Company’s outstanding warrants,
options, and rights, together with any
Restricted Stock issued pursuant to the
Plans, at the time of issuance shall not
exceed 25% of the outstanding voting
securities of the Company, except that if
the amount of voting securities that
would result from the exercise of all of
the Company’s outstanding warrants,
options, and rights issued to the
Company’s directors, officers, and
employees, together with any Restricted
Stock issued pursuant to the Plans,
would exceed 15% of the outstanding
voting securities of the Company, then
the total amount of voting securities that
would result from the exercise of all
outstanding warrants, options, and
rights, together with any Restricted
Stock issued pursuant to the Plans, at
the time of issuance shall not exceed
20% of the outstanding voting securities
of the Company.
4. The maximum amount of Restricted
Stock that may be issued under the
Plans will be 10% of the outstanding
shares of common stock of the Company
on the effective date of the Plans plus
10% of the number of shares of the
Company’s common stock issued or
delivered by the Company (other than
pursuant to compensation plans) during
the term of the Plans.
E:\FR\FM\31DEN1.SGM
31DEN1
74370
Federal Register / Vol. 72, No. 249 / Monday, December 31, 2007 / Notices
5. Both the full Board and the
Committee will review periodically the
potential impact that the issuance of
Restricted Stock under the Plans could
have on the Company’s earnings and
NAV per share, such review to take
place prior to any decisions to grant
Restricted Stock under the Plans, but in
no event less frequently than annually.
Adequate procedures and records will
be maintained to permit such review.
The Board will be authorized to take
appropriate steps to ensure that the
grant of Restricted Stock under the
Plans would not have an effect contrary
to the interests of the Company’s
shareholders. This authority will
include the authority to prevent or limit
the granting of additional Restricted
Stock under the Plans. All records
maintained pursuant to this condition
will be subject to examination by the
Commission and its staff.
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–25357 Filed 12–28–07; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
request a hearing by writing to the
Commission’s Secretary and serving
Applicant with a copy of the request,
personally or by mail. Hearing requests
should be received by the Commission
by 5:30 p.m. on January 15, 2008, and
should be accompanied by proof of
service on Applicant, 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.
Secretary, Securities and
Exchange Commission, 100 F Street, NE,
Washington, DC, 20549–1090.
Applicant, c/o Mr. F. Jacob Cherian,
Millennium India Acquisition Company
Inc., 330 East 38th Street, New York, NY
10016.
ADDRESSES:
Jean
E. Minarick, Senior Counsel, at (202)
551–6811, or Janet M. Grossnickle,
Branch Chief, at (202) 551–6821
(Division of Investment Management,
Office of Investment Company
Regulation).
FOR FURTHER INFORMATION CONTACT:
Millennium India Acquisition Company
Inc.; Notice of Application
The
following is a summary of the
application. The complete application
may be obtained for a fee at the
Commission’s Public Reference Branch,
100 F Street, NE., Washington, DC
20549–0102 (tel. 202–551–5850).
December 21, 2007.
Applicant’s Representations
SUPPLEMENTARY INFORMATION:
[Investment Company Act Release No.
28083; 812–13464]
Securities and Exchange
Commission (‘‘Commission’’).
ACTIONS: Notice of application for an
order under section 6(c) of the
Investment Company Act of 1940 (the
‘‘Act’’) granting an exemption from
section 12(d)(3) of the Act.
sroberts on PROD1PC70 with NOTICES
AGENCY:
1. Applicant, a Delaware corporation,
is registered as a non-diversified,
closed-end management investment
company under the Act. Applicant was
formed in March 2006 as a special
purpose acquisition company to serve as
a vehicle to effect a merger, asset
Applicant: Millennium India
acquisition or other business
Acquisition Company Inc.
combination with one or more
(‘‘Applicant’’).
businesses that have operations
Summary of Application: Applicant
primarily in India.
seeks an order under section 6(c) of the
2. SMC Global Securities Limited
Act to permit Applicant to invest in the
(‘‘SMC’’) and SAM Global Securities
securities of two issuers that each
Limited (‘‘SAM’’), together with their
derives more than 15% of its gross
respective subsidiaries, comprise the
revenues from securities related
activities as defined in rule 12d3–1(d)(1) SMC Group of Companies (the ‘‘SMC
Group’’). The SMC Group, which is
under the Act, in excess of the
based in New Delhi, India, provides
limitations in rule 12d3–1(b).
various financial services, including
Filing Dates: The application was
equities and commodities brokerage,
filed on December 18, 2007, and
mutual fund and initial public offering
amended on December 21, 2007.
Hearing or Notification of Hearing: An distribution, and depository and
clearing services. More than 15% of
order granting the requested relief will
be issued unless the Commission orders SMC’s and SAM’s gross revenues are
derived from ‘‘securities related
a hearing. Interested persons may
VerDate Aug<31>2005
20:08 Dec 28, 2007
Jkt 214001
PO 00000
Frm 00105
Fmt 4703
Sfmt 4703
activities’’ as defined in rule 12d3–
1(d)(1) under the Act.1
3. On May 12, 2007, Applicant
entered into two substantially identical
share subscription agreements (the
‘‘Subscription Agreements’’) to invest in
14.9% of the equity securities of each of
SMC and SAM, subject to shareholder
approval and other conditions (the
‘‘Acquisition Transaction’’).2 In
addition, Applicant has entered into a
set of substantially identical option
agreements that grant Applicant an
option, exercisable within 30 days of the
closing date of the corresponding
Acquisition Transaction and subject to
applicable law, to require SMC or SAM
or both to begin regulatory approval
proceedings that would permit it to
issue global depositary shares to
Applicant, which upon conversion into
equity shares, represent an additional
6% of the equity share capital of SMC
or SAM, as the case may be.
4. The Applicant will not actively
manage a portfolio. Rather, after the
Acquisition Transaction closes, the
Applicant intends to invest at least 80%
of its assets in the securities of the SMC
Group, U.S. government securities and
other short-term instruments, unless or
until such time as it raises additional
capital. Upon consummation of the
Acquisition Transaction and the related
global depositary share acquisition, over
90% of Applicant’s assets would be
invested in the SMC Group. If the
Applicant raises additional capital it
may, if then permitted by Indian law
and other regulatory requirements, make
additional investments in the SMC
Group or it may invest in one or more
other Indian companies. Applicant does
not seek an exemption from section
12(d)(3) of the Act for investment in the
securities of any company other than
the SMC Group.
5. Applicant’s certificate of
incorporation requires that the holders
of a majority of Applicant’s publicly
listed common stock approve the
Acquisition Transaction at a
stockholders’ meeting convened to
consider proposals to approve such
transactions. Moreover, shareholders
who do not approve of the transactions
may elect to have their publicly-traded
shares converted into cash. Applicant
will be precluded from proceeding with
1 Subparagraph (d)(1) of rule 12d3–1 defines
‘‘securities related activities’’ to mean a person’s
activities as a broker, dealer, underwriter, or
investment adviser to a registered investment
company.
2 As described more fully in the application,
Applicant does not seek to acquire more than
14.9% of the equity securities of SMC or SAM due
to certain restrictions and lack of clarity in the
regulatory approval process and timelines under
Indian law.
E:\FR\FM\31DEN1.SGM
31DEN1
]]>Agencies
[Federal Register Volume 72, Number 249 (Monday, December 31, 2007)]
[Notices]
[Pages 74366-74370]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-25357]
[[Page 74366]]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 28082; 812-13411]
Main Street Capital Corporation, et al.; Notice of Application
December 21, 2007.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application for an order under sections 6(c),
57(c) and 57(i) of the Investment Company Act of 1940 (the ``Act'') for
an exemption from sections 18(a), 23(a), 23(b), 57(a)(1), 57(a)(2),
61(a) and 63 of the Act, and under sections 57(a)(4) and 57(i) of the
Act and rule 17d-1 under the Act permitting certain joint transactions
otherwise prohibited by section 57(a)(4) of the Act.
-----------------------------------------------------------------------
Summary of the Application: Applicants, Main Street Capital Corporation
(the ``Company''), Main Street Mezzanine Fund, LP (``MSMF''), Main
Street Capital Partners, LLC (the ``Investment Adviser''), and Main
Street Mezzanine Management, LLC (the ``General Partner''), request an
order to permit: (1) A business development company and its wholly-
owned subsidiaries to engage in certain transactions that otherwise
would be permitted if the business development company and its
subsidiaries were one company, (2) the business development company to
adhere to a modified asset coverage requirement, and (3) the business
development company to issue restricted shares of its common stock
under the terms of its employee and director compensation plans.
Filing Dates: The application was filed on July 27, 2007, and amended
on December 4, 2007. Applicants have agreed to file an amendment during
the notice period, the substance of which is reflected in this notice.
Hearing or Notification of Hearing: An order granting the application
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 January 15, 2008, and should be accompanied by proof of service
on the 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
Street, NE., Washington, DC 20549-1090. Applicants, c/o Vincent D.
Foster, Chief Executive Officer, Main Street Capital Corporation, 1300
Post Oak Boulevard, Suite 800, Houston, TX 77056.
FOR FURTHER INFORMATION CONTACT: Jean E. Minarick, Senior Counsel, at
(202) 551-6811, or Nadya B. Roytblat, Assistant Director, at (202) 551-
6821, (Division of Investment Management, Office of Investment Company
Regulation).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee at the
Commission's Public Reference Desk, 100 F Street, NE., Washington, DC
20549-0102 (tel. 202-551-5850).
Applicants' Representations
1. The Company, a Maryland corporation organized in March 2007, is
an internally managed, non-diversified, closed-end investment company
that has elected to be regulated as a business development company
(``BDC'') under the Act.\1\ The Company will operate as a specialty
investment company focused on providing customized financing solutions
to companies with annual revenues between $10 million and $100 million.
The Company's investment objective is to maximize total return by
generating current income from debt investments and realizing capital
appreciation from equity-related investments. The Company's investments
generally will range in size from $2 million to $15 million. Shares of
the Company's common stock are traded on The NASDAQ Global Select
Market under the symbol ``MAIN.'' After the IPO which was completed in
October 2007, there were 8,826,726 shares of the Company's common stock
outstanding. As of October 2, 2007, the Company had 13 employees.
---------------------------------------------------------------------------
\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 has a six member board of directors (the ``Board'')
of whom two are ``interested persons'' of the Company within the
meaning of section 2(a)(19) of the Act and four are non-interested
persons (``Non-interested Directors''). The Company has four directors
who are neither employees nor officers of the Company (the ``Non-
Employee Directors'').
3. MSMF, a Delaware limited partnership and an indirect wholly-
owned subsidiary of the Company, is a small business investment company
(``SBIC'') licensed under the Small Business Administration (``SBA'')
to operate under the Small Business Investment Act of 1958 (``SBIA'').
MSMF relies on section 3(c)(7) of the Act. The General Partner, which
is a wholly-owned subsidiary of the Company, owns a 0.7% general
partnership interest in MSMF. The Investment Adviser, a Delaware
limited liability company and a wholly-owned subsidiary of the Company,
is the investment adviser to MSMF.
4. The Company may in the future establish additional wholly-owned
subsidiaries (together with MSMF, the ``Subsidiaries''), including
Subsidiaries licensed by the SBA to operate under the SBIA as SBICs
(``SBIC Subsidiaries'').
5. The Company believes that its successful performance depends on
its ability to offer compensation packages to its professionals that
are competitive with those offered by other investment management
businesses. The Company believes its ability to offer compensation
plans providing for the periodic issuance of shares of restricted stock
(i.e., stock that, at the time of issuance, is subject to certain
forfeiture restrictions, and thus is restricted as to its
transferability until such forfeiture restrictions have lapsed) (the
``Restricted Stock'') is vital to its future growth and success. The
Company wishes to adopt equity-based compensation plans for its Non-
Employee Directors (the ``Director Plan'') and its employees and
employees of its Subsidiaries (the ``Employee Plan'', and together the
``Plans'') (the ``Participants'').
6. The Plans will authorize the issuance of shares of Restricted
Stock subject to certain forfeiture restrictions. These restrictions
may relate to continued employment or service on the Company's Board,
as the case may be (lapsing either on an annual or other periodic basis
or on a ``cliff'' basis, i.e., at the end of a stated period of time),
the performance of the Company, or other restrictions deemed by the
Board to be appropriate. The Restricted Stock will be subject to
restrictions on transferability and other restrictions as required by
the Board. Except to the extent restricted under the terms of a Plan, a
Participant granted Restricted Stock will have all the rights of any
other shareholder, including the right to vote the Restricted Stock and
the right
[[Page 74367]]
to receive dividends. During the restriction period, the Restricted
Stock generally may not be sold, transferred, pledged, hypothecated,
margined, or otherwise encumbered by the Participant. Except as the
Board otherwise determines, upon termination of a Participant's
employment or service on the Board during the applicable restriction
period, Restricted Stock for which forfeiture restrictions have not
lapsed at the time of such termination shall be forfeited.
7. The maximum number of shares that may be issued under the Plans
will be 10% of the outstanding shares of the Company's common stock on
the effective date of the Plans plus 10% of the number of shares of the
Company's common stock issued or delivered by the Company (other than
pursuant to compensation plans) during the term of the Plans.\2\ The
Employee Plan limits the total number of shares that may be awarded to
any single Participant in a single year to 500,000 shares. In addition,
no Participant may be granted more than 25% of the shares reserved for
issuance under the Plans. The Employee Plan will be administered by the
Board, which will award shares of Restricted Stock to the Participants
from time to time as part of the Participants' compensation based on a
Participant's actual or expected performance and value to the Company.
---------------------------------------------------------------------------
\2\ For purposes of calculating compliance with this limit, the
Company will count as Restricted Stock all shares of the Company's
common stock that are issued pursuant to the Plans less any shares
that are forfeited back to the Company and cancelled as a result of
forfeiture restrictions not lapsing.
---------------------------------------------------------------------------
8. Under the Director Plan, the Company's Non-Employee Directors
will each receive a grant of $30,000 worth of shares of Restricted
Stock at the beginning of each one-year term of service on the Board,
for which forfeiture restrictions will lapse at the end of that year.
The Director Plan will be administered by the Board, and the grants of
Restricted Stock under the Director Plan will be automatic and will not
be changed without Commission approval.
9. The Plans have been approved by the Board. The Plans will be
submitted for approval to the Company's shareholders, and will become
effective upon such approval, subject to the issuance of the requested
order.
Applicants' Legal Analysis
A. Relief for the Company and Its Subsidiaries To Engage in Certain
Transactions and for the Company To Adhere to a Modified Asset Coverage
Requirement
1. Applicants request an order pursuant to sections 6(c), 57(c) and
57(i) of the Act and rule 17d-1 under the Act granting exemptions from
sections 18(a), 57(a)(1), 57(a)(2) and 61(a) of the Act and permitting
certain transactions otherwise prohibited by section 57(a)(4) of the
Act to permit the Company and the Subsidiaries to engage in certain
transactions that otherwise would be permitted if the Company and the
Subsidiaries were one company and to permit the Company to adhere to a
modified asset coverage requirement.
2. Section 18(a) of the Act prohibits a registered closed-end
investment company from issuing any class of senior security or selling
any such security of which it is the issuer unless the company complies
with the asset coverage requirements set forth in that section. Section
61(a) of the Act makes section 18 applicable to BDCs, with certain
modifications. Section 18(k) exempts an investment company operating as
an SBIC from the asset coverage requirements for senior securities
representing indebtedness that are contained in section 18(a)(1)(A) and
(B).
3. Applicants state that a question exists as to whether the
Company must comply with the asset coverage requirements of section
18(a) (as modified by section 61(a)) solely on an individual basis or
whether the Company must also comply with the asset coverage
requirements on a consolidated basis because the Company may be deemed
to be an indirect issuer of any class of senior securities issued by
MSMF or another SBIC Subsidiary. Applicants state that they wish to
treat MSMF and other SBIC Subsidiaries as if each were a BDC subject to
sections 18 and 61 of the Act. Applicants state that companies
operating under the SBIA, such as MSMF, will be subject to the SBA's
substantial regulation of permissible leverage in its capital
structure.
4. Section 6(c) of the Act, in relevant part, permits the
Commission to exempt any transaction or class of transactions from any
provision of the Act if, and to the extent that, such exemption is
necessary or appropriate in the public interest and consistent with the
protection of investors and the purposes fairly intended by the policy
and provisions of the Act. Applicants state that the requested relief
satisfies the section 6(c) standard. Applicants contend that, to the
extent that the Company is entitled to rely on section 18(k) for an
exemption from the asset coverage requirements of section 18(a) and
61(a), there is no policy reason to deny the benefit of that exemption
when the Company consolidates its assets with those of MSMF and other
SBIC Subsidiaries for the purpose of compliance with those
requirements.
5. Sections 57(a)(1) and (2) of the Act generally prohibit, with
certain exceptions, sales or purchases or other property between BDCs
and certain of their affiliates as described in section 57(b) of the
Act. Section 57(b) includes a person, directly or indirectly, either
controlling, controlled by or under common control of the BDC.
Applicants state that the Company owns or will directly or indirectly
own more than 99.9% of the voting securities of each Subsidiary and
each Subsidiary is or will be under the common control of the Company.
Applicants further state that any purchase or sale between (a) the
Company and one or more subsidiaries, (b) Subsidiaries and downstream
controlled affiliates of the Company and another subsidiary and (c) the
Company and a controlled portfolio affiliate of a Subsidiary may be
prohibited. Applicants submit that the requested relief is to permit
the Company and its Subsidiaries, all of whom are owned, directly or
indirectly, by the shareholders of the Company, to do that which they
would otherwise be permitted to do if they were one company.
6. Section 57(c) provides that the Commission will exempt a
proposed transaction from the terms of the proposed transactions,
including the consideration to be paid or received, if they are
reasonable and fair and do not involve overreaching of any person
concerned, and the proposed transaction is consistent with the policy
of the BDC concerned and the general purposes of the Act. Applicants
submit that the requested relief meets this standard.
7. Section 17(d) of the Act and rule 17d-1 under the Act prohibit
affiliated persons of a registered investment company, or an affiliated
person of such person, acting as principal, from participating in any
joint transaction or arrangement in which the registered company or a
company it controls is a participant, unless the Commission has issued
an order authorizing the arrangement. Section 57(a)(4) of the Act
imposes substantially the same prohibitions on joint transactions
involving BDCs and certain affiliates of their affiliates as described
in section
[[Page 74368]]
57(b). Section 57(i) of the Act provides that rules and regulations
under sections 17(a) and 17(d) and rule 17d-1 will apply to
transactions subject to section 57(a)(4) in the absence of rules under
the section. The Commission has not adopted rules under section
57(a)(4) with respect to joint transactions and, accordingly, the
standard set forth in rule 17d-1 governs applicants' request for
relief.
8. Applicants state that a joint transaction in which a Subsidiary
and the Company or another Subsidiary are participants may be
prohibited under section 57(a)(4) because the Company would not be a
controlled affiliate of the Subsidiaries. Applicants request relief
under sections 57(i) and rule 17d-1 to permit joint transactions in
which a Subsidiary and the Company or another Subsidiary participate to
the extent that such transactions would not be prohibited if the
Subsidiaries participating in the transactions were deemed to be part
of the Company and not separate companies.
9. In determining whether to grant an order under section 57(i) and
rule 17d-1, the Commission considers whether the participation of the
BDC 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 in the transaction. Applicants state that
the standard is satisfied because the requested relief would be simply
to permit the Company and its Subsidiaries to conduct their business as
if they were one company.
B. Relief for the Company To Issue Restricted Stock
Sections 23(a) and (b), Section 63
1. Under section 63 of the Act, the provisions of section 23(a) of
the Act generally prohibiting a registered closed-end investment
company from issuing securities for services or for property other than
cash or securities are made applicable to BDCs. This provision would
prohibit the issuance of Restricted Stock as a part of the Plans.
2. Section 23(b) generally prohibits a closed-end investment
company from selling its common stock at a price below its current net
asset value (``NAV''). Section 63(2) makes section 23(b) applicable to
BDCs unless certain conditions are met. Because Restricted Stock that
would be granted under the Plans would not meet the terms of section
63(2), sections 23(b) and 63 prohibit the issuance of the Restricted
Stock.
3. Section 6(c) provides that the Commission may, by order upon
application, conditionally or unconditionally exempt any person,
security, or transaction, or any class or classes of persons,
securities or transactions, from any provision of the Act, if and to
the extent that the exemption is necessary or appropriate in the public
interest and consistent with the protection of investors and the
purposes fairly intended by the policy and provisions of the Act.
4. The Company requests an order pursuant to section 6(c) of the
Act granting an exemption from the provisions of sections 23(a) and (b)
and section 63 of the Act. The Company states that the concerns
underlying those sections include: (i) Preferential treatment of
investment company insiders and the use of options and other rights by
insiders to obtain control of the investment company; (ii) complication
of the investment company's structure that makes it difficult to
determine the value of the company's shares; and (iii) dilution of
shareholders' equity in the investment company. The Company states that
the Plans do not raise the concern about preferential treatment of the
Company's insiders because the Plans are bona fide compensation plans
of the type that is common among corporations generally. In addition,
section 61(a)(3)(B) of the Act permits a BDC to issue to its officers,
directors and employees, pursuant to an executive compensation plan,
warrants, options and rights to purchase the BDC's voting securities,
subject to certain requirements. The Company states that, for reasons
that are unclear, section 61 and its legislative history do not address
the issuance by a BDC of restricted stock as incentive compensation.
The Company states, however, that the issuance of Restricted Stock is
substantially similar, for purposes of investor protection under the
Act, to the issuance of warrants, options, and rights as contemplated
by section 61. The Company also asserts that the Plans would not become
a means for insiders to obtain control of the Company because the
number of shares of the Company issuable under the Plans would be
limited as set forth in the application. The Company's current
intention is to issue only shares of Restricted Stock as incentive
compensation; however, if the Company issues stock options in the
future, it will do so pursuant to section 61. Moreover, no individual
Participant could be issued more than 25% of the shares reserved for
issuance under the Plans.
5. The Company further states that the Plans will not unduly
complicate the Company's structure because equity-based employee
compensation arrangements are widely used among corporations and
commonly known to investors. The Company notes that the Plans will be
submitted to the Company's shareholders for their approval. The Company
represents that a concise, ``plain English'' description of the Plans,
including their potential dilutive effect, will be provided in the
proxy materials that will be submitted to the Company's shareholders.
The Company also states that it will comply with the proxy disclosure
requirements in Item 10 of Schedule 14A under the Securities Exchange
Act of 1934 (the ``Exchange Act''). The Company further notes that the
Plans will be disclosed to investors in accordance with the
requirements of the Form N-2 registration statement for closed-end
investment companies, and pursuant to the standards and guidelines
adopted by the Financial Accounting Standards Board for operating
companies. In addition, the Company will comply with the disclosure
requirements for executive compensation plans applicable to operating
companies under the Exchange Act.\3\ The Company thus concludes that
the Plans will be adequately disclosed to investors and appropriately
reflected in the market value of the Company's shares.
---------------------------------------------------------------------------
\3\ In addition, Applicant will comply with the amendments to
the disclosure requirements for executive and director compensation,
related party transactions, director independence and other
corporate governance matters, and security ownership of officers and
directors to the extent adopted and applicable to BDCs. See
Executive Compensation and Related Party Disclosure, Release No. 34-
53185 (Jan. 27, 2006).
---------------------------------------------------------------------------
6. The Company acknowledges that, while awards granted under the
Plans would have a dilutive effect on the shareholders' equity in the
Company, that effect would be outweighed by the anticipated benefits of
the Plans to the Company and its shareholders. The Company asserts that
it needs the flexibility to provide the requested equity-based employee
compensation in order to be able to compete effectively with other
financial services firms for talented professionals. These
professionals, the Company suggests, in turn are likely to increase the
Company's performance and shareholder value. The Company also asserts
that equity-based compensation would more closely align the interests
of the Company's employees with those of the Company's shareholders.
The Company believes that the granting of shares of Restricted Stock to
Non-Employee Directors under the Director Plan is fair and reasonable
because of
[[Page 74369]]
the skills and experience that such directors provide to the Company.
Such skills and experience are necessary for the management and
oversight of the Company's investments and operations. The Company
believes that granting the shares of Restricted Stock will provide
significant incentives for Non-Employee Directors to remain on the
Board and to devote their best efforts to the success of the Company's
business in the future. The issuance of shares of Restricted Stock will
also provide a means for the Company's Non-Employee Directors to
increase their ownership interest in the Company, thereby helping to
ensure a close identification of their interests with those of the
Company and its shareholders.
7. In addition, the Company states that the Company's shareholders
will be further protected by the conditions to the requested order that
assure continuing oversight of the operation of the Plans by the
Company's Board. The full Board and the Committee will review
periodically the potential impact that the issuance of Restricted Stock
could have on the Company's earnings and NAV per share, such review to
take place prior to any decisions to issue Restricted Stock under the
Plans, but in no event less frequently than annually. Adequate
procedures and records will be maintained to permit such review. The
Board will be authorized to take appropriate steps to ensure that the
grant of Restricted Stock under the Plans would not have an effect
contrary to the interests of the Company's shareholders. This authority
will include the authority to prevent or limit the grant of additional
Restricted Stock under the Plans.
Section 57(a)(4), Rule 17d-1
8. Section 57(a) proscribes certain transactions between a BDC and
persons related to the BDC in the manner described in section 57(b)
(``57(b) persons''), absent a Commission order. Section 57(a)(4)
generally prohibits a 57(b) person from effecting a transaction in
which the BDC is a joint participant absent such an order. Rule 17d-1,
made applicable to BDCs by section 57(i), proscribes participation in a
``joint enterprise or other joint arrangement or profit-sharing plan,''
which includes a stock option or purchase plan. Employees and directors
of a BDC are 57(b) persons. Thus, the issuance of shares of Restricted
Stock could be deemed to involve a joint transaction involving a BDC
and a 57(b) person in contravention of section 57(a)(4). Rule 17d-1(b)
provides that, in considering relief pursuant to the rule, the
Commission will consider (i) whether the participation of the BDC in a
joint enterprise is consistent with the Act's policies and purposes and
(ii) the extent to which that participation is on a basis different
from or less advantageous than that of other participants.
9. The Company requests an order pursuant to section 57(a)(4) and
rule 17d-1 to permit the Plans. The Company states that the Plans,
although benefiting the Participants and the Company in different ways,
are in the interests of the Company's shareholders because the Plans
will help the Company attract and retain talented professionals, help
align the interests of the Company's employees with those of its
shareholders, and in turn help produce a better return to the Company's
shareholders. Thus, the Company asserts that the Plans are consistent
with the policies and purposes of the Act and that the Company's
participation in the Plans will be on a basis no less advantageous than
that of other participants.
Applicants' Conditions
Applicants agree that the order granting the requested relief will
be subject to the following conditions:
A. Relief for the Company and Its Subsidiaries To Engage in Certain
Transactions and for the Company To Adhere to a Modified Asset Coverage
Requirement
1. The Company will at all times be the sole limited partner of any
Subsidiary and the sole owner of the Subsidiary's general partner, or
otherwise own and hold beneficially, all of the outstanding voting
securities or other equity interests in the Subsidiary.
2. No person shall serve or act as investment adviser to MSMF or
another Subsidiary unless the Company's Board and shareholders of the
Company shall have taken the action with respect thereto also required
to be taken by the functional equivalent of the board of directors of
MSMF or another Subsidiary and shareholders of MSMF or another
Subsidiary as if MSMF or another Subsidiary were a BDC.
3. The managers of a Subsidiary will be the Company, a Subsidiary
of the Company, or a person elected or appointed by the Company.
4. The Company will not issue or sell any senior security and the
Company will not cause or permit MSMF or any other SBIC Subsidiary to
issue or sell any senior security of which the Company, MSMF or any
other SBIC Subsidiary is the issuer except to the extent permitted by
section 18 (as modified for BDCs by section 61) of the Act; provided
that immediately after issuance or sale by any of the Company, MSMF or
any other SBIC Subsidiary of any such senior security, the Company
individually and on a consolidated basis, shall have the asset coverage
required by section 18(a) of the Act (as modified by section 61(a)),
except that, in determining whether the Company on a consolidated basis
has the asset coverage required by section 18(a) of the Act (as
modified by section 61(a)), any senior securities representing
indebtedness of MSMF or another SBIC Subsidiary shall not be considered
senior securities and, for purposes of the definition of ``asset
coverage'' in section 18(h), will be treated as indebtedness not
represented by senior securities.
B. Relief for the Company To Issue Restricted Stock
1. The Employee Plan will be authorized in accordance with section
61(a)(3)(A)(iv) of the Act, and each Plan will be approved by the
Company's shareholders.
2. Each issuance of Restricted Stock to employees, officers and
Non-Employee Directors will be approved by the Required Majority, as
defined in section 57(o) of the Act, of the Company's directors on the
basis that such issuance is in the best interests of the Company and
its shareholders.
3. The amount of voting securities that would result from the
exercise of all of the Company's outstanding warrants, options, and
rights, together with any Restricted Stock issued pursuant to the
Plans, at the time of issuance shall not exceed 25% of the outstanding
voting securities of the Company, except that if the amount of voting
securities that would result from the exercise of all of the Company's
outstanding warrants, options, and rights issued to the Company's
directors, officers, and employees, together with any Restricted Stock
issued pursuant to the Plans, would exceed 15% of the outstanding
voting securities of the Company, then the total amount of voting
securities that would result from the exercise of all outstanding
warrants, options, and rights, together with any Restricted Stock
issued pursuant to the Plans, at the time of issuance shall not exceed
20% of the outstanding voting securities of the Company.
4. The maximum amount of Restricted Stock that may be issued under
the Plans will be 10% of the outstanding shares of common stock of the
Company on the effective date of the Plans plus 10% of the number of
shares of the Company's common stock issued or delivered by the Company
(other than pursuant to compensation plans) during the term of the
Plans.
[[Page 74370]]
5. Both the full Board and the Committee will review periodically
the potential impact that the issuance of Restricted Stock under the
Plans could have on the Company's earnings and NAV per share, such
review to take place prior to any decisions to grant Restricted Stock
under the Plans, but in no event less frequently than annually.
Adequate procedures and records will be maintained to permit such
review. The Board will be authorized to take appropriate steps to
ensure that the grant of Restricted Stock under the Plans would not
have an effect contrary to the interests of the Company's shareholders.
This authority will include the authority to prevent or limit the
granting of additional Restricted Stock under the Plans. All records
maintained pursuant to this condition will be subject to examination by
the Commission and its staff.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-25357 Filed 12-28-07; 8:45 am]
BILLING CODE 8011-01-P
