American Capital, Ltd.; Notice of Application, 48929-48931 [2011-20103]
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Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Notices
will make a separate finding, reflected
in the applicable Board minutes, that
such change is in the best interests of
the Fund and its shareholders, and does
not involve a conflict of interest from
which the Adviser or the Affiliated
Subadviser derives an inappropriate
advantage.
7. The Adviser will provide general
management services to each Fund that
is subadvised, including overall
supervisory responsibility for the
general management and investment of
the Fund’s assets, and, subject to review
and approval of the Board, will: (i) Set
each Fund’s overall investment
strategies; (ii) evaluate, select and
recommend Subadvisers to manage all
or a part of a Fund’s assets; (iii) allocate
and, when appropriate, reallocate a
Fund’s assets among one or more
Subadvisers; (iv) monitor and evaluate
the performance of Subadvisers; and (v)
implement procedures reasonably
designed to ensure that the Subadvisers
comply with the relevant Fund’s
investment objective, policies, and
restrictions.
8. No trustee or officer of the Trust or
a Fund, or director, manager or officer
of the Adviser, will own, directly or
indirectly (other than through a pooled
investment vehicle that is not controlled
by such person), any interest in a
Subadviser, except for (a) ownership of
interests in the Adviser or any entity
that controls, is controlled by, or is
under common control with the
Adviser, or (b) ownership of less than
1% of the outstanding securities of any
class of equity or debt of any publicly
traded company that is either a
Subadviser or an entity that controls, is
controlled by or is under common
control with a Subadviser.
9. In the event the Commission adopts
a rule under the Act providing
substantially similar relief to that in the
order requested in the application, the
requested order will expire on the
effective date of that rule.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Elizabeth M. Murphy,
Secretary.
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[FR Doc. 2011–20102 Filed 8–8–11; 8:45 am]
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Applicant’s Representations
1. Applicant, a Delaware corporation,
is a business development company
[Investment Company Act Release No.
(‘‘BDC’’) within the meaning of section
29744; File No. 812–13853]
2(a)(48) of the Act.1 Applicant’s primary
American Capital, Ltd.; Notice of
business objectives are to increase its
Application
net operating income and net asset
value (‘‘NAV’’) by investing its assets in
August 3, 2011.
senior debt, subordinated debt, with and
AGENCY: Securities and Exchange
without detachable warrants, and equity
Commission (the ‘‘Commission’’).
of small to medium sized businesses
ACTION: Notice of an application for an
with attractive current yields and
order under section 61(a)(3)(B) of the
potential for equity appreciation.
Investment Company Act of 1940 (the
Applicant’s investment decisions are
‘‘Act’’).
made either by its board of directors (the
‘‘Board’’), based on recommendations of
Summary of Application: Applicant,
the executive officers of applicant, or,
American Capital, Ltd. requests an order
for investments that meet certain
approving a proposal to grant stock
objective criteria established by the
options to directors who are not also
Board, by the executive officers of
employees or officers of the applicant
applicant, under authority delegated by
(the ‘‘Non-employee Directors’’) under
the Board. Applicant does not have an
its 2010 Disinterested Director Stock
external investment adviser within the
Option Plan (the ‘‘Plan’’).
meaning of section 2(a)(20) of the Act.
DATES: Filing Dates: The application was
2. Applicant requests an order under
filed on December 21, 2010, and
section 61(a)(3)(B) of the Act approving
amended on July 22, 2011, and July 26,
its proposal to grant stock options under
2011.
the Plan to its Non-employee Directors.2
Hearing or Notification of Hearing: An Applicant has a nine member Board
order granting the application will be
with one current vacancy. Seven of the
issued unless the Commission orders a
eight current members of the Board are
hearing. Interested persons may request not ‘‘interested persons’’ (as defined in
a hearing by writing to the
section 2(a)(19) of the Act) of the
Commission’s Secretary and serving
applicant (‘‘Disinterested Directors’’).
applicant with a copy of the request,
All of the current Non-employee
personally or by mail. Hearing requests
Directors are Disinterested Directors.
should be received by the Commission
The Board approved the Plan at a
by 5:30 p.m. on August 29, 2011, and
meeting of the Board held on April 29,
should be accompanied by proof of
2010,3 and applicant’s stockholders
service on applicant, in the form of an
approved the Plan at the annual meeting
affidavit or, for lawyers, a certificate of
of stockholders held on September 15,
service. Hearing requests should state
2010.
the nature of the writer’s interest, the
3. Non-employee Directors are eligible
reason for the request, and the issues
to receive options under the Plan.4
contested. Persons who wish to be
Under the Plan, a maximum of
notified of a hearing may request
1,250,000 shares of applicant’s common
notification by writing to the
1 Section 2(a)(48) defines a BDC to be any closedCommission’s Secretary.
end investment company that operates for the
ADDRESSES: Secretary, U.S. Securities
purpose of making investments in securities
and Commission, 100 F Street, NE.,
described in sections 55(a)(1) through 55(a)(3) of the
Washington, DC 20549–1090;
Act and makes available significant managerial
assistance with respect to the issuers of such
Applicant, 2 Bethesda Metro Center,
securities.
14th Floor, Bethesda, Maryland 20814.
2 The Non-employee Directors receive a $100,000
FOR FURTHER INFORMATION CONTACT:
per year retainer payment and $3,000 for each
Deepak T. Pai, Senior Counsel, at (202)
Board or committee meeting or other designated
551–6876, or Dalia Osman Blass, Branch Board-related meeting attended, and reimbursement
for related expenses. Non-employee Directors who
Chief, at (202) 551–6821 (Division of
serve as the lead director of the Board receive an
Investment Management, Office of
additional $25,000 per year retainer and NonInvestment Company Regulation).
employee Directors who chair a committee of the
Board receive an additional $15,000 retainer per
SUPPLEMENTARY INFORMATION: The
year. Non-employee Directors who serve as
following is a summary of the
directors on the boards of portfolio companies also
application. The complete application
receive an annual retainer from applicant set at
$30,000 per board, in lieu of any payment from the
may be obtained via the Commission’s
portfolio company.
Web site by searching for the file
3 The Board approved amendments to the Plan on
number, or for an applicant using the
April 28, 2011, and July 21, 2011.
Company name box, at https://
4 The Plan would authorize the issuance of
www.sec.gov/search/search.htm, or by
options only to Non-Employee Directors and not to
employees or officers of applicant.
calling (202) 551–8090.
SECURITIES AND EXCHANGE
COMMISSION
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stock, in the aggregate, may be issued to
Non-employee Directors and options to
purchase 156,250 shares of applicant’s
common stock may be issued to any one
Non-employee Director. On the date that
the Commission issues an order on the
application (‘‘Order Date’’), each of the
seven Non-employee Directors serving
on the Board as of September 15, 2010,
will be granted options to purchase
156,250 shares of applicant’s common
stock (the ‘‘Initial Grants’’), provided
that the Non-employee Director is a
member of the Board on the Order Date.
The options issued under the Initial
Grants will vest in three equal parts on
each of the first three anniversaries of
September 15, 2010. Any person who
becomes a Non-employee Director after
September 15, 2010, will be entitled to
receive options to purchase 156,250
shares of applicant’s common stock (the
‘‘Other Grants’’), if and to the extent that
there are options available for grant to
Non-employee Directors under the Plan.
Each Other Grant will be effective on
the later of the date such person
becomes a Non-employee Director and
the Order Date. The options issued
under the Other Grants will vest in three
equal parts on each of the first three
anniversaries of the date such person
becomes a Non-employee Director.
4. Under the terms of the Plan, the
exercise price of an option will not be
less than 100% of the current market
value of the Shares on the date of
issuance of the option, or if no such
market value exists, the current NAV of
the Shares on the date of issuance of the
options. The Initial Grants will expire
on September 15, 2020, and the Other
Grants will expire on the tenth
anniversary of the date the person
becomes a Non-employee Director.
Options granted under the Plan may not
be assigned or transferred other than by
will or the laws of descent and
distribution. In the event of the death or
disability (as defined in the Plan) of a
Non-employee Director during such
director’s service, all such director’s
unexercised options will immediately
become exercisable and may be
exercised for a period of three years
following the date of death (by such
director’s personal representative) or
one year following the date of disability,
but in no event after the respective
expiration dates of such options. In the
event of the termination of a Nonemployee Director for cause, any
unexercised options will terminate
immediately. If a Non-employee
Director’s service is terminated for any
reason other than by death, disability, or
for cause, the options may be exercised
within one year immediately following
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the date of termination, but in no event
later than the expiration date of such
options.
5. Applicant’s officers and employees,
including directors who are employees,
are eligible or have been eligible to
receive options under stock option
plans that exclude Non-employee
Directors as participants (the ‘‘Employee
Plans’’). Non-employee Directors have
been eligible to receive options under
applicant’s two Disinterested Director
stock option plans (the ‘‘1997
Disinterested Director Plan’’ and the
‘‘2000 Disinterested Director Plan’’,
together the ‘‘Disinterested Director
Plans’’). Additionally, applicant’s
officers and employees, as well as Nonemployee Directors, are eligible or have
been eligible to receive options under
applicant’s 2006 stock option plan (the
‘‘2006 Option Plan’’), applicant’s 2007
stock option plan (the ‘‘2007 Option
Plan’’), applicant’s 2008 stock option
plan (the ‘‘2008 Option Plan’’), and
applicant’s 2009 stock option plan
(‘‘2009 Option Plan’’) (collectively, the
2009 Option Plan, the 2008 Option Plan,
the 2007 Option Plan, the 2006 Option
Plan, the Disinterested Director Plans
and the Employee Plans are the ‘‘Other
Plans’’). Non-employee Directors are
now eligible to receive options only
under the Plan.5 As of July 14, 2011,
applicant had 350,309,123 shares of
common stock outstanding.6 The
1,250,000 shares of applicant’s common
stock that may be issued to Nonemployee Directors under the Plan
represent 0.3% of applicant’s
outstanding voting securities as of July
14, 2011. As of July 14, 2011, the
amount of voting securities that would
result from the exercise of all
outstanding options issued to
applicant’s directors, officers, and
employees under the Other Plans and
the Plan would be 50,200,843 shares of
applicant’s common stock, or 14.3% of
applicant’s outstanding voting
securities. As of July 14, 2011, applicant
had no outstanding warrants, options, or
rights to purchase its voting securities
other than the outstanding options
issued to applicant’s directors, officers,
5 The 1997 Disinterested Director Plan has
expired, and, therefore, no additional options may
be issued under it. The 2000 Disinterested Director
Plan, the 2006 Option Plan, the 2007 Option Plan
and the 2008 Option Plan have been amended so
that no further options will be awarded to Nonemployee Directors under any of them. The Board
has voted to terminate the granting of any further
options to Non-employee Directors under the 2009
Option Plan upon receipt of an order granting the
requested relief.
6 Applicant’s common stock constitutes the only
voting security of applicant currently outstanding.
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and employees under the Other Plans
and the Plan.
Applicant’s Legal Analysis
1. Section 63(3) of the Act permits a
BDC to sell its common stock at a price
below current NAV upon the exercise of
any option issued in accordance with
section 61(a)(3). Section 61(a)(3)(B)
provides, in pertinent part, that a BDC
may issue to its non-employee directors
options to purchase its voting securities
pursuant to an executive compensation
plan, provided that: (a) The options
expire by their terms within ten years;
(b) the exercise price of the options is
not less than the current market value
of the underlying voting securities at the
date of the issuance of the options, or if
no market value exists, the current NAV
of the underlying voting securities; (c)
the proposal to issue the options is
authorized by the BDC’s shareholders,
and is approved by order of the
Commission upon application; (d) the
options are not transferable except for
disposition by gift, will or intestacy; (e)
no investment adviser of the BDC
receives any compensation described in
section 205(a)(1) of the Investment
Advisers Act of 1940, except to the
extent permitted by clause (b)(1) or
(b)(2) of that section; and (f) the BDC
does not have a profit-sharing plan as
described in section 57(n) of the Act.
2. In addition, section 61(a)(3)
provides that the amount of the BDC’s
voting securities that would result from
the exercise of all outstanding warrants,
options, and rights at the time of
issuance may not exceed 25% of the
BDC’s outstanding voting securities,
except that if the amount of voting
securities that would result from the
exercise of all outstanding warrants,
options, and rights issued to the BDC’s
directors, officers, and employees
pursuant to any executive compensation
plan would exceed 15% of the BDC’s
outstanding voting securities, then the
total amount of voting securities that
would result from the exercise of all
outstanding warrants, options, and
rights at the time of issuance will not
exceed 20% of the outstanding voting
securities of the BDC.
3. Applicant represents that its
proposal to grant stock options to Nonemployee Directors under the Plan
meets all the requirements of section
61(a)(3)(B). Applicant states that the
Board is actively involved in the
oversight of applicant’s affairs and that
it relies extensively on the judgment
and experience of its directors. In
addition to their duties as Board
members generally, applicant states that
the Non-employee Directors provide
guidance and advice on operational
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issues, underwriting policies, credit
policies, asset valuation and strategic
direction, as well as serving on
committees. Applicant believes that the
availability of options under the Plan
will provide significant at-risk
incentives to Non-employee Directors to
remain on the Board and devote their
best efforts to ensure applicant’s
success. Applicant states that the
options will provide a means for the
Non-employee Directors to increase
their ownership interests in applicant,
thereby ensuring close identification of
their interests with those of applicant
and its stockholders. Applicant asserts
that by providing incentives such as
options, applicant will be better able to
maintain continuity in the Board’s
membership and to attract and retain
the highly experienced, successful and
dedicated business and professional
people who are critical to applicant’s
success as a BDC.
4. As noted above, applicant states
that the amount of voting securities that
would result from the exercise of all
outstanding options issued to
applicant’s directors, officers, and
employees under the Other Plans and
the Plan would be 50,200,843 shares of
applicant’s common stock, or 14.3% of
applicant’s outstanding voting
securities, as of July 14, 2011. However,
applicant represents that the maximum
number of voting securities that would
result from the exercise of all
outstanding options issued and all
options issuable to applicant’s directors,
officers, and employees under the Plan
and the Other Plans would be
68,698,074 shares of applicant’s
common stock, or 19.6% of applicant’s
outstanding voting securities, as of July
14, 2011. Applicant states that to the
extent the number of shares of common
stock that would be issued upon the
exercise of options issued under the
Other Plans and the Plan exceeds 15%
of applicant’s outstanding voting
securities, applicant will comply with
the 20% limit in section 61(a)(3) of the
Act.
5. Applicant asserts that, given the
relatively small amount of common
stock issuable to Non-employee
Directors upon their exercise of options
under the Plan, the exercise of such
options would not, absent extraordinary
circumstances, have a substantial
dilutive effect on the NAV of applicant’s
common stock.
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011–20103 Filed 8–8–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–65019; File No. SR–CBOE–
2011–073]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend its Fees
Schedule and Circular Regarding
Trading Permit Holder Application and
Other Related Fees
August 3, 2011.
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 August 1,
2011, the Chicago Board Options
Exchange, Incorporated (‘‘CBOE’’ or the
‘‘Exchange’’) 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 CBOE. 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
Chicago Board Options Exchange,
Incorporated (‘‘CBOE’’ or ‘‘Exchange’’)
proposes to amend its Fees Schedule
and circular regarding Trading Permit
Holder application and other related
fees (‘‘Trading Permit Fee Circular’’) to
amend the fee assessed to Floor Broker
Trading Permit Holders that conduct a
certain level of activity in CBOE
Volatility Index (‘‘VIX’’) options. The
text of the proposed rule change is
available on the Exchange’s Web site
(https://www.cboe.org/legal), at the
Exchange’s Office of the Secretary and
at 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,
CBOE included statements concerning
the purpose of and basis for the
1 15
2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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48931
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. CBOE 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
Statutory Basis for, the Proposed Rule
Change
1. Purpose
CBOE Rule 2.20 grants the Exchange
the authority to, from time to time, fix
the fees and charges payable by Trading
Permit Holders. CBOE is proposing to
amend its Fees Schedule and Trading
Permit Fee Circular effective August 1,
2011 to amend the fee assessed to Floor
Broker Trading Permit Holders that
conduct a certain level of activity in VIX
(‘‘VIX Floor Broker Fee’’) to assess one
$1,000 fee monthly to each Trading
Permit Holder and TPH organization
that maintains one or more Floor Broker
Trading Permits that collectively meet
the criteria for the assessment of the VIX
Floor Broker Fee rather than assessing
the Fee to each Floor Broker Trading
Permit Holder. CBOE is also proposing
to eliminate one of the requirements
used to calculate the minimum level of
activity in VIX that subjects a Floor
Broker Trading Permit Holder to this
fee.
CBOE assesses a tier appointment fee
to CBOE Market-Maker Trading Permit
Holders for certain proprietary classes
in recognition of the cost to develop
those products and of the profit
potential in those classes.3 Additionally,
TPH organizations frequently staff more
than one Market-Maker in the VIX
trading crowd, as in doing so, each
Market-Maker present in the trading
crowd may participate on a trade.
In January 2011, CBOE amended its
Fees Schedule to establish a fee (the VIX
Floor Broker Fee) to be assessed to any
Floor Broker Trading Permit Holder (a)
that executes more than 20,000 VIX
contracts during the month and (b)
whose aggregate VIX executed contracts
during the month comprise more than
3 CBOE Rule 8.3(e) provides that the Exchange
may establish one or more types of tier
appointments. In accordance with CBOE Rule
8.3(e), a tier appointment is an appointment to trade
one or more options classes that must be held by
a Market-Maker to be eligible to act as a MarketMaker in the options class or options classes subject
to that appointment. CBOE currently assesses a
$1,000 monthly VIX Tier Appointment fee. The VIX
Tier Appointment fee is assessed to any MarketMaker Trading Permit Holder that either (a) has a
VIX Tier Appointment at any time during a
calendar month; or (b) conducts any transactions in
VIX at any time during a calendar month.
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]]>Agencies
[Federal Register Volume 76, Number 153 (Tuesday, August 9, 2011)]
[Notices]
[Pages 48929-48931]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-20103]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 29744; File No. 812-13853]
American Capital, Ltd.; Notice of Application
August 3, 2011.
AGENCY: Securities and Exchange Commission (the ``Commission'').
ACTION: Notice of an application for an order under section 61(a)(3)(B)
of the Investment Company Act of 1940 (the ``Act'').
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Summary of Application: Applicant, American Capital, Ltd. requests
an order approving a proposal to grant stock options to directors who
are not also employees or officers of the applicant (the ``Non-employee
Directors'') under its 2010 Disinterested Director Stock Option Plan
(the ``Plan'').
DATES: Filing Dates: The application was filed on December 21, 2010,
and amended on July 22, 2011, and July 26, 2011.
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 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 August 29, 2011, 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.
ADDRESSES: Secretary, U.S. Securities and Commission, 100 F Street,
NE., Washington, DC 20549-1090; Applicant, 2 Bethesda Metro Center,
14th Floor, Bethesda, Maryland 20814.
FOR FURTHER INFORMATION CONTACT: Deepak T. Pai, Senior Counsel, at
(202) 551-6876, or Dalia Osman Blass, Branch Chief, 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 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.
Applicant's Representations
1. Applicant, a Delaware corporation, is a business development
company (``BDC'') within the meaning of section 2(a)(48) of the Act.\1\
Applicant's primary business objectives are to increase its net
operating income and net asset value (``NAV'') by investing its assets
in senior debt, subordinated debt, with and without detachable
warrants, and equity of small to medium sized businesses with
attractive current yields and potential for equity appreciation.
Applicant's investment decisions are made either by its board of
directors (the ``Board''), based on recommendations of the executive
officers of applicant, or, for investments that meet certain objective
criteria established by the Board, by the executive officers of
applicant, under authority delegated by the Board. Applicant does not
have an external investment adviser within the meaning of section
2(a)(20) of the Act.
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\1\ Section 2(a)(48) defines a BDC to be any closed-end
investment company that operates for the purpose of making
investments in securities described in sections 55(a)(1) through
55(a)(3) of the Act and makes available significant managerial
assistance with respect to the issuers of such securities.
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2. Applicant requests an order under section 61(a)(3)(B) of the Act
approving its proposal to grant stock options under the Plan to its
Non-employee Directors.\2\ Applicant has a nine member Board with one
current vacancy. Seven of the eight current members of the Board are
not ``interested persons'' (as defined in section 2(a)(19) of the Act)
of the applicant (``Disinterested Directors''). All of the current Non-
employee Directors are Disinterested Directors. The Board approved the
Plan at a meeting of the Board held on April 29, 2010,\3\ and
applicant's stockholders approved the Plan at the annual meeting of
stockholders held on September 15, 2010.
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\2\ The Non-employee Directors receive a $100,000 per year
retainer payment and $3,000 for each Board or committee meeting or
other designated Board-related meeting attended, and reimbursement
for related expenses. Non-employee Directors who serve as the lead
director of the Board receive an additional $25,000 per year
retainer and Non-employee Directors who chair a committee of the
Board receive an additional $15,000 retainer per year. Non-employee
Directors who serve as directors on the boards of portfolio
companies also receive an annual retainer from applicant set at
$30,000 per board, in lieu of any payment from the portfolio
company.
\3\ The Board approved amendments to the Plan on April 28, 2011,
and July 21, 2011.
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3. Non-employee Directors are eligible to receive options under the
Plan.\4\ Under the Plan, a maximum of 1,250,000 shares of applicant's
common
[[Page 48930]]
stock, in the aggregate, may be issued to Non-employee Directors and
options to purchase 156,250 shares of applicant's common stock may be
issued to any one Non-employee Director. On the date that the
Commission issues an order on the application (``Order Date''), each of
the seven Non-employee Directors serving on the Board as of September
15, 2010, will be granted options to purchase 156,250 shares of
applicant's common stock (the ``Initial Grants''), provided that the
Non-employee Director is a member of the Board on the Order Date. The
options issued under the Initial Grants will vest in three equal parts
on each of the first three anniversaries of September 15, 2010. Any
person who becomes a Non-employee Director after September 15, 2010,
will be entitled to receive options to purchase 156,250 shares of
applicant's common stock (the ``Other Grants''), if and to the extent
that there are options available for grant to Non-employee Directors
under the Plan. Each Other Grant will be effective on the later of the
date such person becomes a Non-employee Director and the Order Date.
The options issued under the Other Grants will vest in three equal
parts on each of the first three anniversaries of the date such person
becomes a Non-employee Director.
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\4\ The Plan would authorize the issuance of options only to
Non-Employee Directors and not to employees or officers of
applicant.
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4. Under the terms of the Plan, the exercise price of an option
will not be less than 100% of the current market value of the Shares on
the date of issuance of the option, or if no such market value exists,
the current NAV of the Shares on the date of issuance of the options.
The Initial Grants will expire on September 15, 2020, and the Other
Grants will expire on the tenth anniversary of the date the person
becomes a Non-employee Director. Options granted under the Plan may not
be assigned or transferred other than by will or the laws of descent
and distribution. In the event of the death or disability (as defined
in the Plan) of a Non-employee Director during such director's service,
all such director's unexercised options will immediately become
exercisable and may be exercised for a period of three years following
the date of death (by such director's personal representative) or one
year following the date of disability, but in no event after the
respective expiration dates of such options. In the event of the
termination of a Non-employee Director for cause, any unexercised
options will terminate immediately. If a Non-employee Director's
service is terminated for any reason other than by death, disability,
or for cause, the options may be exercised within one year immediately
following the date of termination, but in no event later than the
expiration date of such options.
5. Applicant's officers and employees, including directors who are
employees, are eligible or have been eligible to receive options under
stock option plans that exclude Non-employee Directors as participants
(the ``Employee Plans''). Non-employee Directors have been eligible to
receive options under applicant's two Disinterested Director stock
option plans (the ``1997 Disinterested Director Plan'' and the ``2000
Disinterested Director Plan'', together the ``Disinterested Director
Plans''). Additionally, applicant's officers and employees, as well as
Non-employee Directors, are eligible or have been eligible to receive
options under applicant's 2006 stock option plan (the ``2006 Option
Plan''), applicant's 2007 stock option plan (the ``2007 Option Plan''),
applicant's 2008 stock option plan (the ``2008 Option Plan''), and
applicant's 2009 stock option plan (``2009 Option Plan'')
(collectively, the 2009 Option Plan, the 2008 Option Plan, the 2007
Option Plan, the 2006 Option Plan, the Disinterested Director Plans and
the Employee Plans are the ``Other Plans''). Non-employee Directors are
now eligible to receive options only under the Plan.\5\ As of July 14,
2011, applicant had 350,309,123 shares of common stock outstanding.\6\
The 1,250,000 shares of applicant's common stock that may be issued to
Non-employee Directors under the Plan represent 0.3% of applicant's
outstanding voting securities as of July 14, 2011. As of July 14, 2011,
the amount of voting securities that would result from the exercise of
all outstanding options issued to applicant's directors, officers, and
employees under the Other Plans and the Plan would be 50,200,843 shares
of applicant's common stock, or 14.3% of applicant's outstanding voting
securities. As of July 14, 2011, applicant had no outstanding warrants,
options, or rights to purchase its voting securities other than the
outstanding options issued to applicant's directors, officers, and
employees under the Other Plans and the Plan.
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\5\ The 1997 Disinterested Director Plan has expired, and,
therefore, no additional options may be issued under it. The 2000
Disinterested Director Plan, the 2006 Option Plan, the 2007 Option
Plan and the 2008 Option Plan have been amended so that no further
options will be awarded to Non-employee Directors under any of them.
The Board has voted to terminate the granting of any further options
to Non-employee Directors under the 2009 Option Plan upon receipt of
an order granting the requested relief.
\6\ Applicant's common stock constitutes the only voting
security of applicant currently outstanding.
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Applicant's Legal Analysis
1. Section 63(3) of the Act permits a BDC to sell its common stock
at a price below current NAV upon the exercise of any option issued in
accordance with section 61(a)(3). Section 61(a)(3)(B) provides, in
pertinent part, that a BDC may issue to its non-employee directors
options to purchase its voting securities pursuant to an executive
compensation plan, provided that: (a) The options expire by their terms
within ten years; (b) the exercise price of the options is not less
than the current market value of the underlying voting securities at
the date of the issuance of the options, or if no market value exists,
the current NAV of the underlying voting securities; (c) the proposal
to issue the options is authorized by the BDC's shareholders, and is
approved by order of the Commission upon application; (d) the options
are not transferable except for disposition by gift, will or intestacy;
(e) no investment adviser of the BDC receives any compensation
described in section 205(a)(1) of the Investment Advisers Act of 1940,
except to the extent permitted by clause (b)(1) or (b)(2) of that
section; and (f) the BDC does not have a profit-sharing plan as
described in section 57(n) of the Act.
2. In addition, section 61(a)(3) provides that the amount of the
BDC's voting securities that would result from the exercise of all
outstanding warrants, options, and rights at the time of issuance may
not exceed 25% of the BDC's outstanding voting securities, except that
if the amount of voting securities that would result from the exercise
of all outstanding warrants, options, and rights issued to the BDC's
directors, officers, and employees pursuant to any executive
compensation plan would exceed 15% of the BDC's outstanding voting
securities, then the total amount of voting securities that would
result from the exercise of all outstanding warrants, options, and
rights at the time of issuance will not exceed 20% of the outstanding
voting securities of the BDC.
3. Applicant represents that its proposal to grant stock options to
Non-employee Directors under the Plan meets all the requirements of
section 61(a)(3)(B). Applicant states that the Board is actively
involved in the oversight of applicant's affairs and that it relies
extensively on the judgment and experience of its directors. In
addition to their duties as Board members generally, applicant states
that the Non-employee Directors provide guidance and advice on
operational
[[Page 48931]]
issues, underwriting policies, credit policies, asset valuation and
strategic direction, as well as serving on committees. Applicant
believes that the availability of options under the Plan will provide
significant at-risk incentives to Non-employee Directors to remain on
the Board and devote their best efforts to ensure applicant's success.
Applicant states that the options will provide a means for the Non-
employee Directors to increase their ownership interests in applicant,
thereby ensuring close identification of their interests with those of
applicant and its stockholders. Applicant asserts that by providing
incentives such as options, applicant will be better able to maintain
continuity in the Board's membership and to attract and retain the
highly experienced, successful and dedicated business and professional
people who are critical to applicant's success as a BDC.
4. As noted above, applicant states that the amount of voting
securities that would result from the exercise of all outstanding
options issued to applicant's directors, officers, and employees under
the Other Plans and the Plan would be 50,200,843 shares of applicant's
common stock, or 14.3% of applicant's outstanding voting securities, as
of July 14, 2011. However, applicant represents that the maximum number
of voting securities that would result from the exercise of all
outstanding options issued and all options issuable to applicant's
directors, officers, and employees under the Plan and the Other Plans
would be 68,698,074 shares of applicant's common stock, or 19.6% of
applicant's outstanding voting securities, as of July 14, 2011.
Applicant states that to the extent the number of shares of common
stock that would be issued upon the exercise of options issued under
the Other Plans and the Plan exceeds 15% of applicant's outstanding
voting securities, applicant will comply with the 20% limit in section
61(a)(3) of the Act.
5. Applicant asserts that, given the relatively small amount of
common stock issuable to Non-employee Directors upon their exercise of
options under the Plan, the exercise of such options would not, absent
extraordinary circumstances, have a substantial dilutive effect on the
NAV of applicant's common stock.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-20103 Filed 8-8-11; 8:45 am]
BILLING CODE 8011-01-P
