The Adams Express Company and Petroleum & Resources Corporation; Notice of Application, 8110-8115 [2015-03026]
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Federal Register / Vol. 80, No. 30 / Friday, February 13, 2015 / Notices
persons may present data, information,
or views, orally or in writing, on issues
pending before the committee. Oral
presentations from the public will be
scheduled between approximately 11:15
a.m. to 11:30 a.m. and 4:00 p.m. and
4:15 p.m. on March 9, 2015 and between
11:15 a.m. and 11:30 a.m. on March 10,
2015. Time allotted for each
presentation may be limited. Those
desiring to make formal oral
presentations should notify the contact
person and submit a brief statement of
the general nature of the evidence or
arguments they wish to present, the
names and addresses of proposed
participants, and an indication of the
approximate time requested to make
their presentation on or before March 2,
2015.
General Information: NIC welcomes
the attendance of the public at its
advisory committee meetings and will
make every effort to accommodate
persons with physical disabilities or
special needs. If you require special
accommodations due to a disability,
please contact Shaina Vanek at least 7
days in advance of the meeting. Notice
of this meeting is given under the
Federal Advisory Committee Act (5
U.S.C. app. 2).
Robert M. Brown, Jr.,
Acting Director, National Institute of
Corrections.
[FR Doc. 2015–02428 Filed 2–12–15; 8:45 am]
BILLING CODE 4410–36–M
LEGAL SERVICES CORPORATION
Sunshine Act Meeting Notice
The Legal Services
Corporation’s Board of Directors and
Finance Committee will meet
telephonically on February 19, 2015.
The Finance Committee meeting will
commence at 4:00 p.m., EDT, and upon
its adjournment, will immediately be
followed by the Board of Directors
meeting.
LOCATION: John N. Erlenborn Conference
Room, Legal Services Corporation
Headquarters, 3333 K Street NW.,
Washington, DC 20007.
PUBLIC OBSERVATION: Members of the
public who are unable to attend in
person but wish to listen to the public
proceedings may do so by following the
telephone call-in directions provided
below.
CALL-IN DIRECTIONS FOR OPEN SESSIONS:
• Call toll-free number: 1–866–451–
4981;
• When prompted, enter the
following numeric pass code:
5907707348.
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DATE AND TIME:
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• When connected to the call, please
immediately ‘‘MUTE’’ your telephone.
Members of the public are asked to
keep their telephones muted to
eliminate background noises. To avoid
disrupting the meeting, please refrain
from placing the call on hold if doing so
will trigger recorded music or other
sound. From time to time, the Chair may
solicit comments from the public.
STATUS OF MEETING: Open.
MATTERS TO BE CONSIDERED:
SECURITIES AND EXCHANGE
COMMISSION
[Release No. IC–31452; 812–14300]
The Adams Express Company and
Petroleum & Resources Corporation;
Notice of Application
February 9, 2015.
Finance Committee
1. Approval of agenda
2. Consider and act on management’s
proposed reorganization plan
D Jim Sandman, President
D Lynn Jennings, Vice President for
Grants Management
3. Public comment
4. Consider and act on other business
5. Consider and act on adjournment of
meeting
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of an application under
sections 6(c), 17(d) and 23(c) of the
Investment Company Act of 1940 (the
‘‘Act’’) and rule 17d–1 under the Act to
permit certain joint transactions
otherwise prohibited under section
17(d) of the Act.
SUMMARY OF APPLICATION:
Board of Directors
1. Approval of agenda
2. Consider and act on the report of the
Finance Committee regarding
management’s proposed
reorganization plan
3. Public comment
4. Consider and act on other business
5. Consider and act on adjournment of
meeting
CONTACT PERSON FOR INFORMATION:
Katherine Ward, Executive Assistant to
the Vice President & General Counsel, at
(202) 295–1500. Questions may be sent
by electronic mail to FR_NOTICE_
QUESTIONS@lsc.gov.
ACCESSIBILITY: LSC complies with the
Americans with Disabilities Act and
Section 504 of the 1973 Rehabilitation
Act. Upon request, meeting notices and
materials will be made available in
alternative formats to accommodate
individuals with disabilities.
Individuals needing other
accommodations due to disability in
order to attend the meeting in person or
telephonically should contact Katherine
Ward, at (202) 295–1500 or FR_
NOTICE_QUESTIONS@lsc.gov, at least
2 business days in advance of the
meeting. If a request is made without
advance notice, LSC will make every
effort to accommodate the request but
cannot guarantee that all requests can be
fulfilled.
Dated: February 11, 2015.
Katherine Ward,
Executive Assistant to the Vice President for
Legal Affairs and General Counsel.
[FR Doc. 2015–03112 Filed 2–11–15; 11:15 am]
BILLING CODE 7050–01–P
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AGENCY:
Applicants
request an order to permit them, subject
to shareholder approval, to adopt new
equity-based incentive compensation
plans to replace equity-based incentive
compensation plans adopted in 2005.
APPLICANTS: The Adams Express
Company (‘‘Adams’’) and Petroleum &
Resources Corporation (‘‘Petroleum’’).
FILING DATES: The application was filed
on April 22, 2014, and amended on
September 12, 2014 and January 20,
2015.
HEARING OR NOTIFICATION OF HEARING: An
order granting the requested relief will
be issued unless the Commission orders
a hearing. Interested persons may
request a hearing by writing to the
Commission’s Secretary and serving
applicants with a copy of the request,
personally or by mail. Hearing requests
should be received by the Commission
by 5:30 p.m. on March 6, 2015, and
should be accompanied by proof of
service on applicants, in the form of an
affidavit or, for lawyers, a certificate of
service. Pursuant to rule 0–5 under the
Act, hearing requests should state the
nature of the writer’s interest, any facts
bearing upon the desirability of a
hearing on the matter, 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, Commission, 100
F Street NE., Washington, DC 20549.
Applicants, c/o Lawrence L. Hooper, Jr.,
Vice President, General Counsel and
Secretary, The Adams Express
Company, 7 Saint Paul Street,
Baltimore, MD 21202.
FOR FURTHER INFORMATION CONTACT:
Courtney S. Thornton, Senior Counsel,
at (202) 551–6812, or David P. Bartels,
Branch Chief, at (202) 551–6821
(Division of Investment Management,
Chief Counsel’s Office).
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Federal Register / Vol. 80, No. 30 / Friday, February 13, 2015 / Notices
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.
SUPPLEMENTARY INFORMATION:
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Applicants’ Representations
1. Adams and Petroleum, both of
which are Maryland corporations, are
registered under the Act as closed-end
management investment companies.
Adams’ principal business is the
ownership and management of its
investment portfolio, which consists
predominantly of equity securities.
Petroleum’s principal business also is
the ownership and management of its
investment portfolio, which consists
predominantly of equity securities and
emphasizes investments in energy and
natural resources companies. Each
company is internally managed. Each
company’s stock is listed on the New
York Stock Exchange. Adams presently
owns approximately 8% of the
outstanding voting shares of Petroleum.1
2. Adams has eight directors, seven of
whom are neither Employees (as
defined below) nor ‘‘interested persons’’
of the company as defined in section
2(a)(19) of the Act (‘‘Non-Interested
Directors’’), and twenty Employees.
Petroleum has eight directors, seven of
whom are Non-Interested Directors, and
eighteen Employees. The boards of
directors (‘‘Boards’’) of Adams and
Petroleum are comprised of the same
individuals. Sixteen Employees serve
both Adams and Petroleum.
3. In 2005, the Commission issued an
order granting applicants exemptions
from sections 17(d), 18(d), and 23(a), (b),
and (c)(3) of the Act (the ‘‘2005
Order’’).2 At their respective annual
1 Applicants state that Adams first acquired an
ownership interest in Petroleum in 1929 and
subsequently increased its ownership interest by
means of stock dividends and participations in
rights offerings. Section 12(d) of the Act restricts the
purchase or other acquisition by investment
companies of securities issued by other investment
companies under specified circumstances.
However, section 12(d) excepts securities received
as dividends from the restriction on acquisitions
and purchases. Applicants represent that, as noted
above, Adams’ initial acquisition and ownership of
shares of Petroleum pre-dated the Act. Applicants
further state that, since the Act became effective,
Adams has not purchased or otherwise acquired
shares of Petroleum other than through stock
dividends, with the exception of acquisitions made
in 1956 and 1969 in connection with certain rights
offerings by Petroleum, each of which was made
pursuant to exemptive orders issued by the
Commission. See The Adams Express Company,
Investment Company Act Release Nos. 2363 (May
28, 1956) (order) and 5744 (July 16, 1969) (order).
2 The Adams Express Company et al., Investment
Company Act Release Nos. 26759 (Feb. 10, 2005)
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meetings held in April 2005, the
applicants’ shareholders approved the
Adams 2005 Equity Incentive
Compensation Plan (the ‘‘2005 Adams
Plan’’) and the Petroleum Equity
Incentive Compensation Plan (the ‘‘2005
Petroleum Plan,’’ and together with the
2005 Adams Plan, the ‘‘2005 Incentive
Plans’’). The 2005 Incentive Plans were
adopted in reliance on the 2005 Order.
The 2005 Incentive Plans will expire by
their terms on April 27, 2015.
5. Applicants state that, because the
investment management business is
highly competitive, they believe their
successful operation depends on their
continued ability to attract, motivate
and retain their Employees with
competitive compensation packages
similar to those offered by their
competitors. Applicants are requesting
relief to permit, subject to shareholder
approval, the adoption of The Adams
Express Company 2015 Incentive
Compensation Plan and Petroleum &
Resources Corporation 2015 Incentive
Compensation Plan (the ‘‘Plans’’). Each
Plan, if approved by shareholders,
would be administered by a
compensation committee (the
‘‘Committee’’) composed of three or
more directors who (a) are NonInterested Directors of the relevant
applicant, (b) are ‘‘non-employee
directors’’ within the meaning of rule
16b–3 under the Securities Exchange
Act of 1934 (the ‘‘Exchange Act’’), and
(c) are ‘‘outside directors’’ as defined
under section 162(m) of the Internal
Revenue Code of 1986 (the ‘‘Code’’).
Applicants represent that each
Committee is currently composed of
four directors, each of whom satisfies
these criteria.
6. The Plans, if approved by
shareholders, would permit the
applicants to issue stock options
(‘‘Options’’),3 stock appreciation rights
(notice) and 26780 (Mar. 8, 2005) (order).
Applicants represent that the 2005 Incentive Plans
replaced stock option plans adopted by Adams and
Petroleum in reliance upon the 1985 order obtained
by the Association of Publicly Traded Investment
Funds (‘‘APTIF’’) of which Adams and Petroleum
were both members. Applicants note that the APTIF
order exempted APTIF’s internally-managed,
closed-end investment company members from the
provisions of sections 17(d), 18(d), and 23(a)(b), and
(c) of the Act and permitted them to offer their key
employees deferred equity compensation in the
form of stock options or stock appreciation rights.
Association of Publicly Traded Investment Funds,
Investment company Act Release Nos. 14541 (May
28, 1985) (notice) and 14594 (June 21, 1985) (order).
3 The exercise price of Options must be at least
100% of the fair market value (‘‘Fair Market Value’’)
of a share of an applicant’s stock on the date of the
grant. For purposes of the Plans, Fair Market Value
would equal the mean of the high and low sale
prices per share of the stock of the applicant as
reported on the New York Stock ExchangeComposite Transactions (or such other national
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(including freestanding and tandem
stock appreciation rights) (‘‘Stock
Appreciation Rights’’),4 restricted shares
of stock (‘‘Restricted Stock’’),5 restricted
stock units (‘‘Restricted Stock Units’’),6
deferred stock units (‘‘Deferred Stock
Units’’),7 shares of common stock
granted as a bonus (‘‘Bonus Stock’’),8
and awards denominated in cash (‘‘Cash
Awards’’) 9 (collectively, ‘‘Awards’’) to
Eligible Persons (defined below), subject
to the terms and conditions discussed
below.10 In addition, the Plans would
permit dividend equivalents to be
awarded in connection with any
Awards under the Plans while the
Awards are outstanding or otherwise
subject to a restriction period on a like
number of shares of applicants’ common
stock. Furthermore, certain Awards may
be subject to performance conditions as
may be specified by the respective
Committee.11
7. Existing awards made under the
2005 Incentive Plans would remain
outstanding and would remain subject
to the terms and conditions of the 2005
Incentive Plans. However, no further
securities exchange or automated inter-dealer
quotation system on which the stock has been duly
listed and approved for quotation and trading) on
the date on which the value is to be determined,
or if no sale of the stock is reported for such date,
the next preceding day for which there is a reported
sale. Options issued under the Plans will expire no
later than 10 years from the date of grant.
4 A Stock Appreciation Right is a right to receive,
upon exercise, the excess of (i) the Fair Market
Value of one share of an applicant’s stock on the
date of exercise over (ii) the stock appreciation
right’s grant price. Stock Appreciation Rights issued
under the Plans will expire no later than ten years
from the date of grant.
5 Restricted Stock is stock that is subject to
restrictions on transferability, risk of forfeiture, or
other restrictions.
6 Restricted Stock Units are rights to receive stock
and are subject to certain restrictions and a risk of
forfeiture.
7 A Deferred Stock Unit is a right to receive stock,
cash or a combination thereof at the end of a
specified deferral period.
8 Except as otherwise determined by the
applicable Committee, Bonus Stock would vest
immediately and would not be subject to any
restrictions.
9 To the extent that a Cash Award is settled in
cash, the applicants are not requesting any relief.
10 The principal difference between the Plans and
the 2005 Incentive Plans is that the Plans would
permit Awards in the form of Bonus Stock and Cash
Awards in addition to the Award types provided in
the 2005 Incentive Plans. However, Awards that
could be issued under the Plans would be subject
to the same limitations, including the limit of 4%
of the outstanding shares of each applicant, as the
2005 Incentive Plans. Applicants note that this is
less than the 4.4% limit that was approved in a
similar order obtained by Central Securities in
2012. Central Securities Corporation, Investment
Company Act Release Nos. 29915 (Jan. 6, 2012)
(notice) and 29940 (Feb. 1, 2012) (order) (the ‘‘2012
Order’’).
11 Such Awards would be payable in cash or stock
of the relevant applicant, conditioned on
satisfaction of performance criteria established by
the relevant Committee.
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grants would be made under the 2005
Incentive Plans following the earlier of
April 27, 2015, and approval of the
Plans by each applicant’s stockholders
at its respective annual meeting, which
applicants expect to hold in April 2015
or as soon thereafter as practicable.
8. Each Plan, in its proposed form, has
been approved by the relevant
applicant’s Board, including a majority
of the Non-Interested Directors of each
applicant. Subject to receipt of the
order, applicants expect that their
respective Boards will approve the
submission of the respective Plan to
stockholders for approval at each
applicant’s annual meeting. Each Plan
would become effective if approved by
stockholders. In addition, each
applicant would submit its Plan to
stockholders for approval once every
five years.12
9. Grants under each Plan may be
made only to ‘‘Eligible Persons,’’ which
is defined, with respect to an applicant,
to mean any person, including officers,
in the regular employment of the
applicant and/or its subsidiaries on a
full-time basis, or of both Adams (and/
or any subsidiary thereof) and
Petroleum (and/or any subsidiary
thereof) on a combined full-time basis
(‘‘Employees’’) and the respective
directors of the applicant who at the
time an Award is to be granted are not
Employees (‘‘Non-Employee
Directors’’).13
10. Immediately following each
annual meeting of stockholders, each
Non-Employee Director who is elected a
director at, or who was previously
elected and continues as a director after,
that annual meeting would receive 750
Restricted Stock Units of Adams and
400 Restricted Stock Units of Petroleum,
as applicable, which amounts may be
adjusted to reflect certain corporate
12 In addition, any amendment to a Plan would
be subject to the approval of the applicable
applicant’s stockholders to the extent such approval
is required by applicable laws or regulations,
including exchange rules, or as the relevant Board
otherwise determines. Each Applicant’s Board is
required to review the applicable Plan at least
annually.
13 Employees who serve both Adams and
Petroleum on a combined full-time basis would be
eligible to receive Awards under both Plans.
Employees who primarily serve one company
would only be expected to receive Awards from
that company. Applicants expect that Employees
who serve both Adams and Petroleum may receive
Awards from both companies if such Employees
make significant contributions to the success of
both companies. The Compensation Committee of
each company will consider separately, for each
company, the work performance, value
contribution, and alignment with the interests of
the stockholders of the company when determining
the appropriate Award amounts for Employees of
the company, including Employees who serve both
companies.
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transactions. In addition, at the effective
date of such Non-Employee Director’s
initial election to the Board, the NonEmployee Director would be granted
750 Restricted Stock Units of Adams
and 400 Restricted Units of Adams, as
applicable, which amounts may be
adjusted to reflect certain corporate
transactions. Non-Employee Directors
would also receive dividend equivalents
in respect of such Restricted Stock Units
equal to the amount or value of any cash
or other dividends or distributions
payable on an equivalent number of
shares of common stock. The Restricted
Stock Units and related dividend
equivalents would vest (and become
non-forfeitable) and be paid (in the form
of shares of common stock) one year
from the date of grant. In addition, NonEmployee Directors may elect each year,
not later than December 31 of the year
preceding the year as to which the
annual grant of Restricted Stock Units is
to be applicable, to defer to a fixed date
or pursuant to a specified schedule
payment of all or any portion of the
annual grant of Restricted Stock Units.
Under the Plans, Non-Employee
Directors may also elect each year, not
later than December 31 of the year
preceding the year as to which deferral
of fees is to be applicable, to defer to a
fixed date or pursuant to a specified
schedule all or any portion of the cash
retainer to be paid for Board service in
the following calendar year through the
issuance of Deferred Stock Units, valued
at the Fair Market Value of the relevant
applicant’s stock on the date when each
payment of such retainer amount would
otherwise be made in cash.
11. The total number of shares of each
applicant’s stock reserved and available
for delivery in connection with Awards
under the applicable Plan (other than
any shares of Adams stock or Petroleum
stock issued in payment of dividend
equivalents) is 4% of the outstanding
shares of the applicable applicant as of
the effective time of the Plan. As of
January 14, 2015, this represents
3,850,570 shares of Adams stock and
1,095,752 shares of Petroleum stock.
12. Applicants state that, in the event
that a dividend, capital gain distribution
or other distribution, recapitalization,
forward or reverse stock split,
reorganization, merger, consolidation,
spin-off, combination, repurchase, share
exchange, liquidation, dissolution or
other similar corporate transaction
affects the common stock of an
applicant, then the relevant Committee
would, in such manner as it may deem
equitable, adjust any or all of (i) the
aggregate number of shares subject to
the relevant Plan; (ii) the number and
kind of shares which may be delivered
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under the relevant Plan; (iii) the number
and kind of shares by which per-person
Award limitations are measured; (iv) the
number and kind of shares subject to or
deliverable in respect of outstanding
Awards; and (v) the exercise price or
grant price relating to any Award. In
addition, after the occurrence of any
such corporate transaction, the relevant
Committee would also have the
authority to make provision for payment
of cash or other property in respect of
an Award. Applicants state that, in the
event a capital gains distribution is
made to applicants’ stockholders, the
exercise price of outstanding Options
and the grant price of outstanding Stock
Appreciation Rights issued under the
Plans may be reduced to reflect any
such distribution made after the date of
grant (provided that no such reduction
will be made that would reduce the
exercise price or grant price below zero).
No adjustments will be made in the case
of a cash income dividend.
Applicants’ Legal Analysis
Sections 18(d), 23(a) and 23(b) of the
Act
1. Section 18(d) of the Act generally
prohibits a registered management
investment company from issuing rights
to purchase the company’s shares.14
Applicants state that section 18(d)
would prohibit the issuance of certain
Awards to Eligible Persons because no
corresponding warrants or rights would
be issued to shareholders, and such
Awards would not be issued in
connection with a reorganization.
2. Section 23(a) of the Act generally
prohibits a registered closed-end
investment company from issuing
securities for services. Applicants state
that because Awards are a form of
compensation, the issuance of stockbased Awards to Eligible Persons would
constitute the issuance of securities for
‘‘services’’ and, therefore, absent an
exemption, would fall within the
prohibitions of section 23(a).
3. Section 23(b) of the Act prohibits
a registered closed-end investment
company from selling its common stock
at a price below its current NAV. The
applicants state that, because Adams
stock and Petroleum stock have often
traded at a discount to their NAV and
Awards under the Plans will be valued
at the current market price of the stock,
section 23(b) would in most cases
prohibit the issuance of the Awards.
14 Section 18(d) permits a fund to issue only
warrants or rights, ratably to a class of stockholders,
that have an exercise period of no more than 120
days or in exchange for warrants in connection with
a reorganization.
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Federal Register / Vol. 80, No. 30 / Friday, February 13, 2015 / Notices
4. Section 6(c) of the Act provides, in
part, that the Commission may, by order
upon application, conditionally or
unconditionally exempt any person,
security or transaction, or any class or
classes thereof, 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. The
applicants request an exemption under
section 6(c) from section 18(d) and
sections 23(a) and (b) of the Act to the
extent necessary to implement the
Plans.
5. Applicants state that the concerns
underlying those sections include (i) the
possibility that Options could be
granted to persons whose interests
might be contrary to the interests of
stockholders; (ii) the potential dilutive
impact of Awards on stockholders; (iii)
the possibility that Options might
facilitate a change of control; (iv) the
introduction of complexity and
uncertainty into the investment
company’s financial structure, thereby
making it more difficult to appraise the
value of their stock; (v) possible
obfuscation of the extent of management
compensation; and (vi) encouragement
of speculative portfolio investments at
the insistence of the option holders (to
increase the possibility of a rise in
market price from which they might
benefit). Applicants assert that these
concerns would not apply to the
Awards for the reasons discussed below
and (in greater detail) in the application.
6. Applicants state that, because
Awards under each Plan may be issued
only to Eligible Persons, Awards will
not be granted to individuals with
interests contrary to those of the
applicants’ stockholders. Applicants
also assert that the Plans would not
become a means for insiders to obtain
control of Adams or Petroleum because
the number of shares of stock issuable
under the Plans would be limited to 4%
of the outstanding shares of Adams or
Petroleum. Moreover, as a condition to
the requested order, no Eligible Person
could be issued more than 35% of the
shares reserved for issuance under the
Plans. In addition, in no event may the
total number of shares of Adams stock
or Petroleum stock, with respect to
which all types of Awards may be
granted to a Participant under the
applicable Plan, exceed 300,000 shares
of stock within any thirty-six month
period during which the relevant Plan is
in effect.15
15 These limitations are separate limitations under
each Plan. Cash Awards that are settled in cash
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7. The applicants further state that
each Plan will be submitted to
stockholders for their approval. The
applicants represent 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 their respective
stockholders. The applicants also state
that they will comply with the proxy
disclosure requirements in Item 10 of
Schedule 14A under the Exchange Act.
The applicants further note that the
Plans will be disclosed to investors in
accordance with the standards and
guidelines adopted by the Financial
Accounting Standards Board and the
requirements of Item 402 of Regulation
S–K, Item 8 of Schedule 14A under the
Exchange Act, and Item 18 of Form N–
2. In addition, applicants will comply
with the disclosure requirements for
executive compensation plans
applicable to operating companies
under the Exchange Act. Applicants
conclude that the Plans will be
adequately disclosed to investors and
appropriately reflected in the market
value of their stock.
8. The applicants acknowledge that
Awards granted under the Plans would
have a dilutive effect on the
stockholders’ equity in Adams and
Petroleum, but argue that the effect
would not be significant and would be
outweighed by the anticipated benefits
of the Plans to Adams, Petroleum and
their stockholders.16 The applicants
believe that the flexibility to offer
equity-based employee compensation is
essential to their ability to compete for
top quality personnel. The applicants
also assert that equity-based
compensation would more closely align
the interests of Adams and Petroleum
directors, officers and employees with
those of the applicants’ stockholders.
would not count against the limit described in the
preceding sentence.
16 Applicants represent that the maximum
potential dilution to an applicant’s stockholders (in
terms of net asset value per share (‘‘NAV’’)) that
would result from grants of Awards under a Plan
would be approximately 3.85%. Applicants submit
that the limitations on the requested exemptive
order would provide protection to investors against
dilution of their pro rata interests that are similar
to those the Commission has previously found
consistent with the purposes and policies of the Act
and are even greater than those that Congress
imposed on stock options issued by BDCs.
Applicants state that less dilution could occur
under the Plans than from stock options issued by
business development companies, on which
Congress imposed a 25% limit on the maximum
increase in the amount of voting securities that
could result if all outstanding warrants, options and
other rights were exercised. Applicants also note
that less dilution would occur under the Plans than
from stock awards that could be issued under the
2012 Order, which allowed a 4.4% limit.
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9. In addition, applicants state that
stockholders will be further protected
by the conditions to the requested order
that assure continuing oversight of the
operation of the Plans by the applicable
Board. Under these conditions, each
applicant’s Board will review the
relevant Plan at least annually. In
addition, the applicable Committee
periodically will review the potential
impact that the grant, exercise or vesting
of Awards could have on an applicant’s
earnings and NAV, such review to take
place prior to any decisions to grant
Awards, but in no event less frequently
than annually. Adequate procedures
and records will be maintained to
permit such review. The relevant
Committee will be authorized to take
appropriate steps to ensure that neither
the grant nor the exercise or vesting of
Awards would have an effect contrary to
the interests of the stockholders of the
applicant. This authority will include
the authority to prevent or limit the
grant of additional Awards.
10. Applicants believe that the
possibility that Awards would
encourage speculative portfolio
investments is minimized because the
applicants have conservative investment
philosophies and the Boards
periodically monitor stock transactions
for consistency with the applicants’
investment objectives.
11. With regard to the standard for
relief under section 6(c), applicants
assert that the requested exemptions are
necessary or appropriate in the public
interest because of the recruiting and
retention benefits noted above.
Applicants further assert that the
requested exemptions are consistent
with the protection of investors because
of the proposed limitations on the grant
of Awards and the required Board and
shareholder approvals. Finally,
applicants argue that the Plans are
consistent with the policies and
purposes of the Act because the
Commission and Congress have
previously permitted certain companies
regulated under the Act to issue stock
options and to adopt incentive
compensation plans similar to the Plans.
Section 17(d) of the Act
12. Section 17(d) of the Act and rule
17d–1 under the Act generally prohibit
an affiliated person of a registered
investment company, or an affiliated
person of such a person, from
participating in a joint enterprise, joint
arrangement or profit-sharing plan in
which the company is a participant,
unless the Commission by order
approves the transaction. Rule 17d–1(c)
defines a joint enterprise to include any
stock option or stock purchase plan.
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Rule 17d–1(b) provides that, in
considering relief pursuant to the rule,
the Commission will consider (i)
whether the participation of the
registered investment company 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. Section 2(a)(3) of the Act
defines an ‘‘affiliated person’’ of another
person to include any officer, director,
partner, copartner or employee of such
other person. Because all Eligible
Persons are either directors or
Employees of applicants, Eligible
Persons fall within the scope of section
17(d) and rule 17d-1 and, consequently,
are prohibited from participating in the
Plans, absent the requested relief.
13. Applicants request an order
pursuant to section 17(d) and rule 17d–
1 to permit the operation of the Plans.
Applicants state that the Plans, although
benefiting Eligible Persons and
applicants in different ways, are in the
interests of stockholders of the
applicants because the Plans would
help them attract, motivate and retain
talented professionals and help align the
interests of Employees with those of
their stockholders. Thus, applicants
assert that applicants’ participation in
the Plans will be on a basis no less
advantageous than that of Eligible
Persons.17
tkelley on DSK3SPTVN1PROD with NOTICES
Section 23(c) of the Act
14. Section 23(c) of the Act generally
prohibits a registered closed-end
investment company from purchasing
any securities of which it is the issuer
except in the open market, pursuant to
tender offers or under other
circumstances as the Commission may
permit to insure that the purchase is
made on a basis that does not unfairly
discriminate against any holders of the
class or classes of securities to be
purchased.
15. Applicants state that the payment
of a stock option exercise price with
previously acquired stock of the
applicants or with shares withheld by
the applicants may be deemed a
purchase by the applicants of their own
securities within the prohibition of
section 23(c).18 Applicants therefore
17 As noted above, applicants also assert that the
Plans are consistent with the policies and purposes
of the Act because the Commission and Congress
have previously permitted certain companies
regulated under the Act to issue stock options and
to adopt incentive compensation plans similar to
the Plans.
18 Applicants state this analysis could also apply
in the case of shares withheld by applicants or
delivery of shares by an Eligible Person in
satisfaction of withholding taxes.
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21:56 Feb 12, 2015
Jkt 235001
request an order under section 23(c) to
permit these purchases. Applicants state
that each applicant will purchase its
shares from Eligible Persons at their Fair
Market Value, as defined in the Plans,
on the relevant date, which would not
be significantly different from the price
at which all other stockholders could
sell their shares in a market transaction.
Applicants therefore submit that such
transactions would not unfairly
discriminate against other stockholders.
Applicants’ Conditions
Applicants agree that any order of the
Commission granting the requested
relief will be subject to the following
conditions:
1. Each Board will maintain a
Committee, none of the members of
which will be ‘‘interested persons’’ of
the applicants as defined in the Act.
Each Committee will administer the
relevant Plan and will be composed of
three or more directors of the relevant
applicant who (i) are Non-Interested
Directors of the relevant applicant, (ii)
are ‘‘non-employee directors’’ within
the meaning of rule 16b–3 under the
Exchange Act and (iii) are ‘‘outside
directors’’ as defined under section
162(m) of the Code.
2. A Plan will not be implemented
unless it is approved by a majority of
the votes cast by stockholders at a
meeting called to consider the Plan. Any
amendment to a Plan will be subject to
the approval of the applicable
applicant’s stockholders to the extent
such approval is required by applicable
law or regulation or the applicable
Board otherwise determines. Unless
terminated or amended, during the fifth
year of each Plan (and each fifth year
thereafter), each Plan shall be submitted
for reapproval to the relevant
applicant’s stockholders and all Awards
made during that year shall be
contingent upon stockholder
reapproval.
3. Awards are not transferable or
assignable, except as the Committees
will specifically approve to facilitate
estate planning or to a beneficiary upon
an Eligible Person’s death or by will or
the laws of descent and distribution.
Awards may also be transferred
pursuant to a qualified domestic
relations order.
4. The maximum number of shares of
stock available for delivery in
connection with Awards under a Plan
(other than any shares of Adams Stock
or Petroleum Stock, as applicable,
issued in payment of dividend
equivalents) will be 4% of the relevant
applicant’s stock outstanding on the
effective date of the relevant Plan,
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Fmt 4703
Sfmt 4703
subject to adjustment for corporate
transactions.
5. Each applicant’s Board will review
the relevant Plan at least annually. In
addition, the applicable Committee
periodically will review the potential
impact that the grant, exercise, or
vesting of Awards could have on an
applicant’s earnings and NAV, such
review to take place prior to any
decisions to grant Awards, but in no
event less frequently than annually.
Adequate procedures and records will
be maintained to permit such review,
and the relevant Committee will be
authorized to take appropriate steps to
ensure that neither the grant nor the
exercise or vesting of Awards would
have an effect contrary to the interests
of investors in the applicant. This will
include the authority to prevent or limit
the grant of additional Awards. All
records maintained pursuant to this
condition will be subject to examination
by the Commission and its staff.
6. The 2005 Incentive Plans will
expire on April 27, 2015 pursuant to
their terms. No further grants would be
made under the 2005 Incentive Plans
following the earlier of April 27, 2015
and the approval of the Plans by each
applicant’s stockholders at the
respective annual meetings expected to
be held in April 2015 or as soon
thereafter as practicable. Existing
awards made under the 2005 Incentive
Plans would remain outstanding and
would remain subject to the terms and
conditions of the 2005 Incentive Plans.
7. Awards under the Plans are
issuable only to Eligible Persons. No
person will be granted Awards relating
to more than 35% of the shares initially
reserved for issuance under the relevant
Plan (as such number of shares initially
reserved for issuance may be adjusted
under the terms of the Plans as
described in Section IV.B of the
application). Subject to the immediately
preceding limitation, in any thirty-six
month period during which a Plan is in
effect, no person may be granted under
that Plan more than 300,000 shares of
stock in respect of Options, 300,000
shares of stock in respect of Stock
Appreciation Rights, 300,000 shares of
stock in respect of Restricted Stock,
300,000 shares of stock in respect of
Restricted Stock Units, 300,000 shares
of stock in respect of Deferred Stock
Units, or 300,000 shares of stock in
respect of Bonus Stock. In addition, in
no event may the total number of shares
of stock with respect to which all types
of Awards may be granted to an Eligible
Person under the applicable Plan exceed
300,000 shares of stock within any
thirty-six month period during which
the applicable Plan is in effect, which
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tkelley on DSK3SPTVN1PROD with NOTICES
amount may be adjusted to reflect
certain corporate transactions or events
that affect the applicant’s stock. Grants
to Non-Employee Directors are limited
to those described in condition 8 below.
8. In each fiscal year, a Non-Employee
Director will be granted 750 Restricted
Stock Units of Adams and 400
Restricted Stock Units of Petroleum, as
applicable, which amounts may be
adjusted to reflect certain corporate
transactions. At the effective date of any
Non-Employee Director’s initial election
to the Board of an Applicant, such NonEmployee Director will be granted 750
Restricted Stock Units of Adams and
400 Restricted Stock Units of Petroleum,
as applicable, which amounts may be
adjusted to reflect certain corporate
transactions. Non-Employee Directors
will also receive dividend equivalents
in respect of such Restricted Stock Units
equal to the amount or value of any cash
or other dividends or distributions
payable on an equivalent number of
shares of common stock. The Restricted
Stock Units and related dividend
equivalents will vest (and become nonforfeitable) and be paid (in the form of
shares of common stock) one year from
the date of grant. In addition, NonEmployee Directors may elect each year,
not later than December 31 of the year
preceding the year as to which the
annual grant of Restricted Stock Units is
to be applicable, to defer to a fixed date
or pursuant to a specified schedule
payment of all or any portion of the
annual grant of Restricted Stock Units.
Any modification of the deferral
election may be made only upon
satisfaction of any conditions that the
relevant Committee may impose. NonEmployee Directors may also elect each
year, not later than December 31 of the
year preceding the year as to which
deferral of fees is to be applicable, to
defer to a fixed date or pursuant to a
specified schedule all or any portion of
the cash retainer to be paid for Board or
other service related to Board activities
in the following calendar year through
the issuance of Deferred Stock Units,
valued at the Fair Market Value of the
relevant Applicant’s stock on the date
when each payment of such retainer
amount would otherwise be made in
cash.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Brent J. Fields,
Secretary.
[FR Doc. 2015–03026 Filed 2–12–15; 8:45 am]
BILLING CODE 8011–01–P
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21:56 Feb 12, 2015
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. IC–31451; File No. 812–14359]
Pacific Life Insurance Company, et al;
Notice of Application
February 9, 2015.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of application for an
order approving the substitution of
certain securities pursuant to Section
26(c) of the Investment Company Act of
1940, as amended (the ‘‘1940 Act’’).
AGENCY:
Applicants: Pacific Life Insurance
Company (‘‘Pacific Life’’), Pacific Life’s
Separate Account A (‘‘Separate Account
A’’), Pacific Life’s Pacific Select Variable
Annuity Separate Account (‘‘Select VA
Account’’ and, together with Separate
Account A, the ‘‘Pacific Life Separate
Accounts’’), Pacific Life & Annuity
Company (‘‘PL&A’’), and PL&A’s
Separate Account A (‘‘PL&A Separate
Account A’’). Pacific Life, PL&A, and
the Separate Accounts are referred to
collectively as the ‘‘Applicants.’’ The
Pacific Life Separate Accounts and
PL&A Separate Account A are referred
to individually as a ‘‘Separate Account’’
and collectively as the ‘‘Separate
Accounts.’’ Pacific Life and PL&A are
referred to herein individually as an
‘‘Insurer’’ and collectively as the
‘‘Insurers.’’
SUMMARY: Summary of Application:
Each Insurer, on behalf of itself and its
Separate Account(s), seeks an order
pursuant to Section 26(c) of the 1940
Act, approving the substitution of
Service Shares of the Janus Aspen
Balanced Portfolio, a series of Janus
Aspen Series (the ‘‘Replacement
Portfolio’’), for the Advisor Class shares
of the PIMCO Global Multi-Asset
Managed Allocation Portfolio, a series of
the PIMCO Variable Insurance Trust
(the ‘‘Replaced Portfolio’’) (the
‘‘Proposed Substitution’’), under certain
variable annuity contracts issued by the
Insurers (collectively, the ‘‘Contracts’’).
DATES: Filing Date: The application was
filed on September 19, 2014, and
amended on February 5, 2015.
Hearing or Notification of Hearing: An
order granting the requested relief will
be issued unless the Commission orders
a hearing. Interested persons may
request a hearing by writing to the
Commission’s Secretary and serving
applicants with a copy of the request,
personally or by mail. Hearing requests
should be received by the Commission
by 5:30 p.m. on March 4, 2015, and
should be accompanied by proof of
service on applicants, in the form of an
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Sfmt 4703
8115
affidavit or, for lawyers, a certificate of
service. Pursuant to Rule 0–5 under the
Act, hearing requests should state the
nature of the writer’s interest, any facts
bearing upon the desirability of a
hearing on the matter, 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: Brandon J. Cage, CLU
Assistant Vice President, Counsel,
Pacific Life Insurance Company, 700
Newport Center Drive, Newport Beach,
CA 92660; Richard T. Choi, Esq.,
Carlton Fields Jorden Burt, P.A., 1025
Thomas Jefferson St. NW., Suite 400
East, Washington, DC 20007.
FOR FURTHER INFORMATION CONTACT:
Laura L. Solomon, Senior Counsel, at
(202) 551–6915, or Nadya Roytblat,
Assistant Chief Counsel, at (202) 551–
6825 (Chief Counsel’s Office, Division of
Investment Management).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
application. The complete application
may be obtained via the Commission’s
Web site by searching for the file
number, or an applicant using the
Company name box, at https://
www.sec.gov/search/search.htm or by
calling (202) 551–8090.
Applicants’ Representations
1. The Insurers, on their own behalf
and on behalf of their respective
Separate Accounts, propose to
substitute Service Shares of the
Replacement Portfolio for Advisor Class
shares of the Replaced Portfolio held by
the Separate Account to fund the
Contracts. Each Separate Account is
divided into subaccounts (each a
‘‘Subaccount,’’ collectively, the
‘‘Subaccounts’’). Each Subaccount
invests in the securities of a single
portfolio of an underlying mutual fund
(‘‘Portfolio’’). Contract owners (each a
‘‘Contract Owner’’ and collectively, the
‘‘Contract Owners’’) may allocate some
or all of their Contract value to one or
more Subaccounts that are available as
investment options under the Contracts.
2. Pacific Life is the depositor and
sponsor of the Pacific Life Separate
Accounts. PL&A is the depositor and
sponsor of PL&A Separate Account A.
3. Each of the Separate Accounts is a
‘‘separate account’’ as defined by
Section 2(a)(37) of the 1940 Act and
each is registered under the 1940 Act as
a unit investment trust for the purpose
of funding the Contracts. Security
interests under the Contracts have been
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]]>Agencies
[Federal Register Volume 80, Number 30 (Friday, February 13, 2015)]
[Notices]
[Pages 8110-8115]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-03026]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-31452; 812-14300]
The Adams Express Company and Petroleum & Resources Corporation;
Notice of Application
February 9, 2015.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application under sections 6(c), 17(d) and 23(c)
of the Investment Company Act of 1940 (the ``Act'') and rule 17d-1
under the Act to permit certain joint transactions otherwise prohibited
under section 17(d) of the Act.
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Summary of Application: Applicants request an order to permit them,
subject to shareholder approval, to adopt new equity-based incentive
compensation plans to replace equity-based incentive compensation plans
adopted in 2005.
Applicants: The Adams Express Company (``Adams'') and Petroleum &
Resources Corporation (``Petroleum'').
Filing Dates: The application was filed on April 22, 2014, and amended
on September 12, 2014 and January 20, 2015.
Hearing or Notification of Hearing: An order granting the requested
relief will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving applicants with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on March 6, 2015, and should be accompanied by proof of
service on applicants, in the form of an affidavit or, for lawyers, a
certificate of service. Pursuant to rule 0-5 under the Act, hearing
requests should state the nature of the writer's interest, any facts
bearing upon the desirability of a hearing on the matter, 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, Commission, 100 F Street NE., Washington, DC
20549. Applicants, c/o Lawrence L. Hooper, Jr., Vice President, General
Counsel and Secretary, The Adams Express Company, 7 Saint Paul Street,
Baltimore, MD 21202.
FOR FURTHER INFORMATION CONTACT: Courtney S. Thornton, Senior Counsel,
at (202) 551-6812, or David P. Bartels, Branch Chief, at (202) 551-6821
(Division of Investment Management, Chief Counsel's Office).
[[Page 8111]]
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site by searching for the file number, or for an
applicant using the Company name box, at https://www.sec.gov/search/search.htm or by calling (202) 551-8090.
Applicants' Representations
1. Adams and Petroleum, both of which are Maryland corporations,
are registered under the Act as closed-end management investment
companies. Adams' principal business is the ownership and management of
its investment portfolio, which consists predominantly of equity
securities. Petroleum's principal business also is the ownership and
management of its investment portfolio, which consists predominantly of
equity securities and emphasizes investments in energy and natural
resources companies. Each company is internally managed. Each company's
stock is listed on the New York Stock Exchange. Adams presently owns
approximately 8% of the outstanding voting shares of Petroleum.\1\
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\1\ Applicants state that Adams first acquired an ownership
interest in Petroleum in 1929 and subsequently increased its
ownership interest by means of stock dividends and participations in
rights offerings. Section 12(d) of the Act restricts the purchase or
other acquisition by investment companies of securities issued by
other investment companies under specified circumstances. However,
section 12(d) excepts securities received as dividends from the
restriction on acquisitions and purchases. Applicants represent
that, as noted above, Adams' initial acquisition and ownership of
shares of Petroleum pre-dated the Act. Applicants further state
that, since the Act became effective, Adams has not purchased or
otherwise acquired shares of Petroleum other than through stock
dividends, with the exception of acquisitions made in 1956 and 1969
in connection with certain rights offerings by Petroleum, each of
which was made pursuant to exemptive orders issued by the
Commission. See The Adams Express Company, Investment Company Act
Release Nos. 2363 (May 28, 1956) (order) and 5744 (July 16, 1969)
(order).
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2. Adams has eight directors, seven of whom are neither Employees
(as defined below) nor ``interested persons'' of the company as defined
in section 2(a)(19) of the Act (``Non-Interested Directors''), and
twenty Employees. Petroleum has eight directors, seven of whom are Non-
Interested Directors, and eighteen Employees. The boards of directors
(``Boards'') of Adams and Petroleum are comprised of the same
individuals. Sixteen Employees serve both Adams and Petroleum.
3. In 2005, the Commission issued an order granting applicants
exemptions from sections 17(d), 18(d), and 23(a), (b), and (c)(3) of
the Act (the ``2005 Order'').\2\ At their respective annual meetings
held in April 2005, the applicants' shareholders approved the Adams
2005 Equity Incentive Compensation Plan (the ``2005 Adams Plan'') and
the Petroleum Equity Incentive Compensation Plan (the ``2005 Petroleum
Plan,'' and together with the 2005 Adams Plan, the ``2005 Incentive
Plans''). The 2005 Incentive Plans were adopted in reliance on the 2005
Order. The 2005 Incentive Plans will expire by their terms on April 27,
2015.
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\2\ The Adams Express Company et al., Investment Company Act
Release Nos. 26759 (Feb. 10, 2005) (notice) and 26780 (Mar. 8, 2005)
(order). Applicants represent that the 2005 Incentive Plans replaced
stock option plans adopted by Adams and Petroleum in reliance upon
the 1985 order obtained by the Association of Publicly Traded
Investment Funds (``APTIF'') of which Adams and Petroleum were both
members. Applicants note that the APTIF order exempted APTIF's
internally-managed, closed-end investment company members from the
provisions of sections 17(d), 18(d), and 23(a)(b), and (c) of the
Act and permitted them to offer their key employees deferred equity
compensation in the form of stock options or stock appreciation
rights. Association of Publicly Traded Investment Funds, Investment
company Act Release Nos. 14541 (May 28, 1985) (notice) and 14594
(June 21, 1985) (order).
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5. Applicants state that, because the investment management
business is highly competitive, they believe their successful operation
depends on their continued ability to attract, motivate and retain
their Employees with competitive compensation packages similar to those
offered by their competitors. Applicants are requesting relief to
permit, subject to shareholder approval, the adoption of The Adams
Express Company 2015 Incentive Compensation Plan and Petroleum &
Resources Corporation 2015 Incentive Compensation Plan (the ``Plans'').
Each Plan, if approved by shareholders, would be administered by a
compensation committee (the ``Committee'') composed of three or more
directors who (a) are Non-Interested Directors of the relevant
applicant, (b) are ``non-employee directors'' within the meaning of
rule 16b-3 under the Securities Exchange Act of 1934 (the ``Exchange
Act''), and (c) are ``outside directors'' as defined under section
162(m) of the Internal Revenue Code of 1986 (the ``Code''). Applicants
represent that each Committee is currently composed of four directors,
each of whom satisfies these criteria.
6. The Plans, if approved by shareholders, would permit the
applicants to issue stock options (``Options''),\3\ stock appreciation
rights (including freestanding and tandem stock appreciation rights)
(``Stock Appreciation Rights''),\4\ restricted shares of stock
(``Restricted Stock''),\5\ restricted stock units (``Restricted Stock
Units''),\6\ deferred stock units (``Deferred Stock Units''),\7\ shares
of common stock granted as a bonus (``Bonus Stock''),\8\ and awards
denominated in cash (``Cash Awards'') \9\ (collectively, ``Awards'') to
Eligible Persons (defined below), subject to the terms and conditions
discussed below.\10\ In addition, the Plans would permit dividend
equivalents to be awarded in connection with any Awards under the Plans
while the Awards are outstanding or otherwise subject to a restriction
period on a like number of shares of applicants' common stock.
Furthermore, certain Awards may be subject to performance conditions as
may be specified by the respective Committee.\11\
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\3\ The exercise price of Options must be at least 100% of the
fair market value (``Fair Market Value'') of a share of an
applicant's stock on the date of the grant. For purposes of the
Plans, Fair Market Value would equal the mean of the high and low
sale prices per share of the stock of the applicant as reported on
the New York Stock Exchange-Composite Transactions (or such other
national securities exchange or automated inter-dealer quotation
system on which the stock has been duly listed and approved for
quotation and trading) on the date on which the value is to be
determined, or if no sale of the stock is reported for such date,
the next preceding day for which there is a reported sale. Options
issued under the Plans will expire no later than 10 years from the
date of grant.
\4\ A Stock Appreciation Right is a right to receive, upon
exercise, the excess of (i) the Fair Market Value of one share of an
applicant's stock on the date of exercise over (ii) the stock
appreciation right's grant price. Stock Appreciation Rights issued
under the Plans will expire no later than ten years from the date of
grant.
\5\ Restricted Stock is stock that is subject to restrictions on
transferability, risk of forfeiture, or other restrictions.
\6\ Restricted Stock Units are rights to receive stock and are
subject to certain restrictions and a risk of forfeiture.
\7\ A Deferred Stock Unit is a right to receive stock, cash or a
combination thereof at the end of a specified deferral period.
\8\ Except as otherwise determined by the applicable Committee,
Bonus Stock would vest immediately and would not be subject to any
restrictions.
\9\ To the extent that a Cash Award is settled in cash, the
applicants are not requesting any relief.
\10\ The principal difference between the Plans and the 2005
Incentive Plans is that the Plans would permit Awards in the form of
Bonus Stock and Cash Awards in addition to the Award types provided
in the 2005 Incentive Plans. However, Awards that could be issued
under the Plans would be subject to the same limitations, including
the limit of 4% of the outstanding shares of each applicant, as the
2005 Incentive Plans. Applicants note that this is less than the
4.4% limit that was approved in a similar order obtained by Central
Securities in 2012. Central Securities Corporation, Investment
Company Act Release Nos. 29915 (Jan. 6, 2012) (notice) and 29940
(Feb. 1, 2012) (order) (the ``2012 Order'').
\11\ Such Awards would be payable in cash or stock of the
relevant applicant, conditioned on satisfaction of performance
criteria established by the relevant Committee.
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7. Existing awards made under the 2005 Incentive Plans would remain
outstanding and would remain subject to the terms and conditions of the
2005 Incentive Plans. However, no further
[[Page 8112]]
grants would be made under the 2005 Incentive Plans following the
earlier of April 27, 2015, and approval of the Plans by each
applicant's stockholders at its respective annual meeting, which
applicants expect to hold in April 2015 or as soon thereafter as
practicable.
8. Each Plan, in its proposed form, has been approved by the
relevant applicant's Board, including a majority of the Non-Interested
Directors of each applicant. Subject to receipt of the order,
applicants expect that their respective Boards will approve the
submission of the respective Plan to stockholders for approval at each
applicant's annual meeting. Each Plan would become effective if
approved by stockholders. In addition, each applicant would submit its
Plan to stockholders for approval once every five years.\12\
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\12\ In addition, any amendment to a Plan would be subject to
the approval of the applicable applicant's stockholders to the
extent such approval is required by applicable laws or regulations,
including exchange rules, or as the relevant Board otherwise
determines. Each Applicant's Board is required to review the
applicable Plan at least annually.
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9. Grants under each Plan may be made only to ``Eligible Persons,''
which is defined, with respect to an applicant, to mean any person,
including officers, in the regular employment of the applicant and/or
its subsidiaries on a full-time basis, or of both Adams (and/or any
subsidiary thereof) and Petroleum (and/or any subsidiary thereof) on a
combined full-time basis (``Employees'') and the respective directors
of the applicant who at the time an Award is to be granted are not
Employees (``Non-Employee Directors'').\13\
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\13\ Employees who serve both Adams and Petroleum on a combined
full-time basis would be eligible to receive Awards under both
Plans. Employees who primarily serve one company would only be
expected to receive Awards from that company. Applicants expect that
Employees who serve both Adams and Petroleum may receive Awards from
both companies if such Employees make significant contributions to
the success of both companies. The Compensation Committee of each
company will consider separately, for each company, the work
performance, value contribution, and alignment with the interests of
the stockholders of the company when determining the appropriate
Award amounts for Employees of the company, including Employees who
serve both companies.
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10. Immediately following each annual meeting of stockholders, each
Non-Employee Director who is elected a director at, or who was
previously elected and continues as a director after, that annual
meeting would receive 750 Restricted Stock Units of Adams and 400
Restricted Stock Units of Petroleum, as applicable, which amounts may
be adjusted to reflect certain corporate transactions. In addition, at
the effective date of such Non-Employee Director's initial election to
the Board, the Non-Employee Director would be granted 750 Restricted
Stock Units of Adams and 400 Restricted Units of Adams, as applicable,
which amounts may be adjusted to reflect certain corporate
transactions. Non-Employee Directors would also receive dividend
equivalents in respect of such Restricted Stock Units equal to the
amount or value of any cash or other dividends or distributions payable
on an equivalent number of shares of common stock. The Restricted Stock
Units and related dividend equivalents would vest (and become non-
forfeitable) and be paid (in the form of shares of common stock) one
year from the date of grant. In addition, Non-Employee Directors may
elect each year, not later than December 31 of the year preceding the
year as to which the annual grant of Restricted Stock Units is to be
applicable, to defer to a fixed date or pursuant to a specified
schedule payment of all or any portion of the annual grant of
Restricted Stock Units. Under the Plans, Non-Employee Directors may
also elect each year, not later than December 31 of the year preceding
the year as to which deferral of fees is to be applicable, to defer to
a fixed date or pursuant to a specified schedule all or any portion of
the cash retainer to be paid for Board service in the following
calendar year through the issuance of Deferred Stock Units, valued at
the Fair Market Value of the relevant applicant's stock on the date
when each payment of such retainer amount would otherwise be made in
cash.
11. The total number of shares of each applicant's stock reserved
and available for delivery in connection with Awards under the
applicable Plan (other than any shares of Adams stock or Petroleum
stock issued in payment of dividend equivalents) is 4% of the
outstanding shares of the applicable applicant as of the effective time
of the Plan. As of January 14, 2015, this represents 3,850,570 shares
of Adams stock and 1,095,752 shares of Petroleum stock.
12. Applicants state that, in the event that a dividend, capital
gain distribution or other distribution, recapitalization, forward or
reverse stock split, reorganization, merger, consolidation, spin-off,
combination, repurchase, share exchange, liquidation, dissolution or
other similar corporate transaction affects the common stock of an
applicant, then the relevant Committee would, in such manner as it may
deem equitable, adjust any or all of (i) the aggregate number of shares
subject to the relevant Plan; (ii) the number and kind of shares which
may be delivered under the relevant Plan; (iii) the number and kind of
shares by which per-person Award limitations are measured; (iv) the
number and kind of shares subject to or deliverable in respect of
outstanding Awards; and (v) the exercise price or grant price relating
to any Award. In addition, after the occurrence of any such corporate
transaction, the relevant Committee would also have the authority to
make provision for payment of cash or other property in respect of an
Award. Applicants state that, in the event a capital gains distribution
is made to applicants' stockholders, the exercise price of outstanding
Options and the grant price of outstanding Stock Appreciation Rights
issued under the Plans may be reduced to reflect any such distribution
made after the date of grant (provided that no such reduction will be
made that would reduce the exercise price or grant price below zero).
No adjustments will be made in the case of a cash income dividend.
Applicants' Legal Analysis
Sections 18(d), 23(a) and 23(b) of the Act
1. Section 18(d) of the Act generally prohibits a registered
management investment company from issuing rights to purchase the
company's shares.\14\ Applicants state that section 18(d) would
prohibit the issuance of certain Awards to Eligible Persons because no
corresponding warrants or rights would be issued to shareholders, and
such Awards would not be issued in connection with a reorganization.
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\14\ Section 18(d) permits a fund to issue only warrants or
rights, ratably to a class of stockholders, that have an exercise
period of no more than 120 days or in exchange for warrants in
connection with a reorganization.
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2. Section 23(a) of the Act generally prohibits a registered
closed-end investment company from issuing securities for services.
Applicants state that because Awards are a form of compensation, the
issuance of stock-based Awards to Eligible Persons would constitute the
issuance of securities for ``services'' and, therefore, absent an
exemption, would fall within the prohibitions of section 23(a).
3. Section 23(b) of the Act prohibits a registered closed-end
investment company from selling its common stock at a price below its
current NAV. The applicants state that, because Adams stock and
Petroleum stock have often traded at a discount to their NAV and Awards
under the Plans will be valued at the current market price of the
stock, section 23(b) would in most cases prohibit the issuance of the
Awards.
[[Page 8113]]
4. Section 6(c) of the Act provides, in part, that the Commission
may, by order upon application, conditionally or unconditionally exempt
any person, security or transaction, or any class or classes thereof,
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. The applicants request an exemption
under section 6(c) from section 18(d) and sections 23(a) and (b) of the
Act to the extent necessary to implement the Plans.
5. Applicants state that the concerns underlying those sections
include (i) the possibility that Options could be granted to persons
whose interests might be contrary to the interests of stockholders;
(ii) the potential dilutive impact of Awards on stockholders; (iii) the
possibility that Options might facilitate a change of control; (iv) the
introduction of complexity and uncertainty into the investment
company's financial structure, thereby making it more difficult to
appraise the value of their stock; (v) possible obfuscation of the
extent of management compensation; and (vi) encouragement of
speculative portfolio investments at the insistence of the option
holders (to increase the possibility of a rise in market price from
which they might benefit). Applicants assert that these concerns would
not apply to the Awards for the reasons discussed below and (in greater
detail) in the application.
6. Applicants state that, because Awards under each Plan may be
issued only to Eligible Persons, Awards will not be granted to
individuals with interests contrary to those of the applicants'
stockholders. Applicants also assert that the Plans would not become a
means for insiders to obtain control of Adams or Petroleum because the
number of shares of stock issuable under the Plans would be limited to
4% of the outstanding shares of Adams or Petroleum. Moreover, as a
condition to the requested order, no Eligible Person could be issued
more than 35% of the shares reserved for issuance under the Plans. In
addition, in no event may the total number of shares of Adams stock or
Petroleum stock, with respect to which all types of Awards may be
granted to a Participant under the applicable Plan, exceed 300,000
shares of stock within any thirty-six month period during which the
relevant Plan is in effect.\15\
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\15\ These limitations are separate limitations under each Plan.
Cash Awards that are settled in cash would not count against the
limit described in the preceding sentence.
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7. The applicants further state that each Plan will be submitted to
stockholders for their approval. The applicants represent 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 their respective stockholders. The applicants also
state that they will comply with the proxy disclosure requirements in
Item 10 of Schedule 14A under the Exchange Act. The applicants further
note that the Plans will be disclosed to investors in accordance with
the standards and guidelines adopted by the Financial Accounting
Standards Board and the requirements of Item 402 of Regulation S-K,
Item 8 of Schedule 14A under the Exchange Act, and Item 18 of Form N-2.
In addition, applicants will comply with the disclosure requirements
for executive compensation plans applicable to operating companies
under the Exchange Act. Applicants conclude that the Plans will be
adequately disclosed to investors and appropriately reflected in the
market value of their stock.
8. The applicants acknowledge that Awards granted under the Plans
would have a dilutive effect on the stockholders' equity in Adams and
Petroleum, but argue that the effect would not be significant and would
be outweighed by the anticipated benefits of the Plans to Adams,
Petroleum and their stockholders.\16\ The applicants believe that the
flexibility to offer equity-based employee compensation is essential to
their ability to compete for top quality personnel. The applicants also
assert that equity-based compensation would more closely align the
interests of Adams and Petroleum directors, officers and employees with
those of the applicants' stockholders.
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\16\ Applicants represent that the maximum potential dilution to
an applicant's stockholders (in terms of net asset value per share
(``NAV'')) that would result from grants of Awards under a Plan
would be approximately 3.85%. Applicants submit that the limitations
on the requested exemptive order would provide protection to
investors against dilution of their pro rata interests that are
similar to those the Commission has previously found consistent with
the purposes and policies of the Act and are even greater than those
that Congress imposed on stock options issued by BDCs. Applicants
state that less dilution could occur under the Plans than from stock
options issued by business development companies, on which Congress
imposed a 25% limit on the maximum increase in the amount of voting
securities that could result if all outstanding warrants, options
and other rights were exercised. Applicants also note that less
dilution would occur under the Plans than from stock awards that
could be issued under the 2012 Order, which allowed a 4.4% limit.
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9. In addition, applicants state that stockholders will be further
protected by the conditions to the requested order that assure
continuing oversight of the operation of the Plans by the applicable
Board. Under these conditions, each applicant's Board will review the
relevant Plan at least annually. In addition, the applicable Committee
periodically will review the potential impact that the grant, exercise
or vesting of Awards could have on an applicant's earnings and NAV,
such review to take place prior to any decisions to grant Awards, but
in no event less frequently than annually. Adequate procedures and
records will be maintained to permit such review. The relevant
Committee will be authorized to take appropriate steps to ensure that
neither the grant nor the exercise or vesting of Awards would have an
effect contrary to the interests of the stockholders of the applicant.
This authority will include the authority to prevent or limit the grant
of additional Awards.
10. Applicants believe that the possibility that Awards would
encourage speculative portfolio investments is minimized because the
applicants have conservative investment philosophies and the Boards
periodically monitor stock transactions for consistency with the
applicants' investment objectives.
11. With regard to the standard for relief under section 6(c),
applicants assert that the requested exemptions are necessary or
appropriate in the public interest because of the recruiting and
retention benefits noted above. Applicants further assert that the
requested exemptions are consistent with the protection of investors
because of the proposed limitations on the grant of Awards and the
required Board and shareholder approvals. Finally, applicants argue
that the Plans are consistent with the policies and purposes of the Act
because the Commission and Congress have previously permitted certain
companies regulated under the Act to issue stock options and to adopt
incentive compensation plans similar to the Plans.
Section 17(d) of the Act
12. Section 17(d) of the Act and rule 17d-1 under the Act generally
prohibit an affiliated person of a registered investment company, or an
affiliated person of such a person, from participating in a joint
enterprise, joint arrangement or profit-sharing plan in which the
company is a participant, unless the Commission by order approves the
transaction. Rule 17d-1(c) defines a joint enterprise to include any
stock option or stock purchase plan.
[[Page 8114]]
Rule 17d-1(b) provides that, in considering relief pursuant to the
rule, the Commission will consider (i) whether the participation of the
registered investment company 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. Section 2(a)(3) of the Act defines an
``affiliated person'' of another person to include any officer,
director, partner, copartner or employee of such other person. Because
all Eligible Persons are either directors or Employees of applicants,
Eligible Persons fall within the scope of section 17(d) and rule 17d-1
and, consequently, are prohibited from participating in the Plans,
absent the requested relief.
13. Applicants request an order pursuant to section 17(d) and rule
17d-1 to permit the operation of the Plans. Applicants state that the
Plans, although benefiting Eligible Persons and applicants in different
ways, are in the interests of stockholders of the applicants because
the Plans would help them attract, motivate and retain talented
professionals and help align the interests of Employees with those of
their stockholders. Thus, applicants assert that applicants'
participation in the Plans will be on a basis no less advantageous than
that of Eligible Persons.\17\
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\17\ As noted above, applicants also assert that the Plans are
consistent with the policies and purposes of the Act because the
Commission and Congress have previously permitted certain companies
regulated under the Act to issue stock options and to adopt
incentive compensation plans similar to the Plans.
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Section 23(c) of the Act
14. Section 23(c) of the Act generally prohibits a registered
closed-end investment company from purchasing any securities of which
it is the issuer except in the open market, pursuant to tender offers
or under other circumstances as the Commission may permit to insure
that the purchase is made on a basis that does not unfairly
discriminate against any holders of the class or classes of securities
to be purchased.
15. Applicants state that the payment of a stock option exercise
price with previously acquired stock of the applicants or with shares
withheld by the applicants may be deemed a purchase by the applicants
of their own securities within the prohibition of section 23(c).\18\
Applicants therefore request an order under section 23(c) to permit
these purchases. Applicants state that each applicant will purchase its
shares from Eligible Persons at their Fair Market Value, as defined in
the Plans, on the relevant date, which would not be significantly
different from the price at which all other stockholders could sell
their shares in a market transaction. Applicants therefore submit that
such transactions would not unfairly discriminate against other
stockholders.
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\18\ Applicants state this analysis could also apply in the case
of shares withheld by applicants or delivery of shares by an
Eligible Person in satisfaction of withholding taxes.
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Applicants' Conditions
Applicants agree that any order of the Commission granting the
requested relief will be subject to the following conditions:
1. Each Board will maintain a Committee, none of the members of
which will be ``interested persons'' of the applicants as defined in
the Act. Each Committee will administer the relevant Plan and will be
composed of three or more directors of the relevant applicant who (i)
are Non-Interested Directors of the relevant applicant, (ii) are ``non-
employee directors'' within the meaning of rule 16b-3 under the
Exchange Act and (iii) are ``outside directors'' as defined under
section 162(m) of the Code.
2. A Plan will not be implemented unless it is approved by a
majority of the votes cast by stockholders at a meeting called to
consider the Plan. Any amendment to a Plan will be subject to the
approval of the applicable applicant's stockholders to the extent such
approval is required by applicable law or regulation or the applicable
Board otherwise determines. Unless terminated or amended, during the
fifth year of each Plan (and each fifth year thereafter), each Plan
shall be submitted for reapproval to the relevant applicant's
stockholders and all Awards made during that year shall be contingent
upon stockholder reapproval.
3. Awards are not transferable or assignable, except as the
Committees will specifically approve to facilitate estate planning or
to a beneficiary upon an Eligible Person's death or by will or the laws
of descent and distribution. Awards may also be transferred pursuant to
a qualified domestic relations order.
4. The maximum number of shares of stock available for delivery in
connection with Awards under a Plan (other than any shares of Adams
Stock or Petroleum Stock, as applicable, issued in payment of dividend
equivalents) will be 4% of the relevant applicant's stock outstanding
on the effective date of the relevant Plan, subject to adjustment for
corporate transactions.
5. Each applicant's Board will review the relevant Plan at least
annually. In addition, the applicable Committee periodically will
review the potential impact that the grant, exercise, or vesting of
Awards could have on an applicant's earnings and NAV, such review to
take place prior to any decisions to grant Awards, but in no event less
frequently than annually. Adequate procedures and records will be
maintained to permit such review, and the relevant Committee will be
authorized to take appropriate steps to ensure that neither the grant
nor the exercise or vesting of Awards would have an effect contrary to
the interests of investors in the applicant. This will include the
authority to prevent or limit the grant of additional Awards. All
records maintained pursuant to this condition will be subject to
examination by the Commission and its staff.
6. The 2005 Incentive Plans will expire on April 27, 2015 pursuant
to their terms. No further grants would be made under the 2005
Incentive Plans following the earlier of April 27, 2015 and the
approval of the Plans by each applicant's stockholders at the
respective annual meetings expected to be held in April 2015 or as soon
thereafter as practicable. Existing awards made under the 2005
Incentive Plans would remain outstanding and would remain subject to
the terms and conditions of the 2005 Incentive Plans.
7. Awards under the Plans are issuable only to Eligible Persons. No
person will be granted Awards relating to more than 35% of the shares
initially reserved for issuance under the relevant Plan (as such number
of shares initially reserved for issuance may be adjusted under the
terms of the Plans as described in Section IV.B of the application).
Subject to the immediately preceding limitation, in any thirty-six
month period during which a Plan is in effect, no person may be granted
under that Plan more than 300,000 shares of stock in respect of
Options, 300,000 shares of stock in respect of Stock Appreciation
Rights, 300,000 shares of stock in respect of Restricted Stock, 300,000
shares of stock in respect of Restricted Stock Units, 300,000 shares of
stock in respect of Deferred Stock Units, or 300,000 shares of stock in
respect of Bonus Stock. In addition, in no event may the total number
of shares of stock with respect to which all types of Awards may be
granted to an Eligible Person under the applicable Plan exceed 300,000
shares of stock within any thirty-six month period during which the
applicable Plan is in effect, which
[[Page 8115]]
amount may be adjusted to reflect certain corporate transactions or
events that affect the applicant's stock. Grants to Non-Employee
Directors are limited to those described in condition 8 below.
8. In each fiscal year, a Non-Employee Director will be granted 750
Restricted Stock Units of Adams and 400 Restricted Stock Units of
Petroleum, as applicable, which amounts may be adjusted to reflect
certain corporate transactions. At the effective date of any Non-
Employee Director's initial election to the Board of an Applicant, such
Non-Employee Director will be granted 750 Restricted Stock Units of
Adams and 400 Restricted Stock Units of Petroleum, as applicable, which
amounts may be adjusted to reflect certain corporate transactions. Non-
Employee Directors will also receive dividend equivalents in respect of
such Restricted Stock Units equal to the amount or value of any cash or
other dividends or distributions payable on an equivalent number of
shares of common stock. The Restricted Stock Units and related dividend
equivalents will vest (and become non-forfeitable) and be paid (in the
form of shares of common stock) one year from the date of grant. In
addition, Non-Employee Directors may elect each year, not later than
December 31 of the year preceding the year as to which the annual grant
of Restricted Stock Units is to be applicable, to defer to a fixed date
or pursuant to a specified schedule payment of all or any portion of
the annual grant of Restricted Stock Units. Any modification of the
deferral election may be made only upon satisfaction of any conditions
that the relevant Committee may impose. Non-Employee Directors may also
elect each year, not later than December 31 of the year preceding the
year as to which deferral of fees is to be applicable, to defer to a
fixed date or pursuant to a specified schedule all or any portion of
the cash retainer to be paid for Board or other service related to
Board activities in the following calendar year through the issuance of
Deferred Stock Units, valued at the Fair Market Value of the relevant
Applicant's stock on the date when each payment of such retainer amount
would otherwise be made in cash.
For the Commission, by the Division of Investment Management,
under delegated authority.
Brent J. Fields,
Secretary.
[FR Doc. 2015-03026 Filed 2-12-15; 8:45 am]
BILLING CODE 8011-01-P
