[Federal Register Volume 60, Number 243 (Tuesday, December 19, 1995)]
[Notices]
[Pages 65367-65369]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-30764]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-21594; 812-9712]
Sirrom Capital Corporation; Notice of Application
December 13, 1995.
Agency: Securities and Exchange Commission (``SEC'').
Action: Notice of Application under the Investment Company Act of 1940
(the ``Act'').
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Applicant: Sirrom Capital Corporation.
Relevant Act Section: Section 61(a)(3)(B).
Summary of Application: Applicant requests an order approving
applicant's 1995 Stock Option Plan for Non-Employee Directors (the
``Plan'') and the grant of certain stock options thereunder.
Filing Dates: The application was filed on August 7, 1995 and amended
on October 30, 1995.
Hearing or Notification of Hearing: An order granting the application
will be
[[Page 65368]]
issued unless the SEC orders a hearing. Interested persons may request
a hearing by writing to the SEC's Secretary and serving applicant with
a copy of the request, personally or by mail. Hearing requests should
be received by the SEC by 5:30 p.m. on January 8, 1996 and should be
accompanied by proof of service on the 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
requests, and the issues contested. Persons may request notification of
a hearing by writing to the SEC's Secretary.
Addresses: Secretary, SEC, 450 5th Street, N.W., Washington, D.C.
20549. Applicant, 511 Union Street, Nashville City Center, Suite 2310,
Nashville, Tennessee 37219.
For Further Information Contact: Sarah A. Buescher, Staff Attorney, at
(202) 942-0573, or Alison E. Baur, Branch Chief, at (202) 942-0564
(Division of Investment Management, Office of Investment Company
Regulation).
Supplementary Information: The following is a summary of the
application. The complete application may be obtained for a fee from
the SEC's Public Reference Branch.
Applicant's Representations
1. Applicant is a business development company (``BDC'') within the
meaning of section 2(a)(48) of the Act.\1\ Applicant requests an order
pursuant to section 61(a)(3)(B) of the Act approving the Plan and
pursuant to the Plan, the automatic grant of options to purchase shares
of applicant's common stock to each director who is neither an officer
nor an employee of applicant (``non-employee director'') and to each
new non-employee director of applicant who may be elected or appointed
in the future to applicant's board of directors. Applicant will submit
the Plan to applicant's shareholders for their approval at the next
meeting for shareholders to be held in the Spring of 1996. Applicant
will implement the Plan subsequent to receiving approval by applicant's
shareholders and an order of the SEC (``Approval Date'').
\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. Such
issuers are small, nascent companies whose securities typically are
illiquid.
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2. Applicant states that its primary investment objectives are to
achieve a high level of current income and long-term growth in the
value of its assets. Applicant is primarily engaged in the business of
making loans to small, privately owned companies whose securities have
no established public market. Applicant's investment decisions are made
by a loan approval committee comprised of senior management of
applicant in accordance with policies approved by applicant's board of
directors. Applicant makes available to its investee companies
significant managerial assistance, and helps its investee companies
establish boards of directors. In addition, applicant assists its
investee companies in obtaining necessary financing and increasing the
value of the investee companies. Applicant does not have an external
``investment adviser'' within the meaning of the Act.
3. Each non-employee director of applicant receives $1,000 for each
board and committee meeting attended and reimbursement for expenses
incurred in attending meetings. Non-employee directors receive no other
compensation for their services to applicant.
4. Grants of options under the Plan would be limited to (a) 18,000
shares of applicant's common stock for non-employee directors elected
prior to December 1, 1994, (b) 12,000 shares of applicant's common
stock for non-employee directors elected between December 1, 1994 and
the Approval Date, and (c) 6,000 shares of applicant's common stock for
non-employee directors elected or appointed after the Approval Date. On
the Approval Date, the aggregate amount of applicant's voting
securities that would result from the exercise of all options issued or
issuable under the Plan and applicant's existing employee stock option
plan would be 614,000 shares, or approximately 6.7% of the 9,195,116
shares of applicant's common stock outstanding as of September 30,
1995. Applicant has no warrants, options, or rights to purchase its
voting securities outstanding, other than those granted or to be
granted as of the Approval Date to its directors, officers, and
employees pursuant to the executive compensation plans described in the
application.
5. Pursuant to the terms of the Plan, the options would vest and
become exercisable on the first anniversary of the date of grant.
Options would be exercisable at any time after they become exercisable
until the tenth anniversary of the date of the grant. The exercise
price of the options would be 100% of the current market value of
applicant's common stock on the date of issuance.
6. In the event of a non-employee director's death or disability
during the director's service, all of the director's unexercised
options would immediately become exercisable for a period of three
years following the date of death or one year following the date of
disability, but in no event after the expiration dates of the options.
In the event of the termination of a non-employee director for cause,
any options held by the director not exercised shall terminate
immediately upon termination of service and may not be exercised
thereafter. If a non-employee director's service is terminated for any
reason other than by death, disability, or by applicant for cause, his
or her options may be exercised within one year following the date of
termination, but in no event after the expiration date of the options.
Applicant's Legal Analysis
1. Section 63(3) of the Act permits a BDC to sell its common stock
at a price below current net asset value upon the exercise of any
option issued in accordance with section 61(a)(3) of the Act.
2. Section 61(a)(3)(B) of the Act 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 securities at the date of the issuance of the
options, or if no such market exists, the then current net asset value
of the underlying securities; (c) the proposal to issue such 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(1) of the Investment Advisers Act of 1940, except to the extent
permitted by clause (A) or (B) of that section; and (f) the BDC does
not have a profit-sharing plan as described in section 57(n) of the
Act.
3. In addition, section 61(a)(3)(B) of the Act 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,
[[Page 65369]]
officers, and employees pursuant to an 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 shall not exceed 20% of the outstanding voting securities of
the BDC.
4. Applicant represents that the Plan, the stock options to be
granted automatically to applicant's non-employee directors, and the
stock options to be granted automatically to applicant's future non-
employee directors pursuant to the Plan would meet the requirements of
section 61(a): (a) the options would expire within ten years from the
date of grant; (b) the exercise price of the options would be the
current market value of applicant's common stock on the date of
issuance; (c) the proposal to issue the options would be authorized by
applicant's shareholders; (d) the options would not be transferable
except for disposition by gift, will, or intestacy; (e) applicant does
not have an investment adviser; and (f) applicant does not have a
profit-sharing plan as described in section 57(n) of the Act. In
addition, the total amount of voting securities that would result from
the exercise of all outstanding warrants, options, and rights at the
time of issuance would not exceed 20% of the outstanding voting
securities of applicant.
5. Applicant represents that its directors are actively involved in
the oversight of applicant's affairs, and that applicant relies on the
judgment and experience of its directors. Applicant's directors have
experience in many of the industries in which applicant's investee
companies operate. The directors' backgrounds enhance applicant's
ability to review and evaluate its investee companies and their
performance. Applicant states that in order to attract and retain
qualified personnel, it must provide non-employee directors with
incentives in the form of an executive compensation program, as
contemplated by section 61(a) of the Act.
6. Applicant submits that the terms of the Plan and the stock
options to be granted automatically to applicant's non-employee
directors are fair and reasonable and do not involve any overreaching
of applicant or its shareholders. Options granted to purchase 6,000,
12,000, or 18,000 shares of applicant's common stock would currently
represent only .07%, .13%, and .20%, respectively, of applicant's
outstanding common stock. Given these relatively small amounts of
stock, applicant submits that the exercise of the options would not,
absent extraordinary circumstances, have a substantial dilutive effect
on the net asset value of applicant's common stock.
7. Applicant asserts that because the stock options granted to a
non-employee director would not vest until after the first anniversary
of the date of grant, the Plan would provide non-employee directors
with incentives to remain directors of applicant. In addition,
applicant contends that because the options granted pursuant to the
Plan have no value unless the price of applicant's common stock exceeds
the exercise price of the option, the options provide significant
incentives for its non-employee directors to devote their best efforts
to the success of applicant's business. Applicant also represents that
the options provide a means for the directors to increase their
ownership interests in applicant, thereby helping to ensure close
identification of their interests with those of applicant and its
shareholders. Applicant contends that incentives in the form of stock
options enable it to maintain continuity in the membership of its board
of directors and to attract and retain as directors the highly
experienced, successful, and dedicated business and professional people
that are critical to applicant's success as a BDC and to the success of
its investee companies.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-30764 Filed 12-18-95; 8:45 am]
BILLING CODE 8010-01-M