Federal Register / Vol. 65, No. 119 / Tuesday, June 20, 2000 / Proposed Rules 38223

must enforce this compliance. The

facility must maintain documented

procedures for identification, collection,

indexing, access, filing, storage,

maintenance, and disposition of quality

system records. The facility must

maintain quality system records to

demonstrate conformance to the quality

manual and the effective operation of

the quality system.

(4) Personnel. There must be a

selection procedure and a training

system to ensure technical competence

of all staff members. The education,

technical knowledge, and experience

required to perform assigned test and

inspection functions must be

documented and clearly defined. In

addition:

(i) Evaluation of plant or tissue

samples must be undertaken by a plant

pathologist or by laboratory technicians

under the supervision of a plant

pathologist. Where personnel are

required to be trained at a facility to

evaluate the particular types of plants or

tissue samples handled by the facility,

the training program must be evaluated

by APHIS and determined to be

effective.

(ii) All staff must have access to and

be familiar with the reference materials,

guides, and manuals required for the

routine performance of the tests and

inspections they conduct.

(Approved by the Office of Management

and Budget under control number 0579–

0130.)

Done in Washington, DC, this 14th day of

June 2000.

Richard L. Dunkle,

Acting Administrator, Animal and Plant

Health Inspection Service.

[FR Doc. 00–15493 Filed 6–19–00; 8:45 am]

BILLING CODE 3410–34–U

SMALL BUSINESS ADMINISTRATION

13 CFR Part 107

Small Business Investment Companies

AGENCY: Small Business Administration.

ACTION: Proposed rule.

SUMMARY: This proposed rule would

implement a provision of Public Law

106–9, enacted April 5, 1999, under

which certain types of consideration

paid to a small business investment

company (SBIC) by a small business are

excluded from ‘‘cost of money’’

limitations.

DATES: Submit comments on or before

July 20, 2000.

ADDRESSES: Address comments to Don

A. Christensen, Associate Administrator

for Investment, U.S. Small Business

Administration, 409 3rd Street, SW,

Suite 6300, Washington, DC 20416.

FOR FURTHER INFORMATION CONTACT:

Leonard W. Fagan, Investment Division,

at (202) 205–7583.

SUPPLEMENTARY INFORMATION: This

proposed rule would implement a

provision of Public Law 106–9, enacted

April 5, 1999, that amended section

308(i)(2) of the Small Business

Investment Act of 1958. The

amendment provided that certain types

of consideration paid to an SBIC by a

small business are excluded from the

regulatory limitations on ‘‘Cost of

Money’’ established by the Small

Business Administration (SBA). The

amendment excluded from these Cost of

Money limits any consideration

consisting of ‘‘contingent obligations’’

granting the SBIC an interest in the

‘‘equity or increased future revenue’’ of

the small business.

To implement this change, SBA is

proposing to broaden one of the

exclusions from Cost of Money in

§ 107.855(g) and to add another. First,

§ 107.855(g)(12) would be revised to

allow the exclusion of royalty payments

for all SBIC financings. Currently, this

exclusion applies only to ‘‘LMI

Investments’’ as defined in § 107.50. To

qualify for the exclusion, the royalty

must be based on improvement in the

performance of the small business after

the date of the financing. The royalty

could be expressed, for example, as a

percentage of any increase in an

underlying unit of measurement (e.g.,

revenues or sales) after the date of the

financing. As discussed in the preamble

to the final rule establishing the original

provision for LMI Investments (64 FR

52641), the royalty can be based on an

increase in more than one unit of

measurement. For example, a royalty

could provide for payment to the SBIC

if either the revenue or the profits of the

small business increased.

If an SBIC makes an investment

through a holding company or an

investment vehicle, as permitted under

§ 107.720(b), performance

improvements will be evaluated in the

same manner already established for

LMI Investments. In determining

whether a business’s performance has

improved, SBA will look through any

holding company or investment vehicle

to the performance of the operating

business itself.

SBA is proposing one additional

change with respect to royalty

payments. In § 107.815(a), the definition

of a Debt Security would be revised to

include a loan with a right to receive

royalties that are excluded from the Cost

of Money. The effect of this change is

that a financing of this type will be

subject to the lower Cost of Money

ceiling applicable to Debt Securities,

rather than the higher ceiling applicable

to Loans with no upside potential.

SBA also proposes to add

§ 107.855(g)(13), which would exclude

from Cost of Money any gains realized

by an SBIC from the disposition of

Equity Securities issued by a small

business. This provision has been added

as a clarification, since SBA’s

longstanding practice has been to

exclude such gains from the Cost of

Money limits. For example, if an SBIC

receives warrants that qualify as Equity

Securities, or converts debt to an Equity

Security, any gains realized on the

disposition of these interests do not

count against the Cost of Money ceiling.

Finally, SBA proposes to remove

paragraph § 107.855(i). This paragraph

allows an SBIC that is lending to a small

business to receive a one-time ‘‘bonus’’

at the end of the loan term, contingent

upon one or more factors reflecting the

performance of the business during the

loan period. Such bonus payments are

excluded from the Cost of Money. The

proposed revision of § 107.855(g)(12),

which would provide a broader

exclusion of contingent payments from

the Cost of Money, renders the bonus

provision redundant.

Compliance With Executive Orders,

12866, 12988, and 13132, the

Regulatory Flexibility Act (5 U.S.C. 601,

et seq., and the Paperwork Reduction

Act (44 U.S.C. Ch. 35)

SBA has determined that this

proposed rule does not constitute a

significant rule within the meaning of

section 3(f) of Executive Order 12866.

Under the Regulatory Flexibility Act,

5 U.S.C. 601, et seq., SBA has

determined that this proposed rule will

not have a significant economic impact

on a substantial number of small

entities. The purpose of the proposed

rule is to implement a provision of

Public Law 106–9 allowing small

business investment companies (SBICs)

to realize contingent payments, such as

royalties, from small businesses without

being subject to regulatory limits on the

amount of consideration received.

Interest and other non-contingent

payments made to SBICs by small

businesses would continue to be subject

to the existing Cost of Money

regulations. This provision is expected

to be attractive primarily to SBICs

considering investments in small

businesses that are seeking to grow, but

whose owners do not want to give

substantial equity interests to outside

investors. In such cases, the SBIC can

38224 Federal Register / Vol. 65, No. 119 / Tuesday, June 20, 2000 / Proposed Rules

participate in the growth of the business

by collecting a royalty rather than

through an ownership interest.

Based on recent statistics for the SBIC

program, the circumstances that this

proposed rule would address do not

appear to apply to most small

businesses currently receiving SBIC

financing. In fiscal year 1999, SBICs

provided financing to 1,983 different

small businesses. In approximately twothirds of all the financings closed during

that year, the SBIC obtained an actual or

potential equity interest in the small

business; even if the proposed rule had

been in place, it is unlikely that these

transactions would have included

royalty provisions. The remaining onethird of SBIC financings typically

consist of loans to very small businesses

with low growth potential, which are

unlikely to have the ability to make

royalty payments under any

circumstances. Thus, it is unlikely that

this proposed rule would affect a

substantial number of small entities.

The proposed rule is expected to

expand financing opportunities for

certain small businesses wishing to

grow while remaining closely held,

rather than make SBIC financing more

expensive for small businesses currently

being served by the program.

For purposes of Executive Order

12988, SBA has determined that this

proposed rule is drafted, to the extent

practicable, in accordance with the

standards set forth in Section 3 of that

Order.

For purposes of Executive Order

13132, SBA has determined that this

proposed rule has no federalism

implications.

For purposes of the Paperwork

Reduction Act, 44 U.S.C. Ch. 35, SBA

certifies that this proposed rule contains

no new reporting or recordkeeping

requirements.

List of Subjects in 13 CFR Part 107

Investment companies, Loan

programs-business, Reporting and

recordkeeping requirements, Small

businesses.

For the reasons set forth in the

preamble, SBA proposes to amend 13

CFR part 107 as follows:

PART 107—SMALL BUSINESS

INVESTMENT COMPANIES

1. The authority citation for part 107

continues to read as follows:

Authority: 15 U.S.C. 681 et seq., 683,

687(c), 687b, 687d, 687g and 687m.

2. In § 107.815, revise the first

sentence of paragraph (a) to read as

follows:

§ 107.815 Financings in the form of Debt

Securities.

* * * * *

(a) Definitions. Debt Securities are

instruments evidencing a loan with an

option or any other right to acquire

Equity Securities in a Small Business or

its Affiliates, or a loan which by its

terms is convertible into an equity

position, or a loan with a right to receive

royalties that are excluded from the Cost

of Money pursuant to § 107.855(g)(12).

* * * * *

3. In § 107.855, revise paragraph

(g)(12), add paragraph (g)(13), and

remove paragraph (i) to read as follows:

§ 107.855 Interest rate ceiling and

limitations on fees charged to Small

Businesses (‘‘Cost of Money’’).

* * * * *

(g) * * *

(12) Royalty payments based on

improvement in the performance of the

Small Business after the date of the

Financing.

(13) Gains realized on the disposition

of Equity Securities issued by the Small

Business.

* * * * *

Dated: June 8, 2000.

Aida Alvarez,

Administrator.

[FR Doc. 00–15421 Filed 6–19–00; 8:45 am]

BILLING CODE 8025–01–U

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 71

[Airspace Docket No. 00–ASO–23]

Proposed Establishment of Class D

Airspace; Kissimmee, FL

AGENCY: Federal Aviation

Administration (FAA), DOT.

ACTION: Notice of proposed rulemaking.

SUMMARY: This action proposes to

establish Class D airspace at Kissimmee,

FL. Air traffic controllers at Kissimmee

Municipal Airport, FL, are being

certificated as weather observers.

Therefore, the airport will meet criteria

for Class D airspace. Class D surface area

airspace is required when the control

tower is open to accommodate current

Standard Instrument Approach

Procedures (SIAPs) and for Instrument

Flight Rules (IFR) operations at the

airport. This action would establish

Class D airspace extending upward from

the surface to and including 2,500 feet

MSL within a 4-mile radius of the

Kissimmee Municipal Airport.

DATES: Comments must be received on

or before July 20, 2000.

ADDRESSES: Send comments on the

proposal in triplicate to: Federal

Aviation Administration, Docket No.

00–ASO–23, Manager, Airspace Branch,

ASO–520, P.O. Box 20636, Atlanta,

Georgia 30320.

The official docket may be examined

in the Office of the Regional Counsel for

Southern Region, Room 550, 1701

Columbia Avenue, College Park, Georgia

30337, telephone (404) 305–5627.

FOR FURTHER INFORMATION CONTACT:

Nancy B. Shelton, Manager, Airspace

Branch, Air Traffic Division, Federal

Aviation Administration, P.O. Box

20636, Atlanta, Georgia 30320;

telephone (404) 305–5586.

SUPPLEMENTARY INFORMATION:

Comments Invited

Interested parties are invited to

participate in this proposed rulemaking

by submitting such written data, views

or arguments as they may desire.

Comments that provide the factual basis

supporting the views and suggestions

presented are particularly helpful in

developing reasoned regulatory

decisions on the proposal. Comments

are specifically invited on the overall

regulatory, aeronautical, economic,

environmental, and energy-related

aspects of the proposal.

Communications should identify the

airspace docket number and be

submitted in triplicate to the address

listed above. Commenters wishing the

FAA to acknowledge receipt of their

comments on this action must submit

with those comments a self-addressed,

stamped postcard on which the

following statement is made:

‘‘Comments to Airspace Docket No. 00–

ASO–23.’’ The postcard will be date/

time stamped and returned to the

commenter. All communications

received before the specified closing

date for comments will be considered

before taking action on the proposed

rule. The proposal contained in this

action may be changed in light of the

comments received. All comments

submitted will be available for

examination in the Office of the

Regional Counsel for Southern Region,

Room 550, 1701 Columbia Avenue,

College Park, Georgia 30337, both before

and after the closing date for comments.

A report summarizing each substantive

public contact with FAA personnel

concerned with this rulemaking will be

filed in the docket.

Availability of NPRMs

Any person may obtain a copy of this

Notice of Proposed Rulemaking (NPRM)