30788 Federal Register / Vol. 63, No. 108 / Friday, June 5, 1998 / Notices

1Section 2(a)(48) defines a BDC to be any closedend investment company that operates for the

purpose of making investments in securities

described in sections 55(a)(1) through 55(a)(3) of the

Act and makes available significant managerial

assistance with respect to the issuers of such

securities.

2Currently, there are eight Non-Employee

Directors: E. Townes Duncan, William D. Eberle,

Edward J. Mathias, Robert A. McCabe, Jr., Raymond

H. Pirtle, Jr., L. Edward Wilson, P.E., Keith M.

Thompson, and John A. Morris, Jr., M.D. However,

John A. Morris, Jr., M.D. will not participate in the

Amended Plan. Each Non-Employee Director

receives $10,000 per year if the Director attends

75% of the regular board meetings held during the

year and receives reimbursement of expenses

incurred in attending these meetings.

3Sirrom Capital Corporation, Investment

Company Act Release No. 21667 (January 11, 1996).

advisory and other services provided to

the Fund during the Interim Period will

be at least equivalent, in the judgment

of the Board, including a majority of the

Independent Directors, to the scope and

quality of services provided under the

Current Agreement. If personnel

providing material services during the

Interim Period change materially,

AAM–P will apprise and consult with

the Board to assure that the Board,

including a majority of the Independent

Directors, are satisfied that the services

provided will not be diminished in

scope or quality.

For the SEC, by the Division of Investment

Management, under delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–14922 Filed 6–4–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Rel. No. IC–23228; 812–10944]

Sirrom Capital Corporation; Notice of

Application

May 29, 1998.

AGENCY: Securities and Exchange

Commission (the ‘‘SEC’’ or the

‘‘Commission’’).

ACTION: Notice of application for an

order under section 61(a)(3)(B) of the

Investment Company Act of 1940 (the

‘‘Act’’).

SUMMARY OF APPLICATION: Applicant,

Sirrom Capital Corporation, requests an

order approving its Amended and

Restated 1995 Stock Option Plan for

Non-Employee Directors (the ‘‘Amended

Plan’’). The requested order would

supersede and existing order.

FILING DATES: The application was filed

on December 31, 1997 and amended on

April 29, 1998.

HEARING OR NOTIFICATION OF HEARING: An

order granting the application will be

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

June 23, 1998, and should be

accompanied by proof of service on

applicant, in the form of an affidavit or,

for lawyers, a certificate of service.

Hearing requests should state the nature

of the writer’s interest, the reason for the

request, and the issues contested.

Persons who wish to be notified of a

hearing may request notification by

writing to the SEC’s Secretary.

ADDRESSES: Secretary, SEC, 450 5th

Street, NW., Washington, DC 20549.

Applicant, 500 Church Street, Suite 200,

Nashville, Tennessee 37219.

FOR FURTHER INFORMATION CONTACT:

Deepak T. Pai, Staff Attorney, at (202)

942–0574, or Edward P. Macdonald,

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 is

available for a fee at the SEC’s Public

Reference Branch, 450 Fifth Street, NW.,

Washington, DC 20549 (tel. 202–942–

8090).

Applicant’s Representations

1. Applicant is a business

development company (‘‘BDC’’) within

the meaning of section 2(a)(48) of the

Act.1 Applicant is a specialty finance

company that primarily makes loans to

small businesses. Applicant’s

investment objectives are to achieve

both a high level of current income and

long-term growth in the value of its

assets. Applicant’s investment decisions

are made by a loan approval committee

comprised of senior management in

accordance with policies approved by

its board of directors (the ‘‘Board’’).

Applicant assists its portfolio

companies in establishing independent

and effective boards of directors and

management teams, devising business

strategies, obtaining necessary

financing, and increasing the value of

the companies. Applicant does not have

an external investment adviser within

the meaning of section 2(a)(20) of the

Act.

2. Applicant requests an order under

section 61(a)(3)(B) of the Act approving

the Amended Plan for directors who are

neither officers nor employees of

applicant during the two year period

preceding the date of grant of an option

(‘‘Non-Employee Directors’’).2 On

December 19, 1997, the Board adopted

the Amended Plan subject to approval

by the SEC and applicant’s

shareholders. On April 17, 1998,

applicant’s shareholders approved the

Amended Plan. The Amended Plan will

become effective on the date it is

approved by the SEC. The requested

order would supersede an existing

order.3

3. The Amended Plan provides for: (i)

An initial automatic grant of options to

purchase 12,000 shares of applicant’s

common stock to a Non-Employee

Director upon election to the Board; and

(ii) an automatic grant of options to

purchase an additional 4,000 shares of

applicant’s common stock to each NonEmployee Director re-elected to the

board in April 1997 and April 1998 and

to each Non-Employee Director who

may be re-elected to the Board in the

future (collectively, ‘‘Options’’). A total

of 492,000 shares of applicant’s

common stock is issuable under the

Amended Plan.

4. Under the terms of the Amended

Plan, the exercise price of an Option is

100% of the current market price of

applicant’s common stock on the date of

issuance of the Option. The Options

vest and become exercisable on the first

anniversary of the date of grant and

expire within ten years form the date of

grant.

5. In the event of the death or

disability of a Non-Employee Director

during the Director’s service,

unexercised Options immediately

become exercisable and may be

exercised for a period of three years

following the date of death (by the

Director’s personal representative) or

one year following the date of disability.

In the event of the termination of a NonEmployee Director for cause, any

unexercised Options terminate

immediately. If a Non-Employee

Director’s service is terminated for any

reason other than by death, disability, or

for cause, the Options may be exercised

within one year immediately following

the date of termination.

6. Applicant’s officers and employees,

including employee directors, are

eligible to receive options under

applicant’s two other stock option plans

(under which Non-Employee Directors

are not entitled to receive awards). The

total number of shares of common stock

that would be issuable under the

Amended Plan and these two other

stock option plans is 7,199,098 shares

and represents 19.4% of the total

number of shares of applicant’s

outstanding common stock as of April

23, 1998. Applicant has no warrants,

options or rights to purchase its
Federal Register / Vol. 63, No. 108 / Friday, June 5, 1998 / Notices 30789

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4.

3Letter from Joan C. Conley, Corporate Secretary,

NASD Regulation, Inc. to Katherine England,

Assistant Director, Division of Market Regulation,

Commission dated May 4, 1998.

4See Securities Exchange Act Release No. 39957

(May 1, 1998), 63 FR 26238 (File No. SR–NASD–

98–34).

5Securities Exchange Act Release No. 37538

(Aug. 8, 1996) (SEC Order Instituting Public

Proceedings Pursuant to Section 19(h)(1) of the

Securities Exchange Act of 1934, Making Findings

and Imposing Remedial Sanctions, In the Matter of

National Association of Securities Dealers, Inc.,

Administrative Proceeding File No. 3–9056). The

order included fourteen undertakings

(‘‘Undertakings’’) addressing actions to be taken by

the Association in response to the findings of the

Order.

outstanding voting securities other than

those granted to its directors, officers,

and employees pursuant to these three

plans.

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

market exists, the current net asset value

of the voting securities; (c) the proposal

to issue the options is authorized by the

BDC’s shareholders, and is approved by

order of the SEC 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,

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 will not exceed 20% of the

outstanding voting securities of the

BDC.

4. Applicant represents that the

Amended Plan would comply with the

requirements of section 61(a) (3) (B) of

the Act. Applicant submits that the

terms of the Amended Plan are fair and

reasonable and do not involve

overreaching of applicant or its

shareholders. Applicant states that the

Options would not be immediately

exercisable and do not vest until the

first anniversary of the date of the grant.

Applicant asserts that under the

Amended Plan, even if each of the

current Non-Employee Directors is reelected for a period of three years, the

total amount of common stock issuable

under the Options would be 164,000

shares (28,000 shares of which would

not yet be exercisable) or 0.44% of

applicant’s outstanding common stock.

In addition, applicant states that the

total number of shares of common stock

issuable under the Options that may be

granted in any one year to the current

Non-Employee Directors represents

.08% of applicant’s outstanding

common stock. Applicant asserts that,

given the small number of common

stock issuable upon exercise of the

Options, the exercise of the Options

pursuant to the Amended Plan will not

have a substantial dilutive effect on the

net asset value of applicant’s common

stock. Applicant states that, the total

amount of voting securities that would

be issuable under the Amended Plan at

the time of issuance would not exceed

20% of applicant’s outstanding voting

securities.

5. Applicant states that its directors

are directly involved in the oversight of

the applicant’s affairs, and applicant

relies on the judgment and experience

of its directors. Applicant also states

that Non-Employee Directors are

involved in applicant’s ongoing

operations and marketing activities, and

applicant’s management regularly

solicits Non-Employee Directors for

their ideas and advice with respect to

prospective investments, acquisitions,

and operational matters. Applicant

believes that the Options will provide

additional incentives to Non-Employee

Directors to remain on the Board.

Applicant also believes that the Options

provide a means for Non-Employee

Directors to increase their ownership

interests in the applicant, thereby

further ensuring close identification of

their interests with those of the

applicant and its shareholders.

Applicant asserts that incentives such as

Options will maintain continuity in the

Board’s membership and help attract

and retain highly experienced

professionals that are critical to

applicant’s success as a BDC.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–14919 Filed 6–4–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–40026, File No. SR–NASD–

98–34]

Self-Regulatory Organizations; Order

Granting Accelerated Approval to

Proposed Rule Change by the National

Association of Securities Dealers, Inc.,

Relating to Cancellations and

Suspensions for Failure To Comply

With Arbitration Award

May 26, 1998.

On May 1, 1998, the National

Association of Securities Dealers, Inc.

(‘‘NASD’’ or ‘‘Association’’) filed with

the Securities and Exchange

Commission (‘‘SEC’’ or ‘‘Commission’’)

a proposed rule change pursuant to

Section 19(b)(1) of the Securities

Exchange Act of 1934 (‘‘Act’’),1 and

Rule 19b–4 thereunder.2 The filing was

thereafter amended on May 4, 1998.3 In

its proposal, the Association sought

approval of an amendment to its Code

of Procedure, to permit members of the

NASD Regulation, Inc. (‘‘NASD

Regulation’’) Office of Hearing Officers

to oversee non-summary proceedings

involving cancellations and suspensions

related to failure to comply with an

arbitration award. Notice of the

proposal, including Amendment No. 1

thereto, was published in the Federal

Register on May 12, 1998 (‘‘Notice’’).4

The Commission did not receive

comment letters on the filing.

I. Introduction and Background

In connection with the recent

reorganization of the Association

following issuance of the SEC Order

Instituting Public Proceedings Pursuant

to Section 19(h)(1) of the Securities

Exchange Act of 1934, Making Findings

and Imposing Remedial Sanctions 5 and

the Report Pursuant to Section 21(a) of

the Securities Exchange Act of 1934

Regarding the NASD and The Nasdaq