Document ID: SEC-2015-0267-0001
Agency: sec
Document Type: Notice
Title: Applications: The Adams Express Co., Petroleum and Resources Corp.
Posted Date: 2015-02-13T05:00Z

[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 http://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