
[Federal Register: May 27, 2009 (Volume 74, Number 100)]
[Notices]               
[Page 25290-25291]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27my09-96]                         

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 28726; File No. 812-13649]

 
Main Street Capital Corporation, et al.; Notice of Application

May 19, 2009.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application for an order under section 23(c)(3) of 
the Investment Company Act of 1940 (the ``Act'') for an exemption from 
section 23(c) of the Act.

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Summary of the Application: Applicants, Main Street Capital Corporation 
(the ``Company''), Main Street Mezzanine Fund, LP (``MSMF''), Main 
Street Capital Partners, LLC (the ``Adviser'') and Main Street 
Mezzanine Management, LLC (the ``GP''), request an order to amend a 
prior order (the ``Prior Order'') that permits the Company to issue 
restricted shares of its common stock (``Restricted Stock'') under the 
terms of its employee and director compensation plan, the Main Street 
Capital Corporation 2008 Equity Incentive Plan (the ``Plan'').\1\ 
Applicants seek to amend the Prior Order in order to permit the 
Company, pursuant to the Plan, to engage in certain transactions that 
may constitute purchases by the Company of its own securities within 
the meaning of section 23(c) of the Act.
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    \1\ Main Street Capital Corporation, et al., Investment Company 
Act Release Nos. 28082 (Dec. 21, 2007) (notice) and 28120 (Jan 16, 
2008) (order). MSMF, the GP and the Adviser are each, directly or 
indirectly, wholly owned by the Company.
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    Filing Dates: The application was filed on April 3, 2009 and 
amended on May 13, 2009 and May 18, 2009.
    Hearing or Notification of Hearing: An order granting the 
application will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Commission's 
Secretary and serving applicant with a copy of the request, personally 
or by mail. Hearing requests should be received by the Commission by 
5:30 p.m. on June 15, 2009, 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 Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street, NE., Washington, DC 20549-1090. Applicants, c/o Jason B. 
Beauvais, General Counsel, Main Street Capital Corporation, 1300 Post 
Oak Boulevard, Suite 800, Houston, TX 77056.

FOR FURTHER INFORMATION CONTACT: Jaea F. Hahn, Senior Counsel, at (202) 
551-6870, or Janet M. Grossnickle, Assistant Director, at (202) 551-
6821, (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 via the 
Commission's Web site by searching for the file number, or an applicant 
using the Company name box, at http://www.sec.gov/search/search.htm or 
by calling (202) 551-8090.

Applicants' Representations

    1. The Company is an internally managed, non-diversified, closed-
end investment company that has elected to be regulated as a business 
development company (``BDC'') under the Act. The Company is currently 
permitted to issue shares of Restricted Stock under the terms of its 
Plan in reliance on the Prior Order. Applicants seek to amend the Prior 
Order in order to permit the Company, pursuant to the Plan, to withhold 
shares of the Company's common stock or purchase shares of the 
Company's common stock from executive officers or employees 
(``Participants'') to satisfy tax withholding obligations related to 
the vesting of Restricted Stock or the exercise of stock options that 
were or will be granted pursuant to the Plan. In addition, the Company 
seeks to amend the Prior Order to permit Participants to pay the 
exercise price of options that were or will be granted to them pursuant 
to the Plan with shares of the Company's common stock already held by 
them or pursuant to a net share settlement feature.\2\ The Applicants 
will continue to comply with all of the terms and conditions of the 
Prior Order.
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    \2\ Net share settlement allows the Company to deliver only gain 
shares (i.e., shares of its common stock with a fair market value, 
as the term is defined in the Plan, equal to the option spread upon 
exercise) directly to the optionee without the need for the optionee 
to sell shares of the Company's common stock on the open market or 
borrow cash from third parties in order to exercise his or her 
options.
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    2. The Plan authorizes the issuance to Participants of shares of 
Restricted Stock and options to purchase shares of the Company's common 
stock, subject to certain forfeiture restrictions. On the date 
Restricted Stock vests, shares of the Restricted Stock are released to 
the Participant and are available for sale or

[[Page 25291]]

transfer and the value of the vesting shares is deemed to be 
compensation for a Participant.\3\ As discussed more fully in the 
application, certain exercises of options result in a Participant being 
deemed to have received compensation in the amount by which the fair 
market value of the shares of the Company's common stock, determined as 
of the date of exercise, exceeds the exercise price. Applicants state 
that any compensation income recognized by a Participant generally is 
subject to federal withholding for income and employment tax purposes. 
Accordingly, arrangements must be made to satisfy the necessary 
withholding tax obligations.
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    \3\ During the restriction period (i.e., prior to the lapse of 
the forfeiture restrictions), the Restricted Stock may not be sold, 
transferred, hypothecated, margined, or otherwise encumbered by the 
Participant.
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    3. The Company's stockholders approved the terms and provisions of 
the Plan on June 17, 2008. The Plan explicitly permits the Company to 
withhold shares of the Company's common stock or purchase shares of the 
Company's common stock from the Participants to satisfy tax withholding 
obligations related to the vesting of Restricted Stock or the exercise 
of options granted pursuant to the Plan. The Plan further provides that 
Participants may pay the exercise price of options to purchase shares 
of the Company's stock with shares of the Company's stock already held 
by such Participants or pursuant to net share settlement.

Applicants' Legal Analysis

    1. Section 23(c) of the Act, which is made applicable to BDCs by 
section 63 of the Act, generally prohibits a BDC 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 ensure 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. Applicants state that the 
withholding or purchase of shares of Restricted Stock and common stock 
in payment of applicable withholding tax obligations or of common stock 
in payment for the exercise price of a stock option might be deemed to 
be purchases by the Company of its own securities within the meaning of 
section 23(c) and therefore prohibited by the Act.
    2. Section 23(c)(3) provides that the Commission may issue an order 
that would permit a BDC to repurchase its shares in circumstances in 
which the repurchase is made in a manner or on a basis that does not 
unfairly discriminate against any holders of the class or classes of 
securities to be purchased. Applicants believe that the requested 
relief meets the standards of section 23(c)(3).
    3. Applicants state that these purchases will be made on a basis 
which does not unfairly discriminate against the stockholders of the 
Company because all purchases of the Company's stock will be at the 
closing price of the common stock on the NASDAQ Global Select Market 
(or any primary exchange on which the shares are traded) on the 
relevant date (i.e., the public market price on the date the Restricted 
Stock vests or the date of the exercise of any options). Applicants 
further state that no transactions will be conducted pursuant to the 
requested order on days where there are no reported market transactions 
involving the Company's shares. Applicants submit that because all 
transactions would take place at the public market price for the 
Company's common stock, the transactions would not be significantly 
different than could be achieved by any stockholder selling in a market 
transaction.
    4. Applicants submit that the proposed purchases do not raise 
concerns about preferential treatment of the Company's insiders because 
the Plan is a bona fide compensation plan of the type that is common 
among corporations generally. Further, the vesting schedule is 
determined at the time of the initial grant of the Restricted Stock 
while the option exercise price is determined at the time of the 
initial grant of the options. Applicants represent that all purchases 
will be made only as permitted by the Plan, which was approved by the 
Company's stockholders. Applicants argue that granting the requested 
relief would be consistent with precedent and the Commission's 
recognition of the important role that equity compensation can play in 
attracting and retaining qualified personnel with respect to certain 
types of investment companies, including BDCs.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-12219 Filed 5-26-09; 8:45 am]

BILLING CODE 8010-01-P
