[Federal Register Volume 85, Number 54 (Thursday, March 19, 2020)]
[Notices]
[Pages 15844-15847]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-05670]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 33816; 812-15043]


Daxor Corporation; Notice of Application

March 13, 2020.

AGENCY:  Securities and Exchange Commission (``Commission'').

ACTION:  Notice of an application for an order under section 6(c) of 
the Investment Company Act of 1940 (the ``Act'') for an exemption from 
sections 18(d) and 23(a) and (b) of the Act, pursuant to section 
23(c)(3) of the Act granting an exemption from section 23(c) of the 
Act, and pursuant to rule 17d-1 under the Act to permit certain joint 
transactions otherwise prohibited under section 17(d) of the Act.

Applicant:  Daxor Corporation (``Daxor'').

Summary of Application:  Applicant requests an order to permit, subject 
to shareholder approval, the Applicant to adopt an incentive 
compensation plan.

Filing Dates:  The application was filed on June 24, 2019, and amended 
on October 17, 2019, and January 21, 2020.

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 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 April 7, 2020 and should be accompanied by proof of 
service on Applicant, 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, U.S. Securities and Exchange Commission, 100 F 
Street NE, Washington, DC 20549-1090. Applicant: Robert J. Michel, 
Chief Financial Officer, Daxor Corporation, 350 Fifth Avenue, Suite 
4740, New York, NY 10118.

FOR FURTHER INFORMATION CONTACT:  Kyle R. Ahlgren, Senior Counsel, at 
(202) 551-6857, or David P. Nicolardi, Branch Chief, at (202) 551-6467 
(Division of Investment Management, Chief Counsel's Office).

SUPPLEMENTARY INFORMATION:  The following is a summary of the 
application. The complete application may be obtained via the 
Commission's website 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.

Applicant's Representations

    1. Applicant, a New York corporation, is an investment company with 
medical instrumentation and biotechnology operations. Applicant is 
registered under the Act as an internally-managed, closed-end 
management investment company.
    2. Applicant has six directors, four of whom are not ``interested 
persons'' of the company as defined in section 2(a)(19) of the Act 
(``Non-Interested Directors''), and fifteen employees.
    3. Applicant has in the past issued stock options (``Options'') 
under the Daxor Corporation 2004 Stock Option Plan (``2004 Daxor 
Plan),\1\ although Applicant no longer does so.
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    \1\ Applicant is not requesting any relief regarding the 
operation of the 2004 Daxor Plan.
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    4. Applicant states that, because the medical instrumentation and 
biotechnology business is highly competitive, it believes that its 
successful operation will depend on its ability to attract, motivate 
and retain its employees with competitive compensation packages similar 
to those offered by its competitors. Applicant asserts that the 
companies with whom the Applicant competes for management talent are 
not registered investment

[[Page 15845]]

companies subject to the Act and are thus able to offer their 
directors, officers and other personnel various types of non-cash, 
deferred compensation, including opportunities for equity participation 
in the enterprise, as well as cash incentive and performance based 
compensation. Accordingly, Applicant is requesting relief to permit, 
subject to final approval by the Board of Directors (``Board'') and 
approval of the Applicant's shareholders, the adoption of the Daxor 
2020 Incentive Compensation Plan (``2020 Daxor Plan'' or ``Plan'').
    5. The 2020 Daxor Plan is administered by a committee of the Board 
composed solely of independent directors (the ``Committee''). The 
Committee is composed solely of three or more directors who (i) are 
Non-Interested Directors of the Applicant, and (ii) are non-employee 
directors within the meaning of rule 16b-3 under the Securities 
Exchange Act of 1934, as amended (the ``Exchange Act'') (``Non-Employee 
Directors''). The 2020 Daxor Plan, if approved by shareholders, would 
permit Applicant to issue options,\2\ stock appreciation rights 
(including freestanding and tandem stock appreciation rights), 
restricted shares of stock, restricted stock units, deferred stock 
units (``Deferred Stock Units''),\3\ shares of common stock granted as 
a bonus (``Bonus Stock''),\4\ and awards denominated in cash (``Cash 
Awards'') \5\ (collectively, ``Awards'') to Eligible Persons,\6\ 
subject to the terms and conditions discussed below. In addition, the 
2020 Daxor Plan would permit dividend equivalents to be awarded in 
connection with any Awards under the 2020 Daxor Plan while the Awards 
are outstanding or otherwise subject to a restriction period on a like 
number of shares of Applicant's common stock. Furthermore, certain 
Awards may be subject to performance conditions as may be specified by 
the Committee.\7\
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    \2\ The exercise price of options must not be not less than the 
fair market value (``Fair Market Value'') of a share of the 
Applicant's stock on the date of the grant, except as such price is 
adjusted to reflect certain corporate actions. For purposes of the 
Plan, Fair Market Value means a price that is based on the opening, 
closing, actual, high or low sale price, or the arithmetic mean of 
selling prices of, a share of common stock, on the NYSE American LLC 
(or such other national securities exchange or automated inter-
dealer quotation system on which the common stock is principally 
trading) on the applicable date, the preceding trading day, the next 
succeeding trading day, or the arithmetic mean of selling prices on 
all trading days over a specified averaging period weighted by 
volume of trading on each trading day in the period that is within 
30 days before or 30 days after the applicable date, as determined 
by the Committee in its discretion; provided that, if an arithmetic 
mean of prices is used to set a grant price or an exercise price for 
an option or stock appreciation right, the commitment to grant the 
applicable Award based on such arithmetic mean must be irrevocable 
before the beginning of the specified averaging period in accordance 
with Treasury Regulation Sec.  1.409A-1(b)(5)(iv)(A).
    \3\ A Deferred Stock Unit is a right to receive stock, cash or a 
combination thereof at the end of a deferral period specified by the 
Committee (or if permitted by the Committee, as elected by the 
Eligible Person).
    \4\ Except as otherwise determined by the Committee, Bonus Stock 
will vest immediately and shall not be subject to any restrictions.
    \5\ Cash Awards may be satisfied in cash, by delivery of the 
number of shares valued at the Fair Market Value on the payout date, 
or a combination thereof, as determined by the Committee at the date 
of grant or thereafter.
    \6\ Under the 2020 Daxor Plan, awards may be granted to (i) any 
person, including officers and directors, in the regular employment 
of the company and (ii) any Non-Employee Director of the company 
(``Eligible Persons'').
    \7\ ``Performance Award'' means an Award granted to an Eligible 
Person which is conditioned upon satisfaction, during a period of at 
least one year but in no event more than ten years, of performance 
criteria established by the Committee.
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    6. Applicant represents that the 2020 Daxor Plan has been approved 
by the Board of Directors, including a majority of the Non-Interested 
Directors of the Applicant. Subject to receipt of the Order, the Board 
is expected to approve the submission of the 2020 Daxor Plan, in its 
final form, to stockholders for approval at a shareholder meeting. The 
2020 Daxor Plan, in its final form, will become effective upon approval 
by stockholders. Applicant represents that it will submit the 2020 
Daxor Plan to stockholders for approval once every five years.\8\ 
Applicant further represents that the Board of Directors, or at its 
direction, the Committee, will also approve policies and procedures, 
established by the Applicant, reasonably designed to comply with the 
conditions to the requested order set forth below.
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    \8\ In addition, any amendment to the 2020 Daxor Plan will be 
subject to the approval of the Applicant's stockholders to the 
extent such approval is required by applicable laws or regulations, 
including exchange rules, or as the Board otherwise determines. The 
Applicant's Board is required to review the 2020 Daxor Plan at least 
annually.
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    7. 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 may receive, at the discretion of the Committee, an award of up 
to 500 shares of vested Bonus Stock without restrictions. In addition, 
the 2020 Daxor Plan permits, to the extent provided for in the 
applicable Award agreement, recipients of Awards to receive dividend 
equivalents in respect of such Awards or any portion thereof as 
specified in the applicable Award agreement equal to the amount or 
value of any cash or other dividends or distributions payable on an 
equivalent number of shares of common stock. Any such dividend 
equivalents will be paid in shares of common stock, cash or a 
combination thereof as and when provided for in the applicable Award 
agreement.
    8. The total number of shares of common stock reserved and 
available for delivery in connection with Awards under the 2020 Daxor 
Plan (other than any shares of common stock issued in payment of 
dividend equivalents) may not exceed 250,000 or 5% of Applicant's 
outstanding shares, whichever is the larger number. As of January 1, 
2020, 250,000 shares represents 6.7% of Applicant's current outstanding 
shares.
    9. Applicant states that, in the event that any extraordinary 
dividend, capital gains distribution or other distribution (whether in 
the form of cash, common stock or other property), recapitalization, 
forward or reverse stock split, reorganization, merger, consolidation, 
spin-off, combination, repurchase, share exchange, liquidation, 
dissolution or other similar corporate transaction or event affects the 
common stock such that an adjustment is determined by the Committee to 
be appropriate under the 2020 Daxor Plan, then the Committee shall, in 
such manner as it may deem equitable, adjust any or all of (i) the 
aggregate number of shares of common stock subject to the 2020 Daxor 
Plan; (ii) the number and kind of shares of common stock which may be 
delivered in connection with Awards granted thereafter; (iii) the 
number and kind of shares of common stock subject to or deliverable in 
respect of outstanding Awards; (iv) the exercise price or grant price 
relating to any Award and/or make provision for payment of cash or 
other property in respect of any outstanding Award; and (v) the 
performance conditions with respect to any outstanding Award.

Applicant's Legal Analysis:

Sections 18(d), 23(a) and 23(b) of the Act

    1. Section 18(d) of the Act prohibits any registered management 
investment company from issuing warrants or rights to subscribe to or 
purchase its securities, except those issued exclusively and ratably to 
a class of the company's security holders with an exercise period of up 
to 120 days or in exchange for warrants in connection with a 
reorganization. Applicant states that section 18(d) would prohibit the 
issuance of certain Awards to Eligible Persons because no corresponding 
warrants or rights would be issued to

[[Page 15846]]

the Applicant's stockholders and because the Awards would not be issued 
in connection with a reorganization.
    2. Section 23(a) of the Act generally prohibits a registered 
closed-end investment company from issuing its securities for services. 
Applicant states 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. Applicant states that Options will be issued with an 
exercise price that is not less than the Fair Market Value, and other 
Awards based on common stock of the Applicant are generally valued at 
Fair Market Value. Applicant further states that on the date of grant 
and date of exercise, an Option's or Stock Appreciation Right's 
exercise price may be less than the net asset value of a share of the 
Applicant's stock on such dates.
    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. Applicant requests 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 Plan.
    5. Applicant states 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 Options 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). Applicant asserts that these concerns would 
not apply to the Awards for the reasons discussed below and in the 
application.
    6. Applicant states that, because Awards under the Plan may be 
issued only to Eligible Persons, Awards will not be granted to 
individuals with interests contrary to those of the applicant's 
stockholders. Moreover, no Eligible Person may, in general, be granted 
Awards that in the aggregate exceed 35% of the shares of common stock 
reserved for issuance under the Plan. 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 Plan exceed 
75,000 shares of stock within any thirty-six month period during which 
the Plan is in effect.
    7. Applicant represents that the 2020 Daxor Plan will be submitted 
to stockholders for their approval in compliance with Item 10 of 
Schedule 14A under the Exchange Act, 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, Applicant 
will comply with the disclosure requirements for executive compensation 
plans applicable to operating companies under the Exchange Act. 
Applicant asserts that the Plan will be adequately disclosed to 
investors and appropriately reflected in the market value of their 
stock.
    8. Applicant acknowledges that Awards granted under the Plan would 
have a dilutive effect on the stockholders' equity in Applicant, but 
argue that the effect would not be significant and would be outweighed 
by the anticipated benefits of the Plan to Applicant and its 
stockholders.\9\ Applicant believes that the flexibility to offer 
equity-based employee compensation is essential to its ability to 
compete. Applicant also asserts that equity-based compensation would 
more closely align the interests of Applicant and its employees and 
directors with those of Applicant's stockholders.
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    \9\ Applicant represents that the maximum potential dilution to 
an applicant's stockholders (in terms of net asset value per share) 
that would result from grants of Awards under the Plan would be 
approximately 6.7%. Applicant submits that the conditions in the 
requested 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 business development companies 
(``BDCs''). Applicant states that less dilution could occur under 
the Plan than from stock options issued by BDCs, 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.
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    9. Applicant states that stockholders will be further protected by 
the conditions to the requested order that assure continuing oversight 
of the operation of the 2020 Daxor Plan by the Board. Applicant asserts 
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, Applicant 
argues that the 2020 Daxor Plan is 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 2020 
Daxor Plan.

Section 17(d) of the Act

    10. 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-l(c) defines a joint enterprise to include any 
stock option or stock purchase plan. 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 Applicant, Eligible Persons fall within the scope of 
section 17(d) and rule 17d-1 and, consequently, are prohibited from 
participating in the Plan, absent the requested relief.
    11. Applicant requests an order pursuant to section 17(d) and rule 
17d-1 to permit the operation of the Plan. Applicant states that the 
Plan, although benefiting Eligible Persons and Applicant in different 
ways, are in the interests of stockholders of the Applicant because the 
Plan would help them attract, motivate and retain talented 
professionals and help align the interests of employees with those of 
their stockholders. Thus, Applicant

[[Page 15847]]

asserts that its participation in the Plan will be on a basis no less 
advantageous than that of Eligible Persons.\10\
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    \10\ As noted above, Applicant also asserts that the Plan is 
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 Plan.
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Section 23(c) of the Act

    12. 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.
    13. Applicant states that the payment of a stock option exercise 
price with previously acquired stock of the Applicant or with shares 
withheld by the Applicant may be deemed a purchase by the Applicant of 
its own securities within the prohibition of section 23(c).\11\ 
Applicant therefore requests an order under section 23(c) to permit 
these purchases. Applicant states that it will purchase its shares from 
Eligible Persons at their Fair Market Value 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. Applicant 
therefore submits that such transactions would not unfairly 
discriminate against other stockholders.
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    \11\ Applicant states this analysis could also apply in the case 
of shares withheld by Applicant or delivery of shares by an Eligible 
Person in satisfaction of withholding taxes.
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Applicant's Conditions

    Applicant agrees that any order of the Commission granting the 
requested relief will be subject to the following conditions:
    1. The Board will maintain a Committee, none of the members of 
which will be ``interested persons'' of the Applicant as defined in the 
Act. The Committee will administer the 2020 Daxor Plan and will be 
composed of three or more directors of the Applicant who (i) are Non-
Interested Directors of the Applicant, and (ii) are Non-Employee 
Directors within the meaning of rule 16b-3 under the Exchange Act.
    2. The Plan will not be operated unless it is approved by a 
majority of the votes cast by stockholders at a meeting called to 
consider the Plan. Any amendment to the 2020 Daxor Plan will be subject 
to the approval of Applicant's stockholders to the extent such approval 
is required by applicable law or regulation or the Board otherwise 
determines. Unless terminated or amended, during the fifth year of the 
2020 Daxor Plan (and each fifth year thereafter), the Plan shall be 
submitted for reapproval to the Applicant's stockholders and all Awards 
made during that year shall be contingent upon stockholder approval.
    3. Awards are not transferable or assignable, except as the 
Committee 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 all Awards granted under the 2020 Daxor Plan may not 
exceed 250,000 of such shares, or 5% of the Applicant's outstanding 
shares, whichever is the larger number, subject to adjustment for 
corporate transactions.
    5. The Board will review the 2020 Daxor Plan at least annually. In 
addition, the Committee periodically will review the potential impact 
that the grant, exercise, or vesting of Awards could have on the 
Applicant's earnings and net asset value per share, 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 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. Awards under the 2020 Daxor Plan are issuable only to Eligible 
Persons. No person will be granted Awards denominated by reference to 
shares, or be issued shares in settlement of Awards not initially 
denominated by reference to shares, that in the aggregate exceed 35% of 
the shares initially reserved for issuance under the Plan, subject to 
adjustment under the Plan. Subject to the immediately preceding 
limitation, in any thirty-six month period during which the Plan is in 
effect, no person may be granted Awards under the Plan relating to more 
than 75,000 shares, which 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 7 below.
    7. In each fiscal year, a Non-Employee Director may be granted up 
to 500 shares of vested Bonus Stock without restrictions, which amount 
may be adjusted to reflect certain corporate transactions.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-05670 Filed 3-18-20; 8:45 am]
 BILLING CODE 8011-01-P


