81 FR 23068 - Newtek Business Services Corp.; Notice of Application

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 75 (April 19, 2016)

Page Range		23068-23071
FR Document		2016-08934

Federal Register, Volume 81 Issue 75 (Tuesday, April 19, 2016)

[Federal Register Volume 81, Number 75 (Tuesday, April 19, 2016)]
[Notices]
[Pages 23068-23071]
From the Federal Register Online [www.thefederalregister.org]
[FR Doc No: 2016-08934]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 32070; 812-14450]

Newtek Business Services Corp.; Notice of Application

April 13, 2016.
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 23(a), 23(b) and 63 of the Act; under sections 57(a)(4) and
57(i) of the Act and rule 17d-1 under the Act permitting certain joint
transactions otherwise prohibited by section 57(a)(4) of the Act; and
under section 23(c)(3) of the Act for an exemption from section 23(c)
of the Act.

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Summary of the Application: Newtek Business Services Corp.
(``Applicant'' or ``Company'') requests an order that would permit
Applicant to (a) issue restricted shares of its common stock
(``Restricted Stock'') as part of the compensation package for certain
participants in its 2015 Stock Incentive Plan (the ``Plan''), (b)
withhold shares of the Applicant's common stock or purchase shares of
Applicant's common stock from participants to satisfy tax withholding
obligations relating to the vesting of Restricted Stock or the exercise
of options to purchase shares of Applicant's common stock
(``Options''), and (c) permit participants to pay the exercise price of
Options with shares of Applicant's common stock.

Filing Dates: The application was filed on April 28, 2015, and amended
on October 28, 2015 and February 9, 2016.

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 May 9, 2016, 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, 212 West 35th Street,
2nd Floor, New York, New York 10001.

FOR FURTHER INFORMATION CONTACT: Jill Ehrlich, Senior Counsel, at (202)
551-6819, or Mary Kay Frech, Branch Chief, at (202) 551-6821 (Chief
Counsel's Office, Division of Investment Management).

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.

Applicant's Representations: 1. Applicant is an internally managed
closed-end investment company that has elected to be regulated as a
business development company (``BDC'') under the Act.\1\ Applicant
represents that it is

[[Page 23069]]

a leading capital provider to small- and medium-sized businesses
(``SMBs''). Applicant originates loans through a variety of sourcing
channels and, through a rigorous underwriting process, seeks to achieve
attractive risk-weighted returns. In addition, Applicant and its
controlled portfolio companies provide comprehensive lending, payment
processing, managed technology, personal and commercial insurance and
payroll solutions to over 100,000 SMB accounts, across all industries.
Shares of Applicant's common stock are traded on the Nasdaq Global
Market under the symbol ``NEWT.'' As of December 31, 2015, there were
14,503,927 shares of Applicant's common stock outstanding. As of that
date, Applicant had 146 employees.
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\1\ Applicant was incorporated under the laws of the state of
New York in June 1999 as Whitestone Holdings, Inc., completed an
initial public offering in September 2000, and changed its name to
Newtek Business Services, Inc. in November 2002. In November 2014,
Newtek Business Services, Inc. merged with and into Newtek Business
Services Corp. (the ``Reincorporation Transaction'') for the purpose
of reincorporating in the state of Maryland. Upon completion of the
Reincorporation Transaction, Applicant elected to be regulated as a
BDC. Section 2(a)(48) of the Act defines a BDC to be any closed-end
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.
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2. Applicant currently has a five-member board of directors (the
``Board'') of whom three are not ``interested persons'' of Applicant
within the meaning of section 2(a)(19) of the Act, and two are
considered ``interested persons'' of Applicant.
3. Applicant believes that, because the market for superior
investment professionals is highly competitive, Applicant's successful
performance depends on its ability to offer fair compensation packages
to its professionals that are competitive with those offered by other
investment management businesses. Applicant states that the ability to
offer equity-based compensation to its employees and non-employee
directors (``Non-Employee Directors''), which both aligns employee and
Board behavior with stockholder interests and provides a retention
tool, is vital to Applicant's future growth and success.
4. Effective October 22, 2014, Applicant adopted the Newtek
Business Services Corp. 2014 Stock Incentive Plan (the ``2014 Plan''),
which provides for the grant of Options. As of February 8, 2016, there
were no Options outstanding. Applicant proposes to amend and restate
the 2014 Plan by adopting the Plan, which will supersede the 2014 Plan,
subject to the issuance of the requested order and stockholder
approval. The Plan authorizes the issuance of Options and Restricted
Stock to the Company's directors, including Non-Employee Directors,
officers and other employees (``Participants'').\2\
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\2\ Options will not be granted to Non-Employee Directors.
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5. The Plan will authorize the issuance of Options and Restricted
Stock subject to certain forfeiture restrictions. The restrictions may
relate to continued employment or service on the Board, the performance
of the Applicant pursuant to performance goals as set forth in the
Plan, or other restrictions deemed by the Required Majority,\3\ the
Compensation, Corporate Governance, and Nominating Committee \4\ or the
Board from time to time to be appropriate and in the best interests of
Applicant and its stockholders. Unless otherwise determined by the
Board, a Participant granted Restricted Stock will have all of the
rights of a stockholder including, without limitation, the right to
vote Restricted Stock and the right to receive dividends, including
deemed dividends, thereon, although such rights may be deferred during
the restricted period applicable to these awards. Restricted Stock may
not be transferred, pledged, hypothecated, margined, or otherwise
encumbered by the Participant during the restricted period, except for
disposition by will or intestacy. Except as otherwise determined by the
Board under the Plan, upon termination of a Participant's employment or
director relationship with the Company during the applicable
restriction period, the Participant's Restricted Stock and any accrued
and unpaid dividends that are then subject to restrictions shall
generally be forfeited.\5\
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\3\ Section 57(o) of the Act provides that the term ``required
majority,'' when used with respect to the approval of a proposed
transaction, plan, or arrangement, means both a majority of a BDC's
directors or general partners who have no financial interest in such
transaction, plan, or arrangement and a majority of such directors
or general partners who are not interested persons of such company.
\4\ The ``Compensation, Corporate Governance, and Nominating
Committee'' is composed of ``non-employee directors'' within the
meaning of rule 16b-3, and ``outside directors'' within the meaning
of section 162(m) of the Internal Revenue Code of 1986, as amended.
\5\ If any shares subject to an award granted under the Plan are
forfeited, cancelled, exchanged or surrendered or if an award
terminates or expires without an issuance of shares, those shares
will again be available for awards under the Plan.
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6. A maximum of twenty percent (20%) of Applicant's total shares of
common stock issued and outstanding (as of the Effective Date) \6\ will
be available for awards under the Plan. Under the Plan, no more than
fifty percent (50%) of the shares of stock reserved for the grant of
awards under the Plan may be Restricted Stock awards at any time during
the term of the Plan. The maximum amount of Restricted Stock that may
be outstanding at any particular time will be ten percent of the
Applicant's voting securities.\7\ Under the Plan, the aggregate number
of shares of common stock deliverable pursuant to awards will not
exceed 3,000,000.\8\
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\6\ Effective Date is defined in section 2(p) of the Plan as the
date on which the Plan is approved by Applicant's stockholders.
\7\ For purposes of calculating compliance with this limit, the
Company will count as Restricted Stock all shares of its common
stock that are issued under the Plan less any shares that are
forfeited back to the Company and cancelled as a result of
forfeiture restrictions not lapsing.
\8\ If the Company does not receive the order to issue
Restricted Stock, all shares granted under the Plan may be subject
to Options. All Option awards will be issued to employees in
accordance with the statutory provisions set forth in section 61 and
will not be granted to Non-Employee Directors.
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7. The Plan will be administered by the Compensation, Corporate
Governance, and Nominating Committee with respect to Participants
employed by Applicant and by the Board with respect to Non-Employee
Directors, and the Board will have the responsibility to ensure that
the Plan is operated in a manner that best serves the interests of
Applicant and its stockholders. Restricted Stock will be awarded to
certain employees, officers and directors, including Non-Employee
Directors, from time to time as part of the employees', officers' or
directors' compensation based on their actual or expected performance
and value to the Company. All awards of Restricted Stock to employees
and Non-Employee Directors will be approved by the Required Majority.
Awards of Restricted Stock to Non-Employee Directors will be made on
the schedule described below.
8. Under the Plan, Non-Employee Directors will each receive a grant
of up to 2,000 shares of Restricted Stock at the beginning of each one-
year term of service on the Board, for which forfeiture restrictions
will lapse as to one-third of such shares each year for three years.
Each grant of Restricted Stock to Non-Employee Directors will be made
pursuant to this schedule and will not be changed without Commission
approval.
9. The Plan provides that the Company is authorized to withhold
stock (in whole or in part) from any award of Restricted Stock granted
in satisfaction of a Participant's tax obligations. In addition, as
discussed more fully in the application, the exercise of Options will
result in the recipient 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

[[Page 23070]]

exercise price. Accordingly, Applicant requests relief to withhold
shares of its common stock or purchase shares of its common stock from
Participants to satisfy tax withholding obligations related to the
exercise of Options granted under the 2014 Plan or the vesting of
Restricted Stock or exercise of Options that will be granted pursuant
to the Plan. Applicant also requests an exemption to permit
Participants to pay the exercise price of Options that were granted
under the 2014 Plan or will be granted to them pursuant to the Plan
with shares of the Company's common stock.
10. The Plan was approved on April 27, 2015 by the Compensation,
Corporate Governance and Nominating Committee and the Board, including
the Required Majority. The Plan will be submitted for approval to the
Company's stockholders, and will become effective upon such approval,
subject to and following receipt of the requested order.

Applicant's Legal Analysis

Sections 23(a) and (b), Section 63

1. Under section 63 of the Act, the provisions of section 23(a) of
the Act generally prohibiting a registered closed-end investment
company from issuing securities for services or for property other than
cash or securities are made applicable to BDCs. This provision would
prohibit the issuance of Restricted Stock as a part of the Plan.
2. Section 23(b) of the Act generally prohibits a registered
closed-end investment company from selling any common stock of which it
is the issuer at a price below its current net asset value. Section
63(2) of the Act makes section 23(b) applicable to BDCs unless certain
conditions are met. Because Restricted Stock that would be granted
under the Plan would not meet the terms of section 63(2), sections
23(b) and 63 would prevent the issuance of Restricted Stock.
3. Section 6(c) 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.
4. Applicant requests an order pursuant to section 6(c) of the Act
granting an exemption from the provisions of sections 23(a), 23(b) and
63 of the Act. Applicant states that the Plan would not violate the
concerns underlying these sections, which include: (a) Preferential
treatment of investment company insiders and the use of options and
other rights by insiders to obtain control of the investment company;
(b) complication of the investment company's structure that made it
difficult to determine the value of the company's shares; and (c)
dilution of shareholders' equity in the investment company. Applicant
asserts that the Plan does not raise concerns about preferential
treatment of Applicant's insiders because the Plan is a bona fide
compensation plan of the type that is common among corporations
generally. In addition, section 61(a)(3)(B) of the Act permits a BDC to
issue to its directors, officers, employees, and general partners
warrants, options, and rights to purchase the BDC's voting securities
pursuant to an executive compensation plan, subject to certain
conditions. Applicant states that, for reasons that are unclear,
section 61 and its legislative history do not address the issuance by a
BDC of restricted stock as incentive compensation. Applicant believes,
however, that the issuance of Restricted Stock is substantially
similar, for purposes of investor protection under the Act, to the
issuance of warrants, options, and rights as contemplated by section
61. Applicant also asserts that the issuance of Restricted Stock would
not become a means for insiders to obtain control of Applicant because
the maximum amount of Restricted Stock that may be issued under the
Plan at any one time will be ten percent of the outstanding shares of
common stock of Applicant. Moreover, no single Participant will be
granted more than 25% of the shares of stock reserved for issuance
under the Plan.
5. Applicant further states that the Plan will not unduly
complicate Applicant's capital structure because equity-based incentive
compensation arrangements are widely used among corporations and
commonly known to investors. Applicant notes that the Plan will be
submitted for approval to the Company's stockholders. Applicant
represents that the proxy materials submitted to Applicant's
stockholders will contain a concise ``plain English'' description of
the Plan and its potential dilutive effect. Applicant also states that
it will comply with the proxy disclosure requirements in Item 10 of
Schedule 14A under the Securities Exchange Act of 1934. Applicant
further notes that the Plan will be disclosed to investors in
accordance with the requirements of the Form N-2 registration statement
for closed-end investment companies and pursuant to the standards and
guidelines adopted by the Financial Accounting Standards Board for
operating companies. Applicant also will comply with the disclosure
requirements for executive compensation plans applicable to BDCs.\9\
Applicant thus concludes that the Plan will be adequately disclosed to
investors and appropriately reflected in the market value of
Applicant's shares.
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\9\ See Executive Compensation and Related Party Disclosure,
Securities Act Release No. 8655 (Jan. 27, 2006) (proposed rule);
Executive Compensation and Related Party Disclosure, Securities Act
Release No. 8732A (Aug. 29, 2006) (final rule and proposed rule), as
amended by Executive Compensation Disclosure, Securities Act Release
No. 8756 (Dec. 22, 2006) (adopted as interim final rules with
request for comments).
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6. Applicant acknowledges that awards granted under the Plan may
have a dilutive effect on the stockholders' equity per share in
Applicant, but believes that effect would be outweighed by the
anticipated benefits of the Plan to Applicant and its stockholders.
Moreover, based on the manner in which the issuance of Restricted Stock
pursuant to the Plan will be administered, the Restricted Stock will be
no more dilutive than if Applicant were to issue only Options to
Participants who are employees, as is permitted by section 61(a)(3) of
the Act. Applicant asserts that it needs the flexibility to provide the
requested equity-based compensation in order to be able to compete
effectively with other venture capital firms for talented
professionals. These professionals, Applicant suggests, in turn are
likely to increase Applicant's performance and stockholder value.
Applicant also asserts that equity-based compensation would more
closely align the interests of Applicant's employees and Non-Employee
Directors with those of its stockholders. In addition, Applicant states
that its stockholders will be further protected by the conditions to
the requested order that assure continuing oversight of the operation
of the Plan by the Board.

Section 57(a)(4), Rule 17d-1

7. Section 57(a) proscribes certain transactions between a BDC and
persons related to the BDC in the manner described in section 57(b)
(``57(b) persons''), absent a Commission order. Section 57(a)(4)
generally prohibits a 57(b) person from effecting a transaction in
which the BDC is a joint participant absent such an order. Rule 17d-1,
made applicable to BDCs by section 57(i), proscribes participation in a
``joint enterprise or other joint arrangement or

[[Page 23071]]

profit-sharing plan,'' which includes a stock option or purchase plan.
Employees and directors of a BDC are 57(b) persons. Thus, the issuance
of shares of Restricted Stock could be deemed to involve a joint
transaction involving a BDC and a 57(b) person in contravention of
section 57(a)(4). Rule 17d-1(b) provides that, in considering relief
pursuant to the rule, the Commission will consider (a) whether the
participation of the BDC in a joint enterprise is consistent with the
policies and purposes of the Act and (b) the extent to which such
participation is on a basis different from or less advantageous than
that of other participants.
8. Applicant requests an order pursuant to sections 57(a)(4) and
57(i) of the Act and rule 17d-1 under the Act to permit Applicant to
issue Restricted Stock under the Plan. Applicant acknowledges that its
role is necessarily different from the other participants because the
other participants are its directors and employees. It notes, however,
that the Plan is in the interest of the Company's stockholders, because
the Plan will help align the interests of Applicant's employees with
those of its stockholders, which will encourage conduct on the part of
those employees designed to produce a better return for Applicant's
stockholders. Additionally, section 57(j)(1) of the Act expressly
permits any director, officer or employee of a BDC to acquire warrants,
options and rights to purchase voting securities of such BDC, and the
securities issued upon the exercise or conversion thereof, pursuant to
an executive compensation plan which meets the requirements of section
61(a)(3)(B) of the Act. Applicant submits that the issuance of
Restricted Stock pursuant to the Plan poses no greater risk to
stockholders than the issuances permitted by section 57(j)(1) of the
Act.

Section 23(c)

9. 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 tenders, or under other circumstances as the Commission may permit
to ensure that the purchases are 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. Applicant states 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.
10. Section 23(c)(3) of the Act permits a BDC to purchase
securities of which it is the issuer 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. Applicant believes that the requested relief meets the
standards of section 23(c)(3).
11. Applicant submits that these purchases will be made in a manner
that does not unfairly discriminate against Applicant's stockholders
because all purchases of Applicant's stock will be at the closing price
of the common stock on the Nasdaq Global Market (or any primary
exchange on which its shares of common stock may be traded in the
future) on the relevant date (i.e., the public market price on the date
of grant of Restricted Stock and the date of grant of Options).
Applicant submits that because all transactions with respect to the
Plan will take place at the public market price for the Company's
common stock, these transactions will not be significantly different
than could be achieved by any stockholder selling in a market
transaction. Applicant represents that no transactions will be
conducted pursuant to the requested order on days where there are no
reported market transactions involving Applicant's shares.
12. Applicant represents that the withholding provisions in the
Plan do not raise concerns about preferential treatment of Applicant's
insiders because the Plan is a bona fide compensation plan of the type
that is common among corporations generally. Furthermore, the vesting
schedule is determined at the time of the initial grant of the
Restricted Stock and the option exercise price is determined at the
time of the initial grant of the Options. Applicant represents that all
purchases may be made only as permitted by the Plan, which will be
approved by the Company's stockholders prior to any application of the
relief. Applicant believes that granting the requested relief would be
consistent with the policies underlying the provisions of the Act
permitting the use of equity compensation as well as prior exemptive
relief granted by the Commission under section 23(c) of the Act.

Applicant's Conditions

Applicant agrees that the order granting the requested relief will
be subject to the following conditions:
1. The Plan will be authorized by Applicant's stockholders.
2. Each issuance of Restricted Stock to an officer, employee, or
Non-Employee Director will be approved by the Required Majority of
Applicant's directors on the basis that such grant is in the best
interest of Applicant and its stockholders.
3. The amount of voting securities that would result from the
exercise of all of Applicant's outstanding warrants, options and
rights, together with any Restricted Stock issued and outstanding
pursuant to the Plan, will not at the time of issuance of any warrant,
option, right or share of Restricted Stock under the Plan, exceed 20
percent of Applicant's outstanding voting securities.
4. The amount of Restricted Stock issued and outstanding will not
at the time of issuance of any shares of Restricted Stock exceed ten
percent of Applicant's outstanding voting securities.
5. The Board will review the Plan at least annually. In addition,
the Board will review periodically the potential impact that the
issuance of Restricted Stock under the Plan could have on Applicant's
earnings and net asset value per share, such review to take place prior
to any decisions to grant Restricted Stock under the Plan, but in no
event less frequently than annually. Adequate procedures and records
will be maintained to permit such review. The Board will be authorized
to take appropriate steps to ensure that the issuance of Restricted
Stock under the Plan will be in the best interest of Applicant and its
stockholders. This authority will include the authority to prevent or
limit the granting of additional Restricted Stock under the Plan. All
records maintained pursuant to this condition will be subject to
examination by the Commission and its staff.

For the Commission, by the Division of Investment Management,
under delegated authority.
Brent J. Fields,
Secretary.
[FR Doc. 2016-08934 Filed 4-18-16; 8:45 am]
BILLING CODE 8011-01-P

Federal Register / Vol. 81, No. 75 / Tuesday, April 19, 2016 / Notices 23069

a leading capital provider to small- and officers and other employees the Plan may be Restricted Stock awards
medium-sized businesses (‘‘SMBs’’). (‘‘Participants’’).2 at any time during the term of the Plan.
Applicant originates loans through a 5. The Plan will authorize the The maximum amount of Restricted
variety of sourcing channels and, issuance of Options and Restricted Stock that may be outstanding at any
through a rigorous underwriting Stock subject to certain forfeiture particular time will be ten percent of the
process, seeks to achieve attractive risk- restrictions. The restrictions may relate Applicant’s voting securities.7 Under
weighted returns. In addition, Applicant to continued employment or service on the Plan, the aggregate number of shares
and its controlled portfolio companies the Board, the performance of the of common stock deliverable pursuant
provide comprehensive lending, Applicant pursuant to performance to awards will not exceed 3,000,000.8
payment processing, managed goals as set forth in the Plan, or other 7. The Plan will be administered by
technology, personal and commercial restrictions deemed by the Required the Compensation, Corporate
insurance and payroll solutions to over Majority,3 the Compensation, Corporate Governance, and Nominating
100,000 SMB accounts, across all Governance, and Nominating Committee with respect to Participants
industries. Shares of Applicant’s Committee 4 or the Board from time to employed by Applicant and by the
common stock are traded on the Nasdaq time to be appropriate and in the best Board with respect to Non-Employee
Global Market under the symbol interests of Applicant and its Directors, and the Board will have the
‘‘NEWT.’’ As of December 31, 2015, stockholders. Unless otherwise responsibility to ensure that the Plan is
there were 14,503,927 shares of determined by the Board, a Participant operated in a manner that best serves
Applicant’s common stock outstanding. granted Restricted Stock will have all of the interests of Applicant and its
As of that date, Applicant had 146 the rights of a stockholder including, stockholders. Restricted Stock will be
employees. without limitation, the right to vote awarded to certain employees, officers
2. Applicant currently has a five- Restricted Stock and the right to receive and directors, including Non-Employee
member board of directors (the ‘‘Board’’) dividends, including deemed dividends, Directors, from time to time as part of
of whom three are not ‘‘interested thereon, although such rights may be the employees’, officers’ or directors’
persons’’ of Applicant within the deferred during the restricted period compensation based on their actual or
meaning of section 2(a)(19) of the Act, applicable to these awards. Restricted expected performance and value to the
and two are considered ‘‘interested Stock may not be transferred, pledged, Company. All awards of Restricted
persons’’ of Applicant. hypothecated, margined, or otherwise Stock to employees and Non-Employee
3. Applicant believes that, because the encumbered by the Participant during Directors will be approved by the
market for superior investment the restricted period, except for Required Majority. Awards of Restricted
professionals is highly competitive, disposition by will or intestacy. Except Stock to Non-Employee Directors will
Applicant’s successful performance as otherwise determined by the Board be made on the schedule described
depends on its ability to offer fair under the Plan, upon termination of a below.
compensation packages to its Participant’s employment or director 8. Under the Plan, Non-Employee
professionals that are competitive with relationship with the Company during Directors will each receive a grant of up
those offered by other investment the applicable restriction period, the to 2,000 shares of Restricted Stock at the
management businesses. Applicant Participant’s Restricted Stock and any beginning of each one-year term of
states that the ability to offer equity- accrued and unpaid dividends that are service on the Board, for which
based compensation to its employees then subject to restrictions shall forfeiture restrictions will lapse as to
and non-employee directors (‘‘Non- generally be forfeited.5 one-third of such shares each year for
Employee Directors’’), which both aligns 6. A maximum of twenty percent three years. Each grant of Restricted
employee and Board behavior with (20%) of Applicant’s total shares of Stock to Non-Employee Directors will
common stock issued and outstanding be made pursuant to this schedule and
stockholder interests and provides a
(as of the Effective Date) 6 will be will not be changed without
retention tool, is vital to Applicant’s
available for awards under the Plan. Commission approval.
future growth and success.
Under the Plan, no more than fifty 9. The Plan provides that the
4. Effective October 22, 2014,
percent (50%) of the shares of stock Company is authorized to withhold
Applicant adopted the Newtek Business
reserved for the grant of awards under stock (in whole or in part) from any
Services Corp. 2014 Stock Incentive
award of Restricted Stock granted in
Plan (the ‘‘2014 Plan’’), which provides 2 Options will not be granted to Non-Employee satisfaction of a Participant’s tax
for the grant of Options. As of February Directors. obligations. In addition, as discussed
8, 2016, there were no Options 3 Section 57(o) of the Act provides that the term
more fully in the application, the
outstanding. Applicant proposes to ‘‘required majority,’’ when used with respect to the
approval of a proposed transaction, plan, or exercise of Options will result in the
amend and restate the 2014 Plan by
arrangement, means both a majority of a BDC’s recipient being deemed to have received
adopting the Plan, which will supersede directors or general partners who have no financial compensation in the amount by which
the 2014 Plan, subject to the issuance of interest in such transaction, plan, or arrangement the fair market value of the shares of the
the requested order and stockholder and a majority of such directors or general partners
who are not interested persons of such company. Company’s common stock, determined
approval. The Plan authorizes the
4 The ‘‘Compensation, Corporate Governance, and as of the date of exercise, exceeds the
issuance of Options and Restricted
Nominating Committee’’ is composed of ‘‘non-
Stock to the Company’s directors, employee directors’’ within the meaning of rule 7 For purposes of calculating compliance with
including Non-Employee Directors, 16b–3, and ‘‘outside directors’’ within the meaning this limit, the Company will count as Restricted
of section 162(m) of the Internal Revenue Code of Stock all shares of its common stock that are issued
mstockstill on DSK4VPTVN1PROD with NOTICES

Upon completion of the Reincorporation 1986, as amended. under the Plan less any shares that are forfeited
5 If any shares subject to an award granted under back to the Company and cancelled as a result of
Transaction, Applicant elected to be regulated as a
BDC. Section 2(a)(48) of the Act defines a BDC to the Plan are forfeited, cancelled, exchanged or forfeiture restrictions not lapsing.
be any closed-end investment company that surrendered or if an award terminates or expires 8 If the Company does not receive the order to

operates for the purpose of making investments in without an issuance of shares, those shares will issue Restricted Stock, all shares granted under the
securities described in sections 55(a)(1) through again be available for awards under the Plan. Plan may be subject to Options. All Option awards
55(a)(3) of the Act and makes available significant 6 Effective Date is defined in section 2(p) of the will be issued to employees in accordance with the
managerial assistance with respect to the issuers of Plan as the date on which the Plan is approved by statutory provisions set forth in section 61 and will
such securities. Applicant’s stockholders. not be granted to Non-Employee Directors.

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Document Created: 2016-04-19 00:15:50
Document Modified: 2016-04-19 00:15:50

Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
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 23(a), 23(b) and 63 of the Act; under sections 57(a)(4) and 57(i) of the Act and rule 17d-1 under the Act permitting certain joint transactions otherwise prohibited by section 57(a)(4) of the Act; and under section 23(c)(3) of the Act for an exemption from section 23(c) of the Act.
Dates		The application was filed on April 28, 2015, and amended on October 28, 2015 and February 9, 2016.
Contact		Jill Ehrlich, Senior Counsel, at (202) 551-6819, or Mary Kay Frech, Branch Chief, at (202) 551-6821 (Chief Counsel's Office, Division of Investment Management).
FR Citation		81 FR 23068