Hercules Technology Growth Capital, Inc.; Notice of Application, 53610-53612 [E7-18388]
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53610
Federal Register / Vol. 72, No. 181 / Wednesday, September 19, 2007 / Notices
rwilkins on PROD1PC63 with NOTICES
fails to make a required deposit to its
Special Reserve Bank Account.
Commission staff estimates that brokerdealers file approximately 65 such
notices per year. Broker-dealers would
require approximately 30 minutes, on
average, to file such a notice. Therefore,
Commission staff estimates that brokerdealers would spend a total of
approximately 33 hours each year to
comply with the notice requirement of
Rule 15c3–3.
Finally, a broker-dealer that effects
transactions in SFPs for customers 1 also
will have paperwork burdens associated
with the requirement in paragraph (o) of
Rule 15c3–3 to make a record of each
change in account type.2 More
specifically, a broker-dealer that
changes the type of account in which a
customer’s SFPs are held must create a
record of each change in account type
that includes the name of the customer,
the account number, the date the brokerdealer received the customer’s request
to change the account type, and the date
the change in account type took place.
As of December 31, 2006, broker-dealers
that were also registered as FCMs
reported that they maintained
38,815,092 customer accounts. The staff
estimates that 8% of these customers
may engage in SFP transactions
(38,815,092 accounts × 8% = 3,105,207).
Further, the staff estimates that 20% per
year may change account type. Thus,
broker-dealers may be required to create
this record for up to 621,041 accounts
(3,105,207 accounts × 20%). The staff
believes that it will take approximately
3 minutes to create each record.3 Thus,
the total annual burden associated with
creating a record of change of account
type will be 31,052 hours (621,041
accounts × (3min/60min)).
Consequently, the staff estimates that
the total annual burden hours associated
with Rule 15c3–3 would be
approximately 77,166 hours (45,960
hours + 121 hours + 33 hours + 31,052
hours).
Written comments are invited on: (a)
Whether the proposed collection of
information is necessary for the proper
performance of the functions of the
agency, including whether the
information shall have practical utility;
(b) the accuracy of the agency’s estimate
1 Broker-dealers that do not engage in an SFP
business with or for customers are not affected by
this section of Rule 15c3–3. Broker-dealers that
engage in an SFP business must also register with
the CFTC as a futures commission merchant
(‘‘FCM’’). As of January 31, 2007 there were 64
broker-dealers that were also registered as FCMs.
2 17 CFR 240.15c3–3(o)(3)(i).
3 In fact, the staff believes that most firms will
have this process automated. To the extent that no
person need be involved in the generation of this
record, the burden will be very minimal.
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of the burden of the proposed collection
of information; (c) ways to enhance the
quality, utility, and clarity of the
information to be collected; and (d)
ways to minimize the burden of the
collection of information on
respondents, including through the use
of automated collection techniques or
other forms of information technology.
Consideration will be given to
comments and suggestions submitted in
writing within 60 days of this
publication.
Comments should be directed to: R.
Corey Booth, Director/Chief Information
Officer, Securities and Exchange
Commission, C/O Shirley Martinson,
6432 General Green Way, Alexandria,
Virginia 22312 or send an e-mail to:
PRA_Mailbox@sec.gov. Comments must
be submitted within 60 days of this
notice.
Dated: September 14, 2007.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–18451 Filed 9–18–07; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
27968; 812–13388]
Hercules Technology Growth Capital,
Inc.; Notice of Application
September 12, 2007.
Securities and Exchange
Commission (The ‘‘Commission’’).
ACTION: Notice of an application for an
order under section 61(a)(3)(B) of the
Investment Company Act of 1940 (the
‘‘Act’’).
AGENCY:
Applicant,
Hercules Technology Growth Capital,
Inc. (‘‘HTGC’’), requests an order that
would approve the proposal to issue
stock options to directors who are not
officers or employees of HTGC (‘‘Nonemployee Directors’’) under HTGC’s
amended and restated 2006 Nonemployee Director Plan (the ‘‘Amended
and Restated 2006 Plan’’). The requested
order would supersede a prior order
issued to HTGC under section
61(a)(3)(B) of the Act (the ‘‘HTGC
Options Order’’).1
FILING DATES: The application was filed
on May 24, 2007 and amended on
September 10, 2007. HTGC has agreed
to file an amendment during the notice
period, the substance of which is
reflected in this notice.
SUMMARY OF APPLICATION:
1 Hercules Technology Growth Capital, Inc.,
Investment Company Act release Nos. 27668 (Jan.
19, 2007) (notice) and 27699 (Feb. 15, 2007) (order).
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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 October 9, 2007, 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. HTGC, c/o Manuel A. Henriquez,
Chairman of the Board, President and
Chief Executive Officer, 400 Hamilton
Avenue, Suite 310, Palo Alto, California
94301.
FOR FURTHER INFORMATION CONTACT:
Laura J. Riegel, Senior Counsel, at (202)
551–6873, or Nadya B. Roytblat,
Assistant Director, at (202) 551–6821
(Division of Investment Management,
Office of Investment Company
Regulation).
The
following is a summary of the
application. The complete application is
available for a fee at the Commission’s
Public Reference Branch, 100 F Street,
NE., Washington, DC 20549–0102 (tel.
202–551–5850).
SUPPLEMENTARY INFORMATION:
Applicant’s Representations
1. HTGC, a Maryland corporation, is
a business development company
(‘‘BDC’’) within the meaning of section
2(a)(48) of the Act.2 HTGC is a specialty
finance company that provides debt and
equity growth capital to technologyrelated and life-science companies at all
stages of development. HTGC’s business
and affairs are managed under the
direction of its board of directors
(‘‘Board’’). HTGC does not have an
external investment adviser within the
meaning of section 2(a)(20) of the Act.
2. HTGC requests an order under
section 61(a)(3)(B) of the Act that would
approve the proposal under the
Amended and Restated 2006 Plan to
2 Section 2(a)(48) generally 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.
E:\FR\FM\19SEN1.SGM
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Federal Register / Vol. 72, No. 181 / Wednesday, September 19, 2007 / Notices
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issue stock options to Non-employee
Directors to purchase shares of HTGC’s
common stock, $.001 par value per
share (‘‘Common Stock’’). The requested
order would supersede the HTGC
Options Order approving the issuance of
stock options to Non-employee
Directors to purchase Common Stock
under HTGC’s 2006 Non-employee
Director Plan (the ‘‘Original 2006
Plan’’).3
3. HTGC currently has a four member
Board, one of whom is considered to be
an ‘‘interested person’’ of HTGC within
the meaning of section 2(a)(19) of the
Act and three of whom are not
interested persons (‘‘Non-interested
Directors’’). HTGC currently has three
Non-employee Directors.4 The Nonemployee Directors are all Noninterested Directors, but it is possible
that HTGC may have Non-employee
Directors in the future who are
interested persons of HTGC.5
4. The Board approved the Amended
and Restated 2006 Plan on March 7,
2007 and amendments to the Amended
and Restated 2006 Plan by unanimous
written consent on July 20, 2007.6 At
the annual meeting of stockholders of
HTGC held on June 21, 2007,
stockholders approved the Amended
and Restated 2006 Plan and the separate
2007 amendment and restatement of
HTGC’s amended and restated 2004
Equity Incentive Plan (such plan, before
both amendments and restatements, the
‘‘Original 2004 Plan’’; as first amended
and restated, the ‘‘First Amended and
Restated 2004 Plan’’; and as further
amended and restated in 2007, the
‘‘Second Amended and Restated 2004
Plan’’). Participants under the Second
Amended and Restated 2004 Plan are
limited to employees of HTGC and do
not include Non-employee Directors.
5. A Commission order permits HTGC
to issue shares of Common Stock that,
at the time of issuance, are subject to
3 HTGC has not issued any options to Nonemployee Directors under the Original 2006 Plan.
At a meeting held on May 17, 2007, the Board voted
to approve the suspension of the Original 2006 Plan
and the grant of any options under the Original
2006 Plan.
4 Because HTGC has a staggered Board, each
director on the Board is elected to a three year term
subject to reelection only every three years.
5 Each Non-employee Director receives an annual
fee of $50,000, $1,500 for each committee meeting
attended, and reimbursement of reasonable out-ofpocket expenses incurred in attending Board
meetings. Each Non-employee Director who serves
as chairperson of a Board committee receives an
additional $15,000 per year
6 The Board determined that its amendments to
the Amended and Restated 2006 Plan complied
with that section of the Amended and Restated
2006 Plan authorizing plan amendments and did
not necessitate a stockholder vote pursuant to the
provisions of the Act and the rules promulgated
thereunder.
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certain forfeiture restrictions, and thus
are restricted as to their transferability
until such forfeiture restrictions have
lapsed (the ‘‘Restricted Stock’’) to Nonemployee Directors under the Amended
and Restated 2006 Plan and employees
of HTGC and employees of its whollyowned consolidated subsidiaries under
the Second Amended and Restated 2004
Plan (‘‘HTGC Restricted Stock Order’’).7
In light of the HTGC Restricted Stock
Order, HTGC believes that it will no
longer need to issue options to purchase
as many shares of Common Stock as it
did under the Original 2006 Plan to
adequately compensate Non-employee
Directors. As compared to the Original
2006 Plan, the Amended and Restated
2006 Plan would reduce the number of
options granted to Non-employee
Directors, change the timeframe within
which such options are granted, and
change the vesting provisions of such
options.
6. Under the Amended and Restated
2006 Plan, a maximum of 1,000,000
shares of Common Stock, in the
aggregate, may be issued to Nonemployee Directors and 40,000 shares of
Common Stock may be issued to any
Non-employee Director in any calendar
year. Each individual initially elected to
the Board as a Non-employee Director
after the date on which the Commission
issues an order on the application (the
‘‘Order Date’’) will automatically be
granted options to purchase 10,000
shares of Common Stock (the ‘‘Initial
Grants’’). The options issued under the
Initial Grants will vest as to one-half of
the 10,000 shares of Common Stock on
each of the first two anniversaries of the
date of grant. Each Non-employee
Director automatically will be granted
options to purchase 15,000 shares of
Common Stock on the date of such Nonemployee Director’s reelection to the
Board (the ‘‘Periodic Grants’’). The
options issued under the Periodic
Grants will vest as to one-third of the
15,000 shares of Common Stock on each
of the three anniversaries of the date of
grant. Non-employee Directors who
hold office on the Order Date will be
granted options for a number of shares
of Common Stock equal to the product
of (x) the number of years remaining in
their then-current term divided by three
and (y) 15,000. These options will vest
as to 5,000 shares of Common Stock on
each anniversary of the date of grant
over the remainder of such Nonemployee Director’s term in office.
7. Under the terms of the Amended
and Restated 2006 Plan, the exercise
7 Hercules Technology Growth Capital, Inc.,
Investment Company Act Release Nos. 27815 (May
2, 2007) (notice) and 27838 (May 23, 2007) (order).
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53611
price of an option will not be less than
the current market value of, or if no
such market value exists, the current net
asset value per share of, Common Stock
on the date of the issuance of the
option.8 Options granted under the
Amended and Restated 2006 Plan will
expire ten years from the date of grant
and may not be transferred except for
disposition by gift, will or intestacy.
8. As of July 31, 2007, HTGC had
issued 6,668 shares of Restricted Stock
to Non-employee Directors under the
Amended and Restated 2006 Plan, had
outstanding options to purchase
2,782,513 shares of Common Stock and
had outstanding warrants to purchase
382,629 shares of Common Stock. As of
that date, all outstanding options to
purchase Common Stock consisted
entirely of options issued to directors,
officers, and employees of HTGC under
the Original 2004 Plan and the First
Amended and Restated 2004 Plan.9 As
of July 31, 2007, of the outstanding
warrants to purchase 382,629 shares of
Common Stock, warrants issued to
officers and employees of HTGC under
the Original 2004 Plan to purchase
10,693 shares of Common Stock were
outstanding. The other warrants
outstanding as of that date were issued
to directors, officers, and employees of
HTGC under a warrant agreement dated
June 22, 2004 by and between HTGC
and American Stock Transfer & Trust
Company, as warrant agent (the
‘‘Warrant Agreement’’). HTGC has no
outstanding warrants and options to
purchase its voting securities, other than
the warrants and options issued under
the Original 2004 Plan, the Warrant
Agreement, and the First Amended and
Restated 2004 Plan.
9. As of July 31, 2007, HTGC had
outstanding 32,414,178 shares of
Common Stock.10 As of that date, the
amount of voting securities issued as
Restricted Stock under the Amended
and Restated 2006 Plan and that would
result from the exercise of all
outstanding warrants and options would
be 3,171,180 shares of Common Stock,
8 Under the Amended and Restated 2006 Plan,
‘‘current market value’’ is the closing price of the
Common Stock on the NASDAQ Global Market (or
if different, on the exchange where the Common
Stock is traded) on the date the option is granted.
9 As of July 31, 2007, HTGC had outstanding
options issued to directors, officers, and employees
of HTGC under the Original 2004 Plan and the First
Amended and Restated 2004 Plan to purchase
1,221,013 shares of Common Stock and 1,561,500
shares of Common Stock, respectively.
10 The outstanding 32,414,178 shares of Common
Stock, as of July 31, 2007, include the 6,668 shares
of Restricted Stock issued under the Amended and
Restated 2006 Plan. The Common Stock, of which
the Restricted Stock is a particular type, constitutes
the only voting security of HTGC currently
outstanding.
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53612
Federal Register / Vol. 72, No. 181 / Wednesday, September 19, 2007 / Notices
rwilkins on PROD1PC63 with NOTICES
or approximately 9.78% of HTGC’s
outstanding voting securities. As of July
31, 2007, the amount of voting securities
issued as Restricted Stock under the
Amended and Restated 2006 Plan and
that would result from the exercise of all
outstanding warrants and options issued
to directors, officers, and employees of
HTGC under the Original 2004 Plan and
the First Amended and Restated 2004
Plan would be 2,799,874 shares of
Common Stock, or approximately 8.66%
of HTGC’s outstanding voting securities.
Applicant’s Legal Analysis
1. Section 63(3) of the Act permits a
BDC to sell its common stock at a price
below current net asset value upon the
exercise of any option issued in
accordance with section 61(a)(3) of the
Act. Section 61(a)(3)(B) of the Act
provides, in pertinent part, that a BDC
may issue to its non-employee directors
options to purchase its voting securities
pursuant to an executive compensation
plan, provided that: (a) The options
expire by their terms within ten years;
(b) the exercise price of the options is
not less than the current market value
of the underlying securities at the date
of the issuance of the options, or if no
market exists, the current net asset value
of the voting securities; (c) the proposal
to issue the options is authorized by the
BDC’s shareholders, and is approved by
order of the Commission upon
application; (d) the options are not
transferable except for disposition by
gift, will or intestacy; (e) no investment
adviser of the BDC receives any
compensation described in section
205(a)(1) of the Investment Advisers Act
of 1940, except to the extent permitted
by clause (b)(1) or (b)(2) of that section;
and (f) the BDC does not have a profitsharing plan as described in section
57(n) of the Act.
2. In addition, section 61(a)(3) of the
Act provides that the amount of the
BDC’s voting securities that would
result from the exercise of all
outstanding warrants, options, and
rights at the time of issuance may not
exceed 25% of the BDC’s outstanding
voting securities, except that if the
amount of voting securities that would
result from the exercise of all
outstanding warrants, options, and
rights issued to the BDC’s directors,
officers, and employees pursuant to an
executive compensation plan would
exceed 15% of the BDC’s outstanding
voting securities, then the total amount
of voting securities that would result
from the exercise of all outstanding
warrants, options, and rights at the time
of issuance will not exceed 20% of the
outstanding voting securities of the
BDC.
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3. HTGC represents that the proposal
to issue options to Non-employee
Directors under the Amended and
Restated 2006 Plan meets all of the
requirements of section 61(a)(3) of the
Act. HTGC states that the Board,
including the Non-employee Directors,
actively oversees HTGC’s affairs and
HTGC relies on the judgment and
experience of the Board. HTGC states
that the Non-employee Directors
provide advice on financial and
operational issues, credit and
underwriting policies, asset valuation,
strategic direction, as well as serve on
various committees. HTGC states that
the professional experiences and
expertise of the Non-employee Directors
make them valuable resources for
management. HTGC states that the
options that will be granted to the Nonemployee Directors under the Amended
and Restated 2006 Plan will provide
significant incentives to the Nonemployee Directors to remain on the
Board and to devote their best efforts to
the success of HTGC’s business and the
enhancement of stockholder value.
HTGC states that the options granted
under the Amended and Restated 2006
Plan will provide a means for the Nonemployee Directors to increase their
ownership interests in HTGC, thereby
ensuring close identification of their
interests with those of HTGC and its
stockholders. HTGC asserts that by
providing incentives in the form of
options under the Amended and
Restated 2006 Plan, HTGC would be
better able to retain and attract qualified
persons to serve as Non-employee
Directors.
4. HTGC submits that the proposal to
issue options to Non-employee Directors
to purchase Common Stock under the
Amended and Restated 2006 Plan is fair
and reasonable and does not involve
overreaching of HTGC or its
stockholders. HTGC states that the
amount of voting securities issued as
Restricted Stock under the Amended
and Restated 2006 Plan and that would
result from the exercise of all
outstanding options and warrants issued
to directors, officers and employees of
HTGC under the Original 2004 Plan and
the First Amended and Restated 2004
Plan would be 2,799,874 shares of
Common Stock, or approximately 8.66%
of HTGC’s outstanding voting securities
as of July 31, 2007, which is below the
percentage limitations in the Act. In
light of the above, HTGC asserts that the
granting of options pursuant to the
Amended and Restated 2006 Plan will
not have a substantial dilutive effect on
the net asset value of Common Stock.
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For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–18388 Filed 9–18–07; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–56375A; File No. SR–
NASD–2004–183]
Self-Regulatory Organizations;
National Association of Securities
Dealers, Inc. (n/k/a Financial Industry
Regulatory Authority, Inc.); Notice of
Filing of Amendment Nos. 3 and 4 and
Order Granting Accelerated Approval
of the Proposed Rule, as Amended,
Related to Sales Practice Standards
and Supervisory Requirements for
Transactions in Variable Annuities
September 14, 2007.
Correction
In FR Document No. E7–18022,
beginning on page 52403 for Thursday,
September 13, 2007, at the third column
of page 52410, first full paragraph,
beginning on line 24, revise ‘‘120 days’’
to read ‘‘180 days’’.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–18415 Filed 9–18–07; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–56383; File No. SR–ISE–
2007–61]
Self-Regulatory Organizations;
International Securities Exchange,
LLC; Notice of Filing of a Proposed
Rule Change and Amendment No. 1
Thereto Relating to Specific
Performance Commitments for Primary
Market Makers
September 11, 2007.
Pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on July 17,
2007, the International Securities
Exchange, LLC (‘‘ISE’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been substantially prepared by the
Exchange. On September 10, 2007, ISE
1 15
2 17
E:\FR\FM\19SEN1.SGM
U.S.C. 78s(b)(1).
CFR 240.19b–4.
19SEN1
]]>Agencies
[Federal Register Volume 72, Number 181 (Wednesday, September 19, 2007)]
[Notices]
[Pages 53610-53612]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-18388]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 27968; 812-13388]
Hercules Technology Growth Capital, Inc.; Notice of Application
September 12, 2007.
AGENCY: Securities and Exchange Commission (The ``Commission'').
ACTION: Notice of an application for an order under section 61(a)(3)(B)
of the Investment Company Act of 1940 (the ``Act'').
-----------------------------------------------------------------------
SUMMARY OF APPLICATION: Applicant, Hercules Technology Growth Capital,
Inc. (``HTGC''), requests an order that would approve the proposal to
issue stock options to directors who are not officers or employees of
HTGC (``Non-employee Directors'') under HTGC's amended and restated
2006 Non-employee Director Plan (the ``Amended and Restated 2006
Plan''). The requested order would supersede a prior order issued to
HTGC under section 61(a)(3)(B) of the Act (the ``HTGC Options
Order'').\1\
---------------------------------------------------------------------------
\1\ Hercules Technology Growth Capital, Inc., Investment Company
Act release Nos. 27668 (Jan. 19, 2007) (notice) and 27699 (Feb. 15,
2007) (order).
FILING DATES: The application was filed on May 24, 2007 and amended on
September 10, 2007. HTGC has agreed to file an amendment during the
---------------------------------------------------------------------------
notice period, the substance of which is reflected in this notice.
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 October 9, 2007, 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. HTGC, c/o Manuel A. Henriquez,
Chairman of the Board, President and Chief Executive Officer, 400
Hamilton Avenue, Suite 310, Palo Alto, California 94301.
FOR FURTHER INFORMATION CONTACT: Laura J. Riegel, Senior Counsel, at
(202) 551-6873, or Nadya B. Roytblat, 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 is available for a fee at the
Commission's Public Reference Branch, 100 F Street, NE., Washington, DC
20549-0102 (tel. 202-551-5850).
Applicant's Representations
1. HTGC, a Maryland corporation, is a business development company
(``BDC'') within the meaning of section 2(a)(48) of the Act.\2\ HTGC is
a specialty finance company that provides debt and equity growth
capital to technology-related and life-science companies at all stages
of development. HTGC's business and affairs are managed under the
direction of its board of directors (``Board''). HTGC does not have an
external investment adviser within the meaning of section 2(a)(20) of
the Act.
---------------------------------------------------------------------------
\2\ Section 2(a)(48) generally 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.
---------------------------------------------------------------------------
2. HTGC requests an order under section 61(a)(3)(B) of the Act that
would approve the proposal under the Amended and Restated 2006 Plan to
[[Page 53611]]
issue stock options to Non-employee Directors to purchase shares of
HTGC's common stock, $.001 par value per share (``Common Stock''). The
requested order would supersede the HTGC Options Order approving the
issuance of stock options to Non-employee Directors to purchase Common
Stock under HTGC's 2006 Non-employee Director Plan (the ``Original 2006
Plan'').\3\
---------------------------------------------------------------------------
\3\ HTGC has not issued any options to Non-employee Directors
under the Original 2006 Plan. At a meeting held on May 17, 2007, the
Board voted to approve the suspension of the Original 2006 Plan and
the grant of any options under the Original 2006 Plan.
---------------------------------------------------------------------------
3. HTGC currently has a four member Board, one of whom is
considered to be an ``interested person'' of HTGC within the meaning of
section 2(a)(19) of the Act and three of whom are not interested
persons (``Non-interested Directors''). HTGC currently has three Non-
employee Directors.\4\ The Non-employee Directors are all Non-
interested Directors, but it is possible that HTGC may have Non-
employee Directors in the future who are interested persons of HTGC.\5\
---------------------------------------------------------------------------
\4\ Because HTGC has a staggered Board, each director on the
Board is elected to a three year term subject to reelection only
every three years.
\5\ Each Non-employee Director receives an annual fee of
$50,000, $1,500 for each committee meeting attended, and
reimbursement of reasonable out-of-pocket expenses incurred in
attending Board meetings. Each Non-employee Director who serves as
chairperson of a Board committee receives an additional $15,000 per
year.
---------------------------------------------------------------------------
4. The Board approved the Amended and Restated 2006 Plan on March
7, 2007 and amendments to the Amended and Restated 2006 Plan by
unanimous written consent on July 20, 2007.\6\ At the annual meeting of
stockholders of HTGC held on June 21, 2007, stockholders approved the
Amended and Restated 2006 Plan and the separate 2007 amendment and
restatement of HTGC's amended and restated 2004 Equity Incentive Plan
(such plan, before both amendments and restatements, the ``Original
2004 Plan''; as first amended and restated, the ``First Amended and
Restated 2004 Plan''; and as further amended and restated in 2007, the
``Second Amended and Restated 2004 Plan''). Participants under the
Second Amended and Restated 2004 Plan are limited to employees of HTGC
and do not include Non-employee Directors.
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\6\ The Board determined that its amendments to the Amended and
Restated 2006 Plan complied with that section of the Amended and
Restated 2006 Plan authorizing plan amendments and did not
necessitate a stockholder vote pursuant to the provisions of the Act
and the rules promulgated thereunder.
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5. A Commission order permits HTGC to issue shares of Common Stock
that, at the time of issuance, are subject to certain forfeiture
restrictions, and thus are restricted as to their transferability until
such forfeiture restrictions have lapsed (the ``Restricted Stock'') to
Non-employee Directors under the Amended and Restated 2006 Plan and
employees of HTGC and employees of its wholly-owned consolidated
subsidiaries under the Second Amended and Restated 2004 Plan (``HTGC
Restricted Stock Order'').\7\ In light of the HTGC Restricted Stock
Order, HTGC believes that it will no longer need to issue options to
purchase as many shares of Common Stock as it did under the Original
2006 Plan to adequately compensate Non-employee Directors. As compared
to the Original 2006 Plan, the Amended and Restated 2006 Plan would
reduce the number of options granted to Non-employee Directors, change
the timeframe within which such options are granted, and change the
vesting provisions of such options.
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\7\ Hercules Technology Growth Capital, Inc., Investment Company
Act Release Nos. 27815 (May 2, 2007) (notice) and 27838 (May 23,
2007) (order).
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6. Under the Amended and Restated 2006 Plan, a maximum of 1,000,000
shares of Common Stock, in the aggregate, may be issued to Non-employee
Directors and 40,000 shares of Common Stock may be issued to any Non-
employee Director in any calendar year. Each individual initially
elected to the Board as a Non-employee Director after the date on which
the Commission issues an order on the application (the ``Order Date'')
will automatically be granted options to purchase 10,000 shares of
Common Stock (the ``Initial Grants''). The options issued under the
Initial Grants will vest as to one-half of the 10,000 shares of Common
Stock on each of the first two anniversaries of the date of grant. Each
Non-employee Director automatically will be granted options to purchase
15,000 shares of Common Stock on the date of such Non-employee
Director's reelection to the Board (the ``Periodic Grants''). The
options issued under the Periodic Grants will vest as to one-third of
the 15,000 shares of Common Stock on each of the three anniversaries of
the date of grant. Non-employee Directors who hold office on the Order
Date will be granted options for a number of shares of Common Stock
equal to the product of (x) the number of years remaining in their
then-current term divided by three and (y) 15,000. These options will
vest as to 5,000 shares of Common Stock on each anniversary of the date
of grant over the remainder of such Non-employee Director's term in
office.
7. Under the terms of the Amended and Restated 2006 Plan, the
exercise price of an option will not be less than the current market
value of, or if no such market value exists, the current net asset
value per share of, Common Stock on the date of the issuance of the
option.\8\ Options granted under the Amended and Restated 2006 Plan
will expire ten years from the date of grant and may not be transferred
except for disposition by gift, will or intestacy.
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\8\ Under the Amended and Restated 2006 Plan, ``current market
value'' is the closing price of the Common Stock on the NASDAQ
Global Market (or if different, on the exchange where the Common
Stock is traded) on the date the option is granted.
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8. As of July 31, 2007, HTGC had issued 6,668 shares of Restricted
Stock to Non-employee Directors under the Amended and Restated 2006
Plan, had outstanding options to purchase 2,782,513 shares of Common
Stock and had outstanding warrants to purchase 382,629 shares of Common
Stock. As of that date, all outstanding options to purchase Common
Stock consisted entirely of options issued to directors, officers, and
employees of HTGC under the Original 2004 Plan and the First Amended
and Restated 2004 Plan.\9\ As of July 31, 2007, of the outstanding
warrants to purchase 382,629 shares of Common Stock, warrants issued to
officers and employees of HTGC under the Original 2004 Plan to purchase
10,693 shares of Common Stock were outstanding. The other warrants
outstanding as of that date were issued to directors, officers, and
employees of HTGC under a warrant agreement dated June 22, 2004 by and
between HTGC and American Stock Transfer & Trust Company, as warrant
agent (the ``Warrant Agreement''). HTGC has no outstanding warrants and
options to purchase its voting securities, other than the warrants and
options issued under the Original 2004 Plan, the Warrant Agreement, and
the First Amended and Restated 2004 Plan.
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\9\ As of July 31, 2007, HTGC had outstanding options issued to
directors, officers, and employees of HTGC under the Original 2004
Plan and the First Amended and Restated 2004 Plan to purchase
1,221,013 shares of Common Stock and 1,561,500 shares of Common
Stock, respectively.
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9. As of July 31, 2007, HTGC had outstanding 32,414,178 shares of
Common Stock.\10\ As of that date, the amount of voting securities
issued as Restricted Stock under the Amended and Restated 2006 Plan and
that would result from the exercise of all outstanding warrants and
options would be 3,171,180 shares of Common Stock,
[[Page 53612]]
or approximately 9.78% of HTGC's outstanding voting securities. As of
July 31, 2007, the amount of voting securities issued as Restricted
Stock under the Amended and Restated 2006 Plan and that would result
from the exercise of all outstanding warrants and options issued to
directors, officers, and employees of HTGC under the Original 2004 Plan
and the First Amended and Restated 2004 Plan would be 2,799,874 shares
of Common Stock, or approximately 8.66% of HTGC's outstanding voting
securities.
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\10\ The outstanding 32,414,178 shares of Common Stock, as of
July 31, 2007, include the 6,668 shares of Restricted Stock issued
under the Amended and Restated 2006 Plan. The Common Stock, of which
the Restricted Stock is a particular type, constitutes the only
voting security of HTGC currently outstanding.
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Applicant's Legal Analysis
1. Section 63(3) of the Act permits a BDC to sell its common stock
at a price below current net asset value upon the exercise of any
option issued in accordance with section 61(a)(3) of the Act. Section
61(a)(3)(B) of the Act provides, in pertinent part, that a BDC may
issue to its non-employee directors options to purchase its voting
securities pursuant to an executive compensation plan, provided that:
(a) The options expire by their terms within ten years; (b) the
exercise price of the options is not less than the current market value
of the underlying securities at the date of the issuance of the
options, or if no market exists, the current net asset value of the
voting securities; (c) the proposal to issue the options is authorized
by the BDC's shareholders, and is approved by order of the Commission
upon application; (d) the options are not transferable except for
disposition by gift, will or intestacy; (e) no investment adviser of
the BDC receives any compensation described in section 205(a)(1) of the
Investment Advisers Act of 1940, except to the extent permitted by
clause (b)(1) or (b)(2) of that section; and (f) the BDC does not have
a profit-sharing plan as described in section 57(n) of the Act.
2. In addition, section 61(a)(3) of the Act provides that the
amount of the BDC's voting securities that would result from the
exercise of all outstanding warrants, options, and rights at the time
of issuance may not exceed 25% of the BDC's outstanding voting
securities, except that if the amount of voting securities that would
result from the exercise of all outstanding warrants, options, and
rights issued to the BDC's directors, officers, and employees pursuant
to an executive compensation plan would exceed 15% of the BDC's
outstanding voting securities, then the total amount of voting
securities that would result from the exercise of all outstanding
warrants, options, and rights at the time of issuance will not exceed
20% of the outstanding voting securities of the BDC.
3. HTGC represents that the proposal to issue options to Non-
employee Directors under the Amended and Restated 2006 Plan meets all
of the requirements of section 61(a)(3) of the Act. HTGC states that
the Board, including the Non-employee Directors, actively oversees
HTGC's affairs and HTGC relies on the judgment and experience of the
Board. HTGC states that the Non-employee Directors provide advice on
financial and operational issues, credit and underwriting policies,
asset valuation, strategic direction, as well as serve on various
committees. HTGC states that the professional experiences and expertise
of the Non-employee Directors make them valuable resources for
management. HTGC states that the options that will be granted to the
Non-employee Directors under the Amended and Restated 2006 Plan will
provide significant incentives to the Non-employee Directors to remain
on the Board and to devote their best efforts to the success of HTGC's
business and the enhancement of stockholder value. HTGC states that the
options granted under the Amended and Restated 2006 Plan will provide a
means for the Non-employee Directors to increase their ownership
interests in HTGC, thereby ensuring close identification of their
interests with those of HTGC and its stockholders. HTGC asserts that by
providing incentives in the form of options under the Amended and
Restated 2006 Plan, HTGC would be better able to retain and attract
qualified persons to serve as Non-employee Directors.
4. HTGC submits that the proposal to issue options to Non-employee
Directors to purchase Common Stock under the Amended and Restated 2006
Plan is fair and reasonable and does not involve overreaching of HTGC
or its stockholders. HTGC states that the amount of voting securities
issued as Restricted Stock under the Amended and Restated 2006 Plan and
that would result from the exercise of all outstanding options and
warrants issued to directors, officers and employees of HTGC under the
Original 2004 Plan and the First Amended and Restated 2004 Plan would
be 2,799,874 shares of Common Stock, or approximately 8.66% of HTGC's
outstanding voting securities as of July 31, 2007, which is below the
percentage limitations in the Act. In light of the above, HTGC asserts
that the granting of options pursuant to the Amended and Restated 2006
Plan will not have a substantial dilutive effect on the net asset value
of Common Stock.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-18388 Filed 9-18-07; 8:45 am]
BILLING CODE 8010-01-P
