[Federal Register: January 25, 2007 (Volume 72, Number 16)]
[Notices]
[Page 3440-3442]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25ja07-81]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 27668; 812-13201]
Hercules Technology Growth Capital, Inc.; Notice of Application
January 19, 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'').
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Summary of Application: Applicant, Hercules Technology Growth Capital,
Inc. (``HTGC''), requests an order approving a proposal to issue
options to purchase HTGC's common stock (``Common Stock'') to directors
who are not officers or employees of HTGC (``Eligible Directors'')
pursuant to HTGC's 2006 Non-employee Director Plan (the ``Plan'').
Filing Dates: The application was filed on June 21, 2005 and amended on
December 12, 2006.
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 February 13, 2007, and
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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 20549-9303. Applicant, c/o Manuel A.
Henriquez, Chairman of the Board, President and Chief Executive
Officer, Hercules Technology Growth Capital, Inc., 400 Hamilton Avenue,
Suite 310, Palo Alto, CA 94301.
FOR FURTHER INFORMATION CONTACT: Emerson S. Davis, Sr., Senior Counsel,
at (202) 551-6868, or Nadya 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.\1\ 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. Applicant's business and affairs are managed under the
direction of its board of directors (``Board''). Applicant does not
have an external investment adviser within the meaning of section
2(a)(20) of the Act.
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\1\ 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.
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2. Applicant requests an order under section 61(a)(3)(B) of the Act
approving the Plan for Eligible Directors.\2\ Applicant has a four
member Board, three of whom are Eligible Directors. The Plan was
approved on May 30, 2006 by the Board and HTGC's shareholders. The Plan
will not become effective until the date the Commission issues an order
on the application (``Order Date'').
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\2\ For their services on the Board and its committees, Eligible
Directors currently receive cash compensation in the form of annual
fees, fees for service on the committees, and reimbursement of
reasonable out-of-pocket expenses incurred in attending Board
meetings.
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3. As of October 20, 2006, HTGC had outstanding 16,188,402 shares
of Common Stock. Applicant has in place an equity compensation plan for
executive officers, directors and other key employees (``2004 Plan'').
Under the 2004 Plan, options to purchase 1,889,346 shares of the Common
Stock are outstanding. Eligible Directors are not eligible to
participate in the 2004 Plan. Applicant also has outstanding warrants
to purchase 673,223 shares of Common Stock, of which 56,551 were issued
under the 2004 Plan to HTGC's officers, directors and employees.
Applicant has no other warrants, options or rights to purchase its
voting securities outstanding.
4. Under the Plan, options may be granted up to a maximum of
1,000,000 shares of Common Stock. Each Eligible Director will receive
an initial grant on the Order Date of options to purchase 20,000 shares
of Common Shares and an annual grant on each anniversary of the
Eligible Director's election to the Board of an option to purchase
20,000 shares of Common Stock, which will vest over two years, in equal
installments, on each anniversary date of the grant. The Plan provides
that the exercise price of the options will not be less than the
current market value of, or if no market value exists, the current net
asset value of, the Common Stock as determined in good faith by the
Board on the date of grant.
5. The Plan also provides that it will terminate on the tenth
anniversary of its adoption and no additional grants of options may be
made under the Plan after that date. The Plan further provides that the
options may not be transferred except for disposition by gift, will or
laws of descent and distribution.
6. As of October 20, 2006, 16,188,402 shares of Common Stock were
outstanding. The total number of shares that would result from the
exercise of all outstanding options and warrants issued to HTGC's
officers, directors and employees is 1,980,733, or approximately 12.24%
of HTGC's outstanding voting securities. The total number of shares
that would result from the exercise of all of HTGC's outstanding
options, warrants or rights is approximately 15.83% 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(1) of the
Investment Advisers Act of 1940, except to the extent permitted by
clause (A) or (B) of section 205(b)(2); 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. Applicant represents that the terms of the Plan meet all of the
requirements of section 61(a)(3) of the Act. HTGC states that the
Board, including the Eligible Directors, actively oversees applicant's
affairs and applicant relies on the judgment and experience of the
Board. Applicant states that the Eligible Directors provide advice on
financial and operational issues, credit and underwriting policies,
asset valuation, strategic direction, as well as serve on various
committees. Applicant states that the professional experiences and
expertise of the Eligible Directors make them valuable resources for
management. HTGC states that the options that will be granted to the
Eligible Directors under the Plan will provide significant incentives
to the
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Eligible 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. Applicant states that the options granted under the
Plan will provide a means for the Eligible Directors to increase their
ownership interests in HTGC, thereby ensuring close identification of
their interests with those of HTGC and its stockholders. Applicant
asserts that by providing incentives in the form of options under the
Plan, HTGC would be better able to retain and attract qualified persons
to serve as Eligible Directors.
4. Applicant submits that the terms of the Plan are fair and
reasonable and do not involve overreaching of applicant or its
shareholders. Applicant asserts that the exercise of the options
pursuant to the Plan will not have a substantial dilutive effect on the
net asset value of applicant's Common Stock.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-1061 Filed 1-24-07; 8:45 am]
BILLING CODE 8011-01-P