[Federal Register Volume 75, Number 105 (Wednesday, June 2, 2010)]
[Notices]
[Pages 30875-30876]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-13154]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 29287; File No. 812-13716]
Hercules Technology Growth Capital, Inc.; Notice of Application
May 26, 2010.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application for an order under section 23(c)(3) of
the Investment Company Act of 1940 (the ``Act'') for an exemption from
section 23(c) of the Act.
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SUMMARY: Summary of the Application: Hercules Technology Growth
Capital, Inc. (``Company'' or ``Applicant'') requests an order to amend
prior orders that permit the Company to issue restricted shares of its
common stock (``Restricted Stock'') and to issue stock options to the
Company's executive officers, employee directors, and other key
employees (together, ``Employees'') and non-employee directors (``Non-
employee Directors'') under the terms of its employee and director
compensation plans, the Amended and Restated 2004 Equity Incentive Plan
and the Amended and Restated 2006 Non-employee Director Plan (each as
amended and restated on June 21, 2007, a ``Plan,'' and together, the
``Plans'').\1\ Applicant seeks to amend the Prior Orders to permit the
Company to engage in certain transactions in connection with the Plans
that may constitute purchases by the Company of its own securities
within the meaning of section 23(c) of the Act. Such transactions are
provided for in the 2009 Amendment and Restatement to each Plan (each,
an ``Amended Plan,'' and together, the ``Amended Plans'').
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\1\ Hercules Technology Growth Capital, Inc., Investment Company
Act Release Nos. 27815 (May 2, 2007) (notice) and 27838 (May 23,
2007) (order) and Hercules Technology Growth Capital, Inc.,
Investment Company Act Release Nos. 27968 (Sept. 12, 2007) (notice)
and 28011 (Oct. 10, 2007) (order) (collectively, the ``Prior
Orders'').
DATES: Filing Dates: The application was filed on November 9, 2009, and
amended on March 22, 2010, and May 25, 2010.
Hearing or Notification of Hearing: An order granting the
application will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving applicant with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on June 21, 2010, 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. Applicant, c/o Mr. Manuel A.
Henriquez, Chief Executive Officer, Hercules Technology Growth Capital,
Inc., 400 Hamilton Avenue, Suite 310, Palo Alto, CA 94301.
FOR FURTHER INFORMATION CONTACT: Jean E. Minarick, Senior Counsel, at
(202) 551-6811, or Julia Kim Gilmer, Branch Chief, at (202) 551-6821
(Division of Investment Management, Office of Investment Company
Regulation).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site by searching for the file number, or the
applicant using the Company name box, at http://www.sec.gov/search/search.htm or by calling (202) 551-8090.
Applicant's Representations
1. The Company is an internally managed, non-diversified, closed-
end investment company that has elected to be regulated as a business
development company (``BDC'') under the Act. The Company is currently
permitted to (i) issue shares of Restricted Stock to certain of its
Employees and Non-employee Directors, and (ii) issue options to
purchase shares of the Company's common stock to certain of its
Employees and Non-employee Directors, under the terms of the Plans in
reliance on the Prior Orders. Applicant seeks to amend the Prior Orders
in order to permit the Company, pursuant to the Amended Plans, to
withhold shares of the Company's common stock or purchase shares of the
Company's common stock from its Employees and Non-employee Directors to
satisfy tax withholding obligations related to the vesting of
Restricted Stock that were or will be granted pursuant to the Plans or
the Amended Plans.\2\ In addition, the Company seeks to amend the Prior
Orders to permit Participants to pay the exercise price of options to
purchase shares of the Company's common stock that were or will be
granted to them pursuant to the Plans or the Amended Plans with shares
of the Company's common stock already held by them or pursuant to a net
share settlement feature.\3\ The Company will continue to comply with
all of the terms and conditions of the Prior Orders.
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\2\ All Employees and Non-Employee Directors who participate in
the Plans or the Amended Plans are referred to as ``Participants.''
\3\ Net share settlement allows the Company to deliver only gain
shares (i.e., shares of its common stock with a current market
value, as the term is defined in the Amended Plans, equal to the
option spread upon exercise) directly to the optionee without the
need for the optionee to sell shares of the Company's common stock
on the open market or borrow cash from third parties in order to
exercise his or her options.
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2. The Plans and the Amended Plans authorize the issuance to
Participants of shares of Restricted Stock, subject to certain
forfeiture restrictions, and options that may be subject to forfeiture
conditions to purchase shares of the Company's common stock. On the
date that any Restricted Stock vests, such vested shares of the
Restricted Stock are released to the Participant and are available for
sale or transfer.\4\ For Participants who are Employees, the value of
the vested shares is deemed to be wage compensation for the Employee.
As discussed more fully in the application, upon the exercise of
certain options the amount by which the current market value of the
shares of the Company's common stock, determined as of the date of
exercise, exceeds the exercise price will be treated as ordinary income
to the recipient of the option in the year of exercise. Applicant
states that any compensation income recognized by an employee generally
is subject to Federal withholding for income and employment tax
purposes. The Amended Plans provide that each grant or exercise of an
Award is subject to the Participant making arrangements to satisfy all
applicable Federal, State, and local or other income and employment tax
withholding obligations.
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\4\ During the restriction period (i.e., prior to the lapse of
the forfeiture restrictions), the Restricted Stock may not be sold,
transferred, pledged, hypothecated, margined, or otherwise
encumbered by a Participant.
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3. The Amended Plans will be subject to approval by the Company's
board of directors (``Board'') as well as the required majority of the
Company's directors with the meaning of section 57(o) of the Act. The
Amended Plans explicitly permit the Company to
[[Page 30876]]
withhold shares of the Company's common stock or purchase shares of the
Company's common stock from the Participants to satisfy tax withholding
obligations related to the vesting of Restricted Stock and the exercise
of options to purchase shares of the Company's common stock granted
pursuant to the Plans or the Amended Plans. The Amended Plans further
provide the Company's Board with discretion to permit the Participants
to pay the exercise price of options to purchase shares of the
Company's stock with shares of the Company's stock already held by such
Participants or pursuant to net share settlement.
Applicant's Legal Analysis
1. Section 23(c) of the Act, which is made applicable to BDCs by
section 63 of the Act, generally prohibits a BDC from purchasing any
securities of which it is the issuer except in the open market,
pursuant to tender offers or under other circumstances as the
Commission may permit to ensure that the purchase is made on a basis
that does not unfairly discriminate against any holders of the class or
classes of securities to be purchased. 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.
2. Section 23(c)(3) provides that the Commission may issue an order
that would permit a BDC to repurchase its shares in circumstances in
which the repurchase is made in a manner or on a basis that does not
unfairly discriminate against any holders of the class or classes of
securities to be purchased. Applicant states that it believes that the
requested relief meets the standards of section 23(c)(3).
3. Applicant states that these purchases will be made on a basis
which does not unfairly discriminate against the stockholders of the
Company because all purchases of the Company's stock will be at the
closing price of the common stock on the NASDAQ Global Select Market
(or any other such exchange on which the shares may be traded in the
future) on the date of the transaction. Applicant further states that
no transactions will be conducted pursuant to the requested order on
days where there are no reported market transactions involving the
Company's shares. Applicant submits that because all transactions would
take place at the public market price for the Company's common stock,
the transactions would not be significantly different than could be
achieved by any stockholder selling in a market transaction.
4. Applicants submit that the proposed purchases do not raise
concerns about preferential treatment of the Company's insiders because
the Amended Plans are bona fide compensation plans of the type that is
common among corporations generally. Further, the vesting schedule is
determined at the time of the initial grant of the Restricted Stock 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 Amended Plans. Applicant argues that
granting the requested relief would be consistent with policies
underlying the provisions of the Act permitting the use of equity
compensation as well as prior exemptive relief granted by the
Commission for relief under section 23(c) of the Act.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-13154 Filed 6-1-10; 8:45 am]
BILLING CODE 8010-01-P