[Federal Register Volume 61, Number 36 (Thursday, February 22, 1996)]
[Notices]
[Pages 6870-6871]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-3983]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-21755; 812-9780]
Harris & Harris Group, Inc.; Notice of Application
February 15, 1996.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of Application under the Investment Company Act of 1940
(the ``Act'').
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APPLICANT: Harris & Harris Group, Inc.
RELEVANT ACT SECTION: Section 61(a)(3)(B).
SUMMARY OF APPLICATION: Applicant requests an order authorizing
applicant to issue stock options to applicant's non-employee directors
pursuant to applicant's Amended and Restated 1988 Stock Option Plan
(the ``Stock Option Plan'').
FILING DATES: The application was filed on September 22, 1995 and
amended on December 29, 1995 and on February 8, 1996.
HEARING OR NOTIFICATION OF HEARING: An order granting the application
will be issued unless the SEC orders a hearing. Interested persons may
request a hearing by writing to the SEC's Secretary and serving
applicant with a copy of the request, personally or by mail. Hearing
requests should be received by the SEC by 5:30 p.m. on March 11, 1996
and should be accompanied by proof of service on the 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 may request
notification of a hearing by writing to the SEC's Secretary.
ADDRESSES: Secretary, SEC, 450 5th Street, N.W., Washington, D.C.
20549. Applicant, One Rockfeller Plaza, New York, New York 10020.
FOR FURTHER INFORMATION CONTACT:
Sarah A. Buescher, Staff Attorney, at (202) 942-0573, or Robert A.
Robertson, Branch Chief, at (202) 942-0564 (Division of Investment
Management, Office of Investment Company Regulation).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application
[[Page 6871]]
may be obtained for a fee from the SEC's Public Reference Branch.
Applicant's Representations
1. Applicant is a business development company (``BDC'') under the
Act. Applicant's investment objective is long-term growth through
capital appreciation primarily through investing in start-up companies
and other investments. Applicant's investment portfolio includes
companies ranging from software development to biotechnology. Applicant
may provide assistance to its portfolio companies in the form of
product planning and development, raising capital, and establishing
relationships with investment bankers and other professionals. In
addition, several of applicant's officers serve on the boards of the
portfolio companies.
2. Applicant requests an order authorizing it to grant options to
purchase shares of applicant's common stock to each of its present non-
employee directors (``Outside Directors'') and to each Outside Director
who may be elected or appointed to its board of directors in the
future. In this regard, applicant's shareholders approved certain
amendments to the Stock Option Plan on October 20, 1995. Applicant will
implement the amendments subsequent to receiving an order from the SEC.
3. Under the Stock Option Plan, all Outside Directors who have not
previously received options would receive options to purchase 20,000
shares of applicant's common stock, cumulatively vesting 20% each year
for a five-year period commencing on the date of grant. Each option
will have a term of not more than ten years. The exercise price of the
options may not be less than the current market value of applicant's
common stock on the date of grant. The options would not be
transferable except by will or by the laws of descent and distribution.
4. Each Outside Director receives $1,000 for each board meeting
attended, $500 for each committee meeting attended, and reimbursement
for out of pocket expenses.
5. At the end of an Outside Director's service, an Outside Director
may exercise options only with respect to the number of shares of stock
that the Outside Director could have acquired by an exercise of the
options immediately prior to cessation of service as an Outside
Director.
6. In the event of an Outside Director's retirement, all of the
Outside Director's unexercised options would immediately become
exercisable for a period of three years following the date of
retirement, but in no event after the expiration date of the options.
In the event of an Outside Director's death or disability, all the
Outside Director's unexercised options would immediately become
exercisable for a period of six months following the date of death or
one year following the date of disability, but in no event after the
expiration date of the options. If an Outside Director ceases to serve
as Outside Director for any reason other than those mentioned above,
any options held by the Outside Director shall be exercisable for 90
days after cessation of service, but in no event after the expiration
date of the options.
7. The aggregate number of options to be granted to Outside
Directors is limited to 200,000 shares, exclusive of any options
outstanding on August 31, 1995. As of August 31, 1995, the total number
of applicant's voting securities that would be issued as a result of
the exercise of all options issued or currently issuable to applicant's
directors, officers, and employees under the Amended 1988 Plan would be
1,391,763, of which 648,563 are fully vested. The options to purchase
1,391,763 shares, together with the 475,017 shares available for future
awards and the 200,000 shares to be granted pursuant to the order
sought hereby, comprise 2,066,780 shares reserved for the issuance of
awards. Options granted to purchase 200,000 shares of applicant's
common stock would currently represent 1.9% of applicant's 10,333,902
outstanding shares of common stock. None of the Outside Directors who
previously received options will be eligible to receive additional
options under the Stock Option Plan.\1\ Applicant has no other
warrants, options or rights to purchase its voting securities
outstanding other than those granted to its directors, officers, and
employees.
\1\See Harris & Harris Group, Inc., Investment Company Act
Release Nos. 21174 (June 29, 1995) (notice) and 21250 (July 25,
1995) (order).
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Applicant's Legal Analysis
1. 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 certain conditions are met, including the options being approved
by the company's shareholders and the SEC issuing an order approving
the options on the basis that the proposal is fair and reasonable and
does not involve overreaching of the company or its shareholders.
2. Applicant represents that the Stock Option Plan and the options
to be granted to applicant's Outside Directors pursuant to the Stock
Option Plan meet the requirements of section 61(a)(3)(B), other than
SEC approval. Applicant believes that the terms of the Stock Option
Plan and the options to be granted automatically to applicant's Outside
Directors are fair and reasonable and do not involve any overreaching
of applicant or its shareholders. Applicant also believes that the
exercise of the options would not have a significant dilutive effect on
applicant's existing shareholders.
3. Applicant states that its long-term success is tied to its
ability to attract retain, and provide appropriate incentives to the
Outside Directors. Applicant asserts that because the stock options
granted to Outside Directors would vest in cumulative installments of
20% per year, the Stock Option Plan would provide Outside Directors
with incentives to remain with applicant. In addition, applicant
contends that because the options granted pursuant to the Stock Option
Plan have no value unless the price of applicant's common stock exceeds
the exercise price of the option, the interests of Outside Directors
would be aligned with the interests of the Company's shareholders.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-3983 Filed 2-21-96; 8:45 am]
BILLING CODE 8010-01-M
