[Federal Register Volume 67, Number 59 (Wednesday, March 27, 2002)]
[Notices]
[Pages 14733-14735]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-7290]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 25468; 812-12446]


UTEK Corporation; Notice of Application

March 20, 2002.
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, UTEK Corporation (``UTEK''), 
requests an order approving its Non-Statutory Stock Option Plan (the 
``2000 Plan'') and the grant of certain stock options under the 2000 
Plan.

FILING DATES: The application was filed on February 13, 2001, and 
amended on January 3, 2002.

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 April 15, 2002, 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

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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, Commission, 450 5th Street, NW, Washington, DC 
20549-0609. Applicant, 202 South Wheeler Street, Plant City, FL 33566.

FOR FURTHER INFORMATION CONTACT: Deepak T. Pai, Senior Counsel, at 
(202) 942-0574, or Nadya Roytblat, Assistant Director, 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 is available for a fee at the 
Commission's Public Reference Branch, 450 Fifth Street, NW, Washington, 
DC 20549-0102 (tel. 202-942-8090).

Applicant's Representations

    1. Applicant is a Delaware corporation and an internally managed 
business development company (``BDC'') within the meaning of section 
2(a)(48) of the Act.\1\ UTEK's primary investment objective is to 
increase its net assets by exchanging stock in its portfolio companies 
for cash and other assets it will use to acquire additional 
technologies. UTEK seeks to achieve that investment objective by 
developing portfolio companies that identify, license and market new 
technologies invented primarily by employees of universities and 
laboratories. UTEK expects that the primary source of technology 
opportunities will be, as it has been in the past, presented to it as a 
result of contacts with universities research laboratories and in 
private industry, provided by its management, including its Non-Officer 
Directors as defined below.
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    \1\ Section 2(a)(48) 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 2000 Plan for directors who are not employees or officers 
of the applicant (``Non-Officer Directors'').\2\ Applicant has a seven-
member board of directors (the ``Board''), five of whom are not 
interested persons of the applicant (``Disinterested Directors'').\3\ 
On February 8, 2000, applicant's Board approved the 2000 Plan, and 
applicant's shareholders approved the 2000 Plan on October 2, 2000. The 
2000 Plan will become effective on the date that the Commission issues 
an order on the application (the ``Order Date'').
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    \2\ Non-Officer Directors currently receive no compensation for 
their services on the board of directors or committees, except for 
the reimbursement of out-of pocket expenses incurred in attending 
meetings.
    \3\ The Non-Officer Directors are Disinterested Directors.
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    3. The 2000 Plan provides for the grant of stock options to 
purchase shares of applicant's common stock (``Options'') to each of 
the Non-Officer Directors on the Order Date. The Non-Officer Directors 
will receive Options pursuant to the following formula: Options 
representing 25,000 Shares will be granted to four of the five Non-
Officer Directors on the Order Date, with 6,250 Options for each 
grantee vested at the time of grant, and an additional 6,250 Options 
vesting on each anniversary of the grant for three consecutive years. 
One Non-Officer Director will be granted 50,000 Options, with 12,500 
Options vested at the time of grant and an additional 12,500 Options 
vesting on each anniversary of the grant for three consecutive years. 
Any Non-Officer Director that is elected or appointed to the Board 
after the Order Date will receive Options representing 25,000 shares 
upon his or her election or appointment, with 6,250 Options vested at 
the time of grant and an additional 6,250 Options vesting on each 
anniversary of the grant for three consecutive years.
    4. Under the 2000 Plan, the exercise price for Options will not be 
less than 100% of the current market value of the shares on the date of 
grant. Options granted under the 2000 Plan are exercisable for a period 
of 10 years from the date of grant or a shorter period as the Board may 
establish. In the event of death or permanent and total disability of 
an Non-Officer Director during the Director's service, unexercised 
Options will become exercisable only during the period of twelve months 
following the date of death or disability. In the event of the 
termination of a Non-Officer Director's directorship for a reason other 
than by death or permanent and total disability, an Option shall be 
held at the date of termination and may be exercisable in whole or in 
part for three months, or some lesser period not to be less than 30 
days, as is provided for in the Option agreement. The Options will not 
be transferable except for disposition by gift, will, intestacy, or 
pursuant to a qualified domestic relations order (``QDRO'') as defined 
by section 414(p) of the Internal Revenue Code of 1986, as amended.\4\
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    \4\ A QDRO is made pursuant to a court order or decree under 
state domestic relations laws (e.g., involving divorce, child 
support, alimony, or marital property rights). Under section 414(p) 
of the Code, a QDRO permits a state domestic relations court to 
issue orders that will allow for employee plan benefits to be paid 
to an alternate payee.
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    5. Applicant states that, in addition to the 2000 Plan, UTEK also 
has in place another stock option plan, which was adopted by UTEK's 
stockholders in 1999 (the ``1999 Plan''). The 1999 Plan provides for 
the issuance of up to 500,000 options to purchase applicant's common 
stock. Non-Officer Directors are not eligible to receive options under 
the 1999 Plan. Applicant states that there is also an outstanding 
warrant to purchase up to 100,000 shares of UTEK's common stock held by 
Schneider Securities Inc., a registered broker-dealer. UTEK's 
outstanding options and warrant represent 471,600 shares or 
approximately 12% of its outstanding common stock as of September 30, 
2001. UTEK does not have any other options, warrants or rights 
outstanding.

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 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

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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 2000 Plan meet all 
the requirements of section 61(a)(3)(B) of the Act. Applicant states 
that Non-Officer Directors not only provide UTEK with skills and 
experience necessary for management and oversight of UTEK's investments 
and operations and are likely to have specific experience with respect 
to technologies in which UTEK invests, but they are also considered an 
important source of technology investment opportunities. Applicant also 
states that Non-Officer Directors with industry or other relevant 
experience also are expected to participate on an ongoing basis in the 
analysis of prospective portfolio companies, as well as to provide 
managerial assistance to UTEK's portfolio companies and aid them in 
their business of researching, identifying, developing and licensing 
new technology. Applicant believes that its ability to make Option 
grants under the 2000 Plan to Non-Officer Directors provides a means of 
retaining the services of its current Non-Officer Directors and of 
attracting qualified persons to serve as Non-Officer Directors in the 
future. The Options also will provide a means for UTEK's Non-Officer 
Directors to increase their ownership interest in UTEK, thereby helping 
to ensure a close identification of their interests with those of UTEK 
and its shareholders. Applicant submits that the terms of the 2000 Plan 
are fair and reasonable and do not involve overreaching of applicant or 
its shareholders and that the grant of Options to Non-Officer Directors 
will not have a substantial dilutive effect on the net asset value of 
UTEK's common stock.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-7290 Filed 3-26-02; 8:45 am]
BILLING CODE 8010-01-P