Non-Employee Director Equity Compensation
On March 18, 2008, we received an order from the SEC granting exemptive relief with respect to our ability to issue restricted stock to our employees and non-employee directors pursuant to the terms of our Amended and Restated 2007 Equity Incentive Plan, or the Equity Incentive Plan. In connection with receiving the necessary exemptive relief, our Board of Directors approved the Equity Incentive Plan and our stockholders voted to approve the Equity Incentive Plan at our 2008 Annual Meeting of Stockholders. On February 22, 2017, both our Compensation Committee and our Board of Directors adopted the Company’s Omnibus Incentive Plan, or the Omnibus Plan, which was approved by our stockholders at the 2017 Annual Meeting of Stockholders. Prior to adoption of the Omnibus Plan, the Company compensated its professional through two separate plans; the Equity Incentive Plan and the 2012 Executive Cash Incentive Plan. The Omnibus Plan was created primarily for the purpose of combining the Equity Incentive Plan and the 2012 Executive Cash Incentive Plan in order to reduce the administrative burden of monitoring the terms and conditions of two separate plans. The terms of the Equity Incentive Plan and the 2012 Executive Cash Incentive Plan, as combined and reflected in the Omnibus Plan, are substantially similar to the respective terms of each standalone plan.
The Omnibus Plan provides that our non-employee directors each receive an automatic grant of restricted stock at the beginning of each one-year term of service on the Board of Directors, for which forfeiture restrictions lapse one year from the grant date. The grant of restricted stock to non-employee directors under the Omnibus Plan is automatic and the terms thereunder may not be changed without SEC approval. On March 21, 2013, the SEC approved an increase in the amount of the automatic grant to non-employee directors to $50,000 worth of restricted stock each year, and our stockholders approved this increase at our 2013 Annual Meeting of Stockholders. Shares granted pursuant to a restricted stock award will not be transferable until such shares have vested in accordance with the terms of the award agreement, unless the transfer is by will or by the laws of descent and distribution.
CORPORATE GOVERNANCE
Director Independence
In accordance with the NYSE’s listing standards, our Board of Directors annually determines each director’s independence. We do not consider a director independent unless ourThe Board of Directors has determined that he or she has no material relationship with us. We monitor the relationshipsa majority of our directors through the activities of our Nominating and Corporate Governance Committee and through a questionnaire each director completes no less frequently than annually and updates periodically if information provided in the most recent questionnaire changes.
In order to evaluate the materiality of any such relationship, the Board of Directors uses the definition of director independence set forth inwho are independent under the listing standards promulgated byof the NYSE. Rule 303A.00 providesNew York Stock Exchange (“NYSE”). The NYSE Listed Company Rules provide that a director of a business development companyBDC shall be considered to be independent if he or she is not an “interested person”"interested person" of the Company, as defined in Section 2(a)(19) of the 1940 Act. Section 2(a)(19) of the 1940 Act defines an "interested person" to include, among other things, any person who has, or within the last two years had, a material business or professional relationship with the Company.
In addition, our Chief Compliance Officer reviews a listThe Board of each director’s securities transactionsDirectors has determined that Mses. Olmstead and holdings in order to ensure that our directors haveLancaster-Beal and Messrs. Mulhern, Okel, Switzer, Knapp, and Byers are independent (or not entered into any transactions with, or own any interest in, companies that would cause one or more of them to be considered “interested persons” of the Company). Based upon information requested from each such director concerning his or her background, employment and affiliations, the Board of Directors has affirmatively determined that none of the independent directors has a material business or professional relationship with the Company, other than in his or her capacity as a member of the Board of Directors or any committee thereof. None of the members of the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee are "interested persons," as defined in Section 2(a)(19) of the 1940 Act. For a more detailed description of these policies, please see “Certain Relationships and Related Party Transactions” herein.
The Board of Directors has determined that Messrs. Dunwoody, Gambill, Goldstein, Mulhern and Rich are independent and have no relationship with us, except as directors and stockholders. AllAct, of the members of our Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee are not "interested persons" as defined in Section 2(a)(19) of the 1940 Act.Company.
Meetings of the Board of Directors and Committees
During 2017, ourIn 2022, the Board of Directors held ten meetings. Ourfive meetings of the Board of Directors, has established anas well as four Audit Committee meetings, one Compensation Committee meeting, and a Nominating and Corporate Governance Committee. Each of the Audit Committee, Compensation Committee andone Nominating and Corporate Governance Committee operates pursuant to a charter, each of which is available under “Corporate Governance” on the Investor Relations section of our website at the following URL: http://ir.tcap.com, and is also available in print to any stockholder who requests a copy.meetings. During 2017,2022, none of our directorsthe members of the Board of Directors attended less than 75% of the aggregate number of meetings of the Board of Directors and of the respective committees on which they served.
Each of ourthe Company's directors makes a diligent effort to attend all board and committee meetings, as well as each Annual Meeting of Stockholders. EightWe encourage, but do not require, our directors to attend annual meetings of our then nine directorsstockholders. All members of the then-constituted Board of Directors attended our 2017 Annual Meeting of Stockholders. Mr. Smith's term expired on the date of our 2017Company's 2022 Annual Meeting of Stockholders.
We have designated Simon B. Rich, Jr. as our lead independent director to preside over all executive sessions of non-employee directors. Executive sessions of non-employee directors are held at each board meeting. Interested parties, stockholders and holders of our senior notes, may communicate with Mr. Rich by writing to: Board of Directors, Triangle Capital Corporation, 3700 Glenwood Avenue, Suite 530, Raleigh, North Carolina 27612.
Audit Committee
We haveThe Company has a separately-designatedseparately designated standing Audit Committee, as defined in Section 3(a)(58)(A) of the Securities Exchange Act.Act of 1934, as amended (the “Exchange Act”). The Audit Committee is responsible for compliance with applicable legaloversight matters, financial statement and regulatory requirements, selecting ourdisclosure oversight matters, matters relating to the hiring, retention and oversight of the Company’s independent registered public accounting firm, reviewing the plans, scope and results of the audit engagement with ourthe Company’s independent registered public accounting firm, approving professional services provided by ourthe Company’s independent registered public accounting firm, reviewing the independence of ourthe Company’s independent registered public accounting firm, reviewing the integrity of the audits of the financial statements and reviewing the adequacy of ourthe Company’s internal accounting controls. The Audit Committee also assists our Board of Directors in establishing and monitoring the application of the valuation policies used for determining the fair value of the Company’s investments that are not publicly traded or for which current market values are not readily available.
OurThe Audit Committee Charter is publicly available under “Corporate Governance”“Governance Documents” on the Investor Relations section of ourthe Company’s website at http:https://ir.tcap.com.ir.barings.com/governance-docs. The contents of the Company’s website are not intended to be incorporated by reference into this proxy statement or in any other report or document it files with the SEC, and any references to the Company’s website are intended to be inactive textual references only.
The members of ourthe Company’s Audit Committee are Messrs. Goldstein, Mulhern, Okel, Switzer, Knapp and Rich.Byers and Mses. Olmstead and Lancaster-Beal. Mr. GoldsteinMulhern serves as the chairman of the Audit Committee. OurThe Board of Directors has determined that Mr. GoldsteinMulhern is an “audit committee financial expert” as defined under Item 407(d)(5) of Regulation S-K of the Exchange Act and that all members of the Audit Committee are financially literate under NYSE listing standards. The Board of Directors also has determined that each of Messrs. Goldstein, Mulhern, Okel, Switzer,
Knapp, and RichByers and Mses. Olmstead and Lancaster-Beal meet the current independence requirements of Rule 10A-3 of the Exchange Act and NYSE listing standards, and, in addition, is not an “interested person” of the Company, as defined in Section 2(a)(19) of the 1940 Act. Our Audit Committee held five meetings during 2017.standards.
Compensation Committee
OurThe Compensation Committee is appointed byresponsible for determining, or recommending to the Board of Directors to discharge its responsibilities relating tofor approval, the compensation of ourthe Company’s independent directors; determining, or recommending to the Board of Directors for determination, the compensation, if any, of the Company’s chief executive officer and all other executive officers of the Company; and assisting the Board of Directors with matters related to compensation generally.
In connection with reviewing, and recommending to the Board of Directors, the compensation of the independent directors, the Compensation Committee evaluates the independent directors’ performance in light of goals and objectives relevant to the independent directors and sets independent directors’ compensation based on such evaluation and such other factors as the Compensation Committee deems appropriate and in the best interests of the Company (including the cost to the Company of such compensation and a review of data of comparable business development companies).
Currently none of the Company’s executive officers is compensated by the Company and, other key employees. Theas a result, the Compensation Committee has the responsibility for recommending appropriate compensation levels for our executive officers, evaluating and approving executive officer compensation plans, policies and programs, reviewing benefit plans for executive officers and other employees and producing an annualdoes not produce and/or review a report on executive compensation for inclusion in our proxy statement.practices. The Compensation Committee also has the authority to engage compensation consultants, legal counsel or other advisors (each, a “Consultant”) following consideration of certain factors related to such Consultants’ independence and has the authority to form and delegate any of its responsibilities to a subcommittee of the Compensation Committee so long as such subcommittee is solely composed of one or more members of the Compensation Committee. The Compensation Committee Charter is available under “Corporate Governance”“Governance Documents” on the Investor Relations section of our website at http:https://ir.tcap.com.
Our Compensation Committee has the authority to and is charged with performing the following, among other responsibilities:
review annually and approve goals and objectives relevant to our executive officers’ compensation, including annual performance objectives;
evaluate annually the performance of our Chief Executive Officer and other executive officers, and recommend to the independent members of the Board of Directors the compensation level for each such person based on this evaluation;
review on a periodic basis our executive compensation programs to determine whether they are properly coordinated and achieve their intended purposes;
review and recommend to the Board of Directors for approval any changes in incentive compensation plans and equity-based compensation plans;
review and approve all equity-based compensation plans of Triangle, whether or not final approval rests with the Company’s stockholders, and review and recommend to the Board of Directors for approval, equity-based awards pursuant to such plans in compliance with the 1940 Act;
review and approve compensation packages, including any special supplemental benefits or perquisites for our executive officers; and
review employee compensation strategies, including salary levels and ranges and employee fringe benefits, as well as compensation consultants’ analyses and various industry comparables including both public and private investment funds that operate and invest in a manner similar to the Company.
In determining executive compensation levels for our executive officers, the Compensation Committee meets at least annually with our Chief Executive Officer, and may meet with independent compensation consultants, in order to determine whether current methods of executive compensation are effective in achieving Triangle’s short and long-term strategies. The Compensation Committee, in conjunction with a compensation consultant if necessary, will analyze the compensation of executive officers and directors of other BDCs and financial services companies in order to establish the compensation levels necessary to attract and retain quality executive officers and investment professionals. In 2017, the Compensation Committee engaged McLagan, a compensation consultant, to advise the Compensation Committee on these matters. McLagan does no work for management, receives no compensation from the Company other than for its work in advising the Compensation Committee and maintains no other economic relationships with the Company or any of its affiliates. From time to time, McLagan receives input from the Company's Chief Executive Officer regarding the Company's strategic goals and the manner in which the executive compensation program should support these goals. For more information regarding the role of the Company's management in determining compensation, please see the discussion in “Compensation Discussion and Analysis — Establishing Compensation Levels — Role of the Compensation Committee and Management.”ir.barings.com/governance-docs.
The members of the Compensation Committee are Messrs. Dunwoody, GoldsteinMulhern, Okel, Switzer, Knapp and Mulhern,Byers, and Mses. Olmstead and Lancaster-Beal, each of whom is not an "interested person" for purposes of Section 2(a)(19) of the 1940 Act and is independent under the applicable NYSE corporate governance listing standards. Mr. MulhernMs. Olmstead serves as the chairmanchair of the Compensation Committee. OurNo members of the Compensation Committee held four meetings during 2017.2022 had any relationship with the Company requiring disclosure under Item 404 of Regulation S-K under the Exchange Act.
Compensation Committee Interlocks and Insider Participation
No interlocking relationship, as defined by the rules adopted by the SEC, existed during the year ended December 31, 2022 between any member of the Board of Directors or the Compensation Committee and an executive officer of the Company.
Nominating and Corporate Governance Committee
OurThe Nominating and Corporate Governance Committee is responsible for identifying, researching and nominatingrecommending for nomination directors for election by ourthe Company's stockholders, selectingrecommending for appointment nominees to fill vacancies on ourthe Board of Directors or a committee of the Board of Directors, developing and recommending to the Board of Directors a set of corporate governance principles and overseeing the evaluation of the Board of Directors and our management.Directors. The Nominating and Corporate Governance Committee’s policy is to consider nominees properly recommended by ourthe Company's stockholders in accordance with ourthe Company's charter, Bylaws and applicable law. For more information on how ourthe Company's stockholders may recommend a nominee for a seat on ourthe Board of Directors, see our answer to"Stockholder Nominations and Proposals for the question “How and when may I submit a stockholder proposal for Triangle’s 20192024 Annual Meeting?” under the section “Additional Information”Meeting" in this proxy statement.
In considering possible candidates for nomination, the The Nominating and Corporate Governance Committee will consider certain factorsalso has the authority to retain, at the Company’s expense, such consultants or advisors as the Committee may deem necessary or appropriate to carry out its duties. The Committee has sole authority to retain or terminate any search firm or individual used to identify any director candidate, including the current composition ofsole authority to approve the Board of Directors, overall business expertise, gender, culturalsearch firm’s fees and racial diversity, whether the composition of the Board of Directors contains a majority of independent directors as determined under the NYSE listing standards and the 1940 Act, the candidate’s character and integrity, whether the candidate possesses an inquiring mind, vision and the ability to work well with others, conflicts of interest interfering with the proper performance of the responsibilities of a director, a candidate’s overall business experience, what type of diversity he or she brings to the Board of Directors, whether the candidate has sufficient time to devote to the affairs of Triangle, including consistent attendance at Board of Directors and committee meetings and advance review of materials and whether each candidate can be trusted to act in the best interests of us and all of our stockholders.retention terms.
The Nominating and Corporate Governance Committee Charter is publicly available under “Corporate Governance”“Governance Documents” on the Investor Relations section of ourthe Company's website at http:https://ir.tcap.com.ir.barings.com/governance-docs.
The members of the Nominating and Corporate Governance Committee are Messrs. Gambill, Mulhern, Okel, Switzer, Knapp, and Rich,Byers and Mses. Olmstead and Lancaster-Beal, each of whom is not an "interested person" for purposes of Section 2(a)(19) of the 1940 Act and is independent under the NYSE corporate governance listing standards. Mr. Okel serves as the chairman of the Nominating and Corporate Governance Committee. Each nominee for election under Proposal No. 1 at the Annual Meeting was recommended by the members of the Nominating and Corporate Governance Committee to ourthe Board of Directors, which approved such nominees. Mr. Rich serves as the chairman of the Nominating and Corporate Governance Committee. Our Nominating and Corporate Governance Committee held one meeting during 2017.
Communication with the Board of Directors
Stockholders with questions about Triangle Capital Corporation are encouraged to contact Steven C. Lilly, at 3700 Glenwood Avenue, Suite 530, Raleigh, North Carolina 27612, (919) 719-4770. However, ifBarings BDC, Inc. stockholders feel their questions have not been addressed, theyand other interested parties may communicate with any member of our Board (including the chairman), the chairman of Directors directlyany of our Board committees, or with our non-management directors as a group by sending their communications to: Triangle Capital Corporation Board of Directors, c/o Simon B. Rich, Jr.to Barings BDC, Inc., 3700 Glenwood Avenue,300 South Tryon St., Suite 530, Raleigh,2500, Charlotte, North Carolina 27612. In addition, stockholders28202, or via e-mail to BDCinvestorrelations@barings.com, or by calling the Barings BDC, Inc.’s investor relations department at 1-888-401-1088. All such communications should indicate clearly the director or directors to whom the communication is being sent so that each communication, other than unsolicited commercial solicitations, may communicate with us by clicking “Contact IR” onbe forwarded directly to the Investor Relations section of our website at http://ir.tcap.com. All stockholder communications received by our corporate secretary in this manner will be delivered to one or more membersappropriate director(s).
The Composition of the Board of Directors.
CorporateDirectors and Leadership Structure
The 1940 Act requires that at least a majority of the Company’s directors not be “interested persons” (as defined in the 1940 Act) of the Company. Currently, seven of the Company’s ten directors have been determined to qualify as independent directors (and to not be “interested persons”). However, Mr. Poole was appointed as the Chairman of our Board of Directors on May 3, 2017 and was named asLloyd, our Chief Executive Officer on February 3, 2016.and the President of Barings LLC, and therefore an interested person of the Company, serves as Executive Chairman of the Board of Directors. The Board of Directors believes that it is in the best interests of investors for Mr. Lloyd to lead the Board of Directors because of his role as Chief Executive Officer of the Company and President of Barings LLC and his broad experience with the day-to-day management of cross-asset class investment teams, corporate strategy, business development and product management. In addition, we havethe Board of Directors has designated Mr. RichOkel as our lead independent director to preside over all executive sessions of non-employeeindependent directors. The Board of Directors believes that its leadership structure is appropriate in light of the Company’s characteristics and circumstances because the structure allocates areas of responsibility among the individual directors and to lead the decision-making processescommittees in a manner that enhances effective oversight. The Board of our independent directors with respect toDirectors also believes that its meeting frequency and governance structure provides ample opportunity for direct communication and interaction between the Strategic Review. We believe that consolidating our leadership structure without an independent chairman provides an efficient and effective management model which fosters direct accountability, effective decision making and alignment of corporate strategy between our Board of Directors and management. Mr. Poole is, and Mr. Rich is not, an “interested person” as defined in Section 2(a)(19) of the 1940 Act.Company’s management.
The Oversight of Risk Management
On behalfRole of the Board of Directors
The Board of Directors’ role in management of the Audit Committee oversees our enterpriseCompany is one of oversight. Oversight of the Company’s investment activities extends to oversight of the risk management function. To this end, the Audit Committee meets at least annually (i)processes employed by Barings as a committee to discusspart of its day-to-day management of the Company’s investment activities. The Board of Directors reviews risk management guidelines, policiesprocesses throughout the year, consulting with appropriate representatives of Barings as necessary and exposuresperiodically requesting the production of risk management reports or presentations and (ii) with our independent auditors to review our internal control environmentreceiving reports from vendors and other risk exposures. Additionally, on behalfservice providers regarding cybersecurity threats and incidents. The goal of the Board of Directors,Directors’ risk oversight function is to ensure that the Compensation Committee overseesrisks associated with the management of risks relating to our executive compensation programCompany’s investment activities are accurately identified, thoroughly investigated and other employee benefit plans. In fulfillment of its duties, the Compensation Committee reviews at least annually our executive compensation program and meets regularly with our Chief Executive Officer to understand the financial, human resources and stockholder implications of all compensation decisions.responsibly addressed. The Audit Committee (which consists of all the independent directors) is responsible for approving the Company’s independent accountants, reviewing with the Company’s independent accountants the plans and results of the Compensationaudit engagement, approving professional services provided by the Company’s independent accountants, reviewing the independence of the Company’s independent accountants and reviewing the adequacy of the Company’s internal accounting controls. The Audit Committee each report toalso monitors the application of the valuation policies used for determining the fair value of the Company’s investments that are not publicly traded or for which current market values are not readily available. Stockholders should note, however, that the Board of Directors on a regular basis to appriseDirectors’ oversight function cannot eliminate all risks or ensure that particular events do not adversely affect the Boardvalue of Directors regarding the status of remediation efforts of known risks and of any new risks that may have arisen since the previous report.
Compliance Policies and Proceduresinvestments.
In accordance with the 1940 Act, wethe Company’s directors have adopted and implemented written policies and procedures reasonably designed to prevent violation of the U.S. federal securities laws, and we review these
compliance policies and procedures annually for their adequacy and the effectiveness of their implementation. In addition, we have designated Mr. LillyGregory MacCordy as ourthe Company’s Chief Compliance Officer. As such, Mr. LillyMacCordy is responsible for administering ourthe Company’s compliance program and meeting with ourthe Board of Directors at least annually to assess its effectiveness.
Code of Business Conduct and Ethics and Corporate Governance Guidelines
We haveThe Company and Barings are subject to Barings LLC's Global Code of Ethics Policy, and the Company has adopted a codeset of business conduct and ethics and corporate governance guidelines covering ethics and business conduct. These documents apply to ourthe Company's directors and officers, among other Barings employees. Barings LLC's Global Code of Ethics Policy and employees. Our code of business conduct and ethics andthe Company's corporate governance guidelines are available on the Investor Relations section of ourthe Company's website at http:https://ir.tcap.com/corporate-governance. We will report anyir.barings.com/governance-docs. Any material amendments to or waivers of a required provision of our codethe Barings LLC Global Code of conductEthics Policy and/or the Company's corporate governance guidelines will be reported on our website and/or in a Current Report on Form 8-K.8-K within four business days of the amendment or waiver.
Under Barings LLC's Global Code of Ethics Policy, officers, directors and certain employees of Barings must first obtain pre-clearance from Barings' compliance department before trading in the Company's securities. In addition, the Company's Insider Trading Policy includes restrictions that prohibit directors and officers of the Company from, among other things, engaging in short sales or hedging transactions with respect to the Company's securities, including through the use of financial instruments such as prepaid variable forward contracts, equity swaps, collars and exchange funds.
EXECUTIVE OFFICERS AND INVESTMENT COMMITTEE
Our executiveThe Company’s officers serve at the discretion of ourthe Board of Directors. The following persons serve as ourbiographical information of each of the Company’s executive officers in(in alphabetical order) who is not a director, as well as the following capacities:
|
| | | | |
Name | | Age | | Position(s) Held |
E. Ashton Poole | | 51 | | Chairman, President and Chief Executive Officer |
Steven C. Lilly | | 48 | | Chief Financial Officer, Secretary and Chief Compliance Officer |
Jeffrey A. Dombcik | | 51 | | Senior Managing Director and Chief Credit Officer |
Cary B. Nordan | | 42 | | Senior Managing Director and Chief Origination Officer |
Douglas A. Vaughn | | 48 | | Senior Managing Director and Chief Administrative Officer |
All of ourCompany's Secretary and Chief Compliance Officer, who are not executive officers are members of ourthe Company, is as follows:
Ian Fowler, 59, is the Company’s President and is Co-Head of Barings LLC’s Global Private Finance Group, as well as a member of the group’s North American, European and Asia-Pacific Private Finance Investment Committee. The Investment CommitteeCommittees. Mr. Fowler has also served as the President and Chief Executive Officer of BCIC since inception and as Co-Chief Executive Officer of BPCC since May 2021 until being appointed as sole Chief Executive Officer in December 2022. He is responsible for all aspects of our investment process,leading a team that originates, underwrites and manages global private finance investments. Mr. Fowler has worked in the industry since 1988 and his experience has encompassed middle market commercial finance, including approval of such investments. All of our executive officers also serve as directors, managers and/or officers of Triangle Mezzanine Fund.
For more information on Messrs. Pooleoriginating, underwriting and Lilly, see the biographical information under "Proposal No. 1 Election of Directors" above.
Messrs. Dombcik, Nordanmanaging senior secured loans, mezzanine and Vaughn joined Mr. Poole and Mr. Lilly on the Company’s Management Committee and became Executive Officers of the Company on October 2, 2016. The biographical information for Messrs. Dombcik, Nordan and Vaughn are as follows:
Jeffrey A. Dombcik joined the Companyco-investment transactions. Prior to joining Barings LLC in 2007 and currently serves as2012, he was a Senior Managing Director with Harbour Group and Chiefco-founded Freeport Financial LLC where he was a member of the Executive Credit OfficerCommittee and responsible for all business development and capital market initiatives. While at Freeport, he helped build the company into one of the top five non-bank affiliated middle market sponsor finance companies in the United States. Before Freeport, Mr. Fowler was Managing Director and Global Group Leader for GE Capital’s Global Sponsor Finance Group. Prior to GE Capital, Mr. Fowler held various leveraged finance and investment positions with NationsBank and Mellon Bank. Mr. Fowler holds a B.A. (Honors) from the University of Western Ontario and is a member of the Company’s Management CommitteeCFA Institute.
Jonathan Landsberg, 38, serves as the Company's Chief Financial Officer and Investment Committee.is a Managing Director at Barings LLC. He also serves as the Chief Financial Officer and Treasurer of BPCC and the Chief Financial Officer of BCIC. Mr. Landsberg also has roles with several Barings-complex BDC-related joint ventures, including Principal of Jocassee Partners LLC, and a Board member of Banff Partners LP, Thompson Rivers LLC, and Waccamaw River LLC. Mr. Landsberg has worked in the industry since 2006. Prior to joining the Company,Barings LLC in 2018, Mr. DombcikLandsberg was a Managing DirectorFixed Income Research Analyst at Wells Fargo Securities, covering the bank and specialty finance sectors. Before Wells Fargo, he spent eight years at Merrill Lynch / Bank of South Franklin Street Partners,America in roles across debt origination and syndicated lending. Mr. Landsberg holds a Small Business Investment Company (SBIC) focused on providing junior capital to middle-market companies. Prior to joining South Franklin Street Partners, Mr. Dombcik served as Executive Vice PresidentB.A. degree in Engineering Sciences and Partner of Edgewater Capital Partners, L.P., a private equity investment firm focused on the acquisition of middle market companies. Mr. Dombcik also served as a Senior Vice President of investment banking for McDonald Investments, Inc. (a wholly owned subsidiary of Key Corp) and Vice President of Brown, Gibbons, Lang & Company L.P., a middle market investment bank with offices in Chicago and Cleveland. Mr. Dombcik began his career as a commercial banking officer with Bank One. Mr. Dombcik has over 20 years of experience in a variety of corporate finance transactions including initial public offerings, mergers and acquisitions, preferred stock underwritings, senior and subordinated debt placements, recapitalizations, leveraged ESOPs and restructurings. He is a graduate of Miami University and John Carroll University.
Cary B. Nordan joined the Company in 2004 and currently serves as Senior Managing Director and Chief Origination OfficerEconomics from Dartmouth College and is a member of the Company’s Management Committee and Investment Committee.CFA Institute.
Prior to joining the Company, Mr. Nordan served as Vice President with BB&T Asset Management (BB&T Funds), a $14 billion mutual fund complex. Preceding his employment with BB&T Asset Management, he worked in corporate finance with Stanford Keene, Inc., an investment bank specializing in the technology industry, and Nuance Capital Group, LLC, an advisory firm to private companies. Prior to that, Mr. Nordan served as an Analyst and Associate in the corporate finance group of Trident Securities, a subsidiary of McDonald Investments, where he specialized in investment banking and advisory services to lower- and middle-market financial institutions throughout the United States. Mr. Nordan has over 10 years of experience investing in private equity transactions and public equity securities as well as corporate finance transactions including IPOs, M&As, senior and subordinated debt placements, recapitalizations, and restructurings. He holds a BSBA, magna cum laude, from Appalachian State University and an MBA from Duke University. Mr. Nordan is a Chartered Financial Analyst and former member of the Board of Directors for the Chartered Financial Analyst North Carolina Society.
Douglas A. Vaughn joined the Company in 2008 and currentlyGregory MacCordy, 63, serves as Senior Managing Director andthe Company's Chief AdministrativeCompliance Officer and is a memberDirector at ACA Group (“ACA”). Mr. MacCordy is an experienced compliance, risk and subject matter expert with over 30 years of the Company’s Management Committeeregulatory and Investment Committee.
Mr. Vaughn has extensive management experience operating businessesfinancial services experience. He serves as chief compliance officer or chief risk officer for SEC registered investment advisers and has served in investment companies such as business development companies and advisory roles for middle-market companies, portfolio businesses, and divisions of large multinational corporations.interval funds. Prior to joiningACA, Mr. MacCordy worked at the Company, Mr. Vaughn was President and a Director of VIETRI, Inc., America’s largest importer, distributor and marketer of handmade Italian ceramic and home décor items. Immediately prior to his eight years at VIETRI, Inc., Mr. Vaughn advised business owners and managers, including private equity funds, on strategic initiatives including acquisitions and corporate finance — first as a Senior Consultant at Deloitte Consulting and later as a Partner at Chatham Partners. Prior to Deloitte Consulting, Mr. Vaughn served in management roles for Sara Lee Corporation, specifically for Sara Lee Personal Products Europe,U.S. Securities & Exchange Commission where he was an original memberIndustry Expert and Specialized Compliance Examiner in the Asset Management Unit (Enforcement Division) conducting enforcement investigations of investment companies, investment advisers, and mutual funds in the areas of business development companies, CLOs, private equity, hedge funds, real estate and fixed income trading. Mr. MacCordy also spent 18 years at The Teachers Insurance and Annuity Association of America-College Retired Equity Fund (TIAA) beginning as a securities analyst and ultimately becoming a Managing Director. During his time at TIAA, he was responsible for investment decisions, credit research, valuation and stress testing, regulatory filings, and the development of risk and compliance program policies and procedures. Mr. MacCordy holds a Bachelor of Science and Business Administration in Accounting from University of Missouri and a MBA in Finance from New York University Stern School of Business.
Elizabeth Murray, 45, serves as the Company’s Chief Operating Officer and Chief Accounting Officer and also serves as the Principal Accounting Officer of BCIC and BPCC. She also serves as the Treasurer for PEOC. Ms. Murray previously was the Director of External Reporting for the Company and previously served as the Vice President of Financial Reporting at Triangle Capital Corporation prior to the externalization of the team that establishedinvestment management of the Company to Barings LLC. Prior to joining Triangle Capital Corporation in 2012, she worked in Financial Planning and managedAnalysis for RBC Bank, the company’s firstU.S. retail banking division for Royal Bank of Canada. Prior to RBC Bank, Ms. Murray spent seven years at Progress Energy, Inc. and held various positions in Eastern Europe including manufacturing, distribution, marketing,finance, accounting and sales operations. Mr. Vaughn holdstax, most recently in Strategy and Financial Planning. Ms. Murray began her career as a BA from the University of Virginia and an MBA from The UniversityTax Consultant with
PricewaterhouseCoopers. Ms. Murray is a graduate of North Carolina’s Kenan-Flagler SchoolCarolina State University where she obtained a B.S. degree in Accounting and a Master of Business. HeAccounting degree. She is also a North Carolina Certified Public Accountant.
Alexandra Pacini, 30, is the Company's Secretary and a Director at Barings LLC. Ms. Pacini also serves as the Secretary of BCIC, BPCC, Barings Global Short Duration High Yield Fund, PEOC, Barings Corporate Investors and Barings Participation Investors
Ashlee Steinnerd, 41, is the Company’s Chief Legal Officer and the Head of Regulatory at Barings LLC. Ms. Steinnerd also serves as Chief Legal Officer of BCIC, BPCC, Barings Global Short Duration High Yield Fund, Barings Corporate Investors, PEOC, and Barings Participation Investors. Ms. Steinnerd has been a member of the Young Presidents’ Organization, a Chartered Financial Analyst, and has servedBarings LLC legal team since 2019, advising Barings LLC on a variety of for-profitregulatory issues. Prior to joining Barings LLC, Ms. Steinnerd was Senior Counsel in the Securities and non-profit boards.
COMPENSATION DISCUSSION AND ANALYSIS
General
The following Compensation Discussion and Analysis, or CD&A, provides information relating to the 2017 compensationExchange Commission’s Office of the Company's named executive officers, or NEOs, for 2017, who were:
E. Ashton Poole, Chairman, President & Chief Executive Officer;
Steven C. Lilly, Chief Financial Officer, Secretary and Chief Compliance Officer;
Jeffrey A. Dombcik, Senior Managing Director and Chief Credit Officer;
Cary B. Nordan, Senior Managing Director and Chief Origination Officer; and
Douglas A. Vaughn, Senior Managing Director and Chief Administrative Officer.
Our executive compensation program is designed to encourage our executive officers to think and act like stockholders of the Company. The structure of the NEOs’ compensation programs was designed to encourage and reward the following factors, among others:
sourcing and pursuing attractively priced investment opportunities in lower middle market companies;
achievement of the Company’s dividend objectives;
maintaining credit quality, monitoring financial performance and ultimately managing a successful exit of the Company’s investment portfolio; and
development of management team and employees.
We completed our initial public offering, or IPO, in February 2007. Our first eleven years of operation as a publicly traded BDC have represented a period of development and growth. As a result, our Compensation Committee continues to focus on creating an executive compensation program that achieves our desired objectives stated above.
In May 2017, weInvestor Advocate. Ms. Steinnerd held a stockholder advisory vote on the compensation of our NEOs, commonly referred to as a say-on-pay vote. Our stockholders approved the compensation of our NEOs, with over 86% of stockholder votes cast in favor of our say-on-pay resolution. Subsequently, the Compensation Committee considered the results of the advisory vote, which affected the Company’s executive compensation decisions and policies by reaffirming the Company’s compensation philosophies. The Compensation Committee will continue to use these philosophies and past practice in determining future compensation decisions. In addition, in May 2017, our stockholders voted, on an advisory basis, to conduct an advisory vote on executive compensation annually. In accordance with the results of this vote, the Board of Directors determined to implement an advisory vote on executive compensation annually until the next required vote on the frequency of stockholder votes on the compensation of executives, which is scheduled to occurseveral roles during her tenure at the 2023 Annual Meeting of Stockholders. The advisory say-on-pay vote proposal will be considered by our stockholders at the Annual Meeting.
Executive Compensation Policy
The compensation programs of the Company adopted by our Compensation Committee are designed with the goal of providing compensation that is fair, reasonableSecurities and competitive. These programs are intended to align the compensation paid to our NEOs with both our short-termExchange Commission between 2011 and long-term objectives2019. Ms. Steinnerd holds a B.S. in Applied International Finance and the interests of stockholders, which we believe will contribute to the achievement of long-term sustainable investment returns. The key elements of our compensation philosophy include: (i) designing compensation programs that enable us to attract and retain the best talent in the financial industries in which we compete; (ii) aligning executive compensation packages with the Company’s performance; and (iii) using long-term equity awards to align employee and stockholder interests.
As a BDC, we must comply with the requirements of the 1940 Act. The 1940 Act imposes certain limitations on the structure of our compensation programs, including limitations on our ability to issue certain equity-based
compensation to our employees and directors. We have received exemptive reliefApplied International Economics from the SEC that permits us to grant restricted stock in exchange for or in recognitionAmerican University of services by our executive officers and employees. Pursuant to the Omnibus Incentive Plan, the Board of Directors may award shares of restricted stock to plan participants in such amounts and on such terms as the Board of Directors determines in its sole discretion, provided that such awards are consistent with the conditions set forth in the SEC’s exemptive order.
Overview
Our performance-driven compensation policy consists primarily of the following three components:
base salary;
annual cash bonus; and
long-term compensation pursuant to the Omnibus Incentive Plan.
Other compensation components may include contributions to our 401(k) and deferred compensation plans, and health, life and disability insurance premiums paid by the Company.
The compensation packages for our NEOs are structured to reflect what we believe to be appropriate practices in corporate governance and executive compensation. We designed each NEO’s compensation package to appropriately reward the NEO for his contribution to the Company. Our compensation philosophy has not historically been, and going forward will not be, a mechanical process, and our Compensation Committee will continue to use its judgment and experience, working in conjunction with our Chief Executive Officer and, potentially, an independent compensation consultant, to determine the appropriate mix of compensation for each NEO. Cash compensation consisting of base salary and discretionary cash bonuses tied to achievement of performance goals set by the Compensation Committee, such as the surpassing of certain operating thresholds related to investment performance, are intended to incentivize NEOs to remain with us in their roles and work hard to achieve our goals. Stock-based compensation in the form of restricted stock is awarded based on individual and Company performance expectations set by the Compensation Committee.
Establishing Compensation Levels
Role of the Compensation Committee and Management
As set forth in the Compensation Committee Charter, our Compensation Committee’s primary responsibility is to evaluate the compensation of our executive officers and ensure that they are compensated effectively and in a manner consistent with our stated compensation objectives. The Compensation Committee also periodically reviews our corporate goals and objectives relevant to executive compensation, our executive compensation structure to ensure that it is designed to achieve the objectives of rewarding our executive officers appropriately for their contributions to corporate growth and profitability and our other goals and objectives. At least annually, the Compensation Committee will evaluate the compensation of our executive officers and determine the amounts and individual elements of total compensation for executive officers consistent with our corporate goals and objectives and will communicate to stockholders the factors and criteria on which the executive officers’ compensation is based, including the relationship of our performance to the executive officers’ compensation. Our executive officers are eligible for variable compensation based on individual, team, and overall corporate performance. With respect to the compensation of our executive officers other than the Chief Executive Officer, the committee works with the chief executive officer to conduct these reviews. The committee will also periodically evaluate the terms and administration of our annual and long-term incentive plans, including equity compensation plans, to ensure that they are structured and administered in a manner consistent with our goals and objectives as to participation in such plans, target annual incentive awards, corporate financial goals, actual awards paid to executive officers and total funds allocated for payment under the compensation plans.
Role of Compensation Consultant
In 2017, the Compensation Committee engaged McLagan, a compensation consultant, to assist the Compensation Committee in its review of executive and Board of Director compensation and to opine on market-
competitive compensation levels and mix necessary to attract and retain quality executive officers and investment professionals. From time to time and in support of McLagan's role as an adviser to the Compensation Committee, McLagan receives input regarding the Company's strategic goals and the manner in which the executive compensation program should support these goals. The Compensation Committee evaluated McLagan's independence from the Company and determined that McLagan is independent primarily because it does no work for management, receives no compensation from the Company other than for its work in advising the Compensation Committee and maintains no other economic relationships with the Company or any of its affiliates.
Assessment of Market Data
From time to time, to assess the competitiveness of our executive compensation program, the Compensation Committee considers compensation information from a comparative group of internally managed BDCs (including Capital Southwest Corporation, Hercules Capital, Inc., KCAP Financial, Inc. and Main Street Capital Corporation) as well as groups of other financial services companies, such as asset managers, specialty lenders and banks and real estate investment trusts. The Compensation Committee performs comprehensive analyses of competitive performance and compensation levels. However, the Compensation Committee does not specifically benchmark the compensation of our NEOs against that paid by other companies with publicly traded securities. This is because the Compensation Committee believes that our primary competitors in both our business and for recruiting executives are investment banks, private equity firms, private debt lenders, hedge funds and other specialty finance companies, including certain specialized commercial banks. Many of these entities do not publicly report the compensation of their executive officers nor do they typically report publicly information on their corporate performance. While various salary surveys from other private sources may become available to the Compensation Committee with regard to these private equity firms, the Compensation Committee believes that without accurate, publicly disclosed information on these private entities that would serve as benchmarks, it is inappropriate for the Compensation Committee to set formal benchmarking procedures.
The Compensation Committee's analyses center around key elements of compensation practices within financial services industries in general and, more specifically, compensation practices at companies closer in asset size, typical investment size, typical investment type, market capitalization, and general business scope to our Company. Items the Compensation Committee reviews from time to time include, but are not necessarily limited to, base compensation, bonus compensation and restricted stock awards. In addition to actual levels of compensation, the Compensation Committee also analyzes the approach other companies take with regard to their compensation practices. Items the Compensation Committee reviews from time to time include, but are not necessarily limited to, certain corporate and executive performance measures established to achieve total returns for stockholders and our “efficiency ratio” compared to the BDCs in our comparative group (which is calculated by taking total general and administrative expenses and dividing it by the company’s total revenue). The Compensation Committee believes that the companies it utilizes are the most relevant comparable companies available with disclosed executive compensation data, and they provide a good representation of competitive compensation levels for our executives.
Chief Executive Officer Pay Ratio
Mr. Poole's total compensation for 2017 was $2,009,260 as reflected in the Summary Compensation Table included in this proxy statement. The total compensation of our median employee, excluding Mr. Poole, for 2017 was $353,029. As a result, Mr. Poole's total compensation was approximately 5.7 times that of our median employee in 2017.
We selected December 31, 2017 as the date used to identify our “median employee” whose annual total compensation was the median of the annual total compensation of all our employees (other than our Chief Executive Officer) for 2017. As of December 31, 2017, our employee population consisted of 26 individuals (excluding Mr. Poole), all located in our Raleigh, North Carolina office. To identify our median employee, we compared the annual total compensation for each of our employees, as determined in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, which included salary, bonus, restricted stock awards, employer contributions to employee accounts in our 401(k) plan, employer contributions to employee accounts in our deferred compensation plan and earnings thereon, and company-paid life insurance premiums. In making this determination, we annualized the compensation of three employees who were hired in 2017 but did not work for us the entire fiscal year. Given that
we had an even number of employees (excluding Mr. Poole) in the employee population for 2017, the calculation of the compensation of the median employee was the average compensation of our 13th and 14th highest paid employees.
Assessment of Company Performance
In determining annual compensation for our NEOs, our Compensation Committee evaluates the individual performance of our NEOs as well as the Company’s overall operating performance. We believe that the alignment of (i) a company’s business plan, (ii) its stockholders' expectations and (iii) its employee compensation is essential to long-term business success in the interest of its stockholders and employees. We typically make three- to seven- year investments in privately held businesses. Our business plan involves taking on investment risk over an extended period of time,Paris, France and a premium is placed on our ability to maintain stabilityJ.D. from Rutgers School of net asset values and continuity of earnings to pass through to stockholders in the form of recurring dividends. Our strategy is to generate income and capital gains from our investments in the debt and equity securities of our portfolio companies. This income supports the payment of dividends to our stockholders. Therefore, a key element of our return to stockholders is current income through the payment of dividends. This recurring payout requires a methodical asset acquisition approach and active monitoring and management of our investment portfolio over time. A substantial part of our employee base is dedicated to the maintenance of asset values and generation of new investment opportunities to allow us to sustain and grow dividends.Law.
In reviewing and approving the compensation packages for our executive officers and other key employees, our Compensation Committee considers the relative achievement of the Company’s strategic and corporate objectives, executive performance factors and the individual performance of each of our NEOs. For 2017, some of the most significant company-specific performance factors considered by the Compensation Committee include:
total and net investment income;
realized and unrealized gains and losses;
overall credit performance of the investment portfolio;
liquidity;
operating efficiency performance;
growth and diversification of the overall investment portfolio;
dividends and distributions to stockholders; and
return on average stockholders’ equity.
Given the Company's overall weaker financial and investment portfolio performance in 2017, as compared to 2016, the Compensation Committee awarded materially lower levels of incentive compensation for 2017 to our NEOs as compared to 2016.
Elements of Triangle’s Executive Compensation
In 2017, our compensation program was comprised primarily of the following three elements: (i) base salary, (ii) annual cash bonus and (iii) long-term equity incentive compensation. At the time of our IPO, our initial compensation program consisted of only base salary and an annual cash bonus. Upon receipt in 2008 of exemptive relief from the SEC that permitted the company to grant restricted stock awards to our executive officers and employees, we began to include long-term equity incentive compensation as part of our compensation program. The company sought such exemptive relief because we believe that creating long-term value for our stockholders is achieved, in part, by retaining our executive officers in a competitive employment environment with a competitive compensation program. This allows us to align a component of our compensation program over a longer-term similar to our target investment period for our privately held business investments, and to more closely align the interests of our NEOs with those of our stockholders. The Compensation Committee does not allocate a fixed percentage of the NEO compensation packages to each of these elements. Instead, the Compensation Committee targets total compensation at levels comparable to other BDCs, private equity firms, mezzanine lenders, hedge funds, specialized commercial banks and other specialty finance companies. In designing our compensation
program, the Compensation Committee seeks to achieve an appropriate balance among these elements to create a compensation program that incentivizes our NEOs to focus on financial and operating results in the near term and the creation of stockholder value over the long-term.
Since our IPO, our Compensation Committee has determined to make annual changes in each element of our compensation program in order to account for cost of living changes, any changes in our asset and revenue growth and financial performance, and to retain our NEOs in a competitive environment for such executives. Our Compensation Committee considers our NEOs’ individual performance, each executive position’s responsibility for and ability to impact company performance, and individual expertise in connection with decisions under our compensation program each year. Because of the broad range of individual responsibilities of each of our NEOs, our Compensation Committee does not set specific or individualized performance metrics for any of our NEOs. The Compensation Committee instead considers the performance of each of our NEOs, and, based upon the evaluation and analysis of our Compensation Committee members, the performance of the Company relative to the general performance of other companies in the comparative group noted above.
Annual Base Salary
The annual base salary is designed to provide a minimum, fixed level of cash compensation to our NEOs in order to attract and retain experienced executive officers who can drive the achievement of our goals and objectives. The Compensation Committee annually reviews the base salary for each of our executive officers and determines whether to adjust it in its sole discretion. Increases to base salary are awarded to recognize levels of responsibilities and related individual performance, and to address changes in the external competitive market for a given position.
In establishing the 2017 base salaries of the NEOs, the Compensation Committee and management considered a number of factors including the seniority of the individual, the functional role of the position, the level of the individual’s responsibility, the ability to replace the individual and the base salary of the individual from the previous year. In addition, the Compensation Committee considered the base salaries paid to comparably situated executive officers in other internally-managed BDCs and other competitive market practices. Finally, the Compensation Committee used a compensation consultant in order to obtain an objective third-party expert’s insight into our NEOs’ base salaries.
Mr. Poole was paid an annual base salary of $445,000 as of December 31, 2017. Mr. Poole’s base salary recognizes his role as President and Chief Executive Officer, including his overall responsibility for our Company’s strategic direction and performance and his leadership which has enabled us to achieve our operational and financial objectives. Mr. Poole’s base salary also reflects his role as a member of our Investment Committee and Management Committee.
Mr. Lilly was paid an annual base salary of $340,000 as of December 31, 2017. Mr. Lilly’s base salary recognizes his lead role in managing all financial aspects of our Company, and his leadership in matters relating to our capital structure, the media and investor relations. Mr. Lilly’s base salary also reflected his service as our Company’s Chief Compliance Officer and Secretary, and as a member of our Investment Committee and Management Committee.
Mr. Dombcik was paid an annual base salary of $320,000 as of December 31, 2017. Mr. Dombcik's base salary recognizes his role as Chief Credit Officer, as a member of our Investment Committee and our Management Committee, and his lead role in managing all aspects of our investment portfolio.
Mr. Nordan was paid an annual base salary of $320,000 as of December 31, 2017. Mr. Nordan's base salary recognizes his role as Chief Origination Officer, as a member of our Investment Committee and our Management Committee, and his lead role managing our origination activities.
Mr. Vaughn was paid an annual base salary of $320,000 as of December 31, 2017. Mr. Vaughn's base salary recognizes his role as Chief Administrative Officer, as a member of our Investment Committee and our Management Committee, and his lead role in managing all administrative matters relating to the Company's operations.
Annual Cash Bonuses
We pay annual cash bonuses to reward corporate and individual achievements for the prior fiscal year. Annual cash bonuses are based on the Compensation Committee’s discretionary assessment of the Company’s and the NEO’s performance, with recommendations from the Chief Executive Officer for NEOs other than himself. While cash bonus awards are discretionary, the Compensation Committee will not award cash bonuses to our NEOs unless the Company achieves certain minimum operating thresholds during the year. The minimum operating threshold for the fiscal year ended December 31, 2017 set by the Compensation Committee in connection with the award of cash bonuses was approximately $28.1 million in net investment income before discretionary compensation. The Compensation Committee determined that the Company achieved this threshold for the fiscal year ended December 31, 2017.
On a quarterly basis, the Compensation Committee, together with input from our Chief Executive Officer, approves an accrual for the annual potential cash bonus pool. The determination of the accrual amount is based upon the Company’s current financial forecast and executive performance contributing to achieving our corporate objectives, and is subject to the sole discretion of the Compensation Committee.
The Company paid cash bonusesis externally managed by Barings LLC, which is registered with the SEC under the Investment Advisers Act of 1940, as amended. Barings also provides the administrative services necessary for us to NEOs in recognitionoperate. Barings, a wholly-owned subsidiary of both corporateMassMutual Life Insurance Company (“MassMutual”), is a leading global asset management firm, whose primary investment capabilities include fixed income, private credit, real estate, equity, and individual 2017 performance. In particular, for the year ended December 31, 2017, we reported the following financial results:
total investment income of $123.0 million, an increase from $113.7 million of total investment income in 2016;
net investment income of $72.2 million, an increase from $58.9 million of net investment income in 2016. (net investment income in 2016 was impacted by approximately $7.0 million of one-time expenses relatedalternative investments. Subject to the retirement of Mr. Tucker in 2016 and the resignation of our former Chief Investment Officer in 2016);
net investment income per share of $1.55, a decrease from $1.62 of net investment income per share in 2016 (net investment income per share in 2016 was impacted by approximately $0.19 per share related to the one-time expenses related to the retirement of Mr. Tucker and the resignation of our former Chief Investment Officer);
operating efficiency ratio of 17.5%; and
regular quarterly dividends during 2017 totaling $1.65 per share, a decrease from $1.89 in regular quarterly dividends during 2016. None of these dividends constituted a return of capital to stockholders.
Despite the Company achieving the minimum operating threshold in 2017 under our Omnibus Incentive Plan, given overall weaker financial and investment portfolio performance in 2017 versus 2016, the Compensation Committee reduced the total amount of annual 2017 cash bonus awards for all employees by 13% from 2016 levels. The reductions in annual cash bonuses for the Company's NEOs from 2016 to 2017 ranged from 20% to 25%, reductions that the Compensation Committee believes are aligned with the Company's 2017 results.
Mr. Poole was paid an annual cash bonus of $405,000 for 2017, a decrease of 24% from his 2016 annual cash bonus of $535,000. Mr. Poole’s cash bonus reflects an increase in responsibilities in 2017 in connection with his appointment as Chairman of the Board of Directors, his overall responsibility for the strategic direction of our Company and his leadership in 2017.
Mr. Lilly was paid an annual cash bonus of $375,000 for 2017, a decrease of 23% from his 2016 annual cash bonus of $485,000. Mr. Lilly’s cash bonus reflects his lead role in managing all financial aspects of our Company, including his leadership in matters relating to our capital structure, liquidity, the Company's relationships with its lenders and investor relations. Mr. Lilly’s cash bonus also reflected his service as our Chief Compliance Officer and Secretary during 2017.
Mr. Dombcik was paid an annual cash bonus of $330,000 for 2017, a decrease of 20% from his 2016 annual cash bonus of $415,000. Mr. Dombcik's cash bonus reflects his lead role in managing our investment portfolio, including our monitoring, valuation and restructuring activities.
Mr. Nordan was paid an annual cash bonus of $330,000 for 2017, a decrease of 25% from his 2016 annual cash bonus of $440,000. Mr. Nordan's cash bonus reflects his role as a senior investment originator as well as his lead role in managing our origination activities, including sourcing and underwriting.
Mr. Vaughn was paid an annual cash bonus of $330,000 for 2017, a decrease of 25% from his 2016 annual cash bonus of $440,000. Mr. Vaughn's cash bonus reflects his role as a senior investment originator as well as his lead role in managing all administrative responsibilities for the Company, including recruiting, training, staffing, performance evaluation and other human resources-related initiatives.
The Compensation Committee believes that these cash bonus awards are individually appropriate based on the Company’s 2017 performance and each individual’s contribution to the Company throughout 2017 as stated above. Such bonuses comprise a key component of the Company’s overall compensation program.
Long-Term Incentive Compensation
General
Our Board of Directors adopted the Omnibus Incentive Plan in order to provide stock-based awards as incentive compensation to our employees and non-employee directors. Since our IPO, our Board of Directors has chosen to utilize shares of our restricted stock, rather than stock options or other equity-based incentive compensation, as long-term incentive compensation.
We use restricted stock awards to (i) attract and retain key employees, (ii) motivate our employees by means of performance-related incentives to achieve long-range performance goals, (iii) enable our employees to participate in our long-term growth and (iv) link our employees’ compensation to the long-term interests of our stockholders. Each restricted stock award is for a fixed number of shares as set forth in an award agreement between the grantee and us. Award agreements set forth time and/or performance vesting schedules and other appropriate terms and/or restrictions with respect to awards, including rights to dividends and voting rights.
The Compensation Committee has been delegated responsibility by our Board of Directors to review the stock-based awards to employees. At the time of each award granted to each NEO, the Compensation Committee determines the terms of the award, including the performance period (or periods) and the performance objectives relating to the award. The Compensation Committee then recommends the approval of the award to the Board of Directors.
Restricted Stock Awards Awarded in 2017 for 2016 Performance
The Compensation Committee generally meets in February of each year to consider the amount of restricted stock that should be awarded to our executive officers with respect to the Company's performance for the prior year. Specific performance factors that the Compensation Committee considered in determining the granting of restricted stock in February 2017 were the Company's achievement of financial and operational goals in 2016 and individual employee performance during 2016 in such areas as work ethic, proficiency and overall contribution to the Company. On February 1, 2017, the Board of Directors, upon recommendation of the Compensation Committee, granted the following awards:
|
| | | |
Name | | Number of
Shares of
Restricted Stock(1)
|
E. Ashton Poole | | 53,500 |
|
Steven C. Lilly | | 45,000 |
|
Jeffrey A. Dombcik | | 39,000 |
|
Cary B. Nordan | | 42,000 |
|
Douglas A. Vaughn | | 39,000 |
|
| |
(1) | Consists of restricted stock which vests over four years from the date of grant. The shares of restricted stock granted to Messrs. Poole, Lilly, Dombcik, Nordan and Vaughn are expected to vest ratably in February of each year, beginning in February of 2018. |
Based on SEC rules requiring equity awards to be disclosed in the tables for the year during which they are granted, rather than earned, the executive compensation tables in this proxy statement include the restricted stock awards granted to our NEOs in February 2017, even though such awards relate to 2016 performance.
Restricted stock awards allow the Company to account for our compensation program based on the price of our common stock, fixed at the grant date of such award, resulting in a known maximum cost of such award under our compensation program at the time of grant. In determining annual restricted stock awards for each of our NEOs, our Compensation Committee considers the grant-date fair value of previously granted restricted stock awards, without assigning value to any appreciation or depreciation subsequent to the grant date of such prior awards.
Restricted Stock Awards Awarded in 2018 for 2017 Performance
In February 2018, our Compensation Committee considered employee performance during fiscal 2017, using similar factors above, in determining the amount of restricted stock awards to recommend for each executive officer. In addition, the Compensation Committee considers each NEO's total cash compensation in relation to the proposed stock award and the effect of dilution of net asset value per share and earnings per share prior to awarding the stock grants. Consistent with the compensation philosophy employed in determining annual cash bonus awards for 2017, in light of the Company's overall weaker financial and investment portfolio performance in 2017 versus 2016, the aggregate value of restricted share awards granted in February 2018 were 35% less than the aggregate value of the awards granted in February 2017, as of the respective grant dates.
On February 8, 2018, the Board of Directors, upon recommendation of the Compensation Committee, approved restricted stock awards for the NEOs, as detailed below.
Mr. Poole was awarded 63,000 shares of restricted stock in February 2018 for his performance during 2017. The aggregate grant date fair value of the February 2018 award was $672,840, a decrease of 35% from the grant date fair value of his 2016 award of $1,029,875. This award reflects an increase in Mr. Poole's responsibilities in 2017 in connection with his appointment as Chairman of the Board of Directors of the Company, his overall responsibility for the strategic direction of our Company, and his leadership in 2017.
Mr. Lilly was awarded 53,000 shares of restricted stock in February 2018 for his performance during 2017. The aggregate grant date fair value of the February 2018 award was $566,040, a decrease of 35% from the grant date fair value of his 2016 award of $866,250. This award reflects Mr. Lilly’s lead role in managing all financial
aspects of our Company, including his leadership in matters relating to our capital structure, liquidity, the Company's relationships with its lenders and investor relations. Mr. Lilly’s restricted stock award also reflected his service as our Chief Compliance Officer and Secretary during 2017.
Mr. Dombcik was awarded 46,000 shares of restricted stock in February 2018 for his performance during 2017. The aggregate grant date fair value of the February 2018 award was $491,280, a decrease of 35% from the grant date fair value of his 2016 award of $750,750. This award reflects Mr. Dombcik's lead role in managing our investment portfolio, including our monitoring, valuation and restructuring activities.
Mr. Nordan was awarded 46,000 shares of restricted stock in February 2018 for his performance during 2017. The aggregate grant date fair value of the February 2018 award was $491,280, a decrease of 39% from the grant date fair value of his 2016 award of $808,500. This award reflects Mr. Nordan's contributions as a senior investment originator as well as his lead role in our origination activities, from initial sourcing to the guidance of each investment through our internal investment process.
Mr. Vaughn was awarded 46,000 shares of restricted stock in February 2018 for his performance during 2017. The aggregate grant date fair value of the February 2018 award was $491,280, a decrease of 35% from the grant date fair value of his 2016 award of $750,750. This award reflects Mr. Vaughn's contributions as a senior investment originator and his lead role in managing all administrative aspects of the Company, including recruiting, training, staffing, performance evaluation and other human resources-related initiatives.
The amount of restricted stock awarded to each of our executive officers is unrelated to the number of shares we may sell below net asset value.
Options
Since our IPO, our Board of Directors has not utilized options to purchase our common stock as a form of compensation to our NEOs and other employees. As such, we did not grant any stock options to our employees in 2017.
Our Board of Directors may, however, grant our employees options to purchase our common stock (including incentive stock options and non-qualified stock options). We expect that, if granted, options will represent a fixed number of shares of our common stock, will have an exercise, or strike, price equal to the fair market value of our common stock on the date of such grant, and will be exercisable, or “vested,” at some later time after grant. Upon any stock option grant, its exercise price will not be changed absent specific SEC approval that we may do so. Some stock options granted by our Board of Directors may vest simply by the holder remaining with the Company for a period of time, and some may vest based on meeting certain performance goals. We anticipate that our options, if granted in the future, will be valued for financial reporting purposes using the Black Scholes valuation method, and charges to earnings will be taken over the relevant service period pursuant to FASB ASC Topic 718.
Other Compensation Matters
401(k) Plan
We maintain a 401(k) plan in which all full-time employees who are at least 21 years of age are eligible to participate and receive certain employer contributions. Eligible employees have the opportunity to contribute their compensation on a pretax salary basis into the 401(k) plan up to $18,000 for the 2017 plan year, and to direct the investment of these contributions. Plan participants who reach the age of 50 prior to or during the plan year are eligible to defer up to an additional $6,000 for the 2017 plan year.
Deferred Compensation Plan
The Compensation Committee has adopted a nonqualified deferred compensation plan covering the Company’s executive officers and key employees. Any compensation deferred and the Company’s additional contributions, if any, will earn a return based on the returns on certain investments designated by the Compensation Committee. Participants will be 100% vested in any elective deferrals, and will vest in any Company contributions ratably over four years from the date of the relevant contribution.
Executive Retention Agreements
As part of the Strategic Review discussed above under "Director Fees,” our Board of Directors recognized that, in the event negotiations are commenced to bring about a strategic transaction, uncertainty and questions could arise that could result in the distraction or departure of our NEOs to our detriment and the detriment of our stockholders. As a result, in November 2017, we entered into Executive Retention Agreements (each, a “Retention Agreement,” and collectively, the “Retention Agreements”) with each of the NEOs to reinforce and encourage the continued attention and dedication of the NEOs to their assigned duties without regard to the potential outcomes of any strategic transaction which would be in the best interests of our stockholders.
Under the Retention Agreements, each NEO (or his designated beneficiary or estate) will be entitled to the following benefits if, (i) during the twenty-four month period following a "change in control" of the Company, as defined in the Retention Agreements, the NEO’s employment is terminated (A) by the Company (other than for death, disability or cause); or (B) by the NEO for Good Reason (as defined in the Retention Agreements), or (ii) the NEO terminates employment for any reason during the thirty-day period immediately following the first anniversary of the change in control; and provided the NEO releases the Company from any liabilities, known or unknown:
the NEO's full base salary through the date of termination, plus an amount equal to any accrued but unused vacation;
the amount of any Executive Incentive Compensation, as such term is used in the Retention Agreements (consisting of annual cash bonuses and the grant date fair market value of restricted stock and deferred compensation awards), (i) for any past completed fiscal year which has not yet been paid, and (ii) for any partially completed period, on a pro rata basis. If the prior year’s Executive Incentive Compensation has not been set, and in any case for the pro-rata calculation, the Executive Incentive Compensation will be calculated at the greater of: (A) the target level of the Executive Incentive Compensation Opportunity, as such term is used in the Retention Agreements, which may include annual cash incentives, as well as annual awards of equity interests, deferred compensation and other incentive pay (without application of any denial provisions based on unsatisfactory personal performance), and (B) the highest Executive Incentive Compensation amount paid to the NEO for the three full fiscal years which ended coincident with or immediately prior to the change in control;
an aggregate lump sum severance payment, paid within sixty days of the date of termination, equal to the product of a multiple (1.25 for each NEO) times the sum of: (i) the NEO’s annual salary calculated at the highest rate of salary in effect during the prior three fiscal years ; (ii) the highest regular annual cash bonus paid to the NEO as part of the Executive Incentive Compensation (excluding any associated restricted stock or deferred compensation awards) for the three full fiscal years which ended coincident with or immediately prior to the change in control; and (iii) an amount equal to the highest contribution paid by the Company to its 401(k) plan on behalf of the NEO for the three full fiscal years which ended coincident with or immediately prior to the change in control;
premiums for the NEO and the NEO's spouse and/or dependents related to Company-sponsored medical and dental benefits for eighteen months following the date of termination or such shorter period for which the NEO is legally eligible to receive such benefits;
for twenty-four months following the date of termination, premiums that may come due on the term life insurance policies on the NEO’s life, consistent with the Company’s practice as of the date of the Retention Agreement;
$25,000, within sixty days of the date of termination, for outplacement services, regardless of whether the NEO elects to use any outplacement services; and
full vesting of the NEO's account in the Company’s Executive Deferred Compensation Plan and in any plan of deferred compensation maintained by the Company or its successor.
In addition, under the Retention Agreements, upon the consummation of a change in control, the NEOs will be fully vested in their outstanding awards under the Company’s Omnibus Incentive Plan and under any equity incentive plan maintained by the Company or its successor, as of the date of the change in control.
The Retention Agreements have an indefinite term; however, the Company may terminate a Retention Agreement at any time by giving the NEO written notice thereof at least twenty-four months in advance of such termination date.
Tax and Accounting Considerations
The Compensation Committee annually reviews and considers the deductibility of the compensation paid to our executive officers, which includes each of the NEOs, under Section 162(m) of the Internal Revenue Code of 1986, or the Code. Pursuant to Section 162(m) of the Code, compensation paid to certain executive officers in excess of $1,000,000 generally is not deductible. However, before the effective date of the 2017 tax reform legislation, amounts in excess of $1,000,000 were deductible if they qualify as “performance-based compensation.” With respect to awards made before the 2017 tax reform legislation, the Compensation Committee endeavored to structure the executive compensation program so that each executive’s compensation will generally be fully deductible. However, to maintain flexibility in compensating our executive officers in a manner designed to promote our objectives, the Compensation Committee has not adopted a policy that requires all compensation to be deductible and has retained the right to approve compensation that is not fully deductible under Section 162(m). The compensation paid pursuant to our cash-based annual and long-term incentive programs was intended to qualify as “performance-based compensation” for purposes of Section 162(m) for all years in which the “performance-based compensation” exception was in effect, including 2017. Base salaries did not qualify as “performance-based compensation” pursuant to the requirements of Section 162(m).
The 2017 tax reform legislation removed the “performance-based compensation” exception from Section 162(m). Accordingly, awards made after November 2, 2017, generally are not eligible for the “performance-based compensation” exception and will not be deductible to the extent that they cause the compensation of the affected executive officers to exceed $1,000,000 in any year. Awards that were made and subject to binding written contracts in effect on November 2, 2017, are “grandfathered” under prior law and can still qualify as deductible “performance-based compensation,” even if paid in future years. The Compensation Committee will continue to monitor these awards and Internal Revenue Service guidance to determine if they are deductible if and when paid. In addition, the Compensation Committee will review the 2017 tax reform legislation and its impact on the Company’s executive compensation program; however, no assurance can be given that compensation intended to satisfy the requirements for exemption from Section 162(m) will do so.
In 2017, all compensation paid to our executive officers was deductible for U.S. federal income tax purposes.
In awarding restricted stock awards for performance in 2017, we accounted for share-based awards under the provisions of FASB ASC Topic 718. FASB ASC Topic 718 establishes accounting for stock-based awards exchanged for goods or services. Accordingly, stock-based compensation cost is measured at grant date, based on the fair value of the awards, and is recognized as an expense ratably over the requisite service period. Accounting rules also require us to record cash compensation as an expense at the time the obligation is incurred.
Conclusion
We believe that our compensation policies are designed to fairly compensate, retain and motivate our NEOs. The retention and motivation of our NEOs should enable us to grow strategically and position ourselves competitively in the market in which we operate.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
All members of our Compensation Committee (Messrs. Dunwoody, Goldstein and Mulhern) are independent directors, and none of the members are present or past employees of the Company. No member of the Compensation Committee has had any relationship with the Company requiring disclosure under Item 404 of Regulation S-K under the Exchange Act. In addition, no interlocking relationship, as defined by the rules adopted by the SEC, existed during the year ended December 31, 2017 between any membersupervision of our Board, a majority of Directors or the Compensation Committee and an executive officerwhich is made up of the Company.
COMPENSATION COMMITTEE REPORT
The Compensation Committee determines the compensation for our executive officers and the amount of salary and bonus to be included in the compensation package for each of our executive officers. The Compensation Committee currently consists of Messrs. Dunwoody, Goldstein and Mulhern, all of whom are considered independent in accordance with NYSE listing standards, SEC rules and our Corporate Governance Guidelines, anddirectors that are not “interested persons” of the Company,persons,” as defined in Section 2(a)(19) of the 1940 Act.Act, of the Company or Barings, Barings’ Global Private Finance Group (“Barings GPFG”) manages our day-to-day operations, and provides investment advisory and management services to us. Barings GPFG is part of Barings' $300 billion (as of December 31, 2022) Global Fixed Income Platform that invests in liquid, private and structured credit. Barings GPFG manages private funds and separately managed accounts, along with multiple public vehicles.
Included in Barings GPFG is Barings North American Private Finance Team (the “U.S. Investment Team”), which consists of 51 investment professionals (as of December 31, 2022) located in four offices in the U.S. The U.S. Investment Team provides a full set of solutions to the North American middle market, including revolvers, first and second lien senior secured loans, unitranche structures, mezzanine debt and equity co-investments. The U.S. Investment Team averages over 20 years of industry experience at the Managing Director and Director level.
The CompensationBarings North American Private Finance investment committee (the “Investment Committee”), which is responsible for our investment origination and portfolio monitoring activities for middle-market companies in North America, consists of six members: Salman Mukhtar, Managing Director; Terry Harris, Managing Director and Head of Global Private Finance Portfolio Management; Ian Fowler, Managing Director, Fund Portfolio Manager and Co-Head of Global Private Finance; Adam Wheeler, Managing Director, Co-Head of Global Private Finance; Mark Flessner, Managing Director and Fund Portfolio Manager; and Brian Baldwin, Managing Director. Collectively, the Investment Committee has over 160 years of industry experience, and each member averages approximately 27 years of industry experience. A majority of the votes cast at a meeting at which a majority of the members of the Investment Committee is present is required to approve all investments in new middle-market companies.
Terry Harris, Ian Fowler and Adam Wheeler also sit on the European and Asia Pacific Investment Committees, which is responsible for our Boardinvestment origination and portfolio monitoring activities for middle-market companies in European and Asia-Pacific geographies, affording them a unique relative value perspective across all of Directors has reviewedBarings' investment geographies. Ian Fowler, Mark Flessner and discussed with management the information contained in the Compensation DiscussionBrian Baldwin have all worked together at prior firms including GE Capital, Freeport Financial and Analysis section of this proxy statement and, based on its review and discussion, has recommended to our Board of DirectorsHarbour Group. Barings believes that the Compensation Discussionindividual and Analysis be included in this proxy statement to be filed with the SEC.
The Compensation Committee:
Mark F. Mulhern, Chair
W. McComb Dunwoody
Benjamin S. Goldstein
The information contained in the report above shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Securities Act, or the Exchange Act, except to the extent specifically incorporated by reference therein.
EXECUTIVE OFFICER COMPENSATION
2017 Summary Compensation
The following table sets forth certain summary information for the years 2017, 2016 and 2015 with respect to the compensation awarded to and earned by our NEOs.
Summary Compensation Table for 2017
|
| | | | | | | | | | | | | | | | | | | | | | |
Name | Principal Position | Year | | Base Salary | | Bonus | | Restricted Stock Awards(1) | | All Other Compensation(2) | | Total |
E. Ashton Poole | CEO | 2017 | | $ | 443,750 |
| | $ | 405,000 |
| | $ | 1,029,875 |
| | $ | 130,635 |
| | $ | 2,009,260 |
|
| | 2016 | | $ | 432,500 |
| | $ | 535,000 |
| | $ | 745,025 |
| | $ | 115,829 |
| | $ | 1,828,354 |
|
| | 2015 | | $ | 407,500 |
| | $ | 647,500 |
| | $ | 980,100 |
| | $ | 97,546 |
| | $ | 2,132,646 |
|
Steven C. Lilly | CFO | 2017 | | $ | 338,750 |
| | $ | 375,000 |
| | $ | 866,250 |
| | $ | 153,429 |
| | $ | 1,733,429 |
|
| | 2016 | | $ | 333,750 |
| | $ | 485,000 |
| | $ | 648,610 |
| | $ | 117,084 |
| | $ | 1,584,444 |
|
| | 2015 | | $ | 325,000 |
| | $ | 580,000 |
| | $ | 871,200 |
| | $ | 84,427 |
| | $ | 1,860,627 |
|
Jeffrey A. Dombcik | CCO(3) | 2017 | | $ | 313,750 |
| | $ | 330,000 |
| | $ | 750,750 |
| | $ | 138,922 |
| | $ | 1,533,422 |
|
| | 2016 | | $ | 294,375 |
| | $ | 415,000 |
| | $ | 508,370 |
| | $ | 107,180 |
| | $ | 1,324,925 |
|
| | 2015 | | $ | 290,000 |
| | $ | 512,000 |
| | $ | 653,400 |
| | $ | 78,890 |
| | $ | 1,534,290 |
|
Cary B. Nordan | COO(4) | 2017 | | $ | 313,750 |
| | $ | 330,000 |
| | $ | 808,500 |
| | $ | 140,215 |
| | $ | 1,592,465 |
|
| | 2016 | | $ | 294,375 |
| | $ | 440,000 |
| | $ | 604,785 |
| | $ | 108,100 |
| | $ | 1,447,260 |
|
| | 2015 | | $ | 290,000 |
| | $ | 555,000 |
| | $ | 696,960 |
| | $ | 78,992 |
| | $ | 1,620,952 |
|
Douglas A. Vaughn | CAO(5) | 2017 | | $ | 313,750 |
| | $ | 330,000 |
| | $ | 750,750 |
| | $ | 139,316 |
| | $ | 1,533,816 |
|
| | 2016 | | $ | 294,375 |
| | $ | 440,000 |
| | $ | 473,310 |
| | $ | 107,367 |
| | $ | 1,315,052 |
|
| | 2015 | | $ | 290,000 |
| | $ | 457,500 |
| | $ | 609,840 |
| | $ | 78,771 |
| | $ | 1,436,111 |
|
| |
(1) | The amounts listed in this column reflect the grant date fair value of the restricted stock granted, in accordance with FASB ASC Topic 718, Compensation — Stock Compensation, based on the closing price of our common stock on February 1, 2017, the grant date. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. These amounts do not correspond to the actual value that will be recognized by our NEOs upon the vesting of such grants. Additionally, pursuant to SEC rules requiring equity awards to be disclosed in the summary compensation table for the year during which they are granted, rather than earned, the amounts in this column include the grant-date fair value of restricted stock awards granted to our NEOs in February 2017, even though such awards relate to 2016 performance. Assumptions used in the calculation of these amounts are set forth in Note 6 — “Equity-Based and Other Compensation Plans” to our consolidated audited financial statements for the fiscal year ended December 31, 2017 which are included in our Annual Report on Form 10-K which was filed with the SEC on February 28, 2018. These amounts do not represent the actual value that may be realized by the NEOs. |
| |
(2) | All Other Compensation includes the value of benefits in the form of 401(k) contributions, deferred compensation plan contributions made by the Company, earnings on deferred compensation plan balances and life insurance premiums paid by the Company for the year. See chart below for disclosure of the amounts of each of these items. |
| |
(3) | “CCO” stands for Chief Credit Officer. |
| |
(4) | “COO” stands for Chief Origination Officer. |
| |
(5) | “CAO” stands for Chief Administrative Officer. |
All Other Compensation in the Summary Compensation Table for 2017 above consists of the following:
|
| | | | | | | | | | | | | | | | |
Name | Year | Company 401(k) Contribution | Company Deferred Comp. Plan Contribution | Deferred Compensation Plan Earnings | Company Paid Life Insurance Premiums | Total All Other Compensation |
E. Ashton Poole | 2017 | $ | 36,000 |
| $ | 50,000 |
| $ | 43,270 |
| $ | 1,365 |
| $ | 130,635 |
|
| 2016 | $ | 35,000 |
| $ | 60,000 |
| $ | 19,464 |
| $ | 1,365 |
| $ | 115,829 |
|
| 2015 | $ | 35,000 |
| $ | 60,000 |
| $ | 1,181 |
| $ | 1,365 |
| $ | 97,546 |
|
Steven C. Lilly | 2017 | $ | 36,000 |
| $ | 40,000 |
| $ | 76,491 |
| $ | 938 |
| $ | 153,429 |
|
| 2016 | $ | 35,000 |
| $ | 45,000 |
| $ | 36,146 |
| $ | 938 |
| $ | 117,084 |
|
| 2015 | $ | 35,000 |
| $ | 45,000 |
| $ | 3,489 |
| $ | 938 |
| $ | 84,427 |
|
Jeffrey A. Dombcik | 2017 | $ | 36,000 |
| $ | 35,000 |
| $ | 66,286 |
| $ | 1,636 |
| $ | 138,922 |
|
| 2016 | $ | 35,000 |
| $ | 40,000 |
| $ | 31,295 |
| $ | 885 |
| $ | 107,180 |
|
| 2015 | $ | 35,000 |
| $ | 40,000 |
| $ | 3,005 |
| $ | 885 |
| $ | 78,890 |
|
Cary B. Nordan | 2017 | $ | 36,000 |
| $ | 35,000 |
| $ | 68,177 |
| $ | 1,038 |
| $ | 140,215 |
|
| 2016 | $ | 35,000 |
| $ | 40,000 |
| $ | 32,220 |
| $ | 880 |
| $ | 108,100 |
|
| 2015 | $ | 35,000 |
| $ | 40,000 |
| $ | 3,112 |
| $ | 880 |
| $ | 78,992 |
|
Douglas A. Vaughn | 2017 | $ | 36,000 |
| $ | 35,000 |
| $ | 66,992 |
| $ | 1,324 |
| $ | 139,316 |
|
| 2016 | $ | 35,000 |
| $ | 40,000 |
| $ | 31,641 |
| $ | 726 |
| $ | 107,367 |
|
| 2015 | $ | 35,000 |
| $ | 40,000 |
| $ | 3,045 |
| $ | 726 |
| $ | 78,771 |
|
2017 Grants of Plan-Based Awards
The following table summarizes grants of plan-based awards made to our NEOs in 2017 for their performance in 2016.
Grants of Plan-Based Awards in 2017
|
| | | | | | | | | |
Name | | Grant Date | | Stock Awards Number of Shares of Stock | | Grant Date Fair Value of Stock |
E. Ashton Poole(1) | | February 1, 2017 | | 53,500 |
| | $ | 1,029,875 |
|
Steven C. Lilly(1) | | February 1, 2017 | | 45,000 |
| | $ | 866,250 |
|
Jeffrey A. Dombcik(1) | | February 1, 2017 | | 39,000 |
| | $ | 750,750 |
|
Cary B. Nordan(1) | | February 1, 2017 | | 42,000 |
| | $ | 808,500 |
|
Douglas A. Vaughn(1) | | February 1, 2017 | | 39,000 |
| | $ | 750,750 |
|
| |
(1) | Consists of restricted stock which vests over four years from the date of grant. The shares of restricted stock are expected to vest ratably in February of each year, beginning in February of 2018. |
Compensation Mix
As discussed in more detail in the section of this Proxy Statement entitled “Compensation Discussion and Analysis” above, in 2017, the Company’s compensation program was comprised primarily of the following three elements: (i) base salary, (ii) annual cash bonus and (iii) long-term equity compensation. Although it does not allocate a fixed percentage of the NEO compensation packages to eachshared experiences of these elements,senior team members provides the CompensationInvestment Committee does seek to achievewith an appropriate balance among these elements to incentivize our NEOs to focus on financialof shared investment philosophy and operating results in the near termdifference of background and the creation of stockholder value over the long-term.opinion.
In 2017, salaries comprised 22.1%, 19.5%, 20.5%, 19.7% and 20.5% of total compensation for Messrs. Poole, Lilly, Dombcik, Nordan and Vaughn, respectively. The annual base salary of each NEO is to be determined annually at the discretion of the Compensation Committee. Moreover, in 2017, annual cash bonuses comprised 20.2%, 21.6%, 21.5%, 20.7% and 21.5% of total compensation for Messrs. Poole, Lilly, Dombcik, Nordan and Vaughn, respectively.
Omnibus Incentive Plan
The restricted stock awards granted to our NEOs during 2017 that appear in the tables above and below were granted pursuant to the Omnibus Incentive Plan (formerly, the Equity Incentive Plan as discussed above under "Director Compensation - Non-Employee Director Equity Compensation" above). On March 18, 2008, we received an exemptive order from the SEC authorizing such issuance of restricted stock to our employees and non-employee directors pursuant to the terms of the Equity Incentive Plan, the terms of which are now included in the Omnibus Incentive Plan, and as otherwise set forth in the exemptive order. The Equity Incentive Plan originally reserved up to 900,000 shares for issuance and in 2012, our Board of Directors and stockholders voted to approve an increase in shares of common stock available for issuance under the Equity Incentive Plan by 1,500,000 shares. In addition, in 2017, in conjunction with the approval of the Omnibus Incentive Plan, our Board of Directors and stockholders voted to approve an increase in shares of common stock available for issuance under the Omnibus Incentive Plan by 1,600,000 shares. Thus, the Omnibus Incentive Plan currently reserves up to 4,000,000 shares of our common stock for issuance. As of December 31, 2017, there were 2,269,467 shares available for issuance under the Omnibus Incentive Plan.
Participants in the Omnibus Incentive Plan who are employees may receive awards of options to purchase shares of common stock or grants of restricted stock, as determined by the Board of Directors. The basis of such participation is to provide incentives to our employees in order to attract and retain the services of qualified professionals.
The Omnibus Incentive Plan includes provisions allowing the issuance of restricted stock to all key employees consistent with such terms and conditions as the Board of Directors shall deem appropriate, subject to the limitations
set forth in the plan. Restricted stock refers to an award of stock that is subject to forfeiture restrictions and may not be transferred until such restrictions have lapsed. With respect to awards issued to our employees, the Board of Directors will determine the time or times at which such shares of restricted stock will vest or the terms on which such shares will vest. Shares granted pursuant to a restricted stock award will not be transferable until such shares have vested in accordance with the terms of the award agreement, unless the transfer is by will or by the laws of descent and distribution. The Omnibus Incentive Plan also allows us to issue options to our key employees in the future should our Board of Directors choose to do so.
Our Board of Directors has delegated administration of the Omnibus Incentive Plan to our Compensation Committee, currently comprised solely of three (3) independent directors who are independent pursuant to the listing requirements of the NYSE. Our Board of Directors may abolish the Compensation Committee at any time and revest in our Board of Directors the administration of the Omnibus Incentive Plan. Our Board of Directors administers the Omnibus Incentive Plan in a manner that is consistent with the applicable requirements of the NYSE and the exemptive order.
On February 1, 2017, the Board of Directors, upon recommendation of our Compensation Committee, approved grants of restricted stock awards to Messrs. Poole, Lilly, Dombcik, Nordan and Vaughn as set forth above. All of these restricted shares of stock were valued at $19.25, the closing price of our common stock on the NYSE on February 1, 2017, the grant date. The restricted share awards granted to Messrs. Poole, Lilly, Dombcik, Nordan and Vaughn vest ratably over four years from the grant date.
None of these shares of restricted stock may be sold, assigned, transferred, pledged, hypothecated or otherwise encumbered or disposed of prior to the their vesting date, and, except as otherwise determined by our Board of Directors at or after the grant of each executive officer’s award of restricted stock, any of the shares which have not fully vested will be forfeited, and all rights of the executive officer to such shares shall terminate, without further obligation on the part of the Company, unless the executive officer remains employed with us for the entire vesting period relating to the restricted stock.
2017 Outstanding Equity Awards at Fiscal Year End
The following table summarizes the number of outstanding equity awards held by each of our NEOs as of December 31, 2017.
2017 Outstanding Equity Awards at Fiscal Year End
|
| | | | | | | |
| | | | |
Name | | Number of Shares of Stock That Have Not Vested(1) | | Market Value of Shares of Stock That Have Not Vested(2) |
E. Ashton Poole | | 123,579 |
| (3) | $ | 1,172,765 |
|
Steven C. Lilly | | 101,000 |
| (4) | $ | 958,490 |
|
Jeffrey A. Dombcik | | 83,000 |
| (5) | $ | 787,670 |
|
Cary B. Nordan | | 91,625 |
| (6) | $ | 869,521 |
|
Douglas A. Vaughn | | 80,750 |
| (7) | $ | 766,318 |
|
22
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(1) | No restricted stock awards reflected in this column have been transferred. |
| |
(2) | The values of the unvested common stock listed are based on a $9.49 closing price of our common stock as reported on the NYSE on December 29, 2017. |
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(3) | 5,500 of the shares will vest on February 4, 2018, 22,500 of the shares will vest ratably on February 4 of each year until February 4, 2019, 31,875 of the shares will vest ratably on February 4 of each year until February 4, 2020, 53,500 of the shares will vest ratably on February 4 of each year until February 4, 2021 and 10,204 of the shares will vest on August 29, 2018, at which respective times such shares will be fully vested, subject to the executive officer still being employed with us at such vesting dates. |
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(4) | 8,250 of the shares will vest on February 4, 2018, 20,000 of the shares will vest ratably on February 4 of each year until February 4, 2019, 27,750 of the shares will vest ratably on February 4 of each year until February 4, 2020 and 45,000 of the shares will vest ratably on February 4 of each year until February 4, 2021, at which respective times such shares will be fully vested, subject to the executive officer still being employed with us at such vesting dates. |
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(5) | 7,250 of the shares will vest on February 4, 2018, 15,000 of the shares will vest ratably on February 4 of each year until February 4, 2019, 21,750 of the shares will vest ratably on February 4 of each year until February 4, 2020 and 39,000 of the shares will vest ratably on February 4 of each year until February 4, 2021, at which respective times such shares will be fully vested, subject to the executive officer still being employed with us at such vesting dates. |
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(6) | 7,750 of the shares will vest on February 4, 2018, 16,000 of the shares will vest ratably on February 4 of each year until February 4, 2019, 25,875 of the shares will vest ratably on February 4 of each year until February 4, 2020 and 42,000 of the shares will vest ratably on February 4 of each year until February 4, 2021, at which respective times such shares will be fully vested, subject to the executive officer still being employed with us at such vesting dates. |
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(7) | 7,500 of the shares will vest on February 4, 2018, 14,000 of the shares will vest ratably on February 4 of each year until February 4, 2019, 20,250 of the shares will vest ratably on February 4 of each year until February 4, 2020 and 39,000 of the shares will vest ratably on February 4 of each year until February 4, 2021, at which respective times such shares will be fully vested, subject to the executive officer still being employed with us at such vesting dates. |
2017 Option Exercises and Stock Vested
The following table summarizes the number of shares of common stock and the value of those shares that vested in 2017 that were awarded to our NEOs.
2017 Option Exercises and Stock Vested
|
| | | | | | | | |
Name | | Number of Shares Acquired on Vesting(1) | | Value Realized on Vesting | |
E. Ashton Poole | | 37,579 |
| (2) | $ | 678,975 |
| (3) |
Steven C. Lilly | | 36,070 |
| | $ | 709,497 |
| (4) |
Jeffrey A. Dombcik | | 29,313 |
| | $ | 576,587 |
| (4) |
Cary B. Nordan | | 31,688 |
| | $ | 623,303 |
| (4) |
Douglas A. Vaughn | | 28,563 |
| | $ | 561,834 |
| (4) |
| |
(1) | Number of Shares Acquired upon Vesting is calculated prior to the withholding of vesting shares by the Company to satisfy tax withholding obligations. Each of our NEOs elected to satisfy his tax withholding obligations by having the Company withhold a portion of his vesting shares. |
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(2) | 27,375 of these shares vested on February 4, 2017, and 10,204 of these shares vested on August 29, 2017. |
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(3) | Values realized are based on the closing market price of our common stock of $19.67, as reported on the NYSE on February 6, 2017 and on the closing market price of our common stock of $13.77, as reported on the NYSE on August 29, 2017. |
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(4) | Based on the closing market price of our common stock of $19.67, as reported on the NYSE on February 6, 2017. |
Nonqualified Deferred Compensation for 2017
The following table sets forth information concerning compensation earned by our NEOs for 2017 under the Company’s Executive Deferred Compensation Plan.
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| | | | | | | | | | | | | | | | | | | | |
Name | | Executive Contributions in 2017 ($) | | Registrant Contributions in 2017 ($)(1) | | Aggregate Earnings in 2017 ($)(2) | | Aggregate Withdrawals/ Distributions in 2017 ($) | | Aggregate Balance at 12/31/2017 ($)(3) |
E. Ashton Poole | | $ | — |
| | $ | 60,000 |
| | $ | 43,270 |
| | $ | — |
| | $ | 247,875 |
|
Steven C. Lilly | | $ | — |
| | $ | 45,000 |
| | $ | 76,491 |
| | $ | — |
| | $ | 431,703 |
|
Jeffrey A. Dombcik | | $ | — |
| | $ | 40,000 |
| | $ | 66,286 |
| | $ | — |
| | $ | 374,217 |
|
Cary B. Nordan | | $ | — |
| | $ | 40,000 |
| | $ | 68,177 |
| | $ | — |
| | $ | 384,770 |
|
Douglas A. Vaughn | | $ | — |
| | $ | 40,000 |
| | $ | 66,992 |
| | $ | — |
| | $ | 378,157 |
|
| |
(1) | Represents amounts earned for 2016 and contributed to the Executive Deferred Compensation Plan in 2017. All of the amounts shown in this column are also reported in the 2016 line in the “All Other Compensation” column of the Summary Compensation Table. |
| |
(2) | Represents earnings on Executive Deferred Compensation Plan balances during 2017. All of the amounts shown in this column are also reported in the “All Other Compensation” column of the Summary Compensation Table for 2017.
|
| |
(3) | All amounts were included in amounts reported in the “All Other Compensation” column of the Summary Compensation Table in 2017 or a prior year. |
During the first quarter of 2012, the Compensation Committee of the Board of Directors approved the Company’s adoption of a non-qualified deferred compensation plan for certain senior executive officers and key employees, including the NEOs (the “Executive Deferred Compensation Plan”). The Executive Deferred Compensation Plan is an unfunded plan maintained for the purpose of providing participating executives with additional deferred compensation. Pursuant to the Executive Deferred Compensation Plan, the Company will contribute certain amounts for the benefit of the participating executives from time to time. In the future, the Company may allow participating executives to elect to contribute on a pre-tax basis up to 50% of their base salary and up to 100% of their cash bonus. The Company may elect to match a portion of such contributions. Contributions to the Executive Deferred Compensation Plan will earn a fixed rate of return. This rate of return is currently determined to equal the rate of return of a hypothetical investment in a mutual fund providing a return equal to the S&P Total Return Index. Participants will be 100% vested in any elective deferrals, and will vest in any Company contributions ratably over four years from the date of the relevant contribution. Distributions to participants are generally payable upon termination of employment.
Potential Payments upon Termination or Change in Control
This section describes and quantifies the estimated compensation payments and other benefits to which our NEOs would be entitled upon the occurrence of each of the following triggering events:
occurrence of a Change in Control (as defined in the Retention Agreements ); or
termination upon death or disability, or occurrence of a Change of Control (as defined in the Omnibus Incentive Plan).
Our NEOs are “at will” employees and, except as otherwise described herein, are only entitled to payment of accrued salary and vacation time, on the same terms as provided to our other employees, upon any resignation, retirement or termination of employment, with or without cause. Except as otherwise noted below, the calculations below do not include any estimated payments for those benefits that we generally make available on the same terms to our full-time, non-executive employees.
Executive Retention Agreements
The estimated severance payments and other benefits presented below are calculated based on compensation arrangements in effect as of December 31, 2017, including the Retention Agreements, and assume that the triggering event occurred on such date. Our estimates of potential benefits are further based on the additional assumptions specifically set forth in the table below, if any. Although these calculations are intended to provide reasonable estimates of potential compensation benefits, the estimated benefit amounts may differ from the actual amount that any individual would receive upon termination or the costs to Triangle associated with continuing certain benefits following termination of employment.
Change of Control Payments and Benefits under Executive Retention Agreements
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| | | | | | | | | | | | | | | |
Name | Severance Payment | Deferred Compensation Plan Vesting(1) | Vesting of Stock Awards(2) | All Other Benefits(3) | Total |
E. Ashton Poole | $ | 1,410,625 |
| $ | 117,518 |
| $ | 1,172,765 |
| $ | 59,806 |
| $ | 2,760,714 |
|
Steven C. Lilly | $ | 1,195,000 |
| $ | 96,599 |
| $ | 958,490 |
| $ | 58,952 |
| $ | 2,309,041 |
|
Jeffrey A. Dombcik | $ | 1,085,000 |
| $ | 85,866 |
| $ | 787,670 |
| $ | 60,348 |
| $ | 2,018,884 |
|
Cary B. Nordan | $ | 1,138,750 |
| $ | 85,866 |
| $ | 869,521 |
| $ | 59,152 |
| $ | 2,153,289 |
|
Douglas A. Vaughn | $ | 1,016,875 |
| $ | 85,866 |
| $ | 766,318 |
| $ | 59,724 |
| $ | 1,928,783 |
|
| |
(1) | Represents the amount of unvested deferred compensation expense related to outstanding grants to each NEO as of December 31, 2017. |
(2)Represents the fair market value of each NEO's unvested restricted share awards as of December 31, 2017, based on a $9.49 closing price of our common stock as reported on the NYSE on December 29, 2017, as follows: |
| | | | | | |
Name | Number of Shares Acquired on Vesting (#) | | Value Realized on Vesting ($) |
E. Ashton Poole | 123,579 |
| | $ | 1,172,765 |
|
Steven C. Lilly | 101,000 |
| | $ | 958,490 |
|
Jeffrey A. Dombcik | 83,000 |
| | $ | 787,670 |
|
Cary B. Nordan | 91,625 |
| | $ | 869,521 |
|
Douglas A. Vaughn | 80,750 |
| | $ | 766,318 |
|
(3)All Other Benefits includes the value of medical and dental insurance premiums, term life insurance premiums and an allowance for outplacement services. See chart below for disclosure of the amounts of each of these items. |
| | | | | | | | | | | | |
Name | Medical and Dental Premiums | Term Life Insurance Premiums | Outplacement Services Allowance | Total All Other Benefits |
E. Ashton Poole | $ | 32,076 |
| $ | 2,730 |
| $ | 25,000 |
| $ | 59,806 |
|
Steven C. Lilly | $ | 32,076 |
| $ | 1,876 |
| $ | 25,000 |
| $ | 58,952 |
|
Jeffrey A. Dombcik | $ | 32,076 |
| $ | 3,272 |
| $ | 25,000 |
| $ | 60,348 |
|
Cary B. Nordan | $ | 32,076 |
| $ | 2,076 |
| $ | 25,000 |
| $ | 59,152 |
|
Douglas A. Vaughn | $ | 32,076 |
| $ | 2,648 |
| $ | 25,000 |
| $ | 59,724 |
|
Death, Disability, and Change of Control Benefits under the Omnibus Incentive Plan
In addition, under the Company's Omnibus Incentive Plan, and the award agreements thereunder, if termination of the NEO's employment with the Company is the result of death or Disability (as defined in the Omnibus Incentive Plan), or if a Change of Control (as defined in the Omnibus Incentive Plan) occurs, the NEO shall become fully vested in any outstanding awards under the Omnibus Incentive Plan. The estimated compensation benefits presented below are calculated based on compensation arrangements in effect as of December 31, 2017 and assume that the triggering event occurred on such date. The estimated benefit amounts related to the Company's common stock are based on a common stock price of $9.49, which was the closing price per share of our common stock on the NYSE on December 29, 2017. Our estimates of potential benefits are further based on the additional assumptions specifically set forth in the table below, if any. Although these calculations are intended to provide reasonable estimates of potential compensation benefits, the estimated benefit amounts may differ from the actual amount that any individual would receive upon termination or the costs to the Company associated with continuing certain benefits following termination of employment.
|
| | | | | | | | | | | | | |
| Termination for Cause | | Termination from Death, from Disability or Occurrence of Change in Control |
Name | Number of Shares Acquired on Vesting (#) | | Value Realized on Vesting ($) | | Number of Shares Acquired on Vesting (#) | | Value Realized on Vesting ($) |
E. Ashton Poole | — |
| | $ | — |
| | 123,579 |
| | $ | 1,172,765 |
|
Steven C. Lilly | — |
| | $ | — |
| | 101,000 |
| | $ | 958,490 |
|
Jeffrey A. Dombcik | — |
| | $ | — |
| | 83,000 |
| | $ | 787,670 |
|
Cary B. Nordan | — |
| | $ | — |
| | 91,625 |
| | $ | 869,521 |
|
Douglas A. Vaughn | — |
| | $ | — |
| | 80,750 |
| | $ | 766,318 |
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the beneficial ownership of ourthe Company's common stock as of February 22, 2018,March 6, 2023, the record date, by each of our executive officers and independent directors and all of ourthe Company's directors and executive officers, both individually and as a group. Asgroup, and by each person known to the Company to beneficially own 5% or more of February 22, 2018, wethe outstanding shares of the Company’s common stock. With respect to persons known to the Company to beneficially own 5% or more of the outstanding shares of the Company’s common stock, the Company bases such knowledge on beneficial ownership filings made by the holders with the SEC and other information known to the Company. Other than as set forth in the table below, none of the Company's directors or executive officers are not awaredeemed to beneficially own shares of any 5% beneficial owners of ourthe Company's common stock.
Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the securities. There is no common stock subject to options or warrants that isare currently exercisable or exercisable within 60 days of February 22, 2018.March 6, 2023. Percentage of beneficial ownership is based on 48,024,614107,916,166 shares of common stock outstanding as of February 22, 2018. TheMarch 6, 2023. Unless otherwise indicated by footnote, the business address of each person listed below is 3700 Glenwood Avenue,300 South Tryon Street, Suite 530, Raleigh,2500, Charlotte, North Carolina 27612.28202.
|
| | | | | | | | | | |
Name of Beneficial Owner | | Number of Shares Beneficially Owned(1) | | | | Percentage of Class(2) | | Dollar Range of Equity Securities Beneficially Owned(3)(4) |
Executive Officers and Interested Directors | | | | | | | | |
E. Ashton Poole | | 251,105 |
| | (5) | | * |
| | over $100,000 |
Steven C. Lilly | | 308,622 |
| | (6) | | * |
| | over $100,000 |
Jeffrey A. Dombcik | | 190,426 |
| | (7) | | * |
| | over $100,000 |
Cary B. Nordan | | 215,559 |
| | (8) | | * |
| | over $100,000 |
Douglas A. Vaughn | | 216,834 |
| | (9) | | * |
| | over $100,000 |
Garland S. Tucker, III | | 210,917 |
| | (10) | | * |
| | over $100,000 |
Independent Directors | | | | | | | | |
W. McComb Dunwoody | | 108,972 |
| | (11) | | * |
| | over $100,000 |
Mark M. Gambill | | 29,950 |
| | (11) | | * |
| | over $100,000 |
Benjamin S. Goldstein | | 61,522 |
| | (11) | | * |
| | over $100,000 |
Mark F. Mulhern | | 5,440 |
| | (11) | | * |
| | $50,000 - $100,000 |
Simon B. Rich, Jr. | | 96,515 |
| | (12) | | * |
| | over $100,000 |
All directors and executive officers as a group | | 1,695,862 |
| | | | 3.5 | % | | over $100,000 |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Name of Beneficial Owner | | Number of Shares Beneficially Owned(1) | | | | Percentage of Class(2) | | Dollar Range of Equity Securities Beneficially Owned(3) |
Directors and Executive Officers: | | | | | | | | |
Interested Directors | | | | | | | | |
Eric Lloyd | | 33,437 | | | | | * | | over $100,000 |
David Mihalick | | 20,000 | | | | | * | | over $100,000 |
Dr. Bernard Harris, Jr.(4) | | — | | | | | * | | None |
Non-Interested Directors | | | | | | | | |
Mark F. Mulhern | | 14,855 | | | | | * | | over $100,000 |
Thomas W. Okel | | 10,037 | | | | | * | | $50,001 - $100,000 |
Jill Olmstead | | 4,000 | | | | | * | | $10,001 - $50,000 |
John A. Switzer | | 6,000 | | | | | * | | $50,001 - $100,000 |
Robert Knapp | | 361,034 | | | | | * | | over $100,000 |
Steve Byers | | 20,019 | | | | | * | | over $100,000 |
Valerie Lancaster-Beal | | — | | | | | * | | None |
Executive Officers Who Are Not Directors | | | | | | | | |
Ian Fowler | | — | | | | | * | | None |
Jonathan Landsberg | | 8,423 | | | | | * | | $50,001 - $100,000 |
Elizabeth Murray | | 12,982 | | | | | * | | over $100,000 |
Ashlee Steinnerd | | — | | | | | * | | None |
All directors and executive officers as a group (14 persons) | | 490,787 | | | | | * | | over $100,000 |
Five-Percent Stockholders: | | | | | | | | |
Barings LLC | | 13,639,681 | | | | | 12.6 | % | | over $100,000 |
* Less than 1.0%
| |
(1) | (1)Beneficial ownership in this column has been determined in accordance with Rule 13d-3 of the Exchange Act. |
| |
(2) | Based on a total of 48,024,614 shares issued and outstanding as of February 22, 2018. |
| |
(3) | Beneficial ownership has been determined in accordance with Rule 16a-1(a)(2) of the Exchange Act. |
| |
(4) | The dollar range of equity securities beneficially owned is based on a stock price of $11.03 per share as of February 22, 2018. |
| |
(5) | Includes 145,829 shares of unvested restricted stock and 4,022 shares held by Mr. Poole's wife. |
| |
(6) | Includes 115,250 shares of unvested restricted stock. |
| |
(7) | Includes 97,250 shares of unvested restricted stock. |
| |
(8) | Includes 102,750 shares of unvested restricted stock. |
| |
(9) | Includes 95,750 shares of unvested restricted stock and 28,965 shares held by Mr. Vaughn's wife. |
| |
(10) | Includes 69,237 shares held by Mr. Tucker’s wife. |
| |
(11) | Includes 2,694 shares of unvested restricted stock. |
| |
(12) | Includes 2,694 shares of unvested restricted stock and 5,590 shares held by Mr. Rich’s wife. |
In addition, our Board of Directors maintains requirements with respect to equity ownership by our Chief Executive Officer, our named executive officers, and our independent directors. As a result, our Chief Executive Officer must own fully vested sharesthe Exchange Act. Except as otherwise noted, each beneficial owner of ourmore than five percent of the Company's common stock equaland each director and executive officer has sole voting and/or investment power over the shares reported.
(2)Based on a total of 107,916,166 shares issued and outstanding as of March 6, 2023.
(3)Beneficial ownership in this column has been determined in accordance with Rule 16a-1(a)(2) of the Exchange Act. The dollar range of equity securities beneficially owned is based on a stock price of $8.71 per share as of March 6, 2023. Dollar ranges are as follows: None, $1 — $10,000, $10,001 — $50,000, $50,001 — $100,000, or over $100,000.
(4)Dr. Harris will not stand for re-election to a minimum of five times the amountBoard at the end of his annual base salary, our named executive officers must own fully vested shares of our common stock equal to a minimum of four timescurrent term at the amount of their annual base salaries and our independent directors must own fully vested shares of our common stock equal to a minimum of two times their annual retainer fees (including both cash and equity components). Our Chief Executive Officer, our named executive officers, and our independent directors are required to achieve these share ownership requirements after five years of service.Annual Meeting.
DELINQUENT SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCEREPORTS
Section 16(a) of the Exchange Act andrequires the disclosure requirements of Item 405 of SEC Regulation S-K require that ourCompany’s officers and directors, and executive officers, and any persons holdingwho own more than 10% of any classour common stock, to file reports of our equity securities report their ownership of such equity securities and any subsequent changes in thatsuch ownership towith the SEC, the NYSE and to us. Based solely on a review of the written statements and copies of such reports furnished to us by our executive officers,SEC. Officers, directors, and greater than 10% beneficial owners, we believestockholders also are required by SEC rules to furnish the Company with copies of all Section 16(a) forms they file.
Based solely on the Company’s review of Forms 3, 4 and 5 filed by such persons and information provided by the Company’s directors and officers, the Company believes that during fiscalthe year 2017,ended December 31, 2022, all Section 16(a) filing requirements applicable to the executive officers, directors and stockholderssuch persons were met in a timely satisfied,manner, with the following inadvertent exceptions: Messrs. Dunwoody, Gambill, Goldstein, Mulhern and Rich each filed lateexception: Steve Byers, one of the Company's directors, failed to timely file a Form 4 with respect to one transaction each.in shares of our common stock during the reporting period.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Related Party Transactions Policy and Procedure
The Company has procedures in place for the review, approval and monitoring of transactions involving the Company and certain persons related personsto it. For example, the Company has a code of conduct that generally prohibits any employee, officer or director of the Company whereby our executive officers screen eachfrom engaging in any transaction where there is a conflict between such individual's personal interest and the interests of our transactions for any possible affiliations, close or remote, between the proposed portfolio investment, us, companies controlled by us and our employees and directors. We will not enter into any agreements unless and until we are satisfied that no affiliations prohibited byCompany. Waivers to the 1940 Act exist or, if such affiliations exist, we have taken appropriate actions to seek board review and approval or, when required, exemptive relief for such transaction. Ourcode of conduct can generally only be obtained from the Chief Compliance Officer, a majority of the Board of Directors reviews these proceduresor the chairperson of the Audit Committee and are publicly disclosed as required by applicable law and regulations. In addition, the members of the Audit Committee oversee, on an annual basis. Our Audit Committee reviewsongoing basis, and approves anyconduct a prior review of all transactions withbetween the Company and related partiespersons (as such term is defined in Item 404 of Regulation S-K). that are required to be disclosed in the Company's proxy statement.
In addition,As a BDC, the Company’s codeCompany is also subject to certain regulatory requirements that restrict the Company's ability to engage in certain related-party transactions. The Company has separate policies and procedures that have been adopted to ensure that it does not enter into any such prohibited transactions without seeking necessary approvals, including prohibited transactions under the 1940 Act.
BDCs generally are prohibited under the 1940 Act from knowingly participating in certain transactions with their affiliates without the prior approval of business conducttheir independent directors and, ethics,in some cases, of the U.S. Securities and Exchange Commission (the “SEC”). Those transactions include purchases and sales, and so-called “joint” transactions, in which has been approveda BDC and one or more of its affiliates engage in certain types of profit-making activities. Any person that owns, directly or indirectly, 5.0% or more of a BDC’s outstanding voting securities will be considered an affiliate of the BDC for purposes of the 1940 Act, and a BDC generally is prohibited from engaging in purchases or sales of assets or joint transactions with such affiliates, absent the prior approval of the BDC’s independent directors. Additionally, without the approval of the SEC, a BDC is prohibited from engaging in purchases or sales of assets or joint transactions with the BDC’s officers and directors, and investment adviser, including funds managed by the Boardinvestment adviser and its affiliates.
BDCs may, however, invest alongside certain related parties or their respective other clients in certain circumstances where doing so is consistent with current law and SEC staff interpretations. For example, a BDC may invest alongside such accounts consistent with guidance promulgated by the SEC staff permitting the BDC and such other accounts to purchase interests in a single class of Directorsprivately placed securities so long as certain conditions are met, including that the BDC’s investment adviser, acting on the BDC’s behalf and acknowledgedon behalf of other clients, negotiates no term other than price. Co-investment with such other accounts is not permitted or appropriate under this guidance when there is an opportunity to invest in writing by all employees, requires that all employees and directors avoid any conflict,different securities of the same issuer or where the appearance ofdifferent investments could be expected to result in a conflict between an individual’s personalthe BDC’s interests and those of other accounts.
The 1940 Act generally prohibits BDCs from making certain negotiated co-investments with certain affiliates absent an order from the SEC permitting the BDC to do so. Pursuant to Barings’ existing SEC co-investment exemptive relief under the 1940 Act (the "Exemptive Relief"), the Company is generally permitted to co-invest with funds affiliated with Barings if a "required majority" (as defined in Section 57(o) of the 1940 Act) of the Company's independent directors make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transaction, including the consideration to be paid, are reasonable and fair to the Company and its stockholders and do not involve overreaching in respect of the Company or its stockholders on the part of any person concerned and (2) the transaction is consistent with the interests of the Company's stockholders and is consistent with the Company's investment objective and strategies. Co-investments made under the Exemptive Relief are subject to compliance with the conditions and other requirements contained in the Exemptive Relief, which could limit the Company’s ability to participate in a co-investment transaction.
The Company’s executive officers and the members of Barings’ Investment Committee, as well as the other principals of Barings, manage other funds affiliated with Barings, including BCIC and BPCC and other closed-end investment companies. In addition, Barings' investment team has responsibilities for managing U.S. and global middle-market debt investments for certain other investment funds and accounts. Accordingly, they have obligations
to investors in those entities, the fulfillment of which may not be in the best interests of, or may be adverse to the interests of, the Company or its stockholders. In addition, certain of the other funds and accounts managed by Barings may provide for higher management or incentive fees, greater expense reimbursements or overhead allocations, or permit Barings and its affiliates to receive higher origination and other transaction fees, all of which may contribute to this conflict of interest and create an incentive for Barings to favor such other funds or accounts. Although the professional staff of Barings will devote as much time to the Company’s management as appropriate to enable Barings to perform its duties in accordance with the Advisory Agreement, the investment professionals of Barings may have conflicts in allocating their time and services among the Company, on the one hand, and the other investment vehicles managed by Barings or one or more of its affiliates on the other hand.
Barings may face conflicts in allocating investment opportunities between the Company and affiliated investment vehicles that have overlapping investment objectives with ours, including BCIC and BPCC. In addition, the Company may not be made aware of and/or be given the opportunity to participate in certain investments made by investment funds which are managed by advisers affiliated with Barings and do not participate in the co-investment program described in the Exemptive Relief. In situations where co-investment with other affiliated funds or accounts is not permitted or appropriate, Barings will need to decide which account will proceed with the investment in accordance with its allocation policies and procedures. Although Barings will endeavor to allocate investment opportunities in a fair and equitable manner in accordance with its allocation policies and procedures, it is possible that, in the future, the Company may not be given the opportunity to participate in investments made by investment funds managed by Barings or an investment manager affiliated with Barings if such investment is prohibited by the Exemptive Relief or the 1940 Act. These restrictions, and similar restrictions that limit the Company's ability to transact business with its officers or directors or their affiliates, including funds managed by Barings, may limit the scope of investment opportunities that would otherwise be available to the Company.
Advisory Agreement
The Company is party to the Advisory Agreement with Barings, in which certain directors and officers of the Company and members of the Investment Committee may have indirect ownership and pecuniary interests. For the year ended December 31, 2022, the base management fee determined in accordance with the terms of the Advisory Agreement was approximately $29.5 million. For the year ended December 31, 2022, the income-based fee determined in accordance with the terms of the Advisory Agreement was approximately $6.6 million.
Administration Agreement
Pursuant to the codeterms of businessthe Administration Agreement between Barings and the Company, Barings provides the Company with certain administrative and other services necessary to conduct the Company's day-to-day operations. The Company reimburses Barings, in its capacity as administrator, for the costs and ethics, each employeeexpenses incurred and director must disclose any conflicts of interest,billed to the Company by Barings in performing its obligations and providing personnel and facilities under the Administration Agreement, or actions or relationships that might give risesuch lesser amount as may be agreed to by the Company and Barings from time to time. If the Company and Barings agree to a conflict, to our Chief Compliance Officer.
The Nominating and Corporate Governance Committee is charged with monitoring and making recommendations to the Board of Directors regarding policies and practices relating to corporate governance. Certain actions or relationships that might give rise to a conflict of interest are reviewed and approved by the Board of Directors.
Certain Transactions With or Involving Related Persons
Other than as described below, during 2017, we did not enter intoreimbursement amount for any transactions with related persons that would be required to be disclosed under this caption pursuant to Item 404(a) of Regulation S-K. For additional information regarding the amount of common stock owned by members of management, see “Security Ownership of Certain Beneficial Owners and Management.”
Garland S. Tucker, III, an interested director of the Company, is the father-in-law of Douglas A. Vaughn, a Senior Managing Director and the Chief Administrative Officer of the Company. Information with respect to Mr. Vaughn's compensation is detailed under "Executive Officer Compensation" in this proxy statement.
AUDIT COMMITTEE REPORT
The Audit Committee of our Board of Directors operates under a written charter adopted by the Board of Directors,period which is available on our website at http://ir.tcap.com/corporate-governance. The Audit Committee is currently comprised of Messrs. Goldstein, Mulhern and Rich.
The Audit Committee assistsless than the Board of Directors in its oversight of the Company’s financial reporting process and implementation and maintenance of effective controls to prevent, deter and detect fraud by management. In addition, the Audit Committee is directly responsible for the appointment, compensation and oversight of the Company’s independent registered public accounting firm. Each of the members of the Audit Committee qualifies as an “independent” director in accordance with NYSE listing standards, SEC rules and our Corporate Governance Guidelines.
In overseeing the preparation of the Company’s financial statements, the Audit Committee met with both management and Ernst & Young LLP, the Company’s independent registered public accounting firm, to review and discuss the financial statements prior to their issuance and to discuss significant accounting issues. Management advised the Audit Committee that all financial statements were prepared in accordance with generally accepted accounting principles, and the Audit Committee discussed the statements with both management and Ernst & Young LLP.
The Audit Committee also is responsible for assisting the Board of Directors in the oversight of the qualification, independence and performance of the Company’s independent auditor. The Audit Committee regularly meets in separate, private executive sessions with certain members of senior management and Ernst & Young LLP. The Audit Committee has discussed with Ernst & Young LLP the matters an independent auditor is required to discuss with the Audit Committeefull amount otherwise permitted under the rules adopted by the Public Company Accounting Oversight Board,Administration Agreement, then Barings will not be entitled to recoup any difference thereof in any subsequent period or PCAOB. The Audit Committee has received from Ernst & Young LLP the written disclosures and the letter required by applicable requirements of the PCAOB regarding Ernst & Young LLP’s communications with the Audit Committee concerning independence and has discussed with Ernst & Young LLP its independence. In addition, the Audit Committee has considered whether the provision of non-audit services, and the fees chargedotherwise. See "Compensation Discussion" above for such services, by Ernst & Young LLP are compatible with Ernst & Young LLP maintaining its independence from the Company.
Based upon the review and discussions referred to above, the Audit Committee recommended to the Company’s Board of Directors that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K formore information. For the fiscal year ended December 31, 2017. The Audit Committee has selected,2022, the Company incurred and was invoiced by Barings for expenses of approximately $3.4 million under the Boardterms of Directors has approved, the appointment of Ernst & Young LLP asAdministration Agreement.
Barings Credit Support Agreements
In connection with the Company’s independent auditormerger with MVC Capital, Inc., the Company entered into a Credit Support Agreement (the “MVC Capital Credit Support Agreement”) with Barings, pursuant to which Barings has agreed to provide credit support to the Company in the amount of up to $23.0 million relating to the net cumulative realized and unrealized losses on the acquired MVC Capital, Inc. investment portfolio over a 10-year period. The MVC Capital Credit Support Agreement is intended to give stockholders of the combined company following the merger of the Company and MVC Capital, Inc. downside protection from net cumulative realized and unrealized losses on the acquired MVC Capital, Inc. portfolio and insulate the combined company’s stockholders from potential value volatility and losses in MVC Capital, Inc.’s portfolio following the closing of the merger. There is no fee or other
payment by the Company to Barings or any of its affiliates in connection with the MVC Capital Credit Support Agreement. Any cash payment from Barings to the Company under the MVC Capital Credit Support Agreement will be excluded from the incentive fee calculations under the Advisory Agreement.
In connection with the Company’s merger with Sierra Income Corporation, the Company entered into a Credit Support Agreement (the “SIC Credit Support Agreement”) with Barings, pursuant to which Barings has agreed to provide credit support to the Company in the amount of up to $100.0 million relating to the net cumulative realized and unrealized losses on the acquired Sierra Income Corporation investment portfolio over a 10-year period. The SIC Credit Support Agreement is intended to give stockholders of the combined company following the merger of the Company and Sierra Income Corporation downside protection from net cumulative realized and unrealized losses on the acquired Sierra Income Corporation portfolio and insulate the combined company’s stockholders from potential value volatility and losses in Sierra Income Corporation’s portfolio following the closing of the merger. There is no fee or other payment by the Company to Barings or any of its affiliates in connection with the SIC Credit Support Agreement. Any cash payment from Barings to the Company under the SIC Credit Support Agreement will be excluded from the incentive fee calculations under the Advisory Agreement.
August 2020 Note Purchase Agreement
On August 3, 2020, the Company entered into a Note Purchase Agreement (the “August 2020 NPA”) with Massachusetts Mutual Life Insurance Company, which wholly-owns Barings, governing the issuance of (1) $50.0 million in aggregate principal amount of Series A senior unsecured notes due August 2025 (the “Series A Notes due 2025”) with a fixed interest rate of 4.66% per year, and (2) up to $50.0 million in aggregate principal amount of additional senior unsecured notes due August 2025 with a fixed interest rate per year to be determined (the “Additional Notes” and, collectively with the Series A Notes due 2025, the “August 2025 Notes”), in each case, to qualified institutional investors in a private placement. The Company issued an aggregate principal amount of $25.0 million of the Series A Notes due 2025 on September 24, 2020 and an aggregate principal amount of $25.0 million of the Series A Notes due 2025 on September 29, 2020, both of which will mature on August 4, 2025 unless redeemed, purchased or prepaid prior to such date in accordance with their terms. Interest on the August 2025 Notes is due semiannually in March and September of each year, beginning in March 2021. The August 2025 Notes are guaranteed by certain of the Company’s subsidiaries and are the Company’s general unsecured obligations that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by the Company. Upon the occurrence of an event of default, the holders of at least 66-2/3% in principal amount of the August 2025 Notes at the time outstanding may declare all August 2025 Notes then outstanding to be immediately due and payable.
On November 4, 2020, the Company amended the August 2020 NPA to reduce the aggregate principal amount of unissued Additional Notes from $50.0 million to $25.0 million. The Company's permitted issuance period for the year ending December 31, 2018.
|
|
The Audit Committee |
|
Benjamin S. Goldstein, Chair |
Mark F. Mulhern |
Simon B. Rich, Jr. |
The foregoing report shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filingAdditional Notes under the Securities Act orAugust 2020 NPA expired on February 3, 2022, prior to which date the Exchange Act, exceptCompany had issued no Additional Notes.
November 2020 Note Purchase Agreement
On November 4, 2020, the Company entered into a Note Purchase Agreement (the “November 2020 NPA”) governing the issuance of (1) $62.5 million in aggregate principal amount of Series B senior unsecured notes due November 2025 (the “Series B Notes”) with a fixed interest rate of 4.25% per year and (2) $112.5 million in aggregate principal amount of Series C senior unsecured notes due November 2027 (the “Series C Notes” and, collectively with the Series B Notes, the “November Notes”) with a fixed interest rate of 4.75% per year, in each case, to qualified institutional investors in a private placement. Each stated interest rate is subject to a step up of (x) 0.75% per year, to the extent that we specifically incorporate this information by reference, and shallthe applicable November Notes do not otherwise be deemed filed under such Securities Actsatisfy certain investment grade conditions and/or Exchange Act.
(y) 1.50% per year, to the extent the ratio of the Company’s secured debt to total assets exceeds specified thresholds, measured as of each fiscal quarter end. The November Notes were delivered and paid for on November 5, 2020.
PROPOSAL NO. 2The Series B Notes will mature on November 4, 2025, and the Series C Notes will mature on November 4, 2027 unless redeemed, purchased or prepaid prior to such date by the Company in accordance with their terms. Interest on the November Notes is due semiannually in May and November, beginning in May 2021. The November Notes are
RATIFICATION OF APPOINTMENT OF
guaranteed by certain of the Company’s subsidiaries, and are the Company's general unsecured obligations that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by the Company.
Barings’ parent company, Massachusetts Mutual Life Insurance Company, holds $25.0 million in aggregate principal amount of the Series B Notes.
February 2021 Note Purchase Agreement
On February 25, 2021, the Company entered into a Note Purchase Agreement (the “February 2021 NPA”) governing the issuance of (1) $80.0 million in aggregate principal amount of Series D senior unsecured notes due February 26, 2026 (the “Series D Notes”) with a fixed interest rate of 3.41% per year and (2) $70.0 million in aggregate principal amount of Series E senior unsecured notes due February 26, 2028 (the “Series E Notes” and, collectively with the Series D Notes, the “February Notes”) with a fixed interest rate of 4.06% per year, in each case, to qualified institutional investors in a private placement. Each stated interest rate is subject to a step up of (x) 0.75% per year, to the extent the applicable February Notes do not satisfy certain investment grade rating conditions and/or (y) 1.50% per year, to the extent the ratio of the Company’s secured debt to total assets exceeds specified thresholds, measured as of each fiscal quarter end. The February Notes were delivered and paid for on February 26, 2021.
The Series D Notes will mature on February 26, 2026, and the Series E Notes will mature on February 26, 2028 unless redeemed, purchased or prepaid prior to such date by the Company in accordance with the terms of the February 2021 NPA. Interest on the February Notes is due semiannually in February and August of each year, beginning in August 2021. The February Notes are guaranteed by certain of the Company’s subsidiaries, and are the Company's general unsecured obligations that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by the Company.
Barings’ parent company, Massachusetts Mutual Life Insurance Company, holds $25.0 million in aggregate principal amount of the Series D Notes.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee and Board of Directors, hasincluding a majority of the independent directors, have selected Ernst & YoungKPMG LLP as ourthe Company's independent registered public accounting firm for the fiscal year ending December 31, 2018, and the Board of Directors has further directed that management should submit the appointment of the independent registered public accounting firm for ratification by the stockholders at the Annual Meeting. Ernst & Young2023. KPMG LLP also will also serve as the independent registered public accounting firmauditors for all of ourthe Company’s wholly-owned subsidiaries. Ernst & Young LLP has served as the Company's independent registered public accounting firm since 2006.subsidiaries and its joint ventures, Jocassee Partners LLC, Thompson Rivers LLC, Waccamaw River LLC, and Sierra Senior Loan Strategy JV I LLC.
Ernst & Young LLP has advised us that neither the firm nor any present member or associateWe expect representatives of it has any material financial interest, direct or indirect, in us or our wholly-owned subsidiaries. It is expected that a representative of Ernst & YoungKPMG LLP will be present at the Annual Meeting and will have an opportunity to make a statement if he or she choosesthey desire to do so and will be available to answerrespond to appropriate questions.
The Board of Directors is submitting the appointment of Ernst & Young LLP to the stockholders for ratification as a matter of good corporate governance; however, our Audit Committee and Board of Directors are not bound by a vote either for or against the proposal. The Audit Committee and Board of Directors will consider a vote against the firm by the stockholders in selecting our independent registered public accounting firm in the future. Even if the stockholders do ratify the appointment, the Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time if it believes that such a change would be in the best interest of the Company and our stockholders.
Required Vote. The affirmative vote of a majority of all votes cast at the Annual Meeting, in person or by proxy, is required to ratify the appointment of Ernst & Young LLP to serve as our independent registered public accounting firm for the year ending December 31, 2018. Abstentions and broker non-votes, if any, will not be included in determining the number of votes cast and, as a result, will not have any effect on the result of the vote.
The Board of Directors recommends a vote “FOR” the ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2018.
Independent Registered Public Accounting Firm’sFirm's Fees
We have paid or expectFees Paid to payIndependent Registered Public Accounting Firm
The following table provides information regarding the following fees to Ernst & Youngbilled by KPMG LLP for work performed in 2016for the fiscal years ended December 31, 2022 and 20172021, or attributable to the audit of our 2016the Company's 2022 or 2021 financial statements, including out-of-pocket expenses:
| | | | | | | | | | | | | | | | | |
| | Fiscal Year Ended December 31, 2022 | | Fiscal Year Ended December 31, 2021 | |
Audit Fees | | $ | 1,292,758 | | | $ | 891,400 | | |
Audit Related Fees | | 1,210,652 | | (3) | 42,024 | | (1) |
Tax Fees | | 138,950 | | | 94,013 | | (2) |
Other Fees | | — | | | — | | |
TOTAL FEES | | $ | 2,642,360 | | | $ | 1,027,437 | | |
(1)Includes fees of $7,950 related to accounting and 2017 financial statements:auditing matters associated with the Sierra Income Corporation merger.
(2)Includes fees of $14,013 related to tax fees associated with the MVC Capital, Inc. merger.
|
| | | | | | | | | | | | |
| | Fiscal Year Ended December 31, 2016 | | | | Fiscal Year Ended December 31, 2017 | | |
Audit Fees | | $ | 720,869 |
| | (1) | | $ | 806,868 |
| | (2) |
Audit Related Fees | | — |
| | | | — |
| | |
Tax Fees | | 93,000 |
| | | | 95,000 |
| | |
Other Fees | | — |
| | | | — |
| | |
TOTAL FEES | | $ | 813,869 |
| | | | $ | 901,868 |
| | |
(3)Includes fees of $1,200,000 related to audit fees of Sierra Income Corporation as of December 31, 2021.During the fiscal years ended December 31, 2022 and 2021, KPMG LLP billed aggregate non-audit fees of $182,337 (comprised of $43,387 related to Barings LLC and $138,950 related to Barings BDC, Inc.) and $135,966 (comprised of $41,953 related to Barings LLC and $94,013 related to Barings BDC, Inc.), respectively, for services rendered to the Company and for services rendered to Barings LLC.
| |
(1) | Includes fees of $80,869 related to our public offering of common stock which closed in 2016. |
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(2) | Includes fees of $69,400 related to our public offering of common stock which closed in 2017 and fees of $47,468 related to the filing of our shelf registration statement on Form N-2 and amendments thereto during 2017. |
Audit Fees. Fees. Audit fees include fees for services that normally would be provided by the accountant in connection with statutory and regulatory filings or engagements and that generally only the independent accountant can provide. In addition to fees for the audit of ourthe Company's annual financial statements, the audit of the effectiveness of our
the Company's internal control over financial reporting and the review of ourthe Company's quarterly financial statements in accordance with generally accepted auditing standards, this category contains fees for comfort letters, statutory audits, consents, and assistance with and review of documents filed with the SEC.
Audit Related Fees. Fees. Audit related fees are assurance related services that traditionally are performed by the independent accountant, such as attest services that are not required by statute or regulation.
Tax Fees.Tax fees include corporate and subsidiary compliance and consulting.
All Other Fees. Fees. Fees for other services would include fees for products and services other than the services reported above, including any non-audit fees.
Pre-Approval Policies and Procedures
The Audit Committee has established, and ourthe Board of Directors has approved, a pre-approval policy that describes the permitted audit, audit-related, tax and other services to be provided by Ernst & Young LLP, the Company’s independent registered accounting firm. The policy requires that the Audit Committee pre-approve the audit and non-audit services
performed by the independent registered accounting firm in order to assure that the provision of such service does not impair the firm’s independence.
Any requests for audit, audit-related, tax and other services that have not received general pre-approval must be submitted to the Audit Committee for specific pre-approval, irrespective of the amount, and cannot commence until such approval has been granted. Normally, pre-approval is provided at regularly scheduled meetings of the Audit Committee. However, the Audit Committee may delegate pre-approval authority to one or more of its members. The member or members to whom such authority is delegated shall report any pre-approval decisions to the Audit Committee at its next scheduleda subsequent meeting. The Audit Committee does not delegate its responsibilities to pre-approve services performed by the independent registered accounting firm to management. During 20162022 and 2017,2021, 100% of ourthe Company’s audit fees, audit-related fees, tax fees and fees for other services provided by ourthe Company's independent registered public accounting firm were pre-approved by ourthe Audit Committee.
AUDIT COMMITTEE REPORT
The Audit Committee assists the Board of Directors in its oversight of the Company’s financial reporting process and implementation and maintenance of effective controls to prevent, deter and detect fraud by management. In addition, the Audit Committee is directly responsible for the appointment, compensation and oversight of the Company’s independent registered public accounting firm. Each of the members of the Audit Committee qualifies as an “independent” director in accordance with NYSE listing standards, SEC rules and the Company’s corporate governance guidelines.
In overseeing the preparation of the Company’s financial statements, the Audit Committee met with both management and KPMG LLP, the Company’s independent registered public accounting firm for the fiscal year ended December 31, 2022, to review and discuss the audited financial statements prior to their issuance and to discuss significant accounting issues. Management advised the Audit Committee that all financial statements were prepared in accordance with generally accepted accounting principles, and the Audit Committee discussed the financial statements with both management and KPMG LLP.
The Audit Committee also is responsible for assisting the Board of Directors in the oversight of the qualification, independence and performance of the Company’s independent auditor. In connection with the audit of the Company’s financial statements for the fiscal year ended December 31, 2022, the Audit Committee regularly met in separate, executive sessions with certain members of senior management and KPMG LLP. The Audit Committee has discussed with KPMG LLP the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board, or PCAOB, and the SEC. The Audit Committee has received from KPMG LLP the written disclosures and the letter required by applicable requirements of the PCAOB regarding KPMG LLP’s communications with the Audit Committee concerning independence and has discussed with KPMG LLP its independence. In addition, the Audit Committee has considered whether the provision of non-audit services, and the fees charged for such services, by KPMG LLP are compatible with KPMG LLP maintaining its independence from the Company.
Based upon the review and discussions referred to above, the Audit Committee recommended to the Company’s Board of Directors that the Company’s audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022. In addition, the Audit Committee has selected, and recommended to the Board of Directors that it approve the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2023.
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THE AUDIT COMMITTEE1 |
Mark F. Mulhern, Chair |
Thomas W. Okel |
Robert Knapp |
Jill Olmstead |
John A. Switzer |
Steve Byers |
Valerie Lancaster-Beal |
The foregoing report shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except to the extent that the Company specifically incorporates this Audit Committee report by reference, and shall not otherwise be deemed filed under such Securities Act and/or Exchange Act.
1Reflects the membership of the Audit Committee as of the date of the Audit Committee's recommendations and approval referenced in this Audit Committee report.
PROPOSAL NO. 32
ADVISORY VOTE ON EXECUTIVE COMPENSATIONAPPROVAL TO SELL SHARES OF COMMON STOCK BELOW NET ASSET VALUE (BOOK VALUE)
The Dodd-Frank Wall Street ReformCompany is a closed-end investment company that has elected to be treated as a BDC under the 1940 Act. The 1940 Act generally prohibits the Company, as a BDC, from issuing and Consumer Protection Actselling shares of 2010,its common stock at a price below the then-current net asset value (i.e., book value) per share of such stock, with certain exceptions. One such exception would permit the Company to issue and sell shares of its common stock at a price below net asset value per share at the time of sale if the Company’s stockholders have approved a sale below net asset value per share within the one-year period immediately prior to any such sale, provided that the Board of Directors also makes certain determinations prior to any such sale.
Pursuant to this provision, the Company is seeking the approval of its stockholders so that it may, in one or more public or private offerings of its common stock, issue and sell shares of its common stock at a price below its then-current net asset value per share in one or more offerings, subject to certain conditions discussed below. It should be noted that the Dodd-Frank Act, enables ourmaximum number of shares that the Company could issue and sell at a per share price below net asset value per share pursuant to this authority would be limited to 30% of its then-outstanding common stock. If approved, the authorization would be effective for a period expiring on the first anniversary of the date of the stockholders’ approval of this proposal and would permit the Company to engage in such transactions at various times within that period, subject to further approval from the Board of Directors.
Generally, equity securities sold in public securities offerings are priced based on public market prices quoted on exchanges such as NYSE, rather than net asset value, or book value, per share. Since the Company’s IPO, the Company’s common stock has traded both above and below its net asset value per share. At each of the Company’s Annual Meetings of Stockholders from 2008 to 2017, and at its 2020, 2021, and 2022 Annual Meetings of Stockholders, the Company requested and received approval from its stockholders to votesell its stock at a price per share below net asset value under certain circumstances. As in such prior years, the Company is seeking the approval of a majority of its stockholders of record to offer and sell shares of its common stock at prices that, net of underwriting discount or commissions, may be less than net asset value per share in one or more offerings. This stockholder approval would permit the Company to issue and sell shares of its common stock in accordance with pricing standards that market conditions generally require, and would also assure stockholders that the number of shares issued and sold pursuant to such authority does not exceed 30% of the Company’s then-outstanding common stock immediately prior to each such offering. If stockholders approve this proposal, the Company should have greater flexibility in taking advantage of changing market and financial conditions in connection with an equity offering. Of the Company’s ten underwritten follow-on equity offerings completed since its IPO, only two were priced below the then-current net asset value per share (both during 2009).
Reasons to Offer Common Stock Below Net Asset Value
Market Conditions Have Created, and May in the Future Create, Attractive Investment and Acquisition Opportunities
From time to time, capital markets may experience periods of disruption and instability. For example, between 2008 and 2009, the global capital markets were unstable as evidenced by periodic disruptions in liquidity in the debt capital markets, significant write-offs in the financial services sector, the re-pricing of credit risk in the broadly syndicated credit market and the failure of major financial institutions. Despite actions of the U.S. federal government and foreign governments, these events contributed to worsening general economic conditions that materially and adversely impacted the broader financial and credit markets and reduced the availability of debt and equity capital for the market as a whole and financial services firms in particular. As a result of the disruption and volatility in the credit markets during this time, the Company saw some measure of reduction in capital available to certain specialty finance companies and other capital providers, causing a reduction in competition. These conditions also generally coincided with lower stock prices for BDCs, with BDCs trading below net asset value. The Company believes that favorable investment opportunities to invest at attractive risk-adjusted returns, including opportunities to make acquisitions of other companies or investment portfolios at attractive values, may be created during these periods of disruption and volatility.
While market conditions have largely recovered from the events of 2008 and 2009, there have been continuing periods of volatility, some lasting longer than others, including recently as a result of the ongoing effects of the global COVID-19 pandemic starting in 2020. Since the Company’s IPO in 2007, the Company’s common stock has traded both at a premium and at a discount in relation to its net asset value, which is the equivalent of “book value,” rather than market or publicly traded value. As of the record date of March 6, 2023, the Company's common stock traded at a discount to net asset value per share. The possibility that shares of the Company’s common stock will continue to trade at a discount from net asset value or trade at premiums that are unsustainable over the long-term are separate and distinct from the risk that the Company’s net asset value will decrease. It is not possible to predict whether any shares of the Company’s common stock issued in the future will trade at, above, or below net asset value.
Since the 2008 recession, lingering economic conditions in the U.S. credit markets from periods of contraction or recession have contributed to significant stock price volatility for capital providers such as the Company and have made access to capital more challenging for many smaller businesses. However, these changes in the credit market conditions also have beneficial effects for capital providers like the Company because small business are selling for lower prices, are generally willing to pay higher interest rates and are generally willing to accept contractual terms that are more favorable to the Company in their investment agreements. Accordingly, for firms that continue to have access to capital, the Company believes that a challenging economic environment could provide investment opportunities on an advisory basis,more favorable terms than have been available in recent periods. In addition, in light of the compensationfact that any debt capital that may be available may be at a higher cost and on less favorable terms and conditions than in past periods, the Company’s ability to take advantage of our NEOs asthese opportunities may be largely dependent upon its access to equity capital.
Stockholder approval of the proposal to sell shares of the Company's common stock at a price below its then-current net asset value per share, subject to the conditions set forth in this Proxy Statement. Specifically,proposal, would provide the Company with the flexibility to invest in such attractive investment opportunities, which typically need to be made expeditiously.
Trading History
The following table, reflecting the public trading history of our common stock since January 1, 2020, lists the high and low closing sales prices for our common stock, and such closing sales prices as percentages of the net asset values per share for the relevant periods. On March 6, 2023, the record date, the last reported closing sale price of our common stock on the NYSE was $8.71. Net asset value per share in the table below is determined as of the last day in the relevant quarter and therefore may not reflect the net asset value per share on the date of the high and low closing sales prices. The net asset values shown are based on outstanding shares at the end of each period.
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| | Net Asset Value | | Closing Sales Price | | Premium (Discount) of High Closing Sales Price to Net Asset Value | | Premium (Discount) of Low Closing Sales Price to Net Asset Value |
High | | Low | |
Year ended December 31, 2020 | | | | | | | | | | |
First Quarter | | $ | 9.23 | | | $ | 10.54 | | | $ | 5.34 | | | 14.2 | % | | (42.1) | % |
Second Quarter | | $ | 10.23 | | | $ | 8.41 | | | $ | 6.22 | | | (17.8) | % | | (39.2) | % |
Third Quarter | | $ | 10.97 | | | $ | 8.44 | | | $ | 7.36 | | | (23.1) | % | | (32.9) | % |
Fourth Quarter | | $ | 10.99 | | | $ | 9.28 | | | $ | 7.51 | | | (15.6) | % | | (31.7) | % |
Year ended December 31, 2021 | | | | | | | | | | |
First Quarter | | $ | 11.14 | | | $ | 10.20 | | | $ | 8.83 | | | (8.4) | % | | (20.7) | % |
Second Quarter | | $ | 11.39 | | | $ | 10.77 | | | $ | 10.16 | | | (5.4) | % | | (10.8) | % |
Third Quarter | | $ | 11.40 | | | $ | 11.07 | | | $ | 10.36 | | | (2.9) | % | | (9.1) | % |
Fourth Quarter | | $ | 11.36 | | | $ | 11.47 | | | $ | 10.62 | | | 1.0 | % | | (6.5) | % |
Year ended December 31, 2022 | | | | | | | | | | |
First Quarter | | $ | 11.86 | | | $ | 11.20 | | | $ | 10.07 | | | (5.6) | % | | (15.1) | % |
Second Quarter | | $ | 11.41 | | | $ | 10.90 | | | $ | 9.24 | | | (4.5) | % | | (19.0) | % |
Third Quarter | | $ | 11.28 | | | $ | 10.41 | | | $ | 8.32 | | | (7.7) | % | | (26.2) | % |
Fourth Quarter | | $ | 11.05 | | | $ | 9.26 | | | $ | 8.06 | | | (16.2) | % | | (27.1) | % |
Year ending December 31, 2023 | | | | | | | | | | |
First Quarter (through March 6, 2023) | | * | | $ | 8.95 | | | $ | 8.22 | | | * | | * |
* Net asset value has not yet been calculated for this Proposal No. 3, commonly knownperiod.
Greater Investment Opportunities Due to Larger Capital Resources
The additional capital raised through an offering of the Company’s common stock may help the Company generate additional deal flow. With more capital to make investments, the Company could be a more meaningful capital provider and such additional capital would allow it to compete more effectively for high quality investment opportunities. Such investment opportunities may be funded with proceeds of an offering of shares of the Company’s common stock.
Status as a “Say-On-Pay” proposal, gives ourBDC and RIC and Maintaining a Favorable Debt-to-Equity Ratio
As a BDC and a regulated investment company, or RIC, for tax purposes, the Company is dependent on its ability to raise capital through the issuance of its common stock. RICs generally must distribute substantially all of their earnings to stockholders as dividends in order to achieve pass-through tax treatment, which prevents the opportunityCompany from retaining any meaningful amount of earnings to express their viewssupport operations, which may include making new investments (including investments in existing portfolio companies). Further, under the 1940 Act, the Company must meet a debt-to equity ratio of less than approximately 2:1 in order to incur debt or issue senior securities. Therefore, to continue to build the Company’s investment portfolio, the Company endeavors to maintain consistent access to capital through the public and private debt markets and the public equity markets enabling it to take advantage of investment opportunities as they arise.
Exceeding the approximate 2:1 debt-to-equity ratio could have severe negative consequences for a BDC, including the inability to pay dividends, breach of applicable debt covenants and failure to qualify for tax treatment as a RIC. Although the Company does not currently expect that it will exceed this debt-to-equity ratio, the markets it operates in and the general economy may be volatile and uncertain. Even though the underlying performance of a particular portfolio company may not indicate an impairment or its inability to repay all principal and interest in full, volatility in the capital markets may negatively impact the valuations of investments and create unrealized losses on certain investments. Any such write-downs in value, as well as unrealized losses based on the compensationunderlying performance of our NEOs. This vote is not intended to addressthe Company’s portfolio companies, if any, particular form of compensation but rather the overall compensation of our NEOswill negatively impact stockholders’ equity and the philosophy, policiesresulting debt-to-equity ratio. Issuing additional equity would allow the Company to realign its debt-to-equity ratio and practices described in this Proxy Statement. More detailed discussion regarding the compensation of our NEOs is provided under the captions “Compensation Discussion and Analysis” and “Executive Compensation” above.
Our compensation program is designedtake steps to (i) enable usavoid these negative consequences. In addition to attract and retain the best talent in the financial industries in which we compete; (ii) align our executive compensation packages withmeeting legal requirements applicable to BDCs, having a more favorable debt-to-equity ratio would also generally strengthen the Company’s performance;balance sheet and (iii) use long-term equity awardsgive it more flexibility to align employee and stockholder interests. In furtherance of these objectives, the Compensation Committee regularly evaluates the compensation of our NEOs and determines the appropriate amounts and the constituent elements of their compensation packages.fully execute its business strategy.
We are asking our stockholders to indicate their support for the compensation of our NEOs as set forth in this Proxy Statement. Accordingly, we recommend our stockholders vote “FOR” the following advisory resolution at the Annual Meeting:
“RESOLVED, that the stockholders of Triangle Capital Corporation approve, on an advisory basis, the compensation of Triangle Capital Corporation’s named executive officers, as disclosed in Triangle Capital Corporation's Proxy Statement for the 2018 Annual Meeting of Stockholders pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, executive compensation tables and narrative discussion.”Summary
The vote for this Proposal No. 3 is advisory, and is therefore not binding upon the Compensation Committee, our Board of Directors orbelieves it is desirable to have the Company. Our Compensation Committeeflexibility to issue shares of the Company’s common stock at a price below the Company’s then-current net asset value per share in certain instances when it is in the best interests of the Company and ourits stockholders. This would, among other things, provide access to capital markets to pursue attractive investment and acquisition opportunities during periods of volatility, improve capital resources to enable the Company to compete more effectively for high quality investment opportunities and add financial flexibility to comply with regulatory requirements and any applicable debt facility covenants, including the 2:1 debt-to-equity ratio limit under the 1940 Act. It could also minimize the likelihood that the Company would be required to sell assets that the Company would not otherwise sell, which sales could occur at times and at prices that are disadvantageous to the Company.
The final terms of any sale of the Company’s common stock at a price below the then-current net asset value per share will be determined by the Board of Directors in connection with such issuance, and the shares of common stock will not include preemptive rights. Any transaction in which the Company issues such shares of common stock, including the nature and amount of consideration that would be received by the Company at the time of issuance and the use of any proceeds therefrom, will be reviewed and approved by the Board of Directors at the time of issuance. If this proposal is approved, no further authorization from the stockholders will be solicited prior to any such issuance in accordance with the terms of this proposal. If approved, the authorization would be effective for a period expiring on the first anniversary of the date of the stockholders’ approval of this proposal and would permit the Company to engage in such transactions at various times within that period, subject to further approval from the Board of Directors.
Conditions to Sales Below Net Asset Value
Stockholder approval is a condition that must be satisfied prior to any sales of the Company’s common stock at a price below the then-current net asset value per share, and the opinionsCompany is seeking such approval in this proposal. If this proposal is approved by the Company’s stockholders, the Company would not issue and sell its common stock at a price below its per share net asset value unless the number of ourshares issued and sold pursuant to such authority does not exceed 30% of the Company’s then-outstanding common stock immediately prior to each such offering. To the extent the Company issues and sells shares of its common stock, regardless of the price at which such shares are sold, the Company’s market capitalization and the amount of its publicly tradable common stock will increase, thus affording all common stockholders potentially greater liquidity in the market for the Company’s shares.
In addition, if this proposal is approved, the Company will issue and sell shares of its common stock at a price below net asset value per share only if the following conditions are met:
▪a majority of the Company’s directors who have no financial interest in the issuance and sale and a majority of such directors who are not interested persons of the Company have determined that any such sale would be in the best interests of the Company and its stockholders; and
▪a majority of the Company’s directors who have no financial interest in the issuance and sale, and a majority of such directors who are not interested persons of the Company, in consultation with the underwriter or underwriters of the offering if it is to be underwritten, and as of a time immediately prior to the extent therefirst solicitation by or on behalf of the Company of firm commitments to purchase such securities or immediately prior to the issuance of such securities, have determined in good faith that the price at which such securities are to be issued and sold is not less than a price which closely approximates the market value of those securities, less any significant vote againstdistributing commission or discount.
In determining whether or not to sell additional shares of the compensation of our NEOs as disclosed in this Proxy Statement, we will carefully consider our stockholders’ concerns, andCompany’s common stock at a price below the Compensation Committee and ournet asset value per share, the Board of Directors will evaluatebe obligated to act in the best interests of the Company and its stockholders.
Key Stockholder Considerations
Before voting on this proposal or giving proxies with regard to this matter, stockholders should consider the dilutive effect on the net asset value per outstanding share of common stock of the issuance of shares of the Company’s common stock at less than net asset value per share. Any sale of common stock at a price below net asset value would result in an immediate dilution to existing common stockholders. Since under this proposal shares of the Company’s common stock could be issued at a price that is substantially below the net asset value per share, the dilution could be substantial. This dilution would include reduction in the net asset value per share as a result of the issuance of shares at a price below the net asset value per share and a proportionately greater decrease in a stockholder’s interest in the earnings and assets of the Company and voting interest in the Company than the increase in the assets of the Company resulting from such issuance. If this Proposal No. 2 is approved, the Board of Directors of the Company may, consistent with its fiduciary duties, approve the sale of the Company’s common stock at any discount to its then-current net asset value per share; however, the Board of Directors will consider the potential dilutive effect of the issuance of shares of common stock at a price below the net asset value per share when considering whether to authorize any actionssuch issuance and will act in the best interests of the Company and its stockholders in doing so. It should be noted that the maximum number of shares that the Company could issue and sell at a per share price below net asset value per share pursuant to this authority would be limited to 30% of the Company’s then-outstanding common stock immediately prior to each such offering.
The 1940 Act establishes a connection between common share sale price and net asset value because, when shares of common stock are necessarysold at a sale price below net asset value per share, the resulting increase in the number of outstanding shares is not accompanied by a proportionate increase in the net assets of the issuer. Further, if current stockholders of the Company do not purchase any shares to addressmaintain their percentage interest, regardless of whether such concerns.offering is above or below the then-current net asset value, their voting power will be diluted. For an illustration of the potential dilutive effect of an offering of our common stock at a price below net asset value, please see the table below under the heading “Examples of Dilutive Effect of the Issuance of Shares Below Net Asset Value.”
Required VoteFinally, any sale of substantial amounts of the Company’s common stock or other securities in the open market may adversely affect the market price of the Company’s common stock and may adversely affect the Company’s ability to obtain future financing in the capital markets. In addition, future sales of the Company’s common stock to the public may create a potential market overhang, which is the existence of a large block of shares readily available for sale that could lead the market to discount the value of shares held by other investors. In the event the Company were to continue to sell its common stock at prices below net value for sustained periods of time, such offerings may result in sustained discounts in the marketplace.
Examples of Dilutive Effect of the Issuance of Shares Below Net Asset Value
The table on the following page illustrates the level of net asset value dilution that would be experienced by a nonparticipating stockholder in four different hypothetical offerings of different sizes and levels of discount from net asset value per share, although it is not possible to predict the level of market price decline that may occur. Actual sales prices and discounts may differ from the presentation below.
The examples assume that Company XYZ has 1,000,000 shares of common stock outstanding, $15,000,000 in total assets and $5,000,000 in total liabilities. The current net asset value and net asset value per share are thus $10,000,000 and $10.00. The table illustrates the dilutive effect on nonparticipating Stockholder A of (1) an offering of 50,000 shares (5% of the outstanding shares) at $9.50 per share after offering expenses and commission (a 5% discount from net asset value), (2) an offering of 100,000 shares (10% of the outstanding shares) at $9.00 per share after offering expenses and commissions (a 10% discount from net asset value), (3) an offering of 200,000 shares (20% of the outstanding shares) at $8.00 per share after offering expenses and commissions (a 20% discount from net asset value) and (4) an offering of 250,000 shares (25% of the outstanding shares) at $0.01 per share after offering expenses and commissions (a 100% discount from net asset value). Because we are not limited as to the amount of discount from net asset value at which we can offer shares, the fourth example on the following table (an offering at a price of $0.01 per share) is included, however, the Company will not offer shares at a 100% discount to net asset value. “NAV” in the table below stands for “net asset value.”
Dilutive Effect of the Issuance of Shares by Company XYZ Below Net Asset Value
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| | | | Example 1 5% Offering at 5% Discount | | Example 2 10% Offering at 10% Discount | | Example 3 20% Offering at 20% Discount | | Example 4 25% Offering at 100% Discount |
| | Prior to Sale Below NAV | | Following Sale | | % Change | | Following Sale | | % Change | | Following Sale | | % Change | | Following Sale | | % Change |
Offering Price | | | | | | | | | | | | | | | | | | |
Price per Share to Public | | — | | | $ | 10.00 | | | — | | | $ | 9.47 | | | — | | | $ | 8.42 | | | — | | | $ | 0.01 | | | — | |
Net Proceeds per Share to Issuer | | — | | | $ | 9.50 | | | — | | | $ | 9.00 | | | — | | | $ | 8.00 | | | — | | | $ | 0.01 | | | — | |
Decrease to NAV | | | | | | | | | | | | | | | | | | |
Total Shares Outstanding | | 1,000,000 | | | 1,050,000 | | | 5.00 | % | | 1,100,000 | | | 10.00 | % | | 1,200,000 | | | 20.00 | % | | 1,250,000 | | | 25.00 | % |
NAV per Share | | $ | 10.00 | | | $ | 9.98 | | | (0.24) | % | | $ | 9.91 | | | (0.91) | % | | $ | 9.67 | | | (3.33) | % | | $ | 8.00 | | | (19.98) | % |
Dilution to Stockholder | | | | | | | | | | | | | | | | | | |
Shares Held by Stockholder A | | 10,000 | | | 10,000 | | | — | | | 10,000 | | | — | | | 10,000 | | | — | | | 10,000 | | | — | |
Percentage Held by Stockholder A | | 1.0 | % | | 0.95 | % | | (4.76) | % | | 0.91 | % | | (9.09) | % | | 0.83 | % | | (16.67) | % | | 0.80 | % | | (20.00) | % |
Total Asset Values | | | | | | | | | | | | | | | | | | |
Total NAV Held by Stockholder A | | $ | 100,000 | | | $ | 99,762 | | | (0.24) | % | | $ | 99,091 | | | (0.91) | % | | $ | 96,667 | | | (3.33) | % | | $ | 80,020 | | | (19.98) | % |
Total Investment by Stockholder A (Assumed to Be $10.00 per Share) | | $ | 100,000 | | | $ | 100,000 | | | — | | | $ | 100,000 | | | — | | | $ | 100,000 | | | — | | | $ | 100,000 | | | — | |
Total Dilution to Stockholder A (Total NAV Less Total Investment) | | — | | | $ | (238) | | | — | | | $ | (909) | | | — | | | $ | (3,333) | | | — | | | $ | (19,980) | | | — | |
Per Share Amounts | | | | | | | | | | | | | | | | | | |
NAV per Share Held by Stockholder A | | — | | | $ | 9.98 | | | — | | | $ | 9.91 | | | — | | | $ | 9.67 | | | — | | | $ | 8.00 | | | — | |
Investment per Share Held by Stockholder A (Assumed to be $10.00 per Share on Shares Held Prior to Sale) | | $ | 10.00 | | | $ | 10.00 | | | — | | | $ | 10.00 | | | — | | | $ | 10.00 | | | — | | | $ | 10.00 | | | — | |
Dilution per Share Held by Stockholder A (NAV per Share Less Investment per Share) | | — | | | $ | (0.02) | | | — | | | $ | (0.09) | | | — | | | $ | (0.33) | | | — | | | $ | (2.00) | | | — | |
Percentage Dilution to Stockholder A (Dilution per Share Divided by Investment per Share) | | — | | | — | | | (0.24) | % | | — | | | (0.91) | % | | — | | | (3.33) | % | | — | | | (19.98) | % |
The Board of Directors recommends a vote “FOR” the proposal to authorize the Company, with the subsequent approval of its Board of Directors, to issue and sell shares of its common stock (during the 12 months following such authorization) at a price below its then-current net asset value per share in one or more offerings, subject to certain limitations set forth herein (including, without limitation, that the number of shares issued and sold pursuant to such authority does not exceed 30% of the Company’s then-outstanding common stock immediately prior to each such offering).
Required Vote.
Approval of this advisory resolutionproposal requires the affirmative vote of each of the following: (1) a majority of all votes castthe outstanding shares of the Company's common stock; and (2) a majority of the outstanding shares of the Company's common stock that are not held by affiliated persons of the Company. For purposes of this proposal, the 1940 Act defines a "majority of the outstanding shares” as the vote of the lesser of: (1) 67% or more of the voting securities of the Company present at the Annual Meeting in personif the holders of more than 50% of the outstanding voting securities of the Company are present virtually or represented by proxy.proxy; or (2) more than 50% of the outstanding voting securities of the Company. Abstentions and broker non-votes, if any, will nothave the effect of votes cast against this proposal.
ADDITIONAL INFORMATION
The Notice of Annual Meeting, this proxy statement and our annual report for the fiscal year ended December 31, 2022 are available free of charge at the following Internet address: https://ir.barings.com/annual-shareholder-meeting-materials.
STOCKHOLDER NOMINATIONS AND PROPOSALS FOR THE 2024 ANNUAL MEETING
The Company's annual meeting of stockholders generally is held in May of each year. We will consider for inclusion in the Company's proxy materials for the 2024 Annual Meeting of Stockholders, stockholder proposals that are received at the Company's executive offices, in writing, no later than 5:00 p.m. (Eastern Time) on November 11, 2023, and that comply with all applicable requirements of Rule 14a-8 promulgated under the Securities Exchange Act of 1934, as amended, or the Exchange Act.
In addition, any stockholder who wishes to propose a nominee to the Board of Directors or propose any other business to be considered by the stockholders (other than a stockholder proposal to be included in determining the Company’s proxy materials pursuant to Rule 14a-8 of the Exchange Act) must comply with the advance notice provisions and other requirements of the Company’s Bylaws, a copy of which is on file with the SEC and may be obtained from the Company’s Secretary upon request. Proposals must be sent to the Company’s Secretary at Barings BDC, Inc., 300 South Tryon Street, Suite 2500, Charlotte, North Carolina 28202. These notice provisions require that nominations of persons for election to the Board of Directors and proposals of business to be considered by the stockholders for the 2024 Annual Meeting of Stockholders must be made in writing and submitted to the Company’s Secretary at the address above no earlier than November 11, 2023 and no later than 5:00 p.m. (Eastern Time) on December 11, 2023 and must otherwise be a proper action by the stockholders. We advise you to review the Bylaws, which contain additional information and other requirements about advance notice of stockholder proposals and director nominations, including the different notice submission date requirements in the event that the Company’s 2024 Annual Meeting of Stockholders is held before April 4, 2024 or after June 3, 2024. In accordance with the Bylaws, the chairman of the 2024 Annual Meeting of Stockholders may determine, if the facts warrant, that a matter has not been properly brought before the meeting and, therefore, may not be considered at the meeting.
FINANCIAL STATEMENTS AVAILABLE
A letter to stockholders and a copy of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which together constitute the Company's 2022 Annual Report, are being mailed along with this proxy statement. The Company's 2022 Annual Report is not incorporated into this proxy statement and shall not be considered proxy solicitation material.
We will also mail to you without charge, upon written request, a copy of any specifically requested exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022. Requests should be sent to: Barings BDC, Inc. Investor Relations, 300 South Tryon Street, Suite 2500, Charlotte, North Carolina 28202, or such requests may be made by calling (704) 805-7200. A copy of the Company's Annual Report on Form 10-K has also been filed with the SEC and may be accessed through the SEC’s homepage (http://www.sec.gov).
HOUSEHOLDING OF PROXY MATERIALS
The SEC has adopted rules that permit companies and intermediaries, such as brokers, to satisfy the delivery requirements for proxy statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially provides extra convenience for stockholders and cost savings for companies.
Brokers may be householding the Company's proxy materials by delivering a single proxy statement and 2022 Annual Report to multiple stockholders sharing an address, unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that they will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If you
did not respond that you did not want to participate in householding, you were deemed to have consented to the process. If at any time you no longer wish to participate in householding and would prefer to receive a separate proxy statement and Annual Report, or if you are receiving multiple copies of the proxy statement and 2022 Annual Report and wish to receive only one, please notify your broker if your shares are held in a brokerage account, or us if you are a stockholder of record. You can notify us by sending a written request to: Barings BDC, Inc. Investor Relations, 300 South Tryon Street, Suite 2500, Charlotte, North Carolina 28202, or by calling (888) 401-1088. In addition, we will promptly deliver, upon written or oral request to the address or telephone number above, a separate copy of votes castthe 2022 Annual Report and proxy statement to a stockholder at a shared address to which a single copy of the documents was delivered.
TABULATION AND REPORTING OF VOTING RESULTS
Preliminary voting results will not have any effect onbe announced at the resultAnnual Meeting. Final voting results will be tallied by the inspector of election after the taking of the vote on this item.
The Board of Directors Recommends a Vote “FOR” approving an advisory (non-binding) vote for the compensation of our named executive officers.
PRIVACY NOTICE
We are committed to protecting your privacy. This privacy notice explains our privacy policies. This notice supersedes any other privacy notice you may have received from us, and its terms apply both to our current stockholders and to former stockholders as well.
We will safeguard, according to strict standards of security and confidentiality, all information we receive about you. The only information we collect from you is your name, address, and number of shares you hold. This information is used only so that we can send you annual reports and other information about us, and send you proxy statements or other information required by law.
We do not share this information with any non-affiliated third party except as described below.
The People and Companies that Make Up Triangle. It is our policy that only our authorized employees who need to know your personal information will have access to it. Our personnel who violate our privacy policy are subject to disciplinary action.
Service Providers. We may disclose your personal information to companies that provide services on our behalf, such as record keeping, processing your trades, and mailing you information. These companies are required to protect your information and use it solely for the purpose for which they received it.
Courts and Government Officials. If required by law, we may disclose your personal information in accordance with a court order or at the requestAnnual Meeting. The Company will publish the final voting results in a Current Report on Form 8-K filed with the SEC within four business days following the Annual Meeting.
OTHER INQUIRIES
If you have any questions about the Annual Meeting, these proxy materials or your ownership of government regulators. Only that information required by law, subpoena, or court order will be disclosed.the Company's common stock, please contact Barings BDC, Inc. Investor Relations, 300 South Tryon Street, Suite 2500, Charlotte, North Carolina 28202, Telephone: (704) 805-7200.
OTHER BUSINESS
The Board of Directors knows of no other business to be presented for action at the 20182023 Annual Meeting of Stockholders. If, however, any other matters do come before the meeting on which action can properly be taken, it is intended that the proxies shallintention of the persons named on the enclosed proxy card to vote on such matters in accordance with the judgment of the person or persons exercising the authority conferred by the proxy at the meeting.their judgment. The submission of a proposal does not guarantee its inclusion in ourthe Company's proxy statement or presentation at the meeting unless certain requirements under applicable securities laws and ourthe Company's Bylaws are met.
You are cordially invited to attend the 20182023 Annual Meeting of Stockholders in person.of Barings BDC, Inc., to be held virtually on Thursday, May 4, 2023, at 8:30 a.m. (Eastern Time), at the following website: www.virtualshareholdermeeting.com/BBDC2023. Your vote is important and, whether or not you plan to attend the meeting, you are requested to complete, date, sign and promptly return the accompanying proxy card in the enclosed postage-paid envelope.
By order of the Board of Directors,
Alexandra PaciniSteven C. LillySecretary, Barings BDC, Inc.
Chief Financial Officer and Secretary
Raleigh,Charlotte, North Carolina
March 1, 201810, 2023
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF41
TRIANGLE CAPITAL CORPORATION FOR THE 2018 ANNUAL MEETING OF STOCKHOLDERS
The undersigned stockholder of Triangle Capital Corporation (the “Company”) acknowledges receipt of the Notice of Annual Meeting of Stockholders of the Company and hereby appoints E. Ashton Poole and Steven C. Lilly, or any one of them, and each with full power of substitution, to act as attorneys and proxies for the undersigned to vote all the shares of common stock of the Company that the undersigned is entitled to vote at the Annual Meeting of Stockholders of the Company to be held on May 2, 2018, at 8:30 a.m., Eastern Time, at the Woman's Club of Raleigh, 3300 Woman's Club Drive, Raleigh, North Carolina 27612, and at any adjournment thereof, as indicated in this proxy.
THIS PROXY IS REVOCABLE AND WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED BELOW; where no choice is specified, it will be voted “FOR” Proposal Nos. 1, 2 and 3.
Please sign and date this proxy on the reverse side and return it in the enclosed envelope.
(CONTINUED ON REVERSE SIDE)
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ANNUAL MEETING OF STOCKHOLDERS
TRIANGLE CAPITAL CORPORATION
May 2, 2018
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Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Triangle Capital Corporation, Alliance Advisors, LLC, Attn: Charlotte Brown, 200 Broadacres Drive, 3rd Floor, Bloomfield, New Jersey 07003 as soon as possible.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSAL NOS. 1, 2 and 3.
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1. The election of the following eight persons as Directors who will serve as directors of Triangle Capital Corporation until the 2019 Annual Meeting and until their successors have been duly elected and qualified. | | Board of Directors Recommendation | FOR
| | AGAINST
| | ABSTAIN
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E. Ashton Poole | | | | | | For | ¨ | | ¨ | | ¨ | |
Steven C. Lilly | | | | | | For | ¨ | | ¨ | | ¨ | |
W. McComb Dunwoody | | | | | | For | ¨ | | ¨ | | ¨ | |
Mark M. Gambill | | | | | | For | ¨ | | ¨ | | ¨ | |
Benjamin S. Goldstein | | | | | | For | ¨ | | ¨ | | ¨ | |
Mark F. Mulhern | | | | | | For | ¨ | | ¨ | | ¨ | |
Simon B. Rich, Jr. | | | | | | For | ¨ | | ¨ | | ¨ | |
Garland S. Tucker, III | | | | | | For | ¨ | | ¨ | | ¨ | |
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| | | FOR
| | AGAINST | | ABSTAIN | |
2. To ratify the appointment of Ernst & Young LLP as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2018 | | For | ¨ | | ¨ | | ¨ | |
| | | FOR
| | AGAINST | | ABSTAIN | |
3. Advisory vote to approve the compensation of our named executive officers. | | For | ¨ | | ¨ | | ¨ | |
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In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting or any adjournment thereof, including procedural matters and matters relating to the conduct of the meeting.
THIS PROXY IS REVOCABLE AND WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED BELOW; where no choice is specified, it will be voted “FOR” Proposal Nos. 1, 2 and 3
IMPORTANT: Please sign exactly as your name appears on this proxy. For joint accounts, each joint owner should sign. When signing as attorney, executor, administrator, trustee or guardian, please give your full title as such. If the signer is a corporation or partnership, please sign in full corporate or partnership name by a duly authorized officer or partner.
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SIGNATURE | | DATE | | SIGNATURE | | DATE |
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