The Equity Incentive 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 Equity Incentive 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. At our 2013 Annual Meeting of Stockholders, our stockholders approved an amendment to our Equity Incentive Plan to provide for the $50,000 annual grant of restricted stock to non-employee directors. 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, Rich and Smith 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 2016, ourIn 2023, the Board of Directors held six 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.meeting. During 2016,2023, 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. We encourage, but do not require, our directors to attend annual meetings of stockholders. All members of our then nine directorsthe then-constituted Board of Directors attended our 2016 Annual Meeting of Stockholders. Mr. Mulhern was not a director on the date of our 2016Company's 2023 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, RichOkel, Switzer, Knapp and Smith.Byers and Mses. Olmstead and Lancaster-Beal. Messrs. Mulhern and Okel and Ms. Olmstead simultaneously serve on the audit committees of more than three public companies, and the Board has determined that each of their simultaneous service on the audit committees of other public companies does not impair their ability to effectively serve on the Audit Committee. 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, RichOkel, Switzer, Knapp, and SmithByers 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 2016.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 CEO, 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 2016, 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, Goldstein, Mulhern, Okel, Switzer, Knapp and Smith,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. SmithMs. Olmstead serves as the chairmanchair of the Compensation Committee. OurNo members of the Compensation Committee held five meetings during 2016.2023 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, 2023 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 20182025 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, RichOkel, Switzer, Knapp, and Smith,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 two meetings during 2016.
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 nine directors have been determined to qualify as independent directors (and to not be “interested persons”). However, Mr. Tucker serves as the Chairman of our Board of Directors and, prior to February 3, 2016, served as our Chief Executive Officer. Mr. Poole 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. We believeThe Board of Directors believes that consolidating ourits leadership structure without an independent chairmanis appropriate in light of the Company’s characteristics and circumstances because the structure allocates areas of responsibility among the individual directors and the committees in a manner that enhances effective oversight. The Board of Directors also believes that its meeting frequency and governance structure provides an efficientample opportunity for direct communication and effective management model which fosters direct accountability, effective decision making and alignment of corporate strategyinteraction between ourthe Board of Directors and management. Mr. Tucker 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. 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 has adopted an Insider Trading Policy, which among other things, governs the purchase, sale, and/or other dispositions of the Company's securities by the Company's directors and officers, and which the Company believes are reasonably designed to promote compliance with insider trading laws, rules and regulations, and applicable listing standards. 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 (Information as of February 23, 2017):
|
| | | | |
Name | | Age | | Position(s) Held |
E. Ashton Poole | | 50 | | President and Chief Executive Officer |
Steven C. Lilly | | 47 | | Chief Financial Officer, Secretary and Chief Compliance Officer |
Jeffrey A. Dombcik | | 49 | | Senior Managing Director and Chief Credit Officer |
Cary B. Nordan | | 41 | | Senior Managing Director and Chief Origination Officer |
Douglas A. Vaughn | | 47 | | 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:
Michael DeSieno, 37, has served as the Company’s Chief Accounting Officer since November 2023. Mr. DeSieno also serves as Chief Accounting Officer of each of BPCC and BCIC. Mr. DeSieno previously served as Senior Director, Head of U.S. Accounting and Financial Reporting for Barings LLC. Prior to joining Barings in 2017, Mr. DeSieno held SEC Reporting roles with MSC Industrial Direct Co., Inc. and Hilton Worldwide. Mr. DeSieno began his career as an auditor with Cherry Bekaert. Mr. DeSieno is a graduate of James Madison University where he obtained a BBA degree in Accounting and a Master of Sciences in Accounting degree. He is also a Virginia Certified Public Accountant.
Ian Fowler, 60, 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 previously served until May 2023 as the President and Chief Executive Officer of BCIC since inception and previously served from December 2022 until May 2023 as Chief Executive Officer of BPCC, prior to which time he served as Co-Chief Executive Officer of BPCC beginning in May 2021. 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 CFA Institute.
Gregory MacCordy, 64, has served as the Company's Chief Compliance Officer since February 2023 and is a Director at ACA Group (“ACA”). Mr. MacCordy is an experienced compliance, risk and subject matter expert with over 30 years of regulatory and financial services experience. He serves as chief compliance officer or chief risk officer for SEC registered investment advisers and investment companies such as business development companies and interval funds. Prior to ACA, Mr. MacCordy worked at the U.S. Securities & Exchange Commission where he was an Industry 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, 46, has served as the Company’s Management CommitteeChief Operating Officer since May 2023 and Investment Committee.as its Chief Financial Officer since April 2023. Ms. Murray also serves as the Chief Operating Officer and Chief Financial Officer of BCIC and BPCC. Ms. Murray also serves as the Treasurer for PEOC. Ms. Murray is also a board member for Rocade LLC, a specialty finance company focused on litigation finance. Ms. Murray previously was the Chief Accounting Officer for the Company, BCIC, and BPCC and previously served as the Vice President of Financial Reporting at Triangle Capital Corporation prior to the externalization of the investment management of the Company to Barings LLC. Prior to joining Triangle Capital Corporation in 2012, Ms. Murray worked in Financial Planning and Analysis for RBC Bank, the Company, Mr. Dombcik was a Managing DirectorU.S. retail banking division for Royal Bank of South Franklin Street Partners, a Small Business Investment Company (SBIC) focused on providing junior capital to middle market companies.Canada. Prior to joining South Franklin Street Partners, Mr. Dombcik served as Executive Vice PresidentRBC Bank, Ms. Murray spent seven years at Progress Energy, Inc. 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)held various positions in finance, accounting and Vice President of Brown, Gibbons, Lang & Company L.P., a middle market investment bank with officestax, most recently in ChicagoStrategy and Cleveland. Mr. DombcikFinancial Planning. Ms. Murray began hisher career as a commercial banking officerTax Consultant 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. HePricewaterhouseCoopers. Ms. Murray is a graduate of MiamiNorth Carolina State University where she obtained a B.S. degree in Accounting and John Carroll University.a Master of Accounting degree. She is also a North Carolina Certified Public Accountant.
Alexandra Pacini, 31, is the Company in 2004Company's Secretary and currentlya Director at Barings LLC. Ms. Pacini also serves as Senior Managing Directorthe Secretary of BCIC, BPCC, Barings Global Short Duration High Yield Fund, PEOC, Barings Corporate Investors and Barings Participation Investors
Ashlee Steinnerd, 42, has served as the Company’s Chief OriginationLegal Officer since February 2023 and is 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 Company’s Management Committee and Investment Committee.
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. He was responsible for research, valuation and portfolio management with a specific focus on small-cap equities. 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,Barings 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 CFA charterholder and former member of the Board of Directors for the CFA North Carolina Society.
Douglas A. Vaughn joined the Company in 2008 and currently serves as Senior Managing Director and Chief Administrative Officer and is a member of the Company’s Management Committee and Investment Committee.
Mr. Vaughn has extensive management experience operating businesses and has served in investment and advisory roles for middle market companies, portfolio businesses, and divisions of large multinational corporations. Prior to joining 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. While with Deloitte, he also led an internal acquisition effort for the firm. Prior to his time in management consulting and investment banking, Mr. Vaughn served in management roles for Sara Lee Corporation, specifically for Sara Lee Personal Products Europe, where he was an original member of thelegal team that established and managed the company’s first division in Eastern Europe including manufacturing, distribution, marketing, and sales operations. Mr. Vaughn holds a BA from the University of Virginia and an MBA from The University of North Carolina’s Kenan-Flagler School of Business. He is a member of the Young Presidents’ Organization, a Chartered Financial Analyst, and has servedsince 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.Exchange Commission’s Office of the Investor Advocate. Ms. Steinnerd held several roles during her tenure at the Securities and Exchange Commission between 2011 and 2019. Ms. Steinnerd holds a B.S. in Applied International Finance and Applied International Economics from the American University of Paris, France and a J.D. from Rutgers School of Law.
RetirementInvestment Committee
The Company is externally managed by Barings LLC, which is registered with the SEC under the Investment Advisers Act of Garland S. Tucker, III
On February 3, 2016, Garland S. Tucker, III,1940, as amended. Barings also provides the Chairmanadministrative services necessary for us to operate. Barings, a wholly-owned subsidiary of MassMutual Life Insurance Company (“MassMutual”), is a leading global asset management firm, whose primary investment capabilities include fixed income, private credit, real estate, equity, and alternative investments. Subject to the overall supervision of our Board, of Directors and former Chief Executive Officer of the Company, retired from his officer positions with the Company and all of its affiliates, and transitioned into a new role as a senior adviser to the Company. In his role as a senior adviser, Mr. Tucker assists the Company with the leadership transition and perform other projects and initiatives at the request and direction of the Company’s management. Mr. Tucker continues to serve as the Chairman of the Company’s Board of Directors. Mr. Tucker's compensation for 2016 is disclosed in the below under "Compensation Discussion and Analysis" because he served as the Company's CEO for a portion of 2016 and is therefore considered a Named Executive Officer, or NEO.
In addition to the shares of restricted stock that the Company typically awards to its executive officers for their performance during the prior year, the Board of Directors, upon the recommendation of the Compensation Committee, awarded Mr. Tucker a $2.5 million cash bonus and accelerated the vesting of his outstanding shares of restricted stock, including the 47,000 shares of restricted stock awarded to him based on his performance during 2015, and certain other compensation in connection with his retirement and in recognition of his long service to the Company. Furthermore, Mr. Tucker, in his role as a senior adviser to the Company, receives an annual salary of $350,000 and participates in the Company’s employee benefits plans on the same terms and conditions as similarly-situated employees.
Concurrent with Mr. Tucker's retirement, E. Ashton Poole, the Company’s President and former Chief Operating Officer, and a member of the Board of Directors, was appointed as the Company’s Chief Executive Officer and President.
Resignation of Brent P. W. Burgess
Effective October 14, 2016, Brent P.W. Burgess resigned as a member of our Board of Directors and from his position as the Company’s Chief Investment Officer. Although Mr. Burgess is no longer an employee of the Company, under SEC rules, he is considered to be a NEO for 2016 and therefore his compensation for 2016 is required to be disclosed below under "Compensation Discussion and Analysis."
In connection with the above-described resignation, Mr. Burgess and the Company entered into an agreement (the “ Agreement ”), pursuant to which he received or will receive: his unpaid salary and accrued but unused vacation leave through October 14, 2016; cash payments totaling $250,000; accelerated vesting of the 93,284 shares of the Company’s restricted stock held by him; and certain other benefits. Mr. Burgess also agreed to certain confidentiality, non-compete, non-solicitation and other covenants in the Agreement.
COMPENSATION DISCUSSION AND ANALYSIS
General
The following Compensation Discussion and Analysis, or CD&A, provides information relating to the 2016 compensation of the Company's NEOs for 2016, who were:
E. Ashton Poole, 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;
Douglas A. Vaughn, Senior Managing Director and Chief Administrative Officer;
Garland S. Tucker, III (the Company's former Chief Executive Officer);
Brent P. W. Burgess (the Company's former Chief Investment 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 ten 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 2014, we 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 82% 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 2011, our stockholders approved, on an advisory basis, that an advisory vote on executive compensation would be considered every three years. The advisory say-on-pay vote and advisory frequency of say-on-pay vote proposals 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, reasonable and competitive. These programs are intended to align the compensation paid to our NEOs with both our short-term and long-term objectives 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 relief from the SEC that permits us to grant restricted stock in exchange for or in recognition of services by our executive officers and employees. Pursuant to the Equity Incentive Plan (now the Omnibus Incentive Plan, if approved by stockholders, as described below), 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 Equity 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 2016, the Compensation Committee engaged McLagan, a compensation consultant, to assist the Compensation Committee in its analysis of the compensation of executive officers and directors of other BDCs and financial services companies in order to assist in establishing the compensation levels 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
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, mezzanine 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 analysis centered 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 reviewed included, but were not necessarily limited to, base compensation, bonus compensation and restricted stock awards. In addition to actual levels of compensation, the Compensation Committee also analyzed the approach other companies were taking with regard to their compensation practices. Items the Compensation Committee reviewed included, but were 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 utilized were the most relevant comparable companies available with disclosed executive compensation data, and they provide a good representation of competitive compensation levels for our executives.
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, and a premium is placed on our ability to maintain stability 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.
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 2016, 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;
sustaining dividends and distributions to stockholders; and
return on average stockholders’ equity.
Elements of Triangle’s Executive Compensation
In 2016, 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, our company’s continued asset and revenue growth and positive 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 2016 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 $440,000 as of December 31, 2016. 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 $335,000 as of December 31, 2016. 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 $295,000 as of December 31, 2016. 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 $295,000 as of December 31, 2016. 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 $295,000 as of December 31, 2016. 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.
Prior to his retirement as CEO in February 2016, Mr. Tucker's annual base salary was $435,000. Subsequent to his retirement and through December 31, 2016, Mr. Tucker's was paid an annual base salary of $350,000.
Prior to his resignation from the Company in October 2016, Mr. Burgess was paid an annual base salary of $375,000.
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.
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 bonuses to NEOs in recognition of both corporate and individual 2016 performance. In particular, for the year ended December 31, 2016, we achieved the following financial highlights:
total investment income of $113.7 million;
net investment income of $65.9 million, or $1.81 per share, exclusive of one-time expenses related to the retirement of Mr. Tucker and the resignation of Mr. Burgess;
operating efficiency ratio of 18.6%, adjusted for the one-time expenses related to the retirement of Mr. Tucker and the resignation of Mr. Burgess; and
regular quarterly dividends during 2016 totaling $1.89 per share. None of these dividends constituted a return of capital to stockholders.
Mr. Poole was paid an annual cash bonus of $535,000 for 2016. Mr. Poole’s cash bonus reflects his overall responsibility for the strategic direction of our Company and his leadership in 2016, which enabled us to achieve the majority of our operational and financial objectives.
Mr. Lilly was paid an annual cash bonuswhich is made up of $485,000 for 2016. 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, the media and investor relations. Mr. Lilly’s cash bonus also reflected his service as our Chief Compliance Officer and Secretary during 2016.
Mr. Dombcik was paid an annual cash bonus of $415,000 for 2016. Mr. Dombcik's cash bonus reflects his role as a senior investment originator as well as his lead role in managing our investment portfolio, including our monitoring, valuation and restructuring activities.
Mr. Nordan was paid an annual cash bonus of $440,000 for 2016. 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 $440,000 for 2016. 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 believesdirectors that these cash bonus awards are individually appropriate based on the Company’s 2016 performance and each individual’s contribution to the Company throughout 2016 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 Equity 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
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 2016 were the Company's achievement of financial and operational goals in 2015 and individual employee performance during 2015 in such areas as work ethic, proficiency and overall contribution to the Company. On February 3, 2016, 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 | | 42,500 |
|
Steven C. Lilly | | 37,000 |
|
Jeffrey A. Dombcik | | 29,000 |
|
Cary B. Nordan | | 34,500 |
|
Douglas A. Vaughn | | 27,000 |
|
Garland S. Tucker, III | | 47,000 |
|
Brent P.W. Burgess | | 37,000 |
|
| |
(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 2017. The shares of restricted stock granted to Mr. Tucker vested in February 2016 in connection with his retirement as CEO of the Company. The shares of restricted stock granted to Mr. Burgess vested in October 2016 in connection with his resignation from the Company. |
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 2016, even though such awards relate to 2015 performance.
In February 2017, our Compensation Committee considered employee performance during fiscal 2016, 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. On February 1, 2017, the Board of Directors, upon recommendation of the Compensation Committee, approved restricted stock awards for the NEOs, as detailed below.
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.
Mr. Poole was awarded 53,500 shares of restricted stock in February 2017 for his performance during 2016. The aggregate grant date fair value of the February 2017 award was $1,029,875. This award reflects Mr. Poole’s leadership during 2016, which enabled us to achieve the majority of our operational and financial objectives. Mr. Poole’s performance during this time was vital to our Company’s success.
Mr. Lilly was awarded 45,000 shares of restricted stock in February 2017 for his performance during 2016. The aggregate grant date fair value of the February 2017 award was $866,250. This award reflects Mr. Lilly’s 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 restricted stock awards also reflect his continued service as our Chief Compliance Officer and Secretary.
Mr. Dombcik was awarded 39,000 shares of restricted stock in February 2017 for his performance during 2016. The aggregate grant date fair value of the February 2017 award was $750,750. This award reflects Mr. Dombcik's contributions as a senior investment originator as well as his lead role in managing all aspects of our investment portfolio, including our monitoring, valuation and restructuring activities.
Mr. Nordan was awarded 42,000 shares of restricted stock in February 2017 for his performance during 2016. The aggregate grant date fair value of the February 2017 award was $808,500. This award reflects Mr. Nordan's contributions as a senior investment originator as well as his lead role in leading our origination activities, from initial sourcing to the guidance of each investment through our internal investment process.
Mr. Vaughn was awarded 39,000 shares of restricted stock in February 2017 for his performance during 2016. The aggregate grant date fair value of the February 2017 award was $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 2016.
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 and have achieved 90 days of service 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 2016 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 2016 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.
Tax and Accounting Considerations
Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Code, limits our deduction for U.S. federal income tax purposes to not more than $1 million of compensation paid to certain executive officers in a calendar year. Compensation above $1 million may be deducted if it is “performance-based compensation” as defined in the Code and the Treasury Regulations thereunder. 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. However, the Compensation Committee evaluates the effects of the compensation limits of Section 162(m) of the Code on all compensation it proposes to grant, and the Compensation Committee intends to provide all executive compensation in a manner consistent with our best interests and those of our stockholders. In 2016, all compensation paid to our executive officers was deductible for U.S. federal income tax purposes.
In awarding restricted stock awards for performance in 2016, 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, Mulhern and Smith) 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, 2016 between any member of our Board of Directors or the Compensation Committee and an executive officer 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, Mulhern and Smith, all of whom are considered independent in accordance with NYSE listing standards, SEC rules and our Corporate Governance Guidelines, and 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' $301.1 billion (as of December 31, 2023) 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 48 investment professionals (as of December 31, 2023) located in three offices in the United States. 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:
Sherwood H. Smith, Jr., Chair
W. McComb Dunwoody
Benjamin S. Goldstein
Mark Mulhern
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
2016 Summary Compensation
The following table sets forth certain summary information for the years 2016, 2015 and 2014 with respect to the compensation awarded to and earned by our NEOs.
Summary Compensation Table for 2016
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| | | | | | | | | | | | | | | | | | | | | | |
Name | Principal Position | Year | | Base Salary | | Bonus | | Restricted Stock Awards(1) | | All Other Compensation(2) | | Total |
E. Ashton Poole | CEO | 2016 | | $ | 432,500 |
| | $ | 535,000 |
| | $ | 745,025 |
| | $ | 115,829 |
| | $ | 1,828,354 |
|
| | 2015 | | $ | 407,500 |
| | $ | 647,500 |
| | $ | 980,100 |
| | $ | 97,546 |
| | $ | 2,132,646 |
|
| | 2014 | | $ | 400,000 |
| | $ | 700,000 |
| | $ | 573,980 |
| | $ | 79,826 |
| | $ | 1,753,806 |
|
Steven C. Lilly | CFO | 2016 | | $ | 333,750 |
| | $ | 485,000 |
| | $ | 648,610 |
| | $ | 117,084 |
| | $ | 1,584,444 |
|
| | 2015 | | $ | 325,000 |
| | $ | 580,000 |
| | $ | 871,200 |
| | $ | 84,427 |
| | $ | 1,860,627 |
|
| | 2014 | | $ | 310,000 |
| | $ | 625,000 |
| | $ | 860,970 |
| | $ | 104,573 |
| | $ | 1,900,543 |
|
Jeffrey A. Dombcik | CCO(3) | 2016 | | $ | 294,375 |
| | $ | 415,000 |
| | $ | 508,370 |
| | $ | 107,180 |
| | $ | 1,324,925 |
|
| | 2015 | | $ | 290,000 |
| | $ | 512,000 |
| | $ | 653,400 |
| | $ | 78,890 |
| | $ | 1,534,290 |
|
| | 2014 | | $ | 282,500 |
| | $ | 525,000 |
| | $ | 756,610 |
| | $ | 96,011 |
| | $ | 1,660,121 |
|
Cary B. Nordan | COO(4) | 2016 | | $ | 294,375 |
| | $ | 440,000 |
| | $ | 604,785 |
| | $ | 108,100 |
| | $ | 1,447,260 |
|
| | 2015 | | $ | 290,000 |
| | $ | 555,000 |
| | $ | 696,960 |
| | $ | 78,992 |
| | $ | 1,620,952 |
|
| | 2014 | | $ | 282,500 |
| | $ | 565,000 |
| | $ | 808,790 |
| | $ | 99,924 |
| | $ | 1,756,214 |
|
Douglas A. Vaughn | CAO(5) | 2016 | | $ | 294,375 |
| | $ | 440,000 |
| | $ | 473,310 |
| | $ | 107,367 |
| | $ | 1,315,052 |
|
| | 2015 | | $ | 290,000 |
| | $ | 457,500 |
| | $ | 609,840 |
| | $ | 78,771 |
| | $ | 1,436,111 |
|
| | 2014 | | $ | 282,500 |
| | $ | 475,000 |
| | $ | 782,700 |
| | $ | 96,195 |
| | $ | 1,636,395 |
|
Garland S. Tucker, III | Former | 2016 | | $ | 358,289 |
| | $ | 2,500,000 |
| | $ | 823,910 |
| | $ | 98,223 |
| | $ | 3,780,422 |
|
| CEO(6) | 2015 | | $ | 432,500 |
| | $ | 670,000 |
| | $ | 1,132,560 |
| | $ | 122,814 |
| | $ | 2,357,874 |
|
| | 2014 | | $ | 425,000 |
| | $ | 725,000 |
| | $ | 1,226,230 |
| | $ | 154,627 |
| | $ | 2,530,857 |
|
Brent P.W. Burgess | Former | 2016 | | $ | 295,625 |
| | $ | — |
| | $ | 648,610 |
| | $ | 111,432 |
| | $ | 1,055,667 |
|
| CIO(7) | 2015 | | $ | 367,500 |
| | $ | 570,000 |
| | $ | 827,640 |
| | $ | 85,294 |
| | $ | 1,850,434 |
|
| | 2014 | | $ | 360,000 |
| | $ | 575,000 |
| | $ | 913,150 |
| | $ | 110,537 |
| | $ | 1,958,687 |
|
| |
(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 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. Assumptions used in the calculation of these amounts are set forth in Note 5 — “Equity Compensation Plans” to our consolidated audited financial statements for the fiscal year ended December 31, 2016 which are included in our Annual Report on Form 10-K which was filed with the SEC on February 22, 2017. These amounts do not represent the actual value that may be realized by the NEOs. |
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(2) | All Other Compensation includes the value of benefits in the form of 401(k) contributions, deferred compensation plan contributions and earnings on deferred compensation plan balances and life insurance premiums paid by the Company for the year. For Mr. Burgess, this amount also includes the amount of accrued but unused vacation that was paid upon his resignation and the amount of severance payments he received in 2016. See chart below for disclosure of the amounts of each of these items. |
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(3) | “CCO” stands for Chief Credit Officer. |
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(4) | “COO” stands for Chief Origination Officer. |
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(5) | “CAO” stands for Chief Administrative Officer. |
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(6) | In connection with Mr. Tucker's resignation as Chief Executive Officer of the Company on February 3, 2016, the Company's Board of Directors awarded him a $2.5 million cash bonus. |
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(7) | “CIO” stands for Chief Investment Officer. |
All Other Compensation in the Summary Compensation Table for 2016 above consists of the following:
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| | | | | | | | | | | | | | | | | | | | | | |
Name | Year | Company 401(k) Contribution | Company Deferred Comp. Plan Contribution | Deferred Compensation Plan Earnings | Company Paid Life Insurance Premiums | Accrued Unused Vacation | Severance Pay | Total All Other Compensation |
E. Ashton Poole | 2016 | $ | 35,000 |
| $ | 60,000 |
| $ | 19,464 |
| $ | 1,365 |
| $ | — |
| $ | — |
| $ | 115,829 |
|
| 2015 | $ | 35,000 |
| $ | 60,000 |
| $ | 1,181 |
| $ | 1,365 |
| $ | — |
| $ | — |
| $ | 97,546 |
|
| 2014 | $ | 34,500 |
| $ | 40,000 |
| $ | 3,961 |
| $ | 1,365 |
| $ | — |
| $ | — |
| $ | 79,826 |
|
Steven C. Lilly | 2016 | $ | 35,000 |
| $ | 45,000 |
| $ | 36,146 |
| $ | 938 |
| $ | — |
| $ | — |
| $ | 117,084 |
|
| 2015 | $ | 35,000 |
| $ | 45,000 |
| $ | 3,489 |
| $ | 938 |
| $ | — |
| $ | — |
| $ | 84,427 |
|
| 2014 | $ | 34,500 |
| $ | 45,000 |
| $ | 24,135 |
| $ | 938 |
| $ | — |
| $ | — |
| $ | 104,573 |
|
Jeffrey A. Dombcik | 2016 | $ | 35,000 |
| $ | 40,000 |
| $ | 31,295 |
| $ | 885 |
| $ | — |
| $ | — |
| $ | 107,180 |
|
| 2015 | $ | 35,000 |
| $ | 40,000 |
| $ | 3,005 |
| $ | 885 |
| $ | — |
| $ | — |
| $ | 78,890 |
|
| 2014 | $ | 34,500 |
| $ | 40,000 |
| $ | 20,626 |
| $ | 885 |
| $ | — |
| $ | — |
| $ | 96,011 |
|
Cary B. Nordan | 2016 | $ | 35,000 |
| $ | 40,000 |
| $ | 32,220 |
| $ | 880 |
| $ | — |
| $ | — |
| $ | 108,100 |
|
| 2015 | $ | 35,000 |
| $ | 40,000 |
| $ | 3,112 |
| $ | 880 |
| $ | — |
| $ | — |
| $ | 78,992 |
|
| 2014 | $ | 34,500 |
| $ | 40,000 |
| $ | 24,544 |
| $ | 880 |
| $ | — |
| $ | — |
| $ | 99,924 |
|
Douglas A. Vaughn | 2016 | $ | 35,000 |
| $ | 40,000 |
| $ | 31,641 |
| $ | 726 |
| $ | — |
| $ | — |
| $ | 107,367 |
|
| 2015 | $ | 35,000 |
| $ | 40,000 |
| $ | 3,045 |
| $ | 726 |
| $ | — |
| $ | — |
| $ | 78,771 |
|
| 2014 | $ | 34,500 |
| $ | 40,000 |
| $ | 20,969 |
| $ | 726 |
| $ | — |
| $ | — |
| $ | 96,195 |
|
Garland S. Tucker, III | 2016 | $ | 35,000 |
| $ | — |
| $ | 57,847 |
| $ | 5,376 |
| $ | — |
| $ | — |
| $ | 98,223 |
|
| 2015 | $ | 35,000 |
| $ | 75,000 |
| $ | 5,537 |
| $ | 7,277 |
| $ | — |
| $ | — |
| $ | 122,814 |
|
| 2014 | $ | 34,500 |
| $ | 75,000 |
| $ | 37,850 |
| $ | 7,277 |
| $ | — |
| $ | — |
| $ | 154,627 |
|
Brent P.W. Burgess | 2016 | $ | 7,950 |
| $ | — |
| $ | 41,660 |
| $ | 1,411 |
| $ | 17,308 |
| $ | 43,103 |
| $ | 111,432 |
|
| 2015 | $ | 35,000 |
| $ | 45,000 |
| $ | 4,129 |
| $ | 1,165 |
| $ | — |
| $ | — |
| $ | 85,294 |
|
| 2014 | $ | 34,500 |
| $ | 45,000 |
| $ | 29,872 |
| $ | 1,165 |
| $ | — |
| $ | — |
| $ | 110,537 |
|
2016 Grants of Plan-Based Awards
The following table summarizes grants of plan-based awards made to our NEOs in 2016.
Grants of Plan-Based Awards in 2016
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| | | | | | | | | |
Name | | Grant Date | | Stock Awards Number of Shares of Stock | | Grant Date Fair Value of Stock |
E. Ashton Poole(1) | | February 3, 2016 | | 42,500 |
| | $ | 745,025 |
|
Steven C. Lilly(1) | | February 3, 2016 | | 37,000 |
| | $ | 648,610 |
|
Jeffrey A. Dombcik(1) | | February 3, 2016 | | 29,000 |
| | $ | 508,370 |
|
Cary B. Nordan(1) | | February 3, 2016 | | 34,500 |
| | $ | 604,785 |
|
Douglas A. Vaughn(1) | | February 3, 2016 | | 27,000 |
| | $ | 473,310 |
|
Garland S. Tucker, III(2) | | February 3, 2016 | | 47,000 |
| | $ | 823,910 |
|
Brent P.W. Burgess(3) | | February 3, 2016 | | 37,000 |
| | $ | 648,610 |
|
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(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 2017. |
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(2) | Consists of restricted stock that vested on February 4, 2016 in connection with Mr. Tucker's retirement from his officer positions with the Company. |
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(3) | Consists of restricted stock that vested on October 25, 2016 in connection with Mr. Burgess' resignation from the Company. |
Compensation Mix
As discussed in more detail in the section of this Proxy Statement entitled “Compensation Discussion and Analysis” above, in 2016, 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 elementsof shared investment philosophy and difference of background and opinion.
Portfolio Managers
Matthew Freund and Bryan High serve as portfolio managers to incentivize our NEOs to focusthe Company. Their biographies and experience is as follows:
Matthew Freund, 35, serves as the Company's Co-Portfolio Manager. Mr. Freund also serves as the Co-Portfolio Manager for BPCC and as President for BCIC and BPCC. Mr. Freund is also a board member for Eclipse Business Credit, a specialty lender focused on financialproviding asset backed loans. Mr. Freund was previously a member of Barings' Global Private Finance Group, responsible for executing, underwriting, and operating resultsmonitoring North American private finance investments. He has worked in the near termindustry since 2009. Prior to joining Barings LLC in 2015, Mr. Freund worked for US Bank structuring bank loans to support leveraged buyouts for private equity sponsors. Prior to US Bank, Mr. Freund worked in underwriting and the creationanalytical roles at Bank of stockholder value over the long-term.
In 2016, salaries comprised 23.7%, 21.1%, 22.2%, 20.3%, 22.4%, 9.5%America as part of corporate and 28.0% of total compensation for Messrs. Poole, Lilly, Dombcik, Nordan, Vaughn, Tuckermiddle market coverage. Mr. Freund has a B.S.B.A degree from Saint Louis University and Burgess, respectively. The annual base salary of each NEO is to be determined annually at the discretiona member of the Compensation Committee. Moreover,CFA Institute.
Bryan High, 43, serves as the Company's Co-Portfolio Manager. Mr. High also serves as Co-Portfolio Manager for BPCC and as Chief Executive Officer of BCIC and BPCC. Mr. High is Head of Barings Capital Solutions and a co-Portfolio Manager for Capital Solutions funds. Mr. High joined Barings LLC in 2016, annual cash bonuses comprised 29.3%, 30.6%, 31.3%, 30.4%, 33.5%2007, and 66.1%has extensive experience in public and private credit, distressed debt / special situations and private equity. Mr. High currently serves on the investment committees for Capital Solutions, U.S. High Yield and Private Structured Finance. Prior to joining Barings LLC, Mr. High was an investment banker at a boutique M&A firm where he advised on middle market transactions. Mr. High also worked at Banc of total compensation for Messrs. Poole, Lilly, Dombcik, Nordan, Vaughn and Tucker, respectively. Mr. Burgess did not receive an annual cash bonus for 2016.
Equity Incentive Plan
The restricted stock awards granted to our NEOs during 2016 that appearAmerica Securities LLC in the tables above and below were granted pursuant to the Equity Incentive Plan. On March 18, 2008 we received an exemptive orderrestructuring advisory group. Mr. High has a B.S. in business administration from the SEC authorizing such issuanceUniversity of restricted stock to our employees and non-employee directors pursuant to the terms of the Equity Incentive Plan and as otherwise set forth in the exemptive order. In 2008, our Board of Directors approved, and the stockholders voted to approve, the Equity Incentive Plan. 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. Thus, the equity Incentive Plan currently reserves up to 2,400,000 shares of our common stock for issuance. As of December 31, 2016, there were 917,641 shares available for issuance under the Equity Incentive Plan.North Carolina at Chapel Hill.
Participants in the Equity 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 Equity 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 Equity 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 Equity Incentive Plan to our Compensation Committee, currently comprised solely of four (4) 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 Equity Incentive Plan. Our Board of Directors administers the Equity Incentive Plan in a manner that is consistent with the applicable requirements of the NYSE and the exemptive order.
On February 3, 2016, the Board of Directors, upon recommendation of our Compensation Committee, approved grants of restricted stock awards to Messrs. Poole, Lilly, Dombcik, Nordan, Vaughn, Tucker, and Burgess as set forth above. All of these restricted shares of stock were valued at $17.53, the closing price of our common stock on the NYSE on February 3, 2016, 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. The restricted share awards granted to Mr. Tucker on February 3, 2016 became fully vested on February 4, 2016 in connection with his retirement from his officer positions with the Company. In addition, the restricted share awards granted to Mr. Burgess on February 3, 2016 became fully vested on October 25, 2016 in connection with his resignation from the Company.
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.
2016 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, 2016.
2016 Outstanding Equity Awards at Fiscal Year End
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| | | | | | | |
| | | | |
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 | | 107,658 |
| (3) | $ | 1,974,448 |
|
Steven C. Lilly | | 92,070 |
| (4) | $ | 1,688,564 |
|
Jeffrey A. Dombcik | | 73,313 |
| (5) | $ | 1,344,560 |
|
Cary B. Nordan | | 81,313 |
| (6) | $ | 1,491,280 |
|
Douglas A. Vaughn | | 70,313 |
| (7) | $ | 1,289,540 |
|
Garland S. Tucker, III | | — |
| | $ | — |
|
Brent P. W. Burgess | | — |
| | $ | — |
|
23
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(1) | No restricted stock awards reflected in this column have been transferred. |
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(2) | The values of the unvested common stock listed are based on a $18.34 closing price of our common stock as reported on the NYSE on December 31, 2016.
|
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(3) | 11,000 of the shares will vest ratably on February 4 of each year until February 4, 2018, 33,750 of the shares will vest ratably on February 4 of each year until February 4, 2019, 42,500 of the shares will vest ratably on February 4 of each year until February 4, 2020 and 20,408 of the shares will vest ratably on August 29 of each year until 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) | 8,570 of the shares will vest ratably on February 4 of each year until February 4, 2017, 16,500 of the shares will vest ratably on February 4 of each year until February 4, 2018, 30,000 of the shares will vest ratably on February 4 of each year until February 4, 2019 and 37,000 of the shares will vest ratably on February 4 of each year until February 4, 2020, 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) | 7,313 of the shares will vest ratably on February 4 of each year until February 4, 2017, 14,500 of the shares will vest ratably on February 4 of each year until February 4, 2018, 22,500 of the shares will vest ratably on February 4 of each year until February 4, 2019 and 29,000 of the shares will vest ratably on February 4 of each year until February 4, 2020, 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) | 7,313 of the shares will vest ratably on February 4 of each year until February 4, 2017, 15,500 of the shares will vest ratably on February 4 of each year until February 4, 2018, 24,000 of the shares will vest ratably on February 4 of each year until February 4, 2019 and 34,500 of the shares will vest ratably on February 4 of each year until February 4, 2020, 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) | 7,313 of the shares will vest ratably on February 4 of each year until February 4, 2017, 15,000 of the shares will vest ratably on February 4 of each year until February 4, 2018, 21,000 of the shares will vest ratably on February 4 of each year until February 4, 2019 and 27,000 of the shares will vest ratably on February 4 of each year until February 4, 2020, at which respective times such shares will be fully vested, subject to the executive officer still being employed with us at such vesting dates. |
2016 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 2016 that were awarded to our NEOs.
2016 Option Exercises and Stock Vested
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| | | | | | | | |
Name | | Number of Shares Acquired on Vesting(1) | | Value Realized on Vesting | |
E. Ashton Poole | | 26,954 |
| (2) | $ | 508,341 |
| (3) |
Steven C. Lilly | | 34,319 |
| | $ | 621,517 |
| (4) |
Jeffrey A. Dombcik | | 28,773 |
| | $ | 521,079 |
| (4) |
Cary B. Nordan | | 31,089 |
| | $ | 563,022 |
| (4) |
Douglas A. Vaughn | | 28,523 |
| | $ | 516,552 |
| (4) |
Garland S. Tucker, III | | 169,658 |
| | $ | 3,072,506 |
| (4) |
Brent P.W. Burgess | | 131,752 |
| (5) | $ | 2,515,693 |
| (6) |
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(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) | 16,750 of these shares vested on February 4, 2016 and 10,204 of these shares vested on August 29, 2016. |
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(3) | Values realized are based on the closing market price of our common stock of $18.11, as reported on the NYSE on February 4, 2016 and on the closing market price of our common stock of $20.09, as reported on the NYSE on August 29, 2016. |
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(4) | Based on the closing market price of our common stock of $18.11, as reported on the NYSE on February 4, 2016. |
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(5) | 38,468 of these shares vested on February 4, 2016 and 93,284 of these shares vested on October 25, 2016. |
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(6) | Values realized are based on the closing market price of our common stock of $18.11, as reported on the NYSE on February 4, 2016 and on the closing market price of our common stock of $19.50, as reported on the NYSE on October 25, 2016. |
Nonqualified Deferred Compensation for 2016
The following table sets forth information concerning compensation earned by our NEO’s for 2016 under the Company’s Executive Deferred Compensation Plan.
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| | | | | | | | | | | | | | | | | | |
Name | | Executive Contributions in 2016 ($) | | Registrant Contributions in 2016 ($)(1) | | Aggregate Earnings in 2016 ($)(2) | | Aggregate Withdrawals/ Distributions in 2016 ($) | | Aggregate Balance at 12/31/2016 ($)(3) |
E. Ashton Poole | | — |
| | $ | 60,000 |
| | $ | 19,464 |
| | — |
| | $ | 144,606 |
|
Steven C. Lilly | | — |
| | $ | 45,000 |
| | $ | 36,146 |
| | — |
| | $ | 310,213 |
|
Jeffrey A. Dombcik | | — |
| | $ | 40,000 |
| | $ | 31,295 |
| | — |
| | $ | 267,930 |
|
Cary B. Nordan | | — |
| | $ | 40,000 |
| | $ | 32,220 |
| | — |
| | $ | 276,593 |
|
Douglas A. Vaughn | | — |
| | $ | 40,000 |
| | $ | 31,641 |
| | — |
| | $ | 271,165 |
|
Garland S. Tucker, III | | — |
| | $ | 75,000 |
| | $ | 57,847 |
| | — |
| | $ | 494,582 |
|
Brent P.W. Burgess | | — |
| | $ | 45,000 |
| | $ | 41,660 |
| | — |
| | $ | 361,845 |
|
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(1) | Represents amounts earned for 2015 and contributed to the Executive Deferred Compensation Plan in 2016. All of the amounts shown in this column are also reported in the 2015 line in the “All Other Compensation” column of the Summary Compensation Table. |
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(2) | Represents earnings on Executive Deferred Compensation Plan balances during 2016. All of the amounts shown in this column are also reported in the “All Other Compensation” column of the Summary Compensation Table for 2016.
|
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(3) | All amounts were included in amounts reported in the “All Other Compensation” column of the Summary Compensation Table in 2016 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 benefits that would be paid to our NEOs upon the occurrence of each of the following triggering events:
termination upon death or disability (as defined in the Equity Incentive Plan); or
occurrence of a change in control in the Company (as defined in the Equity Incentive Plan).
Effective February 2009, as a result of the determination by our Compensation Committee that it would be in the best interests of the Company and our stockholders for the Company to operate without employment agreements, none of our employees is party to an employment agreement with the Company. The information below describes those limited instances in which our NEOs would be entitled to payments or other benefits following a termination of employment and/or upon a change in control of the Company without employment agreements. Our NEOs are “at will” employees and, except as otherwise described below, they 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.
The estimated payments below are calculated based on compensation arrangements in effect as of December 31, 2016 and assume that the triggering event occurred on such date. The estimated benefit amounts are based on a common stock price of $18.34, which was the closing price per share of our common stock on the NYSE on December 31, 2016 and these amounts could be paid lump sum by us should the triggering event occur below. Our estimates of potential benefits are further based on the additional assumptions specifically set forth in the table below, if any. Although these calculations are intended to provide reasonable estimates of potential compensation benefits, the estimated benefit amounts may differ from the actual amount that any individual would receive upon termination or the costs to Triangle associated with continuing certain benefits following termination of employment.
Stock Awards
|
| | | | | | | | | | | | | |
| | Termination For Cause | | Termination from Death, from Disability or Occurrence of Change in Control |
Name | | Number of Shares Acquired on Vesting (#) | | Value Realized on Vesting ($) | | Number of Shares Acquired on Vesting (#) | | Value Realized on Vesting ($) |
E. Ashton Poole | | — |
| | — |
| | 107,658 |
| | $ | 1,974,448 |
|
Steven C. Lilly | | — |
| | — |
| | 92,070 |
| | $ | 1,688,564 |
|
Jeffrey A. Dombcik | | — |
| | — |
| | 73,313 |
| | $ | 1,344,560 |
|
Cary B. Nordan | | — |
| | — |
| | 81,313 |
| | $ | 1,491,280 |
|
Douglas A. Vaughn | | — |
| | — |
| | 70,313 |
| | $ | 1,289,540 |
|
Garland S. Tucker, III | | — |
| | — |
| | — |
| | $ | — |
|
Brent P. W. Burgess | | — |
| | — |
| | — |
| | $ | — |
|
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 23, 2017,March 8, 2024, 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 23, 2017, 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 23, 2017.March 8, 2024. Percentage of beneficial ownership is based on 40,640,838[ ] shares of common stock outstanding as of February 23, 2017. TheMarch 8, 2024. 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 | | 210,334 |
| | (5) | | * |
| | over $100,000 |
Steven C. Lilly | | 275,283 |
| | (6) | | * |
| | over $100,000 |
Jeffrey A. Dombcik | | 159,132 |
| | (7) | | * |
| | over $100,000 |
Cary B. Nordan | | 185,666 |
| | (8) | | * |
| | over $100,000 |
Douglas A. Vaughn | | 184,982 |
| | (9) | | * |
| | over $100,000 |
Garland S. Tucker, III | | 217,917 |
| | (10) | | * |
| | over $100,000 |
Independent Directors | | | | | | | | |
W. McComb Dunwoody | | 155,564 |
| | (11) | | * |
| | over $100,000 |
Mark M. Gambill | | 24,687 |
| | (11) | | * |
| | over $100,000 |
Benjamin S. Goldstein | | 52,408 |
| | (11) | | * |
| | over $100,000 |
Mark F. Mulhern | | 2,500 |
| | | | * |
| | $50,000 - $100,000 |
Simon B. Rich, Jr. | | 93,253 |
| | (12) | | * |
| | over $100,000 |
Sherwood H. Smith, Jr. | | 122,820 |
| | (13) | | * |
| | over $100,000 |
All directors and executive officers as a group | | 1,684,546 |
| | | | 4.1 | % | | 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 | | [ ] | | | | * | | [ ] |
David Mihalick | | [ ] | | | | * | | [ ] |
Non-Interested Directors | | | | | | | | |
Mark F. Mulhern | | [ ] | | | | * | | [ ] |
Thomas W. Okel | | [ ] | | | | * | | [ ] |
Jill Olmstead | | [ ] | | | | * | | [ ] |
John A. Switzer | | [ ] | | | | * | | [ ] |
Robert Knapp | | [ ] | | | | * | | [ ] |
Steve Byers | | [ ] | | | | * | | [ ] |
Valerie Lancaster-Beal | | [ ] | | | | * | | [ ] |
Executive Officers Who Are Not Directors | | | | | | | | |
Michael DeSieno | | [ ] | | | | * | | [ ] |
Ian Fowler | | [ ] | | | | * | | [ ] |
Elizabeth Murray | | [ ] | | | | * | | [ ] |
Ashlee Steinnerd | | [ ] | | | | * | | [ ] |
All directors and executive officers as a group (13 persons) | | [ ] | | | | * | | [ ] |
Five-Percent Stockholders: | | | | | | | | |
Barings LLC | | [ ] | | | | [ ] | | [ ] |
* 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 40,640,838 shares issued and outstanding as of February 23, 2017. |
| |
(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 $20.13 per share as of February 23, 2017. |
| |
(5) | Includes 133,783 shares of unvested restricted stock and 3,602 shares held by Mr. Poole's wife. |
| |
(6) | Includes 101,000 shares of unvested restricted stock. |
| |
(7) | Includes 83,000 shares of unvested restricted stock. |
| |
(8) | Includes 91,625 shares of unvested restricted stock. |
| |
(9) | Includes 80,750 shares of unvested restricted stock and 28,744 shares held by Mr. Vaughn's wife. |
| |
(10) | Includes 69,237 shares held by Mr. Tucker’s wife. |
| |
(11) | Includes 2,721 shares of unvested restricted stock. |
| |
(12) | Includes 2,721 shares of unvested restricted stock and 5,590 shares held by Mr. Rich’s wife. |
| |
(13) | Includes 2,721 shares of unvested restricted stock and 36,660 shares held by Mr. Smith’s wife. |
In addition, our Board of Directors maintains requirements with respect to equity ownership by our CEO, our named executive officers, and our independent directors. As a result, our CEO must own fully vested sharesthe Exchange Act. Except as otherwise noted, each beneficial owner of ourmore than five percent of the Company's common stock equal toand each director and executive officer has sole voting and/or investment power over the shares reported.
(2)Based on a minimumtotal of five times[ ] shares issued and outstanding as of March 8, 2024.
(3)Beneficial ownership in this column has been determined in accordance with Rule 16a-1(a)(2) of the amountExchange Act. The dollar range of his annual base salary, our named executive officers must own fully vested sharesequity securities beneficially owned is based on a stock price of our common stock equal to a minimum$[ ] per share as of four times 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 CEO, our named executive officers, and our independent directorsMarch 8, 2024. Dollar ranges are required to achieve these share ownership requirements after five years of service.as follows: None, $1 — $10,000, $10,001 — $50,000, $50,001 — $100,000, or over $100,000.
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 2016,ended December 31, 2023, all Section 16(a) filing requirements applicable to the executive officers, directors and stockholderssuch persons were met in a timely satisfied.manner.
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, 2023, the base management fee determined in accordance with the terms of the Advisory Agreement was approximately $32.6 million. For the year ended December 31, 2023, the income-based fee determined in accordance with the terms of the Advisory Agreement was approximately $32.0 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 2016, 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. Tucker’s and 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. The Audit Committee is currently comprised of Messrs. Goldstein, Mulhern, Rich and Smith.
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, 20162023, the Company incurred and was invoiced by Barings for expenses of approximately $2.2 million under the terms of the Administration Agreement.
Barings Credit Support Agreements
In connection with the Company’s merger with MVC Capital, Inc., in December 2020, 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, in February 2022, 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”) 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, 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 on September 24, 2020 and an aggregate principal amount of $25.0 million of the Series A Notes 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. In addition, the Company is obligated to offer to repay the August 2025 Notes at par (plus accrued and unpaid interest to, but not including, the date of prepayment) if certain change in control events occur. Subject to the terms of the August 2020 NPA, the Company may redeem the August 2025 Notes in whole or in part at any time or from time to time at the Company’s option at par plus accrued interest to the prepayment date and, if redeemed on or before November 3, 2024, a make-whole premium. 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 Additional Notes under the August 2020 NPA expired on February 3, 2022, prior to which date the Company 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 the applicable November Notes do not satisfy certain investment grade 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 November Notes were delivered and paid for on November 5, 2020.
The 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. In addition, the Company is obligated to offer to repay the November Notes at par (plus accrued and unpaid interest to, but not including, the date of prepayment) if certain change in control events occur. Subject to the terms of the November 2020 NPA, the Company may redeem the Series B Notes and the Series C Notes in whole or in part at any time or from time to time at the Company’s option at par plus accrued interest to the prepayment date and, if redeemed on or before May 4, 2025, with respect to the Series B Notes, or on or before May 4, 2027, with respect to the Series C Notes, a make-whole premium. The November 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 November Notes at the time outstanding may declare all November Notes then outstanding to be immediately due and payable.
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. In addition, the Company is obligated to offer to repay the February Notes at par (plus accrued and unpaid interest to, but not including, the date of prepayment) if certain change in control events occur. Subject to the terms of the February 2021 NPA, the Company may redeem the Series D Notes and the Series E Notes in whole or in part at any time or from time to time at the Company’s option at par plus accrued interest to the prepayment date and, if redeemed on or before August 26, 2025, with respect to the Series D Notes, or on or before August 26, 2027, with respect to the Series E Notes, a make-whole premium. 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. Upon the occurrence of certain events of default, the holders of at least 66-2/3% in principal amount of the February Notes at the time outstanding may declare all February Notes then outstanding to be immediately due and payable.
Barings’ parent company, Massachusetts Mutual Life Insurance Company, holds $25.0 million in aggregate principal amount of the Series D Notes.
November 2026 Notes Indenture
On November 23, 2021, the Company and U.S. Bank Trust Company, National Association (the “Trustee”) entered into an Indenture (the “Base Indenture”) and a First Supplemental Indenture (the “First Supplemental Indenture” and, together with the Base Indenture, the “November 2026 Notes Indenture”). The Audit Committee has selected,First Supplemental Indenture relates to the Company’s issuance of $350.0 million aggregate principal amount of its 3.300% notes due 2026 (the “November 2026 Notes”).
The November 2026 Notes will mature on November 23, 2026 and may be redeemed in whole or in part at the Company’s option at any time or from time to time at the redemption prices set forth in the November 2026 Notes Indenture. The November 2026 Notes bear interest at a rate of 3.300% per year payable semi-annually in May and November of each year, commencing in May 2022. The November 2026 Notes are general unsecured obligations of the Company that rank senior in right of payment to all of the Company’s existing and future indebtedness that is
expressly subordinated in right of payment to the November 2026 Notes, rank pari passu with all existing and future unsecured unsubordinated indebtedness issued by the Company, rank effectively junior to any of the Company’s secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness, and rank structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company’s subsidiaries, financing vehicles or similar facilities.
The November 2026 Notes Indenture contains certain covenants, including covenants requiring the Company to comply with the asset coverage requirements of Section 18(a)(1)(A) as modified by Sections 61(a)(1) and (2) of the 1940 Act, whether or not it is subject to those requirements, and to provide financial information to the holders of the November 2026 Notes and the BoardTrustee if the Company is no longer subject to the reporting requirements under the Exchange Act. These covenants are subject to important limitations and exceptions that are described in the November 2026 Notes Indenture.
In addition, on the occurrence of Directors has approved,a “change of control repurchase event,” as defined in the appointmentNovember 2026 Notes Indenture, the Company will generally be required to make an offer to purchase the outstanding November 2026 Notes at a price equal to 100% of Ernst & Young LLP as the Company’s independent auditor forprincipal amount of such November 2026 Notes plus accrued and unpaid interest to the year ending December 31, 2017.
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The Audit Committee |
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Benjamin S. Goldstein, Chair |
Mark F. Mulhern |
Simon B. Rich, Jr. |
Sherwood H. Smith, Jr. |
repurchase date.
The foregoing report shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filingNovember 2026 Notes were offered to qualified institutional buyers pursuant to Rule 144A under the Securities Act orand to certain non-U.S. persons outside the United States pursuant to Regulation S under the Securities Act. Concurrent with the closing of November 2026 Notes offering, the Company entered into a registration rights agreement for the benefit of the purchasers of the November 2026 Notes. Pursuant to the terms of this registration rights agreement, the Company filed a registration statement on Form N-14 with the SEC, which was subsequently declared effective, to permit electing holders of the November 2026 Notes to exchange all of their outstanding restricted November 2026 Notes for an equal aggregate principal amount of new November 2026 Notes (the “Exchange Notes”). The Exchange Notes have terms substantially identical to the terms of the November 2026 Notes, except that the Exchange Notes are registered under the Securities Act, exceptand certain transfer restrictions, registration rights, and additional interest provisions relating to the November 2026 Notes do not apply to the Exchange Notes.
Barings’ parent company, Massachusetts Mutual Life Insurance Company, and certain of its subsidiaries collectively hold $50.0 million in aggregate principal amount of the November 2026 Notes.
February 2029 Notes Indenture
On February 12, 2024, the Company issued $300 million in aggregate principal amount of 7.000% senior, unsecured notes due 2029 (the “February 2029 Notes”) under a Second Supplemental Indenture, dated February 12, 2024, between the Company and the Trustee (the “Second Supplemental Indenture” and, together with the Base Indenture, the “February 2029 Notes Indenture”) to the Base Indenture.
The February 2029 Notes will mature on February 15, 2029 and may be redeemed in whole or in part at the Company’s option at any time or from time to time at the redemption prices set forth in the February 2029 Notes Indenture. The February 2029 Notes bear interest at a rate of 7.000% per year payable semi-annually in February and August of each year, commencing in August 2024. The February 2029 Notes are general unsecured obligations of the Company that rank senior in right of payment to all of the Company’s existing and future indebtedness that is expressly subordinated in right of payment to the February 2029 Notes, rank pari passu with all existing and future unsecured unsubordinated indebtedness issued by the Company, rank effectively junior to any of the Company’s secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent that we specifically incorporate thisof the value of the assets securing such indebtedness, and rank structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company’s subsidiaries, financing vehicles or similar facilities.
The February 2029 Notes Indenture contains certain covenants, including covenants requiring the Company to comply with the asset coverage requirements of Section 18(a)(1)(A) as modified by Section 61(a)(1) and (2) of the 1940 Act, whether or not it is subject to those requirements (but giving effect to exemptive relief granted to the Company by the SEC), and to provide financial information by reference,to the holders of the February 2029 Notes and shall not otherwise be deemed filedthe Trustee if the Company is no longer subject to the reporting requirements under such Securities Act and/orthe Exchange Act. These covenants are subject to important limitations and exceptions that are described in the February 2029 Notes Indenture.
In addition, on the occurrence of a “change of control repurchase event,” as defined in the February 2029 Notes Indenture, the Company may be required by the holders of the February 2029 Notes to make an offer to purchase the outstanding February 2029 Notes at a price equal to 100% of the principal amount of such February 2029 Notes plus accrued and unpaid interest to the repurchase date.
Barings’ parent company, Massachusetts Mutual Life Insurance Company, holds $25.0 million in aggregate principal amount of the February 2029 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, 2017. Ernst & Young2024. KPMG LLP also will serve as the independent registered public accounting firmauditors for all of ourthe Company’s wholly-owned subsidiaries. It is expected that a representativesubsidiaries and its joint ventures, Jocassee Partners LLC, Thompson Rivers LLC, Waccamaw River LLC, and Sierra Senior Loan Strategy JV I LLC.
We expect representatives 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.
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 2015for the fiscal years ended December 31, 2023 and 20162022, or attributable to the audit of our 2015the Company's 2023 or 2022 financial statements, including out-of-pocket expenses:
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| | Fiscal Year Ended December 31, 2023 | | Fiscal Year Ended December 31, 2022 | |
Audit Fees | | $ | 1,378,403 | | | $ | 1,292,758 | | |
Audit Related Fees | | — | | | 1,210,652 | | (1) |
Tax Fees | | 272,100 | | | 138,950 | | |
Other Fees | | — | | | — | | |
TOTAL FEES | | $ | 1,650,503 | | | $ | 2,642,360 | | |
(1)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, 2023 and 2016 financial statements:2022, KPMG LLP billed aggregate non-audit fees of $315,169 (comprised of $43,069 related to Barings LLC and $272,100 related to Barings BDC, Inc.) and $182,337 (comprised of $43,387 related to Barings LLC and $138,950 related to Barings BDC, Inc.), respectively, for services rendered to the Company and for services rendered to Barings LLC.
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| | Fiscal Year Ended December 31, 2015 | | | | Fiscal Year Ended December 31, 2016 | | |
Audit Fees | | $ | 692,327 |
| | (1) | | $ | 720,869 |
| | (2) |
Audit Related Fees | | — |
| | | | — |
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Tax Fees | | 98,000 |
| | | | 93,000 |
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Other Fees | | — |
| | | | — |
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TOTAL FEES | | $ | 790,327 |
| | | | $ | 813,869 |
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(1) | Includes fees of $95,176 related to (i) our public offering of notes in February 2015, and (ii) the amendment to our universal shelf registration statement on Form N-2 which became effective in 2015. |
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(2) | Includes fees of $80,869 related to our public offering of common stock which closed in 2016. |
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 ourthe 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 20152023 and 2016,2022, 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, 2023, 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, 2023, 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, 2023. 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, 2024.
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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. 2
APPROVAL TO SELL SHARES OF COMMON STOCK OR WARRANTS, OPTIONS OR RIGHTS TO
ACQUIRE COMMON STOCK BELOW NET ASSET VALUE (BOOK VALUE)
The Company 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 selling shares of its common stock or warrants, options or rights to acquire its common stock at a price below the currentthen-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 or warrants, options or rights to acquire its common stock during the next year at a price below the Company’s then current net asset value per share at the time of sale if itsthe Company’s stockholders approve suchhave approved a sale andbelow net asset value per share within the Company’s directors makeone-year period immediately prior to any such sale, provided that the Board of Directors also makes certain determinations. determinations prior to any such sale.
Pursuant to this provision, the Company is seeking the approval of its common stockholders so that it may, in one or more public or private offerings of its common stock, or warrants, options or rights to acquire its common stock,issue and sell shares of its common stock or warrants, options or rights to acquire its common stock at a price below its then currentthen-current net asset value per share in one or more offerings, subject to certain conditions discussed below. 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 its then-outstanding common stock. If approved, the authorization would be effective for a period expiring on the earlier of thefirst anniversary of the date of the stockholders’ approval of this Annual Meeting orproposal and would permit the dateCompany to engage in such transactions at various times within that period, subject to further approval from the Board of the Company’s 2018 Annual Meeting of Stockholders, which is expected to be held in May 2018.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, at times the Company’s common stock has traded both above its net asset value per share, and at times the Company’s common stock has traded below its net asset value per share. At each of the Company’s Annual Meetings of Stockholders from 2008 to 2016,2017, and at its 2020, 2021, 2022, and 2023 Annual Meetings of Stockholders, the Company requested and received approval from its stockholders to sell 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 common stockholders of record to offer and sell shares of its common stock or warrants, options or rights to acquire its common stock at prices that, net of underwriting discount or commissions, may be less than net asset value so as toper share in one or more offerings. This stockholder approval would permit the flexibilityCompany to issue and sell shares of its common stock in accordance with pricing standards that market conditions may require.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 eightten underwritten follow-on equity offerings completed since its IPO, only two were priced below the then currentthen-current net asset value per share (both during 2009).
Reasons to Offer Common Stock or Warrants, Options or Rights to Acquire 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 asome 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. For example, BDCs as an industry have been trading below net asset valueothers, including recently as a result of such stock market volatility.the 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 “book value,” rather than market or publicly-tradedpublicly traded value. As of the record date of March 8, 2024, the Company's common stock traded at [a discount] to net asset value per share. The possibility that shares of ourthe 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 ourthe Company’s net asset value will decrease. It is not possible to predict whether any shares of ourthe Company’s common stock issued in the future will trade at, above, or below net asset value.
There can be no assurance that these adverse marketSince the 2008 recession, lingering economic conditions will not continue or worsen in the future. If adverse market conditions continueU.S. credit markets from periods of contraction or increase in severity and duration,recession have contributed to significant stock price volatility for capital providers such as the Company and other companieshave made access to capital more challenging for many smaller businesses. However, these changes in the financial services sector may notcredit 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 sufficient debt and equity capital, in order to take advantage of attractivethe Company believes that a challenging economic environment could provide investment opportunities including opportunities to make acquisitions of other companies or investment portfolios, that are created during theseon more favorable terms than have been available in recent periods. In addition, in light of the fact that any debt capital that willmay be available if any, may be at a higher cost and on less favorable terms and conditions than in past periods, the future. Company’s ability to take advantage of these opportunities may be largely dependent upon its access to equity capital.
Stockholder approval of the proposal to sell shares of its common stock or warrants, options or rights to acquire itsthe Company's common stock at a price below the Company’s then currentits then-current net asset value per share, subject to the conditions set forth in this 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, 2014,2021, lists the high and low closing sales prices for our common stock, and thesuch closing sales prices as percentages of the net asset values.values per share for the relevant periods. On February 23, 2017,March 8, 2024, the record date, the last reported closing sale price of our common stock on the NYSE was $20.13.$[ ]. 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.
| | | | Net Asset Value | | Sales Price | | Premium (Discount) of High Sales Price to Net Asset Value | | Premium (Discount) of Low Sales Price to Net Asset Value |
High | | Low | |
Year ended December 31, 2014 | | | | | | | | | | |
| | Net Asset Value | | | | 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 |
| Year ended December 31, 2021 | |
Year ended December 31, 2021 | |
Year ended December 31, 2021 | |
First Quarter | |
First Quarter | |
First Quarter | | $ | 15.72 |
| | $ | 29.39 |
| | $ | 25.75 |
| | 87.0 | % | | 63.8 | % | | $ | 11.14 | | | $ | | $ | 10.20 | | | $ | | $ | 8.83 | | | (8.4) | | (8.4) | % | | (20.7) | % |
Second Quarter | | $ | 15.95 |
| | $ | 28.58 |
| | $ | 24.68 |
| | 79.2 | % | | 54.7 | % | Second Quarter | | $ | 11.39 | | | $ | | $ | 10.77 | | | $ | | $ | 10.16 | | | (5.4) | | (5.4) | % | | (10.8) | % |
Third Quarter | | $ | 16.64 |
| | $ | 28.67 |
| | $ | 25.21 |
| | 72.3 | % | | 51.5 | % | Third Quarter | | $ | 11.40 | | | $ | | $ | 11.07 | | | $ | | $ | 10.36 | | | (2.9) | | (2.9) | % | | (9.1) | % |
Fourth Quarter | | $ | 16.11 |
| | $ | 25.79 |
| | $ | 18.18 |
| | 60.1 | % | | 12.8 | % | Fourth Quarter | | $ | 11.36 | | | $ | | $ | 11.47 | | | $ | | $ | 10.62 | | | 1.0 | | 1.0 | % | | (6.5) | % |
Year ending December 31, 2015 | | | | | | | | | | |
Year ended December 31, 2022 | |
First Quarter | |
First Quarter | |
First Quarter | | $ | 15.64 |
| | $ | 24.95 |
| | $ | 19.95 |
| | 59.5 | % | | 27.6 | % | | $ | 11.86 | | | $ | | $ | 11.20 | | | $ | | $ | 10.07 | | | (5.6) | | (5.6) | % | | (15.1) | % |
Second Quarter | | $ | 15.47 |
| | $ | 24.71 |
| | $ | 21.53 |
| | 59.7 | % | | 39.2 | % | Second Quarter | | $ | 11.41 | | | $ | | $ | 10.90 | | | $ | | $ | 9.24 | | | (4.5) | | (4.5) | % | | (19.0) | % |
Third Quarter | | $ | 15.48 |
| | $ | 23.70 |
| | $ | 15.41 |
| | 53.1 | % | | (0.5 | )% | Third Quarter | | $ | 11.28 | | | $ | | $ | 10.41 | | | $ | | $ | 8.32 | | | (7.7) | | (7.7) | % | | (26.2) | % |
Fourth Quarter | | $ | 15.23 |
| | $ | 23.19 |
| | $ | 16.48 |
| | 52.3 | % | | 8.2 | % | Fourth Quarter | | $ | 11.05 | | | $ | | $ | 9.26 | | | $ | | $ | 8.06 | | | (16.2) | | (16.2) | % | | (27.1) | % |
Year ending December 31, 2016 | | | | | | | | | | |
Year ended December 31, 2023 | |
First Quarter | |
First Quarter | |
First Quarter | | $ | 15.02 |
| | $ | 20.85 |
| | $ | 14.91 |
| | 38.8 | % | | (0.7 | )% | | $ | 11.17 | | | $ | | $ | 8.95 | | | $ | | $ | 8.22 | | | (19.9) | | (19.9) | % | | (26.4) | % |
Second Quarter | | $ | 14.82 |
| | $ | 21.35 |
| | $ | 16.00 |
| | 44.1 | % | | 8.0 | % | Second Quarter | | $ | 11.34 | | | $ | | $ | 8.01 | | | $ | | $ | 7.19 | | | (29.4) | | (29.4) | % | | (36.6) | % |
Third Quarter | | $ | 15.33 |
| | $ | 20.60 |
| | $ | 18.56 |
| | 34.4 | % | | 21.1 | % | Third Quarter | | $ | 11.25 | | | $ | | $ | 9.34 | | | $ | | $ | 7.65 | | | (17.0) | | (17.0) | % | | (32.0) | % |
Fourth Quarter | | $ | 15.13 |
| | $ | 19.95 |
| | $ | 16.40 |
| | 31.9 | % | | 8.4 | % | Fourth Quarter | | $ | 11.28 | | | $ | | $ | 9.39 | | | $ | | $ | 8.58 | | | (16.8) | | (16.8) | % | | (23.9) | % |
Year ending December 31, 2017 | | | | | | | | | | |
First Quarter (through February 23, 2017) | | * |
| | $ | 20.35 |
| | $ | 18.31 |
| | * |
| | * |
|
Year ending December 31, 2024 | |
First Quarter (through March 8, 2024) | |
First Quarter (through March 8, 2024) | |
First Quarter (through March 8, 2024) | | | * | | [ ] | | * |
* Net asset value has not yet been calculated for this period.
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 or warrants, options or rights to acquire its common stock.
Status as a BDC and RIC and Maintaining a Favorable Debt to EquityDebt-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 Company from retaining any meaningful amount of earnings to support operations, which may include making new investments (including investments intoin existing portfolio companies). Further, BDCsunder the 1940 Act, the Company must meet a debt todebt-to equity ratio of less than approximately 1:2:1 in order to incur debt or issue senior securities, which requires the Company to finance its investments with at least as much equity as debt and senior securities in the aggregate.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 1:2:1 debt to equitydebt-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 approximate 1:1 debt to equitydebt-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 underlying performance of the Company’s portfolio companies, if any, will negatively impact stockholders’ equity and the resulting debt to equitydebt-to-equity ratio. Issuing additional equity would allow the Company to realign its debt to equitydebt-to-equity ratio and take steps to avoid these negative consequences. In addition to meeting legal requirements applicable to BDCs, having a more favorable debt to equitydebt-to-equity ratio would also generally strengthen the Company’s balance sheet and give it more flexibility to fully execute its business strategy.
Summary
OurThe Board of Directors believes that havingit is desirable to have the flexibility to issue shares of the Company’s common stock or warrants, options or rights to acquire its common stock at a price below the Company’s then currentthen-current net asset value per share in certain instances when it is in the best interests of the Company and its 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 approximate 1:2:1 debt to equity ratio.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.
WhileThe final terms of any sale of the Company has no immediate plans to issue any shares of its common stock or warrants, options or rights to acquire itsCompany’s common stock at a price below the Company’s then currentthen-current net asset value per share it is seeking stockholder approval now in order to provide flexibility if it desires in the future to issue shares of its common stock or warrants, options or rights to acquire its common stock at a price below the Company’s then current net asset value per share, which typically must be undertaken quickly. The final terms of any such sale will be determined by ourthe Board of Directors at the time ofin connection with such issuance, and the shares of common stock or warrants, options or rights to acquire common stock will not include preemptive rights. Also, because the Company has no immediate plans to issue any shares of its common stock or warrants, options or rights to acquire its common stock at a price below the Company’s then current net asset value per share, it is not possible to describe the transaction or transactions in which such shares of common stock or warrants, options or rights to acquire common stock would be issued. Instead, anyAny transaction in which the Company issues such shares of common stock or warrants, options or rights to acquire 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 such consideration,proceeds therefrom, will be reviewed and approved by ourthe 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 securities issued during a period expiring on the earlier of thefirst anniversary of the date of this
Annual Meeting or the datestockholders’ approval of this proposal and would permit the Company’s 2018 Annual MeetingCompany to engage in such transactions at various times within that period, subject to further approval from the Board of Stockholders, which is expected to be held in May 2018.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 Company 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 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. 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 onlyissue and sell shares of its common stock or warrants, options or rights to acquire 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, have determined in good faith, and as of a time immediately prior to the first 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 distributing commission or discount.
As a stockholder, you should also be aware that no conflict of interest exists as to any entity affiliated with the Company such that any such entity would receive fees as a direct result of assets under management increasing from any sale of the Company’s common stock or warrants, options or rights to acquire its common stock at a price per share below net asset value. As an internally managed BDC, we do not pay asset management fees to third party investment advisors.
Finally, inIn determining whether or not to sell additional shares of the Company’s common stock or warrants, options or rights to acquire its common stock at a price below the net asset value per share, the Board of Directors will be 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 or warrants, options or rights to acquire its common stock at less than net asset value per share on the net asset value per outstanding share of common stock.share. Any sale of common stock or warrants, options or rights to acquire 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 or warrants, options or rights to acquire its 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 or warrants, options or rights to acquire common stock 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 or warrants, options or rights to acquire its 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 or warrants, options or rights to acquire common stock at a price below the net asset value per share when considering whether to authorize any such 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 or warrants, options or rights to acquire common stock are sold 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 maintain their percentage interest, regardless of whether such offering is above or below the then currentthen-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“Examples of Dilutive Effect of the Issuance of Shares Below Net Asset Value.Value.”
Finally, any sale of substantial amounts of ourthe Company’s common stock or other securities in the open market may adversely affect the market price of ourthe Company’s common stock and may adversely affect ourthe Company’s ability to obtain future financing in the capital markets. In addition, future sales of ourthe 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 wethe Company were to continue to sell ourits 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
| | | | | | 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 | | | | | 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 | | | 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 |
| | — |
|
Price per Share to Public | |
Price per Share to Public | |
Net Proceeds per Share to Issuer | | — |
| | $ | 9.50 |
| | — |
| | $ | 9.00 |
| | — |
| | $ | 8.00 |
| | — |
| | $ | 0.01 |
| | — |
|
Decrease to NAV | | | | | | | | | | | | | | | | | | |
Total Shares Outstanding | |
Total Shares Outstanding | |
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 | % | | 1,000,000 | | | 1,050,000 | | 1,050,000 | | | 5.00 | | 5.00 | % | | 1,100,000 | | | 10.00 | | 10.00 | % | | 1,200,000 | | | 20.00 | | 20.00 | % | | 1,250,000 | | | 25.00 | | 25.00 | % |
NAV per Share | | $ | 10.00 |
| | $ | 9.98 |
| | (0.24 | )% | | $ | 9.91 |
| | (0.91 | )% | | $ | 9.67 |
| | (3.33 | )% | | $ | 8.00 |
| | (19.98 | )% | NAV per Share | | $ | 10.00 | | | $ | | $ | 9.98 | | | (0.24) | | (0.24) | % | | $ | 9.91 | | | (0.91) | | (0.91) | % | | $ | 9.67 | | | (3.33) | | (3.33) | % | | $ | 8.00 | | | (19.98) | | (19.98) | % |
Dilution to Stockholder | | | | | | | | | | | | | | | | | | |
Shares Held by Stockholder A | | 10,000 |
| | 10,000 |
| | — |
| | 10,000 |
| | — |
| | 10,000 |
| | — |
| | 10,000 |
| | — |
|
Shares Held by Stockholder A | |
Shares Held by Stockholder A | |
Percentage Held by Stockholder A | | 1.0 | % | | 0.95 | % | | (4.76 | )% | | 0.91 | % | | (9.09 | )% | | 0.83 | % | | (16.67 | )% | | 0.80 | % | | (20.00 | )% | 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 | |
Total NAV Held by Stockholder A | |
Total NAV Held by Stockholder A | | $ | 100,000 |
| | $ | 99,762 |
| | (0.24 | )% | | $ | 99,091 |
| | (0.91 | )% | | $ | 96,667 |
| | (3.33 | )% | | $ | 80,020 |
| | (19.98 | )% | | $ | 100,000 | | | $ | | $ | 99,762 | | | (0.24) | | (0.24) | % | | $ | 99,091 | | | (0.91) | | (0.91) | % | | $ | 96,667 | | | (3.33) | | (3.33) | % | | $ | 80,020 | | | (19.98) | | (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 |
| | — |
|
NAV per Share Held by Stockholder A | |
NAV per Share Held by Stockholder A | |
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 | )% | Percentage Dilution to Stockholder A (Dilution per Share Divided by Investment per Share) | | — | | | — | | — | | | (0.24) | | (0.24) | % | | — | | | (0.91) | | (0.91) | % | | — | | | (3.33) | | (3.33) | % | | — | | | (19.98) | | (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 or warrants, options or rights to acquire its common stock during(during the next year12 months following such authorization) at a price below the Company’s then currentits then-current net asset value (i.e., book value) per share.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 proposal requires the affirmative vote of each of the following: (1) a majority of the outstanding shares of the Company's common stock entitled to vote at the Annual Meeting;stock; and (2) a majority of the outstanding shares of the Company's common stock entitled to vote at the Annual Meeting whichthat are not held by affiliated persons of the Company. For purposes of this proposal, the 1940 Act defines “a majoritya "majority of the outstanding shares” as:as the vote of the lesser of: (1) 67% or more of the voting securities of the Company present at the Annual Meeting if the holders of more than 50% of the outstanding voting securities of such companythe Company are present virtually or represented by proxy; or (2) more than 50% of the outstanding voting securities of such company, whichever is the less.Company. Abstentions and broker non-votes, if any, will have the effect of votes cast against this proposal.
PROPOSAL NO. 3
ADVISORY VOTE ON EXECUTIVE COMPENSATIONADDITIONAL INFORMATION
The Dodd-Frank Wall Street ReformNotice of Annual Meeting, this proxy statement and Consumer Protection Actour annual report for the fiscal year ended December 31, 2023 are available free of 2010, orcharge at the Dodd-Frank Act, enables ourfollowing Internet address: https://ir.barings.com/annual-shareholder-meeting-materials.
STOCKHOLDER NOMINATIONS AND PROPOSALS FOR THE 2025 ANNUAL MEETING
The Company's annual meeting of stockholders to vote to approve, on an advisory basis, the compensationgenerally is held in May of our NEOs as set forth in this Proxy Statement. Specifically, this Proposal No. 3, commonly known as a “Say-On-Pay” proposal, gives our stockholders the opportunity to express their views on the compensation of our NEOs. This vote is not intended to address any particular form of compensation but rather the overall compensation of our NEOs and the philosophy, policies 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 designed to (i) enable us to attract and retain the best talenteach year. We will consider for inclusion in the financial industries in which we compete; (ii) align our executive compensation packages with the Company’s performance; and (iii) use long-term equity awards 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.
We are asking our stockholders to indicate their supportCompany's proxy materials 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 20172025 Annual Meeting of Stockholders, pursuant to Item 402stockholder proposals that are received at the Company's executive offices, in writing, no later than 5:00 p.m. (Eastern Time) on [ ], 2024, and that comply with all applicable requirements of Regulation S-K, includingRule 14a-8 promulgated under the Compensation Discussion and Analysis, executive compensation tables and narrative discussion.”
The vote for this Proposal No. 3 is advisory, and is therefore not binding upon the Compensation Committee, our BoardSecurities Exchange Act of Directors1934, as amended, or the Company. Our Compensation Committee and our Board of Directors value the opinions of our stockholders and, to the extent there is any significant vote against the compensation of our NEOs as disclosed in this Proxy Statement, we will carefully consider our stockholders’ concerns, and the Compensation Committee and our Board of Directors will evaluate whether any actions are necessary to address such concerns.
Required Vote. The approval of this advisory resolution requires the affirmative vote of a majority of all votes cast at the Annual Meeting, in person or by proxy. Abstentions and broker non-votes will not be included in determining the number of votes cast and will not have any effect on the result 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.
PROPOSAL NO. 4
ADVISORY VOTE ON THE FREQUENCY OF AN ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Dodd-Frank Act also enables our stockholders to indicate how frequently we should seek an advisory vote on the compensation of our NEOs, as disclosed pursuant to Item 402 of Regulation S-K, such as Proposal No. 3 (advisory (non-binding) vote on executive compensation). By voting, stockholders may indicate whether they would prefer that we conduct an advisory "Say-on-Pay" vote every “ONE YEAR,” “TWO YEARS” or “THREE YEARS.” Stockholders also may, if they wish, abstain from casting a vote on this proposal.
After careful consideration, our Board of Directors has determined that an advisory vote on executive compensation that occurs every “THREE YEARS” is the most appropriate alternative for the Company, and, therefore, our Board of Directors recommends that you vote for a frequency of “THREE YEARS” for the advisory vote on executive compensation.
The Board believes that a triennial vote complements our goal to create a compensation program that enhances long-term shareholder value. As described in the section titled “Compensation Discussion and Analysis,” our executive compensation program is designed to motivate executives to achieve both annual and long-term corporate goals that we believe enhance shareholder value. To help facilitate the creation of long-term, sustainable shareholder value, certain of our compensation awards, such as restricted stock, generally vest over a multi-year service period. A triennial vote will provide shareholders the ability to evaluate our compensation program over a time period similar to the periods associated with our compensation awards, allowing them to compare the Company’s compensation program to the long-term performance of the Company.
You may cast your vote on your preferred voting frequency by choosing the option of “ONE YEAR,” “TWO YEARS” or “THREE YEARS,” or abstain from voting when you vote in response to the resolution set forth below:
“RESOLVED, that the option of once every one year, two years, or three years that receives the highest number of votes cast for this resolution will be deemed the preferred frequency selected by stockholders, on an advisory basis, with which Triangle Capital Corporation is to conduct an advisory vote to approve the compensation of Triangle Capital Corporation’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, executive compensation tables and narrative discussion, as set forth in Triangle Capital Corporation’s annual proxy statements.”
The vote for this Proposal No. 4 is advisory and is therefore not binding upon the Compensation Committee, our Board of Directors or the Company. Accordingly, although we value the opinions of our stockholders and carefully consider their concerns, the Compensation Committee and our Board of Directors may decide that it is in the best interests of our stockholders and the Company to hold an advisory vote on executive compensation more or less frequently than the option that is approved by our stockholders.
Required Vote. The period receiving the greatest number of votes as set forth in this proposal will be the frequency of the advisory vote on the compensation of our named executive officers that has been approved by our stockholders on an advisory basis. Even though your vote is advisory and therefore will not be binding on us, our Board of Directors will review the voting results and take them into consideration when making future decisions regarding the frequency of the advisory vote on executive compensation. Abstentions and broker non-votes will not be included in determining the number of votes cast and will not have any effect on the result of the vote on this item.
The Board of Directors recommends that you vote “THREE YEARS” with respect to the frequency of future advisory (non-binding) "Say-on-Pay" stockholder votes on compensation of our named executive officers.
PROPOSAL NO. 5
APPROVAL OF THE OMNIBUS INCENTIVE PLAN
Background and Purpose
Our Board of Directors and executive management believe that the Company’s successful performance depends on our ability to offer fair compensation packages to our professionals that are competitive with those offered by other investment management businesses. The specialized nature of our business, the competitiveness of our market and the skills and importance of our employees make retention critical. The ability to offer cash and equity-based incentive compensation to our professionals, which helps to align employee behavior with stockholder interests and provides a retention tool, is important to our future growth and success.
Our Board of Directors has been judicious in its use of equity-based compensation under our existing Equity Incentive Plan, which was previously approved by our stockholders in May 2008, and its use of cash incentive compensation under our 2012 Executive Cash Incentive Plan, which was previously approved by our stockholders in May 2012. Pursuant to the Equity Incentive Plan, up to 900,000 shares of common stock were initially reserved for issuance. In March 2012, our Board of Directors authorized, and in May 2012, the Company’s stockholders approved, an increase in the number of shares reserved for issuance under the Equity Incentive Plan by 1,500,000 shares, increasing the total number of shares currently reserved for issuance under the Equity Incentive Plan to 2,400,000 shares of common stock. The remaining shares under the Equity Incentive Plan, however, have been substantially depleted, and the term of the plan will expire in the near future. Without approval of a new or amended equity-based incentive compensation plan, we would need to make changes to our long-term incentive program that would limit our ability to provide market-competitive compensation to attract and retain the caliber of employees necessary to achieve superior performance.
In light of the foregoing, on February 22, 2017, both our Compensation Committee and our Board of Directors adopted the Company’s Omnibus Incentive Plan, or the Omnibus Plan, and recommended that it be submitted to our stockholders for their approval at the Annual Meeting. Prior to adoption of the Omnibus Plan, the Company compensated its professional through two separate plans: as noted above, the Company’s Equity Incentive Plan provided for grants of restricted stock and options to employees, officers and directors, and the 2012 Executive Cash Incentive Plan provided for the payment of cash bonuses to employees and officers. 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 will provide for grants of restricted stock, incentive stock options, non-statutory stock options and cash-based and/or stock-based performance awards, collectively, “Awards,” to our existing and future employees, collectively, the “Participants.” In addition, the Omnibus Plan increased the maximum number of shares of our common stock with respect to which Awards may be granted under the Omnibus Plan to 4,000,000 shares of our common stock from 2,400,000 shares of our common stock that was approved under the Equity Incentive Plan. Finally, if approved, the Omnibus Plan will not expire until ten years following stockholder approval. If stockholders approve the Omnibus Plan at the Annual Meeting, no further Awards will be issued under the terms of the Equity Incentive Plan or the 2012 Executive Cash Incentive Plan, but will instead be granted under the terms of the Omnibus Plan.
The effective date of the Omnibus Plan will be the date on which it is approved by our stockholders. As of the date of this proxy statement, no Awards have been made pursuant to the Omnibus Plan.
Securities Authorized for Issuance Under the Amended and Restated 2007 Equity Incentive Plan
The following table provides information regarding the number of shares of restricted stock authorized and available under the Equity Incentive Plan as of February 23, 2017:
|
| | | | | | | | | | |
Plan Category | | Number of securities to be issued upon exercise of outstanding options, warrants and rights | | Weighted average exercise price of outstanding options, warrants and rights | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column(a)) | |
| | (a) | | (b) | | (c) | |
Equity compensation plans approved by security holders(1) | | — |
| | — |
| | 678,095 |
| (2) |
Equity compensation plans not approved by security holders | | — |
| | — |
| | — |
| |
Total | | — |
| | — |
| | 678,095 |
| |
| |
(1) | The Equity Incentive Plan is the only equity compensation plan currently utilized by us. |
| |
(2) | The Equity Incentive Plan currently has an aggregate of 2,400,000 shares of common stock reserved for issuance. If we receive stockholder approval for the Omnibus Plan at the Annual Meeting, the maximum number of shares of our common stock with respect to which Awards may be granted under the Omnibus Plan would increase to 4,000,000 shares of our common stock from 2,400,000 shares of our common stock. This increase in authorized shares would increase the number of securities available for future issuance under “Equity compensation plans approved by security holders” to 2,278,095 shares of our common stock from 678,095 shares of our common stock. As noted above, if stockholders approve the Omnibus Plan at the Annual Meeting, no further Awards will be issued under the terms of the Equity Incentive Plan or the 2012 Executive Cash Incentive Plan, but will instead be granted under the terms of the Omnibus Plan. |
The following is a summary of certain principal features of the Omnibus Plan. This summary is qualified in its entirety by reference to the complete text of the Omnibus Plan. You are urged to read the actual text of the Omnibus Plan in its entirety, which is set forth in Appendix A.
Shares Available for Awards
Under the Omnibus Plan, the total number of shares of our common stock that may be subject to restricted stock awards, other stock-based awards or stock-based performance awards, including incentive and non-statutory options, is 4,000,000 shares. The maximum number of shares of common stock for which any Participant may be granted Awards in any calendar year is 100,000. Shares underlying Awards which expire or otherwise terminate, in whole or in part, shall revert to and again become available for issuance under the Omnibus Plan. Any shares used for tax withholding shall revert to and again become available for issuance under the Omnibus Plan.
The shares of our common stock subject to the Omnibus Plan may be unissued shares or reacquired shares bought on the market or otherwise. Our Board of Directors is authorized to adjust the limitation on shares available for Awards and outstanding Awards in the event of a dividend or other distribution payable in shares of our common stock, or any division, combination or reclassification of our shares of common stock.
Eligibility
The Omnibus Plan generally authorizes the Board to select employees to be granted awards under the Omnibus Plan, which may be any employee of the Company or its affiliates, including the Company’s executive officers. Participants who are non-employee directors may receive awards of restricted stock in accordance with certain parameters discussed below.
Administration
The Omnibus Plan is to be administered by our Compensation Committee, which has been delegated administration of the Omnibus Plan by our Board of Directors and is comprised solely of directors who are considered independent under the applicable listing standards of the New York Stock Exchange and are not "interested persons," as defined in Section 2(a)(19) of the 1940 Act, and solely of directors who are “outside directors” as defined under Section 162(m) of the Code, of the Company. Subject to the terms of the Omnibus Plan, our Compensation Committee is authorized to determine: eligible persons to receive Awards; when and how each Award shall be granted and documented; what type or combination of types of Awards shall be
granted; the provisions of each Award granted, including the time or times when a person shall be permitted to exercise an Award; and the number of Awards to be granted and the number of shares of our common stock to which Awards will relate. The Compensation Committee may also make all other determinations that may be necessary or advisable for the administration of the Omnibus Plan, including establishing, amending and revoking rules and regulations for its administration.
General Terms of Awards
Cash Awards. Each year, the Compensation Committee will establish award opportunities and performance targets for cash awards under the terms of the Omnibus Plan, including performance goals and payout formulas, which need not be the same for each participant. The Compensation Committee will also designate one or more performance periods, which may be based on a fiscal year or other period designated by the committee. Following the close of the performance period, the Compensation Committee will evaluate the Company’s actual performance against the performance targets to determine the actual cash award to be paid under the Omnibus Plan (if any).
The performance goals (the “Performance Goals”) are established based on one or more of the following criteria:
total investment income;
net investment income;
net investment income per share;
realized and unrealized gains and losses;
net increase in net assets resulting from operations per share;
overall credit performance of the investment portfolio; liquidity; operating efficiency performance;
growth and diversification of the overall investment portfolio;
sustaining dividend distributions to stockholders;
return on average stockholders’ equity; net asset value;
or any combination thereof.Act.
In addition, any stockholder who wishes to the extent consistent with 162(m) of the Code with respect to compensation intended to qualify with such section, the performance goals may be calculated without regard to certain extraordinary or pre-determined items.
Options. Options granted under the Omnibus Plan, or the Options, entitle the optionee, upon exercise to purchase shares of common stock atpropose a specified exercise price per share. Options must have a per share exercise price of no less than the fair market value of a share of stock on the date of grant, subject to the forfeiture provisions as determined by the Compensation Committee. The exercise period of each stock option awarded will expire on a date determined by the Compensation Committee, such date to be specified in the stock option award agreement; however, the Omnibus Plan also states that no stock option award will be exercisable after the expiration of ten years from the date such stock option was granted and no incentive stock option shall be granted more than ten years from the date the Omnibus Plan was approved by the effective date of the Omnibus Plan.
Restricted Stock Awards to Employees. The Omnibus Plan permits the issuance of restricted stock to employees consistent with such terms and conditions as the Compensation Committee shall deem appropriate, subject to the limitations set forth therein. With respect to awards issued to our employees and officers, the Compensation Committee will determine the time or times at which such shares of restricted stock will be exercisable and the terms on which such shares will remain exercisable. Shares granted pursuant to a restricted stock award will not be transferrable 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.
Restricted Stock Awards to Non-Employee Directors.The Omnibus Plan provides that our non-employee directors will each receive an automatic grant of shares of restricted stock at the beginning of each one-year term of service on our Board of Directors, for which forfeiture restrictions will lapse one year from the grant date. The number of shares granted to each non-employee director will be the equivalent of $50,000 worth of shares taken at the market value at the close of the NYSE on the date of grant. The grants of restricted stock to non-employee directors under the Omnibus Plan will be automatic and will not be changed without SEC approval. 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.
Performance Awards.A performance award consists of a right to receive an option, restricted stock, other stock-based award or cash incentive award subject to the attainment of one or more performance goals. Performance awards may be qualified or unqualified under Section 162(m) of the Code. In granting performance awards, the Compensation Committee will utilize the Performance Goals described above with respect to cash awards.
To the extent consistent with the requirements for satisfying the performance-based compensation exception under Section 162(m) of the Code, our Compensation Committee and/or our Board of Directors may provide in the case of any Award intended to qualify for such exception that one or more of the criteria applicable to such Award will be adjusted in an objectively determinable manner to reflect events occurring during the performance period that affect the applicable criteria.
Under the Omnibus Plan, with respect to any "covered officer" (as defined in Section 162(m) of the Code), the maximum amount of all equity-based performance awards that may be settled in cash in any calendar year is $1,000,000, and the maximum amount of any annual cash awards that may be awarded is $3,000,000.
Change in Control
Under the Omnibus Plan, an Award agreement may provide or the Board or Compensation Committee may determine that upon a “change in control” (as defined in the Omnibus Plan) all or a portion of the outstanding Awards shall vest, become immediately exercisable or payable and have all restrictions lifted.
Transactions or events involving a “change in control” under the Omnibus Plan include the following, other than where our stockholders continue to have substantially the same proportionate ownership in an entity which owns substantially all of our assets immediately following such transaction or event:
a single person or entity or group of persons and/or entities, other than us, any of our employee benefit plans, a company owned by our stockholders in substantially the same proportions as their ownership in us or an underwriter temporarily holding securities pursuant to an offering by us, becomes the beneficial owner of more than 35% of the combined voting power of our voting securities then outstanding;
as the result of, or in connection with, any cash tender or exchange offer, merger or other business combination, less than a majority of the combined voting power of the then outstanding securities of the Company or its successor are held by the holders of the Company’s securities who are entitled to vote immediately prior to such transaction;
during any period of two consecutive years, a change in the membership of our Board of Directors such that the individuals who, as of the beginning of any such period, constitute the Board of Directors (the “Continuing Directors”), and any new director whose election or nominationnominee to the Board of Directors was approvedor propose any other business to be considered by the stockholders (other than a vote of at least two-thirdsstockholder proposal to be included in the Company’s proxy materials pursuant to Rule 14a-8 of the Continuing Directors, cease to constitute at least a majorityExchange Act) must comply with the advance notice provisions and other requirements of the Board;
Company’s Bylaws, a complete liquidation or dissolutioncopy of the Company; or
the sale or disposition of all or substantially all of the assets of the Company to another person or entity.
SEC Order and Limitationswhich is on Awards
Following the adoption of our 2007 Equity Incentive Plan in 2007, we filed a requestfile with the SEC and may be obtained from the same yearCompany’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 exemptive relief with respectelection to our ability to issue restricted stock to our employees and an automatic annual grant of $30,000 in restricted stock to non-employee directors. In 2008, ourthe Board of Directors and proposals of business to be considered by the stockholders voted to approvefor the Equity Incentive Plan,2025 Annual Meeting of Stockholders must be made in writing and we received an order, or the Prior Order, from the SEC authorizing such issuance, subjectsubmitted to the condition set forthCompany’s Secretary at the address above no earlier than [ ], 2024 and no later than 5:00 p.m. (Eastern Time) on [ ], 2024 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 Prior Order as discussed below.event that the Company’s 2025 Annual Meeting of Stockholders is held before April 7, 2025 or after June 6, 2025. In 2012, our Boardaccordance with the Bylaws, the chairman of Directorsthe 2025 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 approved an increase inand a copy of the numberCompany's Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which together constitute the Company's 2023 Annual Report, are being mailed along with this proxy statement. The Company's 2023 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 shares reservedany specifically requested exhibit to the Company's Annual Report on Form 10-K for issuance under the Equity Incentive Planfiscal year ended December 31, 2023. 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 1,500,000 shares. The same year, wecalling (704) 805-7200. A copy of the Company's Annual Report on Form 10-K has also been filed a request 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 exemptive reliefproxy statements and annual reports with respect to amend our annual grant of $30,000 in restricted stocktwo or more stockholders sharing the same address by delivering a single proxy statement addressed to non-employee directorsthose stockholders. This process, which is commonly referred to $50,000 worth of restricted stockas “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 2023 Annual Report to non-employee directors based on the closing stock price of our common stock on the grant date. On March 21, 2013, wemultiple stockholders sharing an address, unless contrary instructions have been received an order from the SEC,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 Revised Order, granting such exemptive relief. Awards under the Omnibus Plan will comply with all aspects of the Revised Order, including the following:
The total number of shares that may be outstanding as restricted shares under the Omnibus Plan may not exceed 10% of the total number of the Company’s shares of common stock authorized and outstandingprocess. If at any time (other than shares issuedyou no longer wish to participate in householding and would prefer to receive a separate proxy statement and Annual Report, or delivered pursuant to compensation plans).
No one person shall be granted awards of restricted stock relating to more than 25%if you are receiving multiple copies of the proxy statement and 2023 Annual Report and wish to receive only one, please notify your broker if your shares available for issuance under the Omnibus Plan.
The amountare held in a brokerage account, or us if you are a stockholder of voting securities that would result from the exercise of all our outstanding warrants, options and rights, together with any restricted stock issued pursuantrecord. 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 Omnibus Plan, at the time of issuance shall not exceed 25% of our outstanding voting securities. Notwithstanding the immediately preceding limitation, if the amount of voting securities that would result from such exercise of all of our outstanding warrants, options and rights issued to our directors, officers and employees, together with any restricted stock issued pursuant to the Omnibus Plan, would exceed 15% of our outstanding voting securities, then the total amount of voting securities that would result from the exercise of all outstanding warrants, options and rights, together with any restricted stock issued pursuant to the Omnibus Plan, at the time of issuance shall not exceed 20% of our outstanding voting securities. For purposes of this condition, “outstanding voting securities” does not include restricted stock.
An employee participating in the Omnibus Plan may not receive options to purchase in excess of 100,000 sharesaddress or telephone number above, a separate copy of the Company’s common stock in any2023 Annual Report and proxy statement to a stockholder at a shared address to which a single calendar year. copy of the documents was delivered.
Non-employee directors receive an annual award of restricted stock at the beginning of each one-year term of service on the Board of Directors, for which forfeiture restrictions will lapse one year from the grant date. The number of shares granted to each non-employee directorTABULATION AND REPORTING OF VOTING RESULTS
Preliminary voting results will be the equivalent of $50,000 worth of shares taken at the market value at the close of the New York Stock Exchange on the date of grant. The annual awards of restricted stock to non-employee directors under the Omnibus Plan are automatic and not subject to change without SEC approval.
Amendment and Termination
Our Board of Directors or its delegate may amend, suspend or terminate the Omnibus Plan at any time. Our Board of Directors will seek stockholder approval of any action modifying a provision of the Omnibus Plan when the Board determines that such stockholder approval is required under the provisions of applicable law. If approved by stockholdersannounced at the Annual Meeting,Meeting. Final voting results will be tallied by the Omnibus Plan will terminate oninspector of election after the tenth anniversarytaking of the date the this Annual Meeting, unless terminated sooner by action of our Board of Directors. No Awards may be granted under the Omnibus Plan after its termination, but Awards granted prior to termination will continue to be effective and governed by the Omnibus Plan.
Outstanding Awards Under the Omnibus Plan
As of the date of this proxy statement, no Awards have been made pursuant to the Omnibus Plan; provided however that outstanding awards under the two previous plans will continue to be outstanding and will not be modified as a result of the merger of such plans. Future awards under the Omnibus Plan are discretionary and are, therefore, not determinable at this time.
U.S. Federal Income Tax Consequences
Set forth below is a brief summary of the U.S. federal income tax consequences of Awards under the Omnibus Plan. This summary is not a complete description of the applicable tax consequences, and it is subject to any changes in applicable tax rules. The discussion is general in nature and does not take into account a number of considerations which may apply based on the circumstances of a particular Participant, and should not be relied upon as tax advice.
Cash Awards. Payments made with respect to cash awards under the Omnibus Plan will be taxable to the recipient when paid (unless the award otherwise becomes subject to taxation under the Code), and the Company or the affiliate of the Company which employs the recipient will generally be entitled to a federal income tax deduction for the calendar year in which the amount is paid.
Non-Statutory Stock Options. Stock options granted under the plan will not be taxable to a recipient at the time of grant and we are not allowed a tax deduction by reason of the grant. Upon the exercise of a stock option, the amount by which the fair market value of the shares of common stock received, determined as of the date of exercise, exceeds the exercise price will be treated as ordinary income to the recipient of the option in the year of exercise. In accordance with applicable regulations, we will require the optionee to pay to us an amount sufficient to satisfy withholding taxes in respect of such compensation income at the time of the exercise of the option. If we withhold shares to satisfy this withholding tax obligation, instead of cash, the optionee nonetheless will be required to include in income the fair market value of the shares withheld. Generally, we will be entitled to a deduction for compensation paid in the same amount treated as compensation received by the recipient of the option. When the optionee sells the shares, he will generally recognize a capital gain or loss (long-term or short-term, depending upon the holding period of the stock sold) in an amount equal to the difference between the amount realized upon the sale of the shares and his basis in the shares (i.e., the exercise price plus the amount taxed to the optionee as compensation income).
Incentive Stock Options. A recipient of an incentive stock option under the plan will not generally recognize any taxable income for U.S. federal income tax purposes upon receipt of an incentive stock option or, generally, at the time of exercise of an incentive stock option, except possibly under the alternative minimum income tax rules. If the recipient exercises an
incentive stock option and does not dispose of the shares received in a subsequent "disqualifying disposition" (generally, a sale, gift or other transfer within two years after the date of grant of the stock option or within one year after the shares are transferred to the recipient of the option), the recipient receives long-term capital gains treatment on the difference between the price for which the recipient of the incentive stock option sells the shares of common stock and his or her tax basis in the shares (generally, the amount paid upon exercise of such options). In the event of a disqualifying disposition, the difference between the fair market value of the shares of common stock received on the date of exercise and the exercise price will generally be treated as ordinary income in the year of disposition. We would not be entitled to a deduction with respect to shares received by a recipient of an incentive stock option upon exercise if the common stock received is not disposed of in a disqualifying disposition. If, however, an amount is treated as ordinary income to the recipient of an incentive stock option due to a disqualifying disposition, we would be entitled to a corresponding deduction in the same amount for compensation paid.
Restricted Stock Awards. Generally, a grant under the plan of shares of our common stock which are subject to vesting and transfer restrictions will not result in taxable income to the recipient for U.S. federal income tax purposes or a tax deduction to us in the year of the grant. Instead, the value of the shares will generally be taxable to the recipient as ordinary income in the years in which the restrictions on the shares lapse. Such value will be the fair market value of the shares on the dates the restrictions lapse. Any recipient, however, may elect pursuant to Section 83(b) of the Code to treat the fair market value of the shares on the date of grant as ordinary income in the year of the grant, provided the recipient makes the election within 30 days after the date of the grant. In any case, we would receive a corresponding deduction corresponding to the amount of compensation included in the recipient's income in the year in which that amount is so included. In accordance with applicable regulations, we will require the recipient to pay to us an amount sufficient to satisfy withholding taxes in respect of such compensation income at the time the restrictions on the shares lapse or the recipient makes a Section 83(b) election. If we withhold shares to satisfy this withholding tax obligation, instead of cash, the recipient nonetheless will be required to include in income the fair market value of the shares withheld.
Certain Tax Code Limitations on Deductibility. Section 162(m) of the Code generally disallows a federal income tax deduction to any publicly held corporation for compensation paid in excess of $1,000,000 in any taxable year to the chief executive officer or any of the three other most highly compensated executive officers (other than the chief financial officer) who are employed by the corporation on the last day of the taxable year, but does not disallow a deduction for performance-based compensation the material terms of which are disclosed to and approved by stockholders. We have structured the plan so that resulting compensation can be designed to qualify as performance-based compensation. To allow us to qualify the compensation, we are seeking stockholder approval of the Omnibus Plan and the material terms of the performance goals related to awards intended to qualify as performance-based compensation.
Other Tax Consequences. State tax consequences may in some cases differ from those described above. In addition, Awards made under the plan may be made to persons who are subject to tax in jurisdictions other than the United States and may result in tax consequences differing from those described above.
Required Vote. The approval of the Omnibus Plan requires the affirmative vote of a majority of all votes cast at the Annual Meeting,Meeting. The Company will publish the final voting results in person or by proxy. Abstentions and broker non-votes will not be included in determininga Current Report on Form 8-K filed with the number of votes cast and will notSEC within four business days following the Annual Meeting.
OTHER INQUIRIES
If you have any effect onquestions about the resultAnnual Meeting, these proxy materials or your ownership of the vote on this item.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.
The Board of Directors recommends that the stockholders vote “FOR” the approval of the Omnibus Plan.
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.43
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 request of government regulators. Only that information required by law, subpoena, or court order will be disclosed.
OTHER BUSINESS
The Board of Directors knows of no other business to be presented for action at the 20172024 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 20172024 Annual Meeting of Stockholders in person.of Barings BDC, Inc., to be held virtually on Tuesday, May 7, 2024, at 8:30 a.m. (Eastern Time), at the following website: www.virtualshareholdermeeting.com/BBDC2024. 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 Pacini
Secretary, Barings BDC, Inc.
Steven C. Lilly
Chief Financial Officer and Secretary
Raleigh,Charlotte, North Carolina
March , 2017[ ], 2024
APPENDIX A
TRIANGLE CAPITAL CORPORATION
OMNIBUS INCENTIVE PLAN
(Effective May __, 2017)
1.1. Generally. This plan shall be known as the “Triangle Capital Corporation Omnibus Incentive Plan” (the “Plan”). The purpose of the Plan is to promote the interests of Triangle Capital Corporation, a Maryland corporation (the “Company”), its Affiliates (as defined herein) and its stockholders by (i) attracting and retaining key officers, employees, and directors of, the Company and its Affiliates; (ii) motivating such individuals by means of individual performance-related incentives to achieve long-range performance goals; (iii) encouraging ownership of stock in the Company by such individuals; (iv) linking their compensation to the long-term interests of the Company and its stockholders and (v) providing incentives in the form of cash bonus awards to certain officers and other employees of the Company and its Affiliates. With respect to any awards granted under the Plan that are intended to comply with the requirements of “performance-based compensation” under Section 162(m) of the Code, the Plan shall be interpreted in a manner consistent with such requirements.
1.2. Amendment and Restatement. This Plan amends and restates the Triangle Capital Corporation Amended and Restated 2007 Equity Incentive Plan, approved by stockholders on May 7, 2008 (the “Prior Plan”), in its entirety. The date of this amendment and restatement is May __, 2017, the date of the Plan's adoption by the Company's stockholders (the “Effective Date”).
1.3 Plan Merger. As of the Effective Date, the Triangle Capital Corporation 2012 Cash Incentive Plan (the “Umbrella Plan”) was merged into the Prior Plan, with the resulting name of the plan being the Triangle Capital Corporation Omnibus Incentive Plan. All Awards (as defined below) granted pursuant to the Prior Plan and the Umbrella Plan shall remain in effect without modification following the plan merger, amendment and restatement and name change. All Awards granted subsequent to the Effective Date shall be subject to the terms of this Plan.
As used in the Plan, the following terms shall have the meanings set forth below:
(a) “1940 Act” means the Investment Company Act of 1940, as amended.
(b) “Affiliate” shall mean any wholly-owned consolidated subsidiary of the Company.
(c) “Award” shall mean any Cash Award, Option or Restricted Share Award granted under the Plan, whether singly, in combination or in tandem, to a Participant by the Board (or, in the case of Awards granted pursuant to Section
10, by the Compensation Committee) pursuant to such terms, conditions, restrictions and/or limitations, if any, as the Board (or, in the case of Awards granted pursuant to Section 10, as the Compensation Committee) may establish or which are required by applicable legal requirements.
(d) “Award Agreement” shall mean any written agreement, contract or other instrument or document evidencing any Award, which may, but need not, be executed or acknowledged by a Participant.
(e) “Board” shall mean the Board of Directors of the Company.
(f) “Cash Award” shall mean (i) prior to the Effective Date, Awards granted under the Umbrella Plan; and (ii) following the Effective Date, any cash bonus award made pursuant to Section 5 of this Plan.
(g) “Cause” shall mean, unless otherwise defined in the applicable Award Agreement, (i) the engaging by the Participant in willful misconduct that is injurious to the Company or its Affiliates, or (ii) the embezzlement or misappropriation of funds or property of the Company or its Affiliates by the Participant. For purposes of this paragraph, no act, or failure to act, on the Participant's part shall be considered “willful” unless done, or omitted to be done, by the Participant not in good faith and without reasonable belief that the Participant's action or omission was in the best interest of the Company. Any determination of Cause for purposes of the Plan or any Award shall be made by the Board in its sole discretion. Any such determination shall be final and binding on a Participant.
(h) “Change in Control” shall mean, unless otherwise defined in the applicable Award Agreement, any of the following events:
(i) any person or entity, including a “group” as defined in Section 13(d)(3) of the Exchange Act, other than the Company or an Affiliate thereof or any employee benefit plan of the Company or any of its Affiliates, becomes the beneficial owner of the Company's securities having 35% or more of the combined voting power of the then outstanding securities of the Company that may be cast for the election of directors of the Company (other than as a result of an issuance of securities initiated by the Company in the ordinary course of business);
(ii) as the result of, or in connection with, any cash tender or exchange offer, merger or other business combination or contested election, or any combination of the foregoing transactions, less than a majority of the combined voting power of the then outstanding securities of the Company or any successor company or entity entitled to vote generally in the election of the directors of the Company or such other corporation or entity after such transaction are held in the aggregate by the holders of the Company's securities entitled to vote generally in the election of directors of the Company immediately prior to such transaction;
(iii) during any period of two (2) consecutive years, individuals who at the beginning of any such period constitute the Board cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by the Company's stockholders, of each Director of the Company first elected during such period was approved
by a vote of at least two-thirds (2/3rds) of the Directors of the Company then still in office who were (i) Directors of the Company at the beginning of any such period, and (ii) not initially (a) appointed or elected to office as result of either an actual or threatened election and/or proxy contest by or on behalf of a Person other than the Board, or (b) designated by a Person who has entered into an agreement with the Company to effect a transaction described in (i) or (ii) above or (iv) or (v) below;
(iv) a complete liquidation or dissolution of the Company; or
(v) the sale or other disposition of all or substantially all of the assets of the Company to any Person (other than a transfer to an Affiliate).
(i) “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.
(j) “Committee” shall mean a committee of two or more members of the Board appointed by the Board in accordance with Section 3.3; provided that with respect to Awards granted pursuant to Section 10 hereof, the “Committee” shall be the Compensation Committee of the Company, which shall consist of not less than two “Outside Directors” as defined in Section 162(m).
(k) “Covered Officer” shall mean at any date (i) any individual who, with respect to the previous taxable year of the Company, was a “covered employee” of the Company within the meaning of Section 162(m) of the Code; provided, however, that the term “Covered Officer” shall not include any such individual who is designated by the Board, in its discretion, at the time of any Award or at any subsequent time, as reasonably expected not to be such a “covered employee” with respect to the current taxable year of the Company and (ii) any individual who is designated by the Board, in its discretion, at the time of any Award or at any subsequent time, as reasonably expected to be such a “covered employee” with respect to the current taxable year of the Company or with respect to the taxable year of the Company in which any applicable Award will be paid or vested.
(l) “Director” shall mean a member of the Board.
(m) “Disability” shall mean, unless otherwise defined in the applicable Award Agreement, a disability that would qualify as a total and permanent disability under the Company's then current long-term disability plan.
(n) “Employee” shall mean an officer or employee of the Company or of any Affiliate.
(o) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time.
(p) “Fair Market Value” with respect to the Shares, shall mean, for purposes of a grant of an Option or Restricted Share Award as of any date, (i) the closing sales price of the Shares on the New York Stock Exchange, or any other such exchange on which the Shares are traded, on such date, or (ii) in the event there is no public market for the Shares on such date, the fair market value as determined, in good faith, by the Board in its sole discretion (which, for purposes of Section 6.2, will in no event will be less than the net asset value of such Shares on such date, as determined in
accordance with the 1940 Act and the rules thereunder), and for purposes of a sale of a Share as of any date, the actual sales price on that date.
(q) “Incentive Stock Option” shall mean an option to purchase Shares from the Company that is granted under Section 6 of the Plan and that is intended to meet the requirements of Section 422 of the Code or any successor provision thereto.
(r) “Non-Qualified Stock Option” shall mean an option to purchase Shares from the Company that is granted under Sections 6 or 9 of the Plan and is not intended to be an Incentive Stock Option.
(s) “Non-Employee Director” shall mean a Director who is not an officer or employee of the Company.
(t) “Option” shall mean an Incentive Stock Option or a Non-Qualified Stock Option.
(u) “Option Price” shall mean the purchase price payable to purchase one Share upon the exercise of an Option.
(v) “Participant” shall mean any Employee or Director.
(w) “Performance Award” shall mean any Award granted under Section 8 of the Plan.
(x) “Performance Period” shall mean the Company’s fiscal year or any portion (or multiples ) thereof designated by the Board (or, in the case of Awards granted pursuant to Section 10, by the Compensation Committee) as the Performance Period.
(y) “Performance Goals” shall mean one or more of the following Company, Affiliate, operating unit or division financial performance measures: total investment income; net investment income; net investment income per share; realized and unrealized gains and losses; net increase in net assets resulting from operations per share; overall credit performance of the investment portfolio; liquidity; operating efficiency performance; growth and diversification of the overall investment portfolio; sustaining and growing dividend distributions to stockholders; return on average stockholders’ equity; net asset value; or any combination thereof.
(z) “Person” shall mean any individual, corporation, partnership, limited liability company, association, joint-stock company, trust, unincorporated organization, government or political subdivision thereof or other entity.
(aa) “Restricted Share” or “Restricted Share Award” shall mean any Share granted under Sections 7 or 9 of the Plan.
(ab) “Retirement” shall mean, unless otherwise defined in the applicable Award Agreement, retirement of a Participant from the employ or service of the Company or any of its Affiliates in accordance with the terms of the applicable Company retirement plan or, if a Participant is not covered by any such plan, retirement on or after such Participant's 65th birthday.
(ac) “SEC” shall mean the Securities and Exchange Commission or any successor thereto.
(ad) “Section 16” shall mean Section 16 of the Exchange Act and the rules promulgated thereunder and any successor provision thereto as in effect from time to time.
(ae) “Section 162(m)” shall mean Section 162(m) of the Code and the regulations promulgated thereunder and any successor provision thereto as in effect from time to time.
(af) “Shares” shall mean shares of the common stock, $0.001 par value, of the Company.
(ag) “Substitute Awards” shall mean Awards granted solely in assumption of, or in substitution for, outstanding awards previously granted by a company acquired by the Company or with which the Company combines.
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Section 3. | Administration and Eligibility.
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3.1. Administration by the Board. Except with respect to Awards granted pursuant to Section 10 hereof (in which case the Compensation Committee shall administer the Plan), the Board shall administer the Plan unless and until it delegates administration to a Committee, as provided in Section 3.3 hereof.
3.2. Powers of the Board. The Board shall have the power (except with respect to Awards granted pursuant to Section 10 hereof, in which case the Compensation Committee shall have the power), subject to the express provisions of the Plan and applicable law:
(a) To determine from time to time which of the persons eligible under the Plan shall be granted Awards; when and how each Award shall be granted and documented; what type or combination of types of Awards shall be granted; the provision of each Award granted, including the size, terms and time or times when a Participant shall be permitted to exercise or be paid for an Award; the number of Shares with respect to which an Award shall be granted to each such Participant; the amount of any payments pursuant to such Awards and the Performance Period to which they relate; any employment restrictions on actual receipt of payments pursuant to Awards, performance objectives in respect of such Performance Periods; to determine whether such performance objectives were attained and to modify the terms of any Award that has been granted. Notwithstanding the foregoing powers of the Board, any grants of Awards to Non-Employee Directors under the Plan shall be automatic and shall not be changed without SEC approval, and the issuance of any Award to an Employee will be approved by the required majority, as defined in Section 57(o) of the 1940 Act, of the Company's directors on the basis that such issuance is in the best interests of the Company and its stockholders.
(b) To construe and interpret the Plan and Awards granted under it, and to establish, amend and revoke rules and regulations for its administration. The Board (except with respect to Awards granted pursuant to Section 10 hereof, in which case the Compensation Committee), in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Award documentation, in such manner and to such extent as it shall deem necessary or expedient to make the Plan fully effective.
(c) To amend the Plan or an Award as provided in Section 13.
(d) To terminate or suspend the Plan as provided in Section 13.
(e) Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company and that are not in conflict with the provisions of the Plan.
3.3. Delegation to Committee. Except with respect to Awards granted pursuant to Section 10 hereof (in which case the Compensation Committee shall administer the Plan), the Board may delegate administration of the Plan to a Committee or Committees of three (3) or more members of the Board, and the term “Committee” shall apply to any persons to whom such authority has been delegated. If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board, including the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board, other than the Board reference at the end of this sentence and Board references in the last sentence of this Section 3.3 shall thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. Except with respect to Awards granted pursuant to Section 10 hereof (in which case the Compensation Committee shall administer the Plan), the Board may abolish the Committee at any time and revest in the Board the administration of the Plan.
3.4. Effects of Board's Decision. Determinations, interpretations and constructions made by the Board (except with respect to Awards granted pursuant to Section 10 hereof, in which case determinations, interpretations and constructions shall be made by the Compensation Committee) in good faith shall not be subject to review by any person and shall be final, binding and conclusive on all persons.
3.5 Eligibility. All Covered Officers shall be eligible to participate in the Plan. The Board shall determine additional Employees or Directors who shall be eligible to participate in the Plan; provided, however, that Non-Employee Directors shall only be eligible to receive Awards of Restricted Shares granted consistent with Section 9. The designation of Participants shall be made individually or by groups or classifications of employees, as the Board deems appropriate.
Section 4. Shares Available For Awards.
4.1. Shares Available. Subject to the provisions of Section 4.5 hereof, the stock to be subject to Awards under the Plan shall be the Shares of the Company and the maximum number of Shares with respect to which Awards may be granted under the Plan shall be 4,000,000. If, after the effective date of the Plan, any Shares covered by an Award granted under this Plan, or to which such an Award relates, are forfeited, or if such an Award is settled for cash or otherwise terminates, expires unexercised or is canceled or settled without the delivery of Shares or with the delivery of a reduced number of Shares, then the Shares covered by such Award, or to which such Award relates, or the number of Shares otherwise counted against the aggregate number of Shares with respect to which Awards may be granted, to the extent of any such settlement, reduction, forfeiture, termination, expiration or cancellation, shall again become Shares with respect
to which Awards may be granted. In the event that any Award granted hereunder is exercised through the delivery of Shares or in the event that withholding tax liabilities arising from such Award are satisfied by the withholding of Shares by the Company, the number of Shares available for Awards under the Plan shall be increased by the number of Shares so surrendered or withheld.
4.2. Limits on Grants of Individual Awards.
(a) No individual Participant shall be granted Options under the Plan in any calendar year that relate to more than 100,000 Shares.
(b) No individual Participant shall be granted Awards under the Plan relating to more than 25% of the Shares reserved for issuance.
4.3. Limits on Grants of Restricted Shares. The combined maximum amount of Restricted Shares that may be issued under the Plan will be 10% of the outstanding Shares on the Effective Date (as defined in Section 15.1 below) plus 10% of the number of Shares issued or delivered by the Company (other than pursuant to compensation plans) during the term of the Plan.
4.4. Limits on Number of Awards. The amount of voting securities that would result from the exercise of all of the Company's outstanding warrants, options and rights, together with any Restricted Shares issued pursuant to the Plan, at the time of issuance shall not exceed 25% of the outstanding voting securities of the Company, except that if the amount of voting securities that would result from the exercise of all of the Company's outstanding warrants, options, and rights issued to the Company's directors, officers, and employees, together with any Restricted Shares issued pursuant to the Plan, would exceed 15% of the outstanding voting securities of the Company, then the total amount of voting securities that would result from the exercise of all outstanding warrants, options, and rights, together with any Restricted Shares issued pursuant to the Plan, at the time of issuance shall not exceed 20% of the outstanding voting securities of the Company.
4.5. Adjustments. In the event that any dividend or other distribution (whether in the form of cash, Shares, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company, or other similar corporate transaction or event affects the Shares, then the Board shall in an equitable and proportionate manner (and, as applicable, in such manner as is consistent with Sections 422 and 409A of the Code and the regulations thereunder and with Section 162(m)): (i) adjust any or all of (1) the aggregate number of Shares or other securities of the Company (or number and kind of other securities or property) with respect to which Awards may be granted under the Plan; (2) the number of Shares or other securities of the Company (or number and kind of other securities or property) subject to outstanding Awards under the Plan, provided that the
number of shares subject to any Award shall always be a whole number; (3) the grant or exercise price with respect to any Award under the Plan (but only provided that the SEC has issued an exemptive order or the SEC's staff has provided written confirmation allowing the Company to do so); and (4) the limits on the number of Shares that may be granted to Participants under the Plan in any calendar year; (ii) provide for an equivalent award in respect of securities of the surviving entity of any merger, consolidation or other transaction or event having a similar effect; (iii) make provision for a cash payment to the holder of an outstanding Award; or (iv) adjust a Cash Award as the Company deems equitable.
4.6. Substitute Awards. Any Shares issued by the Company as Substitute Awards in connection with the assumption or substitution of outstanding grants from any acquired corporation shall not reduce the Shares available for Awards under the Plan.
4.7. Sources of Shares Deliverable Under Awards. Any Shares delivered pursuant to an Award may consist, in whole or in part, of authorized and unissued Shares or of issued Shares which have been reacquired by the Company.
4.8. No Grants in Contravention of 1940 Act. No Award may be granted under the Plan if the grant of such Award would cause the Company to violate Section 61(a)(3) of the Act, and, if otherwise approved for grant, shall be void and of no effect. The grants of Awards under the Plan to Non-Employee Directors shall be automatic and shall not be changed without SEC approval.
Section 5. Cash Awards.
5.1 Scope. Each year the Board (except with respect to Awards granted pursuant to Section 10 hereof, in which case the Compensation Committee) will establish award opportunities and performance targets for the determination of potential Cash Awards hereunder. Award opportunities shall be set as a percentage of base salary. Following the close of a Performance Period, the Board (except with respect to Awards granted pursuant to Section 10 hereof, in which case the Compensation Committee) shall evaluate the Company’s actual performance against the performance targets to determine the actual bonus to be paid.
5.2 Performance Goals. Cash Awards to Participants shall be based solely upon the attainment of performance targets related to one or more Performance Goals selected by the Board (except with respect to Awards granted pursuant to Section 10 hereof, in which case the Compensation Committee). For purposes of this Section 5, the formula on which performance targets are based with respect to Cash Awards under this Plan shall be based on one or more of the Performance Goals. Each performance target may be expressed on an absolute and/or relative basis, may be based on or otherwise employ comparisons based on internal targets, the past performance of the Company or any Affiliate, operating unit or division of the Company and/or the past or current performance of other companies, may exclude appropriate pre-determined line items of income or expense, and in the case of earnings-based measures, may use or employ comparisons relating to capital, stockholders’ equity and/or shares of common stock outstanding, or to assets or net assets. The Board
(except with respect to Awards granted pursuant to Section 10 hereof, in which case the Compensation Committee) may appropriately adjust any evaluation of performance under criteria set forth in this Section 5.2 to exclude any of the following events that occurs during a Performance Period: (i) asset impairments or write-downs, (ii) litigation or claim judgments or settlements, (iii) the effect of changes in tax law, accounting principles or other such laws or provisions affecting reported results, (iv) accruals for reorganization and restructuring programs, (v) any extraordinary non-recurring items as described in Accounting Principles Board Opinion No. 30 and/or in management’s discussion and analysis of financial condition and results of operations appearing in the Company’s annual report to stockholders for the applicable year, and (vi) the effect of adverse or delayed federal, state or local governmental or regulatory action; provided that the Board (except with respect to Awards granted pursuant to Section 10 hereof, in which case the Compensation Committee) commits to make any such adjustments within the 90 day period set forth in Section 10.3 below.
5.3 Payment. The amount of a Cash Award payable as determined by the Board (except with respect to Awards granted pursuant to Section 10 hereof, in which case the Compensation Committee) for the Performance Period shall be paid to the participant at such time as determined by the Board (except with respect to Awards granted pursuant to Section 10 hereof, in which case the Compensation Committee) in its sole discretion after the end of the Performance Period, but in all events by such time as is necessary for the payment to qualify as a “short-term deferral” pursuant to Section 1.409A-1(b)(4) of the United States Treasury Regulations; provided, that the Board (except with respect to Awards granted pursuant to Section 10 hereof, in which case the Compensation Committee) may provide for elective deferrals that comply with the requirements of Section 409A of the Code. Payment shall be made in cash. Except as the Board (except with respect to Awards granted pursuant to Section 10 hereof, in which case the Compensation Committee) may otherwise determine in its sole and absolute discretion, termination of a Participant’s employment prior to the end of the Performance Period will result in the forfeiture of the award by the Participant, and no payments shall be made with respect thereto.
Section 6. Stock Options.
6.1. Grant. The Board (except with respect to Awards granted pursuant to Section 10 hereof, in which case the Compensation Committee) shall have sole and complete authority to determine the Participants to whom Options shall be granted, the number of Shares subject to each Award, the exercise price (subject to Section 6.2 below) and the conditions and limitations applicable to the exercise of each Option. The Board shall have the authority to grant Incentive Stock Options, and to grant Non-Qualified Stock Options; provided that no Incentive Stock Options shall be issued more than ten (10) years after the Effective Date. In the case of Incentive Stock Options, the terms and conditions of such grants shall be subject to and comply with Section 422 of the Code, as from time to time amended, and any regulations implementing such statute. A person who has been granted an Option under this Plan may be granted additional Options under the Plan if the Board shall so determine; provided, however, that to the extent the aggregate Fair Market Value (determined at the time
the Incentive Stock Option is granted) of the Shares with respect to which all Incentive Stock Options are exercisable for the first time by an Employee during any calendar year (under all plans described in of Section 422(d) of the Code of the Employee's employer corporation and its parent and Affiliates) exceeds $100,000, such Options shall be treated as Non-Qualified Stock Options.
6.2. Price. The Board in its sole discretion shall establish the Option Price at the time each Option is granted. Except in the case of Substitute Awards, the Option Price of an Option may not be less than one hundred percent (100%) of the Fair Market Value of the Shares with respect to which the Option is granted on the date of grant of such Option. Once established, the Option Price of any Option may not be changed absent an exemptive order from the SEC or written confirmation from its staff allowing the Company to do so.
6.3. Term. Subject to the Board's authority under Section 3.2 and the provisions of Section 6.5, each Option and all rights and obligations thereunder shall expire on the date determined by the Board and specified in the Award Agreement. The Board shall be under no duty to provide terms of like duration for Options granted under the Plan. Notwithstanding the foregoing, no Option shall be exercisable after the expiration of ten (10) years from the date such Option was granted.
6.4. Exercise.
(a) Each Option shall be exercisable at such times and subject to such terms and conditions as the Board may, in its sole discretion, specify in the applicable Award Agreement or thereafter. The Board shall have full and complete authority to determine, subject to Section 6.5 herein, whether an Option will be exercisable in full at any time or from time to time during the term of the Option, or to provide for the exercise thereof in such installments, upon the occurrence of such events and at such times during the term of the Option as the Board may determine.
(b) The Board may impose such conditions with respect to the exercise of Options, including without limitation, any relating to the application of federal, state or foreign securities laws or the Code, as it may deem necessary or advisable. The exercise of any Option granted hereunder shall be effective only at such time as the sale of Shares pursuant to such exercise will not violate any state or federal securities or other laws.
(c) An Option may be exercised in whole or in part at any time, with respect to whole Shares only, within the period permitted thereunder for the exercise thereof, and shall be exercised by written notice of intent to exercise the Option, delivered to the Company at its principal office, and payment in full to the Company at the direction of the Board of the amount of the Option Price for the number of Shares with respect to which the Option is then being exercised.
(d) Payment of the Option Price shall be made in cash or cash equivalents, or, at the discretion of the Board, (i) by transfer, either actually or by attestation, to the Company of Shares that have been held by the Participant for
at least six (6) months (or such lesser period as may be permitted by the Board), valued at the Fair Market Value of such Shares on the date of exercise, together with any applicable withholding taxes, such transfer to be upon such terms and conditions as determined by the Board, or (ii) by a combination of such cash (or cash equivalents) and such Shares; provided, however, that the optionee shall not be entitled to tender Shares pursuant to successive, substantially simultaneous exercises of an Option or any other stock option of the Company. Subject to applicable securities laws, an Option may also be exercised by delivering a notice of exercise of the Option and simultaneously selling the Shares thereby acquired, pursuant to a brokerage or similar agreement approved in advance by proper officers of the Company, using the proceeds of such sale as payment of the Option Price, together with any applicable withholding taxes. Until the optionee has been issued the Shares subject to such exercise, he or she shall possess no rights as a stockholder with respect to such Shares.
6.5. Ten Percent Stock Rule. Notwithstanding any other provisions in the Plan, if at the time an Option is otherwise to be granted pursuant to the Plan, the optionee or rights holder owns directly or indirectly (within the meaning of Section 424(d) of the Code) Shares of the Company possessing more than ten percent (10%) of the total combined voting power of all classes of Stock of the Company or its parent or Affiliate corporations (within the meaning of Section 422(b)(6) of the Code), then any Incentive Stock Option to be granted to such optionee or rights holder pursuant to the Plan shall satisfy the requirement of Section 422(c)(5) of the Code, and the Option Price shall be not less than one hundred ten percent (110%) of the Fair Market Value of the Shares of the Company, and such Option by its terms shall not be exercisable after the expiration of five (5) years from the date such Option is granted.
Section 7. Restricted Shares.
7.1. Grant.
(a) Subject to the provisions of the Plan and other applicable legal requirements, the Board (except with respect to Awards granted pursuant to Section 10 hereof, in which case the Compensation Committee) shall have sole and complete authority to determine the Participants to whom Restricted Shares shall be granted, the number of Restricted Shares to be granted to each Participant, the duration of the period during which, and the conditions under which, the Restricted Shares may be forfeited to the Company, and the other terms and conditions of such Awards. The Restricted Share Awards shall be evidenced by Award Agreements in such form as the Board shall from time to time approve, which agreements shall comply with and be subject to the terms and conditions provided hereunder and any additional terms and conditions established by the Board that are consistent with the terms of the Plan.
(b) Each Restricted Share Award made under the Plan shall be for such number of Shares as shall be determined by the Board and set forth in the Award Agreement containing the terms of such Restricted Share Award. Such agreement shall set forth a period of time during which the grantee must remain in the continuous employment of the
Company in order for the forfeiture and transfer restrictions to lapse. If the Board so determines, the restrictions may lapse during such restricted period in installments with respect to specified portions of the Shares covered by the Restricted Share Award. The Award Agreement may also, in the discretion of the Board, set forth performance or other conditions that will subject the Shares to forfeiture and transfer restrictions. The Board may, at its discretion, waive all or any part of the restrictions applicable to any or all outstanding Restricted Share Awards.
(c) Notwithstanding Sections 7.1(a) and 7.1(b) hereof, any grants of Restricted Shares to Non-Employee Directors under the Plan shall be automatic and shall not be changed without SEC approval.
7.2. Delivery of Shares and Transfer Restrictions. At the time of a Restricted Share Award, a certificate representing the number of Shares awarded thereunder shall be registered in the name of the grantee. Such certificate shall be held by the Company or any custodian appointed by the Company for the account of the grantee subject to the terms and conditions of the Plan, and shall bear such a legend setting forth the restrictions imposed thereon as the Board, in its discretion, may determine. The applicable Award Agreement will specify whether a grantee has the right to receive dividends with respect to the Restricted Shares prior to the lapsing of transfer restrictions. Unless otherwise provided in the applicable Award Agreement, the grantee shall have all other rights of a stockholder with respect to the Restricted Shares, including the right to vote such Shares, subject to the following restrictions: (i) the grantee shall not be entitled to delivery of the stock certificate until the expiration of the restricted period and the fulfillment of any other restrictive conditions set forth in the Award Agreement with respect to such Shares; (ii) none of the Shares may be transferred except for disposition by gift, will or the laws of descent and distribution during such restricted period or until after the fulfillment of any such other restrictive conditions; and (iii) except as otherwise determined by the Board at or after grant, all of the Shares shall be forfeited and all rights of the grantee to such Shares shall terminate, without further obligation on the part of the Company, unless the grantee remains in the continuous employment of the Company for the entire restricted period in relation to which such Shares were granted and unless any other restrictive conditions relating to the Restricted Share Award are met. Unless otherwise provided in the applicable Award Agreement, any Shares, any other securities of the Company and any other property (except for cash dividends) distributed with respect to the Shares subject to Restricted Share Awards shall be subject to the same restrictions, terms and conditions as such restricted Shares.
7.3. Termination of Restrictions. At the end of the restricted period and provided that any other restrictive conditions of the Restricted Share Award are met, or at such earlier time as otherwise determined by the Board, all restrictions set forth in the Award Agreement relating to the Restricted Share Award or in the Plan shall lapse as to the restricted Shares subject thereto, and a stock certificate for the appropriate number of Shares, free of the restrictions and restricted stock legend, shall be delivered to the Participant or the Participant's beneficiary or estate, as the case may be.
Section 8. Performance Awards.
8.1. Grant. The Board (except with respect to Awards granted pursuant to Section 10 hereof, in which case, the Compensation Committee) shall have sole and complete authority to determine the Employees who shall receive a Performance Award, which shall consist of a right that is (i) Shares (including but not limited to Restricted Shares), denominated with a value in cash or by number of Shares , (ii) valued, as determined by the Board, in accordance with the achievement of such Employees' individual performance goals during such Performance Periods as the Board shall establish, and (iii) payable at such time and in such form as the Board shall determine.
8.2. Terms and Conditions. Subject to the terms of the Plan and any applicable Award Agreement, the Board shall determine the performance goals to be achieved during any Performance Period, the length of any Performance Period, the amount of any Performance Award and the amount and kind of any payment or transfer to be made pursuant to any Performance Award, and may amend specific provisions of the Performance Award; provided, however, that such amendment may not adversely affect existing Performance Awards made within a Performance Period commencing prior to implementation of the amendment.
8.3. Payment of Performance Awards. Performance Awards may be paid in a lump sum or in installments following the close of the Performance Period or, in accordance with the procedures established by the Board, on a deferred basis. Termination of employment prior to the end of any Performance Period, other than for reasons of death or Disability, will result in the forfeiture of the Performance Award, and no payments will be made. An employee's rights to any Performance Award may not be sold, assigned, transferred, pledged, hypothecated or otherwise encumbered or disposed of in any manner, except by will or the laws of descent and distribution, and/or except as the Board may determine at or after grant.
Section 9. Non-Employee Director Awards.
9.1. Each Non-Employee Director shall receive a grant of Restricted Shares at the beginning of each one-year term of service on the Board, for which forfeiture restrictions will lapse at the end of that year. The number of Restricted Shares granted to each Non-Employee Director shall be the equivalent of $50,000 worth of Shares based on the market value at the close of the New York Stock Exchange on the date of grant. In addition, the Board may provide that all or a portion of a Non-Employee Director's annual retainer, meeting fees and/or other awards or compensation as determined by the Board, be payable in Shares reserved under the Plan and available for issuance. The Board shall determine the terms and conditions of any such Awards, including the terms and conditions which shall apply upon a termination of the Non-Employee Director's service as a member of the Board, and shall have full power and authority in its discretion to administer such Awards, subject to the terms of the Plan and applicable law.
9.2. Subject to applicable legal requirements and Section 9.3 below, the Board may also grant Awards to Non-Employee Directors pursuant to the terms of the Plan, including any Award described in Sections 6 or 7 above.
9.3. Any grants of Awards to Non-Employee Directors under the Plan shall be automatic and shall not be changed without SEC approval.
Section 10. Provisions Applicable To Covered Officers And Performance Awards.
10.1. Generally. Notwithstanding anything in the Plan to the contrary, unless the Board determines that a Performance Award to be granted to a Covered Officer should not qualify as “performance-based compensation” for purposes of Section 162(m), Performance Awards granted to Covered Officers shall be subject to the terms and provisions of this Section 10. Accordingly, unless otherwise determined by the Board or the Compensation Committee, if any provision of the Plan or any Award Agreement relating to such an Award does not comply or is inconsistent with Section 162(m), such provision shall be construed or deemed amended to the extent necessary to conform to such requirements, and no provision shall be deemed to confer upon the Board or the Compensation Committee discretion to increase the amount of compensation otherwise payable to a Covered Officer in connection with any such Award upon the attainment of the performance criteria established by the Board or the Compensation Committee.
10.2. Maximum Awards. With respect to any Covered Officer, (i) the maximum annual number of Shares in respect of which all Performance Awards may be granted under Section 8 of the Plan is 100,000, (ii) the maximum amount of all Performance Awards that are settled in cash and that may be granted under Section 8 of the Plan in any year is $1,000,000, and (iii) the maximum annual amount of a Cash Award granted under Section 5 in any year is $3,000,000.
10.3. Compliance. To the extent necessary to comply with Section 162(m), with respect to grants of Performance Awards and Cash Awards, no later than 90 days following the commencement of each Performance Period (or such other time as may be required or permitted by Section 162(m) of the Code), the Compensation Committee shall, in writing, (1) select from the Performance Goals the individual performance goal or goals applicable to the Performance Period (including Performance Goals as adjusted pursuant to Section 5.2), (2) establish the various targets and bonus amounts which may be earned for such Performance Period, and (3) specify the relationship between applicable Performance Goals and targets and the amounts to be earned by each Covered Officer for such Performance Period. Following the completion of each Performance Period, the Compensation Committee shall certify in writing whether the applicable performance targets have been achieved and the amounts, if any, payable to Covered Officers for such Performance Period. In determining the amount earned by a Participant for a given Performance Period, the Committee shall have the right to adjust the amount payable at a given level of performance to take into account additional factors that the Compensation Committee may deem relevant to the assessment of individual or corporate performance for the Performance Period;
provided, that with respect to any Covered Officer, the Compensation Committee may exercise the discretion described in this sentence only to reduce the amount otherwise payable to such Covered Officer.
Section 11. Termination Of Employment.
The Board (or in the case of Awards granted pursuant to Section 10, the Compensation Committee) shall have the full power and authority to determine the terms and conditions that shall apply to any Award upon a termination of employment with the Company and Affiliates, including a termination by the Company with or without Cause, by a Participant voluntarily, or by reason of death, Disability or Retirement, and may provide such terms and conditions in the Award Agreement or in such rules and regulations as it may prescribe.
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Section 12. | Change In Control.
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The Board (or in the case of Awards granted pursuant to Section 10, the Compensation Committee) may specify in the applicable Award Agreement at or after grant, or otherwise by resolution prior to a Change in Control, that all or a portion of the outstanding Awards shall vest, become immediately exercisable or payable and have all restrictions lifted upon a Change in Control.
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Section 13. | Amendment And Termination.
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13.1. Amendments to the Plan. The Board may amend, alter, suspend, discontinue or terminate the Plan or any portion thereof at any time; provided that the Board may amend the Plan in such a manner it deems necessary to permit the granting of Awards meeting the requirements of any applicable law, rule or regulation and provided further that the Board may amend the Plan without stockholder approval if such approval is necessary to comply with any tax or regulatory requirement.
13.2. Amendments to Awards. Subject to the restrictions of Sections 6.2 and 10 above and Section 13.5 below, the Board may waive any conditions or rights under, amend any terms of or alter, suspend, discontinue, cancel or terminate, any Award theretofore granted, prospectively or retroactively; provided that any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination that would materially and adversely affect the rights of any Participant or any holder or beneficiary of any Award theretofore granted shall not to that extent be effective without the consent of the affected Participant, holder or beneficiary.
13.3. Adjustments of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events. The Board is hereby authorized to make equitable and proportionate adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (and shall make such adjustments for events described in Section 4.5 hereof) affecting the Company or any Affiliate, or the financial statements of the Company or any Affiliate, or of changes in applicable laws, regulations or accounting principles.
13.4. Section 409A Compliance. No Award (or modification thereof) shall provide for deferral of compensation that does not comply with Section 409A of the Code unless the Board (or in the case of Awards granted pursuant to Section 10, the Compensation Committee), at the time of grant, specifically provides that the Award is not intended to comply with Section 409A of the Code. Notwithstanding any provision of this Plan to the contrary, if one or more of the payments or benefits received or to be received by a Participant pursuant to an Award would cause the Participant to incur any additional tax or interest under Section 409A of the Code, the Board may reform such provision to maintain to the maximum extent practicable the original intent of the applicable provision without violating the provisions of Section 409A of the Code.
13.5. Exercise Price of Awards. Once established, the exercise price of an Award shall not be changed absent an exemptive order from the SEC or written confirmation from its staff that the Company may do so.
Section 14. General Provisions.
14.1. Limited Transferability of Awards. Except as otherwise provided in the Plan, no Award shall be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant, except by gift, will or the laws of descent and distribution. In addition, no transfer or disposition of an Award shall be effective to bind the Company unless the Company shall have been furnished with written notice thereof and an authenticated copy of the gift affidavit, will and/or such other evidence as the Board may deem necessary or appropriate to establish the validity of the transfer.
14.2. Dividends. In the sole and complete discretion of the Board (or in the case of Awards granted pursuant to Section 10, the Compensation Committee), an Award may provide the Participant with dividends, payable in cash, Shares, other securities or other property on a current or deferred basis. All dividends which are not paid currently may, at the discretion of the Board (or in the case of Awards granted pursuant to Section 10, the Compensation Committee), accrue interest, be reinvested into additional Shares, or, in the case of dividends credited in connection with Performance Awards, be credited as additional Performance Awards and paid to the Participant if and when, and to the extent that, payment is made pursuant to such Award. The total number of Shares available for grant under Section 4 shall not be reduced to reflect any dividends that are reinvested into additional Shares or credited as Performance Awards.
14.3. No Rights to Awards. No Person shall have any claim to be granted any Award, and there is no obligation for uniformity of treatment of Participants or holders or beneficiaries of Awards. The terms and conditions of Awards need not be the same with respect to each Participant.
14.4. Share Certificates. All certificates for Shares or other securities of the Company or any Affiliate delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Board (or in the case of Awards granted pursuant to Section 10, the Compensation Committee) may deem advisable under the Plan or the rules, regulations and other requirements of the SEC or any state securities
commission or regulatory authority, any stock exchange or other market upon which such Shares or other securities are then listed, and any applicable Federal or state laws, and the Board (or in the case of Awards granted pursuant to Section 10, the Compensation Committee) may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.
14.5. Withholding and Offset. A Participant may be required to pay to the Company or any Affiliate any applicable withholding or other tax-related obligations in respect of an Award, its exercise or any other transaction involving an Award, including the vesting thereof, or any payment or transfer under an Award or under the Plan. In connection therewith, the Participant shall have the right to request that the Company or any Affiliate withhold from any Award, from any payment due or transfer made under any Award or under the Plan, or from any compensation or other amount owed by the Participant the amount in cash, Shares or other securities, necessary to satisfy withholding obligations under tax rules. The Board may provide for additional cash payments to holders of Options to defray or offset any tax arising from the grant, vesting, exercise or payment of any Award. The Board, in its sole discretion, may reduce any amounts otherwise payable to any Participant hereunder in order to satisfy any liabilities owed to the Company or any of its Affiliates by the Participant, but only to the extent any such offset complies with the requirements of Section 409A of the Code and the guidance issued thereunder.
14.6. Award Agreements. Each Award hereunder shall be evidenced by an Award Agreement that shall be delivered to the Participant and may specify the terms and conditions of the Award and any rules applicable thereto. In the event of a conflict between the terms of the Plan and any Award Agreement, the terms of the Plan shall prevail. The Board (or in the case of Awards granted pursuant to Section 10, the Compensation Committee) shall, subject to applicable law, determine the date an Award is deemed to be granted. The Board (or in the case of Awards granted pursuant to Section 10, the Compensation Committee) or, except to the extent prohibited under applicable law, its delegate(s) may establish the terms of agreements or other documents evidencing Awards under this Plan and may, but need not, require as a condition to any such agreement's or document's effectiveness that such agreement or document be executed by the Participant, including by electronic signature or other electronic indication of acceptance, and that such Participant agree to such further terms and conditions as specified in such agreement or document. The grant of an Award under this Plan shall not confer any rights upon the Participant holding such Award other than such terms, and subject to such conditions, as are specified in this Plan as being applicable to such type of Award (or to all Awards) or as are expressly set forth in the agreement or other document evidencing such Award.
14.7. No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent the Company or any Affiliate from adopting or continuing in effect other compensation arrangements, which may, but need not, provide for the grant of Options or Restricted Shares.
14.8. No Right to Employment. The grant of an Award shall not be construed as giving an Employee the right to be retained in the employ of the Company or any Affiliate. Further, the Company or an Affiliate may at any time dismiss an Employee from employment, free from any liability or any claim under the Plan, unless otherwise expressly provided in an Award Agreement.
14.9. No Rights as Stockholder. Subject to the provisions of the Plan and the applicable Award Agreement, no Participant or holder or beneficiary of any Award shall have any rights as a stockholder with respect to any Shares to be distributed under the Plan until such person has become a holder of such Shares. Notwithstanding the foregoing, in connection with each grant of Restricted Shares hereunder, the applicable Award Agreement shall specify if and to what extent the Participant shall not be entitled to the rights of a stockholder in respect of such Restricted Shares.
14.10. Governing Law. The validity, construction and effect of the Plan and any rules and regulations relating to the Plan and any Award Agreement shall be determined in accordance with the laws of the State of Maryland without giving effect to conflicts of laws principles.
14.11. Severability. If any provision of the Plan or any Award is, or becomes, or is deemed to be invalid, illegal or unenforceable in any jurisdiction or as to any Person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Board, such provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Board, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person or Award and the remainder of the Plan and any such Award shall remain in full force and effect.
14.12. Other Laws. The Board may refuse to issue or transfer any Shares or other consideration under an Award if, acting in its sole discretion, it determines that the issuance or transfer of such Shares or such other consideration might violate any applicable law or regulation (including applicable non-U.S. laws or regulations) or entitle the Company to recover the same under Exchange Act Section 16(b), and any payment tendered to the Company by a Participant, other holder or beneficiary in connection with the exercise of such Award shall be promptly refunded to the relevant Participant, holder or beneficiary.
14.13. No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate and a Participant or any other Person. To the extent that any Person acquires a right to receive payments from the Company or any Affiliate pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company or any Affiliate.
14.14. No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Board shall determine whether cash, other securities or other property shall be paid or transferred in lieu of any
fractional Shares or whether such fractional Shares or any rights thereto shall be canceled, terminated or otherwise eliminated.
14.15. Headings. Headings are given to the sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof.
14.16. 1940 Act. No provision of this Plan shall contravene any portion of the 1940 Act, and in the event of any conflict between the provisions of the Plan or any Award and the 1940 Act, the applicable section of the 1940 Act shall control and all Awards under the Plan shall be so modified. All Participants holding such modified Awards shall be notified of the changes to their Awards and such change shall be binding on such Participant.
Section 15. Term Of The Plan.
15.1. Effective Date. The amendment and restatement of the Plan shall become effective upon approval by the stockholders of the Company and the Board; provided, however, that the Plan shall not be effective with respect to any Award to a Non-Employee Director or any award of Restricted Shares unless the Company has received an order from the SEC that permits such Award.
15.2. Expiration Date. No new Awards shall be granted under the Plan after the tenth anniversary of the Effective Date. Unless otherwise expressly provided in the Plan or in an applicable Award Agreement, any Award granted hereunder may, and the authority of the Board to amend, alter, adjust, suspend, discontinue or terminate any such Award or to waive any conditions or rights under any such Award shall, continue after the tenth anniversary of the Effective Date.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
TRIANGLE CAPITAL CORPORATION FOR THE 2017 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 3, 2017, 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, 3 and 5, and will be voted "THREE YEARS" for Proposal No. 4.
Please sign and date this proxy on the reverse side and return it in the enclosed envelope.
(CONTINUED ON REVERSE SIDE)
PRELIMINARY FORM OF PROXY CARD
SUBJECT TO COMPLETION
DATED FEBRUARY 23, 2024
PRELIMINARY FORM OF PROXY CARD
SUBJECT TO COMPLETION
DATED FEBRUARY 23, 2024
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ANNUAL MEETING OF STOCKHOLDERS
TRIANGLE CAPITAL CORPORATION
May 3, 2017
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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, 3 AND 5 and "THREE YEARS" for PROPOSAL NO. 4.
PRELIMINARY FORM OF PROXY CARD
SUBJECT TO COMPLETION
DATED FEBRUARY 23, 2024
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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 2018 Annual Meeting and until their successors have been duly elected and qualified. | | Board of Directors Recommendation | FOR
| | AGAINST
| | ABSTAIN
| |
E. Ashton Poole | | | | | | For | ¨ | | ¨ | | ¨ | |
Steven C. Lilly | | | | | | For | ¨ | | ¨ | | ¨ | |
Garland S. Tucker, III | | | | | | For | ¨ | | ¨ | | ¨ | |
W. McComb Dunwoody | | | | | | For | ¨ | | ¨ | | ¨ | |
Mark M. Gambill | | | | | | For | ¨ | | ¨ | | ¨ | |
Benjamin S. Goldstein | | | | | | For | ¨ | | ¨ | | ¨ | |
Mark F. Mulhern | | | | | | For | ¨ | | ¨ | | ¨ | |
Simon B. Rich, Jr. | | | | | | For | ¨ | | ¨ | | ¨ | |
| | | | | | | | |
| | | FOR
| | AGAINST | | ABSTAIN | |
2. To approve a proposal to authorize the Company, pursuant to approval of its Board of Directors, to sell shares of its common stock or warrants, options or rights to acquire its common stock during the next year at a price below the Company’s then current net asset value (i.e., book value) per share, subject to certain conditions. | | For | ¨ | | ¨ | | ¨ | |
3. Advisory vote to approve the compensation of our named executive officers. | | For | ¨ | | ¨ | | ¨ | |
| | | | | | | | | | | | |
| | | | | | | ONE
YEAR
| | TWO
YEARS
| | THREE
YEARS
| ABSTAIN |
4. Advisory vote to determine whether a stockholder vote to approve the compensation of our named executive officers should occur every one, two or three years. | | Three
Years
| ¨ | | ¨ | | ¨ | ¨ |
| | | | | | | | | | | | |
| | | | | | | FOR
| | AGAINST | | ABSTAIN | |
5. To approve the Company’s Omnibus Incentive Plan. | | For | ¨ | | ¨ | | ¨ | |
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, 3 AND 5 and "THREE YEARS" for Proposal No. 4
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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| | | | IF HELD JOINTLY | | |