Item 10.
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Directors, Executive Officers and Corporate Governance
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Directors, Executive Officers and Key Employees
Our executive officers, directors and key employees and their positions are set forth below. The address for each executive officer, director and key employee is c/o Hercules Capital, Inc., 400 Hamilton
Avenue, Suite 310, Palo Alto, California 94301.
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Name
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Age
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Positions
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Interested Director:
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Manuel A. Henriquez
(1)
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53
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Chairman of the Board of Directors, President and Chief Executive Officer
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Independent Directors:
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Robert P. Badavas
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64
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Director
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Allyn C. Woodward, Jr.
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76
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Director
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Thomas J. Fallon
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55
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Director
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Susanne D. Lyons
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60
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Director
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Joseph F. Hoffman
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68
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Director
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Doreen Woo Ho
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69
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Director
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Executive Officers:
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Mark Harris
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46
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Chief Financial Officer and Chief Accounting Officer
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Melanie Grace
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48
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General Counsel and Chief Compliance Officer
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Scott Bluestein
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38
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Chief Investment Officer
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Andrew Olson
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34
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Vice President of Finance and Senior Controller
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(1)
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Mr. Henriquez is an interested person, as defined in section 2(a)(19) of the 1940 Act, of the Company due to his position as an executive officer of the Company.
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Set forth below is information, as of April 24, 2017, regarding Mr. Badavas, who is being nominated
for election as director of Hercules by our stockholders at the 2017 annual meeting, as well as information about our other current directors whose terms of office will continue after the annual meeting, including each directors (i) name
and age; (ii) a brief description of their recent business experience, including present occupations and employment during at least the past five years; (iii) directorships, if any, that each director holds and has held during the past
five years; and (iv) the year in which each person became a director of the Company. As the information that follows indicates, each nominee and each continuing director brings strong and unique experience, qualifications, attributes, and
skills to our board. This provides our board, collectively, with competence, experience, and perspective in a variety of areas, including: (i) corporate governance and board service; (ii) executive management, finance, and accounting;
(iii) venture capital financing with a technology-related focus; (iv) business acumen; and (v) an ability to exercise sound judgment.
1
Moreover, our and nominating and corporate governance committee believes that it is
important to seek nominees with a broad diversity of experience, professions, skills, geographic representation and backgrounds. Our nominating and corporate governance committee does not assign specific weights to particular criteria and no
particular criterion is necessarily applicable to all prospective nominees. We believe that the backgrounds and qualifications of the directors, considered as a group, should provide a significant composite mix of experience, knowledge and abilities
that will allow our board to fulfill its responsibilities. Our board does not have a specific diversity policy, but considers diversity of race, religion, national origin, gender, sexual orientation, disability, cultural background and professional
experiences in evaluating candidates for board membership.
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Name, Address, and Age
(1)
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Position(s)
held with
Company
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Term of Office
and Length of
Time Served
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Principal
Occupation(s) During Past
5 Years
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Other Directorships
Held by Director
or Nominee for Director
During the past 5 years
(2)
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Independent Directors
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Susanne D. Lyons (60)
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Director
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Class I Director
since 2015
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Retired. Chief Marketing Officer, VISA from 2005-2007.
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None.
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Robert P. Badavas (64)
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Director
Nominee
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Class I Director
since 2006
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Retired. Chairman and Chief Executive Officer of PlumChoice, provider of remote technical services and support, from
2011-2016.
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Constant Contract, Inc., an
online marketing company,
from 2007-2016.
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Thomas J. Fallon (55)
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Director
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Class II Director
since 2014
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Chief Executive Officer of Infinera Corporation, manufacturer of high capacity optical transmission equipment, since 2010;
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Infinera Corporation since
2014.
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Allyn C. Woodward, Jr. (76)
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Director
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Class II Director
since 2004
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Retired. Vice Chairman and Director of Adams Harkness Financial Group, an institutional investment bank, from 2001-2006.
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None.
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Joseph F. Hoffman (68)
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Director
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Class III
Director since
2015
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Retired. SEC Reviewing Partner and Silicon Valley Professional for KPMG from 1998-2009.
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None.
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Doreen Woo Ho (69)
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Director
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Class III Director
since 2016
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Commissioner of the San Francisco Port Commission since May, 2011 and served as President from 2012 to 2014.
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U.S Bank since 2012.
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Interested Director
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Manuel A. Henriquez (53)
(3)
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Director, Chief
Executive Officer and
Chairman of
the Board of
Directors
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Class III since
2004
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Hercules Capital, Inc. since 2004.
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None.
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(1)
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The address for each officer and director is c/o Hercules Capital, Inc., 400 Hamilton Avenue., Suite 310, Palo Alto, California 94301.
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(2)
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No director otherwise serves as a director of an investment company subject to the 1940 Act.
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(3)
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Mr. Henriquez is an interested director due to his position as an officer of the Company.
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2
Directors
Interested Directors
Mr. Henriquez is an interested
director because he is our Chairman and Chief Executive Officer.
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Manuel A. Henriquez
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Board Committee:
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Independent:
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N/A
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No
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Mr. Henriquez, age 53, is a co-founder of Hercules and has been our Chairman and Chief Executive
Officer since 2004 and our President (since 2005) and his term expires in 2019.
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Prior Business
Experience:
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Partner, VantagePoint Venture Partners, a $2.5 billion multi-stage technology venture fund
(2000-2003)
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President and Chief Investment Officer, Comdisco Ventures, a division of Comdisco, Inc., a leading
technology and financial services company (1999-2000)
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Managing Director, Comdisco Ventures (1997-1999)
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Senior Member, Investment Team, Comdisco Ventures (1997-2000)
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Private
Directorships/
Memberships:
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Northeastern University, a global, experiential research university
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Lucile Packard Foundation for Childrens Health, the sole fundraising entity for Lucile
Packard Childrens Hospital and the child health programs at Stanford University School of Medicine
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Childrens Health Council, a diagnostic and treatment center for children and adolescents
facing developmental and behavioral challenges
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Education:
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Bachelors degree in Business Administration from Northeastern University
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Skills/
Qualifications:
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In particular, Mr. Henriquez key areas of skills/qualifications include, but are not limited to:
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Client Industries
vast array of knowledge in venture capital financing,
including software, life sciences and clean tech
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Banking/Financial Services
extensive experience with equity and debt financings as well
SEC rules and regulations and business development companies
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Leadership/Strategy
current role as chairman and CEO as well as officer and director
experience in several private and public companies and knowledge of financial risk assessment
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Finance/IT and Other Business Processes
extensive experience in IT and
supervising IT internal control and procedures
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3
Independent Directors
The following directors are independent under the New York Stock Exchange (the NYSE) rules and each of the following directors is not an interested person as defined
in Section 2(a)(19) of the Investment Company Act of 1940 (the 1940 Act).
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Robert P. Badavas
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Board Committee:
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Independent:
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Audit,
Chair
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Yes
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Mr. Badavas, aged 64, retired in August, 2016 as Chairman and Chief Executive Officer of PlumChoice,
a venture-backed technology, software and services company (since December 2011). He has served as a director on our Board of Directors (the Board) since March 2006 and his term expires in 2017.
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Business
Experience:
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President, Petros Ventures, Inc., a management and advisory services firm (2009-2011 and 2016
present)
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President and Chief Executive Officer of TAC Worldwide, a multi-national technical workforce
management and business services company (2005-2009)
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Executive Vice President and Chief Financial Officer, TAC Worldwide
(2003-2005)
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Senior Partner and Chief Operating Officer, Atlas Venture, an international venture capital firm
(2001-2003)
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Chief Executive Officer at Cerulean Technology, Inc., a venture capital backed wireless application
software company (1995-2001)
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Certified Public Accountant, PwC (1974-1983)
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Public
Directorships:
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Constant Contact, Inc., including chairman of the audit committee, a provider of email and other
engagement marketing products and services for small and medium sized organizations, acquired by Endurance International Group Holdings, Inc., (2007-2016)
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Prior
Directorships:
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PlumChoice
Arivana, Inc.; a telecommunications infrastructure companypublicly traded
until its acquisition by SAC Capital
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RSA Security; an IT security companypublicly traded until its acquisition by
EMC
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On Technology; an IT software infrastructure companypublicly traded until its acquisition by
Symantec
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Renaissance Worldwide; an IT services and solutions companypublicly traded until its
acquisition by Aquent
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Other
Experience:
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Vice-Chairman, Board of Trustees. Bentley University (since 2005)
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Board of Trustees Executive Committee and Corporate Treasurer, Hellenic College/Holy Cross Orthodox
School of Theology, including positions on the executive committee and corporate treasurer (since 2002)
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Chairman Emeritus, The Learning Center for the Deaf (1995-2005)
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Master Professional Director Certification, American College of Corporate
Directors
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National Association of Corporate Directors
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Annunciation Greek Orthodox Cathedral of New England, Parish Council President (since
2016)
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Education:
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Bachelors degree in Accounting and Finance from Bentley University
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Skills/
Qualifications:
|
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In particular, Mr. Badavas key areas of skill/qualifications include, but are not limited to:
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Client Industries
extensive experience in software, business and
technology enabled services and venture capital
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Leadership/Strategy
significant experience as a senior corporate executive in private
and public companies, including tenure as chief executive officer, chief financial officer and chief operating officer
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Finance, IT and Other Business Strategy and Enterprise Risk Management
prior experience
as a CEO directing business strategy and as a CFO directing IT, financing and accounting, strategic alliances and human resources and evaluation of enterprise risk in such areas
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Governance
extensive experience as an executive and director of private and public
companies with governance matters
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4
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Thomas J. Fallon
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Board Committee:
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Independent:
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Nominating
|
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Yes
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Mr. Fallon, aged 55, currently serves as Chief Executive Officer of Infinera Corporation (since
2010) and a member of Infineras board of directors (since 2009). He has served as a director on our Board since July 2014 and his term expires in 2018.
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Infinera
Corporation
Experience:
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President and Chief Executive Officer, Infinera Corporation (2010-Current)
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Chief Operating Officer, Infinera Corporation (2006-2009)
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Vice President of Engineering and Operations, Infinera Corporation (2004-2006)
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Other Business
Experience
|
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Vice President, Corporate Quality and Development Operations of Cisco Systems, Inc.
(2003-2004)
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General Manager of Cisco Systems Optical Transport Business Unit, VP Operations, VP Supply,
various executive positions (1991-2003)
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Prior
Directorships:
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Piccaro, a leading provider of solutions to measure greenhouse gas concentrations, trace gases and
stable isotopes (2010-2016)
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Other
Experience:
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Member, Engineering Advisory Board of the University of Texas at
Austin
Member, Presidents Development Board University of
Texas
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Education:
|
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Bachelors degree in Mechanical Engineering from the University of Texas at
Austin
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Masters degree in Business Administration from the University of Texas at
Austin
|
|
|
Skills/
Qualifications:
|
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In particular, Mr. Fallons key areas of skill/qualifications include, but are not limited to:
|
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Client Industries
significant experience in venture capital and
technology
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|
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Leadership/Strategy
extensive experience as a director and executive in both public and
private companies
|
|
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Finance, IT and Other Business Processes
extensive experience as a manager and CEO related to finance, accounting, IT, treasury, human
resources, or other key business processes.
|
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Enterprise Risk Management
experience in managing enterprise risk
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Governance
experienced in both corporate governance and executive compensation for both
public and private companies
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5
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|
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Joseph F. Hoffman
|
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Board Committee:
|
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Independent:
|
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Nominating,
Chair
|
|
Yes
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Audit
|
|
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Mr. Hoffman, age 68, is retired from KPMG LLP after 26 years as a partner and senior executive with
that firm. He has served as a director on our Board since April 2015 and his term expires in 2019.
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Prior Business
Experience:
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SEC Reviewing Partner and Silicon Valley Professional Practice Partner, KPMG LLP
(1998-2009)
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Audit Partner and Business Unit Partner in Charge, KPMG LLP (1983-1998)
|
|
|
Private
Directorships:
|
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LiveOps, Inc., a cloud based contact center (since 2013)
|
|
KPMG LLP, an audit, tax, and advisory professional services firm. (2005-2009)
|
|
|
Audit
Committees:
|
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LiveOps, Inc. (since 2013)
|
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KPMG LLP (2005-2009)
|
|
|
Willamette University (since 2014)
|
|
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Non-Profit
Leadership:
|
|
Board of Trustees, Willamette University (since 2011)
|
|
|
Memberships:
|
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California Society of Certified Public Accountants
|
|
|
National Association of Corporate Directors
|
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American College of Corporate Directors
|
|
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Association of Governing Boards of Universities and Colleges
|
|
|
Education:
|
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Bachelors degree in Mathematics and Economics, Willamette University
|
|
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Masters degree in Business Administration, Stanford Graduate School of
Business
|
|
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Certified public accountant, State of California
|
|
|
Skills/
Qualifications:
|
|
In particular, Mr. Hoffmans key areas of skill/qualifications include, but are not limited to:
|
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Client Industries
extensive experience in the technology,
manufacturing, and financial services industries
|
|
|
Finance
and
Enterprise Risk Management
extensive experience as an advisor to
senior management and audit committees on complex accounting, financial reporting, internal controls, and enterprise risk management
|
|
|
Leadership/Strategy
significant experience as a business executive and
director
|
|
|
Governance
experience as the chairman of the governance committee with corporate
governance issues, particularly in a publicly-traded company
|
|
|
Banking/Financial Services
experience with banking, mutual funds, or other financial
services industries, including regulatory experience and specific knowledge of the Securities Act of 1933, as amended
|
6
|
|
|
|
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Susanne D. Lyons
|
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Board Committee:
|
|
Independent:
|
|
|
Compensation,
Chair
|
|
Yes
|
|
|
Nominating
|
|
|
Ms. Lyons, aged 60, is a retired senior executive who has held top marketing and general management
roles at some of the largest financial services companies in America. She has served as a director on our Board since March 2015 and her term expires in 2017.
|
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|
Prior Business
Experience:
|
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Chief Marketing Officer, VISA (USA) (2004-2007)
|
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Various marketing and general management positions, including enterprise president of retail client
service, Charles Schwab & Co., Inc. (1992-2001)
|
|
|
Chief Marketing Officer, Charles Schwab & Co., Inc. (2000-2001)
|
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Senior positions in marketing, product development and business strategy, Fidelity Investments
(1982-1992)
|
|
|
Private
Directorships:
|
|
U.S. Olympic Committee (since December 2010)
|
|
Wildcare, a non-for-profit organization (since 2008)
|
|
|
Prior
Directorships:
|
|
CNET Networks until its acquisition by CBS Corp. (2007-2008)
|
|
Gain Capital Holdings, Inc. (2008-2013)
|
|
|
Other
Experience:
|
|
Advisory Board, Marketo, Inc., a marketing automation software company
(2008-2011)
|
|
|
Education:
|
|
Bachelors degree in French from Vassar College
|
|
|
Masters degree in Business Administration from Boston University
|
|
|
Skills/
Qualifications:
|
|
In particular, Ms. Lyons key areas of skill/qualifications include, but are not limited to:
|
|
Banking/Financial Services
held a variety of key executive and
management positions at large global financial institutions, including 1940-Act regulated companies
|
|
|
Leadership/Strategy
extensive experience as a director and executive with broad
operational experience in investments, finance, human resources, and marketing
|
|
|
Finance, IT and Other Business Processes
expertise in Human Resources, including
extensive experience in public company compensation governance
|
|
|
Governance
experienced executive and director for public companies, including extensive
experience in public company compensation and governance
|
7
|
|
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|
|
Allyn C. Woodward, Jr.
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|
Board Committee:
|
|
Independent:
|
|
|
Audit
|
|
YesLead Director
|
|
|
Compensation
|
|
|
Mr. Woodward, age 76, has extensive experience and qualifications in banking and financial services.
He has served as a director on our Board since February 2004 and his term expires in 2018.
|
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|
Business
Experience:
|
|
Vice Chairman and Director, Adams Harkness Financial Group (formerly Adams, Harkness & Hill),
an independent institutional research, brokerage and investment banking firm (2001-2006)
|
|
President and Director, Adams Harkness Financial Group (1995-2001)
|
|
|
Silicon Valley Bank
|
|
|
Vice President, Founder, Wellesley, Massachusetts office
|
|
|
Senior Vice President (1990-1992)
|
|
|
Chief Operating Officer (California) (1992-1995)
|
|
|
Senior Vice President and Group Manager of Technology Group, Bank of New England
(1963-1990)
|
|
|
Private
Directorships:
|
|
Union Specialties, manufacturer of waterbased polyurethane dispersions and specialty products
(1990-present)
|
|
|
Current
Advisory Board
Directorships:
|
|
Fletcher Spaght Venture Capital (2005-present)
|
|
Boston Millennia Partners (2000-present)
|
|
Ampersand Venture Capital (2013-present)
|
|
|
Prior
Directorships:
|
|
AH&H Venture Capital
|
|
Square 1 Bank
|
|
|
Lecroy Corporation, Chairman
|
|
|
Viewlogic Systems
|
|
|
Cayenne Software, Inc.
|
|
|
Non-Profit
Leadership:
|
|
Member of Finance Committee and Board of Overseers, Newton Wellesley Hospital
(2000-present)
|
|
Babson College, Member of:
|
|
|
Investment Committee
|
|
|
Finance Committee
|
|
|
Private Equity Committee (co-founder) (2000-present)
|
|
|
Education:
|
|
Bachelors degree in Finance and Accounting from Babson College
|
|
Banking degree, Stonier Graduate School of Banking at Rutgers University
|
|
|
Memberships
|
|
National Association of Corporate Directors
|
|
Board Leaders Group
|
|
|
Certifications:
|
|
Executive Masters Professional Director Certification, American College of Corporate
Directors
|
|
|
Skills/
Qualifications:
|
|
In particular, Mr. Woodwards key areas of skill/qualifications include, but are not limited to:
|
|
Client Industries
and
Banking/Financial Services
extensive
leadership, management and director experience in financial services, banking and technology-related companies
|
|
|
Leadership/Strategy
significant executive and board experience for both private and
public companies in business, finance and investments with a special emphasis on best policies regarding compensation and governance and service as Lead Independent Director
|
|
|
Finance, IT and Other Business Processes
extensive experience related to finance,
accounting, IT, treasury, human resources or other key business processes
|
|
|
Governance
as lead director extensive experience with corporate governance issues,
particularly in a publicly-traded company
|
8
|
|
|
|
|
Doreen Woo Ho
|
|
Board Committee:
|
|
Independent:
|
|
|
Compensation
|
|
Yes
|
Ms. Woo Ho, aged 69, is a retired senior executive who has held top management roles at some of the
largest commercial banks in America, including Wells Fargo Bank, Citibank and United Commercial Bank. She has served as a director on our Board since October 2016 and her term expires in 2019.
|
|
|
Business
Experience:
|
|
President and Chief Executive Officer of United Commercial
Bank (2009)
Executive Vice President, Student Loans and Corporate Trust,
Wells Fargo & Company (2008)
President of the Consumer Credit Group,
Wells Fargo Bank (1998-2007)
Senior Vice President of National Business
Banking, US Consumer Bank, Citibank (1974-1998)
|
|
|
Public
Directorships:
|
|
U.S. Bank (since 2012)
|
|
|
Prior
Directorships:
|
|
United Commercial Bank (2009)
|
|
|
Private
Directorships:
|
|
San Francisco Opera (since 1992)
|
|
|
Other
Experience:
|
|
Commissioner of the Port of San Francisco (since
2011)
Wells Fargo Management Committee member
(1999-2008)
|
|
|
Education:
|
|
Bachelors in History from Smith College
Masters in East Asian Studies from the School of International and Public Affairs
at Columbia University
|
|
|
Skills/
Qualifications:
|
|
In particular, Ms. Woo Hos key areas of skill/qualifications include, but are not limited to:
|
|
Banking/Financial Services
held a variety of key executive and
management positions at large global financial institutions
|
|
|
Leadership/Strategy
extensive experience as a director and executive with broad
operational experience in investments and finance
|
|
|
Finance, IT and other Business Processes
extensive experience in commercial lending,
sales marketing as well as other key business processes
|
|
|
Enterprise Risk Management
extensive experience in risk management and regulatory
compliance in banking services
|
|
|
Governance
gained extensive experience as CEO of a banking institution in corporate
governance and executive management
|
9
Information about Executive Officers who are not Directors
The following information, as of April 24, 2017, pertains to our executive officers who are not directors of the Company.
Our executive officers perform policy-making functions for us within the meaning of applicable Securities and Exchange
Commission (the SEC) rules. They may also serve as officers of our other subsidiaries. There are no family relationships among our directors or executive officers.
The following information outlines the name and age of our executive officers and his or her principal occupation with the Company, followed by the biographical information of each of such executive
officer:
|
|
|
|
|
|
|
Name
|
|
Age
|
|
|
Principal Occupation
|
Manuel A. Henriquez
|
|
|
53
|
|
|
Chairman and Chief Executive Officer
|
Mark R. Harris
|
|
|
46
|
|
|
Chief Financial Officer and Chief Accounting Officer
|
Scott Bluestein
|
|
|
38
|
|
|
Chief Investment Officer
|
Melanie Grace
|
|
|
48
|
|
|
General Counsel, Chief Compliance Officer and Secretary
|
Andrew Olson
|
|
|
34
|
|
|
Vice President of Finance and Senior Controller
|
Executive Biographies
Mr. Manuel A. Henriquez
biography can be found under Directors above.
Mark R. Harris
joined us in 2015 as Chief Financial Officer and Chief Accounting Officer. Mr. Harris has over 20 years of experience working with public companies, as well as the mezzanine and
direct lending space. Mr. Harris oversees the financial and accounting functions of the Company.
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|
|
Other Prior
Experience
|
|
Chief Financial Officer, Asia Strategy and Senior Managing Director/Head of Asia, Avenue
Capital, where he lead the Asia strategy (2006-2015)
|
|
Corporate Financial Controller, Hutchinson Telecommunication International Limited (a NYSE and
Stock Exchange of Hong Kong company) (2004-2006)
|
|
Vice President of Finance, Vsource (a NASDAQ listed company) (2001-2004)
|
|
Manager, Global Capital Markets Group, PricewaterhouseCoopers (1995-2001)
|
|
|
Education/ Other:
|
|
Masters of Business Administration from the University of Chicago, Booth School of
Business
|
|
Bachelors in Business Administration with an emphasis in Accounting from California
Polytechnic State University, San Luis Obispo
|
|
Active Certified Public Accountant in California
|
|
Member, Foundation Board of California Polytechnic State University, San Luis
Obispo
|
Scott Bluestein
joined us in 2010 as Chief Credit Officer. He was promoted to Chief Investment
Officer in 2014. Mr. Bluestein is responsible for managing the investment teams and investments made by the Company.
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|
|
Other Prior
Experience
|
|
Founder and Partner, Century Tree Capital Management (2009-2010)
|
|
Managing Director, Laurus-Valens Capital Management, an investment firm specializing in
financing small and microcap growth-oriented businesses through debt and equity securities (2003-2009)
|
|
Member of Financial Institutions Coverage Group focused on Financial Technology, UBS Investment
Bank (2000-2003)
|
|
|
Education/
Other:
|
|
Bachelors in Business Administration from Emory University
|
10
Melanie Grace
joined us in 2015 as General Counsel, Chief Compliance Officer and
Secretary. She has over 17 years of experience representing public and private companies in securities, compliance and transactional matters. Ms. Grace oversees the legal and compliance function for the Company and serves as secretary for the
Company and select subsidiaries.
|
|
|
Other Prior
Experience
|
|
Chief Legal Officer and Corporate Secretary, WHV Investments, Inc. where she also served as
interim Chief Compliance Officer (2011-2015)
|
|
Member, Management, Operations and Proxy Committees, WHV Investments, Inc.
(2013-2015)
|
|
Chair, Ethics Committee, WHV Investments, Inc. (2013-2015)
|
|
Chief Counsel, Corporate, NYSE Euronext (2005-2008)
|
|
Associate, Fenwick & West LLP (2000-2005)
|
|
|
Education/
Other:
|
|
Bachelors and Masters in History from the University of California,
Riverside
|
|
Juris Doctor from Boston University School of Law
|
|
Member, State Bar of California
|
|
Registered In-House Counsel, New York
|
|
Designated Investment Adviser Certified Compliance Professional
®
|
Andrew Olson
joined us in 2014 as Corporate Controller. He has served as our Interim Chief
Financial Officer (June 9, 2015 to August 1, 2015). Currently, Mr. Olson is our Vice President of Finance and Senior Controller and is responsible for financial and regulatory reporting, financial planning and analysis, and financial
systems design and implementation.
|
|
|
Other Prior
Experience
|
|
Senior Manager in Financial Services practice of PricewaterhouseCoopers, LLP San Francisco and
Hong Kong where he developed extensive experience providing audit and consulting services to both regional and international institutions (2006-2014)
|
|
|
Education/
Other:
|
|
Bachelors in Business Economics from the University of California, Santa
Barbara
|
|
Active Certified Public Accountant in California
|
11
CORPORATE GOVERNANCE
Board Committees
Our Board has established an Audit Committee, a
Compensation Committee, and a Nominating and Corporate Governance (NCG) Committee. A brief description of each committee is included in herein and the charters of the Audit, Compensation, and NCG Committees are available on the Investor
Relations section of our website at
http://investor.htgc.com/corporate-governance.cfm.
As of the date of this
Amendment, the members of each of our Board Committees are as follows (the names of the respective committee chairperson are bolded):
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Audit
|
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|
Compensation
|
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|
|
Nominating and
Governance
|
Robert Badavas
Joseph Hoffman
Allyn Woodward, Jr.
|
|
|
|
Susanne Lyons
Allyn Woodward, Jr.
Doreen Woo Ho
|
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|
|
Joseph
Hoffman
Susanne Lyons
Thomas Fallon
|
Each of our directors who sits on a committee satisfies the independence requirements for purposes of the
rules promulgated by the NYSE and the requirements to be a non-interested director as defined in Section 2(a)(19) of the 1940 Act. Messrs. Badavas and Hoffman, Chairman and member of the Audit Committee, respectively, are each an
audit committee financial expert as defined by applicable SEC rules.
Committee Governance
Each committee is governed by a charter that is approved by the Board, which sets forth each committees purpose
and responsibilities. The Board reviews the committees charters, and each committee reviews its own charter, on at least an annual basis, to assess the charters content and sufficiency, with final approval of any proposed changes
required by the full Board.
Committee Responsibilities and Meetings
The key oversight responsibilities of the Boards committees, and the number of meetings held by each committee during 2016, are as
follows:
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|
|
Audit Committee
|
|
Number of meetings held in 2016: 4
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|
|
Appointing, overseeing and replacing, if necessary, our independent auditor.
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|
|
Overseeing the accounting and financial reporting processes and the integrity of the financial statements.
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|
|
Establishing procedures for complaints relating to accounting, internal accounting controls or auditing matters.
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|
|
Examining the independence qualifications of our auditors.
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|
|
Assisting our Boards oversight of our compliance with legal and regulatory requirements and enterprise risk management.
|
|
|
Assisting our Board in fulfilling its oversight responsibilities related to the systems of internal controls and disclosure controls which management
has established regarding finance, accounting, and regulatory compliance.
|
|
|
Reviewing and recommending to the Board the valuation of the Companys portfolio.
|
12
|
|
|
Compensation Committee
|
|
Number of meetings held in 2016: 5
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|
|
Oversees our overall compensation strategies, plans, policies and programs.
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|
|
The approval of director and executive compensation.
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|
|
The assessment of compensation-related risks.
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Nominating and Corporate Governance Committee
|
|
Number of meetings held in 2016: 6
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|
|
Our general corporate governance practices, including review of our Corporate Governance Guidelines.
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|
|
The annual performance evaluation of our Board and its committees.
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The identification and nomination of director candidates.
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Succession planning for management.
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Criteria considered by the NCG Committee in evaluating qualifications of individuals for election as members of the Board consist of the independence
and other applicable NYSE corporate governance requirements; the 1940 Act and all other applicable laws, rules, regulations and listing standards; and the criteria, polices and principles set forth in the NCG Committee charter.
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Considers nominees properly recommended by a stockholder. Nominations for directors may be made by stockholders if notice is timely given and if the
notice contains the information required in our Bylaws. Proposals must comply with the other requirements contained in our Bylaws, including supporting documentation and other information.
|
Code of Business Conduct and Ethics
Our code of business conduct and ethics requires that our directors and executive officers avoid any conflict, or the appearance of a conflict, between an individuals personal interests and the
interests of Hercules. Pursuant to our code of business conduct and ethics, which is available on our website at
http://investor.htgc.com/corporate-governance.cfm
, each director and executive officer must disclose any conflicts of interest,
or actions or relationships that might give rise to a conflict, to our Audit Committee. Certain actions or relationships that might give rise to a conflict of interest are reviewed and approved by our Board.
Availability of Corporate Governance Documents
To learn more about our corporate governance and to view our corporate governance guidelines, code of business conduct and ethics, and the charters of our Audit Committee, Compensation Committee, and NCG
Committee, please visit the Investor Relations page of our website at
http://investor.htgc.com/corporate-governance.cfm
, under Corporate Governance. Copies of these documents are also available in print free of charge by writing
to Hercules Capital, Inc., c/o Melanie Grace, secretary, 400 Hamilton Avenue, Suite 310, Palo Alto, California 94301.
Section 16(a) Beneficial Ownership Reporting Compliance
We believe, based on a review of Forms 3, 4 and 5 and amendment thereto filed with the SEC and other information known to us, that during
fiscal year 2016, our directors, officers (as defined in the rules under Section 16 of the Exchange Act), and any greater than 10% stockholders have complied with all Section 16(a) filing requirements in a timely manner.
13
Item 11.
|
Executive Compensation
|
Compensation Discussion and Analysis
The Compensation Discussion and
Analysis discusses our 2016 executive compensation program, as it relates to the following executive officers:
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Manuel A. Henriquez
|
|
Chairman of the Board of Directors and Chief Executive Officer (CEO)
|
Mark R. Harris
|
|
Chief Financial Officer (CFO) and Chief Accounting Officer
|
Scott Bluestein
|
|
Chief Investment Officer
|
Melanie Grace
|
|
General Counsel, Chief Compliance Officer and Secretary
|
Andrew Olson
|
|
Vice President of Finance and Senior Controller
|
We refer to Messrs. Henriquez, Harris, Bluestein and Olson and Ms. Grace as our named executive
officers, or NEOs.
Executive Summary
Under the oversight of our Compensation Committee, the Companys executive compensation program is designed to attract, incent and
retain talented individuals who are critical to our continued success and our corporate growth and who will deliver sustained strong performance over the longer term. Our executive compensation program is designed to motivate the Companys
executive officers to maintain the financial strength of the Company while avoiding any inappropriate focus on short-term profits that would impede the Companys long-term growth and encourage excessive risk-taking.
In 2016, the Company continued to review and enhance our compensation practices in accordance with our executive
compensation philosophy. The review considered both compensation levels and company performance over a one-, three-, and five-year period from 2012 to 2016 (the Performance Periods). (See
Compensation Philosophy and
Objectives
below). The Company believes that compensation paid to our NEOs for 2016 was commensurate with the Companys overall absolute performance as well as our performance relative to peers during the relevant Performance Periods.
The 2016 compensation decisions made by the Compensation Committee considered the fact that our performance relative to a peer group of companies was above the median, and in most cases above the 75
th
percentile, measured using Return on Average Assets
(ROAA), Return on Equity (ROE), Return on Investment Capital (ROIC), and Total Shareholder Return (TSR) during the trailing one-, three-, and five-years.
The Companys incentive compensation practices are significantly limited by the requirements imposed on us as an internally managed
business development company (BDC) pursuant to the 1940 Act. (See
Limitations Imposed by the 1940 Act Relating to Implementation of Non-Equity Incentive Plans
below). These are regulatory limitations related to our
corporate structure that are relatively unique and do not apply to most other publicly-traded companies. As discussed further below, our NEOs were compensated to reflect the Companys performance during the relevant Performance Periods (See
Performance Highlights and Assessment of Company Performance
below) as well as individual performance.
In
addition to key factors involved in the 2016 decisions made by the Compensation Committee, we continue to maintain the enhancements to our executive officer compensation program that we adopted in 2016, such as our clawback policy for all
Section 16 officers and consideration of a mix of corporate and individual performance factors for our NEOs. In addition, the Compensation Committee did not grant restricted stock awards in 2017. Rather, the Compensation Committee granted
restricted stock units with an additional one-year deferral period following the last vesting date. We believe these restricted stock unit awards assist the Company in retaining NEOs.
14
Compensation Philosophy and Objectives
As an internally managed BDC, the Companys compensation program is designed to encourage the NEOs to think and act like
stockholders. The structure of the NEOs compensation program is designed to encourage and reward the following factors, among other things:
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sourcing and pursuing attractively priced investment opportunities to venture-backed companies;
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achieving the Companys dividend objectives (which focus on stability and potential growth);
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|
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maintaining credit quality, monitoring financial performance and ultimately managing a successful exit of the Companys investment portfolio;
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providing compensation and incentives necessary to attract, motivate and retain key executives critical to our continued success and growth;
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focusing management behavior and decision-making on goals that are consistent with the overall strategy of the business;
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ensuring a linkage between NEO compensation and individual contributions to our performance; and
|
We believe that our continued success during 2016, despite strong competition for top-quality executive talent in the venture debt industry, was attributable to our ability to attract, motivate and retain
the Companys outstanding executive team through the use of both short- and long-term incentive compensation programs.
The Companys compensation objectives are achieved through its executive compensation program, which for 2016 consisted of the
following:
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Annual Base Salary: Cash paid on a regular basis throughout the year. This provides a level of fixed income that is competitive to allow the Company to
retain and attract executive talent.
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Annual Cash Bonus Awards: Cash awards paid on an annual basis following year-end. This rewards NEOs who contribute to our financial performance and
strategic success during the year, and rewards individual achievements.
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Long-Term Equity Incentive Awards: Equity incentive awards vest 1/3 on a one-year cliff with remaining 2/3 vesting quarterly over two years based on
continued employment with the Company. This rewards NEOs who contribute to our success through the creation of shareholder value, provides meaningful retention incentives, and rewards individual achievements.
|
The compensation program is designed to reflect best practices in executive compensation:
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No employment agreements for NEOs.
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No guaranteed retirement benefits.
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No cash severance payments.
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No change in control benefits.
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No tax gross ups for NEOs.
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|
No executive perquisite allowances beyond the benefit programs offered to all employees.
|
15
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No repricing of stock options without stockholder approval, as required under applicable NYSE rules (and subject to other requirements under the 1940
Act).
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Routine engagement of an independent compensation consultant to review NEO compensation.
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Maintenance of stock ownership guidelines for NEOs to own at least two times his or her salary.
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Clawback policy for all Section 16 officers.
|
Executive Compensation Governance
The Companys executive
compensation program is supported by strong corporate governance and Board-level oversight. The Compensation Committee provides primary oversight of our compensation programs, including the design and administration of executive compensation plans,
assessment and setting of corporate performance goals, as well as individual performance metrics, and the approval of executive compensation. In addition, the Compensation Committee retains an independent compensation consultant, and where
appropriate, discusses compensation-related matters with our CEO, as it relates to the other NEOs. The Compensation Committee developed our 2016 compensation program, and the compensation paid to our NEOs during and in respect of 2016 was approved
by the Compensation Committee as well as all of our independent directors.
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Role of Compensation Committee:
The Compensation Committee is comprised entirely of independent directors who are also non-employee
directors as defined in Rule 16b-3 under the Exchange Act, independent directors as defined by the NYSE rules, and are not interested persons of the Company, as defined by Section 2(a)(19) of the 1940 Act. Ms. Lyons,
Ms. Woo Ho and Mr. Woodward comprise the Compensation Committee. Ms. Lyons chairs the Compensation Committee.
|
The Compensation Committee operates pursuant to a charter that sets forth its mission, specific goals and responsibilities. A key component of the Compensation Committees goals and responsibilities
is to evaluate, approve and/or make recommendations to our Board regarding the compensation of our NEOs, and to review their performance relative to their compensation to assure that they are compensated in a manner consistent with the compensation
philosophy discussed above. In addition, the Compensation Committee evaluates and makes recommendations to our Board regarding the compensation of the directors for their services. Annually, the Compensation Committee:
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evaluates our CEOs performance,
|
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|
|
reviews our CEOs evaluation of the other NEOs performance,
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|
determines and approves the compensation paid to our CEO, and
|
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|
with input from our CEO, reviews and approves the compensation of the other NEOs.
|
The Compensation Committee periodically reviews our compensation programs and equity incentive plans to ensure that such
programs and plans are consistent with our corporate objectives and appropriately align our NEOs interests with those of our stockholders. The Compensation Committee also administers our stock incentive program. The Compensation Committee may
not delegate its responsibilities discussed above.
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|
Role of Compensation Consultant:
The Compensation Committee has engaged Frederic W. Cook & Co., Inc., or F.W. Cook, as an
independent outside compensation consultant to assist the Compensation Committee and provide advice on a variety of compensation matters relating to CEO compensation, compensation paid to our other NEOs, peer group selection, compensation program
design, market and industry compensation trends, director compensation levels and regulatory developments. F.W. Cook was hired by and reports directly to the Compensation
|
16
|
Committee. Our compensation consultant does not provide any other services to the Company. The Compensation Committee has assessed the independence of F.W. Cook pursuant to the NYSE rules, and it
has been concluded that the consultants work for the Compensation Committee does not raise any conflict of interest.
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Role of Chief Executive Officer:
From time to time and at the Compensation Committees request, our CEO will attend the Compensation
Committees meetings to discuss the Companys performance and compensation-related matters. Our CEO does not attend executive sessions of the Compensation Committee, unless invited by the Compensation Committee. While our CEO does not
participate in any deliberations relating to his own compensation, our CEO reviews on at least an annual basis the performance of each of the other NEOs and other executive officers. Based on these performance reviews and the Companys overall
absolute and relative performance, our CEO makes recommendations to the Compensation Committee on any changes to base salaries, annual bonuses and equity awards. The Compensation Committee considers the recommendations submitted by our CEO, as well
as data and analysis provided by management and F.W. Cook, but retains full discretion to approve and/or recommend for Board approval all executive and director compensation.
|
Competitive Benchmarking Against Peers
To determine the competitiveness of executive compensation levels, the Compensation Committee analyzes a group of internally managed BDCs, financial services companies and real estate investment trusts
(REITs) as set forth below (the Peer Group). The Peer Group is viewed as reflecting the labor market for our officer and employee talent, has a similar investor base, and, like the Company, the BDCs and REITs in the Peer
Group are pass-through entities with the majority of earnings required to be distributed to shareholders as a dividend. The Compensation Committee does not specifically benchmark the compensation of our NEOs against that paid by other companies.
During 2016, the Compensation Committee, based on the advice of F.W. Cook, reviewed the peer group used in connection with prior compensation decisions. Based on this review, and the advice of F.W. Cook, the Compensation Committee updated our Peer
Group to better align it to our business. Our Peer Group was used as a factor in determining the annual cash bonus awards made with respect to 2016 (but paid in 2017), along with the various performance metrics outlined below under
Performance Highlights and Assessment of Company Performance,
as well as the further considerations further described below under
Annual Cash Bonus Awards
.
Our current Peer Group includes:
Internally Managed BDCs
: American Capital, KCAP Financial, Main Street Capital and Triangle Capital
Financial Services
: Alliance Bernstein, BGC Partners, Cowen Group, Evercore Partners, Fortress Investment Group, Greenhill & Co., Houlihan Lokey, LPL Financial Holdings, On Deck
Capital and WisdomTree Investments
Real Estate Investment Trusts
: Capstead Mortgage, CYS Investments, Hannon
Armstrong, iStar Inc., Ladder Capital, MFA Financial, Redwood Trust, Sabra Health Care and Seritage Growth.
17
As of October 31 2016, which is the period the Compensation Committee reviewed our Peer
Group, the Company outperformed most of its Peer Group over the one-, three- and five-years as follows*:
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|
|
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|
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|
Return on
Average Assets
(excl. cash)
|
|
|
Return on Equity
|
|
|
Return on
Invested Capital
|
|
|
Total Shareholder
Returns
|
|
Performance
Period
|
|
HTGC
|
|
|
% Rank
of Peer
Group
|
|
|
HTGC
|
|
|
% Rank
of Peer
Group
|
|
|
HTGC
|
|
|
% Rank
of Peer
Group
|
|
|
HTGC
|
|
|
% Rank
of Peer
Group
|
|
1-year
|
|
|
6.1
|
%
|
|
|
100
|
%
|
|
|
10.5
|
%
|
|
|
93
|
%
|
|
|
6.2
|
%
|
|
|
93
|
%
|
|
|
36.2
|
%
|
|
|
100
|
%
|
3-year
|
|
|
6.2
|
%
|
|
|
99
|
%
|
|
|
10.2
|
%
|
|
|
89
|
%
|
|
|
6.3
|
%
|
|
|
89
|
%
|
|
|
5.3
|
%
|
|
|
64
|
%
|
5-year
|
|
|
6.3
|
%
|
|
|
96
|
%
|
|
|
10.3
|
%
|
|
|
86
|
%
|
|
|
6.4
|
%
|
|
|
87
|
%
|
|
|
17.2
|
%
|
|
|
88
|
%
|
*
|
The data are from S&P Capital IQ. Data reflects most recent four quarters and TSR available as of 10/31/16.
|
The Company believes that compensation paid to our NEOs for 2016 was commensurate with the Companys overall absolute performance as
well as our performance relative to the Peer Group during the relevant Performance Periods. The 2016 compensation decisions made by the Compensation Committee considered the fact that our performance relative to the Peer Group was above the median,
and in most cases above the 75th percentile, measured using ROAA, ROE, ROIC and TSR during the trailing one-, three-, and five-years as indicated in the chart above.
Limitations Imposed by the 1940 Act Relating to Implementation of Non-Equity Incentive Plans
We are an internally-managed, non-diversified, closed-end investment company that has elected to be regulated as a BDC under the 1940 Act. As a BDC, we are required to comply with certain regulatory
requirements, including the 1940 Act, rules promulgated under the 1940 Act, and exemptive orders issued to us by the SEC. We refer to these requirements, rules, and exemptive orders as the 1940 Act Requirements. The 1940 Act Requirements
provide that the Company may maintain either an equity incentive plan or a profit sharing plan. A profit sharing plan as defined under the 1940 Act is any written or oral plan, contract, authorization or arrangement, or any
practice, understanding or undertaking whereby amounts payable under the compensation plan are dependent upon or related to the profits of the company. The SEC has stated that compensation plans possess profit-sharing characteristics if an
investment company is obligated to make payments under such a plan based on the level of income, realized gains or loss on investments or unrealized appreciation or depreciation of assets of such investment company.
The Company believes that equity incentives strongly align the interests of our stockholders with our NEOs, and, accordingly, an equity
incentive plan was adopted in 2004. Since the Company has adopted the Equity Plan, the 1940 Act Requirements prohibit us from also implementing a profit sharing plan.
Why is this important to the Companys executive compensation? The 1940 Act Requirements that restrict the Company to sponsoring
either an equity incentive plan or a profit sharing plan limit the Companys use of formulas or non-discretionary objective performance goals or criteria in its incentive plans. This means that the Compensation Committee is not
permitted to use a nondiscretionary formulaic application of any performance criteria for corporate and individual goals to determine compensation. Rather, the Compensation Committee must take into consideration all factors and use its discretion to
determine the appropriate amount of compensation for our NEOs. The Compensation Committees objective is to work within this regulatory framework to maintain and motivate pay-for-performance alignment, to establish appropriate compensation
levels relative to our Peer Group and to implement compensation best practices.
18
2016 Advisory Vote on Executive Compensation
At our 2016 annual meeting of stockholders, our advisory vote on say-on-pay received support from our stockholders (89.4% of votes cast).
The Company believes that the continuing dialogue with our stockholders on company performance, compensation and other governance matters is important. In advance of our 2016 annual meeting of stockholders, management engaged in numerous direct
dialogues with our largest institutional shareholders, as well as a number of other institutional shareholders, to gain broad-based and/or specific insights into the Companys overall performance, operating expenses, including executive
compensation and corporate governance practices. In addition, we invited each of our institutional stockholders holding more than 1% of the Companys stock to speak directly with management specifically on executive compensation and corporate
governance practices.
The Company anticipates continuing our stockholder engagement efforts following the 2017 annual meeting
and in advance of our future annual meetings.
Performance Highlights and Assessment of Company Performance
In determining the compensation for our NEOs, the Compensation Committee evaluates our performance relative to our
Peer Group (See
Competitive Benchmarking Against Peers
above), as well as Company-specific absolute performance factors over the relevant Performance Periods. In 2016, relative and company-specific factors included:
Key Performance Indicators
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Period Outcomes
|
|
Metric
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
Total of New Fundings (in $ millions)
|
|
|
680.7
|
|
|
|
712.3
|
|
|
|
621.3
|
|
|
|
500.7
|
|
|
|
554.9
|
|
Total Investments at Cost (in $ millions)
|
|
|
1,511.5
|
|
|
|
1,252.3
|
|
|
|
1,035.3
|
|
|
|
906.3
|
|
|
|
914.3
|
|
Net Interest Margin (in $ million)
|
|
|
138.0
|
|
|
|
120.2
|
|
|
|
108.1
|
|
|
|
104.6
|
|
|
|
73.8
|
|
|
|
|
Total New Fundings:
Debt and equity fundings grew from $554.9 million in 2012 to $680.7 million in 2016 or a CAGR of 5.2%, as we continue
to expand our origination team, increase our market share and organically grow our business via a record funding year for Hercules.
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|
|
|
Total Investments
: Total investments at cost increased to $1,511.5 billion in 2016 from $914.3 million in 2012, a CAGR of 13.4% due to
record new fundings, combined with the monetization of our warrants and equity positions.
|
|
|
|
Net Interest Margin
: We continue to grow our net interest margin due to strong portfolio growth and effectively managing our weighted average
cost of debt.
|
Execution Across Performance Metrics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Period Outcomes
|
|
Metric
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
Liquidity Levels (in $ millions)
|
|
|
203.0
|
|
|
|
195.2
|
|
|
|
377.1
|
|
|
|
373.4
|
|
|
|
288.0
|
|
Available Unfunded Commitments (in $ millions)
|
|
|
59.7
|
|
|
|
75.4
|
|
|
|
147.7
|
|
|
|
69.1
|
|
|
|
19.3
|
|
Cumulative Net Realized Losses (in $ millions)
|
|
|
2.3
|
|
|
|
6.9
|
|
|
|
12.0
|
|
|
|
32.1
|
|
|
|
47.0
|
|
Dividend Yield (%)
*
|
|
|
8.8
|
|
|
|
10.2
|
|
|
|
8.3
|
|
|
|
6.8
|
|
|
|
8.5
|
|
*
|
Dividend Yield:
Dividend Yield is a financial ratio that indicates the amount of dividends paid by the Company relative to its share price and is calculated as
annual dividends per share divided by price per share as of measurement date.
|
|
|
|
Liquidity Levels
: The use of our credit facilities has been an integral component of our treasury management as we minimize our cash drag
on our assets via the use of our warehouse facilities. These facilities have a low interest cost and allow us to build up our asset base for future offerings at competitive rates.
|
19
|
|
|
Available Unfunded Commitments
: We have done an outstanding job on managing our Available Unfunded Commitments. Our Available Unfunded
Commitments was 4.5% of our loan portfolio at the end of 2016, where as in 2015, it was 6.8%.
|
|
|
|
Cumulative Net Realized Losses
: We continue to demonstrate strong credit management and nothing shows this more than our cumulative net
losses, where we finished in 2016 at $2.3 million on commitments of $6.5 billion. In 2012, our cumulative net realized losses were $47 million since inception, demonstrating our ability to manage our portfolio effectively over the last 5 years.
|
|
|
|
Dividend Yield
: We saw our Dividend Yield decline to 8.8% at the end of 2016. We believe that our continued strong performance will be
recognized and our Dividend Yields will reduce further to the range we believe is representative of our stock price.
|
Assessment of Company Performance
In determining annual
compensation for our NEOs, the Compensation Committee analyzes and evaluates the individual achievements and performance of our NEOs as well as the overall relative and absolute operating performance and achievements of the Company. We believe that
the alignment of (i) our business plan, (ii) stockholder expectations and (iii) our employee compensation is essential to long-term business success and the interests of our stockholders and employees and to our ability to attract and
retain executive talent, especially in a competitive environment for top-quality executive talent in the venture debt industry.
Our business plan involves taking on credit risk over an extended period of time, and a premium is placed on our ability to maintain
stability and growth of net asset values as well as continuity of earnings growth to pass through to stockholders in the form of recurring dividends over the long term. Our strategy is to generate income and capital gains from our investments in the
debt with warrant securities, and to a lesser extent direct equity, of our portfolio companies. This income supports the anticipated 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 analyses as well as highly active monitoring and management of our investment portfolio over time. To accomplish these functions, our business requires
implementation and oversight by management and key employees with highly specialized skills and experience in the venture debt industry. A substantial part of our employee base is dedicated to the generation of new investment opportunities to allow
us to sustain dividends and to the maintenance of asset values in our portfolio. In addition to the performance factors above, the Company considered the following Company-specific performance factors over the relevant Performance Periods: overall
credit performance, performance against annual gross funding goals, overall yields, efficiency ratios, total and net investment income and realized and unrealized gains and losses.
Elements of Executive Compensation and 2016 Compensation Determinations
Base Salary
We believe that base salaries are a fundamental element of our compensation program. The Compensation Committee establishes base salaries for each NEO to reflect (i) the scope of the NEOs
industry experience, knowledge and qualifications, (ii) the NEOs position and responsibilities and contributions to our business growth and (iii) salary levels and pay practices of those companies with whom we compete for executive
talent.
20
The Compensation Committee considers base salary levels at least annually as part of its
review of the performance of NEOs and from time to time upon a promotion or other change in job responsibilities. During its review of base salaries for our executives, the Compensation Committee primarily considers: individual performance of the
executive, including leadership and execution of strategic initiatives and the accomplishment of business results for our company; market data provided by our compensation consultant; our NEOs total compensation, both individually and relative to
our other NEOs; and for NEOs other than the CEO, the base salary recommendations of our CEO.
|
|
|
|
|
NEO
|
|
2016
Base
Salary
|
|
Manuel Henriquez
|
|
$
|
803,154
|
|
Mark Harris
|
|
$
|
412,000
|
|
Scott Bluestein
|
|
$
|
432,600
|
|
Melanie Grace
|
|
$
|
283,250
|
|
Andrew Olson
|
|
$
|
211,150
|
|
Annual Cash Bonus Awards
The Compensation Committee, together with input from our CEO, developed a specific bonus pool for the 2016 operating year to be available for our annual cash bonus program. The amount determined to be
available for our annual cash program was dependent upon many factors, including those outlined previously under
Performance Highlights and Assessment of Company Performance
.
The Compensation Committee designs our annual cash bonuses to motivate our NEOs to achieve financial and non-financial objectives
consistent with our operating plan. The Compensation Committee generally targets cash bonuses to 50% to 100% of an NEOs base salary; however, such bonus amounts may exceed these targets in the event of exceptional company and individual
performance.
Bonuses are not formulaic to comply with the 1940 Act regulations that govern our business. As a result, the
Compensation Committee considers overall business performance factors and individual factors, including CEO feedback, when determining the size of individual NEO bonuses. Accordingly, should actual company and NEO performance exceed expectations,
the Compensation Committee may adjust individual cash bonuses to take such superior performance into account. Conversely, if company and NEO performance is below expectations, the Compensation Committee will consider such performance in determining
the NEOs actual cash bonus.
In evaluating the performance of our NEOs to arrive at their 2016 cash
bonus awards, the Compensation Committee considered the performance factor achievements discussed above under
Performance Highlights and Assessment of Company Performance
, and the Compensation Committee specifically compared our
performance and the returns of our stockholders against the performance and shareholder returns of other BDCs. In particular, the Committee considered our high relative total shareholder return and return on invested capital relative to peer group
benchmarks, which was above the 75
th
percentile over the
last year, as this shows the success for shareholders and of the core business mission of allocating equity and debt capital efficiently for a high risk-adjusted return.
When sizing our cash bonus pool and allocating bonus awards, the total compensation paid to our NEOs and other employees is evaluated against the expense ratios of other BDCs. With respect to 2016,
company-wide compensation expense as a percentage of average assets among the peers in the Peer Group was considered. For the fiscal year ended December 31, 2016, the ratio of our compensation expense divided by total revenue was below the
median of the Peer Group.
21
Based on the foregoing considerations and analysis, and after due deliberation, the
Compensation Committee awarded our current NEOs the following annual cash bonuses with respect to 2016.
|
|
|
|
|
NEO
|
|
2016 Cash
Bonus Award
|
|
Manuel Henriquez
|
|
$
|
1,200,000
|
|
Mark Harris
|
|
$
|
400,000
|
|
Scott Bluestein
|
|
$
|
650,000
|
|
Melanie Grace
|
|
$
|
145,000
|
|
Andrew Olson
|
|
$
|
150,000
|
|
Long-Term Equity Incentive Compensation
2004 Equity Incentive Plan
Our long-term equity incentive compensation is designed to develop a strong linkage between pay and our strategic goals and performance, as well as to align the interests of our NEOs, and other executives
and key employees, with those of our stockholders by awarding long-term equity incentives in the form of stock options, restricted stock and/or restricted stock units. These awards are made pursuant to our Equity Plan, which permits options,
restricted stock and restricted stock unit awards.
We believe that annual equity grants, in the form of restricted stock
awards or restricted stock units, to our NEOs are a critical part of our compensation program as they allow us to:
|
|
|
align our business plan, stockholder interests and employee concerns,
|
|
|
|
manage dilution associated with equity-based compensation,
|
|
|
|
match the return expectations of the business more closely with our equity-based compensation plan, and
|
|
|
|
retain key management talent.
|
We believe that these annual equity grants motivate performance that is more consistent with the type of return expectations that we have established for our stockholders. Accordingly, the Company awards
restricted stock award grants to our NEOs. These grants typically vest over three years.
Grant Practices for Executive
Officers
Annual equity compensation grants to executive officers have typically been granted in the first quarter of the
year. The Company does not grant stock options to executive officers. As a result, there were no option grants to our NEOs in 2016.
Restricted Stock Units
In 2017, the Compensation Committee did not grant
restricted stock awards to NEOs. Rather, in January 2017, the Compensation Committee granted restricted stock units to the NEOs. With respect to the restricted stock units, the Compensation Committee assessed each current NEOs individual
performance for 2016, our overall company performance in 2016 (including the performance factors detailed above under
Performance Highlights and Assessment of Company Performance
and
Annual Cash Bonus Awards
)
and the levels of equity compensation paid by other companies with whom we compete for executive talent. Based on this assessment, the Compensation Committee determined that the following restricted stock units be granted to our current NEOs with
respect to 2016, in the amounts and on the dates set forth below to reward them for services performed in 2016. These restricted stock units vest as to one-third of the shares underlying the awards on the first anniversary of the grant date, and
they vest as to the remaining shares in equal quarterly installments over the next two years. Settlement
22
of the restricted stock units is deferred following vesting and the restricted stock units will not be settled until the earliest to occur of (1) January 24, 2021, (2) the death or
disability of the NEO, (3) the separation from service of the NEO, or (4) a change in control of the Company. Each restricted stock unit will entitle the holder to dividend equivalents in the form of the Companys common stock, which
dividend equivalent payments will be settled on the date the related restricted stock unit is settled. We believe these restricted stock unit awards assist the Company in retaining NEOs.
|
|
|
|
|
|
|
|
|
|
|
|
|
NEO
|
|
Grant
Date
|
|
|
Restricted Stock
Units
|
|
|
Fair Value of
Restricted Stock
Awards
(1)
|
|
Manuel Henriquez
|
|
|
1/24/2017
|
|
|
|
351,865
|
|
|
$
|
5,000,000
|
|
Scott Bluestein
|
|
|
1/24/2017
|
|
|
|
123,153
|
|
|
$
|
1,750,000
|
|
Mark Harris
|
|
|
1/24/2017
|
|
|
|
35,187
|
|
|
$
|
500,000
|
|
Melanie Grace
|
|
|
1/24/2017
|
|
|
|
21,112
|
|
|
$
|
300,000
|
|
Andrew Olson
|
|
|
1/24/2017
|
|
|
|
17,593
|
|
|
$
|
250,000
|
|
(1)
|
Based on the closing price per share of our common stock of $14.21 on January 24, 2017.
|
Other Elements of Compensation
|
|
|
Severance
: No NEO or employee of the Company has a written severance agreement or other arrangement providing for payments or benefits upon a
termination of employment.
|
|
|
|
Benefits and Perquisites:
Our NEOs receive the same benefits and perquisites as other full-time employees. Our benefits program is designed to
provide competitive benefits and is not based on performance. Our NEOs and other full-time employees receive health and welfare benefits, which consist of life, long-term and short-term disability, health, dental, vision insurance benefits and the
opportunity to participate in our defined contribution 401(k) plan. During 2016, our 401(k) plan provided for a match of contributions by the company for up to $18,000 per full-time employee. Other than the benefits set forth immediately above, our
NEOs are not entitled to any other benefits or perquisites.
|
|
|
|
Potential Payments Upon Termination or Change of Control:
No NEO or employee of the Company has a written employment agreement, or other
agreement, providing for payments or other benefits in connection with a change of control of the Company. Further, no NEO or any other employee is entitled to any tax gross-up payments.
|
Corporate Goals
For 2016, the Compensation Committee developed corporate goals that were required to be achieved for executive officers to receive up to 50% of their incentive compensation. These goals included
operational performance as well as performance relative to the Peer Group. While the criteria may not be weighted, the Compensation Committee took into consideration each of these factors to determine whether the executive officers are eligible for
up to 50% of the proposed incentive compensation. The Compensation Committee believes that the corporate goals applicable to all executive officers create an alignment not only with shareholders but also to the Companys business strategy and
performance goals.
Defined Individual Goals
For 2016, the Compensation Committee developed individual goals for the CEO. In addition, the CEO and each NEO developed individual goals
for the NEOs and such goals were approved by the Compensation Committee. Each set of individual goals are unique to the executive officers responsibilities and position within the Company. While each of the factors may not be weighted, the
Compensation Committee took into consideration each of these factors to determine whether the executive officers are eligible for up to 50% of the executive officers incentive compensation.
23
Pay-for-Performance Alignment
The Company believes that there exists an alignment between the compensation of our NEOs and our performance over the relevant Performance
Periods. As noted above, a broad range of individual performance factors and company performance factors are analyzed each year, including total shareholder return relative to our Peer Group, and, in 2016, analysis of relative ROAA, ROE, and ROIC
versus the compensation peers over one-, three-, and five-years to measure short-, medium-, and long-term performance. The objective in analyzing these key performance factors is to align NEO compensation to our performance relative to our Peer
Group and our absolute corporate performance.
The Companys annual bonus and equity awards constitute an effective mix
of short- and long-term compensation components and reflect key measures of our performance and the returns enjoyed by our stockholders. Consistent with our pay-for-performance philosophy, the Compensation Committee will make future compensation
decisions taking into account our absolute and relative performance, and, if our future performance were to fall significantly below our peers, the Compensation Committee would consider adjusting NEO compensation prospectively.
Total Compensation Expense Relative to other Internally Managed BDCs
In determining annual bonus awards, the total compensation paid to our NEOs and other employees against the expense ratios of other
internally managed BDCs was considered.
Internal Pay Equity Analysis
Our compensation program is designed with the goal of providing compensation to our NEOs that is fair, reasonable, and competitive. To
achieve this goal, the Company believes it is important to compare compensation paid to each NEO not only with compensation in our comparative group companies, as discussed above, but also with compensation paid to each of our other NEOs. Such an
internal comparison is important to ensure that compensation is equitable among our NEOs.
As part of the Compensation
Committees review, we made a comparison of our CEOs total compensation paid for the period ending October 31, 2016 against that paid to our other NEOs during the same year. Upon review, the Compensation Committee determined that our
CEOs compensation relative to that of our other NEOs was appropriate because of his level and scope of responsibilities, expertise and performance history, and other factors deemed relevant by the Compensation Committee. The Compensation
Committee also reviewed the mix of the individual elements of compensation paid to our NEOs for this period, the individual performance of each NEO and any changes in responsibilities of the NEO.
Stock Ownership Guidelines
The Company maintains stock ownership guidelines, which are outlined in our corporate governance guidelines, because we believe that material stock ownership by our executives plays a role in effectively
aligning the interests of these employees with those of our stockholders and strongly motivates our executives to build long-term shareholder value. Pursuant to our stock ownership guidelines, each member of senior management is required to
beneficially own at least two times the individuals annual salary in Company common stock, based on market value, within three years of joining the Company. Our Board may make exceptions to this requirement based on particular circumstances;
however, no exceptions have been made for our current NEOs. Messrs. Henriquez, Bluestein and Harris have met their minimum guidelines.
The Compensation Committees review of the CEOs stock ownership in the fourth quarter of 2016 showed that he owns shares worth more than 20x his annual base salary.
24
Tax and Accounting Matters
Stock-Based Compensation.
We account for stock-based compensation, including options and shares of restricted stock granted
pursuant to our Equity Plan and 2006 Non-Employee Director Plan in accordance with the requirements of Financial Accounting Standards Board Accounting Standards Codification (FASB ASC) Topic 718. Under the FASB ASC Topic 718, we estimate
the fair value of our option awards at the date of grant using the Black-Scholes-Merton option-pricing model, which requires the use of certain subjective assumptions. The most significant of these assumptions are our estimates on the expected term,
volatility and forfeiture rates of the awards. Forfeitures are not estimated due to our limited history but are reversed in the period in which forfeiture occurs. As required under the accounting rules, we review our valuation assumptions at each
grant date and, as a result, are likely to change our valuation assumptions used to value stock-based awards granted in future periods. We estimate the fair value of our restricted stock awards based on the grant date market closing price.
Deductibility of Executive Compensation.
When analyzing both total compensation and individual elements of
compensation paid to our NEOs, the Company considers the income tax consequences to the Company of its compensation policies and procedures. In particular, the Company considers Section 162(m) of the Internal Revenue Code of 1986, as amended
(the Code), which limits the deductibility of non-performance-based compensation paid to certain of the NEOs to $1,000,000 per affected NEO. The Compensation Committee intends to balance its objective of providing compensation to our
NEOs that is fair, reasonable, and competitive with the Companys ability to claim compensation expense deductions. Our Board believes that the best interests of the Company and our stockholders are served by executive compensation programs
that encourage and promote our principal compensation philosophy, enhancement of shareholder value, and permit the Compensation Committee to exercise discretion in the design and implementation of compensation packages. Accordingly, we may from time
to time pay compensation to our NEOs that may not be fully tax deductible, including certain bonuses and restricted stock. Stock options granted under our stock plan are intended to qualify as performance-based compensation under Section 162(m)
of the Code. The Company will continue to review its executive compensation plans periodically to determine what changes, if any, should be made as a result of any deduction limitations.
Clawback Policy for Section 16 Officers
In 2016, the Board adopted a clawback policy for all Section 16 officers. This was an enhancement to the Companys then-existing clawback policy for the CEO and CFO pursuant to Section 304
of the Sarbanes-Oxley Act of 2002. With respect to the Companys clawback policy, the Company has
|
|
|
broadened its clawback policy to apply to all Section 16 officers; and
|
|
|
|
broadened the scope of its clawback policy beyond financial restatements.
|
Pursuant to our clawback policy, for payments that are predicated on financial results augmented by fraud, embezzlement, gross negligence
or deliberate disregard of applicable rules resulting in significant monetary loss, damage or injury to the Company (Excess Compensation), the Compensation Committee has the authority to seek repayment of any Excess Compensation,
including (1) cancellation of unvested, unexercised or unreleased equity incentive awards; and (2) repayment of any compensation earned on previously exercised or released equity incentive awards whether or not such activity resulted in a
financial restatement.
The Compensation Committee will have sole discretion under this policy, consistent with any applicable
statutory requirements, to seek reimbursement of any Excess Compensation paid or received by the Section 16 officer for up to a 12-month period prior to the date of the Compensation Committee action to require reimbursement of the Excess
Compensation. Any clawback of Excess Compensation
25
must be based upon fraud adjudicated by a court of competent jurisdiction or a financial restatement. Further, following a restatement of our financial statements, we will recover any
compensation received by the CEO and CFO that is required to be recovered by Section 304 of the Sarbanes-Oxley Act of 2002.
For purposes of this policy, Excess Compensation will be measured as the positive difference, if any, between the compensation earned by a Section 16 officer and the compensation that would have been
earned by the Section 16 officer had the fraud, embezzlement, gross negligence or deliberate disregard of applicable rules resulting from significant monetary loss, damage or injury to the Company not occurred.
Risk Assessment of the Compensation Programs
Our Board believe that risks arising from our compensation policies and practices for our employees are not reasonably likely to have a material adverse effect on the Company. The Company has designed our
compensation programs, including our incentive compensation plans, with specific features to address potential risks while rewarding employees for achieving long-term financial and strategic objectives through prudent business judgment and
appropriate risk taking. We use common variable compensation designs, with a significant focus on individual contributions to our performance and the achievement of absolute and relative corporate objectives, as generally described in this
Compensation Discussion and Analysis.
The Compensation Committee and the Board reviewed our compensation programs to assess
whether any aspect of the programs would encourage any of our employees to take any unnecessary or inappropriate risks that could threaten the value of the Company. The Company has designed our compensation programs to reward our employees for
achieving annual profitability and long-terms increase shareholder value.
Our Board recognizes that the pursuit of corporate
objectives possibly leads to behaviors that could weaken the link between pay and performance, and, therefore, the correlation between the compensation delivered to employees and the long-term return realized by stockholders. Accordingly, our
executive compensation program is designed to mitigate these possibilities and to ensure that our compensation practices are consistent with our risk profile. These features include the following:
|
|
|
bonus payouts and equity incentive awards that are not based solely on corporate performance objectives, but are also based on individual performance
levels,
|
|
|
|
the financial opportunity in our long-term equity incentive program that is best realized through long-term appreciation of our stock price, which
mitigates excessive short-term risk-taking,
|
|
|
|
annual cash bonuses that are paid after the end of the fiscal year to which the bonus payout relates,
|
|
|
|
the engagement and use of a compensation consultant,
|
|
|
|
the institution of stock ownership guidelines applicable to our executive officers, and
|
|
|
|
final decision making by our Compensation Committee and our Board of directors on all awards.
|
Additionally, the Company performed an assessment of compensation-related risks for all of our employees. Based on this assessment, we
concluded that our compensation programs do not create risks that are reasonably likely to have a material adverse effect on the Company. In making this evaluation, the Company reviewed the key design elements of our compensation programs in
relation to industry best practices, as well as the means by which any potential risks may be mitigated. In addition, management completed an inventory of incentive programs below the executive level and reviewed the design of these
incentives and concluded that such incentive programs do not encourage excessive risk-taking.
26
Compensation Committee Report
We have reviewed and discussed the foregoing Compensation Discussion and Analysis with management. Based on our review and discussions
with management, we recommend to the Board that the Compensation Discussion and Analysis be included in the Annual Report on Form 10-K/A for the year ended December 31, 2016.
COMPENSATION COMMITTEE MEMBERS
Susanne D. Lyons, Chair
Allyn C. Woodward, Jr.
Doreen Woo Ho
27
Executive Compensation Tables
Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
|
Year
|
|
|
Salary
($)
(1)
|
|
|
Bonus
($)
(2)
|
|
|
Stock
Awards
($)
(3)
|
|
|
Option
Awards
($)
(3)
|
|
|
All
Other
Compensation
($)
(4)
|
|
|
Total ($)
|
|
Manuel Henriquez
|
|
|
2016
|
|
|
$
|
803,154
|
|
|
$
|
1,200,000
|
|
|
$
|
4,005,335
|
|
|
|
|
|
|
$
|
771,425
|
|
|
$
|
6,779,914
|
|
Chairman & Chief Executive Officer
|
|
|
2015
|
|
|
$
|
779,762
|
|
|
$
|
1,000,000
|
|
|
$
|
4,472,142
|
|
|
|
|
|
|
$
|
1,635,353
|
|
|
$
|
7,887,257
|
|
|
|
|
2014
|
|
|
$
|
779,762
|
|
|
$
|
692,500
|
|
|
$
|
5,992,250
|
|
|
|
|
|
|
$
|
804,675
|
|
|
$
|
8,269,187
|
|
Mark R. Harris
|
|
|
2016
|
|
|
$
|
412,000
|
|
|
$
|
400,000
|
|
|
$
|
396,330
|
|
|
|
|
|
|
$
|
95,624
|
|
|
$
|
1,303,954
|
|
Chief Financial Officer
|
|
|
2015
|
|
|
$
|
166,667
|
|
|
$
|
200,000
|
|
|
$
|
400,001
|
|
|
|
|
|
|
$
|
26,404
|
|
|
$
|
793,072
|
|
Scott Bluestein
|
|
|
2016
|
|
|
$
|
432,600
|
|
|
$
|
650,000
|
|
|
$
|
1,249,040
|
|
|
|
|
|
|
$
|
200,555
|
|
|
$
|
2,532,195
|
|
Chief Investment Officer
|
|
|
2015
|
|
|
$
|
420,000
|
|
|
$
|
525,000
|
|
|
$
|
670,212
|
|
|
|
|
|
|
$
|
193,370
|
|
|
$
|
1,808,582
|
|
|
|
|
2014
|
|
|
$
|
420,000
|
|
|
$
|
233,750
|
|
|
$
|
967,100
|
|
|
|
|
|
|
$
|
144,396
|
|
|
$
|
1,765,246
|
|
Melanie Grace
|
|
|
2016
|
|
|
$
|
283,250
|
|
|
$
|
145,000
|
|
|
$
|
112,894
|
|
|
|
|
|
|
$
|
40,726
|
|
|
$
|
581,870
|
|
General Counsel, Chief Compliance Officer
and Secretary
|
|
|
2015
|
|
|
$
|
79,167
|
|
|
$
|
50,000
|
|
|
$
|
112,500
|
|
|
|
|
|
|
$
|
36,466
|
|
|
$
|
278,133
|
|
Andrew Olson
|
|
|
2016
|
|
|
$
|
211,150
|
|
|
$
|
150,000
|
|
|
$
|
72,060
|
|
|
|
|
|
|
$
|
28,684
|
|
|
$
|
461,894
|
|
Vice President of Finance and
Senior Controller
|
|
|
2015
|
|
|
$
|
186,250
|
|
|
$
|
195,000
|
|
|
$
|
53,332
|
|
|
|
|
|
|
$
|
22,717
|
|
|
$
|
457,299
|
|
Jessica Baron.
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former Chief Financial Officer
|
|
|
2015
|
|
|
$
|
130,096
|
|
|
|
|
|
|
$
|
267,838
|
|
|
|
|
|
|
$
|
63,168
|
|
|
$
|
461,102
|
|
|
|
|
2014
|
|
|
$
|
293,550
|
|
|
$
|
123,750
|
|
|
$
|
517,825
|
|
|
|
|
|
|
$
|
109,841
|
|
|
$
|
1,044,966
|
|
(1)
|
Salary column amounts represent base salary compensation received by each named executive officer (NEO) for the listed fiscal year.
|
(2)
|
Bonus column amounts represent the annual cash bonus earned during the fiscal year and awarded and paid out during the first quarter of the following fiscal year.
|
(3)
|
The amounts reflect the aggregate grant date fair value of restricted stock and stock option awards made to our NEOs and former NEOs during the applicable year computed
in accordance with FASB ASC Topic 718. The grant date fair value of each restricted stock award is measured based on the closing price of our common stock on the date of grant.
|
(4)
|
All Other Compensation column includes the following:
|
|
|
|
We made matching contributions under our 401(k) plan of (a) $18,000 in 2016 to Messrs. Henriquez, Bluestein, Harris and Olson and $17,703 to
Ms. Grace (b) $18,000 in 2015 to Messrs. Henriquez, Bluestein and Olson and Ms. Baron; and (c) $17,000 in 2014 to Messrs. Henriquez and Bluestein and Ms. Baron.
|
|
|
|
Distributions to Messrs. Henriquez, Harris, Bluestein and Olson and Ms. Grace in the amount of $753,425, $77,624, $182,555, $10,684 and $23,023,
respectively, were paid on unvested restricted stock awards during 2016.
|
|
|
|
Distributions to Messrs. Henriquez, Harris, Bluestein and Olson and Ms. Grace in the amount of $845,550, $22,587, $134,985, $4,717 and $3,100,
respectively, were paid on unvested restricted stock awards during 2015.
|
|
|
|
Distributions to Messrs. Henriquez and Bluestein and Ms. Baron in the amount of $787,675, $127,396, and $92,841, respectively, were paid on
unvested restricted stock awards during 2014.
|
|
|
|
Due to a change in the vacation policy of NEOs, Messrs. Henriquez, Harris, Bluestein and Ms. Grace were each paid out of all of their accrued
vacation through August 30, 2015 in the amount of $771,803, $3,817, $40,385 and $1,007, respectively. NEOs no longer accrue vacation effective September 1, 2015.
|
|
|
|
Ms. Grace began as a contractor on August 3, 2015 until she was approved by the Board as an executive officer on September 17, 2015.
During this period, Ms. Grace earned $32,359 in compensation.
|
28
Grants of Plan Based Awards in 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NEO
|
|
Grant Date
|
|
|
All Other Stock
Awards: Number of
Shares of
Stock or Units
(1)
|
|
|
All Other Option
Awards: Number of
Securities Underlying
Options
(1)
|
|
|
Grant Date
Fair Value of
Stock and
Option Awards
(2)
|
|
Manuel Henriquez
|
|
|
01/10/2016
|
|
|
|
333,500
|
|
|
|
|
|
|
$
|
4,005,335
|
|
Mark Harris
|
|
|
01/10/2016
|
|
|
|
33,000
|
|
|
|
|
|
|
$
|
396,330
|
|
Scott Bluestein
|
|
|
01/10/2016
|
|
|
|
104,000
|
|
|
|
|
|
|
$
|
1,249,040
|
|
Andrew Olson
|
|
|
01/10/2016
|
|
|
|
6,000
|
|
|
|
|
|
|
$
|
72,060
|
|
Melanie Grace
|
|
|
01/10/2016
|
|
|
|
9,400
|
|
|
|
|
|
|
$
|
112,894
|
|
(1)
|
Restricted stock awards vest as to one-third of the award on the one year anniversary of the date of the grant and quarterly over the succeeding 24 months. When
payable, distributions are paid on a current basis on the unvested shares.
|
(2)
|
The amounts reflect the aggregate grant date fair value of computed in accordance with FASB ASC Topic 718.
|
Outstanding Equity Awards at Fiscal Year End, December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name and Principal Position
|
|
Number of
Securities
Underlying
Unexercised
Options
Exercisable
|
|
|
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
|
|
|
Option
Exercise
Price ($)
|
|
|
Option
Expiration
Date
|
|
|
Number
of Shares
or Units
of
Stock That
Have
Not
Vested
|
|
|
Market
Value of
Shares or
Units of
Stock That
Have
Not
Vested
(1)
|
|
Manuel Henriquez
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,284
|
(2)
|
|
$
|
173,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
132,917
|
(3)
|
|
$
|
1,875,459
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
333,500
|
(6)
|
|
$
|
4,705,685
|
|
Mark Harris
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,252
|
(4)
|
|
$
|
299,866
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,000
|
(6)
|
|
$
|
465,630
|
|
Scott Bluestein
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,457
|
(2)
|
|
$
|
34,668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,920
|
(3)
|
|
$
|
281,071
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104,000
|
(6)
|
|
$
|
1,467,440
|
|
Melanie Grace
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,834
|
(5)
|
|
$
|
82,318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,400
|
(6)
|
|
$
|
132,634
|
|
Andrew Olson
|
|
|
13,332
|
(7)
|
|
|
6,668
|
|
|
$
|
15.12
|
|
|
|
12/03/2021
|
|
|
|
1,586
|
(3)
|
|
$
|
22,378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,000
|
(6)
|
|
$
|
84,660
|
|
(1)
|
Market value is computed by multiplying the closing market price of the Companys stock at December 31, 2016 by the number of shares.
|
(2)
|
Restricted stock granted on 3/4/13 that vests as to one-fourth of the total award on the one-year anniversary of the date of the grant and quarterly over the succeeding
36 months
|
(3)
|
Restricted stock granted on 3/10/15 that vests as to one-third of the total award on the one-year anniversary of the date of the grant and quarterly over the succeeding
24 months.
|
(4)
|
Restricted stock granted on 8/6/15 that vests as to one-third of the total award on the one-year anniversary of the date of the grant and quarterly over the succeeding
24 months
|
(5)
|
Restricted stock granted on 9/17/15 that vests as to one-third of the total award on the one-year anniversary of the date of the grant and quarterly over the succeeding
24 months
|
(6)
|
Restricted stock granted on 1/10/2016 that vests as to one-third of the total award on the one-year anniversary of the date of the grant and quarterly over the
succeeding 24 months
|
(7)
|
Options granted on 12/03/2014 that vest as to one-third of the total underlying shares on the one-year anniversary of the date of the grant and on a monthly basis over
the succeeding 24 months
|
29
Options Exercised and Stock Vested in 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name and Principal Position
|
|
Number of Shares
Acquired on
Exercise
|
|
|
Value Realized
on Exercise
|
|
|
Number of Shares
Acquired on
Vesting
|
|
|
Value Realized
on Vesting
|
|
Manuel Henriquez
|
|
|
|
|
|
|
|
|
|
|
359,264
|
|
|
$
|
4,347,348
|
|
Mark Harris
|
|
|
|
|
|
|
|
|
|
|
15,178
|
|
|
$
|
205,146
|
|
Scott Bluestein
|
|
|
|
|
|
|
|
|
|
|
57,399
|
|
|
$
|
692,290
|
|
Melanie Grace
|
|
|
|
|
|
|
|
|
|
|
4,166
|
|
|
$
|
55,499
|
|
Andrew Olson
|
|
|
|
|
|
|
|
|
|
|
2,218
|
|
|
$
|
26,908
|
|
COMPENSATION OF DIRECTORS
Our Compensation Committee has the authority from our Board for the appointment, compensation and oversight of our outside compensation consultant. Our Compensation Committee generally engages a
compensation consultant every other year to assist it with its responsibilities related to our director compensation program.
The following table discloses the cash, equity awards and other compensation earned, paid or awarded, as the case may be, to each of our
current directors during the fiscal year ended December 31, 2016. We provide further information relating to equity awards made to our non-employee directors below under
2006 Non-Employee Director Plan
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Fees Earned or
Paid in Cash
($)
(1)
|
|
|
Stock
Awards
($)
(2)
|
|
|
Option
Awards
($)
(3)
|
|
|
All
Other
Compensation
($)
(4)
|
|
|
Total
($)
|
|
Robert P. Badavas
|
|
$
|
175,000
|
|
|
|
|
|
|
|
|
|
|
$
|
3,099
|
|
|
$
|
178,099
|
|
Thomas J. Fallon
|
|
$
|
150,000
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
6,199
|
|
|
$
|
156,199
|
|
Joseph F. Hoffman
|
|
$
|
165,000
|
|
|
$
|
62,350
|
|
|
$
|
8,499
|
|
|
$
|
5,683
|
|
|
$
|
241,532
|
|
Susanne D. Lyons
|
|
$
|
175,000
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2,066
|
|
|
$
|
177,066
|
|
Allyn C. Woodward, Jr.
|
|
$
|
175,000
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
5,166
|
|
|
$
|
180,166
|
|
Doreen Woo Ho
|
|
$
|
|
|
|
$
|
45,362
|
|
|
$
|
6,415
|
|
|
$
|
1,033
|
|
|
$
|
52,810
|
|
Manuel A. Henriquez
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Messrs. Badavas, Fallon, Hoffman, Woodward and Ms. Lyons earned $125,000, $100,000, $115,000, $125,000 and $125,000, respectively, and each elected to receive
an additional retainer fee of 3,720 shares of our common stock in lieu of cash. The total value of the shares issued to each of Messrs. Badavas, Fallon, Hoffman and Woodward and Ms. Lyons services in fiscal 2016 was $50,000. Ms. Woo
Ho did not receive any cash compensation during 2016.
|
(2)
|
During 2016, in connection his re-election to our Board, we granted Mr. Hoffman a restricted stock award for 5,000 shares of common stock, and we granted
Ms. Woo Ho a restricted stock award for 3,333 shares of common stock upon her appointment to our Board. The amounts presented reflect the aggregate grant date fair value of the stock awards, as computed in accordance with FASB ASC Topic 718.
The grant date fair value of each restricted stock award is measured based on the closing price of our common stock on the date of grant.
|
(3)
|
During 2016, in connection with his re-election to our Board, we granted Mr. Hoffman a stock option award with respect to 15,000 shares of our common stock, and,
in connection with her appointment to our Board, we granted Ms. Woo Ho a stock option award with respect to 10,000 shares of our common stock. The amounts presented reflect the aggregate grant date fair value of option awards computed in
accordance with FASB ASC Topic 718. The fair value of each stock option grant is estimated based on the fair market value of the option on the date of grant using the Black-Scholes-Merton option pricing model. For a further discussion on the
valuation model and the assumptions used to calculate the fair value of our stock options, please see Note 7 to the consolidated financial statements included in our annual report on Form 10-K for the 2016 fiscal year.
|
(4)
|
Represents distributions paid during 2016 on unvested common stock under restricted stock awards.
|
(5)
|
As an employee director, Mr. Henriquez does not receive any compensation for his service as a director. The compensation Mr. Henriquez receives as our chief
executive officer is disclosed in the Summary Compensation Table and elsewhere under
EXECUTIVE COMPENSATION
.
|
30
As of December 31, 2016, Messrs. Badavas, Fallon, Hoffman and Woodward and
Ms. Lyons and Ms. Woo Ho had outstanding options in the amount of 20,000, 25,000, 25,000, 25,000, 10,000 and 10,000, respectively. As of December 31, 2016, Messrs. Badavas, Fallon, Hoffman and Woodward and Ms. Lyons and
Ms. Woo Ho held unvested shares of restricted stock in the amount of 1,666, 3,333, 6,666, 3,333, 1,666 and 3,333, respectively.
Upon her appointment to our Board in October 2016, Ms. Woo Ho received a restricted stock award with respect to 3,333 shares of our common stock and a stock option to purchase 10,000 shares of our
common stock.
During 2016, the compensation for serving on our Board as an independent director included the following:
|
|
|
Annual Director Retainer Fee
|
|
$100,000
|
Annual Chairperson Fee
|
|
$25,000, Audit Committee
$25,000, Compensation Committee
$15,000, NCG Committee
|
Annual Lead Director Fee
|
|
$25,000
|
In 2016, we granted each independent director an additional retainer of $50,000, which was distributed as
shares of common stock in lieu of cash. In addition, upon re-election to the Board, each independent director is granted an option to purchase 15,000 shares and an additional award of 5,000 shares of restricted stock. Employee directors do not
receive compensation for serving on our Board. In addition, we reimburse our directors for their reasonable out-of-pocket expenses incurred in attending Board meetings.
Under current SEC rules and regulations applicable to BDCs, a BDC may not grant options or restricted stock to non-employee directors unless it receives exemptive relief from the SEC. We filed an
exemptive relief request with the SEC to allow options and restricted stock to be issued to our non-employee directors, which was approved on October 10, 2007. On June 22, 2010, we received approval from the SEC regarding our exemptive
relief request permitting its employees to exercise their stock options and restricted stock and pay any related income taxes using a cashless exercise program.
On June 21, 2007, our stockholders approved amendments to the 2004 Equity Incentive Plan (the Equity Plan) and the 2006 Non-Employee Director Plan allowing for the grant of restricted
stock. The Equity Plan and 2006 Non-Employee Director Plan limit the combined maximum amount of restricted stock that may be issued under both of the Equity Plan and 2006 Non-Employee Director Plan to 10% of the outstanding shares of our common
stock on the effective date of the Equity Plan and 2006 Non-Employee Director Plan plus 10% of the number of shares of common stock issued or delivered by us during the terms of the Equity Plan and 2006 Non-Employee Director Plan.
Compensation Committee Interlocks and Insider Participation
All members of our Compensation Committee are independent directors and none of the members are present or past employees of the Company.
No member of our Compensation Committee: (i) has had any relationship with the Company requiring disclosure under Item 404 of Regulation S-K under the Securities Exchange Act of 1934, as amended, referred to as the Exchange Act; or
(ii) is an executive officer of another entity, at which one of our executive officers serves on the Board.
31