UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
(RULE
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE 14A
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Preliminary
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to §240.14a-12
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SARATOGA
INVESTMENT CORP.
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(Name
of Registrant as Specified In Its Charter)
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(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
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Saratoga
Investment Corp.
535
Madison Avenue
New
York, New York 10022
ANNUAL
MEETING OF STOCKHOLDERS
August
4, 2020
To
the Stockholders of Saratoga Investment Corp.:
You
are cordially invited to attend an annual meeting of stockholders of Saratoga Investment Corp., to be held at the offices of
Eversheds Sutherland (US) LLP, located at 1114 Avenue of the Americas, New York, NY 10036, on September 29, 2020, at 10:00
a.m., local time. Only stockholders of record at the close of business on July 31, 2020 are entitled to notice of, and to
vote at, the meeting, including any adjournment or postponement thereof.
Details
of the business to be conducted at the meeting are given in the accompanying Notice of Annual Meeting of Stockholders and
Proxy Statement.
Whether
or not you expect to attend the meeting, please vote electronically via the internet or by telephone, or sign and return your
proxy card so that your shares may be represented at the meeting. As discussed in the Proxy Statement, voting electronically via
the internet, by telephone or by returning the proxy or voting instruction card does not deprive you of your right to attend the
meeting and to vote your shares in person.
We
look forward to seeing you at the meeting.
Sincerely,
Christian
L. Oberbeck
Chairman
and Chief Executive Officer
Important
Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to Be Held on September 29,
2020.
Our
proxy statement and annual report on Form 10-K for the year ended February 29, 2020 are available at the following cookies-free
website that can be accessed anonymously: www.proxyvote.com.
NOTICE
OF 2020 ANNUAL MEETING OF STOCKHOLDERS
will
be held at the offices of Eversheds Sutherland (US) LLP
1114
Avenue of the Americas, New York NY 10036
September
29, 2020, 10:00 a.m., local time
August
4, 2020
To
the Stockholders of Saratoga Investment Corp.:
The
2020 Annual Meeting of Stockholders (the “Annual Meeting”) of Saratoga Investment Corp., a Maryland corporation
(the “Company”), will be held at the offices of Eversheds Sutherland (US) LLP, located at 1114 Avenue of the
Americas, New York, NY 10036, on September 29, 2020, at 10:00 a.m., local time, for the following purposes:
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1.
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To
elect each of Michael J. Grisius and G. Cabell Williams as a director of the Company,
each to serve until the 2023 Annual Meeting of Stockholders or until his successor is
duly elected and qualified;
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2.
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To
transact such other business as may properly come before the Annual Meeting.
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THE
BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE PROPOSAL.
Holders
of record of our common stock as of the close of business on July 31, 2020, the record date for the Annual Meeting, are entitled
to notice of, and to vote at, the Annual Meeting. Whether or not you expect to be present in person at the Annual Meeting, please
sign the enclosed proxy and return it promptly in the envelope provided, or vote via the Internet or telephone. Instructions are
shown on the proxy card. In the event there are not sufficient votes for a quorum or to approve or ratify the foregoing proposal
at the time of the Annual Meeting, the Annual Meeting may be adjourned in order to permit further solicitation of proxies by the
Company.
The
Company currently intends to hold the Annual Meeting in person. However, the Company is actively monitoring developments in connection
with the coronavirus (COVID-19) outbreak and is sensitive to the public health and travel concerns that stockholders may have
and the protocols or guidance that federal, state and local governments and agencies such as the Centers for Disease Control and
Prevention and the World Health Organization may recommend or impose. In the event it is not possible or advisable to hold
the Annual Meeting in person, the Company will announce alternative arrangements for the meeting as promptly as possible, which
may include holding the Annual Meeting solely by means of remote communication. If the Annual Meeting is held solely by remote
communication, the Company will announce that fact as promptly as practicable, and details on how to participate will be described
in a press release issued by the Company and posted on its website at https://ir.saratogainvestmentcorp.com/press-releases.
In addition, such information will be filed with the U.S. Securities and Exchange Commission as additional proxy material.
Please monitor the Company’s website at https://ir.saratogainvestmentcorp.com/press-releases
for updated information.
Thank you for your support of Saratoga
Investment Corp.
By order of the Board of Directors,
Henri
J. Steenkamp
Chief
Financial Officer, Chief Compliance Officer, Treasurer and Secretary
New
York, New York
August
4, 2020
This
is an important meeting. To ensure proper representation at the Annual Meeting, please complete, sign, date and return the
proxy card in the enclosed, self-addressed envelope, or vote your shares electronically through the Internet or by telephone.
Please see the proxy statement and the enclosed proxy for details about electronic voting. Even if you vote your shares prior
to the Annual Meeting, you still may attend the Annual Meeting and vote your shares in person.
TABLE
OF CONTENTS
Saratoga
Investment Corp.
535
Madison Avenue
New
York, New York 10022
PROXY
STATEMENT
2020
Annual Meeting of Stockholders
GENERAL
We
are furnishing you this proxy statement in connection with the solicitation of proxies by our Board of Directors for the 2020
Annual Meeting of Stockholders (the “Annual Meeting”). We are first furnishing this proxy statement and the accompanying
form of proxy to stockholders on or about August 17, 2020. In this proxy statement, except where the context suggests otherwise,
we refer to Saratoga Investment Corp. as the “Company,” “Saratoga,” “we,” “our”
or “us” and the Board of Directors as the “Board.”
We
encourage you to vote your shares, either by voting in person at the Annual Meeting or by granting a proxy (i.e., authorizing
someone to vote your shares). If you properly sign and date the accompanying proxy card or otherwise provide voting instructions,
either via the Internet or telephone, and the Company receives it in time for the Annual Meeting, the persons named as proxies
will vote the shares registered directly in your name in the manner that you specified. If you give no instructions on the
proxy card, the shares covered by the proxy card will be voted FOR the election of the nominees as directors.
ANNUAL
MEETING INFORMATION
Date and Location
We
will hold the Annual Meeting on September 29, 2020 at 10:00 a.m., local time, at the offices of Eversheds Sutherland (US)
LLP, located at 1114 Avenue of the Americas, New York, NY 10036.
Admission
Only
record or beneficial owners of Saratoga common stock as of the close of business on July 31, 2020 or their proxies may attend
the Annual Meeting. Beneficial owners must also provide evidence of stock holdings, such as a recent brokerage account or bank
statement.
Purpose
of Annual Meeting
At
the Annual Meeting, you will be asked to vote on the following proposal:
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1.
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To
elect each of Michael J. Grisius and G. Cabell Williams as a director of the Company,
each to serve until the 2023 Annual Meeting of Stockholders or until his successor is
duly elected and qualified.
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VOTING
INFORMATION
Record
Date and Quorum
The
record date for the Annual Meeting is the close of business on July 31, 2020 (the “Record Date”). You may cast
one vote for each share of common stock that you own as of the Record Date. On the Record Date, approximately 11,217,545
shares of common stock were outstanding. A quorum is necessary to hold a valid meeting. The presence, in person or by proxy,
of stockholders entitled to cast a majority of the votes entitled to be cast at the meeting will constitute a quorum at the
meeting. Abstentions are counted as present for purposes of establishing a quorum.
If
a quorum is not present at the Annual Meeting, or if a quorum is present but there are not enough votes to approve the proposal,
the person named as chairman of the Annual Meeting may adjourn the meeting to permit further solicitation of proxies. A stockholder
vote may be taken on a proposal in this proxy statement prior to any such adjournment if there are sufficient votes for approval
on such proposal.
Submitting
Voting Instructions for Shares Held Through a Broker
If
you hold shares of common stock through a broker, bank or other nominee, you must follow the voting instructions you receive from
your broker, bank or nominee. If you hold shares of common stock through a broker, bank or other nominee and you want to vote
in person at the meeting, you must obtain a legal proxy from the record holder of your shares and present it at the meeting. If
you do not submit voting instructions to your broker, bank or other nominee, your broker, bank or other nominee is not permitted
to vote your shares on any proposal considered at the meeting.
Authorizing
a Proxy for Shares Held in Your Name
If
you are a record holder of shares of common stock, you may authorize a proxy to vote on your behalf by mail, as described on the
enclosed proxy card. Authorizing a proxy will not limit your right to vote in person at the meeting. A properly completed, executed
and submitted proxy will be voted in accordance with your instructions, unless you subsequently revoke the proxy. If you authorize
a proxy without indicating your voting instructions, the proxyholder will vote your shares according to the Board’s recommendations.
Revoking
Your Proxy
If
you are a stockholder of record, you can revoke your proxy by: (1) delivering a written revocation notice prior to the Annual
Meeting to our Secretary, Henri J. Steenkamp, at 535 Madison Avenue, New York, New York 10022; (2) delivering a later-dated
proxy that we receive no later than the opening of the polls at the meeting; or (3) voting in person at the meeting. If you
hold shares of common stock through a broker, bank or other nominee, you must follow the instructions you receive from your
nominee in order to revoke your voting instructions. Attending the Annual Meeting does not revoke your proxy unless you also
vote in person at the meeting.
Votes
Required to Adopt the Proposal
Proposal
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Vote
Required
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Broker Discretionary
Voting Allowed:
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Effect
of Abstentions and
Broker Non-Votes
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Proposal
1—Election of Michael J. Grisius and G. Cabell Williams each as a director of the Company, each to serve until
the 2023 Annual Meeting of Stockholders or until his successor is duly elected and qualified.
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Affirmative
vote of the holders of a majority of the shares of stock outstanding and entitled to vote at the Annual Meeting.
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No
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Abstentions
and broker non- votes, if any, will have the effect of a vote against this proposal.
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INFORMATION
REGARDING THIS SOLICITATION
The
Company will bear the expense of the solicitation of proxies for the Annual Meeting. The Company has retained Saratoga Proxy
Consulting, LLC to assist in the solicitation of proxies for estimated fees of $7,500 plus out-of-pocket expenses. The proxy
solicitor is an independent, unrelated party to the Company. We have requested that brokers, nominees, fiduciaries and other
persons holding shares in their names, or in the names of their nominees, which are beneficially owned by others, to forward
the proxy materials to, and obtain proxies from, such beneficial owners. We will reimburse such persons for their reasonable
expenses in so doing.
Householding
of Proxy Statement Materials
The
U.S. Securities and Exchange Commission (the “SEC”) has adopted rules that permit companies and intermediaries (e.g.,
brokers) to satisfy the delivery requirements for proxy statements and annual reports with respect to two or more stockholders
sharing the same address by delivering a single proxy statement and annual report addressed to those stockholders. This process,
which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings
for companies.
A
number of brokerages and other institutional holders of record have implemented householding. A single proxy statement will be
delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders.
If you have received notice from your broker that it will be householding communications to your address, householding will continue
until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding
and would prefer to receive a separate proxy statement, please notify your broker. Stockholders who currently receive multiple
copies of the proxy statement at their addresses and would like to request information about householding of their communications
should contact their brokers or other intermediary holder of record. You can notify us by sending a written request to our Secretary,
Henri J. Steenkamp, at 535 Madison Avenue, New York, New York 10022, or by calling (212) 906-7800.
BENEFICIAL
OWNERSHIP OF COMMON STOCK
The
following table sets forth, as of July 31, 2020, the beneficial ownership of each current director, the nominees for director,
the Company’s executive officers, each person known to us to beneficially own 5.0% or more of the outstanding shares of
our common stock, and the executive officers and directors as a group.
The
percentage ownership is based on 11,217,545 shares of common stock outstanding as of July 31, 2020. Shares of common stock that
are subject to warrants or other convertible securities currently exercisable or exercisable within 60 days thereof, are deemed
outstanding for the purposes of computing the percentage ownership of the person holding these options or convertible securities,
but are not deemed outstanding for computing the percentage ownership of any other person. Beneficial ownership is determined
under the rules of the SEC and generally includes voting or investment power with respect to securities. To our knowledge, unless
otherwise indicated in the footnotes to this table, the persons and entities named in the table have sole voting and sole investment
power with respect to all shares beneficially owned. Unless otherwise indicated by footnote, the address for each listed individual
is Saratoga Investment Corp., 535 Madison Avenue, New York, New York 10022.
Name of Beneficial Owners
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Number of
Shares of
Common Stock
Beneficially
Owned
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Percent of
Class
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Interested Directors
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Christian L. Oberbeck
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1,520,261
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(1)
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13.6
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%
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Michael J. Grisius
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153,725
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1.4
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%
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Executive Officer
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Henri J. Steenkamp
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16,635
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*
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Independent Directors
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Steven M. Looney
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2,508
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*
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Charles S. Whitman III
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3,182
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*
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G. Cabell Williams
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64,297
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*
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All Directors and Executive Officers as a Group
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1,760,609
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15.7
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%
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Owners of 5% or more of our common stock
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Black Diamond Capital Management, L.L.C.(2)
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865,955
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7.7
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%
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Elizabeth Birkelund(3)
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549,183
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4.9
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%
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Thomas V. Inglesby
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354,236
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3.2
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%
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Mr.
Oberbeck, Mr. Grisius and Mr. Inglesby are affiliates who make up 18.1% of the ownership of SAR.
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(1)
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Includes
720,450 shares of common stock directly held by Mr. Oberbeck, 217,774 shares of common
stock held by CLO Partners LLC, an entity wholly owned by Mr. Oberbeck, 31,843 shares
of common stock directly held by Mr. Oberbeck’s children, for which Mr. Oberbeck
retains the voting rights, 1,011 shares of common stock directly help by Mr. Oberbeck’s
wife, for which Mr. Oberbeck retains the voting rights and 549,183 shares of common stock
directly held by Elizabeth Birkelund. See footnote 3 below.
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(2)
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Based
on information included in the 13F filed by Black Diamond Capital Management, L.L.C.
with the SEC on May 15, 2020. The address of Black Diamond Capital Management, L.L.C.
is One Sound Shore Drive, Suite 200, Greenwich, CT 06830.
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(3)
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Based
on information included in Amendment No. 3 to Schedule 13D filed jointly by Christian
L. Oberbeck, Elizabeth Oberbeck, Saratoga Investment Advisors and CLO Partners LLC on
November 4, 2014. Pursuant to an Agreement Relating to Shares of Common Stock of Saratoga
Investment Corp. (the “Transfer Agreement”), Christian L. Oberbeck transferred
744,183 shares of common stock beneficially owned by him to Elizabeth Oberbeck. Elizabeth
Oberbeck has full ownership rights with respect to the shares, including without limitation,
the right to (A) receive any cash and/or stock dividends and distributions paid on or
with respect to the shares and (B) sell the shares in accordance with the provisions
of the Transfer Agreement and receive all proceeds therefrom. However, pursuant to the
terms of the Transfer Agreement, Christian L. Oberbeck has retained the right to vote
the shares, except that Elizabeth Oberbeck has retained the right to vote the shares
on all matters submitted to stockholders with respect to any matter that could give rise
to dissenters or other rights of an objecting stockholder under Maryland General Corporation
Law. The Transfer Agreement also contains a right of first refusal that requires Elizabeth
Oberbeck to offer Christian L. Oberbeck the opportunity to purchase any shares of Common
Stock owned by her prior to her intended sale of the shares. Any such purchases may be
made either directly by Mr. Oberbeck or through entities affiliated with him.
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PROPOSAL
1—ELECTION OF DIRECTORS
Our
business and affairs are managed under the direction of our Board. Pursuant to our Articles of Incorporation, the Board may
modify the number of members of the Board provided that the number of directors will not be fewer than three or greater than
eleven and that no decrease in the number of directors shall shorten the term of any incumbent director. The Board currently
consists of five members, of whom three are not “interested persons” of Saratoga, as defined in Section 2(a) (19)
of the 1940 Act. Section 303A.01 of the New York Stock Exchange Listed Company Manual requires that the Company maintain a
majority of independent directors on the Board and further provides that a director of a business development company
(“BDC”) shall be considered to be independent if he or she is not an “interested person” of the
Company, as defined in Section 2(a)(19) of the 1940 Act.
Under
our Articles of Incorporation, our directors are divided into three classes. Each class of directors will hold office for a three-year
term, and until his or her successor is duly elected and qualified. At each Annual Meeting, the successors to the class of directors
whose terms expire at such meeting will be elected to hold office for a term expiring at the Annual Meeting of Stockholders held
in the third year following the year of their election and until their successors have been duly elected and qualified or any
director’s earlier resignation, death or removal.
Mr.
Grisius and Mr. Williams has been nominated for re-election for a three-year term, expiring in 2023. Mr. Grisius and Mr. Williams
has not been nominated to serve as a director pursuant to any agreement or understanding between each of them and the Company.
A
stockholder can vote for or against each of the nominees or abstain from voting. In the absence of instructions to the contrary,
it is the intention of the persons named as proxies to vote such proxy FOR the election of the nominees named below. If
any of the nominees should decline or be unable to serve as a director, it is intended that the proxy will be voted for the election
of such person or persons nominated as a replacement. The Board has no reason to believe that the persons named will be unable
or unwilling to serve.
Our
Board unanimously recommends a vote “FOR” this proposal.
Director
and Executive Officer Information
Directors
Information
regarding the nominee for election as a director at the Annual Meeting and our continuing directors is as follows:
Nominees
for director whose term will expire at our 2020 Annual Meeting of Stockholders:
Name
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Age
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Position
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Director
Since
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Interested
Directors
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Michael
J. Grisius
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56
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Director
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2011
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Independent
Director
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G.
Cabell Williams
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66
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Director
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2007
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Continuing
directors whose terms will expire at our 2021 Annual Meeting of the Stockholders:
Name
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Age
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Position
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Director
Since
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Interested
Directors
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Christian
L. Oberbeck
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60
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Director
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2010
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Continuing
directors whose terms will expire at our 2022 Annual Meeting of Stockholders and until their successors are duly elected and qualified:
Name
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Age
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Position
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Director
Since
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Independent
Directors
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Steven
M. Looney
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70
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Director
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2007
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Charles
S. Whitman III
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78
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Director
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2007
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Biographical
information regarding our Board is set forth below. We have divided the directors into two groups—independent directors
and interested directors. Interested directors are “interested persons” of Saratoga Investment Corp., as defined in
Section 2(a)(19) of the 1940 Act.
Executive
Officers
Name
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Age
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Position
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Executive
Director
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Christian
L. Oberbeck
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60
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Chief
Executive Officer
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Michael
J. Grisius
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56
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President
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Henri
J. Steenkamp
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44
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Chief
Financial Officer, Chief Compliance Officer, Treasurer and Secretary
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Biographical
information regarding our executive officers is set forth below.
Biographical
Information
Independent
Directors
Steven
M. Looney—Mr. Looney is a Managing Director of Peale Davies & Co. Inc., a strategic advisory firm specializing
in change management, revenue enhancement and business process improvement for middle market enterprises and is a CPA and an attorney.
Mr. Looney has served as a consultant and director to numerous companies in the healthcare, manufacturing and services industries.
Between 2000 and 2005, he served as Senior Vice President and Chief Financial Officer of PCCI, Inc., a private IT staffing and
outsourcing firm. Between 1992 and 2000, Mr. Looney worked at WH Industries as Chief Financial and Administrative Officer. Mr.
Looney is a trustee of Excellent Education for Everyone, a nonprofit organization. Mr. Looney graduated summa cum laude from the
University of Washington with a B.A. degree in accounting and received a J.D. from the University of Washington School of Law
where he was a member of the law review. He began his career at the United States Securities and Exchange Commission. Mr. Looney’s
qualifications as director include his experience as a Managing Director of Peale Davies & Co. Inc. and as Chief Financial
and Administrative Officer of WH Industries, as well as his financial, accounting and legal expertise.
Charles
S. Whitman III—Mr. Whitman is senior counsel (retired) at Davis Polk & Wardwell LLP. Mr. Whitman was a partner
in Davis Polk’s Corporate Department for 28 years, representing clients in a broad range of corporate finance matters, including
shelf registrations, securities compliance for financial institutions, foreign asset privatizations, and mergers and acquisitions.
From 1971 to 1973, Mr. Whitman served as Executive Assistant to three successive Chairmen of the SEC. Mr. Whitman graduated from
Harvard College and graduated magna cum laude from Harvard Law School with a LL.B. Mr. Whitman also received an LL.M. from Cambridge
University in England. Mr. Whitman’s qualifications as director include his 28 years of experience representing clients,
including AT&T, Exxon Mobil, General Motors and BP, in securities matters as a partner in Davis Polk’s corporate department.
G.
Cabell Williams—Mr. Williams has served as the Managing General Partner of Williams and Gallagher, a private equity
partnership located in Chevy Chase, Maryland since 2004. Mr. Williams is a Partner, Senior Manager and Director of Farragut Capital
Partners, which is a Mezzanine Fund based out of Chevy Chase, Maryland. Since 2011, Mr. Williams has also served as a partner
of Farragut Capital Partners, an investment firm based in Fairfax, VA. In 2004, Mr. Williams concluded a 23-year career at Allied
Capital Corporation, a business development company based in Washington, DC, which was acquired by Ares Capital Corporation in
2010. While at Allied, Mr. Williams held a variety of positions, including President, CIO and finally Managing Director following
Allied’s merger with its affiliates in 1998. From 1991 to 2004, Mr. Williams either led or co-managed the firm’s Private
Equity Group. For the nine years prior to 1999, Mr. Williams led Allied’s Mezzanine investment activities. For 15 years,
Mr. Williams served on Allied’s Investment Committee where he was responsible for reviewing and approving all of the firm’s
investments. Prior to 1991, Mr. Williams ran Allied’s Minority Small Business Investment Company. He also founded Allied
Capital Commercial Corporation, a real estate investment vehicle. Mr. Williams has served on the board of directors of various
public and private companies. Mr. Williams attended The Landon School, and graduated from Mercersburg Academy and Rollins College,
receiving a B.S. in Business Administration from the latter. Mr. Williams’ qualifications as director include his 28 years
of experience managing investment activities at Allied Capital, where he served in a variety of positions, including President,
CIO and Managing Director.
Interested
directors
Christian
L. Oberbeck—Mr. Oberbeck has over 35 years of experience in leveraged finance, from distressed debt to private equity,
and has been involved in originating, structuring, negotiating, consummating, managing and monitoring investments in these businesses.
Mr. Oberbeck is the Managing Member of Saratoga Investment Advisors, LLC, the Company’s investment adviser, and the Chairman
of the Board and Chief Executive Officer of the Company. Mr. Oberbeck also served as President of the Company until February 2014.
Mr. Oberbeck is also the Managing Partner of Saratoga Partners, a middle market private equity investment firm. Prior to assuming
full management responsibility for Saratoga Partners in 2008, Mr. Oberbeck had co-managed Saratoga Partners since 1995. Mr. Oberbeck
joined Dillon Read and Saratoga Partners from Castle Harlan, Inc., a corporate buyout firm which he had joined at its founding
in 1987 and was a Managing Director, leading successful investments in manufacturing and financial services companies. Prior to
that, he worked in the Corporate Development Group of Arthur Young and in corporate finance at Blyth Eastman Paine Webber. Mr.
Oberbeck has been a director of numerous middle market companies. Mr. Oberbeck graduated from Brown University in 1982 with a
BS in Physics and a BA in Mathematics. In 1985, he earned an MBA from Columbia University. Mr. Oberbeck’s qualifications
as a director include his extensive experience in the investment and finance industry, as well as his intimate knowledge of the
Company’s operations, gained through his service as an executive officer.
Michael
J. Grisius—Mr. Grisius has over 29 years of experience in leveraged finance, investment management and financial
services. He has originated, structured, negotiated, consummated, managed and monitored numerous successful investments in mezzanine
debt, private equity, senior debt, structured products and commercial real estate debt. Mr. Grisius is Chief Investment Officer
and a Managing Director of Saratoga Investment Advisors, LLC, the Company’s investment adviser, and was appointed President
of the Company in February 2013. Mr. Grisius joined Saratoga Investment Advisors, LLC in July 2011. Prior to joining Saratoga
Investment Advisors, Mr. Grisius served as Managing Director at Allied Capital Corporation, where he was an investment professional
for 16 years. At Allied Capital Corporation, Mr. Grisius held several senior positions including co-head of Mezzanine Finance
and member of its Management Committee and its Investment Committee. In 2008, Mr. Grisius was appointed co-chairman of the Allied
Capital Corporation’s Investment Committee. He also had responsibility for structuring and managing Unitranche Fund, LLC.
During his tenure at Allied, Mr. Grisius built and led teams that made investments in subordinated debt, control equity and real
estate mortgage debt. Mr. Grisius has served on the board of directors of numerous middle market companies. Prior to joining Allied
Capital Corp., Mr. Grisius worked in leveraged finance at Chemical Bank from 1989 to 1992 and held senior accountant and consultant
positions with KPMG LLP from 1985 to 1988. Mr. Grisius graduated with a BS from Georgetown University in 1985 and earned an MBA
from Cornell University’s Johnson Graduate School of Management in 1990. Mr. Grisius’ qualifications as a director
include his broad experience in leverage finance, investment management, private equity and financial services.
Executive
Officers
For
information regarding Mr. Oberbeck, the Chairman of the Board and our Chief Executive Officer and Mr. Grisius, our President,
see “—Directors” above.
Henri
J. Steenkamp—Mr. Steenkamp, 44 years old, had served as the Chief Financial Officer of MF Global Holdings Ltd.,
a broker in commodities and derivatives, from April 2011. Prior to that, Mr. Steenkamp held the position of Chief Accounting
Officer and Global Controller at MF Global for four years. He joined MF Global, then Man Financial, in 2006 as Vice President
of External Reporting and Accounting Policy. After MF Global filed for bankruptcy protection in October 2011, he continued to
serve as Chief Financial Officer through January 2013. Before joining MF Global, Mr. Steenkamp spent eight years with
PricewaterhouseCoopers (“PwC”), including four years in Transaction Services in its New York office, managing a
variety of capital-raising transactions on a global basis. His focus was also on the SEC registration and public company
filing process, including technical accounting. He spent four years with PwC in South Africa, where he served as an auditor
primarily for SEC registrants and assisted South African companies as they went public in the U.S. Mr. Steenkamp is a
chartered accountant and holds an honors degree in Finance.
Board
Leadership and the Board’s Role in the Oversight of Risk Management
Our
board of directors monitors and performs an oversight role with respect to the business and affairs of the Company, including
with respect to investment practices and performance, compliance with regulatory requirements and the services, expenses and performance
of service providers to the Company. Among other things, our board of directors approves the appointment of our investment adviser,
administrator and officers; reviews and monitors the services and activities performed by our investment adviser, administrator
and officers; and approves the engagement, and reviews the performance of, our independent public accounting firm.
Under
our Second Amended and Restated Bylaws (the “Bylaws”), the Board may designate a chairman to preside over the meetings
of the Board and meetings of the stockholders and to perform such other duties as may be assigned to him by the Board. The Company
does not have a fixed policy as to whether the chairman of the Board should be an independent director and believes that its flexibility
to select its chairman and reorganize its leadership structure from time to time is in the best interests of the Company and its
stockholders. Mr. Oberbeck, who is an “interested person” of the Company as defined in Section 2(a)(19) of the 1940
Act, serves as both the Chief Executive Officer and chairman of the Board. The Board believes that Mr. Oberbeck, as chief executive
officer of the Company and as a principal of Saratoga Investment Advisors, is the director with the most knowledge of our business
strategy and is best situated to serve as chairman of the Board.
Pursuant
to the Company’s Corporate Governance Guidelines, the Company has designated Steven M. Looney, the Chairman of the Audit
Committee, as the presiding director of all executive sessions of independent directors. Executive sessions of the independent
directors are held at each board meeting. Interested parties, stockholders and holders of the Company’s notes that desire
to communicate directly with the Board of Directors or one or more of its members concerning the affairs of the Company may direct
the communication in written correspondence by letter to: Saratoga Investment Corp., attention Mr. Steven M. Looney, Chairman
of the Audit Committee, 535 Madison Avenue, New York, New York. We believe that our board leadership structure must be evaluated
on a case-by-case basis and that our existing board leadership structure is appropriate. However, we continually re-examine our
corporate governance policies on an ongoing basis to ensure that they continue to meet our needs.
The
Board, directly and through the audit committee and other committees of the Board, takes an active role in the oversight of the
Company’s policies with respect to the assessment and management of enterprise risk. Among other things, the Board has policies
in place for identifying the senior executive responsible for key risks as well as the Board committees with oversight responsibility
for particular key risks. In a number of cases, oversight is conducted by the full Board. Our Board also performs its risk oversight
responsibilities with the assistance of the chief compliance officer. The Chief Compliance Officer is designated to oversee compliance
with the federal securities laws.
We
believe that our Board and its committees’ role in risk oversight complements our Board’s leadership structure because
it allows our independent directors, through three fully independent board committees, auditor and independent valuation providers,
our Chief Compliance Officer, and otherwise, to exercise oversight of risk without any conflict that might discourage critical
review. We believe that our board leadership structure and the Board’s approach to risk oversight must be evaluated on a
case-by-case basis and that the Board’s role in risk oversight is appropriate. However, we continually re-examine the manner
in which the Board administers its oversight function on an ongoing basis to ensure that it continues to meet our needs.
Transactions
with Related Persons
We
have entered into an investment advisory and management agreement (“Management Agreement”) with Saratoga Investment
Advisors, LLC. The Management Agreement with Saratoga Investment Advisors was initially approved by our board of directors at
an in-person meeting of the directors, including a majority of our independent directors, and was approved by our stockholders
at the special meeting of stockholders held on July 30, 2010. Pursuant to the 1940 Act, the Management Agreement remained
in effect for an initial period of two years, and approved thereafter for additional terms of one year by our board of directors
at in-person meetings, including a majority of our independent directors. Most recently, on July 7, 2020, our board of directors
approved the renewal of the Management Agreement for an additional one-year term at an in-person meeting.
In approving the Management Agreement, the directors considered, among other things, (i) the nature, extent and quality of
the advisory and other services to be provided to us by Saratoga Investment Advisors; (ii) our investment performance and
the investment performance of Saratoga Investment Advisors; (iii) the expected costs of the services to be provided by Saratoga
Investment Advisors (including management fees, advisory fees and expense ratios) as compared to other companies within the industry,
and the profits expected to be realized by Saratoga Investment Advisors; (iv) the limited potential for economies of scale
in investment management associated with managing us; and (v) Saratoga Investment Advisors estimated pro forma profitability
with respect to managing us.
Pursuant
to a separate administration agreement, Saratoga Investment Advisors, who also serves as our administrator, furnishes us with
office facilities and equipment, and clerical, book-keeping and record keeping services. Under the administration agreement, our
administrator also performs, or oversees the performance of our required administrative services, which include, among other things,
being responsible for the financial records which we are required to maintain, preparing reports for our stockholders and reports
required to be filed with the SEC. We have also
entered into a license agreement with Saratoga Investment Advisors, LLC, pursuant to which Saratoga Investment Advisors has agreed
to grant us a non-exclusive, royalty-free license to use the name “Saratoga.” In addition, pursuant to the terms of
the administration agreement, Saratoga Investment Advisors, LLC provides us with the office facilities and administrative services
necessary to conduct our day-to- day operations. Mr. Oberbeck, our Chief Executive Officer, is the primary investor in and controls
Saratoga Investment Advisors, LLC.
Review,
Approval or Ratification of Transactions with Related Persons
The
Audit Committee of our Board is required to review and approve any transactions with related persons (as such term is defined
under Item 404 of Regulation S-K).
Corporate
Governance
Corporate
Governance Documents
We
maintain a corporate governance webpage at the “Corporate Governance” link under the “Investor
Relations” link at http://saratogainvestmentcorp.com.
Our
Corporate Governance Procedures, Code of Business Conduct and Ethics, Code of Ethics and Board committee charters are available
at our corporate governance webpage at http://saratogainvestmentcorp.com and
are also available to any stockholder who requests them by writing to our Secretary, Henri J. Steenkamp, at Saratoga Investment
Corp., 535 Madison Avenue, New York, New York 10022.
Director
Independence
In
accordance with rules of the New York Stock Exchange (the “NYSE”), the Board annually determines the independence
of each director. No director is considered independent unless the Board has determined that he or she has no material
relationship with the Company. The Company monitors the status of its directors and officers through the activities of the
Company’s Nominating and Corporate Governance Committee and through a questionnaire to be completed by each director no
less frequently than annually, with updates periodically if information provided in the most recent questionnaire has
changed.
In
order to evaluate the materiality of any such relationship, the Board uses the definition of director independence set forth
in the NYSE Listed Company Manual. Section 303A.00 of the NYSE Listed Company Manual provides that business development
companies, or BDCs, such as the Company, are required to comply with all of the provisions of Section 303A applicable to
domestic issuers other than Sections 303A.02, the section that defines director independence. Section 303A.00 provides that a
director of a BDC shall be considered to be independent if he or she is not an “interested person” of the
Company, as defined in Section 2(a)(19) of the 1940 Act. Section 2(a)(19) of the 1940 Act defines an “interested
person” to include, among other things, any person who has, or within the last two years had, a material business or
professional relationship with the Company.
The
Board has determined that each of the directors is independent and has no relationship with the Company, except as a director
and stockholder of the Company, with the exception of Messrs. Oberbeck and Grisius, who are interested persons of the Company
due to their positions as officers of the Company and officers of Saratoga Investment Advisors, LLC, our external investment adviser.
Steven M. Looney is the designated lead independent director of our board of directors.
Annual
Evaluation
Our
directors perform an evaluation, at least annually, of the effectiveness of the Board and its committees. This evaluation includes
a series of questions for the directors to consider, followed by a discussion among the Board, Board committees, the Company’s
management and outside legal counsel.
Board
Meetings and Committees
Our
Board met six times during fiscal year 2020. Each director attended at least 75% of the total number of meetings of the Board
and committees on which the director served that were held while the director was a member. The Board’s standing committees
are set forth below. We require each director to make a diligent effort to attend all Board and committee meetings, as well as
each annual meeting of stockholders. All five directors attended the 2019 Annual Meeting of Stockholders in person.
Communications
with Directors
Stockholders
and other interested parties may contact any member (or all members) of the Board by mail. To communicate with the Board, any
individual directors or any group or committee of directors, correspondence should be addressed to the Board or any such
individual directors or group or committee of directors by either name or title. All such correspondence should be sent to
Saratoga Investment Corp., 535 Madison Avenue, New York, New York 10022, Attention: Secretary. Any communication to report
potential issues regarding accounting, internal controls and other auditing matters will be directed to the Audit Committee.
Appropriate personnel of the Company will review and sort through communications before forwarding them to the
addressee(s).
Code
of Business Conduct and Ethics
We
have adopted a Code of Business Conduct and Ethics that applies to which applies to, among others, our executive officers, including
our principal executive officer and principal financial officer, as well as every officer, director and employee of the Company.
Requests for copies should be sent in writing to Saratoga Investment Corp., 535 Madison Avenue, New York, New York 10022. The
Company’s Code of Business Conduct and Ethics is also available on our website at http://saratogainvestmentcorp.com.
If
we make any substantive amendment to, or grant a waiver from, a provision of our Code of Business Conduct and Ethics, we will
promptly disclose the nature of the amendment or waiver on our website at http://saratogainvestmentcorp.com.
Practices
and Policies Regarding Hedging, Speculative Trading and Pledging of Securities
Our
insider trading policy generally prohibits the Company’s and our investment adviser’s directors, officers and employees
from engaging in any short-term trading, short sales and other speculative transactions involving our securities, including buying
or selling puts or calls or other derivative securities based on our securities. In addition, such persons are generally prohibited
under our insider trading policy from entering into hedging or monetization transactions or similar arrangements, as well as pledging
our securities in a margin account or as collateral for a loan, except in limited circumstances that are pre-approved by our chief
compliance officer.
Committees
of the Board of Directors
Audit
Committee
The
current members of the audit committee are Steven M. Looney (Chairman), Charles S. Whitman III and G. Cabell Williams. The Board
has determined that Mr. Looney is an “audit committee financial expert” as defined under Item 407 of Regulation S-K
of the Securities Exchange Act of 1934 (the “Exchange Act”), as amended, and that each of Messrs. Whitman and Williams
are “financially literate” as required by NYSE corporate governance standards. All of these members are independent
directors. The audit committee is responsible for approving our independent accountants, reviewing with our independent accountants
the plans and results of the audit engagement, approving professional services provided by our independent accountants, reviewing
the independence of our independent accountants and reviewing the adequacy of our internal accounting controls. The audit committee
is also responsible for aiding our board of directors in determining the fair value of debt and equity investments that are not
publicly traded or for which current market values are not readily available; where appropriate, the board of directors and audit
committee may utilize the services of an independent valuation firm to assist them in determining the fair value of these investments.
Finally, the audit committee also reviews our financial statements and the disclosure thereof and the adequacy of our disclosure
controls and procedures.
Authority
The
audit committee is authorized (without seeking Board approval) to retain special legal, accounting or other advisors and may
request any officer or employee of the Company or the Company’s outside counsel or independent auditor to meet with any
members of, or advisors to, the audit committee. The audit committee has available appropriate funding from the Company as
determined by the audit committee for payment of: (i) compensation to any accounting firm engaged for the purpose of
preparing or issuing an audit report or performing other audit, review or attest services for the Company, (ii) compensation
to any advisers employed by the audit committee, and (iii) ordinary administrative expenses of the audit committee that are
necessary or appropriate in carrying out its duties. The audit committee may delegate its authority to subcommittees or the
chairman of the audit committee when it deems appropriate and in the best interests of the Company.
Procedures
The
audit committee meets as often as it determines is appropriate to carry out its responsibilities under its charter, but not less
frequently than quarterly. The chairman of the audit committee, in consultation with the other committee members, determines the
frequency and length of the committee meetings and sets meeting agendas consistent with its charter. The audit committee meets
separately, periodically, with management, with internal auditors or other personnel responsible for the internal audit function
and with the independent auditor. The audit committee met nine times during fiscal year 2020.
A
charter of the audit committee is available in print to any stockholder who requests it and it is also available on the Company’s
website at www.saratogainvestmentcorp.com.
Nominating
and Corporate Governance Committee
The
current members of the nominating and corporate governance committee are Charles S. Whitman III (Chairman), G. Cabell Williams
and Steven M. Looney. All of these members are independent directors. The nominating and corporate governance committee is responsible
for identifying individuals qualified to become board members, and recommending to the Board director nominees for election at
the next annual or special meeting of stockholders at which directors are to be elected or to fill any vacancies or newly created
directorships that may occur between such meetings, recommending directors for appointment to Board committees, making recommendations
to the Board as to determinations of director independence, overseeing the evaluation of the Board, overseeing and setting compensation
for the Company’s directors.
In
making its recommendations for Board and committee membership, the nominating and corporate governance committee reviews candidates’
qualifications for membership on the Board or a committee of the Board (including making a specific determination as to the independence
of each candidate) based on the criteria approved by the Board (and taking into account the enhanced independence, financial literacy
and financial expertise standards required under law or the New York Stock Exchange rules for audit committee membership purposes).
In evaluating current directors for re-nomination to the Board or re-appointment to any Board committees, the nominating and corporate
governance committee assesses the performance of such directors, periodically reviews the composition of the Board and its committees
in light of the current challenges and needs of the Board, the Company and each committee, and determines whether it may be appropriate
to add or remove individuals after considering issues of judgment, diversity, age, skills, background and experience, considers
rotation of committee members and committee chairmen and considers any other factors that are set forth in the Company’s
corporate governance procedures or are deemed appropriate by the nominating and corporate governance committee or the Board. The
nominating and corporate governance committee considers issues of judgment, diversity, age, skills, background and experience
in evaluating candidates for membership on the Board.
The
nominating and corporate governance committee does not have a formal policy on the consideration of director candidates recommended
by stockholders. The board of directors believes that it is more appropriate to give the nominating and corporate governance committee
flexibility in evaluating stockholder recommendations.
In
the event that a director nominee is recommended by a stockholder, the nominating and corporate governance committee will give
due consideration to the director nominee and will use the same criteria used for evaluating board director nominees, in addition
to considering the information relating to the director nominee provided by the stockholder.
Authority
The
nominating and corporate governance committee has the sole authority to retain and terminate any search firm assisting the nominating
and corporate governance committee in identifying director candidates, including sole authority to approve all such search firm’s
fees and other retention terms. In addition, the nominating and corporate governance committee has the sole authority to retain
and terminate any compensation consultant assisting the nominating and corporate governance committee in the evaluation of director
compensation, including sole authority to approve all such compensation consultant’s fees and other retention terms. The
nominating and corporate governance committee may delegate its authority to subcommittees or the chair of the nominating and corporate
governance committee when it deems appropriate and in the best interests of the Company.
Procedures
The
nominating and corporate governance committee meets as often as it determines is appropriate to carry out its responsibilities
under its charter. The chair of the committee, in consultation with the other committee members, determines the frequency and
length of the committee meetings and shall set meeting agendas consistent with its charter. The nominating and corporate governance
committee met once during fiscal 2020.
A
charter of the nominating and corporate governance committee is available in print to any stockholder who requests it, and it
is also available on the Company’s website at www.saratogainvestmentcorp.com.
Compensation
Committee
The
current members of the compensation committee are G. Cabell Williams (Chairman), Steven M. Looney and Charles S. Whitman III.
All of these members are independent directors. The compensation committee is responsible for overseeing the Company’s compensation
policies generally and making recommendations to the Board with respect to incentive compensation and equity-based plans of the
Company that are subject to Board approval, evaluating executive officer performance and reviewing the Company’s management
succession plan, overseeing and setting compensation for the Company’s directors and, as applicable, its executive officers
and, as applicable, preparing the report on executive officer compensation that SEC rules require to be included in the Company’s
annual proxy statement. Currently, none of our executive officers are compensated by the Company and as such the compensation
committee is not required to produce a report on executive officer compensation for inclusion in our annual proxy statement.
The
compensation committee has the sole authority to retain and terminate any compensation consultant assisting the compensation committee,
including sole authority to approve all such compensation consultant’s fees and other retention terms. The compensation
committee may delegate its authority to subcommittees or the chairman of the compensation committee when it deems appropriate
and in the best interests of the Company.
Procedures
The
compensation committee shall meet as often as it determines is appropriate to carry out its responsibilities under its charter.
The chairman of the compensation committee, in consultation with the other committee members, shall determine the frequency and
length of the committee meetings and shall set meeting agendas consistent with its charter. No executive officer should attend
that portion of any meeting where such executive’s performance (or, as applicable, compensation) is discussed, unless specifically
invited by the compensation committee. The compensation committee met once during fiscal 2020.
A
charter of the compensation committee is available in print to any stockholder who requests it and is also available on the Company’s
website at www.saratogainvestmentcorp.com.
Compensation
Committee Interlocks and Insider Participation
During
fiscal year 2020, none of the Company’s executive officers served on the board of directors (or a compensation committee
thereof or other board committee performing equivalent functions) of any entities that had one or more executive officers serve
on the compensation committee or on the board of directors. No current or past executive officers or employees of the Company
or its affiliates serve on the compensation committee.
Executive
Compensation
Currently,
none of our executive officers are compensated by us. We currently have no employees, and each of our executive officers is also
an employee of Saratoga Investment Advisors. Services necessary for our business are provided by individuals who are employees
of Saratoga Investment Advisors, pursuant to the terms of the investment advisory and management agreement and the administration
agreement.
Director
Compensation
Our
independent directors receive an annual fee of $60,000. They also receive $2,500 plus reimbursement of reasonable
out-of-pocket expenses incurred in connection with attending each board meeting and receive $1,000 plus reimbursement of
reasonable out-of-pocket expenses incurred in connection with attending each committee meeting. In addition, the chairman of
the audit committee receives an annual fee of $10,000 and the chairman of each other committee receives an annual fee of
$5,000 for their additional services in these capacities. In addition, we have purchased directors’ and officers’
liability insurance on behalf of our directors and officers. Independent directors have the option to receive their
directors’ fees in the form of our common stock issued at a price per share equal to the greater of net asset value or
the market price at the time of payment. No compensation is paid to directors who are “interested
persons.”
The
following table sets forth information concerning total compensation earned by or paid to each of our directors during the fiscal
year ended February 29, 2020:
|
|
Fees
Earned or
|
|
|
|
|
Name
|
|
Paid in Cash
|
|
|
Total
|
|
Interested Directors
|
|
|
|
|
|
|
Christian L. Oberbeck(1)
|
|
|
—
|
|
|
|
—
|
|
Michael J. Grisius(1)
|
|
|
—
|
|
|
|
—
|
|
Independent Directors
|
|
|
|
|
|
|
|
|
Steven M. Looney
|
|
$
|
96,000
|
|
|
$
|
96,000
|
|
Charles S. Whitman III
|
|
$
|
91,000
|
|
|
$
|
91,000
|
|
G. Cabell Williams
|
|
$
|
91,000
|
|
|
$
|
91,000
|
|
|
(1)
|
No compensation was paid to directors who are interested
persons of us as defined in the 1940 Act.
|
Portfolio
Management
The
day-to-day management of our portfolio is the responsibility of Saratoga Investment Advisors and overseen by its investment committee.
Investment
Committee
The
members of Saratoga Investment Advisors’ investment committee include Christian L. Oberbeck, Michael J. Grisius, Thomas
V. Inglesby and Charles G. Phillips. See the section of the prospectus entitled “Management” for biographies of Messrs.
Oberbeck and Grisius. For biographical information for Messrs. Inglesby and Phillips, see “Investment Professionals”
below.
Investment
Professionals
Our
investment adviser’s investment personnel, in addition to our investment adviser’s investment committee, are primarily
responsible for the day-to-day management of our portfolio.
The
members of our investment adviser’s investment committee and its investment personnel are not be employed by us, and receive
no compensation from us in connection with their activities. However, they receive compensation from our investment adviser that
includes an annual base salary, an annual individual performance bonus, contributions to 401(k) plans, and, in certain circumstances,
a portion of the incentive fee or carried interest earned in connection with their services.
Below
are the biographies for the members of our investment adviser’s investment committee whose biographies are not included
elsewhere in this prospectus and the other investment professionals of our investment adviser.
Thomas
V. Inglesby—Mr. Inglesby has over 25 years of investment experience including private equity and leveraged finance.
Mr. Inglesby is a managing director at Saratoga Investment Advisors and is responsible for originating, structuring, negotiating,
consummating, managing and monitoring middle market investments.
Prior
to joining Saratoga Investment Advisors, Mr. Inglesby was a senior managing director at GSC Group, Inc. From September 2008
through July 2010, Mr. Inglesby was a senior managing director in the Recovery Investment Group at GSC Group. From 2002 to
2008, Mr. Inglesby served as the Head of the U.S. Corporate Debt Group of GSC Group. During this period, GSC Group raised
and managed $5.6 billion in capital across 12 corporate credit investment funds. From 1997 to 2002, he served as a managing director
at GSC Group focused on middle market buyouts. Prior to joining GSC Group in 1997, Mr. Inglesby served as a managing director
with Harbour Group from 1994 to 1997, where he focused on acquisitions of manufacturing companies in fragmented industries. From
1992 to 1994, Mr. Inglesby served as a managing director at the South Street Funds, a startup distressed debt investment
fund founded by former partners at Goldman Sachs. From 1986 to 1990, Mr. Inglesby served as a vice president in the Merchant
Banking Department at PaineWebber.
Mr. Inglesby
received a J.D. from the University of Virginia School of Law, an M.B.A. from the Darden Graduate School of Business Administration,
and a B.S. in Accounting with General Honors from the University of Maryland.
Charles
G. Phillips IV—Mr. Phillips has over 20 years of middle-market investment experience spanning private equity and
leveraged finance. Mr. Phillips is a managing director of Saratoga Investment Advisors, LLC, the Company’s investment
adviser, and a Member of its Investment Committee. At the Company, and at Saratoga Partners previously, Mr. Phillips has
been responsible for originating, structuring, negotiating, consummating, managing and monitoring middle market investments. Mr. Phillips
has extensive experience investing in companies across a wide variety of industries, including business and tech-enabled
services, financial services, education and manufacturing. Prior corporate finance experience includes mergers and acquisitions
and capital markets experience in the packaged foods, branded consumer products, cable television, energy and education sectors.
Serving as a director of several Saratoga Partners portfolio companies, Mr. Phillips has executed public financings and sales
across many market cycles. Mr. Phillips is a founding member of the Company’s investment adviser since its inception
in 2010, having previously joined Saratoga Partners in 1997 after graduating from Harvard Business School. Prior to that, from
1993 to 1995, Mr. Phillips worked in Dillon Read’s corporate finance department, where he was involved in mergers and
acquisitions and advisory assignments in a variety of industries. Prior experience includes McCown De Leeuw & Co., a
corporate buyout firm.
OTHER
MATTERS
Audit Committee Report
The
audit committee is appointed by the Board to review the Company’s financial matters. Each member of the audit committee
meets the independence requirements established by the 1940 Act and under the applicable listing standards of the NYSE. The audit
committee is responsible for the selection, engagement, compensation, retention and oversight of the Company’s independent
registered public accounting firm. We are also responsible for recommending to the Board that the Company’s audited financial
statements be included in its Annual Report on Form 10-K for the fiscal year.
The
role of the Audit Committee is to assist the Board in fulfilling its oversight responsibilities by (1) overseeing the
Company’s accounting and financial reporting processes and the audits of the Company’s financial statements and
internal control over financial reporting and (2) reviewing the financial reports and other financial information provided by
the Company to the public. However, it is not the Audit Committee’s duty to plan or conduct the audits or to determine
that the Company’s financial statements are complete, accurate and in accordance with generally accepted accounting
principles or that its internal control over financial reporting is effective. The Company’s management is responsible
for the preparation, presentation and integrity of its financial statements, for its accounting and financial reporting
principles and for the establishment and effectiveness of internal controls and procedures designed to assure compliance with
accounting standards and applicable laws and regulations.
The
independent registered public accounting firm is responsible for performing an independent audit of the Company’s
financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) and
expressing an opinion as to the conformity of such financial statements with generally accepted accounting principles in the
United States of America and for auditing and reporting on the effectiveness of the Company’s internal control over
financial reporting.
In
making our recommendation that the Company’s financial statements be included in its Annual Report on Form 10-K for the
year ended February 29, 2020, we have taken the following steps:
|
●
|
We
discussed management’s assessment of the effectiveness of the Company’s internal
control over financial reporting and the independent registered public accounting firm’s
evaluation of the Company’s internal control over financial reporting, with management
and with Ernst & Young LLP, the Company’s independent registered public accounting
firm for the year ended February 29, 2020.
|
|
●
|
We
discussed with Ernst & Young LLP those matters required to be discussed by the applicable
requirements of the Public Company Accounting Oversight Board and the SEC, including
information regarding the scope and results of the audit. These communications and discussions
are intended to assist us in overseeing the financial reporting and disclosure process.
|
|
●
|
We
conducted periodic executive sessions with Ernst & Young LLP, with no members of
the Company’s management present during those discussions. Ernst & Young LLP
did not identify any material audit issues, questions or discrepancies, other than those
previously discussed with management, which were resolved to the satisfaction of all
parties.
|
|
●
|
We
received and reviewed the written disclosures and the letter from Ernst & Young LLP
required by the applicable requirements of the Public Company Accounting Oversight Board
regarding Ernst & Young LLP ‘s communications with us concerning independence,
and we discussed with Ernst & Young LLP its independence from the Company. We also
considered whether the provision of non- audit services to the Company is compatible
with Ernst & Young LLP’s independence.
|
|
●
|
We
determined that there were no former Ernst & Young LLP employees, who previously
participated in the Company’s audit, engaged in a financial reporting oversight
role at the Company.
|
|
●
|
We
reviewed, and discussed with the Company’s management and Ernst & Young LLP,
the Company’s audited consolidated statement of assets and liabilities at February
29, 2020, and consolidated statements of operations, consolidated statements of changes
in net assets and consolidated statements of cash flows for the year ended February 29,
2020.
|
Based
on the reviews and actions described above, we recommended to the Board that the Company’s audited financial statements
be included in its Annual Report on Form 10-K for the year ended February 29, 2020 for filing with the SEC. In addition, the Audit
Committee has approved, and recommended to the Board that it approve, Ernst & Young LLP to serve as the Company’s independent
registered public accounting firm for the year ending February 28, 2021.
|
THE AUDIT COMMITTEE
|
|
|
|
Steven M. Looney, Chair
Charles S. Whitman III
G. Cabell Williams
|
Independent
Registered Public Accounting Firm
Our
Board has ratified the decision of the audit committee to appoint Ernst & Young LLP to serve as our independent
registered public accounting firm until February 28, 2021. We expect that representatives of Ernst & Young LLP will be
present at the Annual Meeting and will have an opportunity to make a statement if they desire to do so and to respond to
appropriate questions.
For
the years ended February 29, 2020 and February 28, 2019, the Company incurred the following fees for services provided by Ernst
& Young LLP, including expenses:
|
|
Fiscal Year
Ended
|
|
|
Fiscal Year
Ended
|
|
|
|
February 29,
2020
|
|
|
February 28,
2019
|
|
Audit Fees
|
|
$
|
647,000
|
|
|
$
|
725,000
|
|
Tax Fees
|
|
|
42,000
|
|
|
|
41,200
|
|
Total Fees
|
|
$
|
689,000
|
|
|
$
|
766,200
|
|
In
addition to the services listed above. Ernst & Young LLP provided audit services to the Company’s subsidiaries. The
following are the related fees:
|
|
Fiscal Year Ended
|
|
|
Fiscal Year Ended
|
|
|
|
February 29,
2020
|
|
|
February 28,
2019
|
|
CLO Audit Fees
|
|
$
|
65,000
|
|
|
$
|
65,000
|
|
Tax Services for Company’s Subsidiaries
|
|
|
-
|
|
|
|
-
|
|
All Other Fees
|
|
|
28,000
|
|
|
|
26,000
|
|
Total Fees
|
|
$
|
93,000
|
|
|
$
|
91,000
|
|
Audit
Fees. Audit fees include fees for services that normally would be provided by the accountant in connection with statutory
and regulatory filings or engagements and that generally only the independent accountant can provide. In addition to fees for
the audit of our annual financial statements, the audit of the effectiveness of our internal control over financial reporting
and the review of our quarterly financial statements in accordance with generally accepted auditing standards, this category contains
fees for comfort letters, statutory audits, consents, and assistance with and review of documents filed with the SEC.
Audit
Related Fees. Audit related fees are assurance related services that traditionally are performed by the independent accountant,
such as attest services that are not required by statute or regulation.
Tax
Fees. Tax fees include services in conjunction with preparation of the Company’s tax return.
All
Other Fees. Fees for other services would include fees for products and services other than the services reported above.
It
is the policy of the audit committee to pre-approve all audit, review or attest engagements and permissible non-audit services
to be performed by our independent registered public accounting firm.
Stockholder
Proposals
The
Company expects that the 2021 Annual Meeting of Stockholders will be held in September 2021, but the exact date, time, and location
of that meeting have yet to be determined. Any stockholder who wishes to have a qualified proposal considered for inclusion in
our proxy statement for the 2021 Annual Meeting of Stockholders, pursuant to Rule 14a-8 promulgated under the Exchange
Act (“Rule 14a-8”), must ensure that notice of such proposal is received at our principal executive office no later
than April 6, 2021, and that such proposal complies with all applicable requirements of Rule 14a-8. The submission of a proposal
does not guarantee its inclusion in the Company’s proxy statement or presentation at the Annual Meeting unless certain securities
law requirements are met.
In
addition, any stockholder who intends to present a proposal at the 2021 Annual Meeting of Stockholders, including the
nomination of a director or any other business to be considered by the stockholders at the 2021 Annual Meeting of Stockholders
(other than a stockholder proposal to be included in our proxy materials pursuant to Rule 14a-8) must comply with the advance
notice provisions and other requirements of our Bylaws and submit the proposal in writing to our Secretary, Henri J. Steenkamp,
at 535 Madison Avenue, New York, New York 10022, and the proposal should be received by the Company between March 7, 2021 and
5:00 p.m. Eastern Time on April 6, 2021.
We
advise you to review our Bylaws, which contain additional requirements about advance notice of stockholder proposals and director
nominations. If the date of 2021 Annual Meeting of Stockholders has been changed by more than thirty (30) days from the first
anniversary of the Annual Meeting, stockholder proposals or director nominations must be received not earlier than the 150th day
prior to the date of the 2021 Annual Meeting of Stockholders and not later than 5:00 p.m., Eastern Time, on the later of the 120th day
prior to the date of the 2021 Annual Meeting of Stockholders or the tenth (10th) day following the day on which such
notice of the date of the 2021 Annual Meeting of Stockholders or such public disclosure is made. Proposals must also comply with
the other requirements contained in the Company’s Bylaws, including supporting documentation and other information.
Proxies
solicited by the Company will confer discretionary voting authority with respect to any stockholder proposals submitted pursuant
to the advance notice provisions of our Bylaws, subject to SEC rules governing the exercise of this authority.
The
above procedures and requirements are only a summary of the provisions in our Bylaws regarding stockholder nominations of directors
and proposals of business to be considered by the stockholders. Please refer to our Bylaws for more information on stockholder
proposal requirements. The Company reserves the right to reject, rule out of order, or to take other appropriate action with respect
to any proposal that does not comply with the advance notice provisions and informational requirements of our Bylaws and other
applicable requirements.
Other
Business
The
Board of Directors does not presently intend to bring any other business before the Annual Meeting, and, so far as is known to
the Board, no matters may properly be brought before the Annual Meeting except as specified in the Notice of the Annual Meeting.
As to any other business that may properly come before the Annual Meeting, however, the proxies, in the form enclosed, will be
voted in respect thereof in accordance with the discretion of the proxyholders.
Whether
or not you expect to attend the Annual Meeting, please complete, date, sign and promptly return the accompanying proxy in the
enclosed postage paid envelope so that you may be represented at the Annual Meeting.
The
Company currently intends to hold the Annual Meeting in person. However, the Company is actively monitoring developments in connection
with the coronavirus (COVID-19) outbreak and is sensitive to the public health and travel concerns that stockholders may have
and the protocols or guidance that federal, state and local governments and agencies such as the Centers for Disease Control and
Prevention and the World Health Organization may recommend or impose. In the event it is not possible or advisable to hold
the Annual Meeting in person, the Company will announce alternative arrangements for the meeting as promptly as possible, which
may include holding the Annual Meeting solely by means of remote communication. If the Annual Meeting is held solely by remote
communication, the Company will announce that fact as promptly as practicable, and details on how to participate will be described
in a press release issued by the Company and posted on its website at https://ir.saratogainvestmentcorp.com/press-releases.
In addition, such information will be filed with the U.S. Securities and Exchange Commission as additional proxy material. Please
monitor the Company’s website https://ir.saratogainvestmentcorp.com/press-releases
for updated information.
Annual
Reports
A
copy of our Annual Report on Form 10-K for the period ended February 29, 2020, which includes financial statements, is available
on the SEC website and is incorporated herein by reference. The information that we have filed with the SEC is available to stockholders
free of charge by contacting us at 535 Madison Avenue, New York, New York 10022 or by telephone at (212) 906-7800 or on our website
at www.saratogainvestmentcorp.com. Information contained on our website is
not incorporated into this document and you should not consider such information to be a part of this document.
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