DEF 14A of Capital Southwest Corp, May 30, 2025

DEF 14A of Capital Southwest Corp

Filed May 30, 2025 · FY20250000017313-25-000050

Open on EDGAR

  1. PROPOSAL ONE: ELECTION OF DIRECTORS

    PROPOSAL ONE: ELECTION OF DIRECTORS At the Annual Meeting, six directors will be elected to serve one-year terms expiring at the 2026 Annual Meeting of Shareholders. Christine S. Battist, David R. Brooks, Jack D. Furst, Ramona L. Rogers-Windsor, William R. Thomas, and Michael S. Sarner are currently directors and each has been nominated to continue to serve as a director of the Board. The director nominees were selected by the Nominating/Corporate Governance Committee of the Board (the “NCG Committee”) and approved by the Board for submission to the shareholders. Each director nominee has consented to being named in this Proxy Statement and to serving as a director if elected at the Annual Meeting. Accordingly, the Board has no reason to believe that the director nominees will be unable or unwilling to serve.

  2. Board Composition

    Board Composition The NCG Committee seeks directors with established, strong professional reputations and experience in areas relevant to our investment strategy. Each of the director nominees holds or has held senior executive positions in large, complex organizations and has experience that meets this objective. In these positions, each of the director nominees has also gained experience in core management skills, such as strategic and financial planning, public company financial reporting, compliance, risk management and leadership development. Each of our director nominees also has experience serving on or advising boards of directors and board committees of other organizations and has an understanding of corporate governance practices and trends. The NCG Committee also believes that each of the director nominees has other key attributes that are important to an effective board: integrity, candor, analytical skills, the willingness to engage management and each other in a constructive and collaborative fashion, and the ability and commitment to devote significant time and energy to serve on the Board and its committees. The NCG Committee takes into account diversity considerations in determining the director nominees and planning for director succession and believes that, as a group, the director nominees bring a diverse range of perspectives to the Board’s deliberations. In addition to the above, the NCG Committee also considered the specific experiences described in the biographical information below in determining to recommend to the Board to approve the nominations of the director nominees for election at the Annual Meeting.

  3. Director Qualifications

    Director Qualifications The NCG Committee reviews with the Board on an annual basis the appropriate skills and characteristics required of Board members in the context of the then-current composition of the Board. This assessment includes, in addition to qualities of intellect, integrity and judgment, the consideration of business experience and knowledge, reputation and character, issues of diversity, relevant industry and trade association knowledge and participation, accounting and financial expertise, public company experience, willingness and ability to devote the time and effort required to effectively serve on the Board and relevant legal and regulatory qualifications. The NCG Committee makes this determination in the context of an assessment of the perceived needs of the Board at that point in time. The Board recognizes that its members benefit from service on the boards of other companies. While we encourage that service, we also believe it is critical that directors have the ability to dedicate sufficient time to their service on our Board.

  4. Information about the Director Nominees

    Information about the Director Nominees For each director nominee, we have highlighted certain key areas of experience that qualify him or her to serve on the Board in each of their respective biographies below. The business address of each director nominee is 8333 Douglas Avenue, Suite 1100, Texas 75225. There are currently no family relationships among any director, nominee, or executive officer.

  5. Information about the Director Nominees

    | Name and Age | Position Held with Company | Year First Elected or Appointed | Principal Occupation | | Independent Directors | | | | | David R. Brooks (66) | Chairman of the Board | 2014 | Former Chairman and Chief Executive Officer of Independent Bank Group, Inc. | | Christine S. Battist (56) | Director | 2018 | Former Chief Financial Officer of Avison Young | | Jack D. Furst (66) | Director | 2014 | Founder of Oak Stream Investors | | Ramona L. Rogers-Windsor (64) | Director | 2021 | Former Managing Director and Portfolio Manager of Northwestern Mutual | | William R. Thomas (54) | Director | 2014 | President of Thomas Heritage Foundation | | Interested Director | | | | | Michael S. Sarner (52) | Director, President and Chief Executive Officer | 2025 | President and Chief Executive Officer of Capital Southwest Corporation |

  6. Director Nominee Biographies

    Director Nominee Biographies

  7. Voting Standard for Election of Directors Changed from Plurality Standard to Majority of Votes Cast Standard

    Voting Standard for Election of Directors Changed from Plurality Standard to Majority of Votes Cast Standard To provide shareholders a meaningful role in director elections, our Board determined that the Company’s director election voting standard should be changed from a plurality voting standard to a majority of votes cast standard. In connection therewith, on April 24, 2019, our Board adopted an amendment to our bylaws to change from a plurality standard to a majority of votes cast standard for the election of directors.

  8. DIRECTOR COMPENSATION

    DIRECTOR COMPENSATION The independent directors receive an annual retainer of $112,000 for service as a director, and are reimbursed for actual travel expenses related to attending Board meetings. In addition, any independent director that serves as a non-voting, observer on the Company's investment committee receives an annual retainer of $20,000. The independent directors also receive an additional quarterly fee of $5,000 to acquire additional shares of common stock to ensure compliance with the stock ownership requirement for our independent directors, as applicable. The non-executive Chairman of the Board and committee chairs also receive additional annual fees as follows:

  9. DIRECTOR COMPENSATION

    | Position | Annual Fee | | Non-Executive Chairman of the Board | $40,000 | | Audit Committee Chair | 20,000 | | Compensation Committee Chair | 15,000 | | Nominating/Corporate Governance Committee Chair | 13,000 |

  10. DIRECTOR COMPENSATION

    The Capital Southwest Corporation 2021 Non-Employee Director Restricted Stock Award Plan (the "Non-Employee Director Plan") provides a means through which we may attract and retain qualified non-employee directors to enter into and remain in service on our Board. Under the Non-Employee Director Plan, at the beginning of each one-year term of service on our Board, each non-employee director receives a number of shares equivalent to approximately $50,000 based on the market value at the close of the Nasdaq Global Select Market on the date of grant. These shares are subject to forfeiture provisions that will lapse as to an entire award at the end of the one-year term. The following table sets forth the total compensation paid to our non-employee directors for the fiscal year ended March 31, 2025.

  11. DIRECTOR COMPENSATION

    | Name | Fees Earned or Paid in Cash | Stock Awards (1) | Total | | Christine S. Battist | $152,000 | $50,014 | $202,014 | | David R. Brooks | 172,000 | 50,014 | 222,014 | | Jack D. Furst | 147,000 | 50,014 | 197,014 | | Ramona L. Rogers-Windsor | 152,000 | 50,014 | 202,014 | | William R. Thomas | 145,000 | 50,014 | 195,014 |

  12. DIRECTOR COMPENSATION

    (1)Each director received an award of 2,090 restricted shares on August 9, 2024 under the Non-Employee Director Plan, which will vest 100% on August 9, 2025. These amounts represent the grant date fair value of the 2024 restricted share awards in accordance with FASB ASC Topic 718, Compensation — Stock Compensation ("ASC 718") based on the closing price of our common stock on the date of the grant. Pursuant to SEC rules, the amounts shown exclude the impact of any estimated forfeitures related to service-based vesting conditions. These amounts may not correspond to the actual value that will be recognized by our directors upon vesting. Each director had 2,090 unvested shares of restricted stock outstanding as of March 31, 2025. Please see the discussion of the valuation of these awards in Note 9 to the audited consolidated financial statements included in the Annual Report. In October 2015, our NCG Committee adopted a stock ownership requirement for our non-employee directors to better align the interests of our Board with our shareholders. The stock ownership requirement initially provided that each non-employee director of our Board own shares of our common stock equal to 2.5 times the annual director retainer. On April 25, 2018, our Board amended this stock ownership requirement to require each non-employee director of our Board to own shares of our common stock equal to 3.5 times the annual director retainer. Christine S. Battist became a director of the Company on August 2, 2018 and, as of the date of this Proxy Statement, she does not yet own shares of our common stock equal to 3.5 times her annual director retainer. Ramona L. Rogers-Windsor became a director of the Company on March 26, 2021 and, as of the date of this Proxy Statement, she does not yet own shares of our common stock equal to 3.5 times her annual director retainer. The Board acknowledges that the stock ownership requirement allows new directors a reasonable amount of time to comply.

  13. Compensation Philosophy and Overview

    Compensation Philosophy and Overview The Compensation Committee has the primary authority to establish our compensation philosophy and the actual compensation levels for the NEOs and to administer all executive compensation arrangements and policies. The compensation programs of the Company adopted by our Compensation Committee are designed with the goal of providing compensation that is fair, reasonable and competitive. These compensation programs are intended to align the compensation paid to our NEOs with both our short-term and long-term objectives and the interests of shareholders, which we believe will contribute to the achievement of long-term sustainable investment returns. The key elements of our compensation philosophy include: (1) designing compensation programs that enable us to attract and retain the best talent in the industry in which we compete; (2) aligning executive compensation packages with the Company’s performance; and (3) using long-term equity awards to align employee and shareholder interests. The structure of the NEOs’ compensation program is designed to encourage and reward the following factors, among other things: •sourcing and pursuing attractively priced investment opportunities in lower middle-market companies; •building a well performing investment portfolio that generates sustainable income and capital gains that sustain and grow the Company’s distributions and net asset value per share; •maintaining liquidity and capital flexibility to accomplish the Company’s business objectives, including the preservation of investor capital; •attaining superior risk-adjusted returns on the Company’s investment portfolio; and •promoting professional development and growth of individual executives, the management team and other employees. The Compensation Committee has the primary authority to establish compensation for the NEOs and other key employees and administers all executive compensation arrangements and policies. Our CEO assists the Compensation Committee by providing recommendations regarding the compensation of our CFO, our CIO and other key employees based on the compensation objectives set by the Compensation Committee as well as current business conditions. The Compensation Committee exercises its discretion by modifying or accepting the CEO’s recommendations. The Compensation Committee determines our CEO’s compensation without assistance or consultation from our CEO. The CEO routinely attends a portion of the Compensation Committee meetings. However, the Compensation Committee meets in executive session without the CEO or other members of executive management from time to time. In reviewing and deliberating over our fiscal 2025 compensation program, the Compensation Committee considered, among other things: •the macroeconomic factors that may impact our portfolio; •our business plan and underlying assumptions; •the goal of maintaining alignment between our senior management and our shareholders through the use of short- and long-term incentive compensation; •the benefits of maintaining a consistent approach to compensation and the structure of our compensation programs through business cycles; •the anticipated performance of our compensation programs based on our business plan and current financial position; and •information and reports prepared by proxy advisors, including Glass, Lewis & Co. and Institutional Shareholder Services Inc. To determine the competitiveness of executive compensation levels, the Compensation Committee also reviews the compensation and benefits practices of a group of other internally managed BDCs, investment management firms, public real estate investment trusts and asset managers, and other specialty finance companies to evaluate corporate and, to the extent available, executive performance measures established to achieve total returns for shareholders. The Compensation Committee does not specifically benchmark the compensation of our NEOs against that paid by other BDCs, but takes such data into account as a factor for determining the compensation of our NEOs.

  14. Elements of Executive Compensation

    | Compensation Element | Form of Compensation | Compensation Objective | | Base Salary | Cash paid on a regular basis throughout the year | Provide a level of fixed income that is competitive to allow the Company to attract and retain executive talent | | Annual Cash Incentive Opportunities | Cash awards paid on an annual basis | Reward NEOs who contribute to our financial performance and strategic success during the year and reward individual achievements | | Long-term Equity Compensation Awards | Restricted stock awards are subject to a graded vesting over four years and are contingent on continued employment with the Company | Reward NEOs who contribute to our success through the creation of shareholder value, to provide meaningful retention incentives, to reward individual achievements and to align interests with shareholders | | Other Benefits | Defined contribution plan and other employee benefit plans that are available to our general employee population | Provide competitive employee benefits and encourage employees’ retirement planning. Our NEOs participate in our defined contribution plan and other employee benefit plans on the same basis as our general employee population. |

  15. Annual Cash Incentive Opportunities

    Annual Cash Incentive Opportunities Annual cash incentive opportunities are intended to reward individual performance as well as operating results during the year and therefore can be highly variable from year to year. The Compensation Committee established the target annual cash incentive opportunities for the NEOs at the start of the year, taking into account the potential contribution by that NEO to overall company performance and each NEO’s industry experience, relative to the market. For the fiscal year ended March 31, 2025, the Compensation Committee set the annual cash incentive target at 125% of annual base salary for Mr. Sarner, 100% of annual base salary for Mr. Rehberger and 125% of annual base salary for Mr. Weinstein, each of which are consistent with fiscal 2024 and fiscal 2023. At the start of each fiscal year, the Compensation Committee also establishes non-formulaic Company performance measures. The Compensation Committee strives to ensure that these non-formulaic performance measures used each year to evaluate NEO performance effectively align the performance of each individual NEO with the performance of the Company and the interests of shareholders. The fiscal 2025 non-formulaic Company performance measures used for determining the annual cash incentive for NEOs included, among other things, the following: •Dividend growth; •Preservation of net asset value; •Capital raised; •Portfolio growth; •Portfolio non-accruals; •Successful portfolio exits; and •Operating leverage. The Compensation Committee evaluated the overall outcome of these performance measures on a holistic basis in determining the annual cash incentive payout. In determining the cash incentive awards for the fiscal year ended March 31, 2025, the Compensation Committee considered the following: (1) declared $2.31 per share in regular cash dividends, an increase of 3.1% from the prior year, and $0.23 per share in supplemental cash dividends; (2) capital raised of approximately $471.1 million, consisting of (a) $25 million increase in commitments on the the Company’s senior secured revolving credit facility, (b) $50 million in additional commitments on the special purpose vehicle financing credit facility, (c) net proceeds of $223.1 million from the issuance of the 5.125% convertible notes due 2029, and (d) net proceeds of $178.5 million from the sale of shares pursuant to the Company's equity at-the-market program (the "ATM Program"); (3) $1.8 billion of investments at fair value, compared to $1.5 billion investments at fair value at the end of the prior year, an increase of 20.9%; and (4) LTM operating leverage, defined as total operating expenses, excluding interest expense, divided by annual average total assets, remained flat at 1.7%. Other factors considered by the Compensation Committee included: (1) maintaining an investment grade rating from each of Moody’s Investors Service, Inc. and Fitch Ratings, Inc.; (2) maintaining liquidity and capital flexibility and increasing such liquidity and capital flexibility when appropriate, to accomplish the Company’s business objectives and mitigate the potential impacts of macroeconomic factors and market volatility; and (3) efficient use of our ATM Program to issue common stock as needed while maintaining a conservative regulatory leverage ratio. The Compensation Committee concluded that the performance of the Company and each individual NEO was at a consistently high level in fiscal 2025, resulting in excellent financial results. Based on the Board’s evaluation of fiscal 2025, Mr. Sarner was awarded an annual cash incentive of $558,095 (representing 89% of his target bonus), Mr. Rehberger was awarded an annual cash incentive of $300,000 (representing 100% of his target bonus) and Mr. Weinstein was awarded an annual cash incentive of $534,375 (representing 95% of his target bonus). The Compensation Committee believes the annual cash incentives earned by the NEOs are appropriate in relation to Capital Southwest’s financial performance for fiscal 2025. In an effort to maintain appropriate dividend growth and coverage, the Compensation Committee and management will continually assess the appropriate annual cash incentive levels paid to our NEOs.

  16. Long-Term Equity Compensation

    Long-Term Equity Compensation The Board and its shareholders previously approved the Capital Southwest Corporation 2010 Restricted Stock Award Plan (the "2010 Employee Plan") and the 2021 Employee Plan. The 2010 Employee Plan previously allowed, and the 2021 Employee Plan allows, Capital Southwest to provide long-term stock-based compensation opportunities to certain key employees, including our NEOs. Capital Southwest utilizes long-term stock-based awards as a component of NEO compensation to: (1) align compensation with the creation of shareholder value; (2) create opportunities for increased stock ownership by executives; and (3) attain competitive levels of total compensation over the long-term.

  17. 2010 Restricted Stock Award Plan

    2010 Restricted Stock Award Plan The right to grant restricted stock awards under the 2010 Employee Plan terminated on July 18, 2021, ten years after the date that the 2010 Employee Plan was approved by the Company's shareholders pursuant to its terms. Pursuant to the 2010 Employee Plan, the Compensation Committee awarded shares of restricted stock to plan participants in such amounts and on such terms as the Compensation Committee determined in its sole discretion, provided that such awards were consistent with the conditions in the SEC’s exemptive order. Each restricted stock grant was for a fixed number of shares as set forth in an award agreement between the grantee and Capital Southwest. Award agreements described the applicable time vesting schedules and other appropriate terms and/or restrictions with respect to awards. Participants who have received restricted stock awards will receive dividends at the same time as our shareholders do and will have voting rights with respect to such shares. The restricted stock granted under the 2010 Employee Plan vest ratably over four years.

  18. 2021 Employee Restricted Stock Award Plan

    2021 Employee Restricted Stock Award Plan In connection with the termination of the 2010 Employee Plan, the Board and shareholders approved the 2021 Employee Plan as part of the compensation package for its employees, the terms of which are, in all material respects, identical to the 2010 Employee Plan. On July 19, 2021, we received an exemptive order that supersedes the prior exemptive order relating to the 2010 Employee Plan (the “Order”) to permit the Company to (i) issue restricted stock as part of the compensation package for its employees in the 2021 Employee Plan, and (ii) withhold shares of the Company’s common stock or purchase shares of the Company’s common stock from the participants to satisfy tax withholding obligations relating to the vesting of restricted stock pursuant to the 2021 Employee Plan. On an annual basis, the Compensation Committee considers employee performance and future potential when determining the amount of restricted stock awards to recommend for each NEO. In addition, the Compensation Committee considers each NEO’s total cash compensation in relation to the proposed stock award and the effect of dilution of net asset value per share and earnings per share prior to awarding the stock grants. On April 24, 2024, the Board, through the Compensation Committee, approved restricted stock awards for our NEOs. Mr. Sarner was awarded 75,000 shares of restricted stock. The aggregate grant date fair value of the award was $1,965,000. The Compensation Committee's determination to grant this award is based on Mr. Sarner’s leadership in the strategic direction of the Company, his role in managing the financial aspects of our Company, and his leadership in matters relating to our capital structure, investment committee and investor relations. Mr. Sarner’s restricted stock awards also reflect his service as our CFO, Chief Compliance Officer, and Secretary during fiscal 2025. Mr. Rehberger was awarded 25,000 shares of restricted stock. The aggregate grant date fair value of the award was $655,000. The Compensation Committee's determination to grant this award is based on Mr. Rehberger's role in managing the financial aspects of the Company, overseeing the valuation process of the Company, and his leadership in matters relating to our capital structure. Mr. Rehberger's restricted stock awards also reflect his service as our Executive Vice President of Finance and Treasurer. Mr. Weinstein was awarded 60,000 shares of restricted stock. The aggregate grant date fair value of the award was $1,572,000. The Compensation Committee's determination to grant this award is based on Mr. Weinstein's role in originating, underwriting and managing our investment portfolio as well as his participation on the investment committee.

  19. Potential Payments upon Change in Control or Termination of Employment

    Potential Payments upon Change in Control or Termination of Employment Capital Southwest offers change-in-control benefits under its long-term incentive plans to motivate executives to focus on transactions that are likely in the best interests of Capital Southwest’s shareholders, even though such transactions may result in a loss of employment for the executives. Capital Southwest believes its programs are consistent with market practices and therefore also serve to attract and retain its executives. Restricted Stock awards granted under the 2010 Employee Plan and the 2021 Employee Plan that are outstanding at the time of a change of control will only vest upon such change in control if either (1) within two years following the change in control, the participant’s service is involuntarily terminated for reasons other than for cause or the participant terminates his or her employment or service for good reason or (2) such awards are not assumed or converted into replacement awards in a manner described in the 2010 Employee Plan and the 2021 Employee Plan.

  20. Grant of Certain Equity Awards Close in Time to the Release of Material Nonpublic Information

    Grant of Certain Equity Awards Close in Time to the Release of Material Nonpublic Information The Company did not grant awards of stock options, stock appreciation rights or similar option-like instruments during the fiscal year ended March 31, 2025. Accordingly, there is no matter to report under Item 402(x) of Regulation S-K.

  21. Compensation Policies and Practices as Related to Risk Management

    Compensation Policies and Practices as Related to Risk Management Capital Southwest works to integrate sound risk management into its compensation programs. Capital Southwest implements a multi-faceted strategy to mitigate risk in compensation. Capital Southwest believes our focus on long-term stable compensation programs and our ability to retain long-term employees work to limit incentives to take unnecessary or imprudent risk-taking actions. Capital Southwest also provides stable fixed cash compensation to each of our executive officers to limit the financial exposure that our NEOs face as holders of significant equity in our enterprise. During fiscal 2025, the Compensation Committee reviewed the elements of the Company's compensation programs to determine whether any portion of compensation encourages excessive risk-taking and concluded: •compensation is allocated among base salary, cash bonus, and short-term and long-term compensation opportunities in such a way as to not encourage excessive risk-taking; •executive goals are appropriately established across several key metrics and criteria in order to avoid an outcome where the failure to achieve any individual target would result in a large percentage loss of compensation; and •multi-year vesting of restricted stock coupled with our executive stock ownership and holding policy and maximum annual incentive opportunity policy properly account for the time horizon of risks. In addition, the Compensation Committee believes that the total compensation paid to the NEOs in fiscal 2025 was consistent with the overall objectives of the Company’s executive compensation program.

  22. Summary Compensation Table

    Summary Compensation Table The following table includes information concerning compensation received by our NEOs during fiscal years ended March 31, 2025, 2024 and 2023, as applicable:

  23. Summary Compensation Table

    | Name and Principal Position | Fiscal Year | Salary | Bonus | Stock Awards (1) | All Other Compensation (2) | Total | | Michael S. Sarner, | 2025 | $500,000 | $558,095 | $1,965,000 | $401,544 | $3,424,639 | | President and Chief | 2024 | $425,000 | $716,072 | $1,190,170 | $331,856 | $2,663,098 | | Executive Officer | 2023 | $425,000 | $795,435 | $934,788 | $272,456 | $2,427,679 | | Chris T. Rehberger,(4) | 2025 | $300,000 | $300,000 | $655,000 | $136,055 | $1,391,055 | | Chief Financial Officer, | | | | | | | | Secretary and Treasurer | | | | | | | | Joshua S. Weinstein,(5) | 2025 | $450,000 | $534,375 | $1,572,000 | $334,958 | $2,891,333 | | Chief Investment Officer | 2024 | $400,000 | $673,950 | $1,020,149 | $275,838 | $2,369,937 | | | 2023 | $365,000 | $683,139 | $796,301 | $209,917 | $2,054,357 | | Bowen S. Diehl(6) | 2025 | $549,279 | $— | $— | $3,915,196 | $4,464,475 | | Former President and | 2024 | $550,000 | $1,112,018 | $1,700,254 | $447,242 | $3,809,514 | | Chief Executive Officer | 2023 | $550,000 | $1,235,264 | $1,347,186 | $346,766 | $3,479,216 |

  24. Summary Compensation Table

    (1)These amounts represent the grant date fair value of restricted stock awards determined in accordance with ASC 718 based on the closing price of our common stock on the date of grant. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. The amounts do not correspond to the actual value that will be recognized by our NEOs upon vesting of these grants. See Note 9 of the consolidated financial statements in the Annual Report regarding assumptions underlying valuation of equity awards. (2)See “All Other Compensation” table below for information regarding amounts included in this column. (3)Mr. Sarner served as Chief Financial Officer, Chief Compliance Officer and Secretary during fiscal years ended March 31, 2024 and 2023 (4)Mr. Rehberger did not serve as an executive officer of the Company during the fiscal years ended March 31, 2024 and 2023. Mr. Rehberger became an executive officer of the Company in connection with his promotion from Executive Vice President of Finance and Treasurer to Chief Financial Officer, Treasurer and Secretary on February 17, 2025. (5)Mr. Weinstein served as the Chief Investment Officer of the Company during the fiscal year ended March 31, 2025 and served as a Senior Managing Director during the fiscal years ended March 31, 2024 and 2023. (6)Mr. Diehl stepped down as the President and Chief Executive Officer of the Company on February 17, 2025.

  25. Grants of Plan-Based Awards

    Grants of Plan-Based Awards The following table sets forth certain information with respect to each grant of a plan-based award to our NEOs in the fiscal year ended March 31, 2025.

  26. Grants of Plan-Based Awards

    | Name | Grant Date | Stock Awards: Number of Shares of Stock (1) | Grant Date Fair Value of Stock Awards (2) | | Michael S. Sarner | 6/10/2024 | 75,000 | $1,965,000 | | Chris T. Rehberger | 6/10/2024 | 25,000 | $655,000 | | Joshua S. Weinstein | 6/10/2024 | 60,000 | $1,572,000 | | Bowen S. Diehl(3) | 6/10/2024 | 95,000 | $2,489,000 |

  27. Grants of Plan-Based Awards

    (1)These restricted stock awards under the 2021 Employee Plan vest one-fourth each year beginning on the first anniversary of the grant date, subject to continued employment. Restricted stock awards entitle the holder to dividends and voting rights beginning on the grant date. (2)The amounts represent the grant date fair value of restricted stock awards determined in accordance with ASC 718 based on the closing price of our common stock on the date of grant. (3)Mr. Diehl forfeited all 95,000 shares of restricted stock in connection with his departure from the Company on February 17, 2025.

  28. Outstanding Equity Awards at Fiscal Year End

    Outstanding Equity Awards at Fiscal Year End The following table sets forth certain information with respect to the outstanding equity awards held by our NEOs as of March 31, 2025.

  29. Outstanding Equity Awards at Fiscal Year End

    | Name | Number of securities underlying unexercised Options (#) exercisable | Number of securities underlying unexercised options (#) unexercisable | Number of securities underlying unexercised unearned options (#) | Option exercise price | Option expiration date | Number of shares of stock that have not vested(1) | Market value of shares of stock that have not vested(2) | | Michael S. Sarner | — | — | — | — | — | 151,645 | $3,384,716 | | Chris T. Rehberger | — | — | — | — | — | 48,250 | $1,076,940 | | Joshua S. Weinstein | — | — | — | — | — | 125,538 | $2,802,008 | | Bowen S. Diehl | — | — | — | — | — | — | — |

  30. Outstanding Equity Awards at Fiscal Year End

    (1)With respect to Mr. Sarner, 9,704 shares of restricted stock will vest on June 10, 2025, 10,998 shares of restricted stock will vest on each of June 10, 2025 and 2026, 14,982 shares of restricted stock will vest on each of June 9, 2025, 2026 and 2027 and 18,750 shares of restricted stock will vest on each of June 10, 2025, 2026, 2027 and 2028. With respect to Mr. Rehberger, 3,125 shares of restricted stock will vest on June 10, 2025, 3,125 shares of restricted stock will vest on each of June 10, 2025 and 2026, 4,625 shares of restricted stock will vest on each of June 9, 2025, 2026 and 2027 and 6,250 shares of restricted stock will vest on each of June 10, 2025, 2026, 2027 and 2028. With respect to Mr. Weinstein, 8,277 shares of restricted stock will vest on June 10, 2025, 9,368 shares of restricted stock will vest on each of June 10, 2025 and 2026, 12,842 shares of restricted stock will vest on each of June 9, 2025, 2026 and 2027 and 15,000 shares of restricted stock will vest on each of June 10, 2025, 2026, 2027 and 2028. (2)The value of the non-vested restricted stock was computed by multiplying the number of non-vested shares of restricted stock by $22.32, the closing stock price on March 31, 2025, the last trading day of fiscal 2025.

  31. Potential Payments Upon Termination or Change in Control

    Potential Payments Upon Termination or Change in Control The agreements governing our restricted stock awards and our long-term cash incentive awards to employees, including NEOs, provide upon certain transactions involving a change in control or upon a participant’s death or disability (each as defined in the award agreement or plan documents), that unvested shares of restricted stock will fully vest and the long-term cash incentive awards would be paid. The acceleration of unvested restricted stock would apply to Mr. Sarner, Mr. Rehberger and Mr. Weinstein. The following table quantifies potential compensation that would have become payable to each of our NEOs if their employment had terminated on March 31, 2025, given the closing price of our common stock on that date. In addition, the table quantifies the compensation that would have become payable to each of our NEOs assuming that a change in control of Capital Southwest had occurred on March 31, 2025, and determining any amounts that would be payable under all compensation agreements in effect as of that date. In the event of the consummation of a change in control in the Company, all outstanding awards granted under the 2010 Employee Plan and the 2021 Employee Plan will vest only where either (1) within two years following the change in control, the participant’s employment or service is involuntarily terminated for reasons other than for cause (as defined in the 2010 Employee Plan and the 2021 Employee Plan) or the participant terminates his or her employment or service for good reason (as defined in the 2010 Employee Plan and the 2021 Employee Plan) or (2) such awards are not assumed or converted into replacement awards in a manner described in the 2010 Employee Plan and the 2021 Employee Plan, as applicable (hereinafter referred to as “Double-Trigger Vesting”).

  32. Potential Payments Upon Termination or Change in Control

    | | Cash Payments | Acceleration of Equity Awards | Total | | Michael S. Sarner | | | | | Termination for Cause | $— | $— | $— | | Termination without Cause | — | — | — | | Change in Control | — | — | — | | Double-Trigger Vesting | — | 3,384,716 | 3,384,716 | | Death or Disability | — | 3,384,716 | 3,384,716 | | Chris T. Rehberger | | | | | Termination for Cause | — | — | — | | Termination without Cause | — | — | — | | Change in Control | — | — | — | | Double-Trigger Vesting | — | 1,076,940 | 1,076,940 | | Death or Disability | — | 1,076,940 | 1,076,940 | | Joshua S. Weinstein | | | | | Termination for Cause | — | — | — | | Termination without Cause | — | — | — | | Change in Control | — | — | — | | Double-Trigger Vesting | — | 2,802,008 | 2,802,008 | | Death or Disability | — | 2,802,008 | 2,802,008 |

  33. Pay Ratio Disclosure

    Pay Ratio Disclosure We are providing the following information about the relationship of the median of the annual total compensation of all of our employees (other than Mr. Sarner, our President and CEO, and Mr. Diehl, our former President and CEO) and the annual total compensation of Mr. Sarner. As of March 31, 2025, we determined that the median of the annual total compensation of all of our employees, other than our President and CEO, was $301,347 and the annual total compensation of Mr. Sarner, our CEO, as reported in the Summary Compensation Table in this Proxy Statement, was $3,424,639. Based on this information, the ratio of the annual total compensation of our CEO to the median of the annual compensation of all employees in fiscal 2025 was 11.4 to 1. The pay ratio provided is a reasonable estimate as of March 31, 2025 calculated in a manner consistent with Item 402(u) of Regulation S-K. The data used to calculate the pay ratio are specific to the Company and its employee population. As a result, our pay ratio may not be comparable to the pay ratios of other companies. We had 29 employees (excluding Mr. Sarner) as of March 31, 2025, all of whom were located in our Dallas, Texas office. To identify the median employee from our employee population, we compared the salary, bonus, restricted stock awards, 401(k) Plan employer match and dividends. Upon identifying our median employee, we combined all of the elements of such employee’s compensation for fiscal 2025 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual compensation for the median employee of $301,347. The Company annualized the salary and bonus component of total compensation for employees that were employed by the Company for less than the full fiscal year. We used the annual total compensation of our CEO as reported in the “Total” column of our Summary Compensation Table in this Proxy Statement.

  34. Pay versus Performance

    Pay versus Performance In accordance with the final rule adopted by the SEC in August 2022 implementing Section 953(a) of the Dodd-Frank Act, we are providing the following table that sets forth certain compensation measures for certain of our NEOs alongside certain performance metrics for the Company and certain of its industry peers:

  35. Pay versus Performance

    | | | | | | | | | | | Value of Initial Fixed $100 Investment Based on: | | | | Fiscal Year | Summary Compensation Table Total for CEO(1) | Summary Compensation Table Total for Former CEO(1) | Compensation Actually Paid to CEO(2) | Compensation Actually Paid to Former CEO(2) | Average SCT Total for Non-CEO NEOs(3) | Average SCT Total for Non-CEO NEOs(4) | Average Compensation Actually Paid to Non-CEO NEOs(2)(3) | Average Compensation Actually Paid to Non-CEO NEOs(2)(4) | Total Shareholder Return(5) | S&P BDC Index Total Shareholder Return | Net Investment Income ($ in thousands) | Dividend Yield on NAV per Share(6) | | 2025 | $3,424,639 | $4,464,475 | $2,989,288 | $4,540,908 | $2,141,194 | $3,157,986 | $1,890,602 | $2,759,957 | $299.30 | $179.56 | $118,182 | 15.1% | | 2024 | — | 3,809,514 | — | 4,987,139 | — | 2,516,518 | — | 3,307,026 | 300.18 | 180.56 | 110,005 | 15.1 | | 2023 | — | 3,479,216 | — | 2,679,245 | — | 2,241,018 | — | 1,685,817 | 215.67 | 157.73 | 68,711 | 13.5 | | 2022 | — | 3,164,276 | — | 3,352,122 | — | 2,329,343 | — | 2,435,312 | 247.81 | 191.41 | 42,687 | 15.7 | | 2021 | — | 2,581,472 | — | 3,799,237 | — | 2,058,181 | — | 3,079,612 | 212.00 | 174.09 | 31,671 | 13.5 |

  36. Pay versus Performance

    (1)For 2025, CEO refers to Michael S. Sarner and former CEO refers to Bowen S. Diehl. On February 17, 2025, Mr. Sarner, a non-CEO NEO, succeeded Mr. Diehl as the CEO. Mr. Diehl served as CEO in 2024, 2023, 2022, and 2021. (2)The amounts shown for Compensation Actually Paid have been calculated in accordance with Item 402(v) of Regulation S-K and do not reflect compensation actually earned, realized, or received by our CEO or Other NEOs. These amounts reflect the Summary Compensation Table Total (SCT) with certain adjustments as set forth in the following reconciliation table:

  37. Pay versus Performance

    | Name | Fiscal Year | SCT Total | SCT Stock Awards | Fair Value of Stock Awards Granted in the Covered Year | Change in Fair Value of Unvested Stock Awards from Prior Years | Fair Value of Stock Awards Granted and Vested in the Covered Year | Change in Fair Value of Stock Awards from Prior Years that Vested in the Covered Year | Fair Value of Stock Awards Forfeited | Compensation Actually Paid | | CEO(1) | 2025 | $3,424,639 | $(1,965,000) | $1,674,000 | $(202,343) | $— | $57,992 | $— | $2,989,288 | | Former CEO(1) | 2025 | 4,464,475 | — | — | — | — | 76,433 | — | 4,540,908 | | | 2024 | 3,809,514 | (1,700,254) | 2,136,876 | 624,947 | — | 116,056 | — | 4,987,139 | | | 2023 | 3,479,216 | (1,347,186) | 1,127,199 | (435,486) | — | (144,498) | — | 2,679,245 | | | 2022 | 3,164,276 | (1,260,437) | 1,083,702 | 116,138 | — | 248,443 | — | 3,352,122 | | | 2021 | 2,581,472 | (1,011,549) | 1,476,543 | 580,766 | — | 172,005 | — | 3,799,237 | | NEO Average to CEO(3) | 2025 | 2,141,194 | (1,113,500) | 948,600 | (117,200) | — | 31,508 | — | 1,890,602 | | NEO Average to Former CEO(4) | 2025 | 3,157,986 | (1,768,500) | 1,506,600 | (187,682) | — | 51,553 | — | 2,759,957 | | | 2024 | 2,516,518 | (1,105,160) | 1,388,962 | 427,257 | — | 79,449 | — | 3,307,026 | | | 2023 | 2,241,018 | (865,544) | 724,206 | (313,790) | — | (100,073) | — | 1,685,817 | | | 2022 | 2,329,343 | (992,593) | 853,414 | 77,290 | — | 167,858 | — | 2,435,312 | | | 2021 | 2,058,181 | (842,900) | 1,230,478 | 490,818 | — | 143,035 | — | 3,079,612 |

  38. Pay versus Performance

    (3)During the period in 2025 in which Michael S. Sarner was CEO, the Non-CEO NEOs were Chris T. Rehberger and Joshua S. Weinstein. (4)During the period in 2025 in which Bowen S. Diehl was CEO, the Non-CEO NEOs were Michael S. Sarner and Joshua S. Weinstein. The Non-CEO NEOs for 2024, 2023 and 2022 were Michael S. Sarner and Joshua S. Weinstein. The Non-CEO NEO for 2021 was Michael S. Sarner. (5)Total Shareholder Return represents the value of a hypothetical $100 investment beginning at market close on the last trading day of fiscal year ended March 31, 2020, assuming reinvestment of all dividends. (6)Dividend yield on NAV per share is calculated by dividing total dividends paid by beginning NAV per share. The graph below reflects the relationship between "Compensation Actually Paid to CEO" to "Average Compensation Actually Paid to Non-CEO NEOs" and total shareholder return for the Company and S&P BDC Index Total Shareholder Return. For purposes of the graph below, the "Compensation Actually Paid to CEO" for 2025 reflects the compensation actually paid to Mr. Diehl as CEO for the period from April 1, 2024 through February 17, 2025 and the compensation actually paid to Mr. Sarner as CEO for the period from February 17, 2025 (when he succeeded Mr. Diehl as CEO) through March 31, 2025. The graph below reflects the relationship between "Compensation Actually Paid to CEO" to "Average Compensation Actually Paid to Non-CEO NEOs" and net investment income per share. For purposes of the graph below, the "Compensation Actually Paid to CEO" for 2025 reflects the compensation actually paid to Mr. Diehl as CEO for the period from April 1, 2024 through February 17, 2025 and the compensation actually paid to Mr. Sarner as CEO for the period from February 17, 2025 (when he succeeded Mr. Diehl as CEO) through March 31, 2025. The graph below reflects the relationship between "Compensation Actually Paid to CEO" to "Average Compensation Actually Paid to Non-CEO NEOs" and dividend yield on NAV per share. For purposes of the graph below, the "Compensation Actually Paid to CEO" for 2025 reflects the compensation actually paid to Mr. Diehl as CEO for the period from April 1, 2024 through February 17, 2025 and the compensation actually paid to Mr. Sarner as CEO for the period from February 17, 2025 (when he succeeded Mr. Diehl as CEO) through March 31, 2025. As described above, restrictions imposed by the 1940 Act restrict the Compensation Committee’s ability to use nondiscretionary or formulaic Company performance goals or criteria to determine executive incentive compensation. However, the Compensation Committee considers several financial performance metrics, along with other factors including operational goals and individual performance criteria, in determining the appropriate compensation for NEOs. Subject to the foregoing restrictions imposed by the 1940 Act, in the Company’s assessment, the following list of performance measures represent the most important performance measures used to link compensation actually paid to our NEOs, for the most recently completed fiscal year, to Company performance: •total distributions paid to shareholders; •distributable net investment income; •portfolio growth (based upon the fair value of investments); •portfolio non-accruals; and •operating leverage. Other key metrics considered by the Compensation Committee when determining the appropriate compensation for NEOs include net origination activities, maintenance of liquidity and capital flexibility and individual contributions to corporate objectives.