DEF 14A of Stellus Capital Investment Corp
Filed Apr 24, 20240001104659-24-051284
PROPOSAL 1: ELECTION OF DIRECTORS
PROPOSAL 1: ELECTION OF DIRECTORS Our business and affairs are managed under the direction of our Board. The Board is divided into three classes and the number of directors on our Board is currently fixed at seven directors, which number may be increased or decreased only by the Board pursuant to the Bylaws. Our Bylaws mandate that there shall never be less than one director, nor more than nine directors. In accordance with our bylaws, our Board reduced its size from seven directors to five directors effective as of May 15, 2020. Each director holds office for the term to which he or she is elected and until his or her successor is duly elected and qualifies. 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 qualify or any director’s earlier resignation, death or removal. Robert T. Ladd and J. Tim Arnoult have been nominated by the Board for re-election each for a three-year term expiring in 2027. Both Mr. Ladd and Mr. Arnoult has each indicated his willingness to continue to serve if elected and have consented to be named as nominees. Neither Mr. Ladd nor Mr. Arnoult are being nominated to serve as directors pursuant to any agreement or understanding between him and the Company. A stockholder can vote for or withhold his or her vote for either of the nominees. 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 both of the nominees named in this proxy statement. If either of the nominees should decline or is unable to serve as a director, it is intended that the proxy will be voted for the election of such person as is nominated by the Board as a replacement. The Board has no reason to believe that either of the nominees will be unable or unwilling to serve.
Required Vote
Required Vote This proposal requires the affirmative vote of a plurality of the votes cast at the Annual Meeting. Stockholders may not cumulate their votes. If you vote “withhold authority” with respect to the nominees, your shares will not be voted with respect to the nominees. Because directors are elected by a plurality of the votes, an abstention will have no effect on the outcome of the vote and, therefore, is not offered as a voting option for this proposal. The Board unanimously recommends a vote “for” the election of both of the nominees named in this proxy statement.
Information about Directors and Executive Officers
Information about Directors and Executive Officers
Board of Directors
Board of Directors We have adopted provisions in our articles of incorporation that divide our Board into three classes. At each annual meeting, directors will be elected for staggered terms of three years (other than the initial terms, which extend for up to three years), with the term of office of only one of these three classes of directors expiring each year. Each director will hold office for the term to which he or she is elected and until his or her successor is duly elected and qualifies. The Board considered whether each of the directors is qualified to serve as a director, based on a review of the experience, qualifications, attributes and skills of each director, including those described below. The Board will also consider whether each director has significant experience in the investment or financial services industries and has held management, board or oversight positions in other companies and organizations. For the purposes of this presentation, our directors have been divided into two groups — independent directors and interested directors. Interested directors are “interested persons” as defined in the 1940 Act. Information regarding Mr. Ladd and Mr. Arnoult, each of whom has been nominated for election as a director of the Company by the stockholders at the Annual Meeting, as well as information about our current directors, whose terms of office will continue after the Annual Meeting, is as follows:
Nominees for Class III Director
Nominees for Class III Director
Term Expiring 2024
Term Expiring 2024
Term Expiring 2024
| Name, Address and Age(1) | Position(s) held with the Company | Principal Occupation(s) During the Past 5 Years | Term of Office and Length of Time Served(2) | Number of Companies in Fund Complex(3) Overseen by Director | Other Directorships Held by Director or Nominee for Director | | Interested Director | | | | | | | Robert T. Ladd, 67 | Chairman, Chief Executive Officer and President | Chairman of the Board, Chief Executive Officer and President of the Company; Chairman of the Board, Chief Executive Officer and President of Stellus Private Credit BDC; Managing Partner and Chief Investment Officer of SCM. | Director since 2012; Term expires in 2024 | 2 | Stellus Private Credit BDC Rice University Rice Management Company | | Independent Director | | | | | | | J. Tim Arnoult, 74 | Director | Retired | Director since 2012; Term expires in 2024 | 2 | Stellus Private Credit BDC |
Term Expiring 2024
(1) The address for each of our directors is c/o Stellus Capital Investment Corporation, 4400 Post Oak Parkway, Suite 2200, Houston, Texas 77027. (2) Directors serve for three-year terms and until their successors are duly elected and qualified. (3) The term “Fund Complex” refers to (a) the Company and (b) Stellus Private Credit BDC, a BDC whose adviser, SPBDC Advisor, is a majority-owned subsidiary of our Advisor. Directors and officers who oversee the funds in the Fund Complex are noted. (4) “Interested person” of the Company as defined in Section 2(a)(19) of the 1940 Act. Mr. Ladd is an “interested person” because of his affiliation with the Company and our Advisor. Robert T. Ladd has served as the Chairman of our Board and Chief Executive Officer and President since 2012. Mr. Ladd has also served as Chairman of the Board of Trustees, Chief Executive Officer and President of Stellus Private Credit BDC since 2021. Mr. Ladd is the managing partner and Chief Investment Officer of Stellus Capital Management, the external investment manager of the Company. Mr. Ladd has more than 40 years of investing, finance, and restructuring experience. Prior to joining Stellus Capital Management, he had been with the D. E. Shaw group, a global investment and technology development firm, where he led the D. E. Shaw group’s Direct Capital Group from February 2004 to January 2012. Prior to joining the D. E. Shaw group, Mr. Ladd served as the president of Duke Energy North America, LLC, a merchant energy subsidiary of Duke Energy Corporation, and president and chief executive officer of Duke Capital Partners, LLC, a merchant banking subsidiary of Duke Energy Corporation, from September 2000 to February 2004. From February 1993 to September 2000, Mr. Ladd was a partner of Arthur Andersen LLP where he last served as worldwide managing partner for Arthur Andersen’s corporate restructuring practice and U.S. managing partner for that firm’s corporate finance practice. Before joining Arthur Andersen, from June 1980 to February 1993, Mr. Ladd served in various capacities for First City Bancorporation of Texas, Inc., a bank holding company, and its subsidiaries, including serving as president of First City Asset Servicing Company, an asset management business and executive vice president for the Texas Banking Division. He serves as Chairman of the Board of Trustees of Rice University and is a board member of Rice Management Company which oversees Rice University’s endowment. He is a member of the Council of Overseers of the Jesse H. Jones Graduate School of Business of Rice University, as well as a member of the University of Texas Health Science Center Development Board and the University of Texas Medical School of Houston Advisory Council. Mr. Ladd received a B.A. in managerial studies and economics from Rice University, and an M.B.A. from The University of Texas at Austin, where he was a Sord Scholar and recipient of the Dean’s Award for Academic Achievement. We believe Mr. Ladd’s extensive investing, finance, and restructuring experience bring important and valuable skills to our Board. J. Tim Arnoult has served as a member of our Board since 2012, as well as a member of the Board of Trustees of Stellus Private Credit BDC since 2021. Mr. Arnoult has over 35 years of banking and financial services experience. From 1979 to 2006, Mr. Arnoult served in various positions at Bank of America, including its predecessors, including president of Global Treasury Services from 2005 — 2006, president of Global Technology and Operations from 2000 to 2005, president of Central U.S. Consumer and Commercial Banking from 1996 to 2000 and president of Global Private Banking from 1991 to 1996. Mr. Arnoult is also experienced in mergers and acquisitions, having been directly involved in significant transactions such as the mergers of NationsBank and Bank of America in 1998 and Bank of America and FleetBoston in 2004. Mr. Arnoult previously served on the board of directors of Cardtronics Inc. (NasdaqGM: CATM) and AgileCraft, LLC and has served on a variety of boards throughout his career, including the board of Visa USA before it became a public company. Mr. Arnoult holds a B.A. in Psychology and a M.B.A. from the University of Texas at Austin. We believe Mr. Arnoult’s extensive banking and financial services experience bring important and valuable skills to our Board.
Incumbent Class I Directors
Incumbent Class I Directors
Incumbent Class I Directors
| Name, Address and Age(1) | Position(s) held with the Company | Principal Occupation(s) During the Past 5 Years | Term of Office and Length of Time Served(2) | Number of Companies in Fund Complex(3) Overseen by Director | Other Directorship Held by Director or Nominee for Director | | Interested Director(4) | | | | | | | Dean D’Angelo, 56 | Director | Founding partner, SCM; Co-Head of SCM’s Private Credit strategy; Member of SCM investment committee | Director since 2012; Term expires in 2025 | 2 | Stellus Private Credit BDC | | Independent Director | | | | | | | William C. Repko, 74 | Director | Retired | Director since 2012; Term expires in 2025 | 2 | Stellus Private Credit BDC Danaos Corporation |
Incumbent Class I Directors
The address for each of our directors is c/o Stellus Capital Investment Corporation, 4400 Post Oak Parkway, Suite 2200, Houston, Texas 77027. Directors serve for three-year terms and until their successors are duly elected and qualified. (3) The term “Fund Complex” refers to (a) the Company and (b) Stellus Private Credit BDC, a BDC whose adviser, SPBDC Advisor, is a majority-owned subsidiary of our Advisor. Directors and officers who oversee the funds in the Fund Complex are noted. (4) “Interested person” of the Company as defined in Section 2(a)(19) of the 1940 Act. Mr. D’Angelo is an “interested person” because of his affiliation with our Advisor. Dean D’Angelo has served as a member of our Board since 2012, as well as a member of the Board of Trustees of Stellus Private Credit BDC since 2021. Mr. D’Angelo is a founding partner of Stellus Capital Management, the external investment manager of the Company, and co-head of its Private Credit strategy and serves on its investment committee. He has over 25 years of experience in investment banking and principal investing. From August 2005 to January 2012, Mr. D’Angelo was a director in the Direct Capital Group at the D. E. Shaw group, a global investment and technology development firm. Prior to joining the D. E. Shaw group, Mr. D’Angelo was a principal of Allied Capital Corporation, a publicly-traded BDC, where he focused on making debt and equity investments in middle-market companies from May 2003 to August 2005. From September 2000 to April 2003, Mr. D’Angelo served as a principal of Duke Capital Partners, LLC, a merchant banking subsidiary of Duke Energy Corporation, where he focused on providing mezzanine, equity, and senior debt financing to businesses in the energy sector. From January 1998 to September 2000, Mr. D’Angelo was a product specialist for Banc of America Securities, LLC where he provided banking services to clients principally in the energy sector. Mr. D’Angelo began his career in the bankruptcy and consulting practice of Coopers & Lybrand L.L.P. in Washington, D.C. Mr. D’Angelo received his B.B.A. in accounting from The College of William and Mary, his M.A. in international economics and relations from The Paul H. Nitze School of Advanced International Studies at The Johns Hopkins University, and his M.B.A., with a concentration in finance, from the Wharton School of the University of Pennsylvania. We believe Mr. D’Angelo’s extensive investment banking and principal investing experience bring important and valuable skills to our Board. William C. Repko has served as a member of our Board since 2012, as well as a member of the Board of Trustees of Stellus Private Credit BDC since 2021 and Danaos Corporation (NYSE: DAC) since 2014. Mr. Repko has over 40 years of investing, finance and restructuring experience. Mr. Repko retired from Evercore Partners in February 2014, where he had served as a senior advisor, senior managing director and was a co-founder of the firm’s Restructuring and Debt Capital Markets Group since September 2005. Prior to joining Evercore Partners Inc., Mr. Repko served as chairman and head of the Restructuring Group at J.P. Morgan Chase, a leading investment banking firm, where he focused on providing comprehensive solutions to clients’ liquidity and reorganization challenges. In 1973, Mr. Repko joined Manufacturers Hanover Trust Company, a commercial bank, which after a series of mergers became part of J.P. Morgan Chase. Mr. Repko has been named to the Turnaround Management Association (TMA)-sponsored Turnaround, Restructuring and Distressed Investing industry Hall of Fame. Mr. Repko received his B.S. in Finance from Lehigh University. We believe Mr. Repko’s extensive investing, finance, and restructuring experience bring important and valuable skills to our Board.
Compensation of Directors
Compensation of Directors The following table shows information regarding the compensation received by each independent director of the Company and the Fund Complex for the calendar year ending December 31, 2023. No compensation is paid to directors who are “interested persons” for their service as directors.
Compensation of Directors
| Name | Aggregate Cash Compensation from Stellus Capital Investment Corporation(1) | Total Compensation from Stellus Capital Investment Corporation | Total Compensation from the Fund Complex | | Interested Directors | | | | | Robert T. Ladd | $— | $— | $— | | Dean D’Angelo | $— | $— | $— | | Independent Directors | | | | | J. Tim Arnoult | $127,844 | $127,844 | $187,844 | | Bruce R. Bilger | $144,156 | $144,156 | $194,156 | | William C. Repko | $134,000 | $134,000 | $184,000 |
Compensation of Directors
For a discussion of the independent directors’ compensation, see below. We do not have a profit sharing or retirement plan, and directors do not receive any pension or retirement benefits. For the year ended December 31, 2023, the independent directors received an annual fee of $100,000. Independent directors also receive $2,500 plus reimbursement of reasonable out-of-pocket expenses incurred in connection with attending in person or telephonically each regular Board meeting and each special telephonic Board meeting. They also receive $1,000 plus reimbursement of reasonable out-of-pocket expenses incurred in connection with each committee meeting attended in person and each telephonic committee meeting. The chairmen of the audit committee, the compensation committee, and the nominating and corporate governance committee receive an annual fee of $15,000, $5,000, and $5,000, respectively. We have obtained directors’ and officers’ liability insurance on behalf of our directors and officers. Independent directors have the option of having their directors’ fees paid in shares of our common stock issued at a price per share equal to the greater of NAV per share or the market price at the time of payment.