DEF 14A of Advanced Flower Capital Inc.
Filed Apr 4, 2025 · FY20240001140361-25-012374
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 14A Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 Filed by the Registrant ☒ Filed by a Party other than the Registrant ☐ Check the appropriate box:
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| ☐ | Preliminary Proxy Statement | | ☐ | Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | | ☒ | Definitive Proxy Statement | | ☐ | Definitive Additional Materials | | ☐ | Soliciting Material Under §240.14a-12 |
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ADVANCED FLOWER CAPITAL INC. (Name of Registrant as Specified In Its Charter) Not applicable (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check all boxes that apply):
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| ☒ | No fee required | | ☐ | Fee paid previously with preliminary materials. | | ☐ | Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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| NOTICE OF ANNUAL MEETING OF SHAREHOLDERS |
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Monday, May 19, 2025 9:30 a.m. Eastern Time
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| HOW TO ATTEND: | The 2025 Annual Meeting of Shareholders of Advanced Flower Capital Inc. (the ““Annual Meeting”) will be held virtually on Monday, May 19, 2025, at 9:30 a.m. Eastern Time. In order to attend the Annual Meeting via live audio webcast, please visit: www.virtualshareholdermeeting.com/AFCG2025 and enter the control number on the proxy card, voting instruction form or Notice of Internet Availability of Proxy Materials, as applicable, you previously received. You will not be able to attend the Annual Meeting in person. | | ITEMS OF BUSINESS: | (1) Elect the one director named in the accompanying Proxy Statement to serve until the Company’s 2028 annual meeting of shareholders and until his successor is duly elected and qualified; (2) Ratify the appointment of CohnReznick LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2025; and (3) Transact such other business as may properly come before the meeting or any postponements or adjournments thereof. | | WHO MAY VOTE: | Shareholders of record at the close of business on March 24, 2025. |
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Your vote is important to us. Whether or not you intend to attend the virtual meeting, please vote using the Internet, by telephone or by mail, in each case, by following the instructions in our Proxy Statement. Shareholders who execute a proxy may nevertheless attend the virtual meeting and vote their shares during the virtual meeting.
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| | By Order of the Board of Directors, | | | Leonard M. Tannenbaum | | April 4, 2025 | Chairman of the Board |
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Important Notice Regarding the Availability of Proxy Materials: This Proxy Statement and our 2024 Annual Report are available on the Internet at www.proxyvote.com These materials are also available on our website at https://investors.advancedflowercapital.com. The other information on our corporate website does not constitute part of this Proxy Statement.
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| ADVANCED FLOWER CAPITAL INC. | 2025 PROXY STATEMENT | 1 |
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| TABLE OF CONTENTS |
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| NOTICE OF ANNUAL MEETING OF SHAREHOLDERS | 1 | | Proxy Summary | 3 | | Proposal 1 - Election of Directors | 5 | | Corporate Governance | 11 | | Executive Officers of the Company | 17 | | Executive Compensation | 19 | | Compensation Committee Interlocks and Insider Participation | 23 | | Director Compensation | 23 | | Security Ownership of Certain Beneficial Owners and Management | 24 | | Report of the Audit and Valuation Committee | 26 | | Proposal 2 - Ratification of Independent Registered Public Accounting Firm | 27 | | Transactions with Related Persons | 29 | | Other Matters | 35 | | Annual Report to Shareholders | 35 | | Shareholder Proposals and Director Nominations for 2026 Annual Meeting | 35 | | Questions and Answers About the Proxy Materials and Annual Meeting | 36 |
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| ADVANCED FLOWER CAPITAL INC. | 2025 PROXY STATEMENT | 2 |
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477 South Rosemary Ave., Suite 301 West Palm Beach, FL, 33401
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| Proxy Summary |
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2025 Annual Meeting of Shareholders To Be Held Monday, May 19, 2025 Advanced Flower Capital Inc.’s Board of Directors is soliciting your proxy for the 2025 Annual Meeting of Shareholders (the “Annual Meeting”) to be held virtually on Monday, May 19, 2025, at 9:30 a.m. Eastern Time, and at any and all postponements or adjournments of the Annual Meeting, for the purposes set forth in the Notice of Annual Meeting of Shareholders accompanying this Proxy Statement. This Proxy Statement and our Annual Report for the year ended December 31, 2024 (the “2024 Annual Report”) are first being made available to shareholders on or about April 4, 2025. We will be hosting the Annual Meeting via live audio webcast. Shareholders will be able to virtually attend the Annual Meeting via the internet by accessing www.virtualshareholdermeeting.com/AFCG2025 and entering the control number on the proxy card, voting instruction form or Notice of Internet Availability of Proxy Materials they previously received, as applicable. Unless the context otherwise requires, references in this Proxy Statement to “AFC,” “Company,” “we,” “our,” “us,” and similar terms refer to Advanced Flower Capital Inc., a Maryland corporation. This proxy summary highlights information contained elsewhere in this Proxy Statement and does not contain all information that you should review and consider. Please read the entire proxy statement with care before voting.
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| MEETING INFORMATION |
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2025 Annual Meeting of Shareholders
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| TIME AND DATE | PLACE | RECORD DATE | | 9:30 a.m. Eastern Time on Monday, May 19, 2025 | The Annual Meeting will be hosted via live audio webcast on the Internet at www.virtualshareholdermeeting.com/AFCG2025. | March 24, 2025 |
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| ADVANCED FLOWER CAPITAL INC. | 2025 PROXY STATEMENT | 3 |
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Voting Shareholders as of the close of business on the record date are entitled to vote. If you are a beneficial owner who owns shares of our common stock, par value $0.01 per share (“Common Stock”), registered in the name of a broker, bank or other nominee, please follow the instructions they provide on how to vote your shares. Shareholders of record may vote as follows:
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| | | | | Vote by telephone by calling 1-800-690-6903. | Vote by Internet at www.proxyvote.com | Complete and return each proxy card received in the prepaid envelope. |
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Vote during the meeting via the Internet at www.virtualshareholdermeeting.com/AFCG2025. Voting Matters
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| PROPOSALS | | BOARD RECOMMENDATION | | 1 | Election of Directors | FOR ALL director nominees | | 2 | Ratification of the Appointment of CohnReznick LLP as the Company’s Independent Registered Public Accounting Firm for the Year Ending December 31, 2025 | FOR |
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| ADVANCED FLOWER CAPITAL INC. | 2025 PROXY STATEMENT | 4 |
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| Proposal 1 - Election of Directors |
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Our Board of Directors (“Board” or “Board of Directors”) is currently comprised of five directors. Under our Articles of Incorporation (the “Articles of Incorporation”), our Board of Directors is divided into three classes, each serving a staggered three-year term and with one class being elected at each year’s annual meeting of shareholders as follows:
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| ● | the Class I directors are Leonard Tannenbaum and Thomas Harrison, and their terms will expire at the 2027 annual meeting of shareholders; |
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| ● | the Class II director is Robert Levy, and his term will expire at the Annual Meeting; and |
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| ● | the Class III directors are Alexander Frank and Marnie Sudnow, and their terms will expire at the 2026 annual meeting of shareholders. |
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Upon the recommendation of the Nominating and Corporate Governance Committee of our Board of Directors, our Board has nominated Robert Levy for election to our Board of Directors as Class II director to serve until the 2028 annual meeting of shareholders and until his successor is duly elected and qualified. Proxies may only be voted for the one Class II director nominated for election at the Annual Meeting. The director nominee has consented to being named in this Proxy Statement and to serving as a director, if elected. We have no reason to believe that the nominee will be unable or unwilling for good cause to serve if elected. However, if any nominee should become unable for any reason or unwilling for good cause to serve, the proxy holders will vote the proxies received by them for another person nominated as a substitute by the Board of Directors, or the Board of Directors may reduce the number of directors on the Board. Our Directors Set forth below is biographical information about each of our director nominees and our continuing directors. The primary experience, qualifications, attributes and skills of each of our director nominees that led to the conclusion of the Nominating and Corporate Governance Committee and the Board of Directors that such nominee should serve as a member of the Board of Directors are also described below.
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| ADVANCED FLOWER CAPITAL INC. | 2025 PROXY STATEMENT | 5 |
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Nominee for Election as Class II Director at the Annual Meeting
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| ROBERT LEVY | | | Class II Independent Age: 59 Director Since: 2020 | Mr. Levy has served as our independent director since December 2020. Currently, Mr. Levy works as a Managing Member at LBX Acquisitions, a position he has held since January 2018. Prior to launching LBX Investments, Mr. Levy co-founded Big V Capital (“BVC”) in March of 2016, where he oversaw and underwrote the partnership’s 11 Southeastern U.S. shopping center acquisitions and managed all capital raising (both debt and equity) and asset management efforts. Prior to BVC, Mr. Levy was the Chief Operating Officer of the Real Estate Group at Benefit Street Partners, a multi-strategy credit manager with over $11.0 billion in assets under management from May 2015 to June 2016. Prior to Benefit Street, Mr. Levy held various leadership positions at Centerline Capital Group, including Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, and Member of the Board of Trustees. Centerline was a multifamily finance and investment management company with over $13 billion in debt and equity under management. Mr. Levy received his M.B.A. from the Leonard M. Stern School of Business at New York University and his B.A. in Economics from Northwestern University. | | | KEY ATTRIBUTES | | | Mr. Levy brings to our Board a critical management experience in capital raising within the finance industry. | | | THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR ALL” OF THE DIRECTOR NOMINEES. |
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| ADVANCED FLOWER CAPITAL INC. | 2025 PROXY STATEMENT | 6 |
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All Other Continuing Directors
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| LEONARD M. TANNENBAUM | | | Class I Age: 53 Director Since: 2020 | POSITION AND BUSINESS EXPERIENCE | | | Mr. Tannenbaum has served as our Chairman since October 2024, prior to which he served as our Executive Chairman and Chief Investment Officer since November 2023 and as our Chief Executive Officer and Chairman and a director from July 2020. Since February 2024, Mr. Tannenbaum has served as director of Sunrise Realty Trust Inc., (“SUNS”), since February 2024 and as Executive Chairman since the Spin-Off (as defined below). Mr. Tannenbaum is responsible for our overall management and, in his capacity as a principal of the Manager, leads the Investment Committee, which is responsible for overseeing investment processes including origination, credit underwriting, risk analysis and loan approvals. Mr. Tannenbaum has extensive leadership experience, including his experience as the founder of Fifth Street Asset Management, Inc., a credit asset manager with a nationwide platform (“FSAM”), and its Chief Executive Officer from its inception in 1998 until October 2017 when substantially all of its assets were sold to Oaktree Capital Management (“Oaktree”). Prior to such sale to Oaktree, Fifth Street had a core focus on disciplined credit investing across multiple economic cycles, and issued billions of dollars in public equity, private capital and public debt securities. Fifth Street made flexible investments across capital structures to growing middle market companies, primarily in conjunction with private equity sponsors. It managed approximately $5 billion of assets across multiple private investment vehicles and two publicly-traded business development companies. Fifth Street dissolved and liquidated its operations in the first half of 2022 and since its asset sale to Oaktree, it has had no revenue generating operations and makes no investments. Mr. Tannenbaum had a controlling interest in Fifth Street. Subsequent to the sale to Oaktree in 2017, Mr. Tannenbaum founded Tannenbaum Capital Group, a group of affiliated investment managers that are focused on allocating capital across various strategies including credit and commercial real estate. Mr. Tannenbaum currently also serves as a director of Southern Realty Trust, Inc. (“SRT”). Mr. Tannenbaum graduated from The Wharton School of the University of Pennsylvania, where he received a B.S. in economics. Subsequent to his undergraduate degree from the University of Pennsylvania, he received an MBA in Finance from The Wharton School as part of the submatriculation program. He is also a holder of the Chartered Financial Analyst designation and is a member of The Wharton Graduate Executive Board. Mr. Tannenbaum is married to the Company’s President and Chief Investment Officer, Robyn Tannenbaum. | | | KEY ATTRIBUTES | | | Mr. Tannenbaum brings extensive financing industry and leadership experience to our Board. He provides our Board with critical understanding of our business and execution of our strategic plans. He is the Founder, and a substantial shareholder, of AFC. |
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| ADVANCED FLOWER CAPITAL INC. | 2025 PROXY STATEMENT | 7 |
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| THOMAS L. HARRISON | | | Class I Lead Independent Age: 77 Director Since: 2020 | POSITION AND BUSINESS EXPERIENCE | | | Since April 2019, Mr. Harrison has served as a Senior Operating Partner at Merida Capital Holdings, a private equity firm investing across the cannabis ecosystem. In addition, Mr. Harrison brings 30 years of experience in marketing, communications and brand positioning. He formerly founded Harrison & Star Business Group in October 1987, a healthcare marketing and communications agency that was acquired by Omnicom Group Inc. (“Omnicom”) in 1992. He is Chairman Emeritus of Diversified Agency Services, a division of Omnicom and one of the world’s largest holding groups of marketing services companies. He was appointed President of the division in April 1997. He is currently a board member for MainStem, the leading purchasing platform in the state-regulated cannabis industry, as well as New Frontier Data, the cannabis industry’s leading consumer data platform. Mr. Harrison has recently been appointed to the Board of Narrative Strategies, a leading DC-based PR/PA/crisis management firm and to the Board of Agenus Pharmaceuticals, a clinical stage oncology biopharmaceutical company. He sits on the board of ACTV8me, an advertising attribution technology company, He is a board director for the Montefiore Health System. Dr. Harrison brings to our Board an important combination of leadership, marketing, cannabis industry, healthcare and financial expertise. His experiences at large corporations and his current board service make him instrumental in helping our Board implement our business and financial strategy. | | | KEY ATTRIBUTES | | | Mr. Harrison brings to our Board an important combination of leadership, marketing, cannabis industry, healthcare and financial expertise. His experiences at large corporations and his current board service make him instrumental in helping our Board implement our business and financial strategy. |
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| ADVANCED FLOWER CAPITAL INC. | 2025 PROXY STATEMENT | 8 |
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| ALEXANDER C. FRANK | | | Class III Independent Age: 67 Director Since: 2020 | POSITION AND BUSINESS EXPERIENCE | | | Mr. Frank has more than 30 years’ experience in financial and operational infrastructure. Since July 2024, he has also served as SUNS’ lead independent director. He previously worked at Fifth Street Asset Management, which he joined in September 2011 and during his tenure through September 2017, he held various positions and was responsible for the operations of the company during his tenure from 2011 to 2017. Since retiring in September 2017, Mr. Frank has served as a board member at Fifth Street. He was the Chief Operating Officer and Chief Financial Officer of Fifth Street from the time of its initial public offering in 2014 to its sale to Oaktree in 2017. From September 2008 to March 2011, he served as a Managing Director and Chief Financial Officer of Chilton Investment Company LLC, a global investment management firm. Prior to that, Mr. Frank spent over 22 years at Morgan Stanley, having served as global head of institutional operations, global corporate controller and chief financial officer of U.S. broker/dealer operations and global treasurer. In his roles, he oversaw various securities infrastructure services, creating efficiencies throughout the organization, and managed all aspects of the internal and external financial control and reporting functions. Mr. Frank began his career in audit and tax accounting at Arthur Andersen LLP before joining Morgan Stanley in 1985. He received an M.B.A. from the University of Michigan and a B.A. from Dartmouth College. | | | KEY ATTRIBUTES | | | Mr. Frank brings to our Board a deep knowledge of financial management. He provides our Board with key insights to the financial markets, capital raising activities, and the management of a large, complex business. |
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| ADVANCED FLOWER CAPITAL INC. | 2025 PROXY STATEMENT | 9 |
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| MARNIE SUDNOW | | | Class III Independent Age: 57 Director Since: 2022 | POSITION AND BUSINESS EXPERIENCE | | | Ms. Sudnow was appointed to the Board in January 2022. Ms. Sudnow has over 25 years’ experience in management consulting. Ms. Sudnow has served as the Senior Vice President of Client Success for Stylitics, a data-driven omnichannel consulting firm to global retailers since June 2022. Previously, Ms. Sudnow served in various roles, most recently as the Senior Vice President of Strategic Accounts, North America, for Mediaocean, an advertising services and software company, from October 2010 to June 2020. Today, Ms. Sudnow is an Executive Coach working with senior leaders to maximize performance and engage hybrid teams to drive business results. Ms. Sudnow received her B.A. in Business Administration, Finance and Marketing from the University of Delaware. Ms. Sudnow is a founding member of CHIEF, a private network for executive women, and a member of The Female Quotient. | | | KEY ATTRIBUTES | | | Ms. Sudnow brings to our Board valuable management experience and strategic planning in dynamic, data-driven environments, especially in retail industries-her knowledge of which provides valuable insight to the discussions of our Board. |
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| ADVANCED FLOWER CAPITAL INC. | 2025 PROXY STATEMENT | 10 |
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| Corporate Governance |
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Corporate Governance Guidelines Our Board of Directors has adopted Corporate Governance Guidelines to assist the Board in the exercise of its duties and responsibilities and to serve the best interests of the Company and our shareholders. Our Corporate Governance Guidelines direct our Board’s actions with respect to, among other things, our Board composition, responsibilities of directors, director compensation, director orientation and continuing education, succession planning and the Board’s annual performance evaluation. A current copy of our Corporate Governance Guidelines is available under “Corporate Governance” on our website at https://investors.advancedflowercapital.com. Director Independence Under the rules of the Nasdaq Stock Market (“Nasdaq”) and our Corporate Governance Guidelines, independent directors must comprise a majority of our Board of Directors. Under Nasdaq rules, a director will only qualify as an “independent director” if our Board of Directors affirmatively determines that the director, in the opinion of our Board of Directors, does not have a relationship which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Our Board reviews any relationship that each of our directors has with us, either directly or indirectly, that could interfere with exercising independent judgment in carrying out a director’s responsibilities. Our Board has affirmatively determined that each of Messrs. Harrison, Frank, and Levy, and Ms. Sudnow is “independent” as that term is defined under the rules of Nasdaq. Mr. Tannenbaum is not an independent director as a result of his prior service as an executive officer. Jodi Hanson Bond and James Fagan, who both served on our Board until their resignation in July 2024, qualified as independent directors during their period of their service on our Board. Board Leadership Structure We do not have a policy as to whether the chairperson of our Board should be an independent director and we believe that our flexibility to select our chairman and reorganize our leadership structure from time to time is in the best interests of us and our shareholders. Presently, Mr. Tannenbaum, serves as the Chairman of the Board. We believe that we are best served through our existing leadership structure with Mr. Tannenbaum serving as Chairman of our Board combined with Mr. Harrison serving as lead independent director. We believe that Mr. Tannenbaum’s extensive finance industry and leadership experience and critical understanding of our business and knowledge of how to craft and execute on our business and strategic plans qualifies him to serve as the Chairman of the Board, and his relationship with AFC Management, LLC (our “Manager”) provides an effective bridge between our Board and our Manager, thus ensuring an open dialogue between our Board and our Manager and that both groups act with a common purpose. We believe that the leadership structure of our Board must be evaluated on a case-by-case basis and that our existing Board leadership structure provides sufficient independent oversight over our Manager. In addition, we believe that the current governance structure, when combined with the functioning of the independent director component of our Board and our overall corporate governance structure, strikes an appropriate balance between strong and consistent leadership and independent oversight of our business and affairs. However, we re-examine our corporate governance policies on an ongoing basis to ensure that they continue to meet our needs.
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| ADVANCED FLOWER CAPITAL INC. | 2025 PROXY STATEMENT | 11 |
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The Board’s Role in Risk Oversight One of the key functions of our Board is informed oversight of our risk management process. Our Board administers this oversight function directly, with support from its three standing committees, the Audit and Valuation Committee, the Compensation Committee and the Nominating and Corporate Governance Committee, each of which addresses risks specific to its respective areas of oversight as discussed below. In addition, our Manager has also established an Investment Committee for us, the members of which consist of employees of our Manager and/or its affiliates, and which currently includes certain affiliates of our Manager and certain of our officers. The Investment Committee works in conjunction with our Board to manage our credit risk through a comprehensive investment review process.
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| ● | Audit and Valuation Committee. Our Audit and Valuation Committee has the responsibility to consider and discuss our major financial risk exposures and the steps our management has taken to monitor and control these exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken. The Audit and Valuation Committee also monitors compliance with legal and regulatory requirements and the review and approval of our related party transactions, in addition to oversight of the performance of our internal audit function (to the extent such function is required by applicable rules and regulations). Because the Audit and Valuation Committee is already charged with approving our related party transactions, our Board has charged the Audit and Valuation Committee with overseeing amounts payable to our Manager pursuant to our Management Agreement and making recommendations to our Board with respect to our Board’s approval of the renewal of our Management Agreement. |
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| ● | Compensation Committee. Our Compensation Committee is generally responsible for discharging the Board’s responsibilities relating to the compensation, if any, of our executive officers and directors, overseeing the expense reimbursement of our Manager and its affiliates for compensation paid by such entities to their respective employees pursuant to our management agreement, by and between us and our Manager (the “Management Agreement”), the administration and implementation of our incentive and equity-based compensation plans, including the 2020 Stock Incentive Plan, and the preparation of reports on or relating to executive compensation required by the rules and regulations of the Securities and Exchange Commission (the “SEC”). |
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| ● | Nominating and Corporate Governance Committee. Our Nominating and Corporate Governance Committee provides oversight with respect to corporate governance and ethical conduct and monitors the effectiveness of our corporate governance guidelines, including whether such guidelines are successful in preventing illegal or improper liability-creating conduct. |
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In addition, our Board and the Audit and Valuation Committee meet regularly with our Manager and consider the feedback our Manager provides concerning the risks related to our enterprise, business, operations and strategies. Our Manager regularly reports to our Board and the Audit and Valuation Committee on our loan portfolio and the risks related thereto, asset impairments, leverage position, affiliate payments (including payments made and expenses reimbursed pursuant to the terms of the Management Agreement), compliance with applicable covenants under the agreements governing our indebtedness, compliance with our qualification as a real estate investment trust (“REIT”) and compliance with our exemption from registration as investment company under the Investment Company Act of 1940, as amended. Members of our Board are routinely in contact with our Manager and our executive officers, as appropriate, in connection with their consideration of matters submitted for the approval of our Board or the Audit and Valuation Committee and the risks associated with such matters. We believe that the extent of our Board’s (and its committees’) role in risk oversight complements the Board’s leadership structure because it allows our independent directors, through the three fully independent Board committees, executive sessions with the independent auditors, and otherwise, to exercise oversight of risk without any conflict that might discourage critical review. We believe that a board of directors’ role in risk oversight must be evaluated on a case by case basis and that our Board’s role in risk oversight is appropriate. However, we re-examine the manner in which our Board administers its oversight function on an ongoing basis to ensure that it continues to meet our needs.
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| ADVANCED FLOWER CAPITAL INC. | 2025 PROXY STATEMENT | 12 |
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Committees of the Board of Directors The Board has three standing committees: the Audit and Valuation Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. Each of our standing committees is comprised solely of independent directors. The written charters of these committees are available under “Corporate Governance” on our website at https://investors.advancedflowercapital.com.
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| | Audit & Valuation | Compensation | Nominating & Corporate Governance | | Alexander Frank | Chair | | Chair | | Thomas Harrison | | Chair | | | Robert Levy | | | | | Marnie Sudnow | | | | | | Committee Member | | Financial Expert |
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Audit and Valuation Committee Our Audit and Valuation Committee consists of three members, Messrs. Frank, Harrison and Levy, with Mr. Frank serving as Chair of the committee. Our Board has affirmatively determined that each of Mr. Harrison, Mr. Frank and Mr. Levy is independent under Nasdaq rules and also meets the enhanced standards of “independence” established by Nasdaq and the SEC for members of the Audit and Valuation Committee. Our Board has also determined that (i) Mr. Frank and Mr. Levy each qualify as an “audit committee financial expert” under SEC rules and regulations and (ii) each member of the Audit and Valuation Committee is “financially literate” as the term is defined by Nasdaq listing standards. The Audit and Valuation Committee’s principal functions include oversight related to:
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| ● | the integrity of our financial statements; |
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| ● | the qualifications and independence of any independent registered public accounting firm engaged by us; |
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| ● | the performance of our internal audit function (to the extent such function is required by applicable rules and regulations) and any independent registered public accounting firm; |
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| ● | the determination of the fair value of assets that are not publicly traded or for which current market values are not readily available; and |
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| ● | the entry and monitoring of related party transactions. |
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The Audit and Valuation Committee assists our Board in its management of AFC. In particular, the Audit and Valuation Committee (i) serves as an independent party to monitor our financial reporting processes and internal control system; (ii) discusses the audit conducted by our independent registered public accounting firm; (iii) provides an open avenue of communication among our independent registered public accounting firm, our management and our Board; and (iv) serves as an independent party to review, approve and monitor our related party transactions. The responsibilities of the Audit and Valuation Committee include, but are not limited to, (i) the appointment, compensation, retention and oversight of any independent registered public accounting firm engaged by us; (ii) discussing and reviewing guidelines and policies with respect to risk assessment and risk management; (iii) reviewing the adequacy of our internal audit function (to the extent such function is required by applicable rules and regulations); (iv) assisting in performing oversight responsibilities for the internal control systems and disclosure procedures; (v) recommending to our Board whether the financial statements should be included in reports made available to its shareholders; and (vi) meeting periodically with management to discuss any of the above or any identified issues. Subject to the provisions of our related person transaction policies and procedures, the Audit and Valuation Committee is also responsible for reviewing and approving our related party transactions, including matters related to our Management Agreement. Because the Audit and Valuation Committee is already charged with approving our related party transactions, our Board has charged the Audit and Valuation Committee with overseeing amounts payable to our Manager pursuant to our Management Agreement and making recommendations to our Board with respect to our Board’s approval of the renewal of our Management Agreement. The Audit and Valuation Committee and our Board must approve any renewal of our Management Agreement. See “Transactions With Related Persons — Policies and Procedures Regarding Related Party Transaction” for additional information.
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| ADVANCED FLOWER CAPITAL INC. | 2025 PROXY STATEMENT | 13 |
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Compensation Committee Our Compensation Committee consists of three members, Ms. Sudnow and Messrs. Levy and Harrison, with Mr. Harrison serving as Chair of the committee. Our Board has affirmatively determined that each of Ms. Sudnow and Messrs. Levy and Harrison is independent under Nasdaq rules and also meets the enhanced standards of independence established by Nasdaq and the SEC for members of the Compensation Committee. In making this determination, the Board considered whether the director has a relationship with the Company that is material to the director’s ability to be independent from management in connection with the duties of a member of the Compensation Committee. The Compensation Committee’s principal functions include:
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| ● | discharging the Board’s responsibilities relating to the compensation, if any, of our executive officers and directors; |
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| ● | overseeing the expense reimbursement of our Manager and its affiliates for compensation paid by such entities to their respective employees pursuant to our Management Agreement; |
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| ● | administering and implementing our incentive and equity-based compensation plans, including the 2020 Stock Incentive Plan; and |
Compensation Clawback Policy
We do not have any employees nor do we intend to hire any employees who will be compensated directly by us. Our loans are sourced and overseen by the members of our senior team. Each of our executive officers, including each executive officer who serves as a director, is employed by our Manager and/or its affiliates and receives compensation for his or her services, including services performed on our behalf, from our Manager and/or its affiliates, as applicable, except we may award equity-based incentive awards for our executive officers under our 2020 Stock Incentive Plan. Instead, we pay our Manager the fees described under “Management Compensation” in our 2024 Annual Report on Form 10-K and we indirectly bear the costs of the compensation paid to certain of our executive officers through expense reimbursements we pay to our Manager or its affiliates, as applicable. Pursuant to our Management Agreement, we reimburse our Manager or its affiliates, as applicable, for our fair and equitable allocable share of the compensation, including annual base salary, bonus, any related withholding taxes and employee benefits, paid to (i) subject to review by the Compensation Committee of our Board, our Manager’s personnel serving as our Chief Executive Officer (except when the Chief Executive Officer serves as a member of the Investment Committee prior to the consummation of an internalization transaction of our Manager by us), President, Chief Legal Counsel, Chief Financial Officer, Chief Marketing Officer, Managing Director and any of our other officers based on the percentage of his or her time spent devoted to our affairs and (ii) other corporate finance, tax, accounting, internal audit, legal, risk management, operations, compliance and other non-investment personnel of the Manager and its affiliates who spend all or a portion of their time managing our affairs, with the allocable share of the compensation of such personnel described in this clause (ii) being as reasonably determined by our Manager to appropriately reflect the amount of time spent devoted by such personnel to our affairs. The service by any personnel of our Manager and its affiliates as a member of the Investment Committee will not, by itself, be dispositive in the determination as to whether such personnel is deemed “investment personnel” of our Manager and its affiliates for purposes of expense reimbursement. For additional information regarding fees paid to our Manager and our reimbursement obligations related to compensation of our executive officers, see “Management Compensation” in our 2024 Annual Report. Mr. Hetzel entered into an employment agreement with our Manager, dated as of January 3, 2023, which provides that, in the event of a termination of Mr. Hetzel’s employment by the Manager other than for “cause” (which includes a non-renewal of the employment agreement term by the Manager), or his resignation for “good reason”, he will be entitled to twelve (12) months’ worth of his then-current base salary. In connection with his appointment as Chief Executive Officer of the Company, Mr. Neville entered into an employment agreement with our Manager, dated as of October 30, 2023, which provides that, in the event of a termination of Mr. Neville’s employment by the Manager without “cause” (other than due to Mr. Neville’s death or “disability”), or his resignation for “good reason” (which includes a non-renewal of the employment agreement term by the Manager), Mr. Neville will be entitled to: (i) three months of base salary continuation; (ii) subject to Mr. Neville’s timely election of continuation coverage under COBRA, payment of 100% of medical, dental and vision premiums for Mr. Neville and his dependents for three months following the month in which the termination occurs; and (iii) the Company’s repurchase right with respect to Mr. Neville’s ownership of the Manager shall terminate and Mr. Neville’s restricted common stock award granted in connection with his commencement of employment shall fully vest.
Compensation Clawback Policy
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(2) | Option Awards ($)(2) | Non-Equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | | Daniel Neville (Chief Executive Officer) | 2024 | - | - | 750,001 | - | - | - | - | 750,001 | | | 2023 | - | - | - | - | - | - | - | - | | Leonard M. Tannenbaum (1) (Chairman) | 2024 | - | - | 1,299,999 | - | - | - | - | 1,299,999 | | | 2023 | - | - | 799,987 | - | - | - | - | 799,987 | | Brandon Hetzel (Chief Financial Officer and Treasurer) | 2024 | 130,689 | 138,891 | 174,985 | - | - | - | - | 444,565 | | | 2023 | 196,737 | 79,975 | 99,991 | | - | - | - | 376,703 | | Robyn Tannenbaum (President and Chief Investment Officer) | 2024 | 69,452 | - | 400,000 | - | - | - | - | 469,452 | | | 2023 | 132,260 | - | 399,993 | - | - | - | - | 532,253 |
Compensation Clawback Policy
| Director Compensation |
Compensation Clawback Policy
| Name | Year | Fees Earned Or Paid in Cash ($) | Stock Awards ($) | Option Awards ($)(1) | Total ($) | | Thomas Harrison(2) | 2024 | 75,000 | 14,999 | - | 89,999 | | Jodi H. Bond(3) | 2024 | 25,000 | 14,999 | - | 39,999 | | James Fagan(4) | 2024 | 25,000 | 14,999 | - | 39,999 | | Alexander Frank(5) | 2024 | 80,000 | 14,999 | - | 94,999 | | Robert Levy(6) | 2024 | 50,000 | 14,999 | - | 64,999 | | Marnie Sudnow(7) | 2024 | 50,000 | 14,999 | - | 64,999 |