DEF 14A of Hercules Capital, Inc., Apr 24, 2025

DEF 14A of Hercules Capital, Inc.

Filed Apr 24, 2025 · FY20240001280784-25-000015

Open on EDGAR

  1. Table of Contents

    | Nonqualified Deferred Compensation in 2024 | 35 | | Potential Payments upon Termination or Change in Control | 35 | | CEO Pay Ratio | 37 | | Pay vs. Performance | 38 | | Independent Director Compensation | 40 | | Equity Compensation Plan Information | 41 | | PROPOSAL 2: ADVISORY VOTE TO APPROVE THE COMPANY’S NAMED EXECUTIVE OFFICER COMPENSATION | 42 | | PROPOSAL 3: AUTHORIZATION OF THE COMPANY TO SELL OR ISSUE SHARES OF ITS COMMON STOCK AT A PRICE BELOW ITS THEN- CURRENT NAV PER SHARE, SUBJECT TO THE CONDITIONS SET FORTH IN PROPOSAL 3 | 44 | | Overview and Conditions of Below-NAV Sales | 44 | | Reasons to Conduct Below-NAV Sales | 45 | | Key Stockholder Considerations | 46 | | Dilutive Effect of Below-NAV Sales on Stockholders | 47 | | Trading History of the Shares | 48 | | Tables | 48 | | PROPOSAL 4: RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANT FOR THE FISCAL YEAR ENDING DECEMBER 31, 2025 | 52 | | Background | 53 | | Key Stockholder Considerations | 53 | | Principal Accountant Fees and Services | 53 | | Pre-Approval Policy | 54 | | AUDIT COMMITTEE REPORT | 55 | | STOCKHOLDER PROPOSALS | 56 | | QUESTION AND ANSWERS | 57 |

  2. election of each Director Nominee. If any Director

    election of each Director Nominee. If any Director

  3. BIOGRAPHICAL INFORMATION

    BIOGRAPHICAL INFORMATION

  4. BIOGRAPHICAL INFORMATION

    | Biographical Summary Table (Directors) |

  5. BIOGRAPHICAL INFORMATION

    | Name, address and age(1) | Position(s) held with Company | Term of office and length of time served | Principal occupation(s) during the past 5 years | Other directorships held by Director or Director Nominee during the past 5 years | | Robert P. Badavas (72) | Lead Independent Director | Class I Director since 2006 | President of Petros Ventures, Inc. from November 2009 to December 2011 and since September 2016. | Polyvinyl Films, Inc. since 2019. | | Pam Randhawa (56) | Independent Director | Class I Director since 2021 | Founder and Chief Executive Officer of Empiriko Corporation since 2010. | Massachusetts Life Science Center since 2016 and Massachusetts Biotechnology Council since 2017. | | Gayle Crowell (74) | Independent Director | Class II Director since 2019 | Independent Business Consultant since 2019. | Envestnet (formerly NYSE: ENV) from 2016 to 2024, Pliant Therapeutics since 2019, Instinct Science since 2022, Centerbase since 2022, Fexa since 2023, GTreasury from 2021 to 2023, and Resman from 2020 to 2021. | | Thomas J. Fallon (63) | Independent Director | Class II Director since 2014 | Executive Vice President - Business Development of Sanmina Corporation since 2022, Chief Executive Officer of Infinera Corporation from 2010 to 2020. | Infinera Corporation from 2010 to 2020. | | Nikos Theodosopoulos (62) | Independent Director | Class II Director since 2023 | Independent director, advisor, consultant and angel investor in the technology industry. | Arista Networks from 2014 to 2023, Driving Management Systems from 2018 to 2022, Harmonic from 2015 to 2022, ADVA Optical Networking from 2014 to 2022. Adtran Holdings Board Member since 2022. | | DeAnne Aguirre (64) | Director Nominee and Independent Director | Class III Director since 2022 | North America Managing Partner and Health Industries Leader at Strategy&, a PwC Network Company from 2015 to 2020. | Cisive, a GTCR portfolio company, since 2022; EPAM Systems, Inc. since 2023. | | Wade Loo (64) | Director Nominee and Independent Director | Class III Director since 2021 | Investor Committee Member at Mapletree Europe Income Trust since 2021 and Investment Committee Member at Mapletree US Commercial Income Trust since 2021. | Silicon Valley Community Foundation 2015 to 2023, University of Denver – Daniels College of Business since 2015, University of Denver Board of Trustees since 2023, Computer History Museum since 2023, JobTrain from 2006 to 2019. | | Scott Bluestein (46) | Director Nominee and Interested Director, Chief Executive Officer and Chief Investment Officer | Class III Director since 2019 | Chief Investment Officer of Hercules since 2014; Director and Chief Executive Officer since 2019. | |

  6. BIOGRAPHICAL INFORMATION

    (1)The address for each officer and director is c/o Hercules Capital, Inc., 1 North B Street, Suite 2000, San Mateo, California 94401. (2)No director otherwise services as a director of an investment company subject to the 1940 Act. 13

  7. Table of Contents

    | WADE LOO ✓ Independent Director Age: 64 Board Member since 2021 Term expires in 2025 Committee Memberships: • Audit (Chair) •Compensation | Business Experience • Audit partner for multinationals and venture-backed entities, with experience working with companies in the areas of technology, financial and life sciences •Partner in Charge of KPMG LLP’s Northern California Audit Business Unit, whose territory includes the Silicon Valley and San Francisco offices •Certified Public Accountant (California) Prior Public Company Directorships •Guidance Software - Board Member and Audit Committee Chair (2016-2017) •Kofax Ltd. - Board Member and Audit Committee Chair (2011-2015) Private and Non-Profit Directorships •Member of the Board of Trustees at University of Denver (2023-present) •Board Member at Computer History Museum, a not-for-profit museum (2023-Present) •Investor Committee Member at Mapletree Europe Income Trust and Mapletree US Income Commercial Trust, both Private Real Estate Investment Trusts (2021-present) •Board Member (2015-2023), Audit Committee Chair (2015-2019) and Board Chair (2021-2023) at the Silicon Valley Community Foundation •Executive Advisory Board Member at the University of Denver—Daniels College of Business (2015- present) and Board Chair (2018-2021) •JobTrain—Board Member (2006-2018), Audit Committee Chair (2006-2010) and Board Chair (2011-2017) Other Experience •Led KPMG’s Audit Committee Institute activities in Silicon Valley, which provides audit committee and governance best practices to audit committee chairs Education •Bachelor’s degree in Accounting from the University of Denver | | KEY QUALIFICATIONS AND EXPERIENCE | | | ✓ Client Industries. Experience in venture capital-backed companies in general, and our specific portfolio company industries: technology, life sciences and middle market. ✓ Banking/Financial Services. Experience with banking, mutual fund or other financial services industries, including regulatory experience and specific knowledge of the Securities Act. ✓ Leadership/Strategy. Both as partner at KPMG and board chair at various organizations, responsible for leading large teams and establishing and executing successful business strategies. ✓ Finance, IT and other Business Processes. Extensive experience as an audit partner and audit committee chair related to finance, accounting and internal controls, IT and other key business processes | ✓ Enterprise Risk Management. Experience with enterprise risk management processes and functions, including compliance and operations. ✓ Governance. Experience with corporate governance issues, particularly in publicly-traded companies. ✓ Strategic Planning. Experience with senior executive level strategic planning for publicly-traded companies, private companies and non-profit companies. ✓ Mergers and Acquisitions. Experience with public and/or private company M&A, both in identifying targets and evaluating potential targets, as well as post-acquisition integration. |

  8. Table of Contents

    | NIKOS THEODOSO- POULOS ✓ Independent Director Age: 62 Board Member since 2023 Term expires in 2027 Committee Memberships: •Audit •Compensation | Business Experience •Independent director, advisor, consultant and angel investor in the technology industry •Various capacities with UBS, a provider of financial services, most recently as managing director of technology equity research (1995-2012) •Senior equity research analyst for Bear, Stearns & Co. Inc., an investment banking firm that was acquired in 2008 by JPMorgan Chase (1994-1995) •Various capacities at AT&T Bell Laboratories and AT&T Network Systems a provider of communications equipment (1985-1994) Public Company Directorships •Adtran Holdings, a provider of networking and communications equipment (2022-present) Prior Public Company Directorships •Arista Networks (member of audit and nominating and corporate governance committees), a provider of data-driven, client to cloud networking for large data center/AI, campus and routing environments (2014-2023) •Harmonic (chair of audit committee), a provider of virtualized broadband and video streaming solutions (2015-2022) •ADVA Optical Networking (chair of supervisory board and nomination and compensation committee; member of audit committee), a telecommunications vendor providing network equipment for data, storage, voice and video services (2014-2022) Prior Private Company Directorships •Driving Management Systems (d/b/a Motion Intelligence), a producer of distracted-driving prevention solutions (2018-2022) Other Experience •Member at NT Advisors LLC (2012-Present) •Member, Columbia Engineering Entrepreneurship Advisory Board (2013-2021) Education •MBA from NYU Stem School of Business •Master of Science, Electrical Engineering from Stanford University •Bachelor of Science Electrical Engineering from Columbia University | | KEY QUALIFICATIONS AND EXPERIENCE | | | ✓ Client Industries. Experience in venture capital-backed companies in general, and our specific portfolio company industries: technology, life sciences and middle market. ✓ Banking/Financial Services. Experience with banking, mutual fund or other financial services industries, including regulatory experience and specific knowledge of the Securities Act. ✓ Finance, IT and other Business Processes. Extensive experience as an audit committee chair overseeing finance, accounting and internal controls, IT and other key business processes. | ✓ Enterprise Risk Management. Experience with enterprise risk management processes and functions, including compliance and operations. ✓ Governance. Experience with corporate governance issues, particularly in publicly-traded companies. ✓ Strategic Planning. Experience with senior executive level strategic planning for publicly-traded companies, private companies and non-profit companies. ✓ Mergers and Acquisitions. Experience with public and/or private company M&A, both in identifying targets and evaluating. |

  9. Table of Contents

    | Key Sections | Page | | Introduction | 23 | | Compensation Determination Process | 23 | | Role of the Independent Compensation Consultant | 24 | | Peer Group Composition, Data and Review | 24 | | Assessment of Company and Individual Performance, Pay-for-Performance Alignment and Other Considerations | 25 | | Risk Assessment of the Compensation Program | 26 | | The NEO Compensation Program | 27 | | Compensation Philosophy | 27 | | Regulatory Limitations on Compensation | 27 | | Compensation Elements | 28 | | Clawback Policy for Section 16 Officers | 30 |

  10. Key Definitions

    Key Definitions AASR means average annual shareholder return Equity Plan means the Company’s Amended and Restated 2018 Equity Incentive Plan LTRSU means long term restricted stock unit. Peer Group means the peer companies listed on the table on page 24 PSU and Retention PSU means performance stock unit and retention performance stock unit ROE means return on equity ROAA means return on average assets RSA means restricted stock award RSU means restricted stock unit TSR means total stockholder return 23

  11. Table of Contents

    | Role of the Independent Compensation Consultant |

  12. Table of Contents

    | The Compensation Committee has engaged FW Cook as its Independent Compensation Consultant to assist the Compensation Committee and provide advice on a variety of compensation matters relating to CEO and NEOs compensation, peer group selection, compensation program best practices, market and industry compensation trends, improved program designs, market competitive director compensation levels and regulatory developments. FW Cook reports directly to the Compensation Committee and does not provide any other services to the Company. The Compensation Committee has assessed the independence of FW Cook pursuant to applicable NYSE rules and has concluded that FW Cook’s work for the Compensation Committee does not raise any conflict of interest. | INDEPENDENT COMPENSATION CONSULTANT DUTIES: •Providing information, research, market analysis and recommendations with respect to our NEO and Independent Director compensation programs, including evaluating the components of those programs and the alignment of those programs with Company performance. •Advising on the design of the NEO and Independent Director compensation programs and the reasonableness of individual compensation levels and awards, including in the context of business and stockholder performance and the importance of individual officers to the Company’s success. •Providing advice and recommendations that incorporate both market data and Company-specific factors. •Assisting the Compensation Committee in making compensation determinations for NEOs after the evaluation of, among other things, Company and individual performance, market compensation levels and recommendations by the CEO. •Advising the Compensation Committee on certain other compensation matters, including peer group selection and regulatory developments. |

  13. Table of Contents

    | Peer Group Composition, Data and Review |

  14. Table of Contents

    | Peer Group | | | | | BDCs | Financial Services | Real Estate Investment Trusts | | | Capital Southwest Main Street Capital Trinity Capital | AllianceBernstein Artisan Partners Cohen & Steers HA Sustainable Moelis & Company Victory Capital WisdomTree | Arbor Realty Chimera Investment EPR Properties Essential Properties Ladder Capital LXP Industrial | MFA Financial New York Mortgage Redwood Trust Sabra Health Care Two Harbors |

  15. Table of Contents

    | Annual Cash Bonus Awards Rewards NEOs for individual achievements and contributions to our financial performance and strategic success during the year |

  16. Table of Contents

    | Name | 2024 Cash Bonus Award ($) | | Scott Bluestein | 3,500,000 | | Seth H. Meyer | 915,000 | | Christian Follmann | 470,000 | | Kiersten Zaza Botelho | 440,000 |

  17. Table of Contents

    | Long-Term Equity Incentive Awards Provides meaningful retention incentives while rewarding NEOs for individual achievements and contributions to our success through the alignment with and creation of stockholder value |

  18. Table of Contents

    | Name | Grant Date | Restricted Stock Award | Fair Value of Restricted Stock Award($)(1) | | Scott Bluestein | 1/09/2025 | 241,742 | 4,830,005 | | Seth H. Meyer | 1/09/2025 | 82,583 | 1,650,008 | | Christian Follmann | 1/09/2025 | 33,784 | 675,004 | | Kiersten Zaza Botelho | 1/09/2025 | 27,528 | 550,009 |

  19. Table of Contents

    | Name | Grant Date | Restricted Stock Milestone Award | Fair Value of Restricted Stock Milestone Award($)(1) | | Seth H. Meyer | 12/05/2024 | 132 | 2,496 |

  20. Table of Contents

    | Name | Grant Date | Restricted Stock Units | Fair Value of Restricted Stock Units($)(1) | | Scott Bluestein | 12/05/2024 | 33,051 | 303,739 | | Seth H. Meyer | 12/05/2024 | 10,576 | 97,193 | | Christian Follmann | 12/05/2024 | 10,576 | 97,193 | | Kiersten Zaza Botelho | 12/05/2024 | 10,576 | 97,193 |

  21. Table of Contents

    | Timing of Equity Compensation |

  22. COMPENSATION TABLES

    | Summary Compensation Table |

  23. COMPENSATION TABLES

    | Name and Principal Occupation | Year | Salary ($)(1) | Bonus ($)(2) | Stock Awards ($) (3) | Option Awards ($) | All Other Compensation ($) (4) | Total ($) | | Scott Bluestein | 2024 | 650,000 | 3,500,000 | 4,903,742 | — | 23,000 | 9,076,742 | | Chief Executive Officer and | 2023 | 650,000 | 3,200,000 | 5,019,494 | — | 22,500 | 8,891,994 | | Chief Investment Officer | 2022 | 650,000 | 3,000,000 | 3,700,008 | — | 20,500 | 7,370,508 | | Seth H. Meyer | 2024 | 550,000 | 915,000 | 1,749,697 | — | 30,500 | 3,245,197 | | Chief Financial Officer | 2023 | 550,000 | 835,000 | 1,625,903 | — | 30,000 | 3,040,903 | | | 2022 | 550,000 | 875,000 | 1,274,998 | — | 27,000 | 2,726,998 | | Christian Follmann | 2024 | 300,000 | 470,000 | 657,195 | | 23,000 | 1,450,195 | | Chief Operating Officer | 2023 | 300,000 | 425,000 | 462,343 | — | 22,500 | 1,209,843 | | | 2022 | 260,000 | 350,000 | 250,005 | — | 20,500 | 880,505 | | Kiersten Zaza Botelho | 2024 | 300,000 | 440,000 | 547,192 | | 23,000 | 1,310,192 | | Chief Legal Officer, Chief Compliance Officer and Corporate Secretary(5) | 2023 | 300,000 | 395,000 | 366,067 | — | 22,500 | 1,083,567 | | | 2022 | 300,000 | 300,000 | 99,993 | — | 18,000 | 717,993 |

  24. Table of Contents

    | Grants of Plan Based Awards in 2024 |

  25. Table of Contents

    | Outstanding Equity Awards at Fiscal Year End, December 31, 2024 |

  26. Table of Contents

    | Options Exercised and Stock Vested in 2024 |

  27. Table of Contents

    | Potential Payments Upon Termination or Change in Control |

  28. Table of Contents

    | CEO Pay Ratio |

  29. Table of Contents

    | Pay vs. Performance |

  30. Table of Contents

    | | | | | | Value of Initial $100 Investment: | | | | | Year | Summary Compensation Table CEO Total Compensation ($) | Compensation Actually Paid to CEO ($)(1) | Average SCT Non-CEO NEOs Total Compensation ($) | Average Compensation Actually Paid to Non-CEO NEOs ($)(1) | Company TSR ($) | Peer Group TSR ($)(2) | Net Income ($ in thousands) | Return on Equity | | 2024 | 9,076,742 | 12,296,799 | 2,001,861 | 2,563,410 | 250.11 | 134.35 | 262,966 | 17.2% | | 2023 | 8,891,994 | 11,871,291 | 1,778,104 | 2,234,447 | 187.59 | 128.90 | 337,484 | 14.9% | | 2022 | 7,370,508 | 12,508,448 | 1,441,832 | 1,354,862 | 131.26 | 113.50 | 102,081 | 11.6% | | 2021 | 7,410,986 | 11,960,041 | 1,548,309 | 1,560,941 | 145.05 | 125.26 | 174,155 | 11.1% | | 2020 | 7,871,404 | 12,662,414 | 1,621,547 | 1,676,816 | 115.13 | 91.15 | 227,261 | 11.3% |

  31. Table of Contents

    | Independent Director Compensation |

  32. Table of Contents

    | Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | Option Awards ($) | All Other Compensation ($) | Total ($) | | Robert P. Badavas | 265,000 | | — | — | 265,000 | | DeAnne Aguirre | 205,000 | — | — | — | 205,000 | | Gayle Crowell | 230,000 | 59,994 | — | — | 289,994 | | Thomas J. Fallon | 220,000 | 59,994 | — | — | 279,994 | | Wade Loo | 230,000 | — | — | — | 230,000 | | Pam Randhawa | 205,000 | | — | — | 205,000 | | Nikos Theodosopoulos | 129,167 | 59,994 | — | — | 189,161 |