UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE
14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant ☒
Filed by a Party other than the
Registrant ☐
Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to
§240.14a-12
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Rand Capital Corporation
(Name of
Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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Fee computed on table below per Exchange Act Rules
14a-6(i)(1)
and
0-11.
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(1)
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Title of each class of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2)
and identify the filing for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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(1)
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(2)
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Form, Schedule or Registration Statement No.:
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Date Filed:
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Proxy Statement Rand Capital Corporation
Rand Capital Corporation
2200 Rand Building
Buffalo, New York 14203
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO OUR SHAREHOLDERS
The 2017 Annual Meeting of
Shareholders of Rand Capital Corporation will be held on Thursday, April 20, 2017 at 10:30 a.m. at The Buffalo Club, (Business Attire Required) Millard Fillmore Conference Room, 388 Delaware Avenue, Buffalo, New York, 14202 for the following
purposes:
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1.
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To elect six Directors to hold office until the next annual meeting of shareholders and until their successors have been elected and qualified.
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2.
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To approve, by advisory vote, executive compensation.
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3.
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To conduct an advisory vote on the frequency of holding future advisory votes on executive compensation.
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4.
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To ratify the selection of Freed Maxick CPAs, P.C. as our independent registered public accounting firm for the year ending December 31, 2017.
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5.
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To consider and act upon such other business as may properly come before the meeting.
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Shareholders of record at the close of business on March 1, 2017 are entitled to notice of, and to vote at the annual meeting, and any
adjournment thereof.
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March 16, 2017
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By order of the Board of Directors,
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Buffalo, New York
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Reginald B. Newman II
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Chairman
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IMPORTANT NOTICE REGARDING
INTERNET AVAILABILITY OF PROXY MATERIALS
FOR THE ANNUAL MEETING TO BE HELD ON
APRIL 20, 2017
THE
PROXY STATEMENT AND ANNUAL REPORT
TO SHAREHOLDERS IS AVAILABLE AT HTTP://MATERIALS.PROXYVOTE.COM/752185
Proxy 1
Proxy Statement Rand Capital Corporation
Rand Capital Corporation
2200 Rand Building
Buffalo, New York 14203
Proxy Statement
GENERAL INFORMATION
We are furnishing this Proxy Statement in connection with the solicitation of proxies by the Board of Directors of Rand Capital
Corporation (Rand or the Corporation or we) for the Annual Meeting of Shareholders to be held on April 20, 2017 (Annual Meeting). Only shareholders of record at the close of business on
March 1, 2017 (Record Date) are entitled to notice of and to vote at the Annual Meeting, and at any adjournment thereof. On the Record Date, Rand had outstanding 6,321,988 Common Shares (net of treasury shares), par value $.10 per
share (shares).
Each share entitles the holder to one vote. Shares cannot be voted at the Annual Meeting unless the
shareholder is present or represented by proxy. If the enclosed form of proxy is returned properly executed and dated, the shares represented thereby will be voted at the Annual Meeting in accordance with the instructions contained in the proxy,
unless the proxy is revoked prior to its exercise. Any shareholder may revoke a proxy by executing a subsequently dated proxy or a notice of revocation, provided that the subsequent proxy or notice is delivered to the Corporation prior to the taking
of a vote, or by voting in person at the Annual Meeting.
Under the New York Business Corporation Law (the BCL) and our
by-laws,
the presence, in person or by proxy, of the holders of a majority of the outstanding shares is necessary to constitute a quorum of the shareholders to take action at the Annual Meeting. The shares that are
present at the Annual Meeting or represented by a proxy will be counted for quorum purposes. Proxies submitted with abstentions and broker
non-votes
will be counted in determining whether or not a quorum is
present. Under the BCL, once a quorum is established, Directors standing for election may be elected by a plurality of the votes cast, and other matters expected to be brought before the Annual Meeting may be approved by a majority of votes cast in
favor of the matter. Votes withheld, broker
non-votes,
and abstentions will not be counted as votes cast on any matter and will have no effect on the results of the vote. A broker
non-vote
occurs when a broker holding shares for a beneficial owner does not vote on a particular proposal because the broker does not have discretionary voting power for that particular item and has not received
instructions on how to vote from the beneficial owner
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This Proxy Statement and accompanying form of proxy are being mailed to
shareholders on or about March 16, 2017. A copy of Rands 2016 Annual Report, which contains financial statements, accompanies this Proxy Statement.
We will bear the cost of soliciting proxies in the accompanying form. We do not expect to pay any compensation for the solicitation of
proxies, but may pay brokers, nominees, fiduciaries and other custodians their reasonable fees and expenses for sending proxy materials to beneficial owners and obtaining their instructions. In addition to solicitation by mail, our Directors,
officers and employees may solicit proxies in person or by telephone, and they will receive no additional compensation therefor.
Our
office is located at 2200 Rand Building, Buffalo, New York 14203 and our telephone number is
716-853-0802.
Proxy 2
Proxy Statement Rand Capital Corporation
BENEFICIAL OWNERSHIP OF SHARES
Unless otherwise indicated, the following table sets forth beneficial ownership of our shares on March 1, 2017, by (a) persons known
by us to be beneficial owners of more than 5% of the outstanding shares, (b) the Directors, nominees for Director, and the named executive officers of Rand, and (c) all Directors and executive officers as a group. For purposes of the
table, the address for each of our Directors, nominees for Director and named executive officers is c/o 2200 Rand Building, Buffalo, NY 14203. Unless otherwise stated, each person named in the table has sole voting and investment power with respect
to the shares indicated as beneficially owned by that person.
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Amount and Nature of
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Percent
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Beneficial Owner
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Beneficial Ownership (1)
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of Class (4)
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(a) More than 5% Owners:
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JAM Capital Partners Management, LLC
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1,238,692
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(2)
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19.6
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%
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16 Boardwalk Plaza
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St. Simons Island, GA 31522
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(b) Directors, nominees for Director and named executive
officers:
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Allen F. Grum
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173,642
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2.7
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%
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Erland E. Kailbourne
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40,000
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*
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Ross B. Kenzie
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113,000
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1.8
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%
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Reginald B. Newman II
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244,124
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3.9
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%
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Jayne K. Rand
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115,433
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1.8
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%
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Robert M. Zak
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65,000
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1.0
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Daniel P. Penberthy
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84,467
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1.3
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%
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* Less than 1%.
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(c) All Directors and executive officers as a group (seven
persons)(3)
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835,666
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13.2
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%
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(1)
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The beneficial ownership information presented is based upon information furnished by each person or contained in filings made with the Securities and Exchange Commission (SEC).
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(2)
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Based upon prior Form 4 filings, the Company believes that these shares are beneficially owned for purposes of Section 16 of the Exchange Act of 1934, as amended (the Exchange Act) by Utility Service
Holding Co.
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Members of the group have sole voting and investment power over these shares.
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(4)
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Percent of Class calculated based on 6,321,988 shares outstanding at the Record Date.
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Proxy 3
Proxy Statement Rand Capital Corporation
PROPOSAL 1.
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ELECTION OF DIRECTORS
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Six Directors are to be elected at the Annual Meeting. The six
nominees were each elected at the last Annual Meeting of Shareholders held in April 2016.
Each of the nominees was recommended for
re-election
by the Governance and Nominating Committee, which is comprised of independent Directors. Each of the nominees has consented to serve as a Director if elected. If at the time of the Annual Meeting any
nominee should be unable to serve, it is the intention of the persons designated as proxies to vote, in their discretion, for such other person as may be designated as a nominee by the Board of Directors.
Director Independence
The Board
of Directors affirmatively determined that all the
non-employee
Directors, Erland E. Kailbourne, Ross B. Kenzie, Reginald B. Newman II, Jayne K. Rand and Robert M. Zak are Independent Directors
under the rules of the SEC and under the rules and guidelines of the NASDAQ Stock Market. Therefore, a majority of Rands
six-person
Board of Directors is currently independent as so defined. The Board of
Directors has determined that there are no relationships between Rand and the Directors determined to be independent other than service on its Board of Directors and compensation paid to those Directors.
The nominees for election as a Director at the Annual Meeting have been selected by the Independent Directors of the Board upon the
recommendation of Rands Governance and Nominating Committee, which is comprised solely of Independent Directors in compliance with the requirements of NASDAQ Rule 5605(e)(1).
Allen F. Grum has been determined to be an interested person under Section 2(a)(19) of the Investment Company Act of 1940, as
amended (Investment Company Act) with respect to Rand because he is an executive officer of Rand. Directors who are determined to be interested persons do not qualify as independent directors under the rules and guidelines of the NASDAQ
Stock Market.
The Board of Directors, with reference to the SEC rules and the NASDAQ Stock Market rules and guidelines, also determined
that:
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each member of the Audit Committee, the Governance and Nominating Committee, and the Compensation Committee are independent under the applicable NASDAQ Stock Market rules and guidelines and SEC rules for purposes of
determining independence of members of each of those committees;
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the 2016 compensation of the executive officers of Rand was determined by a majority of the Independent Directors of the Board;
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each member of the Audit Committee also meets the additional independence requirements under Rule
10A-3(b)
of the Exchange Act and NASDAQ Rule 5605(
c)(2)(a); and
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each member of the Compensation Committee also meet the independence requirements under the rules and guidelines of NASDAQ Rule 5605(d).
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Proxy 4
Proxy Statement Rand Capital Corporation
Rands Chairman, Mr. Newman, serves as chair of meetings of the Independent
Directors. It is currently contemplated that executive sessions of the Independent Directors will occur at least twice during the year ending December 31, 2017. The Corporation will also hold separate committee meetings of the Board
of Directors during 2017, which committees are comprised of Independent Directors.
Board Leadership Structure
Reginald B. Newman II has served as Chairman of the Board of Directors of the Corporation since 1996 and is not an interested
person under Section 2(a)(19) of the Investment Company Act with respect to Rand. His long standing business experience is important to the Corporations Board of Directors discussions. Robert M. Zak was appointed Vice Chair on
November 5, 2014 and is not an interested person under Section 2(a)(19) of the Investment Company Act with respect to Rand. Allen F. Grum has served as President and Chief Executive Officer since 1996 and does qualify as an
interested person under Section 2(a)(19) of the Investment Company Act with respect to Rand. The Corporation believes that separating the Chairman and President (CEO) roles provides independent oversight of the Corporation, enhanced
leadership by the Independent Directors, and a check on management.
The Boards Role in Risk Oversight
The Boards role in the Corporations risk oversight process consists of receiving regular reports from Rands senior management
on areas of material risk to the Corporation, including portfolio valuation, operational, financial, legal, regulatory and compliance, strategic and reputational risks. The full Board of Directors (or the appropriate committee in the case of risks
that are under the purview of a particular committee) reviews these reports from management to understand and provide input on the management of these risks.
Shareholder Communications
Communications to an individual Director, to
non-employee
Directors as a group, or to the entire Board
of Directors, should be addressed as follows: Reginald B. Newman, II, Security Holder Board Communications, 2200 Rand Building, Buffalo, New York, 14203, with an indication of the individual or subgroup (if any) to whose attention the communication
is directed. All security holder communications addressed in that manner will be delivered directly to Mr. Newman, who will receive communications for the Board of Directors and
non-employee
Directors,
and who will deliver the communication unopened to any individual indicated Director.
Meeting Attendance
Each of the current nominees is expected to attend the 2017 Annual Meeting of Shareholders, and also attended the 2016 Annual Meeting with the
exception of Mr. Kailbourne who was excused due to illness. Directors are expected to attend the Annual Meeting, but such attendance is not required.
Proxy 5
Proxy Statement Rand Capital Corporation
Information Regarding Directors, Nominees for Director, and Executive Officers
The following table provides information concerning all persons who are Directors, nominees for Director, or executive officers of Rand. Rand
is not part of a fund complex.
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Name, Age and
Address
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Position(s)
held with
Fund
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Length
of
Time
Served
(1)
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Business Experience and
Occupations During Last Five
Years
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Other
Directorships
(2)
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Directors
who
are
Interested
Persons
(3)
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Allen F. Grum
(59)
c/o 2200 Rand Building Buffalo NY 14203
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President of Rand and a Director
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1996
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President and Chief Executive Officer since 1996. Prior thereto, Mr. Grum served as Senior Vice President of Rand Capital Corporation commencing in June 1995. From 1994 to 1995, Mr. Grum was Executive Vice President of
Hamilton Financial Corporation and from 1991-1994 he served as Senior Vice President of Marine Midland Mortgage Corporation. Mr. Grum serves on a number of Boards of Directors of companies in which Rand Capital Corporation has an investment.
His
in-depth
knowledge of Rand Capital Corporations operations, and the industries in which the Corporation operates makes Mr. Grum qualified to serve as a Director.
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None
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Directors
who
are
not
Interested
Persons
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Erland
E.
Kailbourne
(75)
c/o 2200 Rand Building
Buffalo, NY 14203
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Director
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1999
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Chairman of Albany International, Inc. since May 2009. Prior thereto, from January 2006 until May 2010, Mr. Kailbourne was Chairman of Financial Institutions, Inc. and its subsidiary Five Star Bank. He retired as Chairman and
Chief Executive Officer (New York Region) of Fleet National Bank, a banking subsidiary of Fleet Financial Group, Inc., in 1998. From 1995 2000, he was Vice Chairman State University of New York (SUNY). He was Chairman and Chief Executive
Officer of Fleet Bank, also a subsidiary of Fleet Financial Group, Inc., from 1993 until its merger into Fleet National Bank in 1997. He is a Director of REV LNG, LLC, Financial Institutions, Inc. and Five Star Bank, Albany International
Corporation, Allegany
Co-op
Insurance Company, Conemaugh Valley Insurance Company, and The Thomas and Laura Moogan Foundation. Mr. Kailbournes extensive banking and financial experience provide
necessary attributes as a Director of Rand.
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Chairman of
Albany International, Inc.,
Director of Financial Institutions, Inc. and its subsidiary Five Star Bank
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Proxy 6
Proxy Statement Rand Capital Corporation
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Ross B. Kenzie
(85)
1961 Wehrle Drive
Suite 5
Buffalo, NY 14221
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Director
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1996
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Mr. Kenzie has been retired since 1989. Prior thereto, he was the Chairman of the Board and Chief Executive Officer of Goldome Bank, Buffalo, NY, a savings bank, from 1980. Prior thereto, Mr. Kenzie was Executive Vice President
and Director of Merrill Lynch Pierce Fenner & Smith as well as Merrill Lynch & Co. Mr. Kenzie is a former Director of Biophan Technologies, Inc. and Natural Nano, Inc., development companies specializing in highly marketable business
devices and naturally occurring nanotube technologies; and a former Director of Merchants Mutual Insurance Company. Mr. Kenzie is a former Director of Chicago Board of Options Exchange (CBOE). Mr. Kenzies banking and financial
experience in addition to his involvement with emerging companies, provide invaluable expertise as a Director of Rand.
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None
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Reginald
B.
Newman
II
(79)
50 North Airport Drive
Buffalo, NY 14225
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Director and Chairman of Board
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1987
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Mr. Newman has been Chairman of the Board since 1996. Mr. Newman is the Chairman of Prior Aviation Service, Inc., the Fixed Base Operator (FBO) at Buffalo Niagara International Airport, Buffalo, NY. He is a Director of
Dunn Tire LLC and Taylor Devices, Inc. and former Director of M&T Bank Corporation. Mr. Newmans involvement with small businesses provides necessary skills as a Director of Rand.
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Director of Taylor Devices, Inc.
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Jayne K. Rand
(56)
c/o 2200 Rand Building
Buffalo, NY 14203
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Director
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1989
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Since 1993, Miss Rand has been a Vice President of M&T Bank. Miss Rands banking experience and credit underwriting abilities provide necessary expertise as a Director of Rand.
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None
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Robert
M.
Zak
(59)
250 Main Street
Buffalo, NY 14202
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Director and Vice Chair of the Board
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2005
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Since 1995, Mr. Zak has been President and Chief Executive Officer of Merchants Mutual Insurance Company, which operates under the trade name Merchants Insurance Group. Mr. Zak joined Merchants in 1985. Prior to that, his
career was in public accounting. He is a former Director of Manning & Napier, Inc. Mr. Zaks executive leadership and public accounting experience provide desirable attributes as a Director of Rand.
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None
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Non-Director
Executive Officers
(3)
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Daniel P. Penberthy
(54)
c/o 2200 Rand Building
Buffalo, NY 14203
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Executive Vice President, Treasurer and Chief Financial Officer of Rand
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N/A
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Mr. Penberthy has served as Treasurer of Rand since August 1997. Since January 2002, Mr. Penberthy has served as Executive Vice President, and he has continued to serve as the Chief Financial Officer since 1997. From 1993
to 1997, Mr. Penberthy served as Chief Financial Officer for both the Greater Buffalo Partnership (formerly the Chamber of Commerce) and the Greater Buffalo Convention and Visitors Bureau. Prior thereto, from 1990 to 1993, Mr. Penberthy
was employed by Greater Buffalo Development Foundation and KPMG.
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None
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Proxy 7
Proxy Statement Rand Capital Corporation
(1)
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Indicates initial year in which such person became a Director. All Directors terms of office will be through the next annual meeting of shareholders and until their successors have been duly elected and qualified.
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(2)
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Indicates directorships of companies with a class of equity securities registered under Section 12 of the Exchange Act, subject to the requirements of Section 15(d) of the Exchange Act, or registered as an
investment company under the Investment Company Act.
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(3)
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Indicates an executive officer of Rand, who are deemed to be interested persons under Section 2(a)(19) of the Investment Company Act.
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The Board of Directors of the Company unanimously recommends a vote FOR the election
of the nominees named in this Proxy Statement.
Approximate Value of Investments in Rand
The following table indicates the range of value as of March 1, 2017 of the common shares of Rand (the Fund) beneficially
owned by each Director and nominee for Director of Rand. Rand is not part of a family of investment companies.
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Name of Director or Nominee
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Dollar Range of Equity
Securities in the Fund
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(a) Directors who are not Interested Persons:
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Erland E. Kailbourne
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Over $100,000
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Robert M. Zak
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Over $100,000
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Ross B. Kenzie
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Over $100,000
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Reginald B. Newman, II
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Over $100,000
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Jayne K. Rand
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Over $100,000
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(b) Directors who are Interested Persons:
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Allen F. Grum
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Over $100,000
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2016 Share Purchase Transactions by Director in Excess of 1% of Rands Outstanding Shares
On December 13, 2016, Mr. Newman purchased 150,000 shares in a private sale transaction for $3.00 per share in cash.
Proxy 8
Proxy Statement Rand Capital Corporation
COMMITTEES AND MEETING DATA
The Committees of the Board of Directors have the following members:
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Compensation Committee
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Governance and
Nominating Committee
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Audit Committee
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Robert M. Zak (Chair)
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Erland E. Kailbourne (Chair)
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Ross B. Kenzie (Chair)
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Erland E. Kailbourne
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Ross B. Kenzie
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Erland E. Kailbourne
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Jayne K. Rand
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Jayne K. Rand
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Robert M. Zak
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In 2016, the full Board met six times, the Audit Committee met five times, the Governance and Nominating
Committee met two times and the Compensation Committee met six times. Two Independent Directors did not attend 100% of the Board meetings they were eligible to attend. All other Independent Directors and Mr. Grum, a
non-independent
Board member, did attend 100% of the total number of meetings of the Board of Directors. Mr. Newman was excused from one meeting of the Board due to illness and Mr. Kailbourne was excused
from two meetings of the Board of Directors due to illness and therefore attended 67% of the Board of Directors meetings. All Committee members attended all eligible Committee meetings.
Compensation Committee
The
Compensation Committee is comprised of Independent Board members, each of whom meet the independence requirements of the NASDAQ Stock Market and applicable law, and advises the independent members of the Board of Directors with respect to the
compensation of the executive officers and reviews the criteria that form the basis for management compensation. None of the persons on the Compensation Committee are interested persons as defined in Section 2(a)(19) of the Investment
Company Act.
The compensation levels of Rands President and CEO and Executive Vice President were recommended by Rands
Compensation Committee and approved by the independent members of the Board of Directors, which represents a majority of its membership.
The Compensation Committees charter may be accessed at Rands website, www.randcapital.com.
Governance and Nominating Committee
The primary purposes of the Governance and Nominating Committee include:
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developing, recommending to the Board of Directors and assessing corporate governance policies for Rand;
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overseeing the evaluation of the Board of Directors and its committees; and
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recommending to the Board of Directors the individuals qualified to serve on Rands Board of Directors for election by shareholders at each annual meeting of shareholders, and recommending to the Board of Directors
candidates to fill vacancies on the Board of Directors.
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Proxy 9
Proxy Statement Rand Capital Corporation
The Governance and Nominating Committees charter may be accessed at Rands
website, www.randcapital.com. None of the persons on the Governance and Nominating Committee are interested persons as defined in Section 2(a)(19) of the Investment Company Act. The Governance and Nominating Committee is comprised of
members each of whom meet the independence requirements of the NASDAQ Stock Market.
Nomination of Directors
The Governance and Nominating Committee, as part of its responsibilities under its Charter, oversees the identification of qualified
individuals to serve on the Board.
We seek Directors who have the required and appropriate skills and characteristics, including business
experience and personal skills in finance, marketing, business and other areas that are necessary to contribute to an effective Board of Directors and who meet the criteria set forth in Rands Corporate Governance Guidelines. We identify new
Director candidates from prominent business persons and professionals in the communities Rand serves or who have a shared interest in the types of investments in which Rand transacts. We consider nominees of shareholders in the same manner as other
nominees.
If a vacancy occurs on the Board of Directors, or if the size of the Board of Directors is changed, the Governance and
Nominating Committee may recommend candidates to the Board of Directors for election. The Board of Directors may elect a new Director to fill any unexpired term of the seat. Annually, the Governance and Nominating Committee will recommend a slate of
new and/or continuing candidates for the Board of Directors. The Board of Directors will select a slate of nominees for Director from recommendations of the Governance and Nominating Committee, and submit the slate of nominees to be voted on by
shareholders at Rands next annual meeting of shareholders. Rands
by-laws
provide that an annual meeting of shareholders shall be held on the date that the Board of Directors shall determine. The
number of Directors on the Board is determined by the Board of Directors, but in no event may it be less than three Directors.
Criteria and
Diversity
In considering whether to recommend any candidate for inclusion in the Boards slate of recommended director
nominees, including candidates recommended by shareholders, the Governance and Nominating Committee will apply the criteria set forth in Rands Corporate Governance Guidelines. These criteria include the candidates experience, business
skill set and the ability to act in the interests of all shareholders. Our Corporate Governance Guidelines specify that the value of diversity on the Board should be considered by the Governance and Nominating Committee in the director
identification and nomination process. The Governance and Nominating Committee seeks nominees with a broad diversity of experience, professions, skills, and backgrounds. The Governance and Nominating Committee does not assign specific weights to
particular criteria and no particular criterion is necessarily applicable to all prospective nominees. Rand believes that the backgrounds and qualifications of the Directors, considered as a group, should provide a significant composite mix of
experience, knowledge and abilities that will allow the Board to fulfill its responsibilities. Nominees are not discriminated against on the basis of race, religion, national origin, sexual orientation, disability or any other basis proscribed by
law.
Code of Conduct and Business Ethics
Our Code of Conduct and Business Ethics policies require that all employees and Directors avoid conflicts of interests that interfere with the
performance of their duties or the best interests of
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Proxy Statement Rand Capital Corporation
the Corporation. These policies include additional procedures modeled on Rule
17j-1
under the Investment Company Act to prevent employees and Directors
from abusing their access to information about the Corporations investments.
Rand has adopted a Code of Conduct that applies to
Rands chief executive officer, chief financial officer, and vice president of finance, and a Business Ethics Policy applicable to Rands Directors, officers and employees. The Code of Conduct and the Business Ethics Policy are available
in the Governance section of Rands website at www.randcapital.com.
They are also available in print to any shareholder who requests
it. Rand will disclose any substantive amendments to, or waiver from provisions of, the Code of Conduct made with respect to the chief executive officer, chief financial officer or vice president of finance on its website.
Audit Committee
The Board of
Directors has determined that none of the members of the Audit Committee are interested persons as defined in Section 2(a)(19) of the Investment Company Act. The Audit Committee is comprised of Independent Directors, all of whom meet the
independence requirements of the NASDAQ Stock Market and the rules of the SEC. The Board of Directors has determined that Ross B. Kenzie is an Audit Committee financial expert (as defined by SEC regulations) (see Mr. Kenzies relevant work
experience is described in the table under Information Regarding Directors, Nominees for Directors, and Executive Officers).
The Audit Committees charter may be accessed at Rands website, www.randcapital.com. The Audit Committee reviews the scope and
results of the annual audit, receives reports from Rands independent public accountants, and reports the Audit Committees findings and recommendations to the Board of Directors.
The Audit Committee has adopted necessary reporting procedures for the confidential submission, receipt, retention and treatment of accounting
and auditing complaints.
Factors used in the Audit Committees Assessment of the External Auditor Qualifications and Work Quality:
The Audit Committee annually reviews the Corporations independent public accountants (the audit firm)
performance and independence in deciding whether to continue to retain such firm. In the course of these reviews, the Audit Committee considers, among other things:
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The quality and efficiency of the audit firms historical and recent audit plans.
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The audit firms capabilities and expertise in handling the breadth and complexity of private equity accounting, portfolio valuation and public company reporting.
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The desired balance of the firms experience and fresh perspective occasioned by mandatory audit partner rotation every five years, and the audit firms periodic rotation of other audit management.
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Public Company Accounting Oversight Board (PCAOB) reports on the audit firm, if any.
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The appropriateness of the audit firms fees, which the Audit Committee evaluates, reviews and approves.
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Proxy Statement Rand Capital Corporation
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The effectiveness of the audit firms communications and working relationships with the Audit Committee and our management.
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The audit firms independence and objectivity.
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The audit firms tenure, having served as the Corporations independent registered public accounting firm since 2003.
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Evaluation of the audit by our management and the Audit Committee.
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The Audit Committee
considers
non-audit
fee/services provided when assessing auditor independence. In 2016, the audit firm provided additional tax related research involving the Corporations strategic alternatives and
growth strategies review. The Audit Committee determined that this work did not impair the firms independence.
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Proxy Statement Rand Capital Corporation
Independent Registered Public Accountant (Independent Accountant) Fees
The aggregate fees for each of the last two fiscal years for services rendered by Freed Maxick CPAs, P.C. (Freed) are as follows:
Audit Fees
This
category consists of fees for the audit of annual consolidated financial statements, review of consolidated financial statements included in quarterly reports on Form
10-Q
and services that are normally
provided by the independent accountant in connection with statutory and regulatory filings or audit engagements for those fiscal years.
Audit fees for professional services provided by Freed for the fiscal years ended December 31, 2016 and 2015 were $104,975 and $79,875,
respectively.
Audit Related Fees
This category consists of assurance and related services by the independent accountant that are reasonably related to the performance of the
audit and review of consolidated financial statements and are not reported under audit fees.
During the fiscal year ended
December 31, 2016 and 2015, there were $0 and $3,431, respectively, in audit related fees for assurance and related services.
Tax
Fees
This category consists of professional services rendered by the independent accountant for tax compliance and tax planning. The
services for the fees disclosed under this category include tax return preparation and technical advice provided by Freed.
During the
fiscal years ended December 31, 2016 and 2015, tax fees were $52,800 and $38,600, respectively.
All Other Fees
This category consists of fees not covered by Audit Fees, Audit Related Fees and Tax Fees.
For the fiscal years ended December 31, 2016 and 2015, Rand did not receive or pay for any products or services in this category from
Freed.
For fiscal years 2016 and 2015, all of the services of Freed described in the above categories were
pre-approved
by the Audit Committee.
Estimates of annual audit, quarterly review and tax fees to
be paid during the year are submitted annually to the Audit Committee for its review and
pre-approval
and then budgeted for by Rand. All other
non-audit
services must be
pre-approved
by the Audit Committee prior to engagement, as required by the Audit Committees charter.
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Proxy Statement Rand Capital Corporation
Audit Committee Report
The Audit Committee has reviewed and discussed Rands audited consolidated financial statements with management. In addition, the Audit
Committee has discussed with Rands independent accountants, Freed Maxick CPAs, P.C., the matters required to be discussed by Auditing Standards 1301,
Communications
with
Audit
Committees
.
The Audit Committee has received the written disclosures and the letter from Freed Maxick CPAs, P.C. required by the Public Company Accounting
Oversight Board regarding the independent accountants communications with the Audit Committee concerning independence, and has discussed it with them.
Based on the Audit Committees review and discussions referred to above, the Audit Committee recommended to the Board of Directors that
the audited consolidated financial statements be included in Rands Annual Report on Form
10-K
for the year ended December 31, 2016 for filing with the SEC.
This report is respectfully submitted by the Audit Committee of the Board of Directors.
Ross B. Kenzie, Chair
Erland
E. Kailbourne
Robert M. Zak
The information provided in the preceding Audit Committee Report will not be deemed to be soliciting material or filed
with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Securities Exchange Act, unless in the future the Corporation specifically requests that the information be treated as soliciting material or
specifically incorporates it by reference into any filing under the Securities Act of 1933, as amended or the Exchange Act.
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Proxy Statement Rand Capital Corporation
COMPENSATION DISCUSSION AND ANALYSIS
Rands principal executive officer is
its President, Allen F. Grum, and Rands principal financial officer is its Executive Vice President/Chief Financial Officer, Daniel P. Penberthy. They are Rands Named Executive Officers (NEOs).
The President and Chief Executive Officer and Executive Vice President serve as the Management and Investment Committee of Rands wholly
owned subsidiary, Rand Capital SBIC, Inc. (Rand SBIC), and are parties to a Profit Sharing Plan (the Profit Sharing Plan) of Rand SBIC that was adopted by Rand as a requirement for the licensing of Rand SBIC as a Small
Business Investment Company by the U.S. Small Business Administration (SBA).
The Compensation Committee, all of the members
of which are Independent Directors of the Board, makes determinations and recommendations to the Board of Directors with respect to the compensation of the NEOs. Each of the members (i) satisfies all of the independence requirements under the
current rules and guidelines of the NASDAQ Stock Market as discussed under the Director Independence section of the Proxy Statement; (ii) are outside Directors (as defined in the regulations pursuant to Section 162(m) of
the IRS Code and (iii) are
non-employee
Directors (as defined in Rule
16b-3
of the Exchange Act). The Compensation Committees responsibilities and authority
are set forth in the Compensation Committee charter, which is disclosed on Rands website. The Compensation Committee recommendations are then reviewed by the Independent Directors of the Board, who are responsible for establishing such
compensation. Rands President and Chief Executive Officer is responsible for the compensation of Rands staff other than the NEOs.
Introduction
This Compensation
Discussion and Analysis is designed to provide shareholders with an understanding of our compensation philosophy and objectives as well as the analysis that we performed in setting executive compensation. It discusses the Compensation
Committees determination of how and why, in addition to what, compensation actions were taken for the NEOs.
Objectives of Rands
Compensation Programs and What they are Designed to Reward
Rand depends on the management and analytical abilities of its NEOs for its
long-term success and the enhancement of long-term shareholder value. The objectives of Rands compensation programs are to provide appropriate levels of compensation, reward above average corporate performance, recognize individual initiative
and achievement, attract and retain qualified individuals to contribute to Rands success, and motivate management to enhance shareholder value.
Key Elements of Rands Compensation Plans and Why they are Paid:
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Base Salary Base salaries meet the objectives of attracting and retaining the management talent needed to operate the business successfully. Individual salary amounts are not determined by formulas, but instead
reflect the Compensation Committees judgment with respect to each NEOs responsibility, performance, experience and past compensation, internal equity considerations and other factors, including NEO retention. Annually, the Board, on
recommendation of the Compensation Committee, sets base salaries for the NEOs that it believes are appropriate given the scope of their duties and responsibilities.
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Proxy 15
Proxy Statement Rand Capital Corporation
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Bonus Rand provides the opportunity to earn bonuses to its NEOs and staff to motivate them to achieve results that exceed the annual budget and provide value to the Corporation. The bonus is based on a
qualitative consideration of individual and Corporation performance. For purposes of determining whether a bonus was warranted for 2016 performance, the Committee considered the Corporations operating performance, the price performance of the
Corporations common shares, the decrease in the Net Asset Value per share and the accomplishments of each officer during the year, including the development of a long term strategy to grow the Company. The Compensation Committee considers, and
may make appropriate adjustments for, unusual items that are deemed to be outside the control of the NEOs. Based upon the Committees analysis, no bonus was awarded for 2016.
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Profit Sharing Plan Rand provides long-term incentives to its NEOs through the Profit Sharing Plan, which allows them to participate in the growth of its portfolio and aligns their interests with those of
Rands shareholders. The terms of Rands license to operate Rand SBIC require that it maintain a profit sharing plan, which provides for payment by Rand of designated percentages of net realized capital gains (net of all realized capital
losses and unrealized depreciation) of Rand SBIC. Amounts paid or accrued pursuant to the Profit Sharing Plan cannot exceed 20% of Rands net income in a given year. The Compensation Committee does not have discretion to change the amounts due
under the Profit Sharing Plan. For 2016, $635,026 for each of the NEOs was due pursuant to the Plan and is expected to be paid in 2017. (Escrow details are disclosed in the Disbursement Triggers on
Non-Equity
Incentive Compensation section below.)
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Equity Although we believe that equity ownership by management enhances shareholder value, restrictions imposed by the Investment Company Act preclude Rand from offering stock options or other equity incentives
to its NEOs at any time when they participate in a profit sharing plan. The Compensation Committee believes that the NEOs own shares in Rand that are significant to their respective net worth. During 2016, Mr. Grum purchased 50,000 shares and
Mr. Penberthy purchased 16,667 shares, bringing their total share ownership to 173,642 shares and 84,467 shares, respectively.
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Standard Employee Benefits Rand provides employee benefits it considers competitive and necessary to attract and retain talented personnel. Rand maintains a 401(k) plan for its employees under which participants
may elect to contribute up to 20% of their compensation on a pretax basis, to a maximum of $18,000 ($24,000 if age 50 or over) for 2016. Rand makes a contribution of 1% of compensation for each participant and matches participant contributions up to
5% of compensation, subject to IRS annual compensation and contribution limits. Rand may also elect to contribute discretionary amounts under the 401(k) plan as determined by the Board. No discretionary amounts have been contributed since the 401(k)
plans inception. Rand also provides life insurance and automobile reimbursement benefits to its NEOs.
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Consideration of Prior
Shareholder Advisory Vote on Executive Compensation
At our Annual Meeting, we will provide our shareholders the opportunity to vote to
approve, on an advisory basis, the compensation of our NEOs. At the 2016 Annual Meeting of Shareholders, our shareholders cast 2,258,533 votes, or 95%, in favor of approving the compensation of our NEOs and 95,993 votes, or 4%, against approving
such compensation, with 16,801 votes, or 1%, abstaining. Our Compensation Committee and Board value the opinions expressed by our
Proxy 16
Proxy Statement Rand Capital Corporation
shareholders, including the
non-binding
advisory vote on executive compensation. We are mindful of the strong support our shareholders expressed for our
philosophy of linking compensation to our operating objectives and the enhancement of shareholder value. As a result, our Compensation Committee took the results of the advisory vote on executive compensation into account in determining that our
2016, and anticipated 2017, executive compensation policies remain consistent with our policies in prior years and should continue to emphasize the performance, alignment, and retention objectives described above.
How the Amounts of Each Element of the Compensation are Determined and How They Fit Into Rands Overall Compensation Objectives
Salary, Bonus and Profit Sharing
The
Compensation Committee determined that the salary paid to NEOs for the 2016 fiscal year was in the best interests of shareholders. A discretionary bonus payment was not paid for 2016 to each of the NEOs for the reasons noted above. The NEOs earned a
profit sharing payment under the Profit Sharing Plan. In making its determination, the Compensation Committee considered whether the salaries, bonuses and profit sharing amounts due to its NEOs were consistent with the compensation philosophy
described.
The Analysis Used in Setting Compensation Levels
When making individual compensation decisions for NEOs, the Compensation Committee takes many factors into account, including the
individuals role and responsibilities, performance, and experience; the overall performance of Rand; the recommendations of Board committee chairs; the individuals past compensation; and a comparison to the other NEO of Rand. The
Compensation Committee may engage a compensation consultant to provide insight into setting compensation levels.
Specifically, the
Committee has considered factors such as:
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total compensation in relation to Rands size, and the composition and performance of its investments and total investment capital available;
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Rands success in identifying appropriate investment opportunities and returns on its investments;
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the value of Rands assets in accordance with Accounting Standards Codification 820 fair value measurement;
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the responsibilities and duties of the NEOs;
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whether there has been any adjustment or potential recovery of prior payments resulting from the restatement of prior performance measures upon which bonus or profit sharing awards were based (no such adjustments or
recovery occurred during 2014, 2015 or 2016); and
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realized income from investment exits in the consolidated Rand and Rand SBIC portfolios.
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Proxy Statement Rand Capital Corporation
Evaluating Performance
The Compensation Committee evaluates the performance of the NEOs annually, and consults with the other Directors and committee chairs regarding
that performance. The Compensation Committee also seeks the advice of the President and Chief Executive Officer in connection with the performance evaluation for the other NEO; however, the President and Chief Executive Officer is not present when
the Compensation Committee meets to evaluate his performance and recommend compensation for the NEOs.
The Compensation Committee uses
discretion in qualitatively evaluating individual performance and considers the following factors, among others, in recommending to the Board any annual bonus awards to the NEOs: the input of other Board Committee Chairs, and each NEOs
contribution to Rands leadership, management, strategic planning, business development, and investment returns.
Change in Control Agreements
The Corporation and the Board of Directors believes that entering into a Change in Control Agreement with each of our NEOs is in the
best interest of the Corporation and its shareholders as it will assist to retain our leadership in the event of a change in control and provides our NEOs with reasonable financial security in the case of a loss of employment resulting from a change
in control. The Corporation and the Board of Directors believes that it is in the best interest of the Corporation and its shareholders to have the dedication of our NEOs, without the distraction of personal uncertainties that can result from a
change in control. In addition, the Corporation believes that entering into these Change in Control Agreements helps the Corporation to maintain a competitive compensation program and encourages retention of the NEOs.
On March 1, 2017, the Corporation entered into a Change in Control Agreement with each of its NEOs, which provide each NEO with certain
financial benefits in the event that (i) such NEOs employment is terminated without cause (as defined in the Change in Control Agreement) (other than for death or disability (as defined in the Change in Control Agreement)) in connection
with, or within eighteen months after, a Change in Control of the Corporation or (ii) such NEO terminates his employment in connection with, or within eighteen months after, a Change in Control for Good Reason, which is defined in
the Change in Control Agreements as (1) a change in the location at which such NEO performs his duties for the Corporation to a new location that is at least 50 miles from the prior location; (ii) a material decrease in such NEOs
authority, duties or responsibilities; (iii) a reduction in such NEOs annual base salary or (4) a reduction in such NEOs annual bonus and profit sharing opportunity as compared to the opportunity for the prior fiscal year. As
defined in more detail in the Change in Control Agreements, a Change in Control means the occurrence of any of the following events: (1) any person or entity becomes the beneficial owner, directly or indirectly, of securities
representing more than 50% of the total voting power of the Corporations outstanding securities; (2) a merger or consolidation of the Corporation, other than one that results in the outstanding voting securities of the Corporation prior
to such merger or consolidation representing at least 50% of the total voting power after such merger or consolidation; (3) the sale or disposition by the Corporation of all or substantially all of the Corporations assets or (4) a
change in the composition of the Board of Directors that results in fewer than a majority of the Directors being Incumbent Directors (as defined in the Change in Control Agreements).
Upon the occurrence of such events, the Change in Control Agreements provide for a lump sum payment to the NEO from the Corporation in an
amount equal to (i) the NEOs annual base salary then in effect plus (ii) the average of the annual incentive bonuses and profit sharing payments earned by the NEO for the last five fiscal years ended prior to the NEOs
employment
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Proxy Statement Rand Capital Corporation
termination date. However, the amount of this payment per NEO cannot exceed (and will otherwise be reduced in order not to exceed) 1.5% of the total equity capitalization implied by the Change in
Control event. Prior to receipt of such payment, the Change in Control Agreements require the NEO to execute a general release agreement, which includes a general release of claims against the Corporation by the NEO and agreements by the NEO to
comply with ongoing confidentiality and
non-disparagement
obligations.
The term of the Change in
Control Agreements commenced on March 1, 2017 and shall continue in effect until December 31, 2019, with subsequent automatic extensions of the term for one (1) additional year, unless, not later than nine months prior to the
conclusion of any term, the Corporation or the NEO provides notice to the other not to extend the term.
For each of the NEOs, the table
below estimates the amount that each such NEO would be paid under the Change in Control Agreements if a Change in Control of the Corporation occurs and such NEO is terminated without cause or voluntarily terminates his employment for Good Reason in
connection with, or within eighteen months after, the occurrence of the Change in Control event. The amounts below assume that each employment termination was effective as of December 31, 2016.
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Name
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Current Annual Base
Salary
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Five Year Average of
Annual Incentive
Bonus and Profit
Sharing Payments(1)
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Total Payment
Amount(2)
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Allen F. Grum
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$
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223,871
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$
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232,507
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$
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456,378
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Daniel P. Penberthy
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$
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207,880
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$
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232,507
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$
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440,387
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(1)
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Annual incentive bonus and profit sharing payments are computed using an average of the annual incentive bonuses and profit sharing payments for the prior five completed fiscal years.
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(2)
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Assumes that the total amount of such payment to a NEO does not exceed 1.5% of the total equity capitalization of the Corporation as implied by a hypothetical Change in Control event. In the event that the total payment
amount would be greater than 1.5% of the total equity capitalization implied by the Change in Control event, the amount of such payment will be reduced in order not to exceed 1.5% of the total equity capitalization implied by the Change in Control
event.
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Accounting and Tax Treatments of Compensation
The Compensation Committees policy is to structure compensation in a way that allows it to be fully tax deductible, where doing so will
further the purposes of the executive compensation programs. The Committee also considers it important to retain flexibility to design compensation programs that recognize a full range of criteria important to Rands success, even where
compensation payable under the programs may not be fully tax deductible.
Compensation Consultant
During 2016, the Compensation Committee engaged, at Rands expense, The Burke Group to serve as compensation consultant to the
Compensation Committee. The Committee assessed the independence of The Burke Group (and any individuals working on the Corporations account on The Burke Groups behalf) in accordance with NASDAQ Listing Rules and determined that its work
on behalf of the Compensation Committee raised no conflict of interest. Following such determination, The Burke Group was engaged as an independent advisor to analyze current trends in change of control agreements and develop a recommendation for a
change in control strategy for Rand.
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Proxy Statement Rand Capital Corporation
The Compensation Committee anticipates using an independent advisor periodically.
Profit Sharing Plan
We believe
Rands salaries, bonuses and the Profit Sharing Plan create an appropriate focus on long-term objectives and promote NEO retention. The terms of the SBAs license for Rands SBIC subsidiary require it to maintain a profit sharing plan
that provides for payment to the NEOs of the designated percentages of the net realized capital gains (net of all unrealized capital losses and unrealized depreciation) of the SBIC that are provided for in the Profit Sharing Plan. The Compensation
Committee does not have discretion to change the amounts due under the Profit Sharing Plan.
Under the Profit Sharing Plan, Rand pays its
NEOs cumulative profit sharing payments equal to 12% of realized capital gains of Rand SBIC, net of realized capital losses and unrealized depreciation of Rand SBIC, for each fiscal year of Rand SBIC, computed in accordance with the Profit Sharing
Plan.
The profit sharing payments are shared equally between Rands two NEOs, who are fully vested in the Profit Sharing Plan. Under
the Investment Advisers Act of 1940 (Section 205 (b)(3)) requirements, the aggregate amount which may be paid or accrued under the Profit Sharing Plan and any other incentive based plan maintained by Rand during any fiscal year, may not exceed 20%
of Rands net income after taxes, as defined, for that fiscal year. In accordance with Investment Company Act requirements, a majority of the members of the Board who were not interested persons approved the Profit Sharing Plan on the basis
that it is reasonable and fair to Rands shareholders, and does not involve overreaching of Rand or its shareholders on the part of any person concerned.
In 2016, Rand recorded $14,138,203 in net realized gains primarily from the sale of Gemcor and the receipt of an
earn-out
from the prior sale of a portfolio company offset by the realized loss due to the shutdown of one business and unrealized depreciation under the Profit Sharing Plan on 10 portfolio companies in the amount
of $4,522,280. The net result is an accrual of $635,026 per NEO for 2016.
Disbursement Triggers on
Non-Equity
Incentive Compensation
Realized gains from portfolio exits are typically received by Rand in a combination of lump sum payment (cash)
and a release of escrow 12 to 24 months following closing. Profit sharing payments under the Profit Sharing Plan that are accrued by the Corporation are typically disbursed to the NEOs upon the receipt of cash proceeds. If a loss or deduction to
funds held in escrow occurs due to post-closing adjustments or claims, the
pro-rata
profit sharing obligation payable to NEOs in 2016 under the Profit Sharing Plan will be forfeited. $66,000 of the $635,026
accrued per NEO has been withheld pending receipt of the escrow, which is expected to occur in 2017.
Risk Considerations in our Compensation Program
The compensation of the NEOs consists of fixed and variable compensation. The fixed (or salary) portion of compensation is designed to
provide a steady income so executives do not feel pressured to focus exclusively on short-term gains or annual stock price performance, which may be to the detriment of long-term appreciation and other business metrics. The variable (bonus and
Proxy 20
Proxy Statement Rand Capital Corporation
profit sharing) portions of compensation are designed to reward both short- and long-term corporate performance. For short-term performance, bonuses are qualitatively determined by the
Compensation Committee and approved by the Board. For long-term performance, profit sharing is determined based on realized income from portfolio investment exits, net of realized and unrealized losses and depreciation. In addition, the following
risk mitigation components exist:
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Bonus payments are not tied directly to specific financial metrics, which reduces the risk that management is incented inappropriately to achieve desired targets and performance metrics;
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Maintenance of the Profit Sharing Plan is required under the terms of the SBAs license for our SBIC subsidiary, and the SBAs requirement to maintain the Profit Sharing Plan suggests that it believes that the
Profit Sharing Plan provides for compensation to participants in an appropriate manner and in appropriate amounts;
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Profit sharing payments under the Profit Sharing Plan are limited by the Investment Advisors Act of 1940 to 20% of Rands net income after taxes as defined in any fiscal year;
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The Board, Compensation Committee and independent accountants review all profit sharing calculations prior to disbursement;
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The NEOs personal investment portfolios include significant amounts of Rands shares, which aligns their interests with the interests of our shareholders in Rands long-term success and stock price
appreciation. At the end of 2016, Allen F. Grum owned 173,642 shares and Daniel P. Penberthy owned 84,467 shares.
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The Profit Sharing and bonus plan each have been in place for a number of years, and we have seen no evidence that they encourage unnecessary or excessive risk taking;
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Rand has specific quarterly reporting, review and approval processes with its Board of Directors, which we believe are adequate to prevent manipulation by any employee, including our NEOs; and
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The compensation and bonus of
non-executive
officers are qualitatively determined by the President and Chief Executive Officer, which we believe encourages a balanced approach to
overall corporate performance.
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Conclusion
Through the compensation and incentive structure described above, a significant portion of the amounts that may be payable as compensation have
been, and will continue to be, contingent on Rands performance, and realization of incentive benefits is closely linked to increases in long-term shareholder value. Rand remains committed to this philosophy of pay for performance, recognizing
the volatility of Rands investments may result in highly variable compensation from year to year.
In January 2017, the independent
Directors of the Board approved a 7.2% increase in base salary for Mr. Grum, an 8.2% increase in base salary for Mr. Penberthy and the accrual of $635,026 per the Profit Sharing Plan for each NEO.
Proxy 21
Proxy Statement Rand Capital Corporation
Compensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation
S-K
with management and, based on its review and discussions with management, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy
statement.
Submitted by the Compensation Committee
Robert M. Zak, Chair
Erland E.
Kailbourne
Jayne K. Rand
The information provided in the preceding Compensation Committee Report will not be deemed to be soliciting material or
filed with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Exchange Act, unless in the future the Corporation specifically requests that the information be treated as soliciting material or
specifically incorporates it by reference into any filing under the Securities Act of 1933, as amended or the Exchange Act.
Compensation Committee
Interlocks and Insider Participation
During the last fiscal year, none of the members of the Compensation Committee was an officer or
employee or former officer or employee of Rand or had any relationship with respect to Rand that would require disclosure under Regulation
S-K,
Item 404.
Proxy 22
Proxy Statement Rand Capital Corporation
Summary Compensation Table
The following table sets forth information with respect to the compensation paid or earned for the 2016, 2015 and 2014 fiscal years to each
NEO. Rand is not part of a fund complex.
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Name and Principal Position (1)
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Year
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Salary (2)
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|
|
Bonus
(2)(3)
|
|
|
Non-Equity
Incentive
Plan
Compensation(3)(7)
(Profit Sharing Plan)
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|
|
All
Other
Compensation
(4)(5)
|
|
|
Total
Compensation
(6)
|
|
Allen F. Grum,
President and Chief Executive Officer
|
|
|
2016
|
|
|
$
|
223,871
|
|
|
$
|
0
|
|
|
$
|
635,026
|
|
|
$
$
|
15,989
16,060
|
(4)
(5)
|
|
$
|
890,946
|
|
|
|
2015
|
|
|
$
|
217,350
|
|
|
$
|
50,000
|
|
|
$
|
0
|
|
|
$
$
|
15,900
16,647
|
(4)
(5)
|
|
$
|
299,897
|
|
|
|
2014
|
|
|
$
|
217,350
|
|
|
$
|
26,995
|
|
|
$
|
423,005
|
|
|
$
$
|
20,800
16,704
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(4)
(5)
|
|
$
|
704,854
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|
|
|
|
|
|
|
|
Daniel P. Penberthy,
Executive Vice President and Chief Financial Officer
|
|
|
2016
|
|
|
$
|
207,880
|
|
|
$
|
0
|
|
|
$
|
635,026
|
|
|
$
$
|
15,473
12,024
|
(4)
(5)
|
|
$
|
870,403
|
|
|
|
2015
|
|
|
$
|
201,825
|
|
|
$
|
50,000
|
|
|
$
|
0
|
|
|
$
$
|
15,900
10,778
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(4)
(5)
|
|
$
|
278,503
|
|
|
|
2014
|
|
|
$
|
201,825
|
|
|
$
|
26,995
|
|
|
$
|
423,005
|
|
|
$
$
|
20,800
10,835
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(4)
(5)
|
|
$
|
683,460
|
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(1)
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Mr. Grum is Rands principal executive officer, and Mr. Penberthy is Rands principal financial officer. Neither of them has an employment contract with Rand.
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(2)
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Represent amounts earned, prior to employee 401(k) contributions.
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(3)
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Bonuses and
non-equity
incentive plan compensation were fully accrued as of December 31 of the respective year. Bonus amounts were disbursed subsequent to the respective
year-end
and,
non-equity
incentive compensation is expected to be paid in installments following receipt of respective realized gain proceeds, to include the completion of the
escrow holdback period, which typically occurs in a 12 24 month period following exit from an investment.
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(4)
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Includes contributions made by Rand to the 401(k) plan account for the NEOs. Rands 401(k) plan is available to all Rand employees. Under the 401(k) plan, participants may elect to contribute up to 20% of their
compensation on a pretax basis by salary reduction up to a maximum of $18,000 ($24,000 if age 50 or over) for 2016. For eligible employees, Rand makes a contribution of 1% of compensation and matches employee contributions up to 5%, subject to IRS
annual compensation and contribution limits. In addition, Rand may elect to contribute an annual discretionary amount as determined by the Board of Directors. In 2016, 2015 and 2014, Rand did not make a discretionary contribution to the 401(k) plan.
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(5)
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Amount indicated includes the cost of life insurance, disability insurance and business automobile reimbursement benefits.
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(6)
|
Non-equity
incentive compensation from the Corporations Profit Sharing Plan was 72% of total compensation for the NEOs in 2016. Total salary and bonus for the NEOs
approximated 25%, 90% and 34% of total compensation in 2016, 2015 and 2014, respectively.
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(7)
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Non-equity
incentive plan compensation consists of payments under the Profit Sharing Plan (in each case 6% of net realized capital gains of Rand SBIC as defined in the Profit
Sharing Plan).
|
Proxy 23
Proxy Statement Rand Capital Corporation
Option Plan
Rand does not have any outstanding equity awards, options or stock vesting rights.
Pension Benefits
Rand does not provide
any
tax-qualified
defined benefit plan or supplemental executive retirement plan, or similar plan that provides for specified retirement payments or benefits.
DIRECTOR COMPENSATION
Effective
January 1, 2016, Board compensation was changed so that each Board member receives a $25,000 per annum stipend for Board and Committee service, and per meeting fees were eliminated. Committee Chairs receive an additional stipend of $2,500
(Audit), $1,000 (Compensation) or $1,000 (Governance and Nominating). The Board Chair receives an additional $10,000 retainer. No other forms of compensation are utilized; however, Rand reimburses
out-of-town
Directors for travel and
out-of-pocket
expenses incurred in connection with their service on our Board.
The following table sets forth information with respect to the compensation paid to or earned by each
non-employee
Director for the 2016 fiscal year. Rand did not pay or accrue any other compensation to Directors for the 2016 fiscal year.
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|
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Name
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|
Fees Earned or Paid in Cash
|
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Erland E. Kailbourne
|
|
$
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26,000
|
|
Ross B. Kenzie
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|
$
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27,500
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Robert S. McLeese
|
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$
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25,000
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Reginald B. Newman, II
|
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$
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35,000
|
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E. Wycliffe Orr, Jr.
|
|
$
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18,750
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|
Jayne K. Rand
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$
|
25,000
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Robert M. Zak
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$
|
26,000
|
|
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires Rands Directors and executive officers, and persons who own more than ten percent of
Rands shares, to file with the SEC initial reports of stock ownership and reports of changes to stock ownership. Reporting persons are required by SEC regulations to furnish Rand with all Section 16(a) reports that they file.
To our knowledge, based solely on review of the copies of such reports furnished to Rand and written representations that no other reports
were required, Rand believes all Section 16(a) filing requirements applicable to its executive officers, Directors and greater than ten percent beneficial owners of Rands shares were complied with during the year ended December 31, 2016.
Related Person Transactions
For the year ended December 31, 2016, there were no transactions, or proposed transactions, exceeding $120,000 in which the Corporation
was or is a participant in which any related person had or will have a direct or indirect material interest.
Proxy 24
Proxy Statement Rand Capital Corporation
In order to ensure that the Corporation does not engage in any prohibited transactions with
any persons affiliated with the Corporation, the Corporation requires that the Audit Committee must review in advance any related-party transaction, or series of similar transactions, to which the Corporation or any of its subsidiaries
was or is to be a party, in which the amount involved exceeds $120,000 and in which such related party had, or will have, a direct or indirect material interest.
Directors and Officers Liability Insurance
Rand has an insurance policy from Illinois National Insurance Company effective December 31, 2016, that indemnifies (1) Rand for any
obligation incurred as a result of its indemnification of its Directors and officers under the provisions of the BCL and Rands
by-laws,
and (2) Rands Directors and officers as permitted under
the BCL and Rands
by-laws.
The policy covers all Directors and officers of Rand for the year ending December 31, 2017 for a total premium of $25,035. No sums have been paid to Rand or its Directors
or officers under the insurance contract.
PROPOSAL 2.
|
ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
|
Subject to the rules of the SEC, we are
providing shareholders with the opportunity to vote at the Annual Meeting on an advisory resolution, commonly referred to as a
say-on-pay
proposal, which
will express whether or not they approve of the compensation paid to Rands NEOs and is required by Section 14A of the Exchange Act. The compensation of Rands NEOs is described under the heading Compensation Discussion and
Analysis in this proxy statement.
The Compensation Committee and the Board of Directors have developed the philosophy and policies
described in the Compensation Discussion and Analysis for the purpose of attracting, retaining, and motivating NEOs who will help Rand to achieve its strategic and financial goals. The Compensation Discussion and Analysis and the tabular disclosures
regarding NEO compensation, together with the accompanying narrative disclosures, allow you to view the trends in compensation and the application of our compensation philosophy and practice over the years presented.
Shareholders are being asked to vote on the following advisory resolution:
RESOLVED, that the shareholders of Rand Capital Corporation approve the compensation paid to its NEOs as disclosed in this proxy
statement pursuant to Item 402 of Regulation
S-K,
including the Compensation Discussion and Analysis, compensation tables and related narrative discussion.
Your vote is advisory and will not be binding upon the Board of Directors. Nevertheless, the Compensation Committee and the Board of Directors
will take into account the outcome of the vote when considering future executive compensation arrangements. We believe that both Rand and its shareholders will benefit by maintaining a constructive dialogue between the Board and Rands
shareholders regarding executive compensation arrangements. This proposal is one aspect of Rands corporate governance program and practices that helps to promote a dialogue that is intended to develop long-term shareholder value.
Our Board of Directors recommends that you vote FOR the approval of Rands compensation of its NEOs as disclosed in this proxy
statement pursuant to the compensation disclosure rules of the SEC.
Proxy 25
Proxy Statement Rand Capital Corporation
PROPOSAL 3.
|
ADVISORY VOTE ON THE FREQUENCY OF HOLDING FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION.
|
Section 14A of the Exchange Act also requires that shareholders have the opportunity, at least once every six years, to cast an advisory vote
with respect to whether future executive compensation advisory votes will be held every one, two, or three years. At our 2011 Annual Meeting of Shareholders held on April 29, 2011, our shareholders indicated their preference for an advisory
vote on the compensation of our NEOs to be held annually, which annual frequency was also the recommendation of our Board. Our Board subsequently determined that we would hold an advisory vote to approve the compensation of our NEOs on an annual
basis until the next required vote on the frequency of such advisory votes which is to occur at our Annual Meeting of Shareholders. This vote on the frequency of such advisory votes is next anticipated to be held at the Annual Meeting of
Shareholders in 2023.
Subject to the rules of the SEC, we must submit a proposal to Rands shareholders to vote, on an advisory and
non-binding
basis, on a proposal on how frequently they would like to cast advisory votes on the compensation of Rands NEOs. By voting on the proposal, Rands shareholders may indicate whether they would
prefer to hold an advisory vote on the compensation of NEOs once every one, two, or three years.
After consideration of the frequency
alternatives, the Board of Directors currently believes that conducting an advisory vote on NEOs compensation on an annual basis is appropriate and consistent with the goal of maintaining a constructive dialogue with Rands shareholders
concerning the best means for developing long-term shareholder value.
The affirmative vote of a majority of the votes cast is required
for the advisory approval of this proposal. The Board will carefully consider the outcome of the vote when making future decisions regarding the frequency of advisory votes on executive compensation. Nevertheless, because the vote is advisory and
non-binding,
the Board may in the future decide that it is in the best interests of Rands shareholders to hold advisory votes more or less frequently than the alternative decided by our shareholders.
Our Board of Directors recommends that you vote FOR approval of an annual (1 year) advisory vote on the compensation of Rands
NEOs.
PROPOSAL 4.
|
RATIFICATION OF APPOINTMENT OF REGISTERED PUBLIC ACCOUNTING FIRM
|
Our Audit Committee
has selected Freed Maxick CPAs, P.C. (Freed), independent registered public accounting firm, as our auditors for the year ending December 31, 2017. Although shareholder approval of the selection of Freed is not required by the
Investment Company Act or our
by-laws,
our Board of Directors believes that it is advisable to give shareholders an opportunity to ratify this selection. If this proposal is not approved by our shareholders at
the Annual Meeting, our Audit Committee may reconsider its selection of Freed.
Representatives of Freed are expected to be present at the
Annual Meeting. They will have the opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions from shareholders.
Our Board of Directors recommends that you vote FOR the ratification of the selection of Freed as our independent registered public
accounting firm for the 2017 fiscal year.
Proxy 26
Proxy Statement Rand Capital Corporation
OTHER BUSINESS
Rand does not know of any other matters that will come before the Annual Meeting. If any other matters properly come before the Annual Meeting,
it is the intention of the persons designated as proxies to vote in accordance with their best judgment on such matters.
Proxy 27
Proxy Statement Rand Capital Corporation
Shareholder Proposals for the 2018 Annual Meeting
Shareholder proposals intended to be presented at the 2018 Annual Meeting of Shareholders and to be considered for inclusion in Rands
proxy statement and form of proxy for that meeting must be received at Rands offices not later than November 16, 2017. The Corporations
by-laws
provide that no business may be brought before
an annual meeting of shareholders unless it is specified in the notice of the meeting or is otherwise brought before the meeting by the Board of Directors or by a shareholder entitled to vote who has delivered notice to the Corporation (containing
the information specified in the Corporations
by-laws)
not later than 90 days nor more than 120 days in advance of the anniversary date of the prior years annual meeting of shareholders. These
requirements are separate from and in addition to the SECs requirements that a shareholder must meet in order to have a shareholder proposal included in the Corporations proxy statement. A shareholder wishing to submit a proposal for
consideration at the 2018 Annual Meeting of Shareholders, which is not submitted for inclusion in the proxy statement, should do so between December 21, 2017 and January 20, 2018. In addition, under the Corporations
by-laws,
nominations for director may be made only by the Board of Directors, by the Governance and Nominating Committee, or by a shareholder entitled to vote who has delivered written notice to the Corporation
(containing the information specified in the Corporations
by-laws)
not later than 90 days nor more than 120 days in advance of the anniversary date of the prior years annual meeting of shareholders
(i.e. between December 21, 2017 and January 20, 2018).
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March 16, 2017
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By Order of the Board of Directors
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Reginald B. Newman II
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Chairman of the Board
|
It is important that proxies be returned promptly. Shareholders are urged to complete, sign, date and
return the proxy in the enclosed envelope, to which no postage need be affixed if mailed in the United States. If you attend the Annual Meeting in person you may, if you wish, withdraw your proxy and vote in person.
Proxy 28
Proxy Statement Rand Capital Corporation
Multiple Copies of our Annual Report and Proxy Statement (Householding)
When more than one holder of Rand common stock shares the same address, we may deliver only one annual report and one proxy statement to that
address unless we have received contrary instructions from one or more of those shareholders. Similarly, brokers and other intermediaries holding shares of Rand common stock in street name for more than one beneficial owner with the same
address may deliver only one annual report and one proxy statement to that address if they have received consent from the beneficial owners of the stock.
Rand will deliver promptly upon written or oral request a separate copy of the annual report and proxy statement to any shareholder, including
a beneficial owner of stock held in street name, at a shared address to which a single copy of either of those documents was delivered. To receive additional copies of our annual report and proxy statement, you may call or write Elspeth
A. Donaldson, Office Manager, Rand Capital Corporation, 2200 Rand Building, Buffalo, New York 14203, telephone (716)
853-0802
or email her at eadonaldson@randcapital.com. You may also access a copy of
Rands annual report and proxy statement on our website, www.randcapital.com, or via the SECs EDGAR home page, www.sec.gov/edgar/searchedgar/companysearch.html.
You may also contact Miss Donaldson at the address or telephone number above if you are a shareholder of record of Rand and you wish to
receive a separate annual report and proxy statement in the future, or if you are currently receiving multiple copies of our annual report and proxy statement and want to request delivery of a single copy in the future. If your shares are held in
street name and you want to increase or decrease the number of copies of our annual report and proxy statement delivered to your household in the future, you should contact the broker or other intermediary who holds the shares on your
behalf.
Proxy 29
Proxy Statement Rand Capital Corporation
FINANCIAL STATEMENTS AVAILABLE
A copy of Rands 2016 Annual Report containing audited financial statements accompanies this proxy statement.
Rand will provide without charge to each shareholder upon written request a copy (without exhibits, unless otherwise requested) of
Rands Annual Report on Form
10-K
required to be filed with the SEC for the year ended December 31, 2016. Requests for copies should be addressed to Investor Relations, Rand Capital Corporation, 2200
Rand Building, Buffalo, New York, 14203. Requests may also be directed to (716)
853-0802
or to eadonaldson@randcapital.com via email. Copies may also be accessed electronically by means of the SECs EDGAR
home page on the internet at
http://www.sec.gov/edgar/searchedgar/companysearch.html
.
FINAL PAGE OF PROXY STATEMENT
Proxy 30
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RAND CAPITAL CORPORATION
ATTN: ELSPETH DONALDSON
2200 RAN
BUILDING
BUFFALO, NY 14203
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VOTE BY INTERNET - www.proxyvote.com
Use
the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the
cut-off
date or meeting date. Have your proxy card in hand when
you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
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ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
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If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via
e-mail
or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials
electronically in future years.
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VOTE BY PHONE -
1-800-690-6903
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Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the
cut-off
date or meeting date. Have your proxy card in hand when you call
and then follow the instructions.
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VOTE BY MAIL
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Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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KEEP THIS PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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The Board of Directors recommends you vote FOR the following:
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1.
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Election of Directors
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Nominees
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For
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Against
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Abstain
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01
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Allen F. Grum
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☐
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☐
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☐
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The Board of Directors recommends you vote 1 YEAR on the following proposal:
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1 year
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2 years
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3 years
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Abstain
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02
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Erland E. Kailbourne
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☐
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☐
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☐
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3
To approve, by advisory vote, the frequency of
holding future advisory votes on compensation.
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☐
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☐
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☐
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☐
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03
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Ross B. Kenzie
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☐
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☐
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☐
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04
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Reginald B. Newman II
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☐
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☐
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☐
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The Board of Directors recommends you vote FOR the following proposal:
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For
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Against
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Abstain
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05
06
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Jayne K. Rand
Robert M. Zak
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☐
☐
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☐
☐
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☐
☐
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4
To ratify the selection of Freed Maxick CPAs, P.C. as our
independent registered public accounting firm for the year ending December 31, 2017.
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☐
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☐
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☐
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The Board of Directors recommends you vote FOR the following proposal:
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For
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Against
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Abstain
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NOTE:
Such other business as may properly come before the meeting or any adjournment thereof.
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2
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To approve by, advisory vote, executive compensation.
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☐
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☐
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☐
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Please sign exactly as your name(s) appear(s) hereon. When
signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by
authorized officer.
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Signature [PLEASE SIGN WITHIN BOX]
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Date
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Signature (Joint Owners)
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Date
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Form
10-K,
Proxy Statement is/are available at
www.proxyvote.com
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RAND CAPITAL CORPORATION
Annual Meeting of Shareholders
April 20, 2017 10:30 AM
This proxy is solicited by the Board of Directors
The undersigned hereby appoints Jayne K. Rand and Allen F. Grum as proxies, each with the power to appoint a substitute and hereby
authorizes them to represent and to vote as designated below all the shares of Common Stock of Rand Capital Corporation (the Company) held of record by the undersigned at the annual meeting of shareholders of the Company to be held on
April 20, 2017 or any adjournment hereof.
This proxy,
when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors recommendations.
Continued and to be signed on reverse side
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