Item 9A. Controls and Procedures
Item 9A.
Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
As of December 31, 2021 (the end of the period covered by this report), we, including our Co-Chief
Executive Officers and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the 1934 Act). Based on that
evaluation, our management, including the Co-Chief Executive Officers and Chief Financial Officer, concluded that our disclosure controls and procedures were effective and provided reasonable assurance that
information required to be disclosed in our periodic SEC filings is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and that such information is accumulated and communicated to our
management, including our Co-Chief Executive Officers and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. However, in evaluating the disclosure controls and
procedures, management recognized that any controls and procedures, no matter how well designed and operated can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its
judgment in evaluating the cost-benefit relationship of such possible controls and procedures.
(b) Managements Report on
Internal Control Over Financial Reporting
Managements Report on Internal Control Over Financial Reporting, which appears in
Item 8 of this Form 10-K, is incorporated by reference herein.
(c) Attestation Report
of the Independent Registered Public Accounting Firm
Our independent registered public accounting firm, KPMG LLP, has issued an
attestation report on the Companys internal control over financial reporting, which is set forth above under the heading Report of Independent Registered Public Accounting Firm in Item 8.
(d) Changes in Internal Controls Over Financial Reporting
Management has not identified any change in the Companys internal control over financial reporting that occurred during the fourth fiscal
quarter of 2021 that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.
Item 9B.
Other Information
None.
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not Applicable.
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PART III
Item 10.
Directors, Executive Officers and Corporate Governance
Information about Directors
Certain
information with respect to each of the current directors is set forth below, including their names, ages, a brief description of their recent business experience, including present occupations and employment, certain directorships that each person
holds, the year in which each person became a director of the Company, and a discussion of their particular experience, qualifications, attributes or skills that lead us to conclude that such individual should serve as a director of the Company, in
light of the Companys business and structure. There were no legal proceedings of the type described in Item 401(f) of Regulation S-K in the past 10 years against any of the directors or
officers of the Company and none are currently pending. There is no arrangement or understanding between any of the Companys directors or officers pursuant to which they were selected as directors or officers and the Company or any other
person or entity.
Mr. Gross is an interested person of SLR Capital as defined in the Investment Company Act of 1940
(the 1940 Act) due to his position as Co-Chief Executive Officer and President of the Company and a managing member of SLR Capital Partners, LLC (SLR Capital Partners), the
Companys investment adviser. Mr. Spohler is an interested person of the Company as defined in the 1940 Act due to his position as Co-Chief Executive Officer and Chief Operating Officer
of the Company and a managing member of SLR Capital Partners, the Companys investment adviser. Each of Mr. Wachter, Mr. Hochberg and Mr. Potter is not an interested person of the Company as defined in the 1940 Act.
Name, Address and Age (1)
Position(s) Held
with Company
Terms of Office and
Length of Time
Served
Principal
Occupation(s) During
Past 5
Years
Other Directorships
Held by Director or
Nominee
for Director
During Past 5
Years (2)
Interested Director
Michael S. Gross, 60
Chairman of the Board of Directors, Co-Chief Executive Officer and President.
Class III Director since 2007; Term expires 2024.
Co-Chief Executive Officer of SLR Investment Corp., SLR Senior Investment Corp. and SCP Private Credit Income BDC LLC since June 2019 and SLR HC BDC LLC since September 2020, President of SLR
Investment Corp. since 2007, SLR Senior Investment Corp. since 2010, SCP Private Credit Income BDC LLC since 2018 and SLR HC BDC LLC since 2020; Sole Chief Executive
Chairman of the Board of Directors of SLR Senior Investment Corp. since 2010, of SCP Private Credit Income BDC LLC since 2018 and of SLR HC BDC LLC since 2020; Chairman of the Board of Directors of Global Ship Lease Inc.; Director
of Jarden Corporation (2007-2016); Chairman of the Board of Mt. Sinai Childrens Center Foundation; Director of New York Road
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Name, Address and Age (1)
Position(s) Held
with Company
Terms of Office and
Length of Time
Served
Principal
Occupation(s) During
Past 5
Years
Other Directorships
Held by Director or
Nominee
for Director
During Past 5
Years (2)
Officer of SLR Investment Corp. (February 2007-June 2019), of SLR Senior Investment Corp. (December 2010-June 2019) and of SCP Private Credit Income BDC LLC (June 2018-June 2019).
Runners; Member of the Kellogg Global Advisory Board; and Member of the Ross School Advisory Board at the University of Michigan.
Mr. Gross intimate knowledge of the business and operations of SLR Capital Partners, extensive familiarity with the
financial industry and the investment management process in particular, and experience as a director of other public and private companies not only gives the board of directors valuable insight but also positions him well to continue to serve as the
Chairman of our board of directors.
Name, Address and Age (1)
Position(s) Held
with Company
Terms of Office and
Length of Time
Served
Principal
Occupation(s) During
Past 5 Years
Other Directorships
Held by Director or
Nominee for Director
During Past 5
Years (2)
Interested Director
Bruce Spohler, 61
Co-Chief Executive Officer, Chief Operating Officer and Director
Class II Director
since 2009;
Term expires
2023.
Co-Chief Executive Officer of SLR Investment Corp., SLR Senior Investment Corp. and SCP Private Credit Income BDC LLC since June 2019 and of SLR HC BDC LLC since September 2020; Chief
Operating Officer of SLR Investment Corp. since February 2007, of SLR Senior Investment Corp. since December 2010, of SCP Private Credit Income BDC LLC since June 2018 and of SLR
Director of SLR Senior Investment Corp. since 2010, of SCP Private Credit Income BDC LLC since 2018 and of SLR HC BDC LLC since 2020.
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Name, Address and Age (1)
Position(s) Held
with Company
Terms of Office and
Length of Time
Served
Principal
Occupation(s) During
Past 5 Years
Other Directorships
Held by Director or
Nominee for Director
During Past 5
Years (2)
HC BDC LLC since September 2020; previously, Managing Director and a former Co-Head of U.S. Leveraged Finance for CIBC World Markets.
Mr. Spohlers depth of experience in managerial positions in investment management, leveraged finance and financial
services, as well as his intimate knowledge of The Companys business and operations, gives the board of directors valuable industry-specific knowledge and expertise on these and other matters.
Name, Address and Age (1)
Position(s) Held
with Company
Terms of Office and
Length of Time
Served
Principal
Occupation(s) During
Past 5 Years
Other Directorships
Held by Director or
Nominee for Director
During Past 5
Years (2)
Independent Director
Steven Hochberg, 60
Director
Class II Director since 2007; Term expires 2023.
Partner at Deerfield Management, a healthcare investment firm, since 2013. Co-founder and manager of Ascent Biomedical Ventures, a venture capital firm focused on early stage investment and
development of biomedical companies, since 2004.
Director of SLR Senior Investment Corp. since 2011, of SCP Private Credit Income BDC LLC since 2018, of SLR HC BDC LLC since 2020 and several private companies. Since 2011, Mr. Hochberg had been the Chairman of the Board of
Continuum Health Partners until its merger with Mount Sinai in 2013, where he is the Senior Vice Chairman of the Mount Sinai Health System, a non-profit
healthcare
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Name, Address and Age (1)
Position(s) Held
with Company
Terms of Office and
Length of Time
Served
Principal
Occupation(s) During
Past 5 Years
Other Directorships
Held by Director or
Nominee for Director
During Past 5
Years (2)
integrated delivery system in New York City. Director of a number of private healthcare companies, and the Cardiovascular Research Foundation, an organization focused on advancing new technologies and education in the field of
cardiovascular medicine.
Mr. Hochbergs varied experience in investing in medical technology companies provides the board of directors with
particular knowledge of this field, and his role as chairman of other companies board of directors brings the perspective of a knowledgeable corporate leader.
Name, Address and Age (1)
Position(s) Held
with Company
Terms of Office and
Length of Time
Served
Principal
Occupation(s) During
Past 5 Years
Other Directorships
Held by Director or
Nominee for Director
During Past 5
Years (2)
Independent Director
Leonard A. Potter, 60
Director
Class III Director since 2009; Term expires 2024.
President and Chief Investment Officer of Wildcat Capital Management, LLC since 2011; Co-founder and Senior Managing Director at Vida Ventures I and II, each a biotech venture fund, since
2017; Managing Director of Soros Private Equity at Soros Fund Management LLC from 2002 to 2009.
Director of SLR Senior Investment Corp. since 2011, of SCP Private Credit Income BDC LLC since 2018, of SLR HC BDC LLC since 2020, Hilton Grand Vacations Inc. since 2017, of SuRo Capital Corp. since 2011, and several private
companies.
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Mr. Potters experience practicing as a corporate lawyer provides valuable insight to the board of
directors on regulatory and risk management issues. In addition, his tenure in private equity and other investments and service as a director of both public and private companies provide industry-specific knowledge and expertise to the board of
directors.
Name, Address and Age (1)
Position(s) Held
with Company
Terms of Office and
Length of Time
Served
Principal
Occupation(s) During
Past 5 Years
Other Directorships
Held by Director or
Nominee for Director
During Past 5
Years (2)
Independent Director
David S. Wachter, 58
Director
Class I Director since 2007; Term expires 2022.
Founding Partner and Managing Partner of W Capital Partners, a private equity fund manager, since 2001.
Director of SLR Senior Investment Corp. since 2011, of SCP Private Credit Income BDC LLC since 2018, of SLR HC BDC LLC since 2020 and of several private companies.
Mr. Wachters extensive knowledge of private equity and investment banking provides the board of directors with the
valuable insight of an experienced financial manager.
(1)
The business address of the director nominees and other directors is c/o SLR Investment Corp., 500 Park Avenue,
New York, New York 10022.
(2)
All of the Companys directors also serve as directors of SLR Senior Investment Corp., SCP Private Credit
Income BDC LLC and SLR HC BDC LLC, which are investment companies that have each elected to be regulated as a business development company (BDC) and for which SLR Capital Partners serves as investment adviser. Mr. Potter also serves
as a director of SuRo Capital Corp., which is a closed-end management investment company that has elected to be regulated as a BDC.
Information about Executive Officers Who Are Not Directors
The following information, as of December 31, 2021, pertains to our executive officers who are not directors of the Company.
Name, Address, and Age (1)
Position(s) Held with
Company
Principal Occupation(s) During Past 5 Years
Richard L. Peteka, 60
Chief Financial Officer, Treasurer and Secretary
Chief Financial Officer, Treasurer and Secretary of the Company and of SLR Senior Investment Corp. since May 2012, of SCP Private Credit Income BDC LLC since June 2018 and of SLR HC BDC LLC since September 2020. Mr. Peteka
joined the Company from Apollo Investment Corporation, a publicly-traded business development company, where he served from 2004 to 2012 as the Chief Financial Officer and Treasurer.
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Name, Address, and Age (1)
Position(s) Held with
Company
Principal Occupation(s) During Past 5 Years
Guy Talarico, 66
Chief Compliance Officer
Chief Compliance Officer of SLR Investment Corp. since 2008, of SLR Senior Investment Corp. since 2010, of SCP Private Credit Income BDC LLC since 2018, of SLR HC BDC LLC since 2020 and of SLR Capital Partners, LLC since February
2016all affiliated entities; and Chief Executive Officer of Alaric Compliance Services, LLC (successor to EOS Compliance Services LLC) from December 2005 to December 2021. In December 2021, Alaric was acquired by Foreside Consulting Services,
LLC. Mr. Talarico serves as Senior Managing Director of Foreside Consulting Services, LLC. In conjunction with this primary occupation, Mr. Talarico has served and continues to serve as Chief Compliance Officer for other business
development companies, funds, and/or investment advisers who are not affiliated with the SLR Capital Partners entities.
(1)
The business address of the executive officers is c/o SLR Investment Corp., 500 Park Avenue, New York, New York
10022.
Our common stock is listed on the NASDAQ Global Select Market under the symbol SLRC.
Audit Committee
The Audit Committee
operates pursuant to a charter approved by our board of directors, a copy of which is available on our website at http://www.SLRinvestmentcorp.com. The charter sets forth the responsibilities of the Audit Committee. The Audit Committees
responsibilities include selecting the independent registered public accounting firm for the Company, reviewing with such independent registered public accounting firm the planning, scope and results of their audit of the Companys financial
statements, pre-approving the fees for services performed, reviewing with the independent registered public accounting firm the adequacy of internal control systems, reviewing the Companys annual
financial statements and periodic filings and receiving the Companys audit reports and financial statements. The Audit Committee also establishes guidelines and makes recommendations to our board of directors regarding the valuation of our
investments. The Audit Committee is responsible for aiding our board of directors in determining the fair value of debt and equity securities that are not publicly traded or for which current market values are not readily available. The board of
directors and Audit Committee utilize the services of nationally recognized third-party valuation firms to help determine the fair value of these securities. The Audit Committee is currently composed of Messrs. Hochberg, Wachter and Potter, all of
whom are considered independent under the rules of the NASDAQ Stock Market and are not interested persons of the Company as that term is defined in Section 2(a)(19) of the 1940 Act. Mr. Hochberg serves as Chairman of the Audit
Committee. Our board of directors has determined that Mr. Hochberg is an audit committee financial expert as that term is defined under Item 407 of Regulation S-K, as promulgated under
the Securities Exchange Act of 1934, as amended (the Exchange Act). Mr. Hochberg meets the current independence and experience requirements of Rule 10A-3 of the Exchange Act.
Communication with the Board of Directors
Stockholders with questions about the Company are encouraged to contact the Companys investor relations department. However, if
stockholders believe that their questions have not been addressed, they may communicate with the Companys board of directors by sending their communications to SLR Investment Corp.,
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c/o Richard L. Peteka, Secretary, 500 Park Avenue, New York, New York 10022. All stockholder communications received in this manner will be delivered to one or more members of the board of
directors.
Code of Ethics
The
Company has adopted a code of ethics that applies to, among others, its senior officers, including its Co-Chief Executive Officers and its Chief Financial Officer, as well as every officer, director and
employee of the Company. The Companys code of ethics can be accessed via its website at http://www.SLRinvestmentcorp.com . The Company intends to disclose amendments to or waivers from a required provision of the code of ethics on Form 8-K.
Nomination of Directors
There have been no material changes to the procedures by which stockholders may recommend nominees to our Board of Directors implemented since
the filing of our Proxy Statement for our 2021 Annual Meeting of Stockholders.
Item 11.
Executive Compensation
Compensation of Executive Officers
None
of our officers receives direct compensation from the Company. As a result, we do not engage any compensation consultants. Mr. Gross, our Co-Chief Executive Officer and President, and Mr. Spohler,
our Co-Chief Executive Officer and Chief Operating Officer, through their ownership interest in SLR Capital Partners, our investment adviser, are entitled to a portion of any profits earned by SLR Capital
Partners, which includes any fees payable by us to SLR Capital Partners under the terms of the Advisory Agreement, less expenses incurred by SLR Capital Partners in performing its services under the Advisory Agreement. Messrs. Gross and Spohler do
not receive any additional compensation from SLR Capital Partners in connection with the management of our portfolio.
Mr. Peteka,
our Chief Financial Officer, Treasurer and Secretary and, through Foreside Consulting Services, LLC, Guy Talarico, our Chief Compliance Officer, are paid by SLR Capital Management, our administrator, subject to reimbursement by us of an allocable
portion of such compensation for services rendered by such persons to the Company. To the extent that SLR Capital Management outsources any of its functions, we will pay the fees associated with such functions on a direct basis without profit to SLR
Capital Management.
Compensation of Directors
The following table sets forth compensation of the Companys directors, for the year ended December 31, 2021.
Name
Fees Earned or Paid
in Cash (1)
Stock
Awards (2)
All Other
Compensation
Total
Interested Directors
Michael S. Gross
Bruce Spohler
Independent Directors
Steven Hochberg
$
127,000
$
127,000
David S. Wachter
$
122,000
$
122,000
Leonard A. Potter
$
122,000
$
122,000
(1)
For a discussion of the independent directors compensation, see below.
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(2)
We do not maintain a stock or option plan, non-equity incentive plan or
pension plan for our directors. However, our independent directors have the option to receive all or a portion of the directors fees to which they would otherwise be entitled in the form of shares of our common stock issued at a price per
share equal to the greater of our then current net asset value per share or the market price at the time of payment. No shares were issued to any of our independent directors in lieu of cash during 2021.
Our independent directors annual fee is $100,000. The independent directors also receive $2,500 ($1,500 if participating telephonically)
plus reimbursement of reasonable out-of-pocket expenses incurred in connection with attending each board meeting and $1,000 plus reimbursement of reasonable out-of-pocket expenses incurred in connection with each committee meeting attended. In addition, the Chairman of the Audit Committee receives an annual fee of $7,500, the
Chairman of the Nominating and Corporate Governance Committee receives an annual fee of $2,500 and the Chairman of the Compensation Committee receives an annual fee of $2,500. Further, we purchase directors and officers liability
insurance on behalf of our directors and officers. In addition, no compensation was paid to directors who are interested persons of the Company as defined in the 1940 Act.
Compensation Committee
The Compensation
Committee operates pursuant to a charter approved by our board of directors, a copy of which is available on our website at http://www.SLRinvestmentcorp.com. The charter sets forth the responsibilities of the Compensation Committee. The
Compensation Committee is responsible for reviewing and recommending for approval to our board of directors the Advisory Agreement and the Administration Agreement. In addition, although we do not directly compensate our executive officers
currently, to the extent that we do so in the future, the Compensation Committee would also be responsible for reviewing and evaluating their compensation and making recommendations to the board of directors regarding their compensation. Lastly, the
Compensation Committee would produce a report on our executive compensation practices and policies for inclusion in our proxy statement if required by applicable proxy rules and regulations and, if applicable, make recommendations to the board of
directors with matters related to compensation generally. The Compensation Committee has the authority to engage compensation consultants and to delegate their duties and responsibilities to a member or to a subcommittee of the Compensation
Committee. The members of the Compensation Committee are Messrs. Hochberg, Wachter and Potter, all of whom are considered independent under the rules of the NASDAQ Stock Market and are not interested persons of the Company as that term
is defined in Section 2(a)(19) of the 1940 Act. Mr. Potter serves as Chairman of the Compensation Committee.
Compensation Committee
Interlocks and Insider Participation
During fiscal year 2021 none of the Companys executive officers served on the board of
directors (or a compensation committee thereof or other board committee performing equivalent functions) of any entities that had one or more executive officers serve on the Compensation Committee of the Company or on the Board of Directors of the
Company. No member of the Compensation Committee had any relationship requiring disclosure under any paragraph of Item 404 of Regulation S-K.
Compensation Committee Report
Currently,
none of our executive officers are compensated by the Company, and as such the Company is not required to produce a report on executive officer compensation for inclusion in our annual report on Form 10-K.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth, as of February 25, 2022, the beneficial ownership of each current director, the
nominees for directors, the Companys executive officers, each person known to us to beneficially own 5% or more of the outstanding shares of our common stock, and the executive officers and directors as a group.
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Beneficial ownership is determined in accordance with the rules of the Securities and
Exchange Commission (SEC) and includes voting or investment power with respect to the securities. Ownership information for those persons who beneficially own 5% or more of our shares of common stock is based upon reports filed by such
persons with the SEC and other information obtained from such persons, if available.
Unless otherwise indicated, the Company believes
that each beneficial owner set forth in the table has voting and investment power and has the same address as the Company. Our address is 500 Park Avenue, New York, New York 10022.
Name and Address of Beneficial Owner
Number of Shares
Owned Beneficially(1)
Percentage
of Class(2)
Interested Directors
Michael S. Gross(3)(4)
2,705,638
6.4
%
Bruce Spohler(3)
2,582,680
6.1
%
Independent Directors
Steven Hochberg
10,000
*
Leonard A. Potter
10,000
*
David S. Wachter
46,392
*
Executive Officers
Richard L. Peteka
24,000
0.1
%
Guy Talarico
10,350
*
All executive officers and directors as a group (7 persons)
3,139,042
7.4
%
Thornburg Investment Management Inc.(5)
4,453,425
10.5
%
*
Represents less than one percent.
(1)
Beneficial ownership has been determined in accordance with Rule
13d-3 under the Securities Exchange Act of 1934, as amended (the Exchange Act). Assumes no other purchases or sales of our common stock since the most recently available SEC filings. This
assumption has been made under the rules and regulations of the SEC and does not reflect any knowledge that we have with respect to the present intent of the beneficial owners of our common stock listed in this table.
(2)
Based on a total of 42,260,826 shares of the Companys common stock issued and outstanding as of
February 25, 2022.
(3)
Includes 1,285,013 shares held by SLR Capital Investors, LLC and 715,000 shares held by SLR Capital
Investors II, LLC, a portion of both of which may be deemed to be indirectly beneficially owned by Michael S. Gross, by Bruce Spohler and a grantor retained annuity trust (GRAT) setup by and for Mr. Gross by virtue of their
collective ownership interest therein. Also includes 208,248 shares held by SLR Capital Partners Employee Stock Plan LLC, which is controlled by SLR Capital Partners, LLC. Mr. Gross and Mr. Spohler may be deemed to beneficially own a
portion of the shares held by SLR Capital Partners Employee Stock Plan LLC by virtue of their collective ownership interest in SLR Capital Partners, LLC. Each of Mr. Gross and Mr. Spohler disclaim beneficial ownership of any shares of our
common stock directly held by SLR Capital Partners Employee Stock Plan LLC, SLR Capital Investors, LLC or SLR Capital Investors II, LLC, except to the extent of their respective pecuniary interest therein. Also includes 121,506 shares held in a
trust of which Bruce Spohler became co-trustee in which he and certain members of his immediate family are beneficiaries (the Spohler Trust) and 141,130 shares held by a limited liability company
in which he holds a pro rata interest (the Spohler LLC). Mr. Spohler disclaims beneficial ownership of the shares in the Spohler Trust and the Spohler LLC.
(4)
Includes 97,250 shares directly held by Michael S. Gross profit sharing plan (the Profit Sharing
Plan). Mr. Gross may be deemed to directly beneficially own these shares as the sole participant in the Profit Sharing Plan. Also includes 20,000 shares directly held by the GRAT setup by and for Michael S. Gross, which Mr. Gross may
be deemed to directly beneficially own as the sole trustee of the GRAT. Also includes
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88,775 shares held by certain trusts for the benefit of family members for which Mr. Gross serves as trustee (the Family Trusts). Mr. Gross may be deemed to directly
beneficially own these shares by virtue of his control with respect to the Family Trusts, and disclaims beneficial ownership of the securities held by the Family Trusts except to the extent of his pecuniary interest therein.
(5)
Based upon information contained in the Schedule 13G filed February 7, 2022 by Thornburg Investment
Management Inc. Such securities are held by certain investment vehicles controlled and/or managed by Thornburg Investment Management Inc. or its affiliates. The address for Thornburg Investment Management Inc. is 2300 North Ridgetop Road, Santa Fe,
New Mexico 87506.
Set forth below is the dollar range of equity securities beneficially owned by each of our
directors as of February 25, 2022. We are not part of a family of investment companies, as that term is defined in the 1940 Act.
Name of Director
Dollar Range
of Equity
Securities
Beneficially
Owned(1)(2)
Interested Directors
Michael S. Gross
Over $
100,000
Bruce Spohler
Over $
100,000
Independent Directors
Steven Hochberg
Over $
100,000
Leonard A. Potter
Over $
100,000
David S. Wachter
Over $
100,000
(1)
The dollar ranges are: None, $1-$10,000, $10,001-$50,000, $50,001-$100,000, or Over $100,000.
(2)
The dollar range of equity securities beneficially owned in us is based on the closing price for our common
stock of $18.04 on February 25, 2022 on the NASDAQ Global Select Market. Beneficial ownership has been determined in accordance with Rule 16a-1(a)(2) of the Exchange Act.
Item 13.
Certain Relationships and Related Transactions, and Director Independence
We have entered into the Advisory Agreement with SLR Capital Partners. Mr. Gross, our Chairman,
Co-Chief Executive Officer and President, and Mr. Spohler, our Co-Chief Executive Officer, Chief Operating Officer and board member, are managing members and senior
investment professionals of, and have financial and controlling interests in, SLR Capital Partners. In addition, Mr. Peteka, our Chief Financial Officer, Treasurer and Secretary, serves as the Chief Financial Officer for SLR Capital Partners.
SLR Capital Partners and its affiliates may also manage other funds in the future that may have investment mandates that are similar, in
whole and in part, with ours. For example, SLR Capital Partners presently serves as investment adviser to private funds and managed accounts as well as to SLR Senior Investment Corp., a publicly-traded BDC, which focuses on investing primarily in
senior secured loans, including first lien and second lien debt instruments, SCP Private Credit Income BDC LLC, an unlisted BDC, which focuses on investing primarily in senior secured loans, including
non-traditional asset-based loans and first lien loans and SLR HC BDC LLC, an unlisted BDC whose principal focus is to invest directly and indirectly in senior secured loans and other debt instruments
typically to middle market companies within the healthcare industry. In addition, Michael S. Gross, our Chairman and Co-Chief Executive Officer, Bruce Spohler, our
Co-Chief Executive Officer and Chief Operating Officer, and Richard L. Peteka, our Chief Financial Officer, serve in similar capacities for SLR Senior Investment Corp., SCP Private Credit Income BDC LLC and
SLR HC BDC LLC.
SLR Capital Partners and certain investment advisory affiliates may determine that an investment is appropriate for us
and for one or more of those other funds. In such event, depending on the availability of such investment and other appropriate factors, SLR Capital Partners or its affiliates may determine that we should
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invest side-by-side with one or more other funds. Any such investments will be made only to the extent permitted by
applicable law and interpretive positions of the SEC and its staff, and consistent with SLR Capital Partners allocation procedures.
Related party transactions may occur among SLR Investment Corp., SLR Credit Solutions, Equipment Operating Leases LLC, Kingsbridge Holdings,
LLC, Loyer Capital LLC, SLR Business Credit, SLR Healthcare ABL and SLR Equipment Finance. These transactions may occur in the normal course of business. No administrative or other fees are paid to SLR Capital Partners by SLR Credit Solutions,
Equipment Operating Leases LLC, Kingsbridge Holdings, LLC, Loyer Capital LLC, SLR Business Credit, SLR Healthcare ABL or SLR Equipment Finance.
In addition, we have adopted a formal code of ethics that governs the conduct of our officers and directors. Our officers and directors also
remain subject to the duties imposed by both the 1940 Act and the Maryland General Corporation Law.
Regulatory restrictions limit our
ability to invest in any portfolio company in which any affiliate currently has an investment. The Company obtained its most recent exemptive order from the SEC on June 13, 2017 (the Exemptive Order). The Exemptive Order permits us
to participate in negotiated co-investment transactions with certain affiliates, each of whose investment adviser is an investment adviser that controls, is controlled by or is under common control with SLR
Capital Partners and is registered as an investment adviser under the Advisers Act, in a manner consistent with our investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent
factors, and pursuant to the conditions to the Exemptive Order. We believe that it will be advantageous for us to co-invest with funds managed by SLR Capital Partners where such investment is consistent with
the investment objectives, investment positions, investment policies, investment strategy, investment restrictions, regulatory requirements and other pertinent factors applicable to us.
We have entered into a license agreement with SLR Capital Partners, pursuant to which SLR Capital Partners has agreed to grant us a non-exclusive, royalty-free license to use the names SLR and SOLAR. In addition, pursuant to the terms of the Administration Agreement, SLR Capital Management provides us with the office
facilities and administrative services necessary to conduct our day-to-day operations.
Board Consideration of the Investment Advisory and Management Agreement
Our board of directors, determined at a virtual meeting held on November 3, 2021, to approve the Advisory Agreement between the Company
and SLR Capital Partners. In reliance on certain exemptive relief provided by the SEC in connection with the global COVID-19 pandemic, our board undertook to ratify the Advisory Agreement at its next in-person meeting. In its consideration of the approval of the Advisory Agreement, the board of directors focused on information it had received relating to, among other things:
the nature, extent and quality of advisory and other services provided by SLR Capital Partners, including
information about the investment performance of the Company relative to its stated objectives and in comparison to the performance of the Companys peer group and relevant market indices, and concluded that such advisory and other services are
satisfactory and the Companys investment performance is reasonable;
the experience and qualifications of the personnel providing such advisory and other services, including
information about the backgrounds of the investment personnel, the allocation of responsibilities among such personnel and the process by which investment decisions are made, and concluded that the investment personnel of SLR Capital Partners have
extensive experience and are well qualified to provide advisory and other services to the Company;
the current fee structure, the existence of any fee waivers, and the Companys anticipated expense ratios in
relation to those of other investment companies having comparable investment policies and limitations, and concluded that the current fee structure is reasonable;
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the advisory fees charged by SLR Capital Partners to the Company, to SLR Senior Investment Corp. and to SCP
Private Credit Income BDC LLC, the advisory fees that will be charged by SLR Capital Partners to SLR HC BDC LLC, and comparative data regarding the advisory fees charged by other investment advisers to business development companies with similar
investment objectives, and concluded that the advisory fees charged by SLR Capital Partners to the Company are reasonable;
the direct and indirect costs, including for personnel and office facilities, that are incurred by SLR Capital
Partners and its affiliates in performing services for the Company and the basis of determining and allocating these costs, and concluded that the direct and indirect costs, including the allocation of such costs, are reasonable;
possible economies of scale arising from the Companys size and/or anticipated growth, and the extent to
which such economies of scale are reflected in the advisory fees charged by SLR Capital Partners to the Company, and concluded that some economies of scale may be possible in the future;
other possible benefits to SLR Capital Partners and its affiliates arising from their relationships with the
Company, and concluded that all such other benefits were not material to SLR Capital Partners and its affiliates; and
possible alternative fee structures or bases for determining fees, and concluded that the Companys current
fee structure and bases for determining fees are satisfactory.
Based on the information reviewed and the discussions
detailed above, the board of directors, including a majority of the directors who are not interested persons as defined in the 1940 Act, concluded that the fees payable to SLR Capital Partners pursuant to the Advisory Agreement were
reasonable, and comparable to the fees paid by other management investment companies with similar investment objectives, in relation to the services to be provided. The board of directors did not assign relative weights to the above factors or the
other factors considered by it. Individual members of the board of directors may have given different weights to different factors.
Director
Independence
In accordance with rules of the NASDAQ Stock Market, our board of directors annually determines each directors
independence. We do not consider a director independent unless the board of directors has determined that he has no material relationship with us. We monitor the relationships of our directors and officers through a questionnaire each director
completes no less frequently than annually and updates periodically as information provided in the most recent questionnaire changes.
Our
governance guidelines require any director who has previously been determined to be independent to inform the Chairman of the board of directors, the Chairman of the Nominating and Corporate Governance Committee and our Secretary of any change in
circumstance that may cause his status as an independent director to change. The board of directors limits membership on the Audit Committee, the Nominating and Corporate Governance Committee and the Compensation Committee to independent directors.
In order to evaluate the materiality of any such relationship, the board of directors uses the definition of director independence set
forth in the rules promulgated by the NASDAQ Stock Market. Rule 5605(a)(2) provides that a director of a BDC, shall be considered to be independent if he or she is not an interested person of such BDC, as defined in Section 2(a)(19)
of the 1940 Act.
The board of directors has determined that each of the directors is independent and has no relationship with us, except
as a director and stockholder, with the exception of Michael S. Gross, as a result of his positions as the Co-Chief Executive Officer and President of the Company and a Managing Member of SLR Capital Partners,
and Bruce Spohler, as a result of his positions as the Co-Chief Executive Officer and Chief Operating Officer of the Company and a Managing Member of SLR Capital Partners.
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Indemnification Agreements
We have entered into indemnification agreements with our directors. The indemnification agreements are intended to provide our directors the
maximum indemnification permitted under Maryland law and the 1940 Act. Each indemnification agreement provides that SLR Capital shall indemnify the director who is a party to the agreement (an Indemnitee), including the advancement of
legal expenses, if, by reason of his or her corporate status, the Indemnitee is, or is threatened to be, made a party to or a witness in any threatened, pending, or completed proceeding, to the maximum extent permitted by Maryland law and the 1940
Act.
Item 14.
Principal Accountant Fees and Services
KPMG LLP has advised us that neither the firm nor any present member or associate of it has any material financial interest, direct or
indirect, in the Company or its affiliates.
Table below in thousands
Fiscal Year
Ended
December 31,
2021
Fiscal Year
Ended
December 31,
2020
Audit Fees
$
689.6
$
655.3
Audit-Related Fees
Tax Fees
170.8
165.8
All Other Fees
55.0
Total Fees:
$
915.4
$
821.1
Audit Fees: Audit fees consist of fees billed for professional services rendered for the audit of our year-end financial statements and quarterly reviews and services that are normally provided by KPMG LLP in connection with statutory and regulatory filings.
Audit-Related Fees: Audit-related services consist of fees billed for assurance and related services that are reasonably related to the
performance of the audit or review of our financial statements and are not reported under Audit Fees. These services include attest services that are not required by statute or regulation and consultations concerning financial accounting
and reporting standards.
Tax Services Fees: Tax services fees consist of fees billed for professional tax services. These services
also include assistance regarding federal, state, and local tax compliance.
All Other Fees: Other fees would include fees for
products and services other than the services reported above.
Pre-Approval Policy
The Audit Committee has established a pre-approval policy that describes the permitted audit,
audit-related, tax and other services to be provided by KPMG LLP, the Companys independent registered public accounting firm (KPMG). The policy requires that the Audit Committee pre-approve
the audit and non-audit services performed by the independent auditor in order to assure that the provision of such service does not impair the auditors independence.
Any requests for audit, audit-related, tax and other services that have not received general
pre-approval must be submitted to the Audit Committee for specific pre-approval, irrespective of the amount, and cannot commence until such approval has been granted.
Normally, pre-approval is provided at regularly scheduled meetings of the Audit Committee. However, the Audit Committee may delegate pre-approval authority to one or
more of its
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members. The member or members to whom such authority is delegated shall report any pre-approval decisions to the Audit Committee at its next scheduled
meeting. The Audit Committee does not delegate its responsibilities to pre-approve services performed by the independent registered public accounting firm to management. During the fiscal year ended
December 31, 2021, the Audit Committee pre-approved 100% of services described in this policy.
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PART IV
Item 15.
Exhibit and Financial Statement Schedules
a. Documents Filed as Part of this Report
The following reports and consolidated financial statements are set forth in Item 8:
Page
Managements Report on Internal Control Over Financial
Reporting
100
Report of Independent Registered Public Accounting Firm
101
Consolidated Statements of Assets and Liabilities as of December
31, 2021 and 2020
104
Consolidated Statements of Operations for the years ended December
31, 2021, 2020 and 2019
105
Consolidated Statements of Changes in Net Assets for the years ended December 31,
2021, 2020 and 2019
106
Consolidated Statements of Cash Flows for the years ended December
31, 2021, 2020 and 2019
107
Consolidated Schedules of Investments as of December 31, 2021 and
2020
108
Notes to Consolidated Financial Statements
124
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b. Exhibits
The following exhibits are filed as part of this report or hereby incorporated by reference to exhibits previously filed with the SEC:
Exhibit
Number
Description
2.1
Agreement and Plan of Merger among SLR Investment Corp., SLR Senior Investment Corp., Solstice Merger Sub, Inc. and SLR Capital Partners, LLC
(for the limited purposes set forth therein), dated as of December 1, 2021(12)
3.1
Articles of Amendment and Restatement(1)
3.2
Articles of Amendment (11)
3.3
Second Amended and Restated Bylaws(12)
4.1
Form of Common Stock Certificate(2)
4.2
Indenture, dated as of November 16, 2012, between the Registrant and U.S. Bank National Association as trustee(3)
4.3
Second Supplemental Indenture, dated November
22, 2017, relating to the 4.50% Notes due 2023, between the Registrant and U.S. Bank National Association as trustee, including the Form of 4.50% Notes due 2023(8)
4.4
Description of Securities*
10.1
Dividend Reinvestment Plan(1)
10.2
Form of Senior Secured Credit Agreement dated as of August 28, 2019 (as amended December
28, 2021) among SLR Investment Corp., Citibank, N.A., as Administrative Agent, the lenders party thereto, JPMorgan Chase Bank, N.A., as syndication agent, and Citibank, N.A., J.P. Morgan Securities LLC, and Sumitomo Mitsui Banking Corporation as Joint Lead
Bookrunners and Joint Lead Arrangers(13)
10.3
Third Amended and Restated Investment Advisory and Management Agreement by and between the Registrant and SLR Capital Partners, LLC(7)
10.4
Form of Custodian Agreement(6)
10.5
Amended and Restated Administration Agreement by and between Registrant and SLR Capital Management, LLC(5)
10.6
Form of Indemnification Agreement by and between Registrant and each of its directors(1)
10.7
First Amended and Restated Trademark License Agreement by and between Registrant and SLR Capital Partners, LLC(11)
10.8
Form of Share Purchase Agreement by and between Registrant and SLR Capital Investors II, LLC(2)
10.9
Form of Registration Rights Agreement(4)
10.10
Form of Subscription Agreement(4)
10.11
Form of Note Purchase Agreement by and between the Registrant and the lenders party thereto(9)
10.12
Form of First Supplement to Note Purchase Agreement by and between the Registrant and the lenders party thereto(9)
10.13
Form of Second Supplement to Note Purchase Agreement by and between the Registrant and the lenders party thereto(9)
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Exhibit
Number
Description
10.14
Form of Third Supplement to Note Purchase Agreement by and between the Registrant and the lenders party thereto(9)
10.15
Form of Fifth Supplement to Note Purchase Agreement(14)
14.1
Code of Ethics(10)
14.2
Code of Business Conduct(5)
21.1
Subsidiaries of SLR Investment Corp.*
23.1
Consent of Independent Registered Public Accounting Firm*
23.2
Consent of Independent Registered Public Accounting Firm*
23.3
Consent of Independent Registered Public Accounting Firm*
23.4
Consent of Independent Registered Public Accounting Firm*
31.1
Certification of Co-Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.*
31.2
Certification of Co-Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.*
31.3
Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.*
32.1
Certification of Co-Chief Executive Officer pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.*
32.2
Certification of Co-Chief Executive Officer pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.*
32.3
Certification of Chief Financial Officer pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.*
99.1
Crystal Financial LLC (A Delaware Limited Liability Company) Consolidated Financial Statements for the years ended December 31, 2021 and December 31, 2020*
99.2
NEF Holdings, LLC and Subsidiaries (A Limited Liability Company) Consolidated Financial Statements for the years ended December 31, 2021 and December 31, 2020*
99.3
KBH Topco, LLC (A Delaware Limited Liability Company) Consolidated Financial Statements for the year ended December 31, 2021 and the period November 3, 2020 to December 31, 2020*
99.4
Report of Independent Registered Public Accounting Firm on Supplemental Information*
(1)
Previously filed in connection with SLR Investment Corp.s registration statement on Form N-2 Pre-Effective Amendment No. 7 (File No. 333-148734) filed on January 7, 2010.
(2)
Previously filed in connection with SLR Investment Corp.s registration statement on Form N-2 (File No 333-148734) filed on February 9, 2010.
(3)
Previously filed in connection with SLR Investment Corp.s registration statement on Form N-2 Post-Effective Amendment No. 6 (File No. 333-172968) filed on November 16, 2012.
(4)
Previously filed in connection with SLR Investment Corp.s report on Form
8-K filed on November 29, 2010.
(5)
Previously filed in connection with SLR Investment Corp.s registration statement on Form N-2 Post-Effective Amendment No. 10 (File No. 333-172968) filed on November 12, 2013.
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(6)
Previously filed in connection with SLR Investment Corp.s report on Form
10-K filed on February 25, 2014.
(7)
Previously filed in connection with SLR Investment Corp.s report on Form
10-Q filed on August 6, 2018.
(8)
Previously filed in connection with SLR Investment Corp.s registration statement on Form N-2 Post-Effective Amendment No. 5 (File No. 333-194870) filed on November 22, 2017.
(9)
Previously filed in connection with SLR Investment Corp.s report on Form
10-K filed on February 20, 2020.
(10)
Previously filed in connection with SLR Investment Corp.s report on Form
10-K filed on February 24, 2021.
(11)
Previously filed in connection with SLR Investment Corp.s report on Form
8-K filed on February 25, 2021.
(12)
Previously filed in connection with SLR Investment Corp.s report on Form
8-K filed on December 1, 2021.
(13)
Previously filed in connection with SLR Investment Corp.s report on Form
8-K filed on January 3, 2022.
(14)
Previously filed in connection with SLR Investment Corp.s report on Form
8-K filed on January 12, 2022.
*
Filed herewith.
c. Consolidated Financial Statement Schedules
Separate Financial Statements of Subsidiaries Not Consolidated:
Consolidated Financial Statements for Crystal Financial LLCs (A Delaware Limited Liability Company) years ended December 31, 2021
and December 31, 2020 are attached as Exhibit 99.1 hereto.
Consolidated Financial Statements for NEF Holdings, LLCs (A
Delaware Limited Liability Company) years ended December 31, 2021 and December 31, 2020 are attached as Exhibit 99.2 hereto.
Consolidated Financial Statements for KBH Topco LLCs (A Delaware Limited Liability Company) year ended December 31, 2021 and period
November 3, 2020 to December 31, 2020 are attached as Exhibit 99.3 hereto.
Item 16.
Form 10-K Summary
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SLR INVESTMENT CORP.
By:
/s/ M ICHAEL S. G ROSS
/s/ B RUCE J.
S POHLER
Michael S. Gross
Co-Chief Executive Officer, President, Chairman of the Board and Director
Date: March 1, 2022
Bruce J. Spohler
Co-Chief Executive Officer, Chief Operating Officer and
Director
Date:
March 1, 2022
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacity and on the dates indicated.
Date
Signature
Title
March 1, 2022
/s/ M ICHAEL S. G ROSS
Michael S. Gross
Co-Chief Executive Officer, President, Chairman of the Board and Director (Principal Executive Officer)
March 1, 2022
/s/ B RUCE J. S POHLER
Bruce J. Spohler
Co-Chief Executive Officer, Chief Operating Officer and Director (Principal Executive Officer)
March 1, 2022
/s/ S TEVEN H OCHBERG
Steven Hochberg
Director
March 1, 2022
/s/ D AVID S. W ACHTER
David S. Wachter
Director
March 1, 2022
/s/ L EONARD A. P OTTER
Leonard A. Potter
Director
March 1, 2022
/s/ R ICHARD L. P ETEKA
Richard L. Peteka
Chief Financial Officer (Principal Financial Officer) and Secretary
164