United States
Securities and Exchange Commission
Washington, DC 20549

__________________________

SCHEDULE 14A
(RULE 14a
-101 )
Information Required in Proxy Statement

__________________________

SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934

__________________________

Filed by the Registrant

 

S

Filed by the Party other than the Registrant

 

£

Check the appropriate box:

£

 

Preliminary Proxy Statement

£

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a -6 (e)(2))

S

 

Definitive Proxy Statement

£

 

Definitive Additional Materials

£

 

Soliciting Material Pursuant to Rule 14a -11 (c) or Rule 14a -12

NEWTEK BUSINESS SERVICES CORP.

(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):

S

 

No fee required.

£

 

Fee computed on table below per Exchange Act Rules 14a -6 (i) (1) and 0 -11 .

   

(1)

 

Title of each class of securities to which transaction applies:

       

 

   

(2)

 

Aggregate number of securities to which transaction applies:

       

 

   

(3)

 

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):

       

 

   

(4)

 

Proposed maximum aggregate value of transaction:

       

 

   

(5)

 

Total fee paid:

       

 

£

 

Fee paid previously with preliminary materials:

£

 

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.

   

(1)

 

Amount previously paid:

       

 

   

(2)

 

Form, Schedule or Registration Statement No.:

       

 

   

(3)

 

Filing Party:

       

 

   

(4)

 

Date Filed:

       

 

 

NEWTEK BUSINESS SERVICES CORP.
4800 T-Rex Avenue, Suite 120
Boca Raton, FL 33431

(212) 356-9500

May 13, 2020

Dear Shareholder:

We invite you to attend the Annual Meeting of Shareholders (the “Annual Meeting”) of Newtek Business Services Corp. (the “Company”) to be held electronically via live webcast on June 12, 2020 at 9:00 a.m., local time. Due to the public health impact of the coronavirus, or COVID -19 , pandemic, and to support the health and well -being of our shareholders, service providers, personnel and other stakeholders, the Annual Meeting will be held solely on the internet by virtual means. The live webcast will be accessible over the internet at http s://web.lumiagm.com/2195 97142 . Shareholders will NOT be able to attend the Annual Meeting in -person . However, a shareholder may request the Company to provide a physical location from which to access the virtual meeting, subject to any restrictions in effect under federal or state law. Shareholders must submit their request for a physical location to the Company by close of business on June 3, 2020.

The attached Notice of Annual Meeting and Proxy Statement describe the formal business to be transacted at the Annual Meeting. Also enclosed is a Proxy Card and the Company’s Annual Report on Form 10 -K for the year ended December 31, 2019.

As an integral part of the Annual Meeting, we will report on the operations of the Company. Directors and Officers of the Company and a representative of the Company’s independent accountants will be present to respond to any questions that our shareholders may have. Detailed information concerning our activities and operating performance is contained in our enclosed Annual Report.

YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. On behalf of the Company’s Board of Directors, we urge you to please sign, date and return the enclosed Proxy Card in the enclosed postage -prepaid envelope or vote by telephone or internet as soon as possible even if you currently plan to attend the Annual Meeting electronically via the live webcast. This will not prevent you from voting electronically via the live webcast, but will assure that your vote is counted if you are unable to attend the Annual Meeting.

 

Sincerely yours,

   

/s/ Barry Sloane

   

Barry Sloane

   

Chairman, President and Chief Executive Officer

 

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to Be Held on June 12, 2020.

Our Proxy Statement and Annual Report on Form 10 -K for the year ended December 31, 2019 are available on the internet at http://www.astproxyportal.com/ast/19720 .

The following information applicable to the Annual Meeting may be found in the Proxy Statement and accompanying Proxy Card:

•         The date, time and location of the Annual Meeting;

•         A list of the matters intended to be acted on and our recommendations regarding those matters;

•         Any control/identification numbers that you need to access your Proxy Card; and

•         Information about virtually attending the Annual Meeting and voting electronically via the live webcast.

 

NEWTEK BUSINESS SERVICES CORP.
4800 T-Rex Avenue, Suite 120
Boca Raton, FL 33431
(212) 356-9500

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on June 12, 2020

To the Shareholders of Newtek Business Services Corp.:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the “Annual Meeting”) of Newtek Business Services Corp. (the “Company”) will be held electronically via live webcast on June 12, 2020 at 9:00 a.m., local time. Due to the public health impact of the coronavirus, or COVID -19 , pandemic, and to support the health and well -being of our shareholders, service providers, personnel and other stakeholders, the Annual Meeting will be held solely on the internet by virtual means. The live webcast will be accessible over the internet at htt ps://web.lumiagm.com/219597 142 . Shareholders will NOT be able to attend the Annual Meeting in -person . However, a shareholder may request the Company to provide a physical location from which to access the virtual meeting, subject to any restrictions in effect under federal or state law. Shareholders must submit their request for a physical location to the Company by close of business on June 3, 2020.

The Annual Meeting is for the following purposes, which are more completely described in the accompanying Proxy Statement:

1.      To elect two directors of the Company to serve on the Board of Directors until the Company’s Annual Meeting of Shareholders in 2023 and until their successors are duly elected and qualified;

2.      To ratify the selection of RSM US LLP as the Company’s independent registered accounting firm (independent auditors) for the fiscal year ending December 31, 2020;

3.      To conduct an advisory vote on the compensation of our named executive officers; and

4.      To transact such other business as may properly come before the Annual Meeting or any adjournment thereof.

The Board of Directors is not aware of any other business to come before the Annual Meeting.

Any action may be taken on any one of the foregoing proposals at the Annual Meeting or any adjournments thereof. Shareholders of record at the close of business on April 29, 2020 are entitled to vote at the Annual Meeting and any adjournment thereof.

We ask that you fill in and sign the enclosed Proxy Card which is solicited by the Board of Directors and to mail it promptly in the enclosed envelope. You may also cast your vote by telephone or internet as shown on the Proxy Card. The proxy will not be used if you attend and vote at the Annual Meeting during the live webcast.

 

BY ORDER OF THE BOARD OF DIRECTORS

   

/s/ BARRY SLOANE

   

BARRY SLOANE

   

CHAIRMAN, CHIEF EXECUTIVE OFFICER AND PRESIDENT

Boca Raton, Florida
May 13, 2020

IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF A FURTHER REQUEST FOR PROXIES IN ORDER TO INSURE A QUORUM. A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED STATES. EVEN IF YOU VOTE YOUR SHARES PRIOR TO THE MEETING, YOU STILL MAY ATTEND THE MEETING AND VOTE YOUR SHARES ELECTRONICALLY VIA THE LIVE WEBCAST IF YOU WISH TO CHANGE YOUR VOTE.

 

PROXY STATEMENT

NEWTEK BUSINESS SERVICES CORP.
4800 T-Rex Avenue, Suite 120
Boca Raton, FL 33431
(212) 356-9500

ANNUAL MEETING OF SHAREHOLDERS
June 12, 2020

INTRODUCTION

This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of Newtek Business Services Corp. (the “Company”) for the Annual Meeting of Shareholders (the “Annual Meeting”) to be held electronically via live webcast on June 12, 2020 at 9:00 a.m., local time. Due to the public health impact of the coronavirus, or COVID -19 , pandemic, and to support the health and well -being of our shareholders, service providers, personnel and other stakeholders, the Annual Meeting will be held solely on the internet by virtual means. The live webcast will be accessible over the internet at https://web.lumiagm.com/219597142 . Shareholders will NOT be able to attend the Annual Meeting in -person . However, a shareholder may request the Company to provide a physical location from which to access the virtual meeting, subject to any restrictions in effect under federal or state law. Shareholders must submit their request for a physical location to the Company by close of business on June 3, 2020.

The accompanying Notice of Annual Meeting and this Proxy Statement, together with the enclosed Proxy Card, are first being mailed to shareholders on or about May 13, 2020.

BELOW IS IMPORTANT INFORMATION ABOUT HOW YOU MAY OBTAIN VIRTUAL
ACCESS TO THE ANNUAL MEETING AND VOTE YOUR SHARES.

Attending the Annual Meeting Virtually

Only record or beneficial owners of the Company’s common stock as of the close of business on April 29, 2020 (the “Record Date”) or their proxies may virtually attend the Annual Meeting. To participate in the virtual annual meeting, go to https://web.lumiagm.com/219597142 .

If you are a shareholder of record as of April 29, 2020, the Record Date for the Annual Meeting, you should go to https://web.lumiagm.com/219597142 prior to the start of the Annual Meeting at 9:00 a.m., local time, on June 12, 2020, click on “I have a login,” enter the control number found on your Proxy Card or Notice of Internet Availability of Proxy Materials you previously received, and enter the password “ newtek2020 ” (the password is case sensitive).

If your shares are held in “ street name ” through a broker, bank or other nominee, in order to participate in the virtual Annual Meeting you must first obtain a legal proxy from your broker, bank or other nominee reflecting the number of shares of Company common stock you held as of the Record Date, your name and email address. You then must submit a request for registration to American Stock Transfer & Trust Company, LLC: (1) by email to proxy@astfinancial.com; (2) by facsimile to 718 -765-8730 or (3) by mail to American Stock Transfer & Trust Company, LLC, Attn: Proxy Tabulation Department, 6201 15 th Avenue, Brooklyn, NY 11219. Requests for registration must be labeled as “Legal Proxy” and be received by American Stock Transfer & Trust Company, LLC by no later than 5:00 p.m. Eastern time on June 3, 2020 .

How Do You Exercise Your Rights to Vote on the Proposals?

You may vote using any of the following methods:

By Mail — Shareholders of record may submit proxies by completing, signing and dating each Proxy Card received and returning it in the prepaid envelope. Sign your name exactly as it appears on the proxy. If you return your signed proxy but do not indicate your voting preferences, your shares will be voted on your behalf “FOR” the election of the nominee for director, “FOR” the ratification of RSM US LLP (“RSM”) as the Company’s independent registered public accounting firm for 2020, and “FOR” approval of the advisory vote on the compensation of the named

1

executive officers. Shareholders who hold shares beneficially in street name may provide voting instructions by mail by completing, signing and dating the voting instruction forms provided by their brokers, banks or other nominees.

By Telephone — Shareholders of record may submit proxies by following the telephone voting instructions on each Proxy Card. Most shareholders who hold shares beneficially in street name may provide voting instructions by telephone by calling the number specified on the voting instruction form provided by their brokers, banks or nominees. Please check the voting instruction form for telephone voting availability. Please be aware that if you submit voting instructions by telephone, you may incur costs such as telephone access charges for which you will be responsible. The telephone voting facilities will close at 11:59 p.m., Eastern Daylight Savings Time, the day before the meeting date.

By Internet — Shareholders of record with internet access may submit proxies by following the internet voting instructions on their Proxy Cards. Most shareholders who hold shares beneficially in street name may provide voting instructions by accessing the website specified on the voting instruction form provided by their brokers, banks or nominees. Please check the voting instruction form for internet voting availability. Please be aware that if you vote over the internet, you may incur costs such as internet access charges for which you will be responsible. The internet voting facilities will close at 11:59 p.m., Eastern Daylight Time, the day before the meeting date.

Virtually at the Annual Meeting — If you are a shareholder of record as of April 29, 2020, the Record Date for the Annual Meeting, you may vote during the virtual annual meeting by (a) visiting www.voteproxy.com and following the on screen instructions (have your proxy card or Notice of Internet Availability of Proxy Materials available when you access the webpage), or (b) calling toll -free 1 -800-PROXIES (1 -800-776-9437 ) in the U.S. or 1 -718-921-8500 from foreign countries from any touch -tone phone and follow the instructions (have your proxy card or Notice of Internet Availability of Proxy Materials available when you call).

If your shares are held in “street name” through a bank, broker or other nominee, in order to vote during the virtual Annual Meeting you must first obtain a “legal proxy” from your bank, broker or other nominee and register with American Stock Transfer & Trust Company, LLC, as described above, in order for you to participate in the virtual Annual Meeting. You then may vote by following the instructions provided to you by American Stock Transfer & Trust Company.

Whether or not you expect to participate in the virtual Annual Meeting, the Board of Directors urges shareholders to submit a proxy to vote your shares in advance of the Annual Meeting by (a) visiting www.voteproxy.com and following the on screen instructions (have your proxy card or Notice of Internet Availability of Proxy Materials available when you access the webpage), or (b) calling toll -free 1 -800-PROXIES (1 -800-776-9437 ) in the U.S. or 1 -718-921-8500 from foreign countries from any touch -tone phone and follow the instructions (have your proxy card or Notice of Internet Availability of Proxy Materials available when you call), or (c) submitting your proxy card by mail by using the previously provided self -addressed , stamped envelope. Submitting a proxy will not prevent you from revoking a previously submitted proxy or changing your vote as described above, but it will help to secure a quorum and avoid added solicitation costs.

Shareholders who execute the enclosed Proxy Card retain the right to revoke such proxies at any time prior to voting. Unless so revoked, the shares represented by properly executed proxies will be voted at the Annual Meeting and all adjournments thereof. Proxies may be revoked at any time prior to exercise by written notice to the Secretary of the Company or by the filing of a properly executed, later -dated proxy. A proxy will not be voted if a shareholder virtually attends the Annual Meeting and votes during the live webcast. The virtual presence of a shareholder at the Annual Meeting alone will not revoke such shareholder’s proxy. Shareholders have no dissenters’ or appraisal rights in connection with any of the proposals described herein.

2

What is the Vote Required for Each Proposal?

Proposal

 

Vote Required

 

Broker
Discretionary
Voting
Allowed?

 

Effect of Abstentions and
Broker Non-Votes

Proposal I — Election of Directors

 

Affirmative vote of a plurality of all votes cast at the Annual Meeting

 

No

 

Broker non -votes are not counted as votes cast for purposes of the election of a director nominee and, therefore, will have no effect on the outcome of such election. A proxy marked “withhold” with respect to the director nominee will result in the director nominees receiving one fewer “FOR” vote that would count towards a plurality.

Proposal II — Ratification of Appointment of Independent Auditors

 

Affirmative vote of a majority of the votes cast at the Annual Meeting

 

Yes

 

Abstentions and broker non -votes will not be counted as votes cast and will have no effect on the result of the vote.

Proposal III — Advisory Vote on Compensation of Named Executive Officers

 

Affirmative vote of a majority of the votes cast at the Annual Meeting

 

No

 

Abstentions and broker non -votes will not be counted as votes cast and will have no effect on the result of the vote.

VOTING AND REVOCATION OF PROXIES

Proxies solicited by the Board of Directors of the Company will be voted in accordance with the directions given therein. If any other matters are properly brought before the Annual Meeting as to which proxies confer discretionary authority, the persons named in the proxy will vote the shares represented thereby on such matters as determined by a majority of the Board of Directors. The proxies solicited by the Board of Directors confer discretionary authority on the persons named therein to vote with respect to the election of any person as a director where the nominee is unable to serve or for good cause will not serve, with respect to matters incident to the conduct of the Annual Meeting and with respect to any other matter presented at the Annual Meeting if notice of such matter has not been delivered to the Company within a reasonable time before the date of this Proxy Statement. Proxies marked as abstentions will not be counted as votes cast. In addition, shares held in street name that have been designated by brokers on Proxy Cards as not voted (“broker non -votes ”) will not be counted as votes cast, however brokers are allowed discretionary votes with respect to the proposal relating to the ratification of the Company’s independent registered accounting firm. Proxies marked as abstentions or as broker non -votes will be treated as shares present for purposes of determining whether a quorum is present.

VOTING SECURITIES

The securities which can be voted at the Annual Meeting consist of the Company’s common shares, $0.02 par value per share (“Common Shares”). Shareholders of record as of the close of business on the Record Date are entitled to one vote for each Common Share then held on all matters. As of the Record Date, approximately 20,906,745 Common Shares were issued and outstanding. The presence, electronically via the live webcast or by proxy, of at least a majority of the total number of Common Shares outstanding and entitled to vote will be necessary to constitute a quorum at the Annual Meeting.

Persons and groups owning in excess of 5% of Company’s Common Shares are required to file certain reports regarding such ownership with the Securities and Exchange Commission (“SEC”) pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

3

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of April 13, 2020, the beneficial ownership of each current director, the nominee for director, the Company’s executive officers, each person known to us to beneficially own 5% or more of the outstanding Common Shares, and the executive officers and directors as a group. Percentage of beneficial ownership is based on 20,906,745 Common Shares outstanding as of April 22, 2020. Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the securities. If applicable and available, ownership information for those persons who beneficially own 5% or more of our Common Shares is based upon filings by such persons with the SEC and other information obtained from such persons.

Unless otherwise indicated, the Company believes that each beneficial owner set forth in the table has sole voting and investment power. The Company’s directors are divided into two groups — interested directors and independent directors. Interested directors are “interested persons” of the Company as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended (the “1940 Act”). Unless otherwise indicated, the addresses of all executive officers and directors are c/o Newtek Business Services Corp.,4800 T -Rex Avenue, Suite 120, Boca Raton, FL 33431.

Name of Beneficial Owner

 

Number of
Shares
Beneficially
Owned

 

Percent of
Class

Interested Directors:

       

 

Barry Sloane (1)

 

1,148,673

 

5.5

%

Peter Downs (2)

 

38,665

 

*

 

Independent Directors:

       

 

Gregory Zink (5)

 

15,838

 

*

 

Salvatore Mulia (5)

 

67,910

 

*

 

Richard Salute (5)

 

15,860

 

*

 

Executive Officers:

       

 

Christopher Towers (3)

 

2,325

 

*

 

Michael Schwartz (4)

 

19,314

 

*

 

All current directors and executive officers as a group (7)

 

1,311,364

 

6.3

%

____________

*        Less than 1% of total Common Shares outstanding as of the Record Date.

(1)      Includes 96,221 Shares owned by The B Sloane Family Foundation, a 501(c)(3) private foundation, of which Mr. Sloane shares voting and dispositive power, and 58,480 restricted Common Shares awarded to Mr. Sloane in February 2018, plus accrued dividends through March 31, 2020, with a three -year vesting period.

(2)      Includes 13,158 restricted Common Shares awarded in February 2018 with a three -year vesting period and 1,446 restricted Common Shares awarded in April 2019 with a one year vesting period, plus accrued dividends through March 31, 2020.

(3)      Includes 1,446 restricted Common Shares awarded in April 2019 with a one year vesting period, plus accrued dividends through March 31, 2020.

(4)      Includes 8,772 restricted Common Shares awarded in February 2018 with a three -year vesting period and 1,446 restricted Common Shares awarded in April 2019 with a one year vesting period, plus accrued dividends through March 31, 2020.

(5)      Includes 1,332 restricted Company Shares awarded in June 2019 as equity -based compensation to each non -employee director at the beginning of their 2019 terms of service, which forfeiture restrictions will lapse as to one -third of such Company Shares each year for three years, plus accrued dividends through March 31, 2020.

4

Dollar Range of Equity Securities in the Company Beneficially Owned by Each Director:

Name of Director

 

Dollar Range of Equity Securities in
Newtek
Business Services Corp. (1)(2)

Interested Directors:

   

Barry Sloane

 

Over $100,000

Peter Downs

 

Over $100,000

Independent Directors:

   

Richard Salute

 

Over $100,000

Salvatore Mulia

 

Over $100,000

Gregory Zink

 

Over $100,000

____________

(1)      Dollar ranges are as follows: 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 is based on the closing price for our Common Shares of $15.88 on April 13, 2020 on the Nasdaq Global Market. Beneficial ownership has been determined in accordance with Rule 13d -3 of the Exchange Act.

5

PROPOSAL I — ELECTION OF DIRECTORS

Our Board of Directors currently consists of five directors serving in three classes. Each director holds office for the term to which he or she is elected and until his or her successor is duly elected and qualified. Barry Sloane and Peter Downs serve in Class I, with terms expiring at the 2021 annual meeting; Gregory Zink serves in Class II, with a term expiring at the 2022 annual meeting; and Richard Salute and Salvatore Mulia serve in Class III, with terms expiring at the 2020 annual meeting.

Messrs. Salute and Mulia have been nominated for re -election for terms expiring in 2023. Messrs. Salute and Mulia are not being nominated as directors for election pursuant to any agreements or understandings between Messrs. Salute and Mulia and the Company. Messrs. Salute and Mulia have indicated their willingness to continue to serve if elected and have consented to be named as nominees. Messrs. Salute and Mulia are not “interested persons” of the Company, as such term is defined under the 1940 Act.

A shareholder can vote for or withhold his or her vote for the nominees. In the absence of instructions to the contrary, it is the intention of the persons named as proxies to vote such proxy FOR the election of the nominees named in this Proxy Statement. If a nominee should decline or be unable to serve as a director, it is intended that the proxy will be voted for the election of the person nominated by our Board of Directors as a replacement. Our Board of Directors has no reason to believe that the nominees will be unable or unwilling to serve.

Required Vote

The director nominees shall be elected by a plurality of all the votes cast at the Annual Meeting, electronically via the live webcast or by proxy, if a quorum is present. Shareholders may not cumulate their votes. If you vote “withhold authority” with respect to a nominee, your shares will not be voted with respect to the person indicated. Because directors are elected by a plurality of the votes, an abstention will have no effect on the outcome of the vote and, therefore, is not offered as a voting option for this proposal. Common Shares represented by broker non -votes are not considered votes cast, and thus have no effect on this proposal.

Information about the Directors and Executive Officers

Set forth below is information, as of April 29, 2020, regarding Messrs. Salute and Mulia who are being nominated for election as directors of the Company at the Annual Meeting, as well as information about our other current directors whose terms of office will continue after the Annual Meeting. Included below is specific information about each director’s experience, qualifications, attributes or skills that led the Board of Directors to the conclusion that the individual is qualified to serve on our Board, in light of our business and structure.

(1)    The business addresses of the director nominee and the other directors are c/o Newtek Business Services Corp., 4800 T -Rex Avenue, Suite 120, Boca Raton, FL 33431.

6

Nominees for Class III Directors — Terms Expiring 2023

Name, Address, and Age (1)

 

Position(s)
Held with the
Company

 

Term 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

Current Independent Director:

               

Messrs. Salute and Mulia are not “interested persons” of the Company as defined in the 1940 Act.

               

Richard Salute, 74

 

Director

 

Class III Director since 2015; Term expires 2020

 

Capital Markets and SEC Practice Director at J.H. Cohn and CohnReznick LLP; Partner at Arthur Andersen; Chief Financial Officer, PAVmed Inc., June 2014 through September 2015;

 

Director, Walker Innovation Inc., 2015 – 2018

Mr. Salute served as Capital Markets and SEC Practice Director at J.H. Cohn and CohnReznick LLP from 2004 to 2014. Prior to that, he spent 29 years, from 1972 to 2001, at Arthur Andersen managing complex audits for public and private companies. During his tenure, he was responsible for providing clients with strategic planning services as well as consulting on corporate finance, mergers and acquisitions, and process evaluation. His clients included large multinational companies and entrepreneurial start -ups . In addition to his client responsibilities, he started three business lines for Arthur Anderson: the Enterprise Group (New York Metropolitan area), the Technology Practice (New York office) and the Bankruptcy and Corporate Recovery Practice (nationwide). More recently, Mr. Salute served as Chief Financial Officer of PAVmed Inc. from June 2014 to September 2015. Mr. Salute is a graduate of Adelphi University and a member of the American Institute of Certified Public Accountants and the New York State Society of Certified Public Accountants. Mr. Salute also served as a director of Walker Innovation Inc. from 2015 through 2018.

Mr. Salute has more than 39 years of audit, accounting, and tax experience. His extensive audit, accounting, and tax experience and relationships with industry players are an asset to our Board of Directors. Mr. Salute’s expertise and experience also qualify him to serve as chairman of the Audit Committee and as the Audit Committee Financial Expert. Mr. Salute’s experience with SEC matters includes numerous initial public offerings and his experience representing publicly traded, as well as over -the-counter market traded, clients provides a significant addition to the Board of Directors

Salvatore Mulia, 72

 

Director

 

Class III
Director since 2005;
Term expires 2020

 

Financial advisor at RTM Financial Services

Prior to his retirement in 2017, Mr. Mulia was a financial advisor and principal at RTM Financial Services, Westport, CT, a firm he founded with his wife. RTM was involved in advising small business with an emphasis on leasing and lending advisory services since February 2003. From February 2001 to February 2003, Mr. Mulia was Executive Vice President of Pitney Bowes Capital Corp, Shelton, CT which was engaged in providing financial services to business customers. Prior to that, from 1980 to 1993, Mr. Mulia held senior management positions within General Electric’s Financial Services Division, GE Capital Corporation (“GECC”), and during that time, from 1980 through 1993 he was responsible for developing new products and business initiatives in financial services. During his tenure at GECC Mr. Mulia was a principal in GEVEST, GECC’s investment banking unit, where he headed syndication and led acquisition teams which acquired leasing companies including TransAmerica Leasing, Chase Manhattan’s leasing subsidiary and LeaseAmerica.

7

Mr. Mulia’s experience in the financial services industry, as well as his experience with smaller to mid -sized companies needing capital and debt and his understanding of these businesses provides a significant addition to our Board of Directors. His understanding of the dynamics of these businesses has been particularly helpful in addressing similar issues of the Company and this experience provides a significant addition to the Board of Directors.

Incumbent Class I Directors — Term Expiring 2021

Name, Address, and Age (1)

 

Position(s)
Held with the
Company

 

Term 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

Current Interested Director Nominees:

               

Messrs. Sloane and Downs are “interested persons” of the Company as defined in the 1940 Act.

               

Barry Sloane, 60

 

Director, Chief Executive Officer, and President

 

Class I Director since 1999; Term expires 2021

 

Chairman of the Board of Directors, Chief Executive Officer, President and founder of the Company; Executive Officer of each of the Company’s controlled portfolio companies.

   

Mr. Sloane has served as our Chairman and Chief Executive Officer since 1999 and as our President since 2008. Mr. Sloane founded Newtek in 1998 and is an executive officer of each of the Company’s controlled portfolio companies. In addition, in April 2015, Mr. Sloane became a director with AK Capital LLC, a securities brokerage company, a position he left in 2019. From September 1993 through July 1995, Mr. Sloane was a Managing Director of Smith Barney, Inc. While there, he directed the Commercial and Residential Real Estate Securitization Unit, and he was national sales manager for institutional mortgage and asset backed securities sales. From April 1991 through September 1993, Mr. Sloane was founder and President of Aegis Capital Markets, a consumer loan origination and securitization business which was eventually taken public with the name of “Aegis Consumer Funding.” From October 1988 through March 1991, Mr. Sloane was Senior Vice President of Donaldson, Lufkin and Jenrette, where he was responsible for directing sales of mortgage -backed securities. From August 1982 to September 1988, Mr. Sloane was a senior mortgage security salesman and trader for Bear Stearns, L.F. Rothschild, E.F. Hutton and Paine Webber.

Mr. Sloane’s broad business and financial experience and his knowledge of the Company’s businesses have been of great value to the other members of the Board and qualify him to serve on our Board of Directors and as the Chairman of our Board of Directors.

Peter Downs, 55

 

Director, Chief Lending Officer

 

Class I Director since 2014; Term expires 2021

 

Chief Lending Officer of the Company; President of Newtek Small Business Finance, LLC

Mr. Downs is the Company’s Chief Lending Officer and was appointed as director in connection with the Company’s conversion to a business development company on November 12, 2014. Mr. Downs joined the Company in 2003 and has been the President of Newtek Small Business Finance, LLC (“NSBF”) and a member of the board of directors and Risk Committee for NSBF. He has had primary responsibility for the development of the Company’s lending policies and procedures, portfolio and marketing, from its inception. Prior to joining Newtek in 2003, Mr. Downs spent sixteen years in various small business lending roles within the banking industry. From 1990 to 2001, he

8

was employed with European American Bank (“EAB”), where he held various positions including New Business Development Officer for Small Business Lending and Group Manager of Retail Small Business Lending which encompassed the underwriting and servicing of the bank’s small business loan portfolio. Subsequent to EAB’s acquisition by Citibank, Mr. Downs ran the bank’s SBA lending portfolio in New York, and eventually was named the National Director of SBA lending, after which he was responsible for coordinating the bank’s SBA underwriting and sales efforts in all Citibank markets across the country. In addition to his banking experience, he has been involved in several non -profit small business advisory boards, and has been a member of the National Association of Government Guaranteed Lenders (NAGGL) Regional Technical Issues Committee.

Mr. Down’s history with the Company and extensive experience in the small business lending space, including U.S. Small Business Administration (SBA) 7(a) lending, provides our Board of Directors with the valuable insight of an experienced lender.

Incumbent Class II Director — Term Expiring 2022

Name, Address, and Age (1)

 

Position(s)
Held with the
Company

 

Term 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

Current Independent Director:

               

Mr. Zink is not an “interested person” of the Company as defined in the 1940 Act.

               

Gregory Zink, 63

     

Class II Director since 2017; Term expires 2022

 

Management Consultant, Lowell Group, LLC; NGJ Brand Solutions, CEO, CFO and Director; Exigo, International Sales Director

   

From 1998 to -date , Mr. Zink has been the principal of the Lowell Group, LLC, a management consulting firm which provides strategic, operational, marketing and financial consulting assistance to start -up , small and medium size businesses. From 1988 through 2018, Mr. Zink served as the Chief Executive Officer, Chief Financial Officer and Director of NGJ Brand Solutions, an international distributor of commercial fitness equipment and solutions provider in the Asia Pacific region. Beginning in 2018, Mr. Zink has been the Asia Pacific Sales Director of Exigo, a U.K. manufacturer of commercial fitness equipment and provider of programming solutions for fitness and wellness centers. Mr. Zink was an Executive Vice President of the Company from 2000 to 2005. Mr. Zink was also previously employed by Touche Ross/Deloitte Consulting, AT&T, and is a graduate of the General Electric Financial Management Program. Mr. Zink attended Pennsylvania State University and has an MBA from the Wharton School of Business at the University of Pennsylvania.

Mr. Zink’s professional experience provides a significant addition to the Board of Directors. Mr. Zink’s many years of experience providing consulting and financial advice to small and medium sized businesses, provides a significant addition to the Board of Directors.

The Board of Directors and Board of Directors Meetings

Newtek’s Board of Directors and management are committed to responsible corporate governance to ensure that the Company is managed for the long -term benefit of its shareholders. To that end, the Board of Directors and management periodically review and update, as appropriate, the Company’s corporate governance policies and practices. In doing so, the Board of Directors and management review published guidelines and recommendations of institutional shareholder organizations and current best practices of similarly situated public companies. The

9

Board of Directors and management also regularly evaluate and, when appropriate, revise the Company’s corporate governance policies and practices in accordance with the requirements of the Sarbanes -Oxley Act of 2002 and the rules and listing standards issued by the SEC and The Nasdaq ® Stock Market, Inc. (“Nasdaq”) where the Company’s Common Shares are listed and traded.

During the fiscal year ended December 31, 2019, the Board of Directors held a total of 17 meetings, the Audit Committee held 4 meetings and the Compensation, Corporate Governance and Nominating Committee held 4 meetings. Each of the incumbent directors attended at least 75% of the aggregate of the Board of Directors meetings and meetings of the committee(s) on which he served held during the last fiscal year and while he served as a director. All members of the Board of Directors make a diligent effort to attend all board and committee meetings, as well as the Annual Meeting of Shareholders. In 2019, all members of the Board of Directors attended the Annual Meeting of Shareholders.

Corporate Governance Policies

The Company has adopted corporate governance policies which are available at the Investor Relations page of www.newtekone.com ( http://investor.newtekbusinessservices.com/corporate -governance .cfm ). The corporate governance policies are also available in print to any shareholder who requests them. These policies were adopted by the Board of Directors, among other things, to best ensure that the Board of Directors is independent from management, that the Board of Directors adequately performs its function as the overseer of management and to help ensure that the interests of the Board of Directors and management align with the interests of the shareholders.

On an annual basis, each director and executive officer is obligated to complete a Directors’ and Officers’ Questionnaire which requires disclosure of any transactions with the Company in which the director or executive officer, or any member of his or her immediate family, have a direct or indirect material interest.

Committees of the Board of Directors

The Board of Directors currently has two standing committees: the Audit Committee and the Compensation, Corporate Governance and Nominating Committee. Each member of these committees is independent as defined by applicable Nasdaq and SEC rules. A brief description of each committee is included in this Proxy Statement and each of the committees has a written charter approved by the Board of Directors, which is available the Investor Relations page of our website at www.newtekone.com ( http://investor.newtekbusinessservices.com/corporate -governance .cfm ).

Audit Committee.     The Board of Directors has established an Audit Committee in accordance with the Exchange Act. The Audit Committee consists of Messrs. Salute, Mulia and Zink, none of whom are “interested persons” as defined in the 1940 Act, and operates pursuant to its written Charter. Mr. Salute serves as Chair of the Audit Committee and currently serves as the “audit committee financial expert,” as defined under applicable SEC rules. The Audit Committee is authorized to examine and approve the audit report prepared by the independent auditors of the Company, to review and select the independent auditors to be engaged by the Company, to review the internal accounting controls and audit policies. In addition, the Board of Directors has determined that all members of the Audit Committee are “financially literate” as that term is defined by applicable Nasdaq and SEC rules.

Compensation, Corporate Governance and Nominating Committee.     The Board of Directors has established a Compensation, Corporate Governance and Nominating Committee. The Company’s Compensation, Corporate Governance and Nominating Committee consists of Messrs. Mulia, Salute and Zink, none of whom are “interested persons” as defined in the 1940 Act, and operates pursuant to its written Charter. Mr. Mulia currently serves as Chair of the Compensation, Corporate Governance and Nominating Committee. The Compensation, Corporate Governance and Nominating Committee evaluates the compensation and benefits of the directors, officers and employees, recommends changes, and monitors and evaluates employee performance. The Compensation, Corporate Governance and Nominating Committee is generally responsible for identifying corporate governance issues, creating corporate governance policies, identifying and recommending potential candidates for election to the Board of Directors, review and approve conflict of interest or related party transactions and reviewing executive and director compensation and performance.

The Compensation, Corporate Governance and Nominating Committee seeks candidates who possess the background, skills, and expertise to make a significant contribution to the Board of Directors, the Company, and its shareholders. In considering possible candidates for election as a director, the Compensation, Corporate Governance

10

and Nominating Committee will take into account, in addition to such other factors as it deems relevant, the desirability of selecting candidates who:

•         Are of the highest character and integrity;

•         Are free of any conflict of interest;

•         Are willing and able to devote sufficient time to the affairs of the Company; and

•         Have the capacity and desire to represent the best interests of the shareholders.

The Compensation, Corporate Governance and Nominating Committee has not adopted a formal policy with regard to the consideration of diversity in identifying director nominees. In determining whether to recommend a director nominee, the Compensation, Corporate Governance and Nominating Committee considers and discusses diversity, among other factors, with a view toward the needs of the Board of Directors as a whole. The Compensation, Corporate Governance and Nominating Committee generally conceptualizes diversity expansively to include, without limitation, concepts such as race, gender, national origin, differences of viewpoint, professional experience, education, skill and other qualities that contribute to the Board of Directors, when identifying and recommending director nominees. The Compensation, Corporate Governance and Nominating Committee believes that the inclusion of diversity as one of many factors considered in selecting director nominees is consistent with the Compensation, Corporate Governance and Nominating Committee’s goal of creating a Board of Directors that best serves the needs of the Company and the interest of its shareholders.

Director Independence and Executive Sessions

Nasdaq listing standards and Section 2(a)(19) of the 1940 Act require that a majority of the Board of Directors and every member of our Audit Committee and Compensation, Corporate Governance and Nominating Committee are “independent.” Our Board of Directors reviews the independence of its members annually.

The Board of Directors has determined that Messrs. Mulia, Zink and Salute qualify as “independent” as defined by applicable Nasdaq and SEC rules. In making this determination, the Board of Directors has concluded that none of these members has a relationship which, in the opinion of the Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

It is the policy of the Board of Directors to hold executive sessions of the independent directors meeting without management at the conclusion of regularly scheduled meetings and as requested by a director. Mr. Salute presides over these meetings of the independent directors.

Leadership Structure

The Company currently combines the role of Chairman of the Board of Directors with the role of Chief Executive Officer. Our Board of Directors believes this provides an efficient and effective leadership model for our Company. Combining the Chairman and Chief Executive Officer roles fosters clear accountability, effective decision -making , and alignment on corporate strategy. Mr. Sloane has served as Chairman and Chief Executive Officer of the Company since 1999 and as President since 2008, and is an “interested person” under Section 2(a)(19) of the 1940 Act. The Board of Directors continues to believe that our leadership structure is appropriate since Mr. Sloane has over 25 years of experience in our industry or related businesses, and under his leadership our management team has executed a strategy that has significantly improved our earnings growth, cash flow stability and competitiveness. No single leadership model is right for all companies at all times. Our Board of Directors recognizes that depending on the circumstances, other leadership models might be appropriate. Accordingly, our Board of Directors periodically reviews its leadership structure.

Moreover, our Board of Directors believes that its governance practices provide adequate safeguards against any potential risks that might be associated with having a combined Chairman and Chief Executive Officer. Specifically:

•         three of our five current directors are independent directors;

•         all of the members of our Audit Committee and Compensation, Corporate Governance and Nominating Committee are independent directors;

11

•         our Board of Directors and its committees regularly conduct scheduled, and as needed, meetings in executive session, out of the presence of Messrs. Sloane and Downs and other members of management;

•         our Board of Directors and its committees regularly conduct meetings which specifically include Messrs. Sloane and Downs;

•         our Board of Directors and its committees remain in close contact with, and receive reports on various aspects of the Company’s management and enterprise risk directly from our senior management and independent auditors; and

•         our Board of Directors, including the independent directors, and its committees interact with employees of the Company outside the ranks of senior management.

The Company has not appointed a lead independent director.

Board of Directors Risk Oversight

While management is responsible for identifying, assessing and managing risk, our Board of Directors, at both the full board and committee levels, is responsible for risk oversight with a focus on the most significant risks facing the Company. The Board of Directors’ risk oversight includes, but is not limited to, the following risks:

•         strategic;

•         operational;

•         compliance; and

•         reputational.

During each year, management and the Board of Directors jointly review major risks that the Company prioritizes in the following year. In 2019, the Board of Directors focused on the following areas of risk:

•         determining Newtek’s long -term growth;

•         strategic and operational planning, including investments and the evaluation of the Company’s capital structure and long -term debt financing;

•         overseeing, reviewing and approving management’s estimates of fair value of the Company’s investment portfolio; and

•         legal and regulatory compliance.

The Board of Directors has delegated responsibility for the oversight of specific risks to Board of Directors committees. The Audit Committee oversees risks associated with:

•         the Company’s financial statements and financial reporting; and

•         internal controls over financial reporting.

The Compensation, Governance and Nominating Committee considers the risks associated with:

•         compensation policies and practices;

•         management resources, structure, succession planning and management development;

•         overall governance practices and the structure and leadership of the Board of Directors; and

•         related person transactions and the code of conduct for all employees, officers and directors.

The Board of Directors is kept informed of each committee’s risk oversight and any other activities deemed to engender risk via periodic reports from management and the committee chairs. Our Board of Directors recognizes the importance of risk oversight, and its role is consistent with the Board of Directors’ leadership structure, the

12

Chief Executive Officer and the senior management of the Company. Our senior management is responsible for assessing and managing risk exposure and the Board of Directors, and committees of the Board of Directors provide the oversight consistent with those efforts.

Director Nominations

In considering whether to recommend any particular candidate for inclusion in the Board of Directors’ slate of recommended director nominees, the Compensation, Corporate Governance and Nominating Committee applies the criteria set forth in the Governance Guidelines. These criteria include the candidate’s integrity, business acumen, knowledge of our business and industry, experience, diligence, absence of conflicts of interest and the ability to act in the interest of all shareholders. The committee does not assign specific weights to particular criteria, and no particular criterion is a prerequisite for each prospective nominee. We believe that the backgrounds and qualifications of our directors, considered as a group, should provide a composite mix of experience, knowledge and abilities that will best allow the Board of Directors to fulfill its responsibilities.

Shareholders may recommend individuals to the Compensation, Corporate Governance and Nominating Committee for consideration as potential director candidates by submitting their names, together with appropriate biographical information and background materials. The recommendation should be sent to the Compensation, Corporate Governance and Nominating Committee, c/o Michael A. Schwartz, Corporate Secretary, Newtek Business Services Corp., 1981 Marcus Avenue, Suite 130, Lake Success, New York 11042. Assuming that appropriate biographical and background material has been provided on a timely basis, the Committee will evaluate shareholder -recommended candidates by following substantially the same process, and applying substantially the same criteria, as it follows for candidates recommended by our Board of Directors or others. If the Board of Directors determines to nominate a shareholder -recommended candidate and recommends his or her election, then his or her name will be included in the proposal for election for the next annual meeting.

Shareholders also have the right under our Bylaws to nominate director candidates, without any action or recommendation on the part of the Compensation, Corporate Governance and Nominating Committee or the Board of Directors, by following the procedures set forth under “Shareholder Proposals” in our Proxy Statement. Candidates nominated by shareholders in accordance with the procedures set forth in our Bylaws may be included in our Proxy Statement and solicitation for the next annual meeting.

Code of Ethics

We have adopted, and will maintain, a Code of Ethics that establishes procedures for personal investments and restricts certain personal securities transactions. Personnel subject to the Code of Ethics may invest in securities for their personal investment accounts, including securities that may be purchased or held by us, so long as such investments are made in accordance with the Code’s requirements. Our Code of Ethics generally will not permit investments by our employees in securities that may be purchased or held by us. We may be prohibited under the 1940 Act from conducting certain transactions with our affiliates without the prior approval of our directors who are not interested persons and, in some cases, the prior approval of the SEC. Our current Code of Ethics is posted on the Investor Relations section of our website at http://investor.newtekbusinessservices.com .

Certain Relationships and Related Party Transactions

We have written procedures in place for the review, approval and monitoring of transactions involving the Company and certain persons related to the Company. As a business development company (“BDC”), the Company is prohibited under the 1940 Act from participating in certain transactions with certain of its affiliates without meeting certain requirements, such as the prior approval of the independent directors and, in some cases, the SEC. The affiliates with which the Company may be prohibited from transacting include its officers, directors and employees and any person who owns 5% or more of our outstanding voting securities or controlling or under common control with the Company.

The Board of Directors reviews all potential related party transactions on an ongoing basis, and all such transactions must be approved by the Board of Directors. The Board of Directors reviews such transactions on a case -by-case basis. In addition, the Compensation, Corporate Governance and Nominating Committee or the Board of Directors reviews and approves all compensation -related policies involving our directors and executive officers.

13

The Board of Directors may approve or ratify a related party transaction only if it determines that, under all of the circumstances, the transaction is in, or is not inconsistent with, our best interests. The Board of Directors may impose any conditions on the related person transaction that it deems appropriate.

Mr. Sloane’s nephew Kyle Sloane is employed by one of the Company’s controlled portfolio companies. Kyle Sloane earned in excess of $120,000 for the year ended December 31, 2019. Mr. Sloane’s brother Warren Sloane, who was employed by one of the Company’s controlled portfolio companies during 2019 and prior, is no longer employed by the Company’s controlled portfolio company.

During a portion of 2019, Mr. Sloane was a director with AK Capital LLC, a securities brokerage company. Pursuant to an agreement with AK Capital, AK Capital provided consulting and advisory services to the Company in connection with the sale and/or securitization of participations in SBA guaranteed and unguaranteed SBA 7(a) loans (the “AK Capital Agreement”). The AK Capital Agreement, which was not renewed upon expiration in September 2019, provided for the payment of an annual fee of $10,000, paid monthly over the one -year period of the AK Capital Agreement. During the year ended December 31, 2019, the Company incurred $9,000 in fees from AK Capital pursuant to the AK Capital Agreement.

Director Compensation

The Board of Directors has adopted a plan for compensation of non -employee directors which gives effect to the time and effort required of each of them in the performance of their duties. For 2019, the Board of Directors provided for the payment of annual compensation in the amount of $125,000 for each non -employee director, with no additional fees for committee membership or chairmanship. In addition, pursuant to the terms of the Company’s Amended and Restated 2014 Stock Incentive Plan, non -employee directors may be granted up to 2,000 shares of Company Restricted Stock at the beginning of each one -year term of service on the Board, with one -third of such shares of Restricted Stock vesting on each of the next three anniversaries of the date of grant. In June 2019, the non -employee directors were each granted 1,332 shares of Company Restricted Stock at the beginning of their 2019 terms of service on the Board, with one -third of such shares of Restricted Stock vesting on each of the next three anniversaries of the date of grant.

Directors do not receive any perquisites or other personal benefits from the Company.

Director Summary Compensation Table

The following table discloses the cash, equity awards and other compensation earned, paid or awarded, as the case may be, to each of our current directors during the fiscal years ended December 31, 2019.

Name of Director

 

Fees
earned
or Paid
in Cash
($)

 

Stock
Awards
($) (2)

 

Option
Awards
($) (3)

 

All Other
Compensation
($)

 

Total
($)

Current independent directors:

                   

Salvatore F. Mulia

 

125,000

 

30,000

 

 

 

155,000

Richard Salute

 

125,000

 

30,000

 

 

 

155,000

Gregory Zink

 

125,000

 

30,000

 

 

 

155,000

Interested directors:

                 

Barry Sloane (1)

 

 

 

 

 

Peter Downs (1)

 

 

 

 

 

____________

(1)      As employee directors, Messrs. Sloane and Downs do not receive any compensation for their service as directors. The compensation Messrs. Sloane and Downs receive from the Company as employees is disclosed in the Summary Compensation Table and elsewhere under “EXECUTIVE COMPENSATION.”

(2)      On June 14, 2019, the non -employee directors were each granted 1,332 shares of Company Restricted Stock at the beginning of their 2019 terms of service on the Board, with one -third of such shares of Restricted Stock vesting on each of the next three anniversaries of the date of grant.

14

Chief Executive Officer Pay Ratio

As required by Section 953(b) of the Dodd -Frank Wall Street Reform and Consumer Protection Act (the “Dodd -Frank Act”) and applicable SEC rules, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of our Chief Executive Officer and President, Barry Sloane.

For fiscal year 2019, the median of the annual total compensation of all of our employees (other than Mr. Sloane, our Chief Executive Officer) was $82,767 and the annual total compensation of our Chief Executive Officer, as reported in the Summary Compensation Table, was $1,400,000. Based on this information, our Chief Executive Officer’s 2019 annual total compensation was approximately 16.92 times that of the median of the 2019 annual total compensation of all of our employees.

We selected December 31, 2019 as the date used to identify our “median employee” whose annual total compensation was the median of the annual total compensation of all our employees (other than our Chief Executive Officer) for 2019. As of December 31, 2019, our employee population consisted of 117 individuals, who are located in our Lake Success, New York, Irvine, California, Boca Raton, Florida, and Orlando, Florida offices. To identify our median employee, we compared the annual total compensation for each of our employees, as determined in accordance with the requirements of Item 402(c)(2)(x) of Regulation S -K , which included salary and bonus. In making this determination, we annualized the compensation of 30 employees who were hired in 2019 but did not work for us the entire fiscal year.

15

Executive Compensation

Compensation Discussion and Analysis

2019 Named Executive Officers

This compensation discussion and analysis (“CD&A”) provides 2019 compensation information for the following Named Executive Officers (“NEOs”). References to “2019 NEOs” in this CD&A are references to Messrs. Sloane, Downs, Schwartz and Towers.

Name

 

Age

 

Position

2019 NEOs:

       

Barry Sloane

 

60

 

Chairman, Chief Executive Officer and President

Christopher Towers (1)

 

34

 

Chief Accounting Officer

Peter Downs

 

55

 

Chief Lending Officer; President Newtek Small Business Finance, LLC

Michael A. Schwartz

 

59

 

Chief Legal Officer, Chief Compliance Officer and Corporate Secretary

         

Former NEO:

       

Jennifer Eddelson (2)

 

53

 

Executive Vice President and Chief Accounting Officer

____________

(1)      The Company’s Board of Directors appointed Christopher Towers to the position of Chief Accounting Officer effective May 3, 2019.

(2)      Ms. Eddelson resigned from the Company effective May 3, 2019.

Information about NEOs Who Are Not Directors

Christopher Towers has served as Chief Accounting Officer since May 3, 2019. Mr. Towers has served as Vice President of Financial Reporting of the Company since September 2014, with principal responsibility for financial reporting and the development and implementation of the Company’s accounting policies and practices. Mr. Towers is a New York State certified public accountant and previously worked in the corporate reporting group of Pall Corporation from January 2014 to September 2014 and practiced as a CPA for six years with PwC from April 2012 to January 2014 and CohnReznick, LLP (formerly J.H. Cohn, LLP) from October 2008 to March 2012, primarily in the audit of public and private entities. Mr. Towers is a member of the NYS Society of CPAs and the AICPA.

Michael A. Schwartz has served as Chief Legal Officer and Corporate Secretary since January 2015. In October 2015, Mr. Schwartz was appointed the Company’s Chief Compliance Officer. Previously, Mr. Schwartz was Senior Counsel to the Company beginning in November 2013. Prior to joining the Company, Mr. Schwartz spent twenty -two years in private practice specializing in complex litigation in the fields of securities, mergers and acquisitions, corporate governance, commercial law, unfair employment practices, consumer protection and antitrust. Mr. Schwartz served on the Company’s Board of Directors from 2005 through 2009 .

Former NEO

Ms. Eddelson served as the Company’s Chief Accounting Officer from July 1, 2011 until her resignation, which was effective May 3, 2019.

16

Compensation Discussion and Analysis

Introduction

The following CD&A includes our compensation philosophy, a description of our compensation program and the program’s objectives, the elements of compensation used to pay our executives and the compensation -related decisions made with respect to our NEOs as set forth below.

Compensation Philosophy and Objectives

Our compensation programs are designed to attract and retain key employees and to motivate them to achieve, and reward them for achieving, superior performance. Different programs are geared to shorter- and longer -term performance, with the goal of increasing shareholder value over the long -term . Because we believe the performance of every employee is important to our success, we are mindful of the effect of executive compensation and incentive programs on all of our employees.

We believe that the compensation of our executives should reflect their success as a management team, rather than just as individuals, in attaining key operating objectives, such as growth of investment income, growth of net asset value and growth or maintenance of dividends and long -term competitive advantage, and ultimately, in attaining an increased market price for our Common Shares. We believe that the performance of our executives in managing our Company, considered in light of general economic and specific company, industry and competitive conditions, should be the basis for determining their overall compensation. We also believe that their compensation should not be based on the short -term performance of our Common Shares, whether favorable or unfavorable, but rather that the price of our Common Shares, in the long -term , reflect our operating performance and, ultimately, the management of the Company by our executives. We seek to have the long -term performance of our Common Shares reflected in executive compensation through our equity incentive programs, including stock options and restricted stock awards.

Role of Executive Officers in Compensation Decisions

The Committee supervises the design and implementation of compensation policies for all executive officers (which include the NEOs) and overall incentive equity awards to all employees of the Company. Decisions regarding the non -equity compensation of executive officers, other than NEOs, are made by the Chief Executive Officer within the compensation philosophy set by the Committee. Decisions regarding the non -equity compensation of NEOs are made by the Chief Executive Officer and the Committee for consistency with the Company’s compensation policies.

The Chief Executive Officer semi -annually reviews the performance of each member of the senior executive team, including NEOs (other than himself whose performance is reviewed by the Committee). The conclusions reached and recommendations based on these reviews, including with respect to salary adjustments and annual award amounts, are then presented to the Committee by the Chief Executive Officer. The Committee will review and approve the recommendations for consistency with the Company’s compensation policies.

Setting Executive Compensation

During the course of each fiscal year, it has been the practice of the Chief Executive Officer to review the history of all the elements of each executive officer’s total compensation and the Chief Executive Officer may also compare the compensation of the executive officers with that of the executive officers in an appropriate market comparison group of companies with a capitalization similar to that of the Company. We seek to set compensation levels that are perceived as fair, internally and externally, and competitive with overall compensation levels at other companies in our industry, including larger companies from which we may want to recruit employees. However, the Company does not establish individual objectives in the range of comparative data for each individual or for each element of compensation. Typically, the Chief Executive Officer sets compensation with respect to the executive officers who report to him and presents it to the Committee for conformity with the Company’s overall compensation policies. The NEOs are not present at the time of these deliberations. The Committee then performs a similar review of the Chief Executive Officer’s total compensation and makes compensation decisions with respect to such officer, who does not participate in that determination.

17

We choose to pay each element of compensation in order to attract and retain the necessary executive talent, reward annual performance and provide incentive for balanced focus. The amount of each element of compensation is determined by or under the direction of our Committee, which uses the following factors to determine the amount of salary and other benefits to pay each NEO:

•         achievement of income to sustain and grow the Company’s dividend payments;

•         attainment of risk -adjusted returns on the Company’s investment portfolio;

•         performance against competitors for the year;

•         difficulty in achieving desired results in the coming year;

•         value of their unique skills and capabilities to support long -term performance;

•         contribution and growth as a member of the executive management team;

•         professional development and growth of individual executives, the management team and other employees; and

•         managerial assistance provided to our controlled portfolio companies, including contributions to growth of sales, growth of operating earnings and earnings per share.

We do not establish individual goals but focus on the overall profitable growth of our business.

Based on the foregoing objectives, we have structured the Company’s annual and long -term incentive -based cash and non- cash executive compensation to motivate executives to achieve the business goals set by the Company.

There is no pre -established policy or target for the allocation between either cash or non -cash compensation. Historically we have granted a majority of total compensation to executive officers in the form of cash compensation.

For the year ended December 31, 2019, the principal components of compensation for named executive officers were:

•         base salary;

•         performance -based incentive compensation based on the Company’s and the executive’s performance; and

•         retirement and other benefits made available to all employees.

Base Salary

The Company provides NEOs and other employees with base salary to compensate them for services rendered during the fiscal year. Executive base salaries continue to reflect our operating philosophy, our performance driven corporate culture and business direction, with each salary determined by the skills, experience and performance level of the individual executive, and the needs and resources of the Company. Base salaries are generally targeted to market levels and base salary ranges for NEOs are determined for each executive based on his or her position and responsibility by using market data from peer companies and published salary surveys, and the Company generally attempts to fix each NEO’s salary within the range. We believe that the Company’s most direct competitors for executive talent are not necessarily restricted to those companies that are included in the peer company index used to compare shareholder returns, but encompass a broader group of companies engaged in the recruitment and retention of executive talent in competition with the Company.

During the review of base salaries for senior level executives, including the NEOs, we primarily consider:

•         an internal review of each executive’s compensation both individually and relative to other executive officers;

•         individual performance of the executive; and

•         a review of the Company’s dividend growth and adjusted net investment income relative to the Company’s annual plan.

18

Salary levels typically are considered annually as part of the Company’s performance review process as well as upon a promotion or other change in job responsibility. Merit based increases to salaries are based on the Chief Executive Officer’s assessment of the individual’s performance. Merit based increases to the salaries of NEOs other than the Chief Executive Officer are recommended by the Chief Executive Officer and confirmed by the Committee and those for the Chief Executive Officer are determined by the Committee.

Annual Bonus

Annual bonuses may be awarded to executive officers along with the Company’s non -executive employees under the Company’s cash bonus plan. The Company creates a bonus pool based on an annually determined percentage of the salaries of all employees which it accrues as an expense. Payments under the plan are based on the Company’s overall performance as determined by the Chief Executive Officer and the Committee. The Committee determines any bonus for the Chief Executive Officer based on, among other things, a review of the Company’s investment income, net asset value and dividend payments relative to the Company’s annual plans as established by the Board of Directors. The Chief Executive Officer in consultation with the Committee with respect to the NEOs, or in consultation with the NEOs and other senior level officers with respect to lower level employees, determines annual bonuses for other employees based on such employee’s performance. Factors considered include the achievement of business plans, defined goals and performance relative to other companies of a similar size and business strategy. The mix and weighting of the factors vary, depending on the business segment and the executive’s responsibilities. The level of achievement and overall contribution by the executive determines the level of bonus.

Equity-Based Compensation

The Company must compete for leadership with commercial banks, investment banks, and other publicly traded companies not regulated as investment companies, which are generally able to award many different types of stock -based compensation to their directors, (including their non -employee directors,) officers, and employees. Moreover, the Company also must compete for leadership with private equity funds, which generally have the discretion to offer a portion of their various carried interests to induce professional talent to associate with their funds without being required to obtain SEC approval each time. On September 12, 2014, the Board of Directors voted to establish the Newtek Business Services Corp. 2014 Stock Incentive Plan (the “2014 Plan”). The 2014 Plan was approved by shareholders of the Company on October 22, 2014. The 2014 Plan provided for the grant of options to purchase Common Shares, the terms of which will be determined by the Compensation, Corporate Governance and Nominating Committee and set forth in an award agreement between the Company and the executive or employee. The Company has not issued options under the 2014 Plan.

On April 27, 2015, the Compensation, Corporate Governance and Nominating Committee and the Board of Directors approved the Amended and Restated 2014 Stock Incentive Plan (the “2015 Stock Plan”), subject to exemptive relief from the SEC and shareholder approval, in order to have increased flexibility to use restricted Common Shares, in addition to stock options, to assist the Company in achieving its objectives with respect to long -term equity incentive compensation. On May 10, 2016, we received an exemptive order from the SEC permitting us to award restricted Common Shares to our employees, officers, and non -employee directors, and on July 27, 2016, our shareholders approved the 2015 Stock Plan.

The 2015 Stock Plan permits us to issue awards of stock options and restricted Common Shares in an aggregate amount of up to 20% of our issued and outstanding Common Shares (the “Plan Maximum Shares”) as of the effective date of the plan. Under the 2015 Stock Plan, all of the Plan Maximum Shares are available for grants of stock options, and half of the Plan Maximum Shares (up to 10% of our issued and outstanding Common Shares as of the effective date of the 2015 Stock Plan) is available for grants of restricted Common Shares. The Compensation, Corporate Governance and Nominating Committee believes that restricted Common Shares is the best method of encouraging stock ownership in the Company by eligible participants by giving them a proprietary interest in the Company’s performance, which more closely aligns compensation with the Company’s performance and provides a means to attract and retain persons of outstanding ability in key positions with the Company. If in the future we successfully grow our assets under management and our net asset value, we may choose to increase the number of employees of the Company. The Compensation, Corporate Governance and Nominating Committee may or may not choose to consider the use of stock options for incentive compensation of these employees.

19

The Company’s Board of Directors and its Compensation, Corporate Governance and Nominating Committee, which consists entirely of directors who are not employees of the Company, believe that in light of the Company’s plan for growth, stock -based incentive compensation, particularly the award of restricted Common Shares, advances the interests of the Company by providing substantial motivation for superior performance and more fully aligning the interests of officers and directors with the interests of our shareholders.

Benefits and Perquisites

Our NEOs are generally not entitled to benefits that are not available to all of our employees. In this regard, it should be noted that we do not provide pension arrangements, post -retirement health coverage or similar benefits for our executives or employees. The Committee periodically reviews the levels of benefits provided to executive officers. The NEOs participate in the Company’s 401(k) savings plan and other benefit plans on the same basis as other similarly situated employees. The Company has adopted a match for the Company’s 401(k) savings plan which consists of a discretionary match of 50% of the first 2% of employee contributions up to a maximum of 1% of the employee’s compensation (subject to the Internal Revenue Code annual limitation). For 2019, a match of approximately $116,173 in cash was approved and will be paid in May 2020.

Compensation of the Chief Executive Officer

The Committee’s decisions regarding compensation of Mr. Sloane are guided by the same policies and considerations that govern compensation of the Company’s other NEOs. While recognizing the Chief Executive Officer’s leadership in building a highly talented management team and in driving the Company forward, Mr. Sloane’s base salary was $700,000 for 2019 and 2018. Mr. Sloane earned a $700,000 bonus in 2019 that was paid in 2020, and a $600,000 bonus for 2018 that was paid in 2019.

Mr. Sloane received an award of 58,480 restricted Common Shares in February 2018 with a three -year vesting period and did not receive an award of restricted Common Shares in 2019. The Committee has determined that this salary and bonus package is competitive with the labor market median for someone with Mr. Sloane’s skills and talents and is reflective of the Company’s current cash and financial position and the status of the Company’s Common Shares.

Compensation of the Other NEOs

The Committee approved the 2019 compensation for Jennifer Eddelson, Peter Downs, Michael Schwartz and Christopher Towers, as recommended to it by the Chief Executive Officer.

2019 NEOs

Mr. Down’s base salary was $500,000 in 2019 and $450,000 in 2018. Mr. Downs received a $125,000 cash bonus in 2019 (paid in 2020) and a $250,000 cash bonus in 2018 (paid in 2019). Mr. Downs received an award of 1,446 restricted Common Shares in April 2019 with a one year vesting period and an award of 13,158 restricted Common Shares in February 2018 with a three -year vesting period.

Mr. Schwartz’s base salary was $335,000 in 2019 and 2018. Mr. Schwartz received a $200,000 cash bonus in 2019 (paid in 2020) and a $175,000 cash bonus in 2018 (paid in 2019). Mr. Schwartz received an award of 1,446 restricted Common Shares in April 2019 with a one year vesting period and an award of 8,772 restricted Common Shares in February 2018 with a three -year vesting period.

Mr. Towers’ base salary was $240,000 in 2019. Mr. Towers received a $75,000 cash bonus in 2019 (paid in 2020). Mr. Towers received an award of 1,446 restricted Common Shares in April 2019 with a one year vesting period.

Former NEOs

Ms. Eddelson’s base salary was $335,000 in 2019 and 2018. Ms. Eddelson received a $150,000 cash bonus in 2018 (paid in 2019). Ms. Eddelson received an award of 8,772 restricted Common Shares in February 2018 with a three -year vesting period, which shares were forfeited upon her resignation in 2019.

20

Elements of Executive Compensation and 2019 Compensation Determinations

Base Salary .    We believe that base salaries are a fundamental element of our compensation program. The Committee establishes base salaries for each NEO to reflect (i) the scope of the NEO’s industry experience, knowledge and qualifications, (ii) the NEO’s position and responsibilities and contributions to our business growth and (iii) salary levels and pay practices of those companies with whom we compete for executive talent.

The Committee considers base salary levels at least annually as part of its review of the performance of NEOs and from time to time upon a promotion or other change in job responsibilities. During its review of base salaries for our executives, the Committee primarily considers: individual performance of the executive, including leadership and execution of strategic initiatives and the accomplishment of business results for the company; market data; the NEO’s total compensation, both individually and relative to our other NEOs; and for NEOs other than the CEO, the base salary recommendations of our Chief Executive Officer.

The following table sets forth the 2019 and 2018 base salaries for our current NEOs.

 

2019
Base Salary

 

2018
Base Salary

2019 NEOs

 

 

   

 

 

Barry Sloane

 

$

700,000

 

$

700,000

Peter Downs

 

$

500,000

 

$

450,000

Christopher Towers (1)

 

$

240,000

 

$

Michael Schwartz

 

$

335,000

 

$

335,000

   

 

   

 

 

Former NEOs

 

 

   

 

 

Jennifer Eddelson (2)

 

$

335,000

 

$

335,000

____________

(1)      The Company’s Board of Directors appointed Christopher Towers to the position of Chief Accounting Officer effective May 3, 2019.

(2)      On April 12, 2019, Ms. Eddelson resigned from the Company effective May 3, 2019.

Annual Bonus Awards .    The Committee designs our annual cash bonuses to motivate our NEOs to achieve financial and non -financial objectives consistent with our operating plan. The Committee retains discretion in the sizing and awarding of cash bonuses for each NEO to ensure that individual bonus determinations appropriately balance the interests of the Company’s shareholders, while rewarding an NEO’s contributions to performance. In evaluating the performance of our NEOs to arrive at their 2019 cash bonus awards, the Committee considered the factors to determine the amount of salary and other benefits, as set forth above. The Committee also considered the following factors and aspects of the Company’s 2018 operating performance in the determination of specific NEO bonus awards:

•         Declaration of $2.15 per share in cash dividends;

•         Completion of a public offering of $63.3 million in aggregate principal amount of its 5.75% Notes Due 2024;

•         The management of the Company’s at -the-market equity program;

•         Closing of the Company’s tenth and largest small business loan securitization;

•         Managerial assistance provided to our controlled portfolio companies, including contributions to growth of sales, growth of operating earnings and earnings per share;

•         Launch of the Company’s joint venture Newtek Conventional Lending, LLC to provide non -conforming conventional commercial and industrial term loans to U.S. middle -market companies and small businesses; and

•         Each NEO’s specific performance achievements and contributions to the Company’s 2019 financial performance.

21

When allocating bonus awards, the Committee also evaluated the total compensation paid to the NEOs and other employees. Based on the foregoing considerations and analysis, and after due deliberation, the Committee awarded the 2019 NEOs the following annual cash bonuses and award of restricted Common Shares pursuant to the 2015 Stock Plan with respect to 2019.

 

2019 Cash
Bonus Award

 

As Percentage
of 2019 Base
Salary

2019 NEOs

 

 

     

 

Barry Sloane

 

$

700,000

 

100

%

Peter Downs

 

$

125,000

 

25

%

Christopher Towers

 

$

75,000

 

31

%

Michael Schwartz

 

$

200,000

 

60

%

   

 

     

 

Former NEOs

 

 

     

 

Jennifer Eddelson

 

$

 

%

Name

 

Number of
Shares or Units
that have not
Vested
(#)

 

Market Value of
Shares
or Units
of Stock that
have not Vested
($)
(1)

 

Equity Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other Rights
that have not
Vested
(#)

 

Equity
Incentive Plan
Awards: Market
or Payout
Value of
Number of
Unearned
Shares, Units
or Other Rights
that have not
Vested
($)

Barry Sloane

 

 

$

 

 

$

Christopher Towers (2)

 

1,446

 

$

22,962

 

1,613

 

$

25,614

Peter Downs (2)

 

1,446

 

$

22,962

 

1,613

 

$

25,614

Michael A Schwartz (2)

 

1,446

 

$

22,962

 

1,613

 

$

25,614

All Others

 

1,446

 

$

22,962

 

1,613

 

$

25,614

       

 

       

 

 

Former NEOs

     

 

       

 

 

Jennifer Eddelson (3)

 

 

$

 

 

$

____________

(1)      Based on the closing price for our Common Shares of $15.88 on April 13, 2020.

(2)      Received an award of 1,446 restricted Common Shares in April 2019 with a one year vesting period. Total number of shares that have not vested included in the table above include accrued dividends through December 31, 2019

(3)      On April 12, 2019, Ms. Eddelson resigned from the Company effective May 3, 2019.

Conclusion

The Committee believes that attracting and retaining talented and motivated management and employees is essential to creating long -term shareholder value. The Committee seeks to attract and retain management and employees by offering a competitive, performance -based compensation program which the Committee believes aligns the interests of the executive officers and other key employees with those of our Shareholders. We believe that the Company’s 2019 compensation program met those objectives.

Compensation Risk Assessment

Our Compensation, Corporate Governance and Nominating Committee aims to establish Company -wide compensation policies and practices that reward contributions to long -term shareholder value and do not promote unnecessary or excessive risk -taking . In furtherance of this objective, the Committee conducted an assessment of our compensation arrangements, including those for our named executive officers. The assessment process included, among other things, a review of our (1) compensation philosophy, (2) compensation mix and (3) cash and equity -based incentive plans.

22

In its review, among other factors, the Committee considered the following:

•         Our investment model and our cash incentive plan encourage our employees to focus on creating a stable, predictable stream of investment income over multiple years, rather than focusing on current year revenue at the expense of succeeding years.

•         The distribution of compensation among our core compensation elements has effectively balanced short -term performance and long -term performance.

•         Our cash and equity -based incentive awards in conjunction with management efforts focus on both near -term and long -term goals.

•         Our cash and equity -based incentive awards contain a range of performance levels and payouts, to discourage executives from taking risky actions to meet a single target with an all or nothing result of compensation or no compensation.

Our executives are encouraged to hold a meaningful number of Common Shares pursuant to our stock ownership policy. Based upon this assessment, our Compensation, Corporate Governance and Nominating Committee believes that our Company -wide compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on us.

2019 Advisory Vote on Executive Compensation; Continuing Shareholder Engagement

At our 2019 annual meeting of shareholders, our advisory vote on say -on-pay received strong support from our shareholders (approximately 94% of votes cast).

The Committee views as important the continuing dialogue with our shareholders on compensation and other governance matters. The results of the Company’s 2019 advisory vote on say -on-pay represent positive support for the named executive officers’ compensation, but we continue to review our compensation program such that it recognizes the business environment in which the Company operates, control costs, is transparent, and enables employees to make informed decisions. We anticipate continuing our shareholder engagement efforts following the 2020 annual meeting and in advance of our future annual meetings.

Compensation, Corporate Governance and Nominating Committee Interlocks and Insider Participation

All members of the Compensation, Corporate Governance and Nominating Committee are independent directors, and none of them are paid officers of ours or any of our subsidiaries. No member of the Compensation, Corporate Governance and Nominating Committee: (i) has had any relationship with us requiring disclosure under Item 404 of Regulation S -K under the Securities Exchange Act of 1934, as amended; or (ii) is an executive officer of another entity, at which one of our executive officers serves on our Board of Directors.

2019 Compensation, Corporation Governance and Nominating Committee Report

The Compensation, Corporate Governance and Nominating Committee of the Company has reviewed and discussed the foregoing Compensation Discussion and Analysis for fiscal 2019 required by Item 402(b) of Regulation S -K with management and, based on such review and discussions, the Compensation, Corporate Governance and Nominating Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.

THE COMPENSATION, CORPORATE GOVERNANCE AND NOMINATING COMMITTEE

Salvatore Mulia, Chairman
Richard Salute
Gregory Zink

23

Summary Compensation Table

The following tables set forth the aggregate compensation earned by the Company’s Chief Executive Officer, Chief Accounting Officer, and next three most highly compensated executive officers (which we refer to as NEOs) during 2019 and the two previous years.

Name and Principal
Position

 

Year

 

Salary
($)

 

Bonus
($)

 

Stock
Awards (3)
($)

 

Option
Awards (3)

 

Non-Equity
Incentive Plan Compensation
($)

 

Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)

 

All
Other
Compensation
($)

 

Totals
($)

Barry Sloane,

 

2019

 

700,000

 

700,000

(1)

 

 

 

 

 

 

1,400,000

Chief Executive

 

2018

 

683,333

 

600,000

(2)

 

1,000,000

 

 

 

 

 

2,283,333

Officer

 

2017

 

600,000

 

600,000

(4)

 

 

 

 

 

 

1,200,000

             

 

                       

Christopher Towers,

 

2019

 

160,00

 

75,000

(1)

 

30,000

 

 

 

 

 

265,000

Chief Accounting

 

2018

 

 

 

 

 

 

 

 

 

Officer

 

2017

 

 

 

 

 

 

 

 

 

             

 

                       

Peter Downs

 

2019

 

491,667

 

125,000

(1)

 

30,000

 

 

 

 

 

646,667

Chief Lending

 

2018

 

443,333

 

250,000

(2)

 

225,000

 

 

 

 

 

918,333

Officer

 

2017

 

404,167

 

200,000

(4)

 

 

 

 

 

 

604,167

             

 

                       

Michael Schwartz

 

2019

 

335,000

 

200,000

(1)

 

30,000

 

 

 

 

 

565,000

Chief Legal

 

2018

 

329,167

 

175,000

(2)

 

150,000

 

 

 

 

 

654,167

Officer

 

2017

 

295,833

 

150,000

(4)

     

 

 

 

 

445,833

             

 

                       

Former NEOs

           

 

                       

Jennifer Eddelson (5)  

 

2019

 

115,532

 

 

 

 

 

 

 

 

88,894

Chief Accounting

 

2018

 

329,167

 

150,000

(2)

 

150,000

 

 

 

 

 

629,167

Officer

 

2017

 

295,833

 

150,000

(4)

 

 

 

 

 

 

445,833

____________

(1)      Cash bonus awarded for 2019 performance and paid in 2020.

(2)      Cash bonus awarded for 2018 performance and paid in 2019.

(3)      Awards of restricted Common Shares were made in February 2018 with thirty -six (36) month vesting periods and in August 2016 with twelve (12) month vesting periods. The value reported for Stock and Option Awards is the aggregate grant date fair value of options or stock awards granted to the NEOs in the years shown, determined in accordance with FASB ASC Topic 718, disregarding adjustments for forfeiture assumptions. The assumptions for making the valuation determinations are set forth in the footnote titled “Stock -Based Compensation” to our financial statements in the Company’s Annual Report on Form 10 -K for the fiscal year ended December 31, 2018.

(4)      Cash bonus awarded for 2017 performance and paid in 2018.

(5)      On April 12, 2019, Ms. Eddelson resigned from the Company effective May 3, 2019.

Equity Compensation Plans & Grants of Plan-Based Awards

On April 27, 2015, the Compensation, Corporate Governance and Nominating Committee and the Board of Directors approved the 2015 Stock Plan, subject to exemptive relief from the SEC and shareholder approval, in order to have increased flexibility to use restricted stock, in addition to stock options, to assist the Company in achieving its objectives with respect to long -term equity incentive compensation. On May 10, 2016, we received an exemptive order from the SEC permitting us to award shares of restricted stock to our employees, officers, and non -employee directors, and on July 27, 2016, our shareholders approved the 2015 Stock Plan.

Under the 2015 Stock Plan, a maximum of 20% of our total Common Shares issued and outstanding, calculated on a fully diluted basis, will be available for awards under the Amended Stock Plan as of the Annual Meeting date. Up to 10% of our total issued and outstanding Common Shares will be available for grants of restricted Common Shares. We expect to have approximately 20,906,745 Common Shares outstanding on the date of

24

the Annual Meeting. Therefore, there would be 3.0 million Common Shares available for grant pursuant to the 2015 Stock Plan. None of those shares are currently subject to stock options. Under the 2015 Stock Plan, no more than 50% of the Common Shares reserved for the grant of the awards under the Amended Stock Plan (up to an aggregate of 3,000,000 shares) may be restricted stock awards at any time during the term of the 2015 Stock Plan. To date, the Compensation, Corporate Governance and Nominating Committee has awarded 222,147 restricted Common Shares (net of forfeitures) to 30 employees. Therefore, after including accrued stock dividends and adding back the Common Shares withheld from awards upon vesting to satisfy recipient’s tax withholding obligations, approximately 1.3 million Common Shares would be available for additional grants of restricted Common Shares as of the Annual Meeting date.

No more than 25% of our Common Shares may be made subject to awards under the plan to any individual. In the event that the Compensation, Corporate Governance and Nominating Committee determines that any corporate event, such as a stock split, dividend or other distribution (including deemed dividends), reorganization, merger, consolidation, repurchase or share exchange, affects our Common Shares such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of plan participants, then the Corporate Governance and Nominating Committee will make those adjustments as it deems necessary or appropriate to any or all of (i) the number and kind of shares or other property that may thereafter be issued in connection with future awards, (ii) the number and kind of shares or other property that may be issued under outstanding awards, (iii) the exercise price or purchase price of any outstanding award and (iv) the performance goals applicable to outstanding awards.

The Company has no outstanding options under the 2015 Stock Plan.

Outstanding Equity Awards at 2019 Year End

There were 129,714 outstanding equity awards as of December 31, 2019, including dividends paid on the outstanding equity awards in the form of additional restricted Common Shares, of which 102,023 were held by our NEOs.

There were no outstanding option awards as of December 31, 2019.

The following table sets forth information regarding outstanding awards of restricted Common Shares held by our Named Executive Officers as of December 31, 2019:

Name

 

Number of
Shares or
Units that
have not
Vested
(#)

 

Market
Value of
Shares or
Units of
Stock that
have not
Vested
($)

 

Equity
Incentive
Plan
Awards:
Number of
Unearned Shares,
Units or
Other Rights
that have not
Vested
(#)

 

Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Number of
Unearned
Shares, Units or
Other Rights
that have not
Vested
($)
(5)

Barry Sloane (1)

 

58,480

 

928,662

 

70,793

 

1,124,193

Christopher Towers (2)

 

1,446

 

22,962

 

1,561

 

24,789

Peter Downs (3)

 

14,604

 

231,912

 

17,489

 

277,725

Michael A Schwartz (4)

 

10,218

 

162,262

 

12,180

 

193,418

____________

(1)      Mr. Sloane received an award of 58,480 restricted Common Shares in February 2018 with a three -year vesting period.

(2)      Mr. Towers received an award of 1,446 restricted Common Shares in April 2019 with a one year vesting period.

(3)      Mr. Downs received an award of 13,158 restricted Common Shares in February 2018 with a three -year vesting period and an award of 1,446 restricted Common Shares in April 2019 with a one year vesting period .

(4)      Mr. Schwartz received an award of 8,772 restricted Common Shares in February 2018 with a three -year vesting period and an award of 1,446 restricted Common Shares in April 2019 with a one year vesting period.

(5)      Based on the closing price of our Common Shares of $15.88 on April 13, 2020.

25

Options Exercised and Stock Vested

No options were exercised in 2019. The number of restricted Common Shares held by the NEOs that vested in the fiscal year ended December 31, 2019 are set forth in the table below.

 

Option Awards

 

Stock Awards

Name

 

Number of
shares acquired on exercise
(#)

 

Value
realized
on exercise
($)

 

Number of
Shares
Acquired
on Vesting
(#)

 

Value
Realized
on Vesting
($)

Barry Sloane

 

 

 

 

$

Christopher Towers

 

 

 

 

$

Peter Downs

 

 

 

 

$

Michael Schwartz

 

 

 

 

$

Jennifer Eddelson (1)

 

 

 

 

$

____________

(1)      On April 12, 2019, Ms. Eddelson resigned from the Company effective May 3, 2019.

Employment Agreements

The Company entered into separate employment agreements with the following NEOs during 2019 (each, an “Employment Agreement”):

•         Barry Sloane, as Chairman, Chief Executive Officer and President;

•         Jennifer Eddelson, as Executive Vice President and Chief Accounting Officer;

•         Mr. Downs, as Chief Lending Officer and President of Newtek Small Business Finance, LLC; and

•         Michael Schwartz, as Chief Legal Officer, Chief Compliance Officer and Secretary.

Mr. Sloane’s, Mr. Down’s and Mr. Schwartz’s employment agreements were renewed as of March 15, 2020 for terms through March 31, 2021, at annual base salaries of $700,000, $550,000 and $360,000, respectively. Ms. Eddelson resigned from the Company effective May 3, 2019. Aside from base salaries, the other terms and provisions of the employment agreements remained substantially the same.

Generally, under the Employment Agreements, Messrs. Sloane, Schwartz and Downs were entitled to a set base compensation, cash bonuses pursuant to the Company’s Annual Cash Bonus Plan or by the action of the board of directors, and incentive compensation at the discretion of the Compensation, Corporate Governance and Nominating Committee. In addition, Messrs. Sloane, Schwartz and Downs are entitled to other benefits, such as participation in retirement and medical and other plans, executive benefits, and vacation and sick leave. The Employment Agreements also provide for severance payments in the case of termination without just cause, as defined therein, or of resignation with good reason, as defined therein, and payment if their employment agreements are not renewed for other than just cause. Under the Employment Agreements, during the term of their employment, Messrs. Schwartz, Downs and Sloane agree to devote substantially all of their business time to the Company and to not engage in any business or activity contrary to the business or affairs of the Company. The Company agrees to indemnify Messrs. Downs, Schwartz and Sloane for any and all loss, expenses, or liability that he or she may incur as a result of his or her services for the Company to the extent permitted by the Company’s Bylaws.

Mr. Sloane’s Employment Agreement provided for:

•         a twelve -month term through March   31, 2020 at an annual base salary of $700,000;

•         at least one annual salary review by the Board of Directors;

•         participation in any discretionary bonus plan established for senior executives; and

•         retirement and medical plans, customary fringe benefits, vacation and sick leave.

26

Mr. Downs’ Employment Agreement provided for:

•         a twelve -month term through March   31, 2020 at an annual base salary of $500,000;

•         at least one annual salary review by the Board of Directors;

•         participation in any discretionary bonus plan established for senior executives; and

•         retirement and medical plans, customary fringe benefits, vacation and sick leave.

Mr. Schwartz’s Employment Agreement provided for:

•         a twelve -month term through March   31, 2020 at an annual base salary of $335,000;

•         at least one annual salary review by the Board of Directors;

•         participation in any discretionary bonus plan established for senior executives; and

•         retirement and medical plans, customary fringe benefits, vacation and sick leave.

Payments upon Change of Control, Non-renewal or Termination

Mr. Sloane’s Employment Agreement provided for a payment in the event of non -renewal of his employment in an amount equal to one (1.0) times the sum of his annual base compensation plus any cash bonus or other incentive compensation paid in the immediately preceding fiscal year, or in the case of a change of control or termination other than for just cause, an amount equal to two (2) times the sum of the executive’s annual base salary in effect at the time of termination, plus the amount of any incentive compensation paid with respect to the immediately preceding fiscal year. In addition, in the case of termination other than for just cause, all outstanding and unvested equity awards are to be accelerated in full.

Messrs. Downs’ and Schwartz’ Employment Agreements provided for a payment in the case of termination other than for just cause or a change in cont