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 [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or
Rule 14a-12
TECHNOLOGY INVESTMENT CAPITAL CORP.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] 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:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed
TECHNOLOGY INVESTMENT CAPITAL CORP.
8 SOUND SHORE DRIVE
GREENWICH, CONNECTICUT 06830
April [ __ ], 2004
Dear Stockholder:
You are cordially invited to attend the 2004 Annual Meeting of
Stockholders to be held on Thursday, June 17, 2004 at 10:00 a.m., Eastern Time,
at the Company's corporate headquarters located at 8 Sound Shore Drive,
Greenwich, Connecticut 06830.
The notice of annual meeting and proxy statement accompanying this letter
provide an outline of the business to be conducted at the meeting. At the
meeting, you will be asked to elect a director of the Company, to ratify the
selection of PricewaterhouseCoopers LLP as the Company's independent auditors,
and to approve an amendment to the Company's investment advisory agreement with
Technology Investment Management, LLC.
We are asking for shareholder approval for the proposed amendment to our
investment advisory agreement as described in "Proposal III: Amendment of
Investment Advisory Agreement and Fees Paid to the Adviser." The proposed
amendment would change our base management fee from 2.0% of average net assets
to 2.0% of average gross assets, which, if approved, may have the effect of
increasing the fees payable to our investment adviser. This change will
effectively enable the Company's investment adviser to leverage our portfolio
and/or acquire existing levered portfolios. Although we do not currently have
any proposals to issue debt, the proposed change will effectively enable the
Company's investment adviser to take advantage of such opportunities as and when
they arise. We believe that we can grow our portfolio more effectively by
providing our investment adviser with the resources to originate investments and
monitor a portfolio utilizing the increased assets available through the use of
leverage. Leverage, while increasing risk, can increase our return on equity and
can increase our flexibility by decreasing dependence on the equity capital
markets. The proposed amendment is consistent with investment advisory
agreements of other externally-managed business development companies that
perform comparable services to our investment adviser.
It is important that your shares be represented at the annual meeting. If
you are unable to attend the meeting in person, I urge you to complete, date and
sign the enclosed proxy card and promptly return it in the envelope provided.
Your vote is important.
Sincerely yours,
--------------------------
Jonathan H. Cohen
Chief Executive Officer
TECHNOLOGY INVESTMENT CAPITAL CORP.
8 SOUND SHORE DRIVE
GREENWICH, CONNECTICUT 06830
(203) 983-5275
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 17, 2004
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To the Stockholders of Technology Investment Capital Corp.:
The 2004 Annual Meeting of Stockholders of Technology Investment Capital
Corp. (the "Company") will be held at the Company's corporate headquarters
located at 8 Sound Shore Drive, Greenwich, Connecticut 06830 on Thursday, June
17, 2004, at 10:00 a.m. Eastern Time for the following purposes:
1. To elect a director of the Company who will serve for three years,
or until her successor is elected and qualified;
2. To ratify the selection of PricewaterhouseCoopers LLP to serve as
independent auditors for the Company for the fiscal year ending
December 31, 2004;
3. To approve an amendment to the investment advisory agreement
between the Company and Technology Investment Management, LLC (the
"Adviser"), which, if approved, may have the effect of increasing
the fees payable to the Adviser; and
4. To transact such other business as may properly come before the
meeting.
You have the right to receive notice of and to vote at the meeting if you
were a stockholder of record at the close of business on April 27, 2004. Whether
or not you expect to be present in person at the meeting, please sign the
enclosed proxy and return it promptly in the self-addressed envelope provided.
Instructions are shown on the proxy card. In the event there are not sufficient
votes for a quorum or to approve or ratify any of the foregoing proposals at the
time of the annual meeting, the annual meeting may be adjourned in order to
permit further solicitation of the proxies by the Company.
By Order of the Board of Directors,
Saul B. Rosenthal
Secretary
Greenwich, Connecticut
April [ __ ], 2004
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This is an important meeting. To ensure proper representation at the meeting,
please complete, sign, date and return the proxy card in the enclosed,
self-addressed envelope. Even if you vote your shares prior to the meeting,
you still may attend the meeting and vote your shares in person.
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TECHNOLOGY INVESTMENT CAPITAL CORP.
8 SOUND SHORE DRIVE
GREENWICH, CONNECTICUT 06830
(203) 983-5275
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PROXY STATEMENT
2004 ANNUAL MEETING OF STOCKHOLDERS
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This Proxy Statement is furnished in connection with the solicitation of
proxies by the board of directors of Technology Investment Capital Corp. (the
"Company", "we", "us" or "our") for use at the Company's 2004 Annual Meeting of
Stockholders (the "Meeting") to be held on Thursday, June 17, 2004, at 10:00
a.m. at the Company's corporate headquarters located at 8 Sound Shore Drive,
Greenwich, Connecticut 06830 and at any adjournments thereof. This Proxy
Statement, the accompanying proxy card and the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 2003 are first being sent to
stockholders on or about April __, 2004.
We encourage you to vote your shares, either by voting in person at the
Meeting or by granting a proxy (i.e., authorizing someone to vote your shares).
If you properly sign and date the accompanying proxy card, and the Company
receives it in time for the Meeting, the persons named as proxies will vote the
shares registered directly in your name in the manner that you specified. IF YOU
GIVE NO INSTRUCTIONS ON THE PROXY CARD, THE SHARES COVERED BY THE PROXY CARD
WILL BE VOTED FOR THE ELECTION OF THE NOMINEE AS A DIRECTOR AND FOR THE OTHER
MATTERS LISTED IN THE ACCOMPANYING NOTICE OF ANNUAL MEETING OF STOCKHOLDERS.
If you are a "stockholder of record" (i.e., you hold shares directly in
your name), you may revoke a proxy at any time before it is exercised by
notifying the proxy tabulator in writing, by submitting a properly executed,
later-dated proxy, or by voting in person at the Meeting. Any stockholder of
record attending the Meeting may vote in person whether or not he or she has
previously voted his or her shares. If your shares are held for your account by
a broker, bank or other institution or nominee ("Broker Shares"), you may vote
such shares at the Meeting only if you obtain proper written authority from your
institution or nominee and present it at the Meeting.
If your shares are registered in the name of a bank or brokerage firm, you
may be eligible to vote your shares electronically via the Internet or by
telephone. A large number of banks and brokerage firms participate in the ADP
Investor Communications Services online program. This program provides eligible
stockholders who receive a copy of the annual report and proxy statement, either
by paper or electronically, the opportunity to vote via the Internet or by
telephone. If the entity holding your shares participates in ADP's program, your
voting form will provide instructions. If your voting form does not reference
Internet or telephone voting information, please complete and return the paper
proxy card in the pre-addressed, postage-paid envelope provided.
PURPOSE OF MEETING
At the Meeting, you will be asked to vote on the following proposals:
1. To elect a director of the Company who will serve for three years,
or until her successor is elected and qualified;
2. To ratify the selection of PricewaterhouseCoopers LLP to serve as
independent auditors for the Company for the fiscal year ending
December 31, 2004;
3. To approve an amendment to the investment advisory agreement
between the Company and Technology Investment Management, LLC,
which, if approved, may have the effect of increasing the fees
payable to the Adviser; and
4. To transact such other business as may properly come before the
meeting.
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VOTING SECURITIES
You may vote your shares at the Meeting only if you were a stockholder of
record at the close of business on April 27, 2004 (the "Record Date"). On April
27, 2004, there were 10,045,961 shares of the Company's common stock
outstanding. Each share of the common stock is entitled to one vote.
QUORUM REQUIRED
A quorum must be present at the Meeting for any business to be conducted.
The presence at the Meeting, in person or by proxy, of the holders of a majority
of the shares of common stock outstanding on the record date will constitute a
quorum. Abstentions will not be treated as shares present for quorum purposes.
Broker Shares for which the nominee has not received voting instructions from
the record holder and does not have discretionary authority to vote the shares
on certain proposals (which are considered "Broker Non-Votes" with respect to
such proposals) will be treated as shares present for quorum purposes.
If a quorum is not present at the Meeting, the stockholders who are
represented may adjourn the Meeting until a quorum is present. The persons named
as proxies will vote those proxies for such adjournment, unless marked to be
voted against any proposal for which an adjournment is sought, to permit the
further solicitation of proxies.
VOTE REQUIRED
Election of Nominee Director. The election of a director requires the
vote of a plurality of the Common Stock. Stockholders may not cumulate their
votes. If you vote "Withhold Authority" with respect to the 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.
Ratification of Independent Auditors. The affirmative vote of a
majority of the votes cast at the Meeting in person or by proxy is required to
ratify the appointment of Pricewaterhouse Coopers LLP to serve as the Company's
independent public auditors. Abstentions will not be included in determining
the number of votes cast and, as a result, will have no effect on this proposal.
Approval of Amendment of the Investment Advisory Agreement. The
approval of the proposal to amend our investment advisory agreement with
Technology Investment Management, LLC ("TIM") requires an affirmative vote of
the lesser of: (i) 67% or more of the Company's shares present at the meeting if
more than 50% of the outstanding shares of the Company are present or
represented by proxy, or (ii) more than 50% of the outstanding shares of the
Company. Abstentions and broker non-votes will have the same effect as votes
against the proposal unless holders of more than 50% of all shares entitled to
vote on the proposal cast votes, in which event abstentions and broker non-votes
will not have any effect on the result of the votes.
INFORMATION REGARDING THIS SOLICITATION
We will bear the expense of the solicitation of proxies for the Meeting,
including the cost of preparing, printing and mailing this Proxy Statement, the
accompanying Notice of Annual Meeting of Stockholders, and proxy card. We have
requested that brokers, nominees, fiduciaries and other persons holding shares
in their names, or in the name of their nominees, which are beneficially owned
by others, forward the proxy materials to, and obtain proxies from, such
beneficial owners. We will reimburse such persons for their reasonable expenses
in so doing. The Company intends to retain Georgeson Shareholder Communications,
Inc. to assist in the solicitation of proxies. We estimate that the cost of
these services will be $______, all of which will be paid by TIM.
In addition to the solicitation of proxies by the use of the mails,
proxies may be solicited in person and by telephone or facsimile transmission by
directors, officers or employees of the Company and/or TIM (without special
compensation therefor). Any proxy given pursuant to this solicitation may be
revoked by notice from the person giving the proxy at any time before it is
exercised. Any such notice of revocation should be provided in writing signed by
the stockholder in the same manner as the proxy being revoked and delivered to
the Company's proxy tabulator.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of April 14, 2004, 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 shares of our common stock, and the executive officers and
directors as a group.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting or investment power with
respect to the securities. Ownership information for those persons who
beneficially own 5% or more of our shares of common stock is based upon Schedule
13G filings by such persons with the Securities and Exchange Commission 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 and has the
same address as the Company. Our address is 8 Sound Shore Drive, Greenwich,
Connecticut, 06830.
NUMBER OF
SHARES OWNED
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY PERCENTAGE OF CLASS(1)
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INTERESTED DIRECTORS
Jonathan H. Cohen ............................................................. 139,100 1.38%
Charles M. Royce............................................................... 69,500 *
INDEPENDENT DIRECTORS
Steven P. Novak................................................................ 2,000 *
G. Peter O'Brien............................................................... 10,000 *
Tonia L. Pankopf............................................................... 8,300 *
EXECUTIVE OFFICERS
Patrick F. Conroy.............................................................. 200 *
Saul B. Rosenthal.............................................................. 3,400 *
Lee D. Stern................................................................... 3,400 *
EXECUTIVE OFFICERS AND DIRECTORS AS A GROUP.................................... 235,900 2.35%
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* Represents less than one percent.
(1) Based on a total of 10,045,961 shares of the Company's common stock issued
and outstanding on April 14, 2004.
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Set forth below is the dollar range of equity securities beneficially
owned by each director and the nominee for election as a director of the
Company as of April 14, 2004:
NAME OF DIRECTOR DOLLAR RANGE OF EQUITY SECURITIES BENEFICIALLY OWNED(1)(2)(3)
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INTERESTED DIRECTORS
Jonathan H. Cohen(4)...................................... Over $100,000
Charles M. Royce(4)....................................... Over $100,000
INDEPENDENT DIRECTORS
Steven P. Novak........................................... $10,001 - $50,000
G. Peter O'Brien.......................................... Over $100,000
Tonia L. Pankopf.......................................... Over $100,000
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(1) Beneficial ownership has been determined in accordance with Rule 16a-1(a)(2)
under the Securities Exchange Act of 1934.
(2) The dollar ranges are: None, $1-$10,000, $10,001-$50,000, $50,001-$100,000,
or Over $100,000.
(3) The dollar range of equity securities beneficially owned in the Company is
based on the closing price of $14.38 on April 14, 2004 on the Nasdaq Stock
Market.
PROPOSAL I: ELECTION OF DIRECTORS
Pursuant to the Company's bylaws, the number of directors is set at five
unless otherwise designated by the board of directors. Directors are elected for
a staggered term of three years each, with a term of office of only one of the
three classes of directors expiring each year. Each director will hold office
for the term to which he or she is elected and until his or her successor is
duly elected and qualifies.
Ms. Pankopf has been nominated for election for a three year term expiring
in 2007. Ms. Pankopf's nomination as a director is not being proposed for
election pursuant to any agreement or understanding between any such person and
the Company.
A stockholder can vote for or withhold his or her vote from the nominee.
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 NOMINEE
NAMED BELOW. IF THE NOMINEE SHOULD DECLINE OR BE UNABLE TO SERVE AS A DIRECTOR,
IT IS INTENDED THAT THE PROXY WILL BE VOTED FOR THE ELECTION OF SUCH PERSON AS
IS NOMINATED BY THE BOARD OF DIRECTORS AS A REPLACEMENT. The board of directors
has no reason to believe that any of the persons named will be unable or
unwilling to serve.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE
NOMINEE NAMED IN THIS PROXY STATEMENT.
INFORMATION ABOUT THE NOMINEE AND DIRECTORS
Certain information, as of April 14, 2004, with respect to the nominee for
election at the Meeting, as well as each of the current directors, are set forth
below, including their names, ages, a brief description of their recent business
experience, including present occupations and employment, certain directorships
that the nominee holds, and the year in which each nominee became a director of
the Company.
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The business address of each nominee and director listed below is 8 Sound Shore
Drive, Greenwich, Connecticut 06830.
NOMINEE FOR DIRECTOR
INDEPENDENT DIRECTORS
The following director is not an "interested person" as defined in the
Investment Company Act of 1940.
NAME AND YEAR FIRST ELECTED DIRECTOR AGE BACKGROUND INFORMATION
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Tonia L. Pankopf (2003)............... 35 Ms. Pankopf has been a senior analyst and managing director at
Palladio Capital Management since January of 2004. She was a
private investor from July 2003 through December 2003. She previously
served as an analyst with P.A.W. Capital Partners, LP from 2001 to
July 2003. Ms. Pankopf was a senior analyst and vice president at
Goldman, Sachs & Co. from 1999 to 2001 and at Merrill Lynch & Co. from
1998 to 1999.
CURRENT DIRECTORS
INTERESTED DIRECTORS
Messrs. Cohen and Royce are "interested persons" as defined in the Investment
Company Act of 1940. Mr. Cohen is an interested person of the Company due to his
position as chief executive officer and president of TIM, the Company's
investment adviser, and as the managing member of BDC Partners, LLC, the
managing member of TIM. Mr. Royce is an interested person of the Company due to
his relationship with Royce & Associates.
NAME AND YEAR FIRST ELECTED DIRECTOR AGE BACKGROUND INFORMATION
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Jonathan H. Cohen (2003)............ 39 Mr. Cohen is chief executive officer and president of Technology
Investment Capital Corp. and its investment adviser, Technology
Investment Management, and the managing member of BDC Partners.
Mr. Cohen is also a principal of JHC Capital Management, a
registered investment adviser that serves as the sub-adviser to
the Royce Technology Value Fund, and was previously a principal
of Privet Financial Securities, LLC, a registered broker-dealer.
Prior to founding JHC Capital Management in 2001, Mr. Cohen
managed technology research groups at Wit SoundView from 1999 to
2001. He has also managed securities research groups at Merrill
Lynch & Co. from 1998 to 1999.
NAME AND YEAR FIRST ELECTED DIRECTOR AGE BACKGROUND INFORMATION
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Charles M. Royce (2003)............. 64 Mr. Royce became president and chief investment officer in 1972
and a member of the Board of Managers of Royce & Associates, LLC in
2001. He also manages or co-manages ten of Royce & Associates'
open- and closed-end registered funds. Mr. Royce serves on the
board of directors of The Royce Funds.
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INDEPENDENT DIRECTORS
The following directors are not an "interested persons" as defined in the
Investment Company Act of 1940.
NAME AND YEAR FIRST ELECTED DIRECTOR AGE BACKGROUND INFORMATION
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Steven P. Novak (2003).............. 55 Mr. Novak currently serves as president of Palladio Capital
Management, LLC and as the principal and managing member of the
General Partner of Palladio Partners, LP, an equities hedge fund
that commenced operations in July 2002. Prior to founding
Palladio, Mr. Novak was a Managing Director of C.E. Unterberg,
Towbin from February 1993 through December 2001. Mr. Novak
serves on the board of directors of CyberSource Corporation.
G. Peter O'Brien (2003)............. 57 Mr. O'Brien is currently a member of the Board of Trustees of
Colgate University and President of the Board of Directors of
Hill House, Inc., a congregate care facility for low income
elderly residents in Riverside, Connecticut. Mr. O'Brien retired
as a managing director of Merrill Lynch & Co. in 1999 after
working in the Equity Capital Markets area since he joined
Merrill Lynch & Co. in 1971. Mr. O'Brien serves on the board of
directors of the Legg Mason Family of Mutual Funds, the Royce
Funds and the Renaissance IPO Plus Aftermarket Fund.
INFORMATION ABOUT EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following information, as of April 14, 2004, pertains to our executive
officers who are not directors of the Company. Certain of our executive officers
serve as directors of, or on the board of managers of, certain of our portfolio
companies.
NAME AGE BACKGROUND INFORMATION
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Saul B. Rosenthal................... 35 Mr. Rosenthal is chief operating officer, treasurer and corporate
secretary of Technology Investment Capital Corp. and its
investment adviser, Technology Investment Management, and a
member of BDC Partners. Mr. Rosenthal was previously president of
Privet Financial Securities, LLC, a registered broker-dealer and
financial consultant to small to medium-sized private and public
technology companies. Mr. Rosenthal led the private
financing/public company effort at SoundView Technology Group
from 2000 to 2002, where he co-founded SoundView's Private Equity
Group. Previously, Mr. Rosenthal was a vice president and
co-founder of the Private Equity Group at Wit Capital from 1998
to 2000.
Patrick F. Conroy................... 47 Mr. Conroy is the chief financial officer of Technology
Investment Capital Corp., Technology Investment Management, and
BDC Partners. He joined the Company in December 2003, and was
previously a consultant on financial reporting and compliance
matters, as well as an adjunct professor of accounting and
finance at St. Thomas Aquinas College. Mr. Conroy was the chief
financial officer of New York Mercantile Exchange from 1993 to
2003. He is a certified public accountant.
Lee D. Stern........................ 52 Mr. Stern is an executive vice president of Technology Investment
Capital Corp. and the chief transaction officer of Technology
Investment Management and BDC Partners. He has over 20 years
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of financial and investment experience in leveraged finance and in
financing technology companies. Prior to joining the Company, Mr.
Stern was a member of Hill Street Capital, and was previously a
partner of Thomas Weisel Partners and its predecessor,
NationsBanc Montgomery, from 1997 to 2000.
COMMITTEES OF THE BOARD OF DIRECTORS
Our board of directors has established an audit committee and a valuation
committee. During 2003, the board of directors of the Company held 4 board
meetings and 1 committee meeting. All directors attended at least 75% of the
aggregate number of meetings of the respective boards and of the respective
committees on which they served. The Company requires each director to make a
diligent effort to attend all board and committee meetings, as well as each
annual meeting of stockholders.
The Audit Committee. The audit committee operates pursuant to a charter approved
by the board of directors. The charter sets forth the responsibilities of the
Audit Committee. The Audit Committee's responsibilities include recommending the
selection of independent auditors for the Company, reviewing with such
independent auditors the planning, scope and results of their audit of the
Company's financial statements, pre-approving the fees for services performed,
reviewing with the independent auditors the adequacy of internal control
systems, reviewing the Company's annual financial statements and periodic
filings, and receiving the Company's audit reports and financial statements. A
copy of the charter is included as an appendix to this proxy statement. The
Audit Committee is presently composed of three persons, including Messrs. Novak
and O'Brien and Ms. Pankopf, all of whom are considered independent under the
rules promulgated by NASDAQ. The Company's board of directors has determined
that Mr. Novak is an "audit committee financial expert" as that term is defined
under Item 401 of Regulation S-K of the Securities Exchange Act of 1934. Mr.
Novak meets the current independence and experience requirements of Rule 10A-3
of the Exchange Act and, in addition, is not an "interested person" of the
Company as that term is defined in Section 2(a)(19) of the Investment Company
Act of 1940. The Audit Committee met once during 2003.
The Nominating Committee. The Company does not have a nominating
committee. A majority of the independent directors of the board of directors, in
accordance with the NASDAQ listing standards, recommends candidates for election
as directors. The Company does not currently have a charter or written policy
with regard to the nomination process or stockholder recommendations. The
absence of such a policy does not mean, however, that a stockholder
recommendation would not have been considered had one been received.
In evaluating director nominees, the independent members of the board of
directors consider the following factors:
o the appropriate size and composition of the Company's board of
directors;
o whether or not the person is an "interested person" of the
Company as defined in Section 2(a)(19) of the Investment
Company Act of 1940;
o the needs of the Company with respect to the particular talents
and experience of its directors;
o the knowledge, skills and experience of nominees in light of
prevailing business conditions and the knowledge, skills and
experience already possessed by other members of the board of
directors;
o familiarity with national and international business matters;
o experience with accounting rules and practices;
o appreciation of the relationship of the Company's business to
the changing needs of society;
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o the desire to balance the considerable benefit of continuity
with the periodic injection of the fresh perspective provided
by new members; and
o all applicable laws, rules, regulations, and listing standards.
The board's goal is to assemble a board of directors that brings to the
Company a variety of perspectives and skills derived from high quality business
and professional experience.
Other than the foregoing there are no stated minimum criteria for director
nominees, although the independent members of the board of directors may also
consider such other factors as they may deem are in the best interests of the
Company and its stockholders. The board of directors also believes it
appropriate for certain key members of the Company's management to participate
as members of the board of directors.
The independent members of the board of directors identify nominees by
first evaluating the current members of the board of directors willing to
continue in service. Current members of the board of directors with skills and
experience that are relevant to the Company's business and who are willing to
continue in service are considered for re-nomination, balancing the value of
continuity of service by existing members of the board of directors with that of
obtaining a new perspective. If any member of the board of directors does not
wish to continue in service or if the board of directors decides not to
re-nominate a member for re-election, the independent members of the board of
directors identify the desired skills and experience of a new nominee in light
of the criteria above. The entire board of directors is polled for suggestions
as to individuals meeting the aforementioned criteria. Research may also be
performed to identify qualified individuals. To date, the Company has not
engaged third parties to identify or evaluate or assist in identifying potential
nominees although the Company reserves the right in the future to retain a third
party search firm, if necessary.
The Valuation Committee. The Valuation Committee establishes guidelines
and makes recommendations to our board of directors regarding the valuation of
our loans and investments. The Valuation Committee is presently composed of
Messrs. Novak and O'Brien and Ms. Pankopf. The valuation committee did not meet
during 2003.
The Compensation Committee. The Company does not have a compensation
committee because our executive officers do not receive any direct compensation
from the Company.
COMMUNICATION WITH THE BOARD OF DIRECTORS
Stockholders with questions about the Company are encouraged to contact
Technology Investment Capital Corp.'s Investor Relations department. However, if
stockholders believe that their questions have not been addressed, they may
communicate with the Company's board of directors by sending their
communications to Technology Investment Capital Corp., c/o Saul B. Rosenthal,
Corporate Secretary, 8 Sound Shore Drive, Greenwich, Connecticut 06830. All
stockholder communications received in this manner will be delivered to one or
more members of the board of directors.
CODE OF ETHICS
The Company has adopted a code of ethics which applies to, among
others, its senior officers, including its Chief Executive Officer and its Chief
Financial Officer, as well as every employee of the Company. The Company's code
can be accessed via its website at http://www.ticc.com. The Company intends to
disclose amendments to or waivers from a required provision of the code on Form
8-K.
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COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth compensation of the Company's directors,
none of whom is an employee of the Company. Except as set forth in such table,
no other compensation was paid to any directors (including those who also serve
as executive officers) by the Company or any other entity in the Company's fund
complex during 2003.
COMPENSATION TABLE
PENSION OR
RETIREMENT
BENEFITS
AGGREGATE ACCRUED AS TOTAL COMPENSATION
COMPENSATION PART OF THE FROM FUND AND FUND
FROM THE COMPANY'S COMPLEX PAID TO
NAME AND POSITION COMPANY EXPENSES(1) DIRECTORS(2)
- ------------------ ------- -----------
INTERESTED DIRECTORS
Jonathan H. Cohen $ -- None $ --
Charles M. Royce -- None --
INDEPENDENT DIRECTORS
Steven P. Novak -- None --
G. Peter O'Brien -- None --
Tonia L. Pankopf -- None --
EXECUTIVE OFFICERS
Patrick F. Conroy --(3) None --
Saul B. Rosenthal --(4) None --
Lee D. Stern --(4) None --
- ----------
(1) We do not have a bonus, profit sharing or retirement plan, and directors do
not receive any pension or retirement benefits.
(2) Consists only of directors' fees paid by the Company during 2003. The
directors have waived all of their fees for 2003.
(3) We hired a chief financial officer after the completion of our initial
public offering; however, he did not receive any compensation from us in
2003. The compensation of our chief financial officer is paid by BDC
Partners, subject to reimbursement by us of an allocable portion of such
compensation for services rendered by him to the Company. For the fiscal
year ending December 31, 2004, we estimate that the amount of such
reimbursement will be approximately $180,000.
(4) With the exception of our chief financial officer, none of our officers
receives compensation from the Company.
COMPENSATION OF DIRECTORS
The directors have waived all of their fees for the year 2003. Beginning
in 2004, the independent directors will receive an annual fee of $35,000 and
will receive $2,000 plus reimbursement of reasonable out-of-pocket expenses
incurred in connection with attending each board meeting. No additional fees
will be paid in connection with attending committee meetings. No compensation is
paid to directors who are interested persons of the Company as defined in the
Investment Company Act of 1940.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
TRANSACTIONS WITH AFFILIATED PERSONS
The Company has entered into an investment advisory agreement with TIM.
TIM is controlled by BDC Partners, its managing member. In addition to BDC
9
Partners, TIM is owned by Royce & Associates as the non-managing member. BDC
Partners, as the managing member of TIM, manages the business and internal
affairs of TIM . In addition, BDC Partners provides us with office facilities
and administrative services pursuant to an administration agreement. Jonathan
H. Cohen, our chief executive officer and president, as well as a director, is
the managing member of and controls BDC Partners. Saul B. Rosenthal, our chief
operating officer, is also the chief operating officer of TIM and a member of
BDC Partners.
Charles M. Royce, a director and the non-executive chairman of our
board of directors, is president and chief investment officer of Royce &
Associates. Royce & Associates, as the non-managing member of our investment
adviser, does not take part in the management or participate in the operations
of TIM; however, Royce & Accociates has agreed to make Mr. Royce or certain
other portfolio managers available to TIM to provide certain consulting services
without compensation. Royce & Associates is a wholly owned subsidiary of Legg
Mason, Inc.
JHC Capital Management, a registered investment adviser owned by Mr.
Cohen, serves as the sub-adviser to the Royce Technology Value Fund. In
addition, JHC Capital Management has invested on behalf of certain of its
discretionary advisory clients in CyberSource Corporation, a public company
engaged in the business of processing online payments for electronic merchants
listed on the Nasdaq National Market. Mr. Novak, an independent director of the
Company, is also an independent director of CyberSource Corporation. JHC Capital
Management's discretionary advisory clients own in the aggregate less than 5% of
the outstanding common stock (on a fully diluted basis) of CyberSource
Corporation.
Saul B. Rosenthal, chief operating officer, treasurer and corporate
secretary of the Company, holds less than a 0.02% limited partnership interest
in Dawntreader Fund II, a private equity partnership which owns less than 5% of
MortgageIT, Inc., one of the Company's portfolio companies.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16(a) of the Securities Exchange Act of 1934, the
Company's directors and executive officers, and any persons holding more than
10% of its common stock, are required to report their beneficial ownership and
any changes therein to the Securities and Exchange Commission and the Company.
Specific due dates for those reports have been established, and the Company is
required to report herein any failure to file such reports by those due dates.
Based on the Company's review of Forms 3, 4 and 5 filed by such persons, the
Company believes that during 2003 all Section 16(a) filing requirements
applicable to such persons were met in a timely manner.
PROPOSAL II: RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The audit committee and the non-interested members of the board of
directors have selected PricewaterhouseCoopers LLP as independent auditors for
the Company for the fiscal year ending December 31, 2004. This selection is
subject to ratification or rejection by the stockholders of the Company.
PricewaterhouseCoopers LLP has advised the Company that neither the firm
nor any present member or associate of it has any material financial interest,
direct or indirect, in the Company or its subsidiaries. It is expected that a
representative of PricewaterhouseCoopers LLP will be present at the Meeting and
will have an opportunity to make a statement if he or she chooses and will be
available to answer questions.
FISCAL YEAR ENDED FISCAL YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
----------------- -----------------
Audit Fees $ 50,000 N/A
Audit-Related Fees -- N/A
Tax Fees -- N/A
All Other Fees -- N/A
TOTAL FEES: $ 50,000 N/A
10
Audit Fees. Audit fees consist of fees billed for professional services
rendered for the audit of our year-end financial statements and services that
are normally provided by PricewaterhouseCoopers in connection with statutory and
regulatory filings.
Audit-Related Fees. Audit-related services consist of fees billed for
assurance and related services that are reasonably related to the performance of
the audit or review of our financial statements and are not reported under
"Audit Fees." These services include attest services that are not required by
statute or regulation and consultations concerning financial accounting and
reporting standards.
Tax Fees. Tax fees consist of fees billed for professional services for
tax compliance. These services include assistance regarding federal, state, and
local tax compliance.
All Other Fees. All other fees would include fees for products and
services other than the services reported above.
AUDIT COMMITTEE REPORT
The Audit Committee of the board of directors of Technology Investment
Capital Corp. (the "Audit Committee") operates under a written charter adopted
by the board of directors effective as of October 28, 2003 and filed as an
appendix to this Proxy Statement for the 2004 Annual Meeting of Stockholders.
The Audit Committee is currently comprised of Messrs. Novak and O'Brien and Ms.
Pankopf.
Management is responsible for the Company's internal controls and the
financial reporting process. The independent auditors are responsible for
performing an independent audit of the Company's financial statements in
accordance with auditing standards generally accepted in the United States and
expressing an opinion on the conformity of those audited financial statements in
accordance with accounting principles generally accepted in the United States.
The Audit Committee's responsibility is to monitor and oversee these processes.
The Audit Committee is also directly responsible for the appointment,
compensation and oversight of the Company's independent auditors.
Pre-Approval Policy
The Audit Committee has established a pre-approval policy that
describes the permitted audit, audit-related, tax and other services to be
provided by PricewaterhouseCoopers LLP, the Company's independent auditor. The
policy requires that the Audit Committee pre-approve the audit and non-audit
services performed by the independent auditor in order to assure that the
provision of such service does not impair the auditor's independence.
Any requests for audit, audit-related, tax and other services that have
not received general pre-approval must be submitted to the Audit Committee for
specific pre-approval, irrespective of the amount, and cannot commence until
such approval has been granted. Normally, pre-approval is provided at regularly
scheduled meetings of the Audit Committee. However, the Audit Committee may
delegate pre-approval authority to one or more of its members. The member or
members to whom such authority is delegated shall report any pre-approval
decisions to the Audit Committee at its next scheduled meeting. The Audit
Committee does not delegate its responsibilities to pre-approve services
performed by the independent auditor to management.
Review with Management
The Audit Committee has reviewed the audited financial statements and met
and held discussions with management regarding the audited financial statements.
Management has represented to the Audit Committee that the Company's financial
statements were prepared in accordance with accounting principles generally
accepted in the United States.
Review and Discussion with Independent Auditors
The Audit Committee has discussed with PricewaterhouseCoopers LLP, the
Company's independent auditors, matters required to be discussed by Statement of
Auditing Standards No. 61 (Communication with Audit Committees). The Audit
Committee received and reviewed the written disclosures and the letter from the
independent auditors required by Independence Standard No. 1, Independence
Discussions with Audit Committees,
11
as amended by the Independence Standards Board, and has discussed with the
auditors the auditors' independence. The Audit Committee has also considered the
compatibility of non-audit services with the auditors' independence.
Conclusion
Based on the Audit Committee's discussion with management and the
independent auditors, the Audit Committee's review of the audited financial
statements, the representations of management and the report of the independent
auditors to the Audit Committee, the Audit Committee recommends that the board
of directors include the audited financial statements in the Company's Annual
Report on Form 10-K for the year ended December 31, 2003 for filing with the
Securities and Exchange Commission. The Audit Committee also appoints
Pricewaterhouse Coopers LLP to serve as independent auditors for the year ended
December 31, 2004, subject to ratification of such appointment by the
stockholders of the Company.
Respectfully Submitted,
The Audit Committee
Steven P. Novak
G. Peter O'Brien
Tonia L. Pankopf
UNLESS MARKED TO THE CONTRARY, THE SHARES REPRESENTED BY THE ENCLOSED
PROXY CARD WILL BE VOTED FOR RATIFICATION OF THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS THE INDEPENDENT AUDITORS OF THE COMPANY.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE TO RATIFY THE SELECTION OF
PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT AUDITORS FOR THE COMPANY.
PROPOSAL III: AMENDMENT OF INVESTMENT ADVISORY AGREEMENT AND FEES
PAID TO THE ADVISER
TIM serves as our investment adviser. TIM is registered as an
investment adviser under the Investment Advisers Act of 1940. Subject to the
overall supervision of our board of directors, TIM provides investment advisory
services to the Company. Under the terms of an investment advisory agreement,
TIM:
o Determines the composition of our portfolio, the nature and timing of
the changes to our portfolio and the manner of implementing such
changes;
o identifies, evaluates and negotiates the structure of the investments
we make;
o closes, monitors and services the investments we make; and
o determines what securities we purchase, retain or sell.
TIM's services under the investment advisory agreement are not
exclusive, and it is free to furnish similar services to other entities so long
as its services to us are not impaired. However, TIM has agreed that, during the
term of the investment advisory agreement, it will not serve as investment
adviser to any other public or private entity that utilizes a principal
investment strategy of providing debt financing to technology-related companies.
Stockholders of the Company are being asked to approve an amendment to
our investment advisory agreement (the "Proposed Amendment"). The Proposed
Amendment is attached as Appendix B to this Proxy Statement.
THE PROPOSED AMENDMENT
Under the Proposed Amendment, the Company would make the following
modifications: the base management fee payable to TIM would be changed from
2.00% of average net assets to 2.00% of average gross assets. Under the Proposed
Amendment, Section 3(a) of the investment advisory agreement would be revised as
follows:
12
The Base Management Fee shall be calculated at an annual rate of 2.00%.
The Base Management Fee will be payable quarterly in arrears, and will
be calculated based on the average value of the Corporation's gross
assets at the end of the two most recently completed calendar quarters,
and adjusted pro rata for any share issuances, debt issuances,
repurchases or redemptions during the current calendar quarter. Base
Management Fees for any partial month or quarter will be pro rated.
The Company may utilize leverage to some degree in the future. TIM believes that
the Proposed Amendment will provide it with the resources to originate
investments and monitor a portfolio utilizing the increased assets available
through the use of leverage.
The Proposed Amendment would change our base management fee from 2.0%
of average net assets to 2.0% of average gross assets, which, if approved, could
increase the fees payable to TIM. This change will effectively enable the
Company's investment adviser to leverage our portfolio and/or acquire existing
levered portfolios. Although we do not currently have any proposals to issue
debt, the proposed change will effectively enable the Company's investment
adviser to take advantage of such opportunities as and when they arise. We
believe that we can grow our portfolio more effectively by providing our
investment adviser with the resources to originate investments and monitor a
portfolio utilizing the increased assets available through the use of leverage.
Although utilizing leverage can expose us to certain risks, including the risk
that a decrease in the value of our investments would have a greater negative
impact on the value of our common stock than if we did not use debt, we believe
that it can increase our return on equity and can increase our flexibility by
decreasing dependence on the equity capital markets. The Proposed Amendment is
consistent with investment advisory agreements of other externally-managed
business development companies that perform comparable services to our
investment adviser.
BOARD CONSIDERATION OF THE APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT
At a meeting of the board of directors held on April 9, 2004, the
directors present in person unanimously voted to approve the Proposed Amendment.
In reaching a decision to amend the investment advisory agreement, the board of
directors considered, among other things:
o the nature, extent and quality of the services performed and to be
performed by TIM;
o the costs of the services to be provided by TIM and the profits to be
realized by TIM and its affiliates from its relationship with the
Company;
o the fee structures of comparable externally managed business
development companies that engage in similar investing activities; and
o the infrastructure required to manage assets.
Based on its review and discussion of the amended investment advisory
agreement, the board of directors approved the Proposed Amendment as being in
the best interests of the Company's stockholders. The board then directed that
the Proposed Amendment be submitted to stockholders for approval with the
board's recommendation that stockholders of the Company vote to approve the
Proposed Amendment.
13
ADDITIONAL EXPENSE INFORMATION
The following table is intended to assist stockholders in understanding the
difference in expenses between our current management fee structure and the
management fee structure under the Proposed Amendment. The fee table should not
be considered a representation of past or future expenses or annual rates of
return. Actual expenses or annual rates of return may be more or less than those
used for purposes of the fee table.
- ----------------------------------------------------------------------------------------------------------------------
CURRENT PRO FORMA
ANNUAL EXPENSES (as a percentage of net assets attributable to common stock) (1)(2)
Management Fees 2.00% 2.00%
Incentive Fees Payable Under Investment Advisory Agreement (3) 0.00 0.00
Interest Payments on Borrowed Funds (4) 0.00 0.00
Other Expenses (5) 0.62 0.62
Total Annual Expenses 2.62% 2.62%
- ----------------------------------------------------------------------------------------------------------------------
- ----------
(1) Net assets attributable to common stock equaled consolidated net assets of
$138 million at December 31, 2003.
(2) Our management fee under the Proposed Amendment will be based on gross
assets. This example assumes no leverage. We have borrowed no funds since
our IPO in November 2003, but may borrow funds in the future up to an
amount so that asset coverage, as defined in the Investment Company Act, is
at least 200% after each issuance of senior securities. The SEC requires
that the "Total annual expenses" percentage be calculated as a percentage
of net assets, rather than the gross assets, including assets that have
been funded with borrowed monies. If the "Total annual expenses" percentage
were calculated instead as a percentage of gross assets, and if we utilize
leverage, our "Total annual expenses" would increase proportionately to the
extent that we are leveraged.
(3) Based on our projected net operating income and net realized gains, we
would not anticipate paying any incentive fees in fiscal year 2004. Based
on our current business plan, we expect that we will not have any capital
gains and only a small amount of interest income as we complete our
investments during fiscal year 2004. In subsequent years, incentive fees
would increase if, and to the extent that, we earn greater interest income
through our investments in portfolio companies and, to a lesser extent,
realize capital gains upon the sale of warrants or other equity investments
in such companies.
(4) This example assumes no leverage. We have borrowed no funds since our IPO
in November 2003, but may borrow funds in the future up to an amount so
that asset coverage, as defined in the Investment Company Act, is at least
200% after each issuance of senior securities. Assuming an interest rate of
3.0%, interest payments on borrowed funds would range from 0.0% to 3.0%
(assuming leverage of 0% to 100% of our net assets), on a current and pro
forma basis.
(5) The percentage under "Other expenses" is based on an estimate of $850,000
and includes payments under the Administration Agreement based on our
projected allocable portion of overhead and other expenses incurred by BDC
Partners in performing its obligations under the Administration Agreement.
This percentage also assumes that we have not incurred any indebtedness.
14
The following example is intended to help you compare the projected dollar
amount of total cumulative expenses that would be incurred over various periods
with respect to a hypothetical investment of $1,000 in our common stock under
the current management agreement and under the pro forma management agreement
pursuant to the Proposed Amendment. The example assumes an investment has a 5%
return each year and that our operating expenses remain the same.
EXAMPLE (1)
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------------------------------------------
Current $ 56 $ 167 $ 277 $ 545
Pro Forma $ 75 $ 220 $ 357 $ 669
- --------------------------------------------------------------------------------------------------------------------
(1) Amounts shown assume leverage of 100% of our total assets. We have not
entered into any borrowing arrangements at this time, and may elect to do so in
the future. For purposes of calculating the borrowing cost for leverage, we have
assumed an annual interest rate of 3%. We have selected this rate based on
prevailing conditions in the debt markets for borrowings by similar entities
having a maturity of one year and an interest rate based on an appropriate risk
premium over 90-day LIBOR. However, our credit risk profile will likely vary
from the credit risk profiles of these entities and the terms at which these
entities can borrow may be more favorable or less restrictive than the terms
available to us, depending on our asset size and existing leverage at the time
of borrowing. We expect that the rate at which we will be able to borrow will
vary based on an established index such as LIBOR and that, upon such borrowing,
the rate will be fixed for each 90-day period through the maturity date. We
believe these are appropriate assumptions on which to base an estimate of the
Company's hypothetical borrowing costs for purposes of this example. Such rates
could be substantially higher than the assumed rate and such higher rates could
be due to changes in market conditions.
This example and the expenses in the table above should not be considered a
representation of our future expenses, and actual expenses (including leverage
and other expenses) may be greater or less than those shown. Moreover, while the
example assumes, as required by the SEC, a 5% annual return, our performance
will vary and may result in a return greater or less than 5%. The incentive fee
under the investment advisory agreement, which, assuming a 5% annual return,
would either not be payable or have a de minimis effect, is not included in the
example. If we achieve sufficient returns on our investments to trigger an
incentive fee of a material amount, our expenses, and returns to our investors,
would be higher. In addition, while the example assumes reinvestment of all
dividends and distributions at net asset value, participants in our distribution
reinvestment plan may receive shares valued at the market price in effect at
that time. This price may be at, above or below net asset value.
INVESTMENT ADVISORY AGREEMENT SUMMARY
MANAGEMENT FEE
We pay TIM a fee for investment advisory services consisting of two
components - a base management fee and an incentive fee. The base management fee
is calculated at an annual rate of 2.00%. The base management fee will be
payable quarterly in arrears, and will be calculated based on the average value
of our total gross assets at the end of the two most recently completed calendar
quarters, and adjusted pro rata for any share issuances, repurchases or
redemptions during the current calendar quarter.
The incentive fee has two parts, as follows: One part is calculated and
payable quarterly in arrears based on our pre-incentive fee net investment
income for the immediately preceding calendar quarter. For this purpose,
pre-incentive fee net investment income means interest income, dividend income
and any other income earned during the calendar quarter, minus our operating
expenses for the quarter (including the base management fee and any interest
expense and dividends paid on any issued and outstanding preferred stock, but
excluding the incentive fee). Pre-incentive fee net investment income includes
any consulting or other fees that we receive from portfolio companies, but does
not include any net realized capital gains. Pre-incentive fee net investment
income, expressed as a rate of return on the value of our net assets at the end
of the immediately preceding calendar quarter, will be compared to one-fourth of
the applicable annual "hurdle rate." TIM is entitled to 20.0% of the excess (if
any) of our pre-incentive fee net investment income for the quarter over
one-fourth of the applicable annual hurdle rate. The annual hurdle for the
period from the closing of our initial public offering through and including
December 31, 2004 is 8.27%, which is equal to the interest rate payable, at the
beginning of the period, on the most recently issued five-
15
year U.S. Treasury Notes plus 5.0%. For each calendar year commencing on or
after January 1, 2005, the annual hurdle rate will be determined as of the
immediately preceding December 31st by adding 5.0% to the interest rate then
payable on the most recently issued five-year U.S. Treasury Notes, up to a
maximum annual hurdle rate of 10.0%. The calculations will be pro rated for any
period of less than three months and adjusted for any share issuances,
redemptions or repurchases during the current quarter.
The second part of the incentive fee will be determined and payable in
arrears as of the end of each calendar year (or upon termination of the
investment advisory agreement, as of the termination date), commencing on
December 31, 2004, and will equal 20.0% of our net realized capital gains for
the calendar year less any unrealized capital losses for such year; provided
that the incentive fee as of December 31, 2004 will be calculated for a period
of longer than twelve calendar months to take into account any net realized
capital gains and unrealized capital losses for the period ended December 31,
2003.
EXAMPLES OF INCENTIVE FEE CALCULATION
Total Incentive Fee = income related portion of incentive fee plus capital gains
portion of incentive fee
EXAMPLE 1: INCOME-RELATED PORTION OF INCENTIVE FEE: (1)
ALTERNATIVE 1:
Assumptions
Investment income (including interest, dividends, fees, etc.) = 8%
Hurdle rate = 8.27%
Management fee = 2% (2)
Other expenses (legal, accounting, custodian, transfer agent, etc.) = 1%
Pre-incentive fee net investment income (investment income - (management
fee + other expenses)) = 5%
PRE-INCENTIVE FEE NET INVESTMENT INCOME DOES NOT EXCEED HURDLE RATE, THEREFORE
THERE IS NO INCENTIVE FEE.
ALTERNATIVE 2:
Assumptions
Investment income (including interest, dividends, fees, etc.) = 12%
Hurdle rate = 8.27%
Management fee = 2% (2)
Other expenses (legal, accounting, custodian, transfer agent, etc.) = 1%
Pre-incentive fee net investment income (investment income - (management
fee + other expenses)) = 9%
Incentive Fee = 20% x (12% - (8.27 + 2% + 1%))
= 20% x (12% - 11.27%)
= 20% x .73%
= .146%
(1) For purposes of this example, these calculations are shown on an annual
basis and the hypothetical amount of returns shown are based on a
percentage of our total net assets and assumes no leverage.
(2) Based on average gross assets, but assumes no leverage.
EXAMPLE 2: CAPITAL GAINS PORTION OF INCENTIVE FEE: (1)
Assumptions
Year 1 = no net realized capital gains or losses
Year 2 = 6% net realized capital gains, 1% unrealized capital losses and 0%
unrealized gains
Year 3 = 12% net realized capital gains, 2% unrealized capital losses and 2%
unrealized gains
Capital gains incentive fee = 20% x (net realized capital gains for year less
unrealized capital losses for the period)
Year 1 incentive fee = 20% x (0)
= 0
= no incentive fee
Year 2 incentive fee = 20% x (6% - 1%)
16
= 20% x (5%)
= 1%
Year 3 incentive fee = 20% x (12% - 2%)
= 20% x (10%)
= 2%
(1) The hypothetical amount of returns shown are based on a percentage of our
total net assets and assumes no leverage.
TOTAL INCENTIVE FEE
To determine the total incentive fee, you must add the income-related
portion of the incentive fee with the capital gains portion of the incentive
fee. For example, if the income-related portion of the incentive fee is 0.146%
as set forth in Alternative 2 to the first example above and the capital gains
portion of the incentive fee is 2.0% as set forth in Year 3 to the second
example above, the total incentive fee would be 2.146% as a percentage of our
total gross assets (assuming no leverage). These amounts are based on the
hypothetical amounts reflected in the above examples, and the actual amount for
either portion of the incentive fee may differ.
OTHER INFORMATION ABOUT THE PROPOSED AMENDMENT
If approved by stockholders, the investment advisory agreement, as
amended by the Proposed Amendment will remain in full force and effect for two
years from the date of the Annual Meeting, and will continue in full force and
effect indefinitely thereafter, but only so long as such continuance is
specifically approved at least annually by both (i) the board of directors of
the Company or by the vote of a majority of the outstanding voting securities
(as defined in the Investment Company Act of 1940) of the Company, and (ii) the
vote of a majority of those Directors of the Company who are not parties to the
investment advisory agreement, as amended by the Proposed Amendment or
interested persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval.
The approval of the proposal to amend our investment advisory agreement
with TIM requires an affirmative vote of the lesser of: (i) 67% or more of the
Company's shares present at the meeting if more than 50% of the outstanding
shares of the Company are present or represented by proxy, or (ii) more than 50%
of the outstanding shares of the Company. Shares that are voted as abstentions
and Broker Shares will have the effect of a vote against the proposal.
UNLESS MARKED TO THE CONTRARY, THE SHARES REPRESENTED BY THE ENCLOSED PROXY
CARD WILL BE VOTED FOR THE AMENDMENT OF THE INVESTMENT ADVISORY AGREEMENT.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE AMENDMENT OF THE
INVESTMENT ADVISORY AGREEMENT.
OTHER BUSINESS
The board of directors knows of no other business to be presented for
action at the Meeting. If any matters do come before the Meeting on which action
can properly be taken, it is intended that the proxies shall vote in accordance
with the judgment of the person or persons exercising the authority conferred by
the proxy at the Meeting. The submission of a proposal does not guarantee its
inclusion in the Company's proxy statement or presentation at the Meeting unless
certain securities law requirements are met.
SUBMISSION OF STOCKHOLDER PROPOSALS
The Company expects that the 2005 Annual Meeting of Stockholders will be
held in May 2005, but the exact date, time, and location of such meeting have
yet to be determined. A stockholder who intends to present a proposal at that
annual meeting must submit the proposal in writing to the Company at its address
in Greenwich, Connecticut, and the Company must receive the proposal no later
than February 17, 2005, in order for the proposal to be considered for inclusion
in the Company's proxy statement for that meeting. The submission of a proposal
does not guarantee its inclusion in the Company's proxy statement or
presentation at the meeting.
For any proposal that is not submitted for inclusion in next year's proxy
statement (as described in the preceding paragraph) but is instead sought to be
presented directly at next year's annual meeting, SEC rules permit
17
management to vote proxies in its discretion if (a) the Company receives notice
of the proposal before the close of business on [ _________] , 2005 and advises
stockholders in next year's proxy statement about the nature of the matter and
how management intends to vote on such matter, or (b) does not receive notice of
the proposal prior to the close of business on [ _________ ], 2005.
Notices of intention to present proposals at the 2005 annual meeting
should be addressed to Saul B. Rosenthal, our Chief Operating Officer and
Corporate Secretary, Technology Investment Capital Corp., 8 Sound Shore Drive,
Greenwich, Connecticut 06830. The Company reserves the right to reject, rule out
of order, or take other appropriate action with respect to any proposal that
does not comply with these and other applicable requirements.
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING OF STOCKHOLDERS IN
PERSON. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO
COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.
By Order of the Board of Directors
Saul B. Rosenthal
Corporate Secretary
Greenwich, Connecticut
April __, 2004
18
APPENDIX A
TECHNOLOGY INVESTMENT CAPITAL CORP.
AUDIT COMMITTEE CHARTER
PURPOSE
The Audit Committee is appointed by the Board of Directors of the
Corporation, pursuant to authority delegated to it by the Board, to monitor (1)
the integrity of the financial statements of the Corporation, (2) the
independent auditor's qualifications and independence, (3) the performance of
the Corporation's internal audit function and independent auditors, and (4) the
compliance by the Corporation with legal and regulatory requirements.
The Audit Committee shall prepare the report required by the Securities
and Exchange Commission (the "Commission") to be included in the Corporation's
annual proxy statement.
COMMITTEE MEMBERSHIP AND FUNCTION
The Audit Committee of the Corporation shall at all times have at least
three members and be composed solely of Independent Board Members. "Independent
Board Members" are Corporation Directors who (i) are not "interested persons"
(as defined in the Investment Company Act of 1940 (the "1940 Act")) of the
Corporation, (ii) are "independent directors" (as defined in Rule 4200(a)(14) of
the National Association of Securities Dealers' listing standards) and (iii)
meet the independence requirements of Section 10A(m)(3) of the Securities
Exchange Act of 1934 (the "Exchange Act") and the rules and regulations of the
Commission, including the requirement that they not accept directly or
indirectly any consulting, advisory, or other compensation from the Corporation
(other than Directors' fees received in his or her capacity as a member of the
Audit Committee, Board of Directors or another committee of the Board). The
Board of Directors shall designate the members of the Audit Committee. The Board
of Directors shall have the power at any time to change the membership of the
Audit Committee, to fill all vacancies, and to designate alternate members to
replace any absent or disqualified members, so long as the Audit Committee shall
at all times have at least three members and be composed solely of Independent
Board Members. Audit Committee members shall not simultaneously serve on the
audit committees of more than two other public companies. The members of the
Audit Committee shall select its Chairman.
As a matter of best practices, the Audit Committee will endeavor to
have at least one of its members with the requisite qualifications to be
designated by the Board of Directors as an "audit committee financial expert,"
as such term is defined by the Sarbanes-Oxley Act of 2002 and rules adopted
thereunder from time to time ("Sarbanes-Oxley Act"). To that end, the Audit
Committee shall consider at least annually whether one or more of its members
qualifies to be designated by the Board as an "audit committee financial
expert." The Audit Committee shall report the results of its deliberations to
the Board of Directors for further action as appropriate, including, but not
limited to, a determination by the Board of Directors that the Audit Committee
membership includes or does not include one or more "audit committee financial
experts" and any related disclosure to be made concerning this matter. If a
vacancy exists due to the retirement or resignation of a member of the Audit
Committee who has been designated as an "audit committee financial expert," the
Board will, as a matter of best practices, endeavor to fill such vacancy with
another "audit committee financial expert," as soon as reasonably practicable
thereafter. The designation of a member of the Audit Committee as an "audit
committee financial expert" will not increase the duties, obligations or
liability of the designee as compared to the duties, obligations and liability
imposed on the designee as a member of the Audit Committee and of the Board of
Directors.
Notwithstanding the foregoing, for so long as the Corporation's common
stock is listed on The Nasdaq National Market (i) the Audit Committee shall at
all times have at least one member that has past employment experience in
finance or accounting, requisite professional certification in accounting, or
any other comparable experience or background which results in the individual's
financial sophistication, including being or having been a chief executive
officer, chief financial officer or other senior officer with financial
oversight responsibilities, and (ii)
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all members of the Audit Committee shall be able to read and understand
fundamental financial statements, including a company's balance sheet, income
statement, and cash flow statement.
COMMITTEE AUTHORITY AND RESPONSIBILITIES
The function of the Audit Committee is oversight. Management(1) is
primarily responsible for maintaining appropriate systems for accounting and
financial reporting principles and policies and internal controls and procedures
that provide for compliance with accounting standards and applicable laws and
regulations. The independent accountants are primarily responsible for planning
and carrying out a proper audit of the Corporation's annual financial statements
in accordance with generally accepted accounting standards. The independent
accountants are accountable to the Board of Directors and the Audit Committee,
as representatives of the Corporation's shareholders. The Board of Directors and
the Audit Committee have the ultimate authority and responsibility to select,
evaluate and, where appropriate, replace the Corporation's independent
accountants (subject, if applicable, to shareholder ratification.)
In fulfilling their responsibilities thereunder, it is recognized that
members of the Audit Committee are not full-time employees of the Corporation or
management and are not, and do not represent themselves to be, accountants or
auditors by profession. As such, it is not the duty or the responsibility of the
Audit Committee or its members to conduct "field work" or other types of
auditing or accounting reviews or procedures, to determine that the financial
statements are complete and accurate and are in accordance with generally
accepted accounting principles, or to set auditor independence standards. Each
member of the Audit Committee shall be entitled to rely on (a) the integrity of
those persons within and outside the Corporation and management from which it
receives information; (b) the accuracy of the financial and other information
provided to the Audit Committee absent actual knowledge to the contrary (which
shall be promptly reported to the Board of Directors); and (c) statements made
by the officers and employees of the Corporation, its investment adviser or
other third parties as to any information technology, internal audit and other
non-audit services provided by the independent accountants to the Corporation.
In carrying out its responsibilities, the Audit Committee's policies and
procedures shall be adapted, as appropriate, to best react to a changing
environment.
The Audit Committee shall be given the resources and authority
appropriate to discharge its responsibilities, including the authority to retain
experts, independent counsel or consultants at the expense of the Corporation.
The Audit Committee shall also be given the resources, as determined by the
Audit Committee, for payment of (i) compensation to any registered public
accounting firm engaged for the purpose of preparing or issuing an audit report
or performing other audit, review or attest services for the Corporation and
(ii) ordinary administrative expenses of the Audit Committee that are necessary
or appropriate in carrying out its duties.
The Audit Committee shall review this Charter at least once annually
and recommend any changes to this Charter that it deems appropriate to the full
Board of Directors. The Audit Committee shall have such further responsibilities
as are given to it from time to time by the Board of Directors. The Audit
Committee shall consult, on an ongoing basis, with management, the independent
accountants and counsel as to legal or regulatory developments affecting its
responsibilities, as well as relevant tax, accounting and industry developments.
Nothing in this Charter shall be interpreted as diminishing or
derogating from the responsibilities of the Board of Directors.
Pursuant to authority granted to it by the Board of Directors, the
responsibilities of the Audit Committee are:
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(1) For purposes of this Charter, the term management means the appropriate
officers of the Corporation, and its investment adviser, administrator,
fund accounting agent, and other key service providers (other than the
independent accountants). Also, for purposes of this Charter, the phrase
internal accounting staff means the appropriate officers and employees of
the Corporation, and its investment adviser, administrator, fund accounting
agent, and other key service providers (other than the independent
accountants).
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Retention of Independent Accountants and Approval of Services
1. To select or retain each year a firm or firms of independent
accountants to audit the accounts and records of the
Corporation, to approve the terms of compensation of such
independent accountants and to terminate such independent
accountants as it deems appropriate.
2. To pre-approve any independent accountants' engagement to
render audit and/or permissible non-audit services (including
the fees charged and proposed to be charged by the independent
accountants), subject to the de minimis exceptions under
Section 10A(i)(1)(B) of the Exchange Act, and as otherwise
required by law(2).
3. The Audit Committee may delegate its pre-approval
responsibilities to one or more of its members. The member(s)
to whom such responsibility is delegated must report, for
informational purposes only, any pre-approval decisions to the
Audit Committee at its next scheduled meeting.
Oversight of the Corporation's Relationship with the Independent
Accountants
4. To obtain and review a report from the independent accountants
at least annually regarding:
(a) the independent accountants' internal quality-control
procedures;
(b) any material issues raised by the most recent internal
quality-control review, or peer review, of the firm, or by
any inquiry or investigation by governmental or
professional authorities within the preceding five years
respecting one or more independent audits carried out by
the firm;
(c) any steps taken to deal with any such issues; and
(d) all relationships between the independent accountants
and the Corporation.
5. To evaluate the qualifications, performance and independence
of the independent accountants, including the following:
(a) evaluating the performance of the lead partner, and
the quality and depth of the professional staff assigned
to the Corporation;
(b) considering whether the accountant's quality controls
are adequate;
(c) considering whether the provision of permitted
non-audit services is compatible with maintaining the
accountant's independence; and
(d) taking into account the opinions of management and the
internal accounting staff.
The Audit Committee shall present its conclusions with respect
to the independent accountants to the Board.
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(2) In addition to the requirement to pre-approve audit and permissible
non-audit services (subject to the de minimis exceptions under Section
10A(i)(1)(B)) to be rendered to the Corporation by its independent
accountants, the Audit Committee is required to pre-approve non-audit
services (subject to the de minimis exceptions under Section 10A(i)(1)(B))
rendered by the Corporation's independent accountants to the Corporation's
investment adviser (not including a sub-adviser whose role is primarily
portfolio management and is sub-contracted or overseen by another
investment adviser), and to any entity controlling, controlled by or under
common control with its investment adviser that provides ongoing services
to the Corporation if the engagement relates directly to the operations and
financial reporting of the Corporation.
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6. To ensure the rotation of the lead (or coordinating) audit
partner having primary responsibility for the audit and the
audit partner responsible for reviewing the audit as required
by law. To consider whether, in order to assure continuing
auditor independence, it is appropriate to adopt a policy of
rotating the independent accounting firm on a regular basis.
7. To recommend to the Board policies for the Corporation's
hiring of employees or former employees of the independent
accountants who participated in any capacity in the audit of
the Corporation.
8. To discuss with the national office of the independent
accountants issues on which they were consulted by the
Corporation's audit team and matters of audit quality and
consistency.
9. To consider the effect on the Corporation of:
(a) any changes in accounting principles or practices
proposed by management or the independent accountants;
(b) any changes in service providers, such as the
Corporation's accountants or administrators, that could
impact the Corporation's internal controls; and
(c) any changes in schedules (such as fiscal or tax
year-end changes) or structures or transactions that
require special accounting activities or resources.
10. To review a presentation by the independent accountants with
respect to the Corporation's qualification under Subchapter M
of the Internal Revenue Code and amounts distributed and
reported to shareholders for Federal tax purposes.
11. To annually review a formal written statement from the
independent accountants delineating all relationships between
the independent accountants and the Corporation, consistent
with applicable standards of the Independence Standards Board,
and discussing with the independent accountants their methods
and procedures for insuring independence.
12. To interact with the Corporation's independent accountants,
including reviewing and, where necessary, resolving
disagreements that have arisen between management and the
independent accountants regarding financial reporting.
Financial Statements and Disclosure Matters
13. To review and discuss with management and the independent
accountants the annual audited financial statements, including
disclosures made in management's discussion and analysis, and
recommend to the Board whether the audited financial
statements should be included in the Corporation's Annual
Report on Form 10-K.
14. To review and discuss with management and the independent
accountants the Corporation's quarterly financial statements
prior to the filing of its Quarterly Reports on Form 10-Q,
including the results of the independent accountants' reviews
of the quarterly financial statements.
15. To meet with the Corporation's independent accountants at
least four times during each fiscal year, including private
meetings, and review written materials prepared by the
independent accountants, as appropriate.
(a) to review the arrangements for and the scope of the
annual audit and any special audits or other special
permissible services;
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(b) to review the Corporation's financial statements and
to discuss any matters of concern arising in connection
with audits of such financial statements, including any
adjustments to such statements recommended by the
independent accountants or any other results of the
audits;
(c) to consider and review, as appropriate and in
consultation with the independent accountants, the
appropriateness and adequacy of the Corporation's
financial and accounting policies, procedures and internal
accounting controls and, as appropriate, the internal
controls of key service providers, and to review
management's responses to the independent accountants'
comments relating to those policies, procedures and
controls, and to any special steps adopted in light of
material control deficiencies;
(d) to review with the independent accountants their
opinions as to the fairness of the financial statements;
(e) to review and discuss quarterly reports from the
independent accountants relating to:
(1) all critical accounting policies and practices to
be used;
(2) all alternative treatment of financial
information within generally accepted accounting
principles that have been discussed with management,
ramifications of the use of such alternative
disclosures and treatments and the treatment
preferred by the independent accountants; and
(3) other material written communications between the
independent accountant and management, such as any
management letter or schedule of unadjusted
differences.
Compliance Oversight
16. To obtain from the independent accountants assurance that
Section 10A(b) of the Exchange Act has not been implicated.
17. To investigate, when the Audit Committee deems it necessary,
improprieties or suspected improprieties in Corporation
operations.
18. To establish and maintain procedures for the following,
including considering exceptions to and responding to alleged
violations of such procedures as the Audit Committee shall
consider appropriate:
(a) the receipt, retention and treatment of complaints
received by the Corporation regarding accounting, internal
accounting controls or auditing matters; and
(b) the confidential, anonymous submission by employees of
the Corporation of concerns regarding questionable
accounting or auditing matters.
19. To discuss with management and the independent accountants any
correspondence with regulators or governmental agencies and
any published reports which raise material issues regarding
the Corporation's financial statements or accounting policies.
20. To discuss with the Corporation's counsel legal matters that
may have a material impact on the financial statements or the
Company's compliance policies.
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Oversight of Corporation's Internal Audit Function
21. To recommend to the Board of Directors the appointment of the
Corporation's principal accounting officer and principal
financial officer.
22. To consider whether to grant any approvals or waivers sought
under the Corporation's Code of Ethics (the "Code") adopted
pursuant to the Sarbanes-Oxley Act.
23. To review any alleged violations under the Corporation's Code
and to make any recommendations to the Board of Directors as
it deems appropriate.
24. To require the Treasurer or other appropriate officers of the
Corporation, internal accounting staff, and individuals with
internal audit responsibilities, on such reasonable notice as
the Audit Committee may provide, to meet with the Audit
Committee for consultation on audit, accounting and related
financial matters.
25. To review disclosures made to the Audit Committee by the
Corporation's chief executive officer and chief financial
officer, or persons performing similar roles, during their
certification process for the Corporation's Annual Report on
Form 10-K and Quarterly Reports on Form 10-Q concerning any
significant deficiencies in the design or operation of
internal controls or material weaknesses in such controls, and
any fraud involving management or other employees who have a
significant role in the Corporation's internal controls.
26. To discuss with management the Corporation's major financial
risk exposures and the steps management has taken to monitor
and control such exposures, including the Corporation's risk
assessment and risk management policies.
Other
27. To report its activities to the Board on a regular basis and
to make such recommendations with respect to the matters
described above and other matters as the Audit Committee may
deem necessary or appropriate.
COMMITTEE MEETINGS
The Audit Committee shall meet as often as it determines, but not less
frequently than quarterly, and is empowered to hold special meetings as
circumstances require. The Chairman of the Audit Committee or any two members of
the Audit Committee may fix the time and place of the Audit Committee's meetings
unless the Board of Directors shall otherwise provide. Members of the Audit
Committee may participate in a meeting by means of a conference telephone or
similar communications equipment if all persons participating can hear each
other at the same time. Subject to the provisions of the 1940 Act, participation
in a meeting by these means constitutes presence in person at the meeting. Any
action required or permitted to be taken at a meeting of the Audit Committee may
also be taken without a meeting if all members of the Audit Committee consent
thereto in writing. The Audit Committee shall keep regular minutes of its
meetings and records of decisions taken without a meeting and cause them to be
recorded in the Corporation's minute book. The Audit Committee may invite any
Director who is not a member of the Audit Committee, management, counsel,
representatives of service providers or other persons to attend meetings and
provide information as the Audit Committee, in its sole discretion, considers
appropriate.
One third, but not less than two, of the members of the Audit Committee
shall be present at any meeting of the Audit Committee in order to constitute a
quorum for the transaction of business at such meeting, and the act of a
majority present shall be the act of the Audit Committee. In the absence or
disqualification of any member of the Audit Committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he/she or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any such absent or
disqualified member, so long as such appointee is an Independent Board Member.
Approved: October 28, 2003.
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APPENDIX B
AMENDED AND RESTATED INVESTMENT ADVISORY AGREEMENT
BETWEEN
TECHNOLOGY INVESTMENT CAPITAL CORP.
AND
TECHNOLOGY INVESTMENT MANAGEMENT, LLC
Agreement made this ______ day of _______________, 2004, by
and between TECHNOLOGY INVESTMENT CAPITAL CORP., a Maryland corporation (the
"Corporation"), and TECHNOLOGY INVESTMENT MANAGEMENT, LLC, a Delaware limited
liability company (the "Adviser").
WHEREAS, the Corporation is a specialty finance company that
has elected to become a business development company under the Investment
Company Act of 1940 (the "Investment Company Act");
WHEREAS, the Adviser is an investment adviser that has
registered under the Investment Advisers Act of 1940 (the "Advisers Act"); and
WHEREAS, the Corporation desires to retain the Adviser to
furnish investment advisory services to the Corporation on the terms and
conditions hereinafter set forth, and the Adviser wishes to be retained to
provide such services.
NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration, the parties hereby agree as follows:
1. Duties of the Adviser.
(a) The Corporation hereby employs the Adviser to act as the
investment adviser to the Corporation and to manage the investment and
reinvestment of the assets of the Corporation, subject to the supervision of the
Board of Directors of the Corporation, for the period and upon the terms herein
set forth, (i) in accordance with the investment objective, policies and
restrictions that are set forth in the Corporation's Registration Statement on
Form N-2, dated September 23, 2003, as amended from time to time (as amended,
the "Registration Statement"), (ii) in accordance with the Investment Company
Act, subsequent to the time that the Corporation becomes a business development
company, and (iii) during the term of this Agreement in accordance with all
other applicable federal and state laws, rules and regulations, and the
Corporation's charter and by-laws. Without limiting the generality of the
foregoing, the Adviser shall, during the term and subject to the provisions of
this Agreement, (i) determine the composition of the portfolio of the
Corporation, the nature and timing of the changes therein and the manner of
implementing such changes; (ii) identify, evaluate and negotiate the structure
of the investments made by the Corporation; (iii) close, monitor and service the
Corporation's investments; (iv) determine the securities and other assets that
the
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Corporation will purchase, retain, or sell; and (v) provide the Corporation with
such other investment advisory, research and related services as the Corporation
may, from time to time, reasonably require for the investment of its funds. The
Adviser shall have the power and authority on behalf of the Corporation to
effectuate its investment decisions for the Corporation, including the execution
and delivery of all documents relating to the Corporation's investments and the
placing of orders for other purchase or sale transactions on behalf of the
Corporation. In the event that the Corporation determines to acquire debt
financing, the Adviser will arrange for such financing on the Corporation's
behalf, subject to the oversight and approval of the Corporation's Board of
Directors.
(b) The Adviser hereby accepts such employment and agrees during the
term hereof to render the services described herein for the compensation
provided herein.
(c) The Adviser is hereby authorized to enter into one or more
sub-advisory agreements with other investment advisers (each, a "Sub-Adviser")
pursuant to which the Adviser may obtain the services of the Sub-Adviser(s) to
assist the Adviser in fulfilling its responsibilities hereunder. Specifically,
the Adviser may retain a Sub-Adviser to recommend specific securities or other
investments based upon the Corporation's investment objective and policies, and
work, along with the Adviser, in structuring, negotiating, arranging or
effecting the acquisition or disposition of such investments and monitoring
investments on behalf of the Corporation, subject to the oversight of the
Adviser and the Corporation. The Adviser or BDC Partners, LLC, the managing
member of the Adviser, and not the Corporation, shall be responsible for any
compensation payable to any Sub-Adviser. Any sub-advisory agreement entered into
by the Adviser shall be in accordance with the requirements of the Investment
Company Act and other applicable federal and state law.
(d) The Adviser shall for all purposes herein provided be deemed to
be an independent contractor and, except as expressly provided or authorized
herein, shall have no authority to act for or represent the Corporation in any
way or otherwise be deemed an agent of the Corporation.
(e) The Adviser shall keep and preserve for the period required by
the Investment Company Act any books and records relevant to the provision of
its investment advisory services to the Corporation and shall specifically
maintain all books and records with respect to the Corporation's portfolio
transactions and shall render to the Corporation's Board of Directors such
periodic and special reports as the Board may reasonably request. The Adviser
agrees that all records that it maintains for the Corporation are the property
of the Corporation and will surrender promptly to the Corporation any such
records upon the Corporation's request, provided that the Adviser may retain a
copy of such records.
2. Corporation's Responsibilities and Expenses Payable by the
Corporation. All personnel of the Adviser, when and to the extent engaged in
providing investment advisory services hereunder, and the compensation and
expenses of such personnel allocable to such services, will be provided and paid
for by the Adviser or by BDC Partners, LLC, as managing member of the Adviser,
and not by the Corporation. The Corporation shall be responsible for all other
costs and expenses of its operations and transactions, including (without
limitation) those relating to: organization and offering; calculating the
Corporation's net asset value; effecting
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sales and repurchases of shares of the Corporation's common stock and other
securities; investment advisory fees; fees payable to third parties relating to,
or associated with, making investments (in each case subject to approval of the
Corporation's Board of Directors); transfer agent and custodial fees; federal
and state registration fees; all costs of registration and listing the
Corporation's shares on any securities exchange; federal, state and local taxes;
independent Directors' fees and expenses; costs of proxy statements,
stockholders' reports and notices; fidelity bond, directors and officers/errors
and omissions liability insurance, and any other insurance premiums; direct
costs such as printing, mailing, long distance telephone, staff, independent
auditors and outside legal costs; and all other expenses incurred by the
Corporation or BDC Partners, LLC in connection with administering the
Corporation's business, including payments under the Administration Agreement
between the Corporation and BDC Partners, LLC based upon the Corporation's
allocable portion of BDC Partners, LLC's overhead in performing its obligations
under the Administration Agreement, including rent.
3. Compensation of the Adviser. The Corporation agrees to pay to the
Adviser, and the Adviser agrees to accept as compensation for the services
provided by the Adviser hereunder, a base management fee ("Base Management Fee")
and an incentive fee ("Incentive Fee") as hereinafter set forth. The Adviser may
agree to temporarily or permanently waive, in whole or in part, the Base
Management Fee and/or the Incentive Fee.
(a) The Base Management Fee shall be calculated at an annual rate of
2.00%. The Base Management Fee will be payable quarterly in arrears, and will be
calculated based on the average value of the Corporation's gross assets at
the end of the two most recently completed calendar quarters, and adjusted pro
rata for any share issuances, debt issuances, repurchases or redemptions during
the current calendar quarter. Base Management Fees for any partial month or
quarter will be pro rated.
(b) The Incentive Fee shall consist of two parts, as follows:
(i) One part will be calculated and payable quarterly in
arrears based on the pre-Incentive Fee net investment income
for the immediately preceding calendar quarter. For this
purpose, pre-Incentive Fee net investment income means
interest income, dividend income and any other income earned
by the Corporation during the calendar quarter, minus the
Corporation's operating expenses for the quarter (including
the Base Management Fee and any interest expense and dividends
paid on any issued and outstanding preferred stock, but
excluding the Incentive Fee). Pre-Incentive Fee net investment
income includes any consulting or other fees that the
Corporation receives from portfolio companies, but does not
include any net realized capital gains. Pre-
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Incentive Fee net investment income, expressed as a rate of
return on the value of the Corporation's net assets at the end
of the immediately preceding calendar quarter, will be
compared to one-fourth of an applicable annual "hurdle rate."
The Adviser will be entitled to 20% of the excess (if any) of
the Corporation's pre-Incentive Fee net investment income for
the quarter over one-fourth of the applicable annual hurdle
rate. The annual hurdle rate will initially be 8.27%. For each
calendar year, commencing on or after January 1, 2005, the
annual hurdle rate will be determined as of the immediately
preceding December 31st by adding 5% to the interest rate then
payable on the most recently issued five-year U.S. Treasury
Notes, up to a maximum annual hurdle rate of 10%. The
calculations will be appropriately pro rated for any period of
less than three months and adjusted for any share issuances,
redemptions or repurchases during the current quarter.
(ii) The second part of the Incentive Fee (the "Capital Gains
Fee") will be determined and payable in arrears as of the end
of each calendar year (or upon termination of this Agreement
as set forth below), commencing on December 31, 2004, and will
equal 20.0% of the Corporation's net realized capital gains
for the calendar year less any unrealized capital losses at
the end of such year; provided that the Capital Gains Fee
determined as of December 31, 2004 will take into account any
capital gains and losses for the period ending December 31,
2003, if any. In the event that this Agreement shall terminate
as of a date that is not a calendar year end, the termination
date shall be treated as though it were a calendar year end
for purposes of calculating and paying a Capital Gains Fee.
4. Covenants of the Adviser. The Adviser covenants that it will
register as an investment adviser under the Advisers Act prior to the
Corporation's election to become a business development company. The Adviser
agrees that its activities will at all times be in compliance in all material
respects with all applicable federal and state laws governing its operations and
investments.
5. Excess Brokerage Commissions. The Adviser is hereby authorized,
to the fullest extent now or hereafter permitted by law, to cause the
Corporation to pay a member of a national securities exchange, broker or dealer
an amount of commission for effecting a securities transaction in excess of the
amount of commission another member of such exchange, broker or dealer would
have charged for effecting that transaction, if the Adviser determines in good
faith, taking into account such factors as price (including the applicable
brokerage commission or dealer spread), size of order, difficulty of execution,
and operational facilities of the firm and the firm's risk and skill in
positioning blocks of securities, that such amount of commission is reasonable
in relation to the value of the brokerage and/or research services provided by
such member, broker or dealer, viewed in terms of either that particular
transaction or its overall responsibilities with respect to the Corporation's
portfolio, and constitutes the best net results for the Corporation.
6. Limitations on the Employment of the Adviser. The services of the
Adviser to the Corporation are not exclusive, and the Adviser may engage in any
other business
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or render similar or different services to others so long as its services to the
Corporation hereunder are not impaired thereby, and nothing in this Agreement
shall limit or restrict the right of any manager, officer or employee of the
Adviser to engage in any other business or to devote his or her time and
attention in part to any other business, whether of a similar or dissimilar
nature; provided, that during the term of this Agreement, the Adviser will not
serve as investment adviser to any other public or private entity that utilizes
a principal investment strategy of providing debt financing to "target
technology-related companies." For purposes of this Agreement, "target
technology-related companies" are companies having annual revenues of less than
$100 million and/or a market capitalization of less than $200 million, that
create products or provide services requiring advanced technology, and that
compete in industries characterized by such products or services, including
companies in the following businesses: computer software and hardware,
networking systems, semiconductors, semiconductor capital equipment, diversified
technology, medical device technology, information technology infrastructure or
services, Internet, telecommunications and telecommunications equipment and
media. So long as this Agreement or any extension, renewal or amendment remains
in effect, the Adviser shall be the only investment adviser for the Corporation,
subject to the Adviser's right to enter into sub-advisory agreements. The
Adviser assumes no responsibility under this Agreement other than to render the
services called for hereunder. It is understood that directors, officers,
employees and stockholders of the Corporation are or may become interested in
the Adviser and its affiliates, as directors, officers, employees, partners,
stockholders, members, managers or otherwise, and that the Adviser and
directors, officers, employees, partners, stockholders, members and managers of
the Adviser and its affiliates are or may become similarly interested in the
Corporation as stockholders or otherwise.
7. Responsibility of Dual Directors, Officers and/or Employees. If
any person who is a manager, officer or employee of the Adviser or its managing
member is or becomes a director, officer and/or employee of the Corporation and
acts as such in any business of the Corporation, then such manager, officer
and/or employee of the Adviser or its managing member shall be deemed to be
acting in such capacity solely for the Corporation, and not as a manager,
officer or employee of the Adviser or its managing member or under the control
or direction of the Adviser or its managing member, although paid by BDC
Partners, LLC as managing member of the Adviser.
8. Limitation of Liability of the Adviser; Indemnification. The
Adviser (and its officers, managers, agents, employees, controlling persons,
members and any other person or entity affiliated with the Adviser, including
without limitation BDC Partners, LLC) shall not be liable to the Corporation for
any action taken or omitted to be taken by the Adviser in connection with the
performance of any of its duties or obligations under this Agreement or
otherwise as an investment adviser of the Corporation, except to the extent
specified in Section 36(b) of the Investment Company Act concerning loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services, and the Corporation shall indemnify the Adviser (and
its officers, managers, agents, employees, controlling persons, members and any
other person or entity affiliated with the Adviser, including without limitation
BDC Partners, LLC) (collectively, the "Indemnified Parties") and hold them
harmless from and against all damages, liabilities, costs and expenses
(including reasonable attorneys' fees and amounts reasonably paid in settlement)
incurred by the Indemnified Parties in or by reason of any pending, threatened
or completed action, suit, investigation or other proceeding (including an
action or suit by or in the
B-5
right of the Corporation or its security holders) arising out of or otherwise
based upon the performance of any of the Adviser's duties or obligations under
this Agreement or otherwise as an investment adviser of the Corporation.
Notwithstanding the preceding sentence of this Paragraph 8 to the contrary,
nothing contained herein shall protect or be deemed to protect the Indemnified
Parties against or entitle or be deemed to entitle the Indemnified Parties to
indemnification in respect of, any liability to the Corporation or its security
holders to which the Indemnified Parties would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of the
Adviser's duties or by reason of the reckless disregard of the Adviser's duties
and obligations under this Agreement.
9. Effectiveness, Duration and Termination of Agreement. This
Agreement shall become effective as of the date above written. This Agreement
shall remain in effect for two years, and thereafter shall continue
automatically for successive annual periods, provided that such continuance is
specifically approved at least annually by (a) the vote of the Corporation's
Board of Directors, or by the vote of a majority of the outstanding voting
securities of the Corporation and (b) the vote of a majority of the
Corporation's Directors who are not parties to this Agreement or "interested
persons" (as such term is defined in Section 2(a)(19) of the Investment Company
Act) of any such party, in accordance with the requirements of the Investment
Company Act. This Agreement may be terminated at any time, without the payment
of any penalty, upon 60 days' written notice, by the vote of a majority of the
outstanding voting securities of the Corporation, or by the vote of the
Corporation's Directors or by the Adviser. This Agreement will automatically
terminate in the event of its "assignment" (as such term is defined for purposes
of Section 15(a)(4) of the Investment Company Act). The provisions of Paragraph
8 of this Agreement and of the Amended and Restated Investment Advisory
Agreement between the Corporation and the Adviser, dated as of November 18,
2003, shall remain in full force and effect, and the Adviser shall remain
entitled to the benefits thereof, notwithstanding any termination of this
Agreement.
10. Notices. Any notice under this Agreement shall be given in
writing, addressed and delivered or mailed, postage prepaid, to the other party
at its principal office.
11. Amendments. This Agreement may be amended by mutual consent, but
the consent of the Corporation must be obtained in conformity with the
requirements of the Investment Company Act.
12. Entire Agreement; Governing Law. This Agreement contains the
entire agreement of the parties and supersedes all prior agreements,
understandings and arrangements with respect to the subject matter hereof. This
Agreement shall be construed in accordance with the laws of the State of New
York and the applicable provisions of the Investment Company Act. To the extent
the applicable laws of the State of New York, or any of the provisions herein,
conflict with the provisions of the Investment Company Act, the latter shall
control.
B-6
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed on the date above written.
TECHNOLOGY INVESTMENT CAPITAL CORP.
By:
------------------------------------
Jonathan Cohen, President
TECHNOLOGY INVESTMENT MANAGEMENT, LLC
By: BDC Partners, LLC, its managing member
By:
------------------------------------
Jonathan Cohen, Managing Member
B-7
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
TECHNOLOGY INVESTMENT CAPITAL CORP.
FOR ANNUAL MEETING OF STOCKHOLDERS
JUNE 17, 2004
The undersigned stockholder of Technology Investment Capital Corp. (the
"Company") acknowledges receipt of the Notice of Annual Meeting of Stockholders
of the Company and hereby appoints Jonathan H. Cohen, Saul B. Rosenthal and
Patrick F. Conroy, or any one of them, and each with full power of substitution,
to act as attorneys and proxies for the undersigned to vote all the shares of
common stock of the Company which the undersigned is entitled to vote at the
Annual Meeting of Stockholders of the Company to be held at the Company's
corporate headquarters located at 8 Sound Shore Drive, Greenwich, Connecticut
06830 on June 17, 2004, at 10:00 a.m. Eastern Time and at all adjournments
thereof, as indicated on this proxy.
(CONTINUED ON REVERSE SIDE)
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
TECHNOLOGY INVESTMENT CAPITAL CORP.
JUNE 17, 2004
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
- --------------------------------------------------------------------------------
A (X) PLEASE MARK
YOUR VOTES
AS IN THIS
EXAMPLE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3
1. The election of the FOR WITHHOLD Nominee:
following person (except AUTHORITY Tonia L. Pankopf
as marked to the [ ] [ ]
contrary) as Director who
will serve as director of
Technology Investment
Capital Corp. until 2007,
or until her successor is
elected and qualified.
INSTRUCTIONS: To withhold
authority to vote for any
individual, strike a line
through his name on the
list at right.
2. The ratification FOR AGAINST ABSTAIN
of the selection of [ ] [ ] [ ]
Pricewaterhouse Coopers
LLP as independent
auditors for Technology
Investment Capital
Corp. for the fiscal
year ending
December 31, 2004.
3. The amendment of
the Investment Advisory FOR AGAINST ABSTAIN
Agreement between [ ] [ ] [ ]
Technology Investment
Capital Corp. and
Technology Investment
Management, LLC., which,
if approved, could
increase the fees
payable to the Adviser.
4. To vote upon such other business as may properly come before the meeting or
any adjournment thereof.
THIS PROXY IS REVOCABLE AND WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED BELOW;
where no choice is specified, it will be voted FOR Proposals 1, 2 and 3 and in
the discretion of the proxies with respect to matters described in Proposal 4.
SIGNATURE DATE SIGNATURE DATE
- ------------------- ---------, 2004 ---------------------- ---------, 2004
IF HELD JOINTLY
IMPORTANT: Please sign your names exactly as shown hereon and date your
proxy in the blank provided. For joint accounts, each joint
owner should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give your full
title as such. If the signer is a corporation or partnership,
please sign in full corporate or partnership name by a duly
authorized officer or partner.