Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
As previously disclosed, on November 2, 2020, Hercules Capital, Inc. (the “Company”) and certain qualified institutional investors entered into the First Supplement (the “Supplement”) to the Note Purchase Agreement dated as of February 5, 2020 (the “Note Purchase Agreement”). The Supplement provides for the issuance of $100,000,000 in aggregate principal amount of senior unsecured notes, consisting of $50,000,000 in aggregate principal amount of notes with a fixed interest rate of 4.50% per year, which were issued on November 4, 2020 (the “4.50% Notes”) and $50,000,000 in aggregate principal amount of notes with a fixed interest rate of 4.55% per year, which were issued on March 4, 2021 (the “4.55% Notes” and, together with the 4.50% Notes, the “Notes”). The Notes will mature on March 4, 2026 unless redeemed, purchased, or prepaid prior to such date by the Company or its affiliates in accordance with their terms.
Interest on the Notes will be due semiannually. In addition, the Company is obligated to offer to repay the Notes at par if an externalization or certain change in control events occur. The Notes are general unsecured obligations of the Company that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by the Company.
The Company intends to use the net proceeds from this offering (i) to pay down existing credit facilities, (ii) to fund investments in debt and equity securities in accordance with its investment objective, and (iii) for other general corporate purposes.
The Note Purchase Agreement, as modified by the Supplement, contains customary terms and conditions for senior unsecured notes issued in a private placement, including, without limitation, affirmative and negative covenants such as information reporting, maintenance of the Company’s status as a business development company within the meaning of the Investment Company Act of 1940, as amended, minimum shareholders’ equity, maximum debt to equity ratio and minimum unencumbered asset coverage ratio. The Note Purchase Agreement, as modified by the Supplement, also contains customary events of default with customary cure and notice periods, including, without limitation, nonpayment, incorrect representation in any material respect, breach of covenant, cross-default under other indebtedness of the Company or subsidiary guarantors, certain judgements and orders, and certain events of bankruptcy.
The Notes were offered in reliance on Section 4(a)(2) of Securities Act of 1933, as amended (the “Securities Act”). The Notes have not and will not be registered under the Securities Act or any state securities laws and, unless so registered, may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, as applicable.
The information on this Current Report on Form 8-K shall not constitute an offer to sell or a solicitation of an offer to purchase the Notes or any other securities.
The description above is only a summary of the material provisions of the Note Purchase Agreement and the Supplement and is qualified in its entirety by reference to the copies of the Note Purchase Agreement and the Supplement, which are filed as Exhibits 10.1 and 10.2, respectively, to this current report on Form 8-K and are incorporated herein by reference thereto.