424B2 1 d205414d424b2.htm 424B2 424B2
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Filed Pursuant to Rule 424(b)(2)
Registration No. 333-231089

 

This preliminary prospectus supplement relates to an effective registration statement under the Securities Act of 1933, as amended, but is not complete and may be changed. This preliminary prospectus supplement is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION, DATED SEPTEMBER 13, 2021

PRELIMINARY PROSPECTUS SUPPLEMENT

(To prospectus dated April 29, 2019)

$                

 

 

    % Notes due

 

 

We are an internally-managed, non-diversified, closed-end investment company that has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended, or the 1940 Act. Our investment objective is to maximize our portfolio’s total return by generating current income from our debt investments and capital appreciation from our warrant and equity-related investments.

We are offering $                 in aggregate principal amount of                 % notes due                 , or the “Notes.” The Notes will mature on                 . We will pay interest on the Notes on                  and                  of each year, beginning on                 , 2022. We may redeem the Notes in whole or in part at any time or from time to time, at the redemption price set forth under “Description of Notes and the Offering—Optional Redemption” in this prospectus supplement. In addition, holders of the Notes can require us to repurchase the Notes at 100% of their principal amount upon the occurrence of a Change of Control Repurchase Event (as defined herein). The Notes will be issued in minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof.

The Notes will be our unsecured obligations and rank pari passu, or equally in right of payment, with all outstanding and future unsecured unsubordinated indebtedness issued by Hercules Capital, Inc.

 

 

An investment in the Notes involves risks that are described in the “Supplementary Risk Factors” section beginning on page S-14 in this prospectus supplement, the “Risk Factors” section beginning on page 8 of the accompanying prospectus and in our most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q, as well as any of our subsequent filings with the Securities and Exchange Commission, or SEC.

This prospectus supplement, the accompanying prospectus, any free writing prospectus related to the offering of the Notes and the documents incorporated by reference herein and therein contain important information you should know before investing in the Notes, including information about the risks related thereto. Please read these documents before investing and retain them for future reference. Additional information about us, including our annual, quarterly and current reports and proxy statements, has been filed with the SEC, and can be accessed free of charge at its website at www.sec.gov. This information is also available free of charge by contacting us at 400 Hamilton Avenue, Suite 310, Palo Alto, California 94301, or by telephone by calling collect at (650) 289-3060 or on our website at www.htgc.com. The information on the websites referred to herein is not incorporated by reference into this prospectus supplement or the accompanying prospectus.

 

     Per Note     Total  

Public offering price(1)

                        $                  

Sales load (underwriting discounts and commissions)

                        $  

Proceeds to us (before expenses)(2)

                        $  

 

(1)

The public offering price set forth above does not include accrued interest, if any. Interest on the Notes will accrue from September    , 2021 and must be paid by the purchaser if the Notes are delivered after September    , 2021.

(2)

Before deducting expenses payable by us related to this offering, estimated at $            . See “Underwriting” in this prospectus supplement for complete details of underwriters’ compensation.

THE NOTES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.

Neither the SEC nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

 

Delivery of the Notes in book-entry form only through The Depository Trust Company will be made on or about September    , 2021.

Joint Book-Running Managers

 

Goldman Sachs & Co. LLC   SMBC Nikko
MUFG   RBC Capital Markets                                         

The date of this prospectus supplement is September     , 2021.


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You should rely only on the information contained in this prospectus supplement, the accompanying prospectus, any free writing prospectus related to the offering of the Notes, the documents incorporated by reference herein and therein, or any other information to which we have referred you. We have not, and the underwriters have not, authorized any other person to provide you with different information from that contained in this prospectus supplement, the accompanying prospectus and in any free writing prospectus related to the offering of the Notes. If anyone provides you with different or inconsistent information, you should not rely on it. This prospectus supplement, the accompanying prospectus, and any free writing prospectus related to the offering of the Notes do not constitute an offer to sell, or a solicitation of an offer to buy, any of our securities by any person in any jurisdiction where it is unlawful for that person to make such an offer or solicitation or to any person in any jurisdiction to whom it is unlawful to make such an offer or solicitation. The information contained in this prospectus supplement, the accompanying prospectus, and any free writing prospectus related to the offering of the Notes is complete and accurate only as of their respective dates, regardless of the time of their delivery or sale of our securities. Our business, financial condition, results of operations and prospects may have changed since that date.

This document is in two parts. The first part is this prospectus supplement, which describes the terms of this offering and also adds to and updates information contained in the accompanying prospectus. The second part is the accompanying prospectus, which gives more general information and disclosure. To the extent the information contained in this prospectus supplement differs from the information contained in the accompanying prospectus, the information in this prospectus supplement shall control. You should read this prospectus supplement and the accompanying prospectus together with the additional information described under the heading, “Available Information” before investing in our Notes.


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TABLE OF CONTENTS

Prospectus Supplement

 

     Page  

SUMMARY

     S-1  

FORWARD-LOOKING STATEMENTS

     S-12  

SUPPLEMENTARY RISK FACTORS

     S-14  

USE OF PROCEEDS

     S-19  

CAPITALIZATION

     S-20  

SENIOR SECURITIES

     S-21  

DESCRIPTION OF NOTES

     S-25  

UNDERWRITING

     S-37  

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

     S-42  

LEGAL MATTERS

     S-46  

EXPERTS

     S-46  

AVAILABLE INFORMATION

     S-46  

INCORPORATION BY REFERENCE

     S-46  

 

Prospectus       

HERCULES CAPITAL, INC.

     1  

FEES AND EXPENSES

     3  

RISK FACTORS

     5  

FORWARD-LOOKING STATEMENTS

     6  

USE OF PROCEEDS

     7  

PRICE RANGE OF COMMON STOCK AND DISTRIBUTIONS

     8  

PORTFOLIO COMPANIES

     9  

SENIOR SECURITIES

     36  

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

     39  

SALES OF COMMON STOCK BELOW NET ASSET VALUE

     49  

DIVIDEND REINVESTMENT PLAN

     54  

DESCRIPTION OF CAPITAL STOCK

     55  

DESCRIPTION OF OUR PREFERRED STOCK

     62  

DESCRIPTION OF OUR SUBSCRIPTION RIGHTS

     64  

DESCRIPTION OF WARRANTS

     66  

DESCRIPTION OF OUR DEBT SECURITIES

     68  

PLAN OF DISTRIBUTION

     81  

CUSTODIAN, TRANSFER AND DIVIDEND PAYING AGENT AND REGISTRAR

     83  

LEGAL MATTERS

     83  

EXPERTS

     83  

INCORPORATION BY REFERENCE

     84  

AVAILABLE INFORMATION

     84  

 

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SUMMARY

The following summary highlights some of the information included elsewhere, or incorporated by reference, in this prospectus supplement or the accompanying prospectus. It is not complete and may not contain all of the information that you may want to consider before making any investment decision regarding the Notes offered hereby. To understand the Notes offered hereby before making any such investment decision, you should carefully read this entire prospectus supplement and the accompanying prospectus, including the documents incorporated by reference herein or therein, and any free writing prospectus related to the offering of the Notes, including the sections entitled “Supplementary Risk Factors,” “Risk Factors,” “Available Information,” “Incorporation by Reference,” and “Use of Proceeds,” and the financial statements contained elsewhere or incorporated by reference in this prospectus supplement and the accompanying prospectus. Together, these documents describe the specific terms of the Notes. In this prospectus supplement and the accompanying prospectus, unless the context otherwise requires, the “Company,” “Hercules Capital,” “Hercules,” “we,” “us” and “our” refer to Hercules Capital, Inc. and our wholly owned subsidiaries.

Our Company

We are a specialty finance company focused on providing senior secured loans to high-growth, innovative venture capital-backed companies in a variety of technology, life sciences and sustainable and renewable technology industries. Our investment objective is to maximize our portfolio’s total return by generating current income from our debt investments and capital appreciation from our warrant and equity-related investments. We are an internally-managed, non-diversified closed-end investment company that has elected to be regulated as a business development company, or BDC, under the 1940 Act. Effective January 1, 2006, we elected to be treated for tax purposes as a regulated investment company, or RIC, under the Internal Revenue Code of 1986, as amended, or the Code.

As of June 30, 2021, our total assets were approximately $2.6 billion, of which our investments comprised $2.5 billion at fair value and $2.4 billion at cost. Since inception through June 30, 2021, we have made debt commitments of approximately $12.0 billion to our portfolio companies.

We also make investments in qualifying small businesses through our wholly owned small business investment company, or SBIC. Our SBIC subsidiary, Hercules Capital IV, L.P., or HC IV, holds approximately $92.7 million in assets, and accounted for approximately 3.6% of our total assets, prior to consolidation at June 30, 2021. At June 30, 2021, we have issued $53.7 million in SBA-guaranteed debentures in our SBIC subsidiary. See “Regulation—Small Business Administration Regulations” in the accompanying prospectus and the documents incorporated by reference herein for additional information regarding our SBIC subsidiary.

As of June 30, 2021, our investment professionals, including Scott Bluestein, our President, Chief Executive Officer and Chief Investment Officer, are currently comprised of 44 professionals. Managing Directors and Principals have, on average, more than 10 years of experience in venture capital, structured finance, commercial lending or acquisition finance with the types of technology-related companies that we are targeting. We believe that we can leverage the experience and relationships of our management team to successfully identify attractive investment opportunities, underwrite prospective portfolio companies and structure customized financing solutions.

In May 2020, Hercules Adviser LLC (the “Adviser Subsidiary”) was formed as a wholly owned Delaware limited liability subsidiary of the Company to provide investment advisory and related services to investment vehicles (“External Funds”) owned by one or more unrelated third-party investors. The Adviser Subsidiary will receive fee income for the services provided to External Funds. The Company was granted no-action relief by the staff of the SEC to allow the Adviser Subsidiary to register as a registered investment adviser under the Investment Advisers Act of 1940, as amended.


 

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Organizational Structure

The following chart summarizes our organizational structure as of June 30, 2021. This chart is provided for illustrative purposes only.

 

 

Our Market Opportunity

We believe that technology-related companies compete in one of the largest and most rapidly growing sectors of the U.S. economy and that continued growth is supported by ongoing innovation and performance improvements in technology products as well as the adoption of technology across virtually all industries in response to competitive pressures. We believe that an attractive market opportunity exists for a specialty finance company focused primarily on investments in structured debt with warrants in technology-related companies for the following reasons:

 

   

Technology-related companies have generally been underserved by traditional lending sources;

 

   

Unfulfilled demand exists for structured debt financing to technology-related companies due to the complexity of evaluating risk in these investments; and

 

   

Structured debt with warrants products are less dilutive and complement equity financing from venture capital and private equity funds.

Technology-Related Companies are Underserved by Traditional Lenders. We believe many viable technology-related companies backed by financial sponsors have been unable to obtain sufficient growth financing from traditional lenders, including financial services companies such as commercial banks and finance companies because traditional lenders have continued to consolidate and have adopted a more risk-averse approach to lending. More importantly, we believe traditional lenders are typically unable to underwrite the risk associated with these companies effectively.


 

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The unique cash flow characteristics of many technology-related companies typically include significant research and development expenditures and high projected revenue growth thus often making such companies difficult to evaluate from a credit perspective. In addition, the balance sheets of these companies often include a disproportionately large amount of intellectual property assets, which can be difficult to value. Finally, the speed of innovation in technology and rapid shifts in consumer demand and market share add to the difficulty in evaluating technology-related companies.

Due to the difficulties described above, we believe traditional lenders generally refrain from entering the structured debt financing marketplace, instead preferring the risk-reward profile of asset-based lending. Traditional lenders generally do not have flexible product offerings that meet the needs of technology-related companies. The financing products offered by traditional lenders typically impose on borrowers many restrictive covenants and conditions, including limiting cash outflows and requiring a significant depository relationship to facilitate rapid liquidation.

Unfulfilled Demand for Structured Debt Financing to Technology-Related Companies. Private debt capital in the form of structured debt financing from specialty finance companies continues to be an important source of funding for technology-related companies. We believe that the level of demand for structured debt financing is a function of the level of annual venture equity investment activity.

We believe that demand for structured debt financing is currently underserved. The venture capital market for the technology-related companies in which we invest has been active. Therefore, to the extent we have capital available, we believe this is an opportune time to be active in the structured lending market for technology-related companies.

Structured Debt with Warrants Products Complement Equity Financing from Venture Capital and Private Equity Funds. We believe that technology-related companies and their financial sponsors will continue to view structured debt securities as an attractive source of capital because it augments the capital provided by venture capital and private equity funds. We believe that our structured debt with warrants products provide access to growth capital that otherwise may only be available through incremental investments by existing equity investors. As such, we provide portfolio companies and their financial sponsors with an opportunity to diversify their capital sources. Generally, we believe many technology-related companies at all stages of development target a portion of their capital to be debt in an attempt to achieve a higher valuation through internal growth. In addition, because financial sponsor-backed companies have reached a more mature stage prior to reaching a liquidity event, we believe our investments could provide the debt capital needed to grow or recapitalize during the extended period sometimes required prior to liquidity events.

Our Business Strategy

Our strategy to achieve our investment objective includes the following key elements:

Leverage the Experience and Industry Relationships of Our Management Team and Investment Professionals. We have assembled a team of experienced investment professionals with extensive experience as venture capitalists, commercial lenders, and originators of structured debt and equity investments in technology-related companies. Our investment professionals have, on average, more than 10 years of experience as equity investors in, and/or lenders to, technology-related companies. In addition, our team members have originated structured debt, debt with warrants and equity investments in over 530 technology-related companies, representing more than $12.0 billion in commitments from inception to June 30, 2021, and have developed a network of industry contacts with investors and other participants within the venture capital and private equity communities. In addition, members of our management team also have operational, research and development and finance experience with technology-related companies. We have established contacts with leading venture capital and private equity fund sponsors, public and private companies, research institutions and other industry participants, which we believe will enable us to identify and attract well-positioned prospective portfolio companies.


 

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We focus our investing activities generally in industries in which our investment professionals have investment experience. We believe that our focus on financing technology-related companies will enable us to leverage our expertise in structuring prospective investments, to assess the value of both tangible and intangible assets, to evaluate the business prospects and operating characteristics of technology-related companies and to identify and originate potentially attractive investments with these types of companies.

Mitigate Risk of Principal Loss and Build a Portfolio of Equity-Related Securities. We expect that our investments have the potential to produce attractive risk-adjusted returns through current income, in the form of interest and fee income, as well as capital appreciation from warrant and equity-related securities. We believe that we can mitigate the risk of loss on our debt investments through the combination of loan principal amortization after an initial interest only period, cash interest payments, relatively short maturities (typically between 36 – 48 months), security interests in the assets of our portfolio companies, and on select investment covenants requiring prospective portfolio companies to have certain amounts of available cash at the time of our investment and the continued support from a venture capital or private equity firm at the time we make our investment. Although we do not currently engage in hedging transactions, we may engage in hedging transactions in the future utilizing instruments such as forward contracts, currency options and interest rate swaps, caps, collars, and floors.

Historically our structured debt investments to technology-related companies typically include warrants or other equity interests, giving us the potential to realize equity-like returns on a portion of our investment. In addition, in some cases, we receive the right to make additional equity investments in our portfolio companies, including the right to convert some portion of our debt into equity, in connection with future equity financing rounds. We believe these equity interests will create the potential for meaningful long-term capital gains in connection with the future liquidity events of these technology-related companies.

Provide Customized Financing Complementary to Financial Sponsors’ Capital. We offer a broad range of investment structures and possess expertise and experience to effectively structure and price investments in technology-related companies. Unlike many of our competitors that only invest in companies that fit a specific set of investment parameters, we have the flexibility to structure our investments to suit the particular needs of our portfolio companies. We offer customized financing solutions ranging from senior debt, including below-investment grade debt instruments, also known as “junk bonds”, to equity capital, with a focus on structured debt with warrants.

We use our relationships in the financial sponsor community to originate investment opportunities. Because venture capital and private equity funds typically invest solely in the equity securities of their portfolio companies, we believe that our debt investments will be viewed as an attractive and complimentary source of capital, both by the portfolio company and by the portfolio company’s financial sponsor. In addition, we believe that many venture capital and private equity fund sponsors encourage their portfolio companies to use debt financing for a portion of their capital needs as a means of potentially enhancing equity returns, minimizing equity dilution and increasing valuations prior to a subsequent equity financing round or a liquidity event.

Invest at Various Stages of Development. We provide growth capital to technology-related companies at all stages of development, including select publicly listed companies and select later stage sponsor-backed companies that require additional capital to fund acquisitions, recapitalizations and refinancings and established-stage companies. We believe that this provides us with a broader range of potential investment opportunities than those available to many of our competitors, who generally focus their investments on a particular stage in a company’s development. Because of the flexible structure of our investments and the extensive experience of our investment professionals, we believe we are well positioned to take advantage of these investment opportunities at all stages of prospective portfolio companies’ development.

Benefit from Our Efficient Organizational Structure. We believe that the perpetual nature of our corporate structure enables us to be a long-term partner for our portfolio companies in contrast to traditional investment


 

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funds, which typically have a limited life. In addition, because of our access to the equity markets, we believe that we may benefit from a lower cost of capital than that available to private investment funds. We are not subject to requirements to return invested capital to investors, nor do we have a finite investment horizon. Capital providers that are subject to such limitations are often required to seek a liquidity event more quickly than they otherwise might, which can result in a lower overall return on an investment.

Deal Sourcing Through Our Proprietary Database. We have developed a proprietary and comprehensive structured query language-based, or SQL, database system to track various aspects of our investment process including sourcing, originations, transaction monitoring and post-investment performance. As of June 30, 2021, our proprietary SQL-based database system included over 70,000 technology-related companies and over 12,500 venture capital firms, private equity sponsors or investors, as well as various other industry contacts. This proprietary SQL system allows us to maintain, cultivate and grow our industry relationships while providing us with comprehensive details on companies in the technology-related industries and their financial sponsors.

Recent Developments

Closed and Pending Commitments

Since the close of our second fiscal quarter of 2021 and as of August 31, 2021, we and the Adviser Subsidiary Funds have closed new debt and equity commitments of $186.9 million and funded $107.1 million. We and the Adviser Subsidiary Funds have pending debt and equity commitments of $553.8 million in signed non-binding term sheets outstanding as of August 31, 2021. Excluding the commitments and fundings assigned and / or directly originated or funded by the Adviser Subsidiary Funds, during the same period, we have closed net debt and equity commitments of $142.0 million and funded $83.3 million.

Signed non-binding term sheets are subject to satisfactory completion of our due diligence and final investment committee approval process as well as negotiations of definitive documentation with the prospective portfolio companies. These non-binding term sheets generally convert to contractual commitments in approximately 90 days from signing and some portion has been and may be assigned or allocated to private funds managed by the Adviser Subsidiary prior to or after closing. It is important to note that not all signed non-binding term sheets are expected to close and they do not necessarily represent future cash requirements or investments.

General Information

Our principal executive offices are located at 400 Hamilton Avenue, Suite 310, Palo Alto, California 94301, and our telephone number is (650) 289-3060. We also have offices in Boston, MA, New York, NY, Bethesda, MD, Westport, CT, Chicago, IL, and San Diego, CA.

Available Information

We file with or submit to the SEC periodic and current reports, proxy statements and other information meeting the informational requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We maintain a website on the Internet at www.htgc.com. We make available on our website, free of charge, our proxy statements, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, any amendments to those reports and other publicly filed information available as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. In addition, the SEC maintains an Internet website, at www.sec.gov, that contains reports, proxy and information statements, and other information regarding issuers, including us, who file documents electronically with the SEC. The information on the websites referred to herein is not incorporated by reference into this prospectus supplement or the accompanying prospectus.


 

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The Offering

This prospectus supplement sets forth certain terms of the Notes that we are offering pursuant to this prospectus supplement and supplements the accompanying prospectus that is attached to the back of this prospectus supplement. This section outlines the specific legal and financial terms of the Notes. You should read this section together with the section entitled “Description of Notes” in this prospectus supplement and the more general description of our debt securities in the accompanying prospectus under the heading “Description of Our Debt Securities” before investing in the Notes.

 

Issuer

Hercules Capital, Inc.

 

Title of the securities

                % Notes due

 

Aggregate principal amount being offered

$                

 

Initial public offering price

                % of the aggregate principal amount.

 

Interest Rate

                %

 

Yield to Maturity

                %

 

Trade Date

September    , 2021

 

Issue Date

September    , 2021

 

Stated Maturity Date

                ,

 

Day Count Basis

360-day year of twelve 30-day months

 

Interest payment dates for the Notes

Each                 and                 commencing                , 2022. If an interest payment date falls on a non-business day, the applicable interest payment will be made on the next business day and no additional interest will accrue as a result of such delayed payment.

 

Regular Record Dates for Interest

Each                 and                 .

 

Specified Currency

U.S. Dollars

 

Place of Payment

New York City or such other office designated by the Trustee

 

Ranking of Notes

The Notes will be our unsecured obligations that rank senior in right of payment to all of our existing and future indebtedness that is expressly subordinated, or junior, in right of payment to the Notes. The Notes will not be guaranteed by any of our current or future subsidiaries. The Notes will rank pari passu, or equally, in right of payment with all of our existing and future liabilities that are not so subordinated, or junior. The Notes will effectively rank subordinated, or junior, to any of our secured indebtedness (including unsecured indebtedness that we later secure) to the extent of the value of the


 

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assets securing such indebtedness. The Notes will rank structurally subordinated, or junior, to all existing and future indebtedness (including trade payables) incurred by our subsidiaries, financing vehicles or similar facilities.

 

  As of June 30, 2021, our total consolidated indebtedness was approximately $1.2 billion, which included:

 

   

approximately $150.0 million in aggregate principal amount of 4.625% notes due 2022 (the “2022 Notes”); approximately $105.0 million in aggregate principal amount of 4.77% notes due 2024 (the “July 2024 Notes”); approximately $50.0 million in aggregate principal amount of 4.28% notes due February 2025 (the “February 2025 Notes”); approximately $75.0 million in aggregate principal amount of 5.25% notes due April 2025 (the “April 2025 Notes”); approximately $70.0 million in aggregate principal amount of 4.31% notes due June 2025 (the “June 2025 Notes”); approximately $50.0 million in aggregate principal amount of 4.50% notes due March 2026 (the “March 2026 A Notes”); approximately $50.0 million in aggregate principal amount of 4.55% notes due March 2026 (the “March 2026 B Notes”); approximately $40.0 million in aggregate principal amount of 6.25% notes due 2033 (the “2033 Notes”); and approximately $230.0 million of 4.375% convertible notes due 2022 (the “2022 Convertible Notes”).

 

   

indebtedness and other obligations of any of our subsidiaries, including, without limitation, $53.7 million in principal outstanding under the SBA Debentures, borrowings under the $75.0 million revolving senior secured credit facility with Wells Fargo Capital Finance, LLC, (the “Wells Facility”), borrowings under the $400.0 million revolving senior secured credit facility with MUFG Union Bank, N. A. (the “Union Bank Facility,” and together with the Wells Facility, the “Credit Facilities”), the approximately $117.9 million in aggregate principal amount of 4.605% asset-backed notes due 2027 (the “2027 Asset-Backed Notes”) and the approximately $196.5 million in aggregate principal amount of 4.703% asset-backed notes due 2028 (the “2028 Asset-Backed Notes” and, together with the 2027 Asset-Backed Notes, the “Asset-Backed Notes”), each as of June 30, 2021. As of June 30, 2021, there was no outstanding borrowings under the Wells Facility and $1.7 million in outstanding borrowings under the Union Bank Facility.

 

 

We expect to use the proceeds of this offering to repurchase or redeem all or a portion of the Asset-Backed Notes, see “Use of Proceeds.” After giving effect to the issuance of the Notes and assuming the proceeds therefrom are used to repurchase or redeem all or a portion of the Asset-Backed Notes, our total consolidated indebtedness would have been approximately


 

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$1.2 billion aggregate principal amount outstanding as of June 30, 2021. See “Capitalization.”

 

Denominations

We will issue the Notes in denominations of $2,000 and integral multiples of $1,000 in excess thereof.

 

Business Day

Each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in New York City, or in such other place of payment designated by the Trustee, are authorized or required by law or executive order to close.

 

Optional Redemption

We may redeem some or all of the Notes at any time, or from time to time, at a redemption price equal to the greater of (1) 100% of the principal amount of the Notes to be redeemed or (2) the sum of the present values of the remaining scheduled payments of principal and interest (exclusive of accrued and unpaid interest to the date of redemption) on the Notes to be redeemed, discounted to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) using the applicable Treasury Rate plus                basis points, plus, in each case, accrued and unpaid interest to the redemption date; provided, however, that if we redeem any Notes on or after                ,                 (the date falling                 prior to the maturity date of the Notes), the redemption price for the Notes will be equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the date of redemption.

 

  You may be prevented from exchanging or transferring the Notes when they are subject to redemption.

 

  If we are redeeming less than all of the Notes, the particular Notes to be redeemed will be selected in accordance with the applicable procedures of the Trustee and, so long as the Notes are registered to The Depository Trust Company or its nominee, DTC; provided, however, that no such partial redemption shall reduce the portion of the principal amount of a Note not redeemed to less than $2,000. Unless we default in payment of the redemption price, on and after the date of redemption, interest will cease to accrue on the Notes or portions of the Notes called for redemption.

 

Sinking Fund

The Notes will not be subject to any sinking fund. A sinking fund is a reserve fund accumulated over a period of time for the retirement of debt.

 

Offer to Purchase upon a Change of Control Repurchase Event

If a Change of Control Repurchase Event occurs prior to maturity, holders will have the right, at their option, to require us to repurchase for cash some or all of the Notes at a repurchase price equal to 100% of the principal amount of the Notes being repurchased, plus accrued and unpaid interest to, but not including, the repurchase date.

 

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Defeasance and Covenant Defeasance

The Notes are subject to defeasance by us, which means that, subject to the satisfaction of certain conditions, including, but not limited to, (i) depositing in trust for the benefit of the holders of the Notes a combination of money and/or U.S. government or U.S. government agency notes or bonds that will generate enough cash to make interest, principal and any other payments on the Notes on their various due dates and (ii) delivering to the Trustee an opinion of counsel as described herein under “Description of Notes—Satisfaction and Discharge; Defeasance,” we can legally release ourselves from all payment and other obligations on the Notes.

 

  The Notes are subject to covenant defeasance by us, which means that, subject to the satisfaction of certain conditions, including, but not limited to, (i) depositing in trust for the benefit of the holders of the Notes a combination of money and/or U.S. government or U.S. government agency notes or bonds that will generate enough cash to make interest, principal and any other payments on the Notes on their various due dates and (ii) delivering to the Trustee an opinion of counsel as described herein under “Description of Notes— Satisfaction and Discharge; Defeasance,” we will be released from some of the restrictive covenants in the indenture.

 

Form of Notes

The Notes will be represented by global securities that will be deposited and registered in the name of DTC or its nominee. Except in limited circumstances, you will not receive certificates for the Notes. Beneficial interests in the Notes will be represented through book-entry accounts of financial institutions acting on behalf of beneficial owners as direct and indirect participants in DTC. Investors may elect to hold interests in the Notes through either DTC, if they are a participant, or indirectly through organizations which are participants in DTC.

 

Trustee, Paying Agent and Security Registrar

U.S. Bank National Association

 

Other Covenants

In addition to the covenants described in the prospectus attached to this prospectus supplement, the following covenants shall apply to the Notes:

 

   

We agree that for the period of time during which the Notes are outstanding, we will not violate, whether or not we are subject to, Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act or any successor provisions, giving effect to any exemptive relief granted to us by the SEC (even if we are no longer subject to the 1940 Act). Currently, these provisions generally prohibit us from making additional borrowings, including through the issuance of additional debt or the sale of additional debt securities, unless our asset coverage, as defined in the 1940 Act, equals at least 150% after such borrowings. See “Risk Factors—Risks Related to our Business Structure—


 

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Recently passed legislation allows us to incur additional leverage, which may increase the risk of investing with us,” in our most recent Annual Report on Form 10-K.

 

   

If, at any time, we are not subject to the reporting requirements of Sections 13 or 15(d) of the Exchange Act to file any periodic reports with the SEC, we agree to furnish to holders of the Notes and the Trustee, for the period of time during which the Notes are outstanding, our audited annual consolidated financial statements, within 90 days of our fiscal year end, and unaudited interim consolidated financial statements, within 45 days of our fiscal quarter end (other than our fourth fiscal quarter). All such financial statements will be prepared, in all material respects, in accordance with applicable United States generally accepted accounting principles (“GAAP”), as applicable.

 

Events of Default

If an event of default (as described herein under “Description of Notes”) on the Notes occurs, the principal amount of the Notes, plus accrued and unpaid interest, may be declared immediately due and payable, subject to conditions set forth in the indenture. These amounts automatically become due and payable in the case of certain types of bankruptcy or insolvency events involving us.

 

No Established Trading Market

The Notes are a new issue of securities with no established trading market. The Notes will not be listed on any securities exchange or quoted on any automated dealer quotation system. Although certain of the underwriters have informed us that they intend to make a market in the Notes, as permitted by applicable laws and regulations, they are not obligated to do so and may discontinue any such market making activities at any time without notice. See “Underwriting.” Accordingly, we cannot assure you that a liquid market for the Notes will develop or be maintained.

 

Global Clearance and Settlement Procedures

Interests in the Notes will trade in DTC’s Same Day Funds Settlement System, and any permitted secondary market trading activity in such Notes will, therefore, be required by DTC to be settled in immediately available funds. None of the issuer, the Trustee or the paying agent will have any responsibility for the performance by DTC or its participants or indirect participants of their respective obligations under the rules and procedures governing their operations.

 

Further Issuances

We have the ability to issue additional debt securities under the indenture with terms different from the Notes and, without the consent of the holders thereof, to reopen the Notes and issue additional Notes.

 

Use of Proceeds

We estimate that the net proceeds we receive from the sale of the $                million aggregate principal amount of Notes in this offering will be approximately $                million after deducting the


 

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underwriting discount of approximately $                million payable by us and estimated offering expenses of approximately $                payable by us. We expect to use the net proceeds from this offering (i) to repurchase or redeem all or a portion of the Asset-Backed Notes, (ii) to fund investments in debt and equity securities in accordance with our investment objective, and (iii) for other general corporate purposes.

 

Governing Law

The Notes and the indenture will be governed by and construed in accordance with the laws of the State of New York.

 

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FORWARD-LOOKING STATEMENTS

The matters discussed in this prospectus supplement and the accompanying prospectus, including the documents that we incorporate by reference herein and therein, and any applicable free writing prospectus, including the documents that we incorporate by reference therein, as well as in future oral and written statements by management of Hercules Capital, Inc., that are forward-looking statements are based on current management expectations that involve substantial risks and uncertainties which could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements. Forward-looking statements relate to future events or our future financial performance. We generally identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. Important assumptions include our ability to originate new investments, achieve certain margins and levels of profitability, the availability of additional capital, and the ability to maintain certain debt to asset ratios. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this prospectus should not be regarded as a representation by us that our plans or objectives will be achieved. The forward-looking statements included or incorporated by reference in this prospectus supplement, the accompanying prospectus, and in any free writing prospectus related to the offering of the Notes involve risks and uncertainties, including statements as to:

 

   

our current and future management structure;

 

   

our future operating results;

 

   

our business prospects and the prospects of our prospective portfolio companies;

 

   

the impact of investments that we expect to make;

 

   

our informal relationships with third parties including in the venture capital industry;

 

   

the expected market for venture capital investments and our addressable market;

 

   

the dependence of our future success on the general economy and its impact on the industries in which we invest;

 

   

our ability to access debt markets and equity markets;

 

   

the current and future effects of the COVID-19 pandemic on us and our portfolio companies;

 

   

the ability of our portfolio companies to achieve their objectives;

 

   

our expected financings and investments;

 

   

our regulatory structure and tax status;

 

   

our ability to operate as a BDC, a SBIC and a RIC;

 

   

the adequacy of our cash resources and working capital;

 

   

the timing of cash flows, if any, from the operations of our portfolio companies;

 

   

the timing, form and amount of any distributions;

 

   

the impact of fluctuations in interest rates on our business;

 

   

the valuation of any investments in portfolio companies, particularly those having no liquid trading market; and

 

   

our ability to recover unrealized losses.

For a discussion of factors that could cause our actual results to differ from forward-looking statements contained in this prospectus supplement and the accompanying prospectus, please see the discussion under

 

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“Supplementary Risk Factors” in this prospectus supplement and “Risk Factors” in the accompanying prospectus. You should not place undue reliance on these forward-looking statements because the matters they describe are subject to known and unknown risks, uncertainties and other unpredictable factors, many of which are beyond our control. In addition to other information included or incorporated by reference in this prospectus supplement, please read carefully the sections titled “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, as well as the section entitled “Forward-Looking Statements” in the accompanying prospectus, before making any investment in the Notes. The forward-looking statements made in this prospectus supplement, the accompanying prospectus, and any free writing prospectus related to the offering of the Notes, and the documents incorporated herein and therein, relate only to events as of the date on which the statements are made and are excluded from the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, or the Securities Act. We undertake no obligation to update any forward-looking statement to reflect events or circumstances occurring after the date of this prospectus supplement but advise you to consult any additional disclosures that we may make directly to you or through reports that we may file in the future with the SEC, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

Industry and Market Data

We have compiled certain industry estimates presented in this prospectus supplement and the accompanying prospectus from internally generated information and data. While we believe our estimates are reliable, they have not been verified by any independent sources. The estimates are based on a number of assumptions, including increasing investment in venture capital and private equity-backed companies. Actual results may differ from projections and estimates, and this market may not grow at the rates projected, or at all. If this market fails to grow at projected rates, our business and the market price of our securities, including the Notes, could be materially adversely affected.

 

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SUPPLEMENTARY RISK FACTORS

Investing in our securities involves a number of significant risks. Before you invest in our securities, you should be aware of various risks, including those described below and those set forth in the accompanying prospectus, our most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, and any subsequent filings with the SEC, which are incorporated by reference into this prospectus supplement and the accompanying prospectus in their entirety. You should carefully consider these risk factors, together with all of the other information included or incorporated by reference in this prospectus supplement, the accompanying prospectus and any free writing prospectus related to the offering of the Notes, before you decide whether to make an investment in our securities. The risks set out below and in the documents referenced above are not the only risks we face. Additional risks and uncertainties not presently known to us or not presently deemed material by us may also impair our operations and performance. If any of the following events occur, our business, financial condition, results of operations and cash flows could be materially and adversely affected which could materially adversely affect our ability to repay principal and interest on the Notes. In addition, the market price of the Notes and our net asset value could decline, and you may lose all or part of your investment. Please also read carefully the section titled “Forward-Looking Statements” in this prospectus supplement.

Risks Related to the Notes

The Notes will be unsecured and therefore will be effectively subordinated to any secured indebtedness we have currently incurred or may incur in the future.

The Notes will not be secured by any of our assets or any of the assets of our subsidiaries. As a result, the Notes are effectively subordinated to any secured indebtedness we or our subsidiaries have currently incurred and may incur in the future (or any indebtedness that is initially unsecured to which we subsequently grant security) to the extent of the value of the assets securing such indebtedness. In any liquidation, dissolution, bankruptcy or other similar proceeding, the holders of any of our existing or future secured indebtedness and the secured indebtedness of our subsidiaries may assert rights against the assets pledged to secure that indebtedness in order to receive full payment of their indebtedness before the assets may be used to pay other creditors, including the holders of the Notes. As of June 30, 2021, we had $1.7 million in outstanding borrowings under our Union Bank Facility, which is secured by all of the assets of Hercules Funding IV, a special purpose wholly owned subsidiary, no outstanding borrowings under our Wells Facility, which is secured by all of the assets of Hercules Funding II, a special purpose wholly owned subsidiary, $53.7 million in outstanding borrowings under the SBA Debentures, which are secured by all of the assets of HC IV, a special purpose wholly owned subsidiary, $117.9 million in outstanding borrowings under our 2027 Asset-Backed Notes, which are secured by certain assets of certain of our portfolio companies and $196.5 million in outstanding borrowings under our 2028 Asset-Backed Notes, which are secured by certain assets of certain of our portfolio companies.

The Notes will be structurally subordinated to the indebtedness and other liabilities of our subsidiaries.

The Notes are obligations exclusively of Hercules Capital, Inc. and not of any of our subsidiaries. None of our subsidiaries is a guarantor of the Notes and the Notes are not required to be guaranteed by any subsidiaries we may acquire or create in the future. A significant portion of the indebtedness required to be consolidated on our balance sheet is held through our SBIC subsidiary. For example, at June 30, 2021, we have issued $53.7 million in SBA-guaranteed debentures in our SBIC subsidiary. The assets of such subsidiaries are not directly available to satisfy the claims of our creditors, including holders of the Notes. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Condition, Liquidity and Capital Resources” in our most recent Annual Report on Form 10-K and our most recent Quarterly Report on Form 10-Q for more detail on the SBA-guaranteed debentures.

Except to the extent we are a creditor with recognized claims against our subsidiaries, all claims of creditors (including trade creditors), if any, of our subsidiaries will have priority over our equity interests in such

 

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subsidiaries (and therefore the claims of our creditors, including holders of the Notes) with respect to the assets of such subsidiaries. Even if we are recognized as a creditor of one or more of our subsidiaries, our claims would still be effectively subordinated to any security interests in the assets of any such subsidiary and to any indebtedness or other liabilities of any such subsidiary senior to our claims. Consequently, the Notes will be structurally subordinated to all indebtedness and other liabilities (including trade payables) of any of our subsidiaries and any subsidiaries that we may in the future acquire or establish as financing vehicles or otherwise.

As of June 30, 2021, we had no outstanding borrowings under our Wells Facility, $1.7 million in outstanding borrowings under our Union Bank Facility, $117.9 million outstanding under the 2027 Asset-Backed Notes and $196.5 million outstanding under the 2028 Asset-Backed Notes and approximately $53.7 million of indebtedness outstanding incurred by our SBIC subsidiary, HC IV. All of such indebtedness would be structurally senior to the Notes. In addition, our subsidiaries may incur substantial additional indebtedness in the future, all of which would be structurally senior to the Notes.

The indenture under which the Notes will be issued will contain limited protection for holders of the Notes.

The indenture under which the Notes will be issued offers limited protection to holders of the Notes. The terms of the indenture and the Notes do not restrict our or any of our subsidiaries’ ability to engage in, or otherwise be a party to, a variety of corporate transactions, circumstances or events that could have an adverse impact on your investment in the Notes. In particular, the terms of the indenture and the Notes will not place any restrictions on our or our subsidiaries’ ability to:

 

   

issue securities or otherwise incur additional indebtedness or other obligations, including (1) any indebtedness or other obligations that would be equal in right of payment to the Notes, (2) any indebtedness or other obligations that would be secured and therefore rank effectively senior in right of payment to the Notes to the extent of the values of the assets securing such debt, (3) indebtedness of ours that is guaranteed by one or more of our subsidiaries and which therefore is structurally senior to the Notes and (4) securities, indebtedness or obligations issued or incurred by our subsidiaries that would be senior to our equity interests in our subsidiaries and therefore rank structurally senior to the Notes with respect to the assets of our subsidiaries, in each case other than an incurrence of indebtedness or other obligation that would cause a violation of Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act or any successor provisions, whether or not we continue to be subject to such provisions of the 1940 Act, but giving effect to any exemptive relief granted to us by the SEC (currently, these provisions generally prohibit us from making additional borrowings, including through the issuance of additional debt or the sale of additional debt securities, unless our asset coverage, as defined in the 1940 Act, equals at least 150% after such borrowings);

 

   

pay distributions on, or purchase or redeem or make any payments in respect of, capital stock or other securities ranking junior in right of payment to the Notes;

 

   

sell assets (other than certain limited restrictions on our ability to consolidate, merge or sell all or substantially all of our assets);

 

   

enter into transactions with affiliates;

 

   

create liens (including liens on the shares of our subsidiaries) or enter into sale and leaseback transactions;

 

   

make investments; or

 

   

create restrictions on the payment of distributions or other amounts to us from our subsidiaries.

Furthermore, the terms of the indenture and the Notes do not protect holders of the Notes in the event that we experience changes (including significant adverse changes) in our financial condition, results of operations or credit ratings, as they do not require that we or our subsidiaries adhere to any financial tests or ratios or specified levels of net worth, revenues, income, cash flow, or liquidity.

 

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Our ability to recapitalize, incur additional debt and take a number of other actions that are not limited by the terms of the Notes may have important consequences for you as a holder of the Notes, including making it more difficult for us to satisfy our obligations with respect to the Notes or negatively affecting the trading value of the Notes.

Certain of our current debt instruments include more protections for their holders than the indenture and the Notes. See “Risk Factors—In addition to regulatory requirements that restrict our ability to raise capital, our 2022 Notes, July 2024 Notes, February 2025 Notes, April 2025 Notes, June 2025 Notes, March 2026 A Notes, 2033 Notes, 2022 Convertible Notes, and Credit Facilities contain various covenants which, if not complied with, could require accelerated repayment under the facility or require us to repurchase the 2022 Notes, July 2024 Notes, February 2025 Notes, April 2025 Notes, June 2025 Notes, March 2026 A Notes, 2033 Notes, or 2022 Convertible Notes thereby materially and adversely affecting our liquidity, financial condition, results of operations and ability to pay distributions” in our most recent Annual Report on Form 10-K. In addition, other debt, including the March 2026 B Notes, and other debt we issue or incur in the future could contain more protections for its holders than the indenture and the Notes, including additional covenants and events of default. The issuance or incurrence of any such debt with incremental protections could affect the market for, and trading levels and prices of, the Notes.

An increase in market interest rates could result in a decrease in the market value of the Notes.

The condition of the financial markets and prevailing interest rates have fluctuated in the past and are likely to fluctuate in the future, which could have an adverse effect on the market prices of the Notes. In general, as market interest rates rise, debt securities bearing interest at fixed rates of interest decline in value. Consequently, if you purchase Notes bearing interest at fixed rates and market interest rates increase, the market values of those Notes may decline. We cannot predict the future level of market interest rates.

The optional redemption provision may materially adversely affect your return on the Notes.

The Notes are redeemable in whole or in part upon certain conditions at any time or from time to time at our option. We may choose to redeem the Notes at times when prevailing interest rates are lower than the interest rate paid on the Notes. In this circumstance, you may not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as the Notes being redeemed.

Our amount of debt outstanding may increase as a result of this offering. Our current indebtedness could adversely affect our business, financial condition and results of operations and our ability to meet our payment obligations under the Notes and our other debt.

The use of debt could have significant consequences on our future operations, including:

 

   

making it more difficult for us to meet our payment and other obligations under the Notes and our other outstanding debt;

 

   

resulting in an event of default if we fail to comply with the financial and other restrictive covenants contained in our financing arrangements, which event of default could result in substantially all of our debt becoming immediately due and payable;

 

   

reducing the availability of our cash flow to fund investments, acquisitions and other general corporate purposes, and limiting our ability to obtain additional financing for these purposes;

 

   

subjecting us to the risk of increased sensitivity to interest rate increases on our indebtedness with variable interest rates, including borrowings under our financing arrangements; and

 

   

limiting our flexibility in planning for, or reacting to, and increasing our vulnerability to, changes in our business, the industry in which we operate and the general economy.

 

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Any of the above-listed factors could have an adverse effect on our business, financial condition and results of operations and our ability to meet our payment obligations under the Notes and our other debt.

Our ability to meet our payment and other obligations under our financing arrangements depends on our ability to generate significant cash flow in the future. This, to some extent, is subject to general economic, financial, competitive, legislative and regulatory factors as well as other factors that are beyond our control. We cannot assure you that our business will generate cash flow from operations, or that future borrowings will be available to us under our financing arrangements or otherwise, in an amount sufficient to enable us to meet our payment obligations under the Notes and our other debt and to fund other liquidity needs. If we are not able to generate sufficient cash flow to service our debt obligations, we may need to refinance or restructure our debt, including the Notes, sell assets, reduce or delay capital investments, or seek to raise additional capital. If we are unable to implement one or more of these alternatives, we may not be able to meet our payment obligations under the Notes and our other debt.

We may not be able to repurchase the Notes upon a Change of Control Repurchase Event.

Upon the occurrence of a Change of Control Repurchase Event, as defined in the indenture, as supplemented, subject to certain conditions, we will be required to offer to repurchase all outstanding Notes at 100% of their principal amount, plus accrued and unpaid interest. The source of funds for that purchase of Notes will be our available cash or cash generated from our operations or other potential sources, including borrowings, investment repayments, sales of assets or sales of equity. We cannot assure you that sufficient funds from such sources will be available at the time of any Change of Control Repurchase Event to make required repurchases of Notes tendered. The terms of certain of our and our subsidiaries’ financing arrangements provide that certain change of control events will constitute an event of default thereunder entitling the lenders to accelerate any indebtedness outstanding under our and our subsidiaries’ financing arrangements at that time and to terminate the financing arrangements. In addition, the indenture governing our 2022 Convertible Notes contains a provision that would require us to offer to purchase the 2022 Convertible Notes upon the occurrence of a fundamental change. A failure to purchase any tendered 2022 Convertible Notes would constitute an event of default under the indenture for the 2022 Convertible Notes, which would, in turn, constitute a default under the Credit Facilities and the indenture. Our and our subsidiaries’ future debt instruments may also contain similar restrictions and provisions. If the holders of the Notes exercise their right to require us to repurchase Notes upon a Change of Control Repurchase Event, the financial effect of this repurchase could cause a default under our and our subsidiaries’ future debt instruments, even if the Change of Control Repurchase Event itself would not cause a default. It is possible that we will not have sufficient funds at the time of the Change of Control Repurchase Event to make the required repurchase of the Notes and/or our other debt. See “Description of Notes—Offer to Repurchase Upon a Change of Control Repurchase Event.”

An active trading market for the Notes may not develop or be maintained, which could limit the market price of the Notes or your ability to sell them.

The Notes are a new issue of debt securities for which there currently is no trading market. We do not intend to apply for listing of the Notes on any securities exchange or for quotation of the Notes on any automated dealer quotation system. If no active trading market develops, you may not be able to resell your Notes at their fair market value or at all. If the Notes are traded after their initial issuance, they may trade at a discount from their initial offering price depending on prevailing interest rates, the market for similar securities, our credit ratings, general economic conditions, our financial condition, performance and prospects and other factors. Certain of the underwriters have advised us that they intend to make a market in the Notes, but they are not obligated to do so. Such underwriters may discontinue any market-making in the Notes at any time at their sole discretion. Accordingly, we cannot assure you that a liquid trading market will develop or be maintained for the Notes, that you will be able to sell your Notes at a particular time or that the price you receive when you sell will be favorable. To the extent an active trading market does not develop or is not maintained, the liquidity and trading price for the Notes may be harmed. Accordingly, you may be required to bear the financial risk of an investment in the Notes for an indefinite period of time.

 

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A downgrade, suspension or withdrawal of a credit rating assigned by a rating agency to us or our unsecured debt, if any, or change in the debt markets could cause the liquidity or market value of the Notes to decline significantly.

Our credit ratings are an assessment by rating agencies of our ability to pay our debts when due. Consequently, real or anticipated changes in our credit ratings will generally affect the market value of the Notes. These credit ratings may not reflect the potential impact of risks relating to the structure or marketing of the Notes. Credit ratings are not a recommendation to buy, sell or hold any security, and may be revised or withdrawn at any time by the issuing organization in its sole discretion. Neither we nor any underwriter undertakes any obligation to maintain our credit ratings or to advise holders of Notes of any changes in our credit ratings. There can be no assurance that our credit ratings will remain for any given period of time or that such credit ratings will not be lowered or withdrawn entirely by the rating agencies if in their judgment future circumstances relating to the basis of the credit ratings, such as adverse changes in our company, so warrant. The conditions of the financial markets and prevailing interest rates have fluctuated in the past and are likely to fluctuate in the future, which could have an adverse effect on the market prices of the Notes.

Our credit ratings may not reflect all risks of an investment in the Notes.

Our credit ratings are an assessment by third parties of our ability to pay our obligations. Consequently, real or anticipated changes in our credit ratings will generally affect the market value of the Notes. Our credit ratings, however, may not reflect the potential impact of risks related to market conditions generally or other factors discussed above on the market value of or trading market for the Notes.

If we Default on our obligations to pay our other indebtedness, we may not be able to make payments on the Notes.

Any default under the agreements governing our indebtedness, including a default under the Wells Facility, the Union Bank Facility, the SBA Debentures, the 2022 Notes, the July 2024 Notes, the February 2025 Notes, the April 2025 Notes, the June 2025 Notes, the March 2026 A Notes, the March 2026 B Notes, the 2033 Notes, the Asset-Backed Notes, and the 2022 Convertible Notes (together, our “Indebtedness”) or other indebtedness to which we may be a party, that is not waived by the required lenders or holders, and the remedies sought by the holders of such indebtedness, could make us unable to pay principal, premium, if any, and interest on the Notes and substantially decrease the market value of the Notes. If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the instruments governing our indebtedness, we could be in default under the terms of the agreements governing such indebtedness. In the event of such default, the holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, the lenders under the Wells Facility and the Union Bank Facility or other debt we may incur in the future could elect to terminate their commitments, cease making further loans and institute foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidation. If our operating performance declines, we may in the future need to seek to obtain waivers from the required lenders or the required holders (as applicable) under our Indebtedness or other debt that we may incur in the future to avoid being in default. If we breach our covenants under our Indebtedness or other debt and seek a waiver, we may not be able to obtain a waiver from the required lenders or holders. If this occurs, we would be in default under our Indebtedness or other debt and, as applicable, the lenders or holders could exercise their rights as described above, and we could be forced into bankruptcy or liquidation. If we are unable to repay debt, lenders having secured obligations, including the lenders under the Wells Facility and the Union Bank Facility, could proceed against the collateral securing the debt. Because the Wells Facility and the Union Bank Facility have, and any future credit facilities will likely have, customary cross-default provisions, if the indebtedness under the Notes, our Indebtedness or under any future credit facility is accelerated, we may be unable to repay or finance the amounts due. See “Specific Terms of the Notes and the Offering” in this prospectus supplement.

 

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USE OF PROCEEDS

We estimate that the net proceeds we will receive from the sale of the $                million aggregate principal amount of Notes in this offering will be approximately $                , based on a public offering of        % of par, after deducting the underwriting discount of approximately $                 million payable by us and estimated offering expenses of approximately $                 payable by us.

We expect to use the net proceeds from this offering (i) to repurchase or redeem all or a portion of the Asset-Backed Notes, (ii) to fund investments in debt and equity securities in accordance with our investment objective, and (iii) for other general corporate purposes.

As of June 30, 2021, the aggregate principal balance of the 2027 Asset-Backed Notes was approximately $117.9 million. The 2027 Asset-Backed Notes bear interest at a rate of 4.605% per year, payable quarterly and mature, unless earlier repurchased or redeemed, on November 22, 2027. As of June 30, 2021, the aggregate principal balance of the 2028 Asset-Backed Notes was approximately $196.5 million. The 2028 Asset-Backed Notes bear interest at a rate of 4.703% per year, payable quarterly and mature, unless earlier repurchased or redeemed, on February 22, 2028.

We intend to seek to invest the net proceeds received in this offering as promptly as practicable after receipt thereof consistent with our investment objective. Pending such uses and investments, we will invest a portion of the net proceeds of this offering primarily in cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment. Our ability to achieve our investment objectives may be limited to the extent that the net proceeds of this offering, pending full investment, are held in lower yielding short-term instruments.

The amount of net proceeds may be more or less than the amount described in this preliminary prospectus supplement depending on the amount of Notes we sell in the offering, which will be determined at pricing. To the extent that we receive more than the amount described in this preliminary prospectus supplement, we intend to use the net proceeds for investment in portfolio companies in accordance with our investment objective and strategies and for working capital and general corporate purposes. To the extent we receive less, the amount we have available for such purposes will be reduced.

 

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CAPITALIZATION

The following table sets forth (i) our actual capitalization as of June 30, 2021, and (ii) our capitalization as adjusted to give effect to the sale of $                 aggregate principal amount of Notes in this offering, after deducting the underwriting discounts and commissions of approximately $                 million payable by us and estimated offering expenses of approximately $                 payable by us and the application of the net proceeds therefrom as described under “Use of Proceeds.” You should read this table together with the “Use of Proceeds” section included in this prospectus supplement and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our most recent consolidated financial statements and notes thereto incorporated by reference into this prospectus supplement and the accompanying prospectus.

 

     As of June 30, 2021  
     Actual      As Adjusted  
     (in thousands)  

Investments at fair value

   $ 2,521,090      $    

Cash and cash equivalents

   $ 18,447      $    

Liabilities(1):

     

Accounts payable and accrued liabilities

   $ 36,886      $    

Operating lease liability

     7,813     

Long-term SBA debentures

     51,889     

2022 Notes

     149,301     

July 2024 Notes

     104,090     

February 2025 Notes

     49,579     

April 2025 Notes

     73,541     

June 2025 Notes

     69,353     

March 2026 A Notes

     49,558     

March 2026 B Notes

     49,518     

2033 Notes

     38,663     

2027 Asset-Backed Notes

     116,571     

2028 Asset-Backed Notes

     194,749     

2022 Convertible Notes

     228,958     

Credit Facilities

     1,745     

Notes offered herein

     —                            
  

 

 

    

 

 

 

Total liabilities

   $ 1,222,214      $    
  

 

 

    

 

 

 

Net assets:

     

Common stock, par value $0.001 per share; 200,000,000 shares authorized; 115,866,665 shares issued and outstanding

   $ 116      $    

Capital in excess of par value

     1,163,910     

Total distributable earnings

     192,332     
  

 

 

    

 

 

 

Total net assets

   $ 1,356,358      $    
  

 

 

    

 

 

 

Total capitalization

   $ 2,578,572      $    
  

 

 

    

 

 

 

 

(1)

The above table reflects the carrying value of indebtedness outstanding as of June 30, 2021. As of August 31, 2021, indebtedness under the Long-term SBA debentures, 2022 Notes, July 2024 Notes, February 2025 Notes, June 2025 Notes, March 2026 A Notes, March 2026 B Notes, 2033 Notes, 2027 Asset-Backed Notes, 2028 Asset-Backed Notes, 2022 Convertible Notes, the Wells Facility and the Union Bank Credit Facility were $64.5 million, $150.0 million, $105.0 million, $50.0 million, $70.0 million, $50.0 million, $50.0 million, $40.0 million, $115.4 million, $184.4 million, $230.0 million, $0.0 million, and $66.0 million, respectively. The net proceeds from the sale of the Notes are expected to be used to repurchase or redeem the Asset-Backed Notes, fund investments in debt and equity securities in accordance with our investment objective, and for other general corporate purposes. See “Use of Proceeds.”

 

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SENIOR SECURITIES

Information about our senior securities is shown in the following table as of June 30, 2021 and December 31, 2020, 2019, 2018, 2017, 2016, 2015, 2014, 2013, 2012 and 2011. The annual information is derived from our audited financial statements for these periods, which have been audited by PricewaterhouseCoopers LLP, our independent registered public accounting firm. The “N/A” indicates information that the SEC expressly does not require to be disclosed for certain types of senior securities.

 

Class and Year

   Total Amount
Outstanding
Exclusive of
Treasury
Securities(1)
     Asset Coverage
per Unit(2)
     Average
Market
Value
per Unit(3)
 

Securitized Credit Facility with Wells Fargo Capital Finance

        

December 31, 2011

   $ 10,186,830      $ 73,369        N/A  

December 31, 2012(6)

     —          —          N/A  

December 31, 2013(6)

     —          —          N/A  

December 31, 2014(6)

     —          —          N/A  

December 31, 2015

   $ 50,000,000      $ 26,352        N/A  

December 31, 2016

   $ 5,015,620      $ 290,234        N/A  

December 31, 2017(6)

     —          —          N/A  

December 31, 2018

   $ 13,106,582      $ 147,497        N/A  

December 31, 2019(6)

     —          —          N/A  

December 31, 2020(6)

     —          —          N/A  

June 30, 2021 (unaudited)(6)

     —          —          N/A  

Securitized Credit Facility with Union Bank, NA

        

December 31, 2011(6)

     —          —          N/A  

December 31, 2012(6)

     —          —          N/A  

December 31, 2013(6)

     —          —          N/A  

December 31, 2014(6)

     —          —          N/A  

December 31, 2015(6)

     —          —          N/A  

December 31, 2016(6)

     —          —          N/A  

December 31, 2017(6)

     —          —          N/A  

December 31, 2018

   $ 39,849,010      $ 48,513        N/A  

December 31, 2019

   $ 103,918,736      $ 23,423        N/A  

December 31, 2020(6)

     —          —          N/A  

June 30, 2021 (unaudited)

   $ 1,744,604      $ 1,459,061        N/A  

Small Business Administration Debentures (HT II)(4)

        

December 31, 2011

   $ 125,000,000      $ 5,979        N/A  

December 31, 2012

   $ 76,000,000      $ 14,786        N/A  

December 31, 2013

   $ 76,000,000      $ 16,075        N/A  

December 31, 2014

   $ 41,200,000      $ 31,535        N/A  

December 31, 2015

   $ 41,200,000      $ 31,981        N/A  

December 31, 2016

   $ 41,200,000      $ 35,333        N/A  

December 31, 2017

   $ 41,200,000      $ 39,814        N/A  

December 31, 2018

     —          —          N/A  

Small Business Administration Debentures (HT III)(5)

        

December 31, 2011

   $ 100,000,000      $ 7,474        N/A  

December 31, 2012

   $ 149,000,000      $ 7,542        N/A  

December 31, 2013

   $ 149,000,000      $ 8,199        N/A  

December 31, 2014

   $ 149,000,000      $ 8,720        N/A  

 

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Class and Year

   Total Amount
Outstanding
Exclusive of
Treasury
Securities(1)
     Asset Coverage
per Unit(2)
     Average
Market
Value
per Unit(3)
 

December 31, 2015

   $ 149,000,000      $ 8,843        N/A  

December 31, 2016

   $ 149,000,000      $ 9,770        N/A  

December 31, 2017

   $ 149,000,000      $ 11,009        N/A  

December 31, 2018

   $ 149,000,000      $ 12,974        N/A  

December 31, 2019

   $ 149,000,000      $ 16,336        N/A  

December 31, 2020

   $ 99,000,000      $ 26,168        N/A  

June 30, 2021 (unaudited)

     —          —          N/A  

Small Business Administration Debentures (HC IV)(8)

        

June 30, 2021 (unaudited)

   $ 53,700,000      $ 47,402        N/A  

2016 Convertible Notes

        

December 31, 2011

   $ 75,000,000      $ 10,623      $ 885  

December 31, 2012

   $ 75,000,000      $ 15,731      $ 1,038  

December 31, 2013

   $ 75,000,000      $ 16,847      $ 1,403  

December 31, 2014

   $ 17,674,000      $ 74,905      $ 1,290  

December 31, 2015

   $ 17,604,000      $ 74,847      $ 1,110  

December 31, 2016

     —          —          N/A  

April 2019 Notes

        

December 31, 2012

   $ 84,489,500      $ 13,300      $ 986  

December 31, 2013

   $ 84,489,500      $ 14,460      $ 1,021  

December 31, 2014

   $ 84,489,500      $ 15,377      $ 1,023  

December 31, 2015

   $ 64,489,500      $ 20,431      $ 1,017  

December 31, 2016

   $ 64,489,500      $ 22,573      $ 1,022  

December 31, 2017

     —          —          N/A  

September 2019 Notes

        

December 31, 2012

   $ 85,875,000      $ 13,086      $ 1,003  

December 31, 2013

   $ 85,875,000      $ 14,227      $ 1,016  

December 31, 2014

   $ 85,875,000      $ 15,129      $ 1,026  

December 31, 2015

   $ 45,875,000      $ 28,722      $ 1,009  

December 31, 2016

   $ 45,875,000      $ 31,732      $ 1,023  

December 31, 2017

     —          —          N/A  

2022 Notes

        

December 31, 2017

   $ 150,000,000      $ 10,935      $ 1,014  

December 31, 2018

   $ 150,000,000      $ 12,888      $ 976  

December 31, 2019

   $ 150,000,000      $ 16,227      $ 1,008  

December 31, 2020

   $ 150,000,000      $ 17,271      $ 1,017  

June 30, 2021 (unaudited)

   $ 150,000,000      $ 16,970      $ 1,016  

2024 Notes

        

December 31, 2014

   $ 103,000,000      $ 12,614      $ 1,010  

December 31, 2015

   $ 103,000,000      $ 12,792      $ 1,014  

December 31, 2016

   $ 252,873,175      $ 5,757      $ 1,016  

December 31, 2017

   $ 183,509,600      $ 8,939      $ 1,025  

December 31, 2018

   $ 83,509,600      $ 23,149      $ 1,011  

December 31, 2019

     —          —          N/A  

2025 Notes

        

December 31, 2018

   $ 75,000,000      $ 25,776      $ 962  

December 31, 2019

   $ 75,000,000      $ 32,454      $ 1,032  

December 31, 2020

   $ 75,000,000      $ 34,541      $ 1,020  

June 30, 2021 (unaudited)

   $ 75,000,000      $ 33,940      $ 1,008  

 

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Class and Year

   Total Amount
Outstanding
Exclusive of
Treasury
Securities(1)
     Asset Coverage
per Unit(2)
     Average
Market
Value
per Unit(3)
 

2033 Notes

        

December 31, 2018

   $ 40,000,000      $ 48,330      $ 934  

December 31, 2019

   $ 40,000,000      $ 60,851      $ 1,054  

December 31, 2020

   $ 40,000,000      $ 64,765      $ 1,072  

June 30, 2021 (unaudited)

   $ 40,000,000      $ 63,637      $ 1,073  

July 2024 Notes

        

December 31, 2019

   $ 105,000,000      $ 23,181        N/A  

December 31, 2020

   $ 105,000,000      $ 24,672        N/A  

June 30, 2021 (unaudited)

   $ 105,000,000      $ 24,243        N/A  

February 2025 Notes

        

December 31, 2020

   $ 50,000,000      $ 51,812        N/A  

June 30, 2021 (unaudited)

   $ 50,000,000      $ 50,910        N/A  

June 2025 Notes

        

December 31, 2020

   $ 70,000,000      $ 37,009        N/A  

June 30, 2021 (unaudited)

   $ 70,000,000      $ 36,364        N/A  

March 2026 A Notes

        

December 31, 2020

   $ 50,000,000      $ 51,812        N/A  

June 30, 2021 (unaudited)

   $ 50,000,000      $ 50,910        N/A  

March 2026 B Notes

        

June 30, 2021 (unaudited)

   $ 50,000,000      $ 50,910        N/A  

2017 Asset-Backed Notes

        

December 31, 2012

   $ 129,300,000      $ 8,691      $ 1,000  

December 31, 2013

   $ 89,556,972      $ 13,642      $ 1,004  

December 31, 2014

   $ 16,049,144      $ 80,953      $ 1,375  

December 31, 2015

     —          —          N/A  

2021 Asset-Backed Notes

        

December 31, 2014

   $ 129,300,000      $ 10,048      $ 1,000  

December 31, 2015

   $ 129,300,000      $ 10,190      $ 996  

December 31, 2016

   $ 109,205,263      $ 13,330      $ 1,002  

December 31, 2017

   $ 49,152,504      $ 33,372      $ 1,001  

December 31, 2018

     —          —          N/A  

2027 Asset-Backed Notes

        

December 31, 2018

   $ 200,000,000      $ 9,666      $ 1,006  

December 31, 2019

   $ 200,000,000      $ 12,170      $ 1,004  

December 31, 2020

   $ 180,988,022      $ 14,314      $ 1,001  

June 30, 2021 (unaudited)

   $ 117,896,476      $ 21,591      $ 1,000  

2028 Asset-Backed Notes

        

December 31, 2019

   $ 250,000,000      $ 9,736      $ 1,004  

December31, 2020

   $ 250,000,000      $ 10,362      $ 1,002  

June 30, 2021 (unaudited)

   $ 196,485,411      $ 12,955      $ 1,001  

2022 Convertible Notes

        

December 31, 2017

   $ 230,000,000      $ 7,132      $ 1,028  

December 31, 2018

   $ 230,000,000      $ 8,405      $ 946  

December 31, 2019

   $ 230,000,000      $ 10,583      $ 1,021  

December 31, 2020

   $ 230,000,000      $ 11,264      $ 1,027  

June 30, 2021 (unaudited)

   $ 230,000,000      $ 11,067      $ 1,059  

 

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Class and Year

   Total Amount
Outstanding
Exclusive of
Treasury
Securities(1)
     Asset Coverage
per Unit(2)
     Average
Market
Value
per Unit(3)
 

Total Senior Securities(7)

        

December 31, 2011

   $ 310,186,830      $ 2,409        N/A  

December 31, 2012

   $ 599,664,500      $ 1,874        N/A  

December 31, 2013

   $ 559,921,472      $ 2,182        N/A  

December 31, 2014

   $ 626,587,644      $ 2,073        N/A  

December 31, 2015

   $ 600,468,500      $ 2,194        N/A  

December 31, 2016

   $ 667,658,558      $ 2,180        N/A  

December 31, 2017

   $ 802,862,104      $ 2,043        N/A  

December 31, 2018

   $ 980,465,192      $ 1,972        N/A  

December 31, 2019

   $ 1,302,918,736      $ 1,868        N/A  

December 31, 2020

   $ 1,299,988,022      $ 1,993        N/A  

June 30, 2021 (unaudited)

   $ 1,189,826,491      $ 2,139        N/A  

 

(1)

Total amount of each class of senior securities outstanding at the end of the period presented.

(2)

The asset coverage ratio for a class of senior securities representing indebtedness is calculated as our consolidated total assets, less all liabilities and indebtedness not represented by senior securities, including senior securities not subject to asset coverage requirements under the 1940 Act due to exemptive relief from the SEC, divided by senior securities representing indebtedness. This asset coverage ratio is multiplied by $1,000 to determine the Asset Coverage per Unit.

(3)

Not applicable because senior securities are not registered for public trading.

(4)

Issued by Hercules Technology II, L.P., or HT II, one of our prior SBIC subsidiaries, to the Small Business Association, or SBA. On July 13, 2018, we completed repayment of the remaining outstanding HT II debentures and subsequently surrendered the SBA license with respect to HT II. These categories of senior securities were not subject to the asset coverage requirements of the 1940 Act as a result of exemptive relief granted to us by the SEC.

(5)

Issued by HT III, one of our prior SBIC subsidiaries, to the SBA. On May 5, 2021, we completed repayment of the remaining outstanding HT III debentures and subsequently surrendered the SBA license with respect to HT III. These categories of senior securities were not subject to the asset coverage requirements of the 1940 Act as a result of exemptive relief granted to us by the SEC.

(6)

The Company’s Wells Facility and Union Bank Facility had no borrowings outstanding during the periods noted above.

(7)

The total senior securities and Asset Coverage per Unit shown for those securities do not represent the asset coverage ratio requirement under the 1940 Act, because the presentation includes senior securities not subject to the asset coverage requirements of the 1940 Act as a result of exemptive relief granted to us by the SEC. As of June 30, 2021 and December 31, 2020, our asset coverage ratio under our regulatory requirements as a business development company was 219.3% and 207.5%, respectively, excluding our SBA debentures as a result of our exemptive order from the SEC which allows us to exclude all SBA leverage from our asset coverage ratio.

(8)

Issued by Hercules Capital IV, L.P. or HC IV, a SBIC subsidiary, to the SBA. These categories of senior securities were not subject to the asset coverage requirements of the 1940 Act as a result of exemptive relief granted to us by the SEC.

 

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DESCRIPTION OF NOTES

The following description of the particular terms of the         % Notes due 20     supplements and, to the extent inconsistent with, replaces the description of the general terms and provisions of the debt securities set forth in the accompanying prospectus.

We will issue the Notes under a base indenture dated as of March 6, 2012, between us and U.S. Bank National Association, as trustee (the “trustee”), as supplemented by a separate supplemental indenture to be dated as of the settlement date for the Notes. As used in this section, all references to the “indenture” mean the base indenture as supplemented by the supplemental indenture. The terms of the Notes include those expressly set forth in the indenture and those made part of the indenture by reference to the Trust Indenture Act of 1939, as amended, or the TIA.

The following description is a summary of the material provisions of the Notes and the indenture and does not purport to be complete. This summary is subject to and is qualified by reference to all the provisions of the Notes and the indenture, including the definitions of certain terms used in the indenture. We urge you to read these documents because they, and not this description, define your rights as a holder of the Notes.

For purposes of this description, references to “we,” “our” and “us” refer only to Hercules Capital, Inc. and not to any of its current or future subsidiaries and references to “subsidiaries” refer only to our consolidated subsidiaries and exclude any investments held by Hercules Capital in the ordinary course of business which are not, under GAAP, consolidated on the financial statements of Hercules Capital and its subsidiaries.

General

The Notes:

 

   

will be our general unsecured, senior obligations;

 

   

will initially be issued in an aggregate principal amount of $                 million;

 

   

will mature on                 , unless earlier redeemed or repurchased, as discussed below;

 

   

will bear cash interest from                 , 2021 at an annual rate of         % payable semi-annually on                 and     of each year, beginning on                 , 2022;

 

   

will not be subject to any sinking fund;

 

   

will be subject to redemption at our option as described under “—Optional Redemption;”

 

   

will be subject to repurchase by us at the option of the holders following a Change of Control Repurchase Event (as defined below under “—Offer to Repurchase Upon a Change of Control Repurchase Event”), at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the date of repurchase;

 

   

will be issued in denominations of $2,000 and integral multiples of $1,000 thereof; and

 

   

will be represented by one or more registered Notes in global form, but in certain limited circumstances may be represented by Notes in definitive form. See “—Book-Entry, Settlement and Clearance.”

The indenture does not limit the amount of debt that may be issued by us or our subsidiaries under the indenture or otherwise. The indenture does not contain any financial covenants and does not restrict us from paying distributions or issuing or repurchasing our other securities. Other than restrictions described under “—Offer to Repurchase Upon a Change of Control Repurchase Event” and “—Merger, Consolidation or Sale of Assets” below, the indenture does not contain any covenants or other provisions designed to afford holders of the Notes protection in the event of a highly leveraged transaction involving us or in the event of a decline in our credit rating as the result of a takeover, recapitalization, highly leveraged transaction or similar restructuring involving us that could adversely affect such holders.

 

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We may, without the consent of the holders, issue additional Notes under the indenture with the same terms (except for the issue date, public offering price and, if applicable, the initial interest payment date) and with the same CUSIP numbers as the Notes offered hereby in an unlimited aggregate principal amount; provided that if such additional Notes are not fungible with the Notes offered hereby (or any other tranche of additional Notes) for U.S. federal income tax purposes, then such additional Notes will have different CUSIP numbers from the Notes offered hereby (and any such other tranche of additional Notes).

We do not intend to apply to list the Notes on any securities exchange or any automated dealer quotation system.

Payments on the Notes; Paying Agent and Registrar; Transfer and Exchange

We will pay the principal of, and interest on, Notes in global form registered in the name of or held by DTC or its nominee in immediately available funds to DTC or its nominee, as the case may be, as the registered holder of such Global Note (as defined below).

Payment of principal of (and premium, if any) and any such interest on the Notes will be made at the corporate trust office of the trustee in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at our option payment of interest may be made by check mailed to the address of the person entitled thereto as such address shall appear in the security register.

A holder of Notes may transfer or exchange Notes at the office of the registrar in accordance with the indenture. The registrar and the trustee may require a holder, among other things, to furnish appropriate endorsements and transfer documents. No service charge will be imposed by us, the trustee or the registrar for any registration of transfer or exchange of Notes, but we may require a holder to pay a sum sufficient to cover any transfer tax or other similar governmental charge required by law or permitted by the indenture.

The registered holder of a Note will be treated as its owner for all purposes.

Interest

The Notes will bear cash interest at a rate of         % per year until maturity. Interest on the Notes will accrue from                 , 2021 or from the most recent date on which interest has been paid or duly provided for. Interest will be payable semiannually in arrears on                  and                  of each year, beginning on                 , 2022.

Interest will be paid to the person in whose name a Note is registered at 5:00 p.m. New York City time (the “close of business”) on                  or                 , as the case may be, immediately preceding the relevant interest payment date. Interest on the Notes will be computed on the basis of a 360-day year composed of twelve 30-day months.

If any interest payment date, redemption date, the maturity date or any earlier required repurchase date upon a Change of Control Repurchase Event (defined below) of a Note falls on a day that is not a business day, the required payment will be made on the next succeeding business day and no interest on such payment will accrue in respect of the delay. The term “business day” means, with respect to any Note, any day other than a Saturday, a Sunday or a day on which banking institutions in New York are authorized or obligated by law or executive order to close.

Ranking

The Notes will be our unsecured obligations that rank senior in right of payment to all of our existing and future indebtedness that is expressly subordinated, or junior, in right of payment to the Notes. The Notes will not

 

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be guaranteed by any of our current or future subsidiaries. The Notes will rank pari passu, or equally, in right of payment with all of our existing and future liabilities that are not so subordinated, or junior. The Notes will effectively rank subordinated, or junior, to any of our secured indebtedness (including unsecured indebtedness that we later secure) to the extent of the value of the assets securing such indebtedness. The Notes will rank structurally subordinated, or junior, to all existing and future indebtedness (including trade payables) incurred by our subsidiaries, financing vehicles or similar facilities. In the event of our bankruptcy, liquidation, reorganization or other winding up, our assets that secure secured debt will be available to pay obligations on the Notes only after all indebtedness under such secured debt has been repaid in full from such assets. We advise you that there may not be sufficient assets remaining to pay amounts due on any or all the Notes then outstanding.

As of June 30, 2021, our total consolidated indebtedness was approximately $1.2 billion aggregate principal amount outstanding, of which approximately $369.8 million was secured indebtedness. After giving effect to the issuance of the Notes, our total consolidated indebtedness would have been approximately $                 million aggregate principal amount outstanding as of June 30, 2021. See “Capitalization.”

Optional Redemption

We may redeem some or all of the Notes at any time, or from time to time. If we choose to redeem any Notes prior to maturity, we will pay a redemption price equal to the greater of the following amounts, plus, in each case, accrued and unpaid interest to the redemption date:

 

   

100% of the principal amount of the Notes to be redeemed, or

 

   

the sum of the present values of the remaining scheduled payments of principal and interest (exclusive of accrued and unpaid interest to the date of redemption) on the Notes to be redeemed, discounted to the redemption date on a semi- annual basis (assuming a 360-day year consisting of twelve 30- day months) using the applicable Treasury Rate plus                  basis points;

provided, however, that if we redeem any Notes on or after                 (the date falling one month prior to the maturity date of the Notes), the redemption price for the Notes will be equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the date of redemption.

If we choose to redeem any Notes, we will deliver a notice of redemption to holders of Notes not less than 30 nor more than 60 days before the redemption date. If we are redeeming less than all of the Notes, the particular Notes to be redeemed will be selected in accordance with the applicable procedures of the trustee and, so long as the Notes are registered to DTC or its nominee, DTC; provided, however, that no such partial redemption shall reduce the portion of the principal amount of a Note not redeemed to less than $2,000. Unless we default in payment of the redemption price, on and after the redemption date, interest will cease to accrue on the Notes or portions of the Notes called for redemption.

For purposes of calculating the redemption price in connection with the redemption of the Notes, on any redemption date, the following terms have the meanings set forth below:

“Treasury Rate” means, with respect to any redemption date, the rate per annum equal to the semi-annual equivalent yield-to-maturity of the Comparable Treasury Issue (computed as of the third business day immediately preceding the redemption), assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date. The redemption price and the Treasury Rate will be determined by us.

“Comparable Treasury Issue” means the United States Treasury security selected by the Reference Treasury Dealer as having a maturity comparable to the remaining term of the Notes to be redeemed that would be utilized, at the time of selection and in accordance with customary financing practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Notes being redeemed.

 

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“Comparable Treasury Price” means (1) the average of the remaining Reference Treasury Dealer Quotations for the redemption date, after excluding the highest and lowest Reference Treasury Dealer Quotations, or (2) if the Quotation Agent obtains fewer than four such Reference Treasury Dealer Quotations, the average of all such quotations.

“Quotation Agent” means a Reference Treasury Dealer selected by us.

“Reference Treasury Dealer” means each of (1) Goldman Sachs & Co. LLC or (2) a primary U.S. government securities dealer selected by SMBC Nikko Securities America, Inc., or their respective affiliates which are primary U.S. government securities dealers and their respective successors; provided, however, that if any of the foregoing or their affiliates shall cease to be a primary U.S. government securities dealer in the United States (a “Primary Treasury Dealer”), we shall select another Primary Treasury Dealer.

“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Quotation Agent, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Quotation Agent by such Reference Treasury Dealer at 3:30 p.m. New York time on the third business day preceding such redemption date.

All determinations made by any Reference Treasury Dealer, including the Quotation Agent, with respect to determining the redemption price will be final and binding absent manifest error.

Offer to Repurchase Upon a Change of Control Repurchase Event

If a Change of Control Repurchase Event occurs, unless we have exercised our right to redeem the Notes in full, we will make an offer to each holder of Notes to repurchase all or any part (in minimum denominations of $2,000 and integral multiples of $1,000 principal amount) of that holder’s Notes at a repurchase price in cash equal to 100% of the aggregate principal amount of Notes repurchased plus any accrued and unpaid interest on the Notes repurchased to, but not including, the date of purchase. Within 30 days following any Change of Control Repurchase Event or, at our option, prior to any Change of Control, but after the public announcement of the Change of Control, we will mail a notice to each holder describing the transaction or transactions that constitute or may constitute the Change of Control Repurchase Event and offering to repurchase Notes on the payment date specified in the notice, which date will be no earlier than 30 days and no later than 60 days from the date such notice is mailed. The notice shall, if mailed prior to the date of consummation of the Change of Control, state that the offer to purchase is conditioned on the Change of Control Repurchase Event occurring on or prior to the payment date specified in the notice. We will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control Repurchase Event. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control Repurchase Event provisions of the Notes, we will comply with the applicable securities laws and regulations and will not be deemed to have breached our obligations under the Change of Control Repurchase Event provisions of the Notes by virtue of such conflict.

On the Change of Control Repurchase Event payment date, subject to extension if necessary to comply with the provisions of the 1940 Act, we will, to the extent lawful:

 

  (1)

accept for payment all Notes or portions of Notes properly tendered pursuant to our offer;

 

  (2)

deposit with the paying agent an amount equal to the aggregate purchase price in respect of all Notes or portions of Notes properly tendered; and

 

  (3)

deliver or cause to be delivered to the trustee the Notes properly accepted, together with an officers’ certificate stating the aggregate principal amount of Notes being purchased by us.

 

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The paying agent will promptly remit to each holder of Notes properly tendered the purchase price for the Notes, and the trustee will promptly authenticate and mail (or cause to be transferred by book-entry) to each holder a new Note equal in principal amount to any unpurchased portion of any Notes surrendered; provided that each new Note will be in a minimum principal amount of $2,000 or an integral multiple of $1,000 in excess thereof.

We will not be required to make an offer to repurchase the Notes upon a Change of Control Repurchase Event if a third party makes an offer in the manner, at the times and otherwise in compliance with the requirements for an offer made by us and such third party purchases all Notes properly tendered and not withdrawn under its offer.

The source of funds that will be required to repurchase Notes in the event of a Change of Control Repurchase Event will be our available cash or cash generated from our operations or other potential sources, including funds provided by a purchaser in the Change of Control transaction, borrowings, sales of assets or sales of equity. We cannot assure you that sufficient funds from such sources will be available at the time of any Change of Control Repurchase Event to make required repurchases of Notes tendered. The terms of certain of our and our subsidiaries’ financing arrangements provide that certain change of control events will constitute an event of default thereunder entitling the lenders to accelerate any indebtedness outstanding under our and our subsidiaries’ financing arrangements at that time and to terminate the financing arrangements. In addition, the indenture governing our 2022 Convertible Notes contains a provision that would require us to offer to purchase the 2022 Convertible Notes upon the occurrence of a fundamental change. A failure to purchase any tendered 2022 Convertible Notes would constitute an event of default under the indenture for the 2022 Convertible Notes, which would, in turn, constitute a default under the Credit Facilities and the indenture. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Condition, Liquidity and Capital Resources” in our most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q for a general discussion of our indebtedness. Our and our subsidiaries’ future debt instruments may contain similar restrictions and provisions. If the holders of the Notes exercise their right to require us to repurchase Notes upon a Change of Control Repurchase Event, the financial effect of this repurchase could cause a default under our and our subsidiaries’ future debt instruments, even if the Change of Control Repurchase Event itself would not cause a default. It is possible that we will not have sufficient funds at the time of the Change of Control Repurchase Event to make the required repurchase of the Notes and/or our other debt. See “Supplementary Risk Factors—Risks Relating to the Notes—We may not be able to repurchase the Notes upon a Change of Control Repurchase Event.”

The definition of “Change of Control” includes a phrase relating to the direct or indirect sale, transfer, conveyance or other disposition of “all or substantially all” of our properties or assets and those of our subsidiaries taken as a whole. Although there is a limited body of case law interpreting the phrase “substantially all,” there is no precise, established definition of the phrase under applicable law. Accordingly, the ability of a holder of Notes to require us to repurchase the Notes as a result of a sale, transfer, conveyance or other disposition of less than all of our assets and the assets of our subsidiaries taken as a whole to another person or group may be uncertain.

For purposes of the Notes:

“Below Investment Grade Rating Event” means the Notes are downgraded below Investment Grade by (i) one Rating Agency if the Notes are rated by less than two Rating Agencies, (ii) both Rating Agencies if the Notes are rated by two Rating Agencies or (iii) at least a majority of such Rating Agencies if the Notes are rated by three or more Rating Agencies on any date from the date of the public notice of an arrangement that results in a Change of Control until the end of the 60-day period following public notice of the occurrence of a Change of Control (which period shall be extended so long as the rating of the Notes is under publicly announced consideration for possible downgrade by any of the Rating Agencies); provided that a Below Investment Grade Rating Event otherwise arising by virtue of a particular reduction in rating shall not be deemed to have occurred

 

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in respect of a particular Change of Control (and thus shall not be deemed a Below Investment Grade Rating Event for purposes of the definition of Change of Control Repurchase Event hereunder) if the Rating Agencies making the reduction in rating to which this definition would otherwise apply do not announce or publicly confirm or inform the trustee in writing at its request that the reduction was the result, in whole or in part, of any event or circumstance comprised of or arising as a result of, or in respect of, the applicable Change of Control (whether or not the applicable Change of Control shall have occurred at the time of the Below Investment Grade Rating Event).

“Change of Control” means the occurrence of any of the following:

 

  (1)

the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation) in one or a series of related transactions, of all or substantially all of the assets of Hercules Capital and its Controlled Subsidiaries taken as a whole to any “person” or “group” (as those terms are used in Section 13(d)(3) of the Exchange Act), other than to any Permitted Holders; provided that, for the avoidance of doubt, a pledge of assets pursuant to any secured debt instrument of Hercules Capital or its Controlled Subsidiaries shall not be deemed to be any such sale, lease, transfer, conveyance or disposition;

 

  (2)

the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any “person” or “group” (as those terms are used in Section 13(d)(3) of the Exchange Act) (other than any Permitted Holders) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than 50% of the outstanding Voting Stock of Hercules Capital, measured by voting power rather than number of shares; or

 

  (3)

the approval by Hercules Capital’s stockholders of any plan or proposal relating to the liquidation or dissolution of Hercules Capital.

“Change of Control Repurchase Event” means the occurrence of a Change of Control and a Below Investment Grade Rating Event.

“Controlled Subsidiary” means any subsidiary of Hercules Capital, 50% or more of the outstanding equity interests of which are owned by Hercules Capital and its direct or indirect subsidiaries and of which Hercules Capital possesses, directly or indirectly, the power to direct or cause the direction of the management or policies, whether through the ownership of voting equity interests, by agreement or otherwise.

“Fitch” means Fitch, Inc. or any successor thereto.

“Investment Grade” means a rating of Baa3 or better by Moody’s or a rating of BBB– or better by KBRA (or the equivalent rating under any successor rating categories of Moody’s or KBRA) or the equivalent of any other Rating Agency, as applicable, or in each case, the equivalent under any successor category of such Rating Agency.

“KBRA” means Kroll Bond Rating Agency, LLC or any successor thereto.

“Moody’s” means Moody’s Investors Services, Inc. or any successor thereto.

“Permitted Holders” means (i) us and (ii) one or more of our Controlled Subsidiaries.

“Rating Agency” means:

 

  (1)

Moody’s;

 

  (2)

KBRA; and

 

  (2)

Fitch or S&P if either of them rates the Notes.

 

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“S&P” means Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business, or any successor thereto.

“Voting Stock” as applied to stock of any person, means shares, interests, participations or other equivalents in the equity interest (however designated) in such person having ordinary voting power for the election of a majority of the directors (or the equivalent) of such person, other than shares, interests, participations or other equivalents having such power only by reason of the occurrence of a contingency.

Covenants

In addition to the covenants described in the base indenture, the following covenants shall apply to the Notes. To the extent of any conflict or inconsistency between the base indenture and the following covenants, the following covenants shall govern:

Merger, Consolidation or Sale of Assets

The indenture will provide that we will not merge or consolidate with or into any other person (other than a merger of a wholly owned subsidiary into us), or sell, transfer, lease, convey or otherwise dispose of all or substantially all our property (provided that, for the avoidance of doubt, a pledge of assets pursuant to any secured debt instrument of Hercules Capital or its Controlled Subsidiaries shall not be deemed to be any such sale, transfer, lease, conveyance or disposition) in any one transaction or series of related transactions unless:

 

   

we are the surviving person (the “Surviving Person”) or the Surviving Person (if other than us) formed by such merger or consolidation or to which such sale, transfer, lease, conveyance or disposition is made shall be a corporation or limited liability company organized and existing under the laws of the United States of America or any state or territory thereof;

 

   

the Surviving Person (if other than us) expressly assumes, by supplemental indenture in form reasonably satisfactory to the trustee, executed and delivered to the trustee by such Surviving Person, the due and punctual payment of the principal of, and premium, if any, and interest on, all the Notes outstanding, and the due and punctual performance and observance of all the covenants and conditions of the indenture to be performed by us;

 

   

immediately before and immediately after giving effect to such transaction or series of related transactions, no default or event of default shall have occurred and be continuing; and

 

   

we shall deliver, or cause to be delivered, to the trustee, an officers’ certificate and an opinion of counsel, each stating that such transaction and the supplemental indenture, if any, in respect thereto, comply with this covenant and that all conditions precedent in the indenture relating to such transaction have been complied with.

For the purposes of this covenant, the sale, transfer, lease, conveyance or other disposition of all the property of one or more of our subsidiaries, which property, if held by us instead of such subsidiaries, would constitute all or substantially all of our property on a consolidated basis, shall be deemed to be the transfer of all or substantially all of our property.

Although there is a limited body of case law interpreting the phrase “substantially all,” there is no precise established definition of the phrase under applicable law. Accordingly, in certain circumstances there may be a degree of uncertainty as to whether a particular transaction would involve “all or substantially all” of the properties or assets of a person. As a result, it may be unclear as to whether the merger, consolidation or sale of assets covenant would apply to a particular transaction as described above absent a decision by a court of competent jurisdiction. Although these types of transactions are permitted under the indenture, certain of the foregoing transactions could constitute a Change of Control that results in a Change of Control Repurchase Event permitting each holder to require us to repurchase the Notes of such holder as described above.

 

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An assumption by any person of obligations under the Notes and the indenture might be deemed for U.S. federal income tax purposes to be an exchange of the Notes for new Notes by the holders thereof, resulting in recognition of gain or loss for such purposes and possibly other adverse tax consequences to the holders. Holders should consult their own tax advisors regarding the tax consequences of such an assumption.

Other Covenants

 

   

We agree that for the period of time during which the Notes are outstanding, we will not violate, whether or not we are subject to, Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act or any successor provisions, giving effect to any exemptive relief granted to us by the SEC (even if we are no longer subject to the 1940 Act).

 

   

If, at any time, we are not subject to the reporting requirements of Sections 13 or 15(d) of the Exchange Act to file any periodic reports with the SEC, we agree to furnish to holders of the Notes and the trustee, for the period of time during which the Notes are outstanding, our audited annual consolidated financial statements, within 90 days of our fiscal year end, and unaudited interim consolidated financial statements, within 45 days of our fiscal quarter end (other than our fourth fiscal quarter). All such financial statements will be prepared, in all material respects, in accordance with GAAP, as applicable.

Events of Default

Each of the following is an event of default:

 

  (1)

default in the payment of any interest upon any Note when due and payable and the default continues for a period of 30 days;

 

  (2)

default in the payment of the principal of (or premium, if any, on) any Note when it becomes due and payable at its maturity including upon any redemption date or required repurchase date;

 

  (3)

our failure for 60 consecutive days after written notice from the trustee or the holders of at least 25% in principal amount of the Notes then outstanding has been received to comply with any of our other agreements contained in the Notes or indenture;

 

  (4)

default by us or any of our significant subsidiaries, as defined in Article 1, Rule 1-02 of Regulation S-X under the Exchange Act (but excluding any subsidiary which is (a) a non-recourse or limited recourse subsidiary, (b) a bankruptcy remote special purpose vehicle or (c) is not consolidated with Hercules Capital for purposes of GAAP), with respect to any mortgage, agreement or other instrument under which there may be outstanding, or by which there may be secured or evidenced, any indebtedness for money borrowed in excess of $50 million in the aggregate of us and/or any such subsidiary, whether such indebtedness now exists or shall hereafter be created (i) resulting in such indebtedness becoming or being declared due and payable or (ii) constituting a failure to pay the principal or interest of any such debt when due and payable at its stated maturity, upon required repurchase, upon declaration of acceleration or otherwise, unless, in either case, such indebtedness is discharged, or such acceleration is rescinded, stayed or annulled, within a period of 30 calendar days after written notice of such failure is given to us by the trustee or to us and the trustee by the holders of at least 25% in aggregate principal amount of the Notes then outstanding;

 

  (5)

Pursuant to Section 18(a)(1)(C)(ii) and Section 61 of the 1940 Act, on the last business day of each of 24 consecutive calendar months, any class of securities shall have an asset coverage (as such term is used in the 1940 Act) of less than 100% giving effect to any exemptive relief granted to us by the SEC; or

 

  (6)

certain events of bankruptcy, insolvency, or reorganization involving us occur and remain undischarged or unstayed for a period of 60 days.

If an event of default occurs and is continuing, then and in every such case (other than an event of default specified in item (6) above) the trustee or the holders of at least 25% in principal amount of the outstanding

 

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Notes may declare the entire principal amount of Notes to be due and immediately payable, by a notice in writing to us (and to the trustee if given by the holders), and upon any such declaration such principal or specified portion thereof shall become immediately due and payable. Notwithstanding the foregoing, in the case of the events of bankruptcy, insolvency or reorganization described in item (6) above, 100% of the principal of and accrued and unpaid interest on the Notes will automatically become due and payable.

At any time after a declaration of acceleration with respect to the Notes has been made and before a judgment or decree for payment of the money due has been obtained by the trustee, the holders of a majority in principal amount of the outstanding Notes, by written notice to us and the trustee, may rescind and annul such declaration and its consequences if (i) we have paid or deposited with the trustee a sum sufficient to pay all overdue installments of interest, if any, on all outstanding Notes, the principal of (and premium, if any, on) all outstanding Notes that have become due otherwise than by such declaration of acceleration and interest thereon at the rate or rates borne by or provided for in such Notes, to the extent that payment of such interest is lawful interest upon overdue installments of interest at the rate or rates borne by or provided for in such Notes, and all sums paid or advanced by the trustee and the reasonable compensation, expenses, disbursements and advances of the trustee, its agents and counsel, and (ii) all events of default with respect to the Notes, other than the nonpayment of the principal of (or premium, if any, on) or interest on such Notes that have become due solely by such declaration of acceleration, have been cured or waived. No such rescission will affect any subsequent default or impair any right consequent thereon.

No holder of Notes will have any right to institute any proceeding, judicial or otherwise, with respect to the indenture, or for the appointment of a receiver or trustee, or for any other remedy under the indenture, unless

 

  (i)

such holder has previously given written notice to the trustee of a continuing event of default with respect to the Notes,

 

  (ii)

the holders of not less than 25% in principal amount of the outstanding Notes shall have made written request to the trustee to institute proceedings in respect of such event of default;

 

  (iii)

such holder or holders have offered to the trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request;

 

  (iv)

the trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and

 

  (v)

no direction inconsistent with such written request has been given to the trustee during such 60-day period by the holders of a majority in principal amount of the outstanding Notes.

Notwithstanding any other provision in the indenture, the holder of any Note shall have the right, which is absolute and unconditional, to receive payment of the principal of (and premium, if any, on) and interest, if any, on such Note on the stated maturity or maturity expressed in such Note (or, in the case of redemption, on the redemption date or, in the case of repayment at the option of the holders, on the repayment date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such holder.

The trustee shall be under no obligation to exercise any of the rights or powers vested in it by the indenture at the request or direction of any of the holders of the Notes unless such holders shall have offered to the trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. Subject to the foregoing, the holders of a majority in principal amount of the outstanding Notes shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the trustee or exercising any trust or power conferred on the trustee with respect to the Notes, provided that (i) such direction shall not be in conflict with any rule of law or with this indenture, (ii) the trustee may take any other action deemed proper by the trustee that is not inconsistent with such direction and (iii) the trustee need not take any action that it determines in good faith may involve it in personal liability or be unjustly prejudicial to the holders of Notes not consenting.

 

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The holders of not less than a majority in principal amount of the outstanding Notes may on behalf of the holders of all of the Notes waive any past default under the indenture with respect to the Notes and its consequences, except a default (i) in the payment of (or premium, if any, on) or interest, if any, on any Note, or (ii) in respect of a covenant or provision of the indenture which cannot be modified or amended without the consent of the holder of each outstanding Note affected. Upon any such waiver, such default shall cease to exist, and any event of default arising therefrom shall be deemed to have been cured, for every purpose, but no such waiver shall extend to any subsequent or other default or event of default or impair any right consequent thereto.

We are required to deliver to the trustee, within 120 days after the end of each fiscal year, an officers’ certificate stating that to the knowledge of the signers whether we are in default in the performance of any of the terms, provisions or conditions of the indenture.

Within 90 days after the occurrence of any default under the indenture with respect to the Notes, the trustee shall transmit notice of such default known to the trustee, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal of (or premium, if any, on) or interest, if any, on any Note, the trustee shall be protected in withholding such notice if and so long as the Board of Directors, the executive committee or a trust committee of directors of the trustee in good faith determines that withholding of such notice is in the interest of the holders of the Notes.

Satisfaction and Discharge; Defeasance

We may satisfy and discharge our obligations under the indenture by delivering to the securities registrar for cancellation all outstanding Notes or by depositing with the trustee or delivering to the holders, as applicable, after the Notes have become due and payable, or otherwise, moneys sufficient to pay all of the outstanding Notes and paying all other sums payable under the indenture by us. Such discharge is subject to terms contained in the indenture.

In addition, the Notes are subject to defeasance and covenant defeasance, in each case, in accordance with the terms of the indenture. Defeasance means that, subject to the satisfaction of certain conditions, including, but not limited to, (i) depositing in trust for the benefit of the holders of the Notes a combination of money and/or U.S. government or U.S. government agency notes or bonds that will generate enough cash to make interest, principal and any other payments on the Notes on their various due date and (ii) delivering to the Trustee an opinion of counsel stating that (a) we have received from, or there has been published by, the Internal Revenue Service (the “IRS”) a ruling, or (b) since the date of execution of the indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon, the holders and beneficial owners of the Notes and any coupons appertaining thereto will not recognize income, gain or loss for federal income tax purposes as a result of such defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred, we can legally release ourselves from all payment and other obligations on the Notes. Covenant defeasance means that, subject to the satisfaction of certain conditions, including, but not limited to, (i) depositing in trust for the benefit of the holders of the Notes a combination of money and/or U.S. government or U.S. government agency notes or bonds that will generate enough cash to make interest, principal and any other payments on the Notes on their various due dates and (ii) delivering to the Trustee an opinion of counsel to the effect that the holders and beneficial owners of the Notes and any coupons appertaining thereto will not recognize income, gain or loss for federal income tax purposes as a result of such covenant defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred, we will be released from some of the restrictive covenants in the indenture.

Trustee

U.S. Bank National Association is the trustee, security registrar and paying agent. U.S. Bank National Association, in each of its capacities, including without limitation as trustee, security registrar and paying agent,

 

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assumes no responsibility for the accuracy or completeness of the information concerning us or our affiliates or any other party contained in this document or the related documents or for any failure by us or any other party to disclose events that may have occurred and may affect the significance or accuracy of such information, or for any information provided to it by us, including but not limited to settlement amounts and any other information.

We may maintain banking relationships in the ordinary course of business with the trustee and its affiliates.

Governing Law

The indenture provides that it and the Notes shall be governed by and construed in accordance with the laws of the State of New York, without regard to principles of conflicts of laws that would cause the application of laws of another jurisdiction.

Book-Entry, Settlement and Clearance

Global Notes

The Notes will be initially issued in the form of one or more registered Notes in global form, without interest coupons (the “Global Notes”). Upon issuance, each of the Global Notes will be deposited with the trustee as custodian for DTC and registered in the name of Cede & Co., as nominee of DTC.

Ownership of beneficial interests in a Global Note will be limited to persons who have accounts with DTC (“DTC participants”) or persons who hold interests through DTC participants. We expect that under procedures established by DTC:

 

   

upon deposit of a Global Note with DTC’s custodian, DTC will credit portions of the principal amount of the Global Note to the accounts of the DTC participants designated by the underwriters; and

 

   

ownership of beneficial interests in a Global Note will be shown on, and transfer of ownership of those interests will be effected only through, records maintained by DTC (with respect to interests of DTC participants) and the records of DTC participants (with respect to other owners of beneficial interests in the Global Note).

Beneficial interests in Global Notes may not be exchanged for Notes in physical, certificated form except in the limited circumstances described below.

Book-Entry Procedures for Global Notes

All interests in the Global Notes will be subject to the operations and procedures of DTC. We provide the following summary of those operations and procedures solely for the convenience of investors. The operations and procedures of DTC are controlled by that settlement system and may be changed at any time. Neither we nor the underwriters are responsible for those operations or procedures.

DTC has advised us that it is:

 

   

a limited purpose trust company organized under the laws of the State of New York;

 

   

a “banking organization” within the meaning of the New York State Banking Law;

 

   

a member of the Federal Reserve System;

 

   

a “clearing corporation” within the meaning of the Uniform Commercial Code; and

 

   

a “clearing agency” registered under Section 17A of the Exchange Act.

DTC was created to hold securities for its participants and to facilitate the clearance and settlement of securities transactions between its participants through electronic book-entry changes to the accounts of its

 

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participants. DTC’s participants include securities brokers and dealers, including the underwriters; banks and trust companies; clearing corporations and other organizations. Indirect access to DTC’s system is also available to others such as banks, brokers, dealers and trust companies; these indirect participants clear through or maintain a custodial relationship with a DTC participant, either directly or indirectly. Investors who are not DTC participants may beneficially own securities held by or on behalf of DTC only through DTC participants or indirect participants in DTC.

So long as DTC’s nominee is the registered owner of a Global Note, that nominee will be considered the sole owner or holder of the Notes represented by that Global Note for all purposes under the indenture. Except as provided below, owners of beneficial interests in a Global Note:

 

   

will not be entitled to have Notes represented by the Global Note registered in their names;

 

   

will not receive or be entitled to receive physical, certificated Notes; and

 

   

will not be considered the owners or holders of the Notes under the indenture for any purpose, including with respect to the giving of any direction, instruction or approval to the trustee under the indenture.

As a result, each investor who owns a beneficial interest in a Global Note must rely on the procedures of DTC to exercise any rights of a holder of Notes under the indenture (and, if the investor is not a participant or an indirect participant in DTC, on the procedures of the DTC participant through which the investor owns its interest).

Payments of principal and interest with respect to the Notes represented by a Global Note will be made by the trustee to DTC’s nominee as the registered holder of the Global Note. Neither we nor the Trustee will have any responsibility or liability for the payment of amounts to owners of beneficial interests in a Global Note, for any aspect of the records relating to or payments made on account of those interests by DTC, or for maintaining, supervising or reviewing any records of DTC relating to those interests.

Payments by participants and indirect participants in DTC to the owners of beneficial interests in a Global Note will be governed by standing instructions and customary industry practice and will be the responsibility of those participants or indirect participants and DTC.

Transfers between participants in DTC will be effected under DTC’s procedures and will be settled in same-day funds.

Certificated Notes

Notes in physical, certificated form will be issued and delivered to each person that DTC identifies as a beneficial owner of the related Notes only if:

 

   

DTC notifies us at any time that it is unwilling or unable to continue as depositary for the Global Notes and a successor depositary is not appointed within 90 days;

 

   

DTC ceases to be registered as a clearing agency under the Exchange Act and a successor depositary is not appointed within 90 days; or

 

   

an event of default with respect to the Notes has occurred and is continuing and such beneficial owner requests that its Notes be issued in physical, certificated form.

 

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UNDERWRITING

We are offering the Notes described in this prospectus supplement and the accompanying prospectus through a number of underwriters. Goldman Sachs & Co. LLC and SMBC Nikko Securities America, Inc. are acting as representatives of the underwriters. We have entered into an underwriting agreement with the underwriters. Subject to the terms and conditions of the underwriting agreement, we have agreed to sell to the underwriters, and each underwriter has severally and not jointly agreed to purchase from us, the aggregate principal amount of Notes listed next to its name in the following table:

 

Underwriter

   Principal Amount  

Goldman Sachs & Co. LLC

   $                  

SMBC Nikko Securities America, Inc.

  

MUFG Securities Americas Inc.

  

RBC Capital Markets, LLC

   $    
  

 

 

 

Total

   $    
  

 

 

 

Subject to the terms and conditions set forth in the underwriting agreement, the underwriters have agreed, severally and not jointly, to purchase all of the Notes sold under the underwriting agreement if any of these Notes are purchased. If an underwriter defaults, the underwriting agreement provides that the purchase commitments of the non-defaulting underwriters may be increased or the underwriting agreement may be terminated.

We have agreed to indemnify the several underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make in respect of those liabilities.

The underwriters are offering the Notes, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel, and other conditions contained in the underwriting agreement, such as the receipt by the underwriters of officer’s certificates and legal opinions. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.

Commissions and Discounts

The following table shows the total underwriting discounts and commissions that we are to pay to the underwriters in connection with this offering.

 

     Per Note     Total  

Public offering price

                $              

Underwriting discount

                $    

Proceeds, before expenses, to us

                $    

The underwriters propose to offer some of the Notes to the public at the public offering price set forth on the cover page of this prospectus supplement and some of the Notes to certain other Financial Industry Regulatory Authority, Inc. (FINRA) members at the public offering price less a concession not in excess of        % of the aggregate principal amount of the Notes. The underwriters may allow, and the dealers may reallow, a discount not in excess of        % of the aggregate principal amount of the Notes. After the initial offering of the Notes to the public, the public offering price and such concessions may be changed. No such change shall change the amount of proceeds to be received by us as set forth on the cover page of this prospectus supplement.

The expenses of the offering, including up to $                 in reimbursement of underwriters’ counsel fee, but not including the underwriting discount, are estimated at $                 and are payable by us.

 

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No Sales of Similar Securities

We have agreed not to directly or indirectly sell, offer to sell, enter into any agreement to sell, or otherwise dispose of, any debt securities issued by the Company which are substantially similar to the Notes or securities convertible into such debt securities which are substantially similar to the Notes during the period beginning on and including the date of this prospectus supplement through and including the settlement date of this offering without first obtaining the written consent of the representatives. This consent may be given at any time without public notice.

Listing

The Notes are a new issue of securities with no established trading market. The Notes will not be listed on any securities exchange or quoted on any automated dealer quotation system.

We have been advised by certain of the underwriters that certain of the underwriters presently intend to make a market in the Notes after completion of this offering as permitted by applicable laws and regulations. Such underwriters are not obligated, however, to make a market in the Notes and any such market-making may be discontinued at any time in the sole discretion of such underwriters without any notice. Accordingly, no assurance can be given that an active and liquid public trading market for the Notes will develop or be maintained. If an active public trading market for the Notes does not develop, the market price and liquidity of the Notes may be adversely affected.

Price Stabilization, Short Positions

In connection with the offering, the underwriters may purchase and sell Notes in the open market. These transactions may include covering transactions and stabilizing transactions. Short sales involve sales of securities by the underwriters in excess of the aggregate principal amount of securities to be purchased by the underwriters in the offering, which creates a short position for the underwriters. Covering transactions involve purchases of the securities in the open market after the distribution has been completed in order to cover short positions. Stabilizing transactions consist of certain bids or purchases of securities made for the purpose of preventing or retarding a decline in the market price of the securities while the offering is in progress.

The underwriters also may impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives have repurchased Notes sold by or for the account of such underwriter in stabilizing or short covering transactions.

Any of these activities may cause the price of the Notes to be higher than the price that otherwise would exist in the open market in the absence of such transactions. These transactions may be affected in the over-the-counter market or otherwise and, if commenced, may be discontinued at any time without any notice relating thereto.

Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the Notes. In addition, neither we nor any of the underwriters make any representation that the representatives will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.

Electronic Offer, Sale and Distribution of Notes

The underwriters may make prospectuses available in electronic (PDF) format. A prospectus in electronic (PDF) format may be made available on a web site maintained by the underwriters, and the underwriters may distribute such prospectuses electronically. The underwriters may allocate a limited principal amount of the Notes for sale to their online brokerage customers.

 

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Other Relationships

The underwriters and their affiliates have provided in the past and may provide from time to time in the future in the ordinary course of their business certain commercial banking, financial advisory, investment banking and other services to Hercules or our portfolio companies for which they have received or will be entitled to receive separate fees. In particular, the underwriters or their affiliates may execute transactions with Hercules or on behalf of Hercules or any of our portfolio companies.

The underwriters or their affiliates may also trade in our securities, securities of our portfolio companies or other financial instruments related thereto for their own accounts or for the account of others and may extend loans or financing directly or through derivative transactions to us or any of our portfolio companies.

We may purchase securities of third parties from the underwriters or their affiliates after the offering. However, we have not entered into any agreement or arrangement regarding the acquisition of any such securities, and we may not purchase any such securities. We would only purchase any such securities if—among other things—we identified securities that satisfied our investment needs and completed our due diligence review of such securities.

After the date of this prospectus supplement, the underwriters and their affiliates may from time to time obtain information regarding specific portfolio companies or us that may not be available to the general public. Any such information is obtained by the underwriters and their affiliates in the ordinary course of its business and not in connection with the offering of the Notes. In addition, after the offering period for the sale of the Notes, the underwriters or their affiliates may develop analyses or opinions related to Hercules or our portfolio companies and buy or sell interests in one or more of our portfolio companies on behalf of their proprietary or client accounts and may engage in competitive activities. There is no obligation on behalf of these parties to disclose their respective analyses, opinions or purchase and sale activities regarding any portfolio company or regarding us to our noteholders or any other persons.

In the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of ours or our affiliates. Certain of the underwriters and their affiliates that have a lending relationship with us routinely hedge their credit exposure to us consistent with their customary risk management policies. Typically, such underwriters and their affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in our securities, including potentially the Notes offered hereby. Any such short positions could adversely affect future trading prices of the Notes offered hereby. The underwriters and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

The principal business address of Goldman Sachs & Co. LLC is 200 West Street, , New York, New York 10282. The principal business address of SMBC Nikko Securities America, Inc. is 277 Park Avenue, New York, New York 10172.

European Economic Area and United Kingdom

The notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in any Member State of the European Economic Area or the United Kingdom (each, a “Relevant State”). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (as amended, “MiFID II”); (ii) a customer within the meaning of Directive 2016/97/EU (as amended), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MIFID II; or (iii) not a qualified

 

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investor as defined in Regulation 2017/1129 (EU) (as amended or superseded, the “Prospectus Regulation”). Consequently, no key information document required by Regulation (EU) No 1286/2014 (as amended, the “PRIIPs Regulation”) for offering or selling the notes or otherwise making them available to retail investors in a Relevant State has been prepared and therefore offering or selling the notes or otherwise making them available to any retail investor in a Relevant State may be unlawful under the PRIIPs Regulation. This prospectus supplement has been prepared on the basis that any offer of notes in any Relevant State will be made pursuant to an exemption under the Prospectus Regulation from the requirement to publish a prospectus for offers of notes. This prospectus supplement is not a prospectus for the purposes of the Prospectus Regulation.

United Kingdom

Each Underwriter has represented and agreed that:

 

  (a)

it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (as amended, the “FSMA”)) received by it in connection with the issue or sale of the notes in circumstances in which Section 21(1) of the FSMA does not apply to the company; and

 

  (b)

it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the notes in, from or otherwise involving the United Kingdom.

Hong Kong

The notes may not be offered or sold in Hong Kong by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32 of the Laws of Hong Kong) (“Companies (Winding Up and Miscellaneous Provisions) Ordinance”) or which do not constitute an invitation to the public within the meaning of the Securities and Futures Ordinance Ordinance (Cap. 571 of the Laws of Hong Kong) (“Securities and Futures Ordinance”), or (ii) to “professional investors” as defined in the Securities and Futures Ordinance and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance, and no advertisement, invitation or document relating to the notes may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to notes which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” in Hong Kong as defined in the Securities and Futures Ordinance and any rules made thereunder.

Singapore

This offering circular has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this offering circular and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the notes may not be circulated or distributed, nor may the notes be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor (as defined in Section 4A of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”)) under Section 274 of the SFA, (ii) to a relevant person (as defined in Section 275(2) of the SFA ) pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA, in each case subject to conditions set forth in the SFA.

Where the notes are subscribed or purchased under Section 275 of the SFA by a relevant person which is a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of

 

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which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor, the securities (as defined in Section 239(1) of the SFA) of that corporation shall not be transferable for 6 months after that corporation has acquired the notes under Section 275 of the SFA except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person (as defined in Section 275(2) of the SFA), (2) where such transfer arises from an offer in that corporation’s securities pursuant to Section 275(1A) of the SFA, (3) where no consideration is or will be given for the transfer, (4) where the transfer is by operation of law, (5) as specified in Section 276(7) of the SFA, or (6) as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore (“Regulation 32”).

Where the notes are subscribed or purchased under Section 275 of the SFA by a relevant person which is a trust (where the trustee is not an accredited investor (as defined in Section 4A of the SFA)) whose sole purpose is to hold investments and each beneficiary of the trust is an accredited investor, the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferable for 6 months after that trust has acquired the notes under Section 275 of the SFA except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person (as defined in Section 275(2) of the SFA), (2) where such transfer arises from an offer that is made on terms that such rights or interest are acquired at a consideration of not less than S$200,000 (or its equivalent in a foreign currency) for each transaction (whether such amount is to be paid for in cash or by exchange of securities or other assets), (3) where no consideration is or will be given for the transfer, (4) where the transfer is by operation of law, (5) as specified in Section 276(7) of the SFA, or (6) as specified in Regulation 32.

Israel

No action has been, or will be, taken in Israel that would permit an offering of the Notes or a distribution of this prospectus supplement and the accompanying prospectus to the public in Israel. In particular, neither the prospectus supplement nor the accompanying prospectus has been reviewed or approved by the Israel Securities Authority. The Notes are being offered to a limited number of qualified investors listed on the first addendum of the Securities Law (a “Qualified Investor”), in all cases under the circumstances that will fall within the private placement exemption of the Israeli Securities Law of 1968 (“Securities Law”). This prospectus supplement and the accompanying prospectus may not be reproduced or used for any other purpose, nor be furnished to any other person other than those to whom copies have been sent. Any investor in the Notes shall be required to declare in writing prior to such purchase that it qualifies as a Qualified Investor, agrees to be deemed a Qualified Investor, and is aware of the consequences of being classified as a Qualified Investor, that it will comply with the guidelines of the Israel Securities Authority with respect to the sale or offer of securities to Qualified Investors (including those published on September 21, 2014), and that it is purchasing the Notes for its own benefit and on its own account and not with the aim or intention of distributing or offering the Notes to other parties. Nothing in this prospectus supplement or the accompanying prospectus should be considered ‘investment advice’, or ‘investment marketing’ as defined in the Regulation of Investment Advice, Investment Marketing and Portfolio Management Law of 1995. Any investor who purchases the Notes shall be required to declare in writing that it has the knowledge, expertise and experience in financial and business matters so as to be capable of evaluating the risks and merits of an investment in the Notes, without relying on any of the materials provided.

 

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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

The following discussion is a general summary of the material U.S. federal income tax considerations (and, in the case of a non-U.S. holder (as defined below), the material U.S. federal estate tax consequences) applicable to an investment in the Notes. This summary deals only with Notes that are purchased for cash in this offering for a price equal to the “issue price” of the Notes (i.e., the first price at which a substantial amount of the Notes is sold for money to investors, other than to bond houses, brokers or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers). This summary does not purport to be a complete description of the income and estate tax considerations applicable to such an investment. The discussion is based upon the Code, Treasury Regulations, and administrative and judicial interpretations, each as of the date of this prospectus supplement and all of which are subject to change, potentially with retroactive effect. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax aspects set forth below. You should consult your own tax advisor with respect to tax considerations that pertain to your acquisition, ownership and disposition of our Notes. For a summary of the U.S. federal income tax considerations applicable to us regarding our election to be treated as a RIC, please refer to “Certain United States Federal Income Tax Considerations—Election to be Taxed as a RIC” and “Taxation as a Regulated Investment Company” in the accompanying prospectus.

This discussion deals only with Notes held as capital assets within the meaning of Section 1221 of the Code (generally, property held for investment purposes) and does not purport to deal with persons in special tax situations, such as financial institutions, insurance companies, regulated investment companies, dealers in securities or currencies, traders in securities, former citizens of the United States, persons holding the Notes as a hedge against currency risks or as a position in a “straddle,” “hedge,” “constructive sale transaction” or “conversion transaction” for tax purposes, entities that are tax-exempt for U.S. federal income tax purposes, retirement plans, individual retirement accounts, tax-deferred accounts, persons subject to the alternative minimum tax, pass-through entities (including partnerships and entities and arrangements classified as partnerships for U.S. federal income tax purposes) and beneficial owners of pass-through entities, accrual method taxpayers for U.S. federal income tax purposes required to accelerate the recognition of any item of gross income with respect to the Notes as a result of such income being recognized on an applicable financial statement, or U.S. holders (as defined below) whose functional currency (as defined in Section 985 of the Code) is not the U.S. dollar. In addition, this discussion does not deal with any tax consequences other than U.S. federal income tax consequences (and, in the case of a non-U.S. holder, U.S. federal estate tax consequences). If you are considering acquiring the Notes, you should consult your own tax advisor concerning the application of the U.S. federal income and estate tax laws to you in light of your particular situation, as well as any consequences to you of purchasing, owning and disposing of the Notes under the laws of any other taxing jurisdiction.

For purposes of this discussion, the term “U.S. holder” means a beneficial owner of a Note that is, for U.S. federal income tax purposes, (i) an individual citizen or resident of the United States, (ii) a corporation or other entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or of any state thereof or the District of Columbia, (iii) a trust (a) subject to the control of one or more U.S. persons and the primary supervision of a court in the United States, or (b) that existed on August 20, 1996 and has made a valid election (under applicable Treasury Regulations) to be treated as a domestic trust, or (iv) an estate the income of which is subject to U.S. federal income taxation regardless of its source.

The term “non-U.S. holder” means a beneficial owner of a Note that is neither a U.S. holder nor a partnership (including an entity or arrangement treated as a partnership for U.S. federal income tax purposes). An individual may, subject to certain exceptions, be subject to treatment as a resident alien, as opposed to a non-resident alien, for U.S. federal income tax purposes by, among other ways, being physically present in the U.S. (i) on at least 31 days during a calendar year, and (ii) for an aggregate period of at least 183 days during a three-year period ending in the current calendar year, counting for such purposes all of the days present in the current calendar year, one-third of the days present in the immediate preceding year, and one-sixth of the days present in the second preceding year. Resident aliens are subject to U.S. federal income tax as if they were U.S. citizens.

 

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If a partnership (including an entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds any Notes, the U.S. federal income tax treatment of a partner of the partnership generally will depend upon the status of the partner, the activities of the partnership and certain determinations made at the partner level. Partnerships holding Notes, and the persons holding interests in such partnerships, should consult their own tax advisors as to the consequences of investing in the Notes in their individual circumstances.

Taxation of Note Holders

Taxation of U.S. Holders.

Payments or accruals of interest on a Note generally will be taxable to a U.S. holder as ordinary interest income at the time they are received (actually or constructively) or accrued, in accordance with the U.S. holder’s regular method of tax accounting.

Upon the sale, exchange, redemption, retirement or other taxable disposition of a Note, a U.S. holder generally will recognize capital gain or loss equal to the difference between the amount realized on the sale, exchange, redemption, retirement or other taxable disposition (excluding amounts representing accrued and unpaid interest, which are treated as ordinary income to the extent not previously included in income) and the U.S. holder’s adjusted tax basis in the Note. A U.S. holder’s adjusted tax basis in a Note generally will equal the U.S. holder’s initial investment in the Note. Capital gain or loss generally will be long-term capital gain or loss if the U.S. holder’s holding period in the Note was more than one year. Long-term capital gains generally are taxed at reduced rates for individuals and certain other non-corporate U.S. holders. The distinction between capital gain and loss and ordinary income and loss also is important for purposes of, among other things, the limitations imposed on a U.S. holder’s ability to offset capital losses against ordinary income.

A tax of 3.8% will be imposed on certain “net investment income” (or “undistributed net investment income,” in the case of estates and trusts) received by U.S. holders with modified adjusted gross income above certain threshold amounts. “Net investment income” as defined for U.S. federal Medicare contribution purposes generally includes interest payments on and gain recognized from the sale, redemption, retirement or other taxable disposition of the Notes. U.S. holders should consult their own tax advisors regarding the effect, if any, of this tax on their ownership and disposition of the Notes.

Under applicable Treasury Regulations, if a U.S. holder recognizes a loss with respect to the Notes or shares of our common stock of $2 million or more for a non-corporate U.S. holder or $10 million or more for a corporate U.S. holder in any single taxable year (or a greater loss over a combination of taxable years), the U.S. holder may be required to file with the IRS a disclosure statement on IRS Form 8886. Direct U.S. holders of portfolio securities are in many cases excepted from this reporting requirement, but, under current guidance, U.S. holders of a RIC are not excepted. Future guidance may extend the current exception from this reporting requirement to U.S. holders of most or all RICs. The fact that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayer’s treatment of the loss is proper. Significant monetary penalties apply to a failure to comply with this reporting requirement. States may also have a similar reporting requirement. U.S. holders of the Notes or our common stock should consult their own tax advisors to determine the applicability of these Treasury Regulations in light of their individual circumstances.

Taxation of Non-U.S. Holders. Except as provided below under “Information Reporting and Backup Withholding” and “FATCA,” a non-U.S. holder generally will not be subject to U.S. federal income or withholding taxes on payments of principal or interest on a Note provided that (i) income on the Note is not effectively connected with the conduct by the non-U.S. holder of a trade or business within the United States, (ii) the non-U.S. holder is not a controlled foreign corporation related to the Company through stock ownership, (iii) the non-U.S. holder is not a bank receiving interest described in Section 881(c)(3)(A) of the Code, (iv) the non-U.S. holder does not own (directly or indirectly, actually or constructively) 10% or more of the total combined voting power of all classes of stock of the Company, and (v)(A) the non-U.S. holder provides the applicable withholding agent with a valid certification on an IRS Form W-8BEN, Form W-8BEN-E, or other

 

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applicable U.S. nonresident withholding tax certification form, certifying its non-U.S. holder status, or (B) a securities clearing organization, bank, or other financial institution that holds customer securities in the ordinary course of its trade or business (i.e., a “financial institution”) and holds a Note on a non-U.S. holder’s behalf certifies to the applicable withhold agent under penalties of perjury that either it or another financial institution has received the required statement from the non-U.S. holder certifying that it is a non-U.S. person and furnishes the applicable withhold agent with a copy of the statement.

A non-U.S. holder that is not exempt from tax under these rules generally will be subject to U.S. federal income tax withholding on payments of interest on the Notes at a rate of 30% unless (i) the income is effectively connected with the conduct of a U.S. trade or business, so long as the non-U.S. holder has provided the applicable withhold agent with an IRS Form W-8ECI or substantially similar substitute U.S. nonresident withholding tax certification form stating that the interest on the Notes is effectively connected with the non-U.S. holder’s conduct of a trade or business in the U.S. in which case the interest will be subject to U.S. federal income tax on a net income basis as applicable to U.S. holders generally (unless an applicable income tax treaty provides otherwise), or (ii) an applicable income tax treaty or provision in the Code provides for a lower rate of, or exemption from, withholding tax, so long as the non-U.S. holder has provided the applicable withhold agent with an IRS Form W-8BEN or Form W-8BEN-E (or other applicable U.S. nonresident withholding tax certification form) signed under penalties of perjury, claiming such lower rate of, or exemption from, withholding tax under such income tax treaty.

To claim the benefit of an income tax treaty or to claim exemption from withholding because income is effectively connected with a U.S. trade or business, the non-U.S. holder must timely provide the appropriate, properly executed IRS U.S. nonresident withholding tax certification form, signed under penalties of perjury, to the applicable withholding agent. These forms may be required to be updated periodically. Additionally, a non-U.S. holder who is claiming the benefits of an income tax treaty may be required to obtain a U.S. taxpayer identification number and provide certain documentary evidence issued by a non-U.S. governmental authority in order to prove residence in a foreign country.

In the case of a non-U.S. holder that is a corporation and that receives income that is effectively connected with the conduct of a U.S. trade or business, such income may also be subject to a branch profits tax (which is generally imposed on a non-U.S. corporation on the actual or deemed repatriation from the United States of earnings and profits attributable to a U.S. trade or business) at a 30% rate. The branch profits tax may not apply (or may apply at a reduced rate) if the non-U.S. holder is a qualified resident of a country with which the United States has an income tax treaty and provides the applicable withhold agent with an IRS Form W-8BEN or Form W-8BEN-E claiming exemption from, or entitlement to a lower rate of, branch profits tax under such treaty.

Generally, a non-U.S. holder will not be subject to U.S. federal income or withholding taxes on any amount that constitutes capital gain upon the sale, exchange, redemption, retirement or other taxable disposition of a Note, provided that the gain is not effectively connected with the conduct of a trade or business in the United States by the non-U.S. holder (and, if required by an applicable income tax treaty, is not attributable to a United States “permanent establishment” maintained by the non-U.S. holder). Non-U.S. holders should consult their own tax advisors with regard to whether taxes will be imposed on capital gain in their individual circumstances.

A Note that is held by an individual who, at the time of death, is not a citizen or resident of the United States (as specially defined for U.S. federal estate tax purposes) generally will not be subject to the U.S. federal estate tax, unless, at the time of death, (i) such individual directly or indirectly, actually or constructively, owns ten percent or more of the total combined voting power of all classes of our stock entitled to vote within the meaning of Section 871(h)(3) of the Code and the Treasury Regulations thereunder or (ii) such individual’s interest in the Notes is effectively connected with the individual’s conduct of a U.S. trade or business.

Information Reporting and Backup Withholding. A U.S. holder (other than an “exempt recipient,” including a corporation and certain other persons who, when required, demonstrate their exempt status) may be subject to backup withholding at a rate of 28% on, and to information reporting requirements with respect to,

 

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payments of principal and interest on, and proceeds from the sale, exchange, redemption or retirement of, the Notes. In general, if a non-corporate U.S. holder subject to information reporting fails to furnish a correct taxpayer identification number or otherwise fails to comply with applicable backup withholding requirements, backup withholding at the applicable rate may apply.

If you are a non-U.S. holder, generally, the applicable withholding agent must report to the IRS and to you payments of interest on the Notes and the amount of tax, if any, withheld with respect to those payments. Copies of the information returns reporting such interest payments and any withholding may also be made available to the tax authorities in the country in which you reside under the provisions of a treaty or agreement. In general, backup withholding will apply to payments of interest on your Notes, unless you have provided to the applicable withholding agent the required certification that you are not a U.S. person or you otherwise establish an exemption, and the applicable withholding agent does not have actual knowledge or reason to know that you are a U.S. person. Information reporting and, depending on the circumstances, backup withholding will apply to payment to you of the proceeds of a sale or other disposition (including a retirement or redemption) of the Notes within the U.S. or conducted through certain U.S.-related financial intermediaries, unless you certify under penalties of perjury that you are not a U.S. person or you otherwise establish an exemption, and the applicable withholding agent does not have actual knowledge or reason to know that you are a U.S. person.

You should consult your tax advisor regarding the qualification for an exemption from backup withholding and information reporting and the procedures for obtaining such an exemption, if applicable. Any amounts withheld under the backup withholding rules from a payment to a beneficial owner generally would be allowed as a refund or a credit against such beneficial owner’s U.S. federal income tax provided the required information is timely furnished to the IRS.

FATCA. Certain provisions of the Code, commonly known as FATCA, generally impose a withholding tax of 30% on certain payments to certain foreign entities (including financial intermediaries) unless various U.S. information reporting and diligence requirements (that are in addition to the requirement to deliver an applicable U.S. nonresident withholding tax certification form (e.g., IRS Form W-8BEN), as discussed above) and certain other requirements have been satisfied. FATCA withholding generally applies to payments of interest (“withholdable payments”), including interest on the notes, to certain non-U.S. entities (including, in some circumstances, where such an entity is acting as an intermediary) that fail to comply with certain certification, identification, withholding and information reporting requirements imposed by FATCA. FATCA withholding taxes generally apply to all withholdable payments without regard to whether the beneficial owner of the payment would otherwise be entitled to an exemption from withholding taxes pursuant to an applicable income tax treaty with the U.S. or under U.S. domestic law. If FATCA withholding taxes are imposed with respect to any payments of interest or proceeds made under the Notes, holders that are otherwise eligible for an exemption from, or reduction of, U.S. federal withholding taxes with respect to such interest or proceeds will be required to seek a credit or refund from the IRS in order to obtain the benefit of such exemption or reduction, if any. Holders of or prospective holders of the Notes may be required to provide additional information to enable the applicable withholding agent to determine whether withholding is required. Persons located in jurisdictions that have entered into an intergovernmental agreement with the U.S. to implement FATCA may be subject to different rules. FATCA withholding would have applied to payments of gross proceeds from a sale or other disposition (including a retirement or redemption) of the Notes; however, under proposed Treasury Regulations that may be relied upon pending finalization, the withholding tax on gross proceeds would be eliminated and, consequently, FATCA withholding on gross proceeds is not expected to apply. Non-U.S. holders, and U.S. holders that expect to hold the Notes through non-U.S. entities, should consult their own tax advisors regarding the effect, if any, of these withholding and reporting provisions.

The preceding discussion of material U.S. federal income tax considerations is for general information only and is not tax advice. We urge you to consult your own tax advisor with respect to the particular tax consequences to you of an investment in the Notes, including the possible effect of any pending legislation or proposed regulations.

 

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LEGAL MATTERS

Certain legal matters in connection with the securities offered hereby will be passed upon for us by Dechert LLP. Certain legal matters in connection with the securities offered hereby will be passed upon for the underwriters by Fried, Frank, Harris, Shriver & Jacobson LLP.

EXPERTS

The financial statements and management’s assessment of the effectiveness of internal control over financial reporting (which is included in Management’s Annual Report on Internal Control over Financial Reporting) incorporated in this prospectus supplement by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 have been so incorporated in reliance on the report of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

AVAILABLE INFORMATION

We have filed with the SEC a universal shelf registration statement, of which this prospectus supplement forms a part, on Form N-2, together with all amendments and related exhibits, under the Securities Act, with respect to the Notes offered by this prospectus supplement and the accompanying prospectus. The registration statement contains additional information about us and the securities being offered by this prospectus supplement and the accompanying prospectus.

We file with or submit to the SEC annual, quarterly and current periodic reports, proxy statements and other information meeting the informational requirements of the Exchange Act. The SEC maintains a website that contains reports, proxy and information statements and other information filed electronically by us with the SEC at www.sec.gov. Copies of these reports, proxy and information statements and other information may be obtained, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov. This information is also available free of charge by contacting us at 400 Hamilton Avenue, Suite 310, Palo Alto, California 94301, or by telephone by calling collect at (650) 289-3060 or on our website at www.htgc.com. Information contained on, or that can be accessed through, our website is not incorporated by reference into this prospectus supplement or the accompanying prospectus, and you should not consider such information to be part of this prospectus supplement or the accompanying prospectus.

INCORPORATION BY REFERENCE

We incorporate by reference in this prospectus supplement the documents listed below and any future reports and other documents we file with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, until all of the securities offered by this prospectus supplement have been sold or we otherwise terminate the offering of these securities (such reports and other documents deemed to be incorporated by reference into this prospectus supplement and to be part hereof from the date of filing of such reports and other documents); provided, however, that information “furnished” under Item 2.02 or Item 7.01 of Form 8-K, or other information “furnished” to the SEC pursuant to the Exchange Act will not be incorporated by reference into this prospectus supplement:

 

   

our Annual Report on Form 10-K for fiscal year ended December 31, 2020, filed with the SEC on February 23, 2021;

 

   

our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021, filed with the SEC on July 29, 2021, and our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021, filed with the SEC on April 29, 2021; and

 

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our Current Reports on Form 8-K, filed with the SEC on February 23, 2021, March 4, 2021, March 8, 2021, April 29, 2021, May  28, 2021, June 25, 2021, July 13, 2021 and July 29, 2021.

Any reports filed by us with the SEC before the date that any offering of any securities by means of this prospectus supplement and the accompanying prospectus is terminated will automatically update and, where applicable, supersede any information contained in this prospectus supplement and the accompanying prospectus or incorporated by reference into this prospectus supplement and the accompanying prospectus.

To obtain copies of these filings, see “Available Information” in this prospectus supplement.

 

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PROSPECTUS

$850,000,000

 

 

Common Stock

Preferred Stock

Warrants

Subscription Rights

Debt Securities

This prospectus relates to the offer, from time to time, in one or more offerings or series, up to $850,000,000 of shares of our common stock, par value $0.001 per share, preferred stock, par value $0.001 per share, warrants representing rights to purchase shares of our common stock, preferred stock or debt securities, subscription rights or debt securities, which we refer to, collectively, as the “securities.” The preferred stock, debt securities, subscription rights and warrants offered hereby may be convertible or exchangeable into shares of our common stock. We may sell our securities through underwriters or dealers, “at-the-market” to or through a market maker into an existing trading market or otherwise directly to one or more purchasers, including existing stockholders in a rights offering, or through agents or through a combination of methods of sale, including auctions. The identities of such underwriters, dealers, market makers or agents, as the case may be, will be described in one or more supplements to this prospectus. The securities may be offered at prices and on terms to be described in one or more supplements to this prospectus.

In the event we offer common stock, the offering price per share will not be less than the net asset value per share of our common stock at the time we make the offering except (1) in connection with a rights offering to our existing stockholders, (2) with the consent of the holders of the majority of our voting securities and approval of our Board of Directors, or (3) under such circumstances as the Securities and Exchange Commission may permit. See “Risk Factors” for more information.

We are a specialty finance company focused on providing senior secured loans to high-growth, innovative venture capital-backed companies in a variety of technology, life sciences and sustainable and renewable technology industries. We primarily finance privately-held companies backed by leading venture capital and private equity firms and publicly-traded companies that lack access to public capital or are sensitive to equity ownership dilution. We source our investments through our principal office located in Palo Alto, CA, as well as through additional offices in Boston, MA, New York, NY, Washington, DC, Hartford, CT, Westport, CT, Chicago, IL, and San Diego, CA. Our goal is to be the leading structured debt financing provider for venture capital-backed companies in technology-related industries requiring sophisticated and customized financing solutions. We invest primarily in structured debt with warrants and, to a lesser extent, in senior debt and equity investments. We use the term “structured debt with warrants” to refer to any debt investment, such as a senior or subordinated secured loan, that is coupled with an equity component, including warrants, options or other rights to purchase common or preferred stock. Our structured debt with warrants investments typically are secured by some or all of the assets of the portfolio company. We invest primarily in private companies but also have investments in public companies.

Our investment objective is to maximize our portfolio total return by generating current income from our debt investments and capital appreciation from our warrant and equity-related investments. We are an internally-managed, non-diversified closed-end investment company that has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended.

Our common stock is traded on the New York Stock Exchange, or NYSE, under the symbol “HTGC.” On April 23, 2019, the last reported sale price of a share of our common stock on the NYSE, was $12.83. The net asset value per share of our common stock at December 31, 2018 (the last date prior to the date of this prospectus on which we determined net asset value) was $9.90.

 

 

An investment in our securities may be speculative and involves risks including a heightened risk of total loss of investment. In addition, the companies in which we invest are subject to special risks. See “ Risk Factors ” on page 5 of this prospectus, in our most recent Annual Report on Form 10-K, in any of our other filings with the Securities and Exchange Commission , and in any applicable prospectus supplement and in any free writing prospectus to read about risks that you should consider before investing in our securities, including the risk of leverage.

Please read this prospectus and any free writing prospectus before investing and keep it for future reference. It contains important information about us that a prospective investor ought to know before investing in our securities. We file annual, quarterly and current reports, proxy statements and other information about us with the Securities and Exchange Commission. The information is available free of charge by contacting us at 400 Hamilton Avenue, Suite 310, Palo Alto, California 94301 or by telephone calling collect at (650) 289-3060 or on our website at www.htgc.com. The Securities and Exchange Commission also maintains a website at www.sec.gov that contains such information.

 

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

This prospectus may not be used to consummate sales of any securities unless accompanied by a prospectus supplement.

The date of this prospect us is April 29 , 2019


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You should rely only on the information contained in this prospectus , any applicable prospectus supplement, any free writing prospectus, the documents incorporated by reference in this prospectus and any applicable prospectus supplement, or any other information which we have referred you . We have not authorized any dealer, salesperson or other person to provide you with different information or to make representations as to matters not stated in this prospectus or in any free writing prospectus . If anyone provides you with different or inconsistent information, you should not rely on it. This prospectus , any applicable prospectus supplement, and any free writing prospectus do not constitute an offer to sell, or a solicitation of an offer to buy, any securities by any person in any jurisdiction where it is unlawful for that person to make such an offer or solicitation or to any person in any jurisdiction to whom it is unlawful to make such an offer or solicitation. The information in this prospectus , any applicable prospectus supplement, and any free writing prospectus is accurate only as of its date, and under no circumstances should the delivery of this prospectus , any applicable prospectus supplement, or any free writing prospectus or the sale of any securities imply that the information in this prospectus , any applicable prospectus supplement, or any free writing prospectus is accurate as of any later date or that the affairs of Hercules Capital, Inc. have not changed since the date hereof. This prospectus will be updated to reflect material changes.

 

 

TABLE OF CONTENTS

 

     Page  

Hercules Capital, Inc.

     1  

Fees and Expenses

     3  

Risk Factors

     5  

Forward-Looking Statements

     6  

Use of Proceeds

     7  

Price Range of Common Stock and Distributions

     8  

Portfolio Companies

     9  

Senior Securities

     36  

Certain United States Federal Income Tax Considerations

     39  

Sales of Common Stock Below Net Asset Value

     49  

Dividend Reinvestment Plan

     54  

Description of Capital Stock

     55  

Description of Our Preferred Stock

     62  

Description of Our Subscription Rights

     64  

Description of Warrants

     66  

Description of Our Debt Securities

     68  

Plan of Distribution

     81  

Custodian, Transfer and Dividend Paying Agent and Registrar

     83  

Legal Matters

     83  

Experts

     83  

Incorporation By Reference

     84  

Available Information

     84  

 

 

Hercules Capital, Inc., our logo and other trademarks of Hercules Capital, Inc. mentioned in this prospectus are the property of Hercules Capital, Inc. All other trademarks or trade names referred to in this prospectus are the property of their respective owners.


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ABOUT THIS PROSPECTUS

This prospectus is part of a registration statement that we have filed with the Securities and Exchange Commission using the “shelf” registration process as a “well-known seasoned issuer,” as defined in Rule 405 under the Securities Act of 1933, as amended, or the Securities Act. Under the shelf registration process, which constitutes a delayed offering in reliance on Rule 415 under the Securities Act, we may offer, from time to time, up to $850,000,000 of our common stock, preferred stock, warrants representing rights to purchase shares of our common stock, preferred stock or debt securities, subscription rights or debt securities on the terms to be determined at the time of the offering. We may sell our securities through underwriters or dealers, “at-the-market” to or through a market maker, into an existing trading market or otherwise directly to one or more purchasers, including existing stockholders in a rights offering, or through agents or through a combination of methods of sale. The identities of such underwriters, dealers, market makers or agents, as the case may be, will be described in one or more supplements to this prospectus. The securities may be offered at prices and on terms described in one or more supplements to this prospectus. This prospectus provides you with a general description of the securities that we may offer. Each time we use this prospectus to offer securities, we will provide a prospectus supplement that will contain specific information about the terms of that offering. Please carefully read this prospectus and any such supplements together with the additional information described under “Incorporation by Reference” and “Available Information” sections before you make an investment decision.

A prospectus supplement may also add to, update or change information contained in this prospectus.

In this prospectus, unless the context otherwise requires, the “Company,” “Hercules,” “HTGC,” “we,” “us” and “our” refer to Hercules Capital, Inc. and its wholly owned subsidiaries and its affiliated securitization trusts.


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HERCULES CAPITAL, INC.

Business Overview

We are a specialty finance company focused on providing senior secured loans to high-growth, innovative venture capital-backed companies in a variety of technology, life sciences and sustainable and renewable technology industries. We source our investments through our principal office located in Palo Alto, CA, as well as through our additional offices in Boston, MA, New York, NY, Washington, DC, Hartford, CT, Westport, CT, Chicago, IL, and San Diego, CA.

Our goal is to be the leading structured debt financing provider for venture capital-backed companies in technology-related industries requiring sophisticated and customized financing solutions. Our strategy is to evaluate and invest in a broad range of technology-related industries including technology, drug discovery and development, biotechnology, life sciences, healthcare, and sustainable and renewable technology and to offer a full suite of growth capital products. We focus our investments in companies active in the technology industry sub-sectors characterized by products or services that require advanced technologies, including, but not limited to, computer software and hardware, networking systems, semiconductors, semiconductor capital equipment, information technology infrastructure or services, internet consumer and business services, telecommunications, telecommunications equipment, renewable or alternative energy, media and life sciences. Within the life sciences sub-sector, we generally focus on medical devices, bio-pharmaceutical, drug discovery, drug delivery, health care services and information systems companies. Within the sustainable and renewable technology sub-sector, we focus on sustainable and renewable energy technologies and energy efficiency and monitoring technologies. We refer to all of these companies as “technology-related” companies and intend, under normal circumstances, to invest at least 80% of the value of our total assets in such businesses.

We invest primarily in structured debt with warrants and, to a lesser extent, in senior debt and equity investments. We invest primarily in private companies but also have investments in public companies. We use the term “structured debt with warrants” to refer to any debt investment, such as a senior or subordinated secured loan, that is coupled with an equity component, including warrants, options or other rights to purchase common or preferred stock. Our structured debt with warrants investments typically are secured by some or all of the assets of the portfolio company. We also provide “unitranche” loans, which are loans that combine both senior and mezzanine debt, generally in a first lien position.

Our investment objective is to maximize our portfolio total return by generating current income from our debt investments and capital appreciation from our warrant and equity-related investments. Our primary business objectives are to increase our net income, net operating income and net asset value, or NAV, by investing in structured debt with warrants and equity of venture capital-backed companies in technology-related industries with attractive current yields and the potential for equity appreciation and realized gains. Our equity ownership in our portfolio companies may exceed 25% of the voting securities of such companies, which represents a controlling interest under the Investment Company Act of 1940, as amended, or the 1940 Act. In some cases, we receive the right to make additional equity investments in our portfolio companies in connection with future equity financing rounds. Capital that we provide directly to venture capital-backed companies in technology-related industries is generally used for growth and general working capital purposes as well as in select cases for acquisitions or recapitalizations.

Corporate Information

We are an internally-managed, non-diversified, closed-end investment company that has elected to be regulated as a business development company, or a BDC, under the 1940 Act. Effective January 1, 2006, we elected to be treated for tax purposes as a regulated investment company, or RIC, under the Internal Revenue Code of 1986, as amended, or the Code.

 

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We are a Maryland corporation formed in December 2003 that began investment operations in September 2004. On February 25, 2016, we changed our name from “Hercules Technology Growth Capital, Inc.” to “Hercules Capital, Inc.”

Our principal executive offices are located at 400 Hamilton Avenue, Suite 310, Palo Alto, California 94301, and our telephone number is (650) 289-3060.

 

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FEES AND EXPENSES

The following table is intended to assist you in understanding the various costs and expenses that an investor in our common stock will bear directly or indirectly. However, we caution you that some of the percentages indicated in the table below are estimates and may vary. The footnotes to the fee table state which items are estimates. Except where the context suggests otherwise, whenever this prospectus contains a reference to fees or expenses paid by “you” or “us” or that “we” will pay fees or expenses, stockholders will indirectly bear such fees or expenses as investors in Hercules Capital, Inc.

 

Stockholder Transaction Expenses (as a percentage of the public offering price):

  

Sales load (as a percentage of offering price)(1)

     —  

Offering expenses

     —   %(2) 

Dividend reinvestment plan fees

    
—  
%(3) 
 
  

 

 

 

Total stockholder transaction expenses (as a percentage of the public offering price)

    
—  
%(4) 
 
  

 

 

 

Annual Expenses (as a percentage of net assets attributable to common stock):(5)

  

Operating expenses

     5.67 %(6)(7) 

Interest and fees paid in connection with borrowed funds

     5.06 %(8) 
  

 

 

 

Total annual expenses

     10.73 %(9) 
  

 

 

 

 

 

(1)

In the event that our securities are sold to or through underwriters, a corresponding prospectus supplement to this prospectus will disclose the applicable sales load.

(2)

In the event that we conduct an offering of our securities, a corresponding prospectus supplement to this prospectus will disclose the estimated offering expenses.

(3)

The expenses associated with the administration of our dividend reinvestment plan are included in “Operating expenses.” We pay all brokerage commissions incurred with respect to open market purchases, if any, made by the administrator under the plan. For more details about the plan, see “Dividend Reinvestment Plan.”

(4)

Total stockholder transaction expenses may include sales load and will be disclosed in a future prospectus supplement, if any.

(5)

“Net assets attributable to common stock” equals the weighted average net assets for the year ended December 31, 2018, which is approximately $923.1 million.

(6)

“Operating expenses” represents our actual operating expenses incurred for the year ended December 31, 2018, including all fees and expenses of our consolidated subsidiaries and excluding interests and fees on indebtedness.

(7)

We do not have an investment adviser and are internally managed by our executive officers under the supervision of our Board of Directors. As a result, we do not pay investment advisory fees, but instead we pay the operating costs associated with employing investment management professionals.

(8)

“Interest and fees paid in connection with borrowed funds” represents our estimated interest, fees and credit facility expenses by annualizing our actual interest, fees and credit facility expenses incurred for the year ended December 31, 2018, including our then $75.0 million revolving senior secured credit facility with Wells Fargo Capital Finance, LLC, or the Wells Facility, then $100.0 million revolving senior secured credit facility with MUFG Union Bank, N.A., or the Union Bank Facility, and, together with the Wells Facility, the Credit Facilities, 4.625% notes due 2022, or the 2022 Notes, 6.25% notes due 2024, or the 2024 Notes, 5.25% notes due 2025, or the 2025 Notes, 6.25% notes due 2033, or the 2033 Notes, 4.375% convertible notes due 2022, or the 2022 Convertible Notes, fixed rate asset-backed notes due 2021, or the 2021

 

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  Asset-Backed Notes, fixed rate asset-backed notes due 2027, or the 2027 Asset-Backed Notes, and the Small Business Administration, or SBA, debentures.
(9)

“Total annual expenses” is the sum of “operating expenses,” and “interest and fees paid in connection with borrowed funds.” “Total annual expenses” is presented as a percentage of weighted average net assets attributable to common stockholders because the holders of shares of our common stock (and not the holders of our debt securities or preferred stock, if any) bear all of our fees and expenses, including the fees and expenses of our wholly-owned consolidated subsidiaries, all of which are included in this fee table presentation.

Example

The following example demonstrates the projected dollar amount of total cumulative expenses that would be incurred over various periods with respect to a hypothetical investment in our common stock. These amounts are based upon our payment of annual operating expenses at the levels set forth in the table above and assume no additional leverage.

 

     1 Year      3 Years      5 Years      10 Years  

You would pay the following expenses on a $1,000 common stock investment, assuming a 5% annual return

   $ 130      $ 316      $ 482      $ 822  

The example and the expenses in the tables above should not be considered a representation of our future expenses, and actual expenses may be greater or lesser than those shown. Moreover, while the example assumes, as required by the applicable rules of the SEC, a 5% annual return, our performance will vary and may result in a return greater or lesser than 5%. In addition, while the example assumes reinvestment of all distributions at NAV, participants in our dividend reinvestment plan may receive shares valued at the market price in effect at that time. This price may be at, above or below NAV. See “Dividend Reinvestment Plan” for additional information regarding our dividend reinvestment plan.

 

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RISK FACTORS

Investing in our securities may be speculative and involves a high degree of risk. You should carefully consider the risk factors incorporated by reference from our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (File No. 814-00702) and any subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K we file after the date of this prospectus and before the termination of the offering of securities under this prospectus, and all other information contained or incorporated by reference into this prospectus and any free writing prospectus, as updated by our subsequent filings under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the risk factors and other information contained in any prospectus supplement and any free writing prospectus before acquiring any of such securities. Additional risks and uncertainties not presently known to us or not presently deemed material by us may also impair our operations and performance. Each of the risk factors could materially adversely affect our business, financial condition and results of operations. In such case, our NAV and the trading price of our securities could decline, and you may lose all or part of your investment.

 

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FORWARD-LOOKING STATEMENTS

The matters discussed in this prospectus, including the documents that we incorporate by reference herein, and any applicable prospectus supplement or free writing prospectus, including the documents we incorporate by reference therein, as well as in future oral and written statements by management of Hercules Capital, Inc., that are forward-looking statements are based on current management expectations that involve substantial risks and uncertainties which could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements. Forward-looking statements relate to future events or our future financial performance. We generally identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. Important assumptions include our ability to originate new investments, achieve certain margins and levels of profitability, the availability of additional capital, and the ability to maintain certain debt to asset ratios. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this prospectus should not be regarded as a representation by us that our plans or objectives will be achieved. The forward-looking statements contained in this prospectus and any applicable prospectus supplement or free writing prospectus include statements as to:

 

   

our current and future management structure;

 

   

our future operating results;

 

   

our business prospects and the prospects of our prospective portfolio companies;

 

   

the impact of investments that we expect to make;

 

   

our informal relationships with third parties including in the venture capital industry;

 

   

the expected market for venture capital investments and our addressable market;

 

   

the dependence of our future success on the general economy and its impact on the industries in which we invest;

 

   

our ability to access debt markets and equity markets;

 

   

the ability of our portfolio companies to achieve their objectives;

 

   

our expected financings and investments;

 

   

our regulatory structure and tax status;

 

   

our ability to operate as a BDC, a small business investment company, or SBIC, and a RIC;

 

   

the adequacy of our cash resources and working capital;

 

   

the timing of cash flows, if any, from the operations of our portfolio companies;

 

   

the timing, form and amount of any distributions;

 

   

the impact of fluctuations in interest rates on our business;

 

   

the valuation of any investments in portfolio companies, particularly those having no liquid trading market; and

 

   

our ability to recover unrealized losses.

You should not place undue reliance on these forward-looking statements. The forward-looking statements made in this prospectus, any free writing prospectus, and the documents incorporated by reference into this prospectus relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statement to reflect events or circumstances occurring after the date of this prospectus.

 

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USE OF PROCEEDS

We intend to use the net proceeds from selling our securities to fund investments in debt and equity securities in accordance with our investment objectives, to make acquisitions, to retire certain debt obligations and for other general corporate purposes. The supplement to this prospectus or any free writing prospectus relating to an offering will more fully identify the use of proceeds from such offering.

We anticipate that substantially all of the net proceeds from any offering of our securities will be used as described above within twelve months, but in no event longer than two years. Pending such uses and investments, we will invest the net proceeds primarily in cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment. Our ability to achieve our investment objective may be limited to the extent that the net proceeds of any offering, pending full investment, are held in lower yielding short-term instruments.

 

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PRICE RANGE OF COMMON STOCK AND DISTRIBUTIONS

Our common stock is traded on the NYSE under the symbol “HTGC.”

The following table sets forth the range of high and low sales prices of our common stock, the sales price as a percentage of NAV and the distributions declared by us for each fiscal quarter. The stock quotations are interdealer quotations and do not include markups, markdowns or commissions.

 

     NAV(1)      Price Range      Premium/
Discount of
High Sales

Price to NAV
    Premium/
Discount of
Low Sales

Price to NAV
    Cash
Distribution

per Share
 
     High      Low  

2017

               

First quarter

   $ 9.76      $ 15.43      $ 14.12        58.1     44.7   $ 0.310  

Second quarter

   $ 9.87      $ 15.56      $ 12.66        57.6     28.3   $ 0.310  

Third quarter

   $ 10.00      $ 13.50      $ 12.04        35.0     20.4   $ 0.310  

Fourth quarter

   $ 9.96      $ 13.94      $ 12.44        39.9     24.9   $ 0.310  

2018

               

First quarter

   $ 9.72      $ 13.25      $ 11.89        36.3     22.3   $ 0.310  

Second quarter

   $ 10.22      $ 12.97      $ 11.99        26.9     17.3   $ 0.310  

Third quarter

   $ 10.38      $ 13.64      $ 12.71        31.4     22.4   $ 0.330 (2) 

Fourth quarter

   $ 9.90      $ 13.28      $ 10.63        34.1     7.4   $ 0.310  

2019

               

First quarter

     *      $ 14.04      $ 11.23        *       *       *

Second quarter (through April 23, 2019)

     *      $ 12.83      $ 12.57        *       *       *

 

(1)

NAV per share is generally determined as of the last day in the relevant quarter and therefore may not reflect the NAV per share on the date of the high and low sales prices. The NAVs shown are based on outstanding shares at the end of each period.

(2)

Includes a supplemental distribution of $0.02 per share.

*

NAV has not yet been calculated for this period.

**

Cash distribution per share has not yet been determined for this period.

The last reported price for our common stock on April 23, 2019 was $12.83 per share.

Shares of BDCs may trade at a market price that is less than the value of the net assets attributable to those shares. The possibility that our shares of common stock will trade at a discount from NAV or at premiums that are unsustainable over the long term are separate and distinct from the risk that our NAV will decrease. At times, our shares of common stock have traded at a premium to NAV and at times our shares of common stock have traded at a discount to the net assets attributable to those shares. It is not possible to predict whether the shares offered hereby will trade at, above, or below NAV.

 

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PORTFOLIO COMPANIES

(dollars in thousands)

The following tables set forth certain information as of December 31, 2018 regarding each portfolio company in which we had a debt or equity investment. Other than these investments, our only formal relationship with our portfolio companies is the offer to make available significant managerial assistance. In addition, we may receive rights to observe the Board of Directors’ meetings of our portfolio companies. Amounts are presented in thousands.

(dollars in thousands)

 

Portfolio Company

 

Sub-Industry

 

Type of
Investment(1)

 

Maturity
Date

 

Interest Rate and
Floor(2)

  Principal
Amount
    Cost(3)     Value(4)  

Debt Investments

             

Biotechnology Tools

             

Under 1 Year Maturity

             

Exicure, Inc.(11)
8045 Lamon Avenue, Suite 410
Skokie, IL 60077

  Biotechnology Tools   Senior Secured   September 2019   Interest rate PRIME + 6.45% or Floor rate of
9.95%, 3.85% Exit Fee
  $ 4,999     $ 5,165     $ 5,165  
           

 

 

   

 

 

 

Subtotal: Under 1 Year Maturity

              5,165       5,165  
           

 

 

   

 

 

 

Subtotal: Biotechnology Tools (0.54%)*

              5,165       5,165  
           

 

 

   

 

 

 

Consumer & Business Products

             

1-5 Years Maturity

             

WHOOP, INC.(12)
1325 Boylston Street, Suite 401
Boston, MA 02251

  Consumer & Business Products   Senior Secured   July 2021   Interest rate PRIME + 3.75% or Floor rate of 8.50%, 6.95% Exit Fee   $ 6,000       6,026       5,983  
           

 

 

   

 

 

 

Subtotal: 1-5 Years Maturity

              6,026       5,983  
           

 

 

   

 

 

 

Subtotal: Consumer & Business Products (0.63%)*

              6,026       5,983  
           

 

 

   

 

 

 

Diversified Financial Services

             

1-5 Years Maturity

             

Gibraltar Business Capital,
LLC.(7)
400 Skokie Blvd #375
Northbrook, IL 60062

  Diversified Financial Services   Unsecured   March 2023   Interest rate FIXED 14.50%   $ 15,000       14,729       14,401  
           

 

 

   

 

 

 

Subtotal: 1-5 Years Maturity

              14,729       14,401  
           

 

 

   

 

 

 

Subtotal: Diversified Financial Services (1.51%)*

              14,729       14,401  
           

 

 

   

 

 

 

Drug Delivery

             

1-5 Years Maturity

             

AcelRx Pharmaceuticals, Inc.(11)
351 Galveston Drive
Redwood City, CA 94063

  Drug Delivery   Senior Secured   March 2020   Interest rate PRIME + 6.05% or Floor rate of 9.55%, 11.69% Exit Fee   $ 10,936       11,926       11,842  

 

9


Table of Contents

Portfolio Company

 

Sub-Industry

 

Type of
Investment(1)

 

Maturity
Date

 

Interest Rate and
Floor(2)

  Principal
Amount
    Cost(3)     Value(4)  

Antares Pharma Inc.(10)(11)(15)
100 Princeton South, Suite 300
Ewing, NJ 08628

  Drug Delivery   Senior Secured   July 2022   Interest rate PRIME + 4.50% or Floor rate of 9.25%, 4.25% Exit Fee   $ 25,000       25,313       25,081  
           

 

 

   

 

 

 

Subtotal: 1-5 Years Maturity

              37,239       36,923  
           

 

 

   

 

 

 

Subtotal: Drug Delivery (3.86%)*

              37,239       36,923  
           

 

 

   

 

 

 

Drug Discovery & Development

             

Under 1 Year Maturity

             

Auris Medical Holding, AG(5)(10)
Dornacherstrasse 210
CH-4053, Basel Switzerland

  Drug Discovery & Development   Senior Secured   February 2019   Interest rate PRIME + 6.05% or Floor rate of 9.55%, 5.75% Exit Fee   $ 757     $ 1,471     $ 1,471  

Brickell Biotech, Inc.(12)
5777 Central Ave, Suite 102
Boulder, CO 80301

  Drug Discovery & Development   Senior Secured   September 2019   Interest rate PRIME + 5.70% or Floor rate of 9.20%, 7.82% Exit Fee   $ 4,808       5,281       5,281  

Epirus Biopharmaceuticals, Inc.(8)
99 High Street
Boston, MA 02110-2320

  Drug Discovery & Development   Senior Secured   June 2019   Interest rate PRIME + 4.70% or Floor rate of 7.95%, 3.00% Exit Fee   $ 2,203       2,487    

 

—  

 

           

 

 

   

 

 

 

Subtotal: Under 1 Year Maturity

              9,239       6,752  
           

 

 

   

 

 

 

1-5 Years Maturity

             

Acacia Pharma Inc.(10)(11)
The Officers’ Mess, Royston Rd, Duxford
Cambridge,
UK CB22 4QH

  Drug Discovery & Development   Senior Secured   January 2022   Interest rate PRIME + 4.50% or Floor rate of 9.25%, 3.95% Exit Fee   $ 10,000       9,871       9,819  

Aveo Pharmaceuticals, Inc.(11)
One Broadway, 14th Floor
Cambridge, MA 02142

  Drug Discovery & Development   Senior Secured   July 2021   Interest rate PRIME + 4.70% or Floor rate of 9.45%, 5.40% Exit Fee   $ 10,000       10,111       10,042  
  Drug Discovery & Development   Senior Secured   July 2021   Interest rate PRIME + 4.70% or Floor rate of 9.45%, 3.00% Exit Fee   $ 10,000       10,220       10,157  
         

 

 

   

 

 

   

 

 

 

Total Aveo Pharmaceuticals, Inc.

          $ 20,000       20,331       20,199  

Axovant Sciences Ltd.(5)(10)(11)(16)
11 Times Square 33rd Floor
New York, NY 10036

  Drug Discovery & Development   Senior Secured   March 2021   Interest rate PRIME + 6.80% or Floor rate of 10.55%   $ 50,219       49,485       49,286  

BridgeBio Pharma LLC(13)(16)
421 Kipling Street
Palo Alto, CA 94301

  Drug Discovery & Development   Senior Secured   July 2022   Interest rate PRIME + 4.35% or Floor rate of 9.35%, 6.35% Exit Fee   $ 35,000       35,054       35,263  
  Drug Discovery & Development   Senior Secured   July 2022   Interest rate PRIME + 3.35% or Floor rate of 9.10%, 5.75% Exit Fee   $ 20,000       19,904       19,904  
         

 

 

   

 

 

   

 

 

 

Total BridgeBio Pharma LLC

          $ 55,000       54,958       55,167  

Chemocentryx, Inc.(10)(15)
850 Maude Avenue
Mountain View, CA 94043

  Drug Discovery & Development   Senior Secured   December 2022   Interest rate PRIME + 3.30% or Floor rate of 8.05%, 6.25% Exit Fee   $ 20,000       19,957       20,104  

Genocea Biosciences, Inc.(11)
100 Acorn Park Drive, 5th Floor
Cambridge, MA 02140

  Drug Discovery & Development   Senior Secured   May 2021   Interest rate PRIME + 2.75% or Floor rate of 7.75%, 10.12% Exit Fee   $ 14,000       14,937       14,788  

 

10


Table of Contents

Portfolio Company

 

Sub-Industry

 

Type of
Investment(1)

 

Maturity
Date

 

Interest Rate and
Floor(2)

  Principal
Amount
    Cost(3)     Value(4)  

Merrimack Pharmaceuticals, Inc.(12)
One Kendall Square, Suite B7201
Cambridge, MA 2139

  Drug Discovery & Development   Senior Secured   August 2021   Interest rate PRIME + 4.00% or Floor rate of 9.25%, 5.55% Exit Fee   $ 15,000       15,024       15,024  

Mesoblast(5)(10)(11)
55 Collins Street Level 38
Melbourne, Victoria, Australia 3000

  Drug Discovery & Development   Senior Secured   March 2022   Interest rate PRIME + 4.95% or Floor rate of 9.45%, 6.95% Exit Fee   $ 35,000       35,346       35,190  

Metuchen Pharmaceuticals LLC(14)
11 Commerce Drive, First Floor
Cranford, NJ 07016

  Drug Discovery & Development   Senior Secured   October 2020   Interest rate PRIME + 7.25% or Floor rate of 10.75%, PIK Interest 1.35%, 2.25% Exit Fee   $ 18,569       19,256       19,122  

Motif BioSciences Inc.(5)(10)(11)(15)
125 Park Avenue., 25th Floor
New York, NY 10017

  Drug Discovery & Development   Senior Secured   September 2021   Interest rate PRIME + 5.50% or Floor rate of 10.00%, 2.15% Exit Fee   $ 15,000       14,907       14,786  

Myovant Sciences, Ltd.(5)(10)(11)
2000 Sierra Point Parkway, 9th Floor
Brisbane, CA 94005

  Drug Discovery & Development   Senior Secured   November 2021   Interest rate PRIME + 4.00% or Floor rate of 8.25%, 6.55% Exit Fee   $ 40,000       40,320       40,151  

Nabriva Therapeutics(5)(10)
25-28 North Wall Quay
IFSC, Dublin 1, Ireland 19406

  Drug Discovery & Development   Senior Secured   June 2023   Interest rate PRIME + 4.30% or Floor rate of 9.80%, 6.95% Exit Fee   $ 25,000       24,750       24,750  

Paratek Pharmaceuticals, Inc. (p.k.a. Transcept Pharmaceuticals,
Inc.)(10)(11)(15)(16)
75 Park Plaza, 4th Floor
Boston, MA 02116

  Drug Discovery & Development   Senior Secured   September 2020   Interest rate PRIME + 2.75% or Floor rate of 8.50%, 4.50% Exit Fee   $ 40,000       40,882       40,472  
  Drug Discovery & Development   Senior Secured   September 2021   Interest rate PRIME + 2.75% or Floor rate of 8.50%, 4.50% Exit Fee   $ 10,000       10,240       10,137  
  Drug Discovery & Development   Senior Secured   September 2021   Interest rate PRIME + 2.75% or Floor rate of 8.50%, 2.25% Exit Fee   $ 10,000       10,084       9,925  
  Drug Discovery & Development   Senior Secured   August 2022   Interest rate PRIME + 2.10% or Floor rate of 7.85%, 6.95% Exit Fee   $ 10,000       10,014       10,014  
         

 

 

   

 

 

   

 

 

 

Total Paratek Pharmaceuticals, Inc. (p.k.a. Transcept Pharmaceuticals, Inc.)

          $ 70,000       71,220       70,548  

Stealth Bio Therapeutics Corp.(5)(10)(11)
275 Grove Street, Suite 3-107
Newton, MA 02466

  Drug Discovery & Development   Senior Secured   January 2021   Interest rate PRIME + 5.50% or Floor rate of 9.50%, 6.25% Exit Fee   $ 19,313       19,740       19,597  

Tricida, Inc.(11)(15)
7000 Shoreline Ct #201
South San Francisco, CA 94080

  Drug Discovery & Development   Senior Secured   March 2022   Interest rate PRIME + 3.35% or Floor rate of 8.85%, 8.19% Exit Fee   $ 40,000       39,622       39,794  

uniQure B.V.(5)(10)(11)
Paasheuvelweg 25A
Amsterdam, The Netherlands 1105 BP

  Drug Discovery & Development   Senior Secured   June 2023   Interest rate PRIME + 3.35% or Floor rate of 8.85%, 7.72% Exit Fee   $ 35,000       35,538       35,386  

 

11


Table of Contents

Portfolio Company

 

Sub-Industry

 

Type of
Investment(1)

 

Maturity
Date

 

Interest Rate and
Floor(2)

  Principal
Amount
    Cost(3)     Value(4)  

Verastem, Inc.(11)
117 Kendrick Street, Suite 500
Needham, MA 02494

  Drug Discovery & Development   Senior Secured   December 2020   Interest rate PRIME + 6.00%
or Floor rate of 10.50%, 4.50% Exit Fee
  $ 5,000       5,058       5,059  
  Drug Discovery & Development   Senior Secured   December 2020   Interest rate PRIME + 6.00%
or Floor rate of 10.50%, 4.50% Exit Fee
  $ 5,000       5,082       5,083  
  Drug Discovery & Development   Senior Secured   December 2020   Interest rate PRIME + 6.00% or Floor rate of 10.50%, 4.50% Exit Fee   $ 5,000       5,057       5,057  
  Drug Discovery & Development   Senior Secured   December 2020   Interest rate PRIME + 6.00% or Floor rate of 10.50%, 4.50% Exit Fee   $ 10,000       10,033       9,976  
         

 

 

   

 

 

   

 

 

 

Total Verastem, Inc.

          $ 25,000       25,230       25,175  

X4 Pharmaceuticals Inc.
955 Massachusetts Ave 4th Floor
Cambridge, MA 02139

  Drug Discovery & Development   Senior Secured   November 2021   Interest rate PRIME + 4.25% or Floor rate of 9.50%, 7.95% Exit Fee   $ 10,000       9,746       9,746  
           

 

 

   

 

 

 

Subtotal: 1-5 Years Maturity

              520,238       518,632  
           

 

 

   

 

 

 

Subtotal: Drug Discovery & Development (54.99%)*

              529,477       525,384  
           

 

 

   

 

 

 

Electronics & Computer Hardware

             

1-5 Years Maturity

             

908 DEVICES INC.(15)
645 Summer St. 2nd floor
Boston, MA 02210

  Electronics & Computer Hardware   Senior Secured   September 2020   Interest rate PRIME + 4.00% or Floor rate of 8.25%, 4.25% Exit Fee   $ 10,000     $ 10,145     $ 10,155  

Glo AB(5)(10)(13)(14)
1225 Bordeaux Drive
Sunnyvale, CA 94089

  Electronics & Computer Hardware   Senior Secured   February 2021   Interest rate PRIME + 6.20% or Floor rate of 10.45%, PIK Interest 1.75%, 2.95% Exit Fee   $ 12,192       12,265       5,556  
           

 

 

   

 

 

 

Subtotal: 1-5 Years Maturity

              22,410       15,711  
           

 

 

   

 

 

 

Subtotal: Electronics & Computer Hardware (1.64%)*

              22,410       15,711  
           

 

 

   

 

 

 

Healthcare Services, Other

             

1-5 Years Maturity

             

Oak Street Health(12)
30 W. Monroe St. Suite 1200
Chicago, IL 60603

  Healthcare Services, Other   Senior Secured   September 2021   Interest rate PRIME + 5.00% or Floor rate of 9.75%, 5.95% Exit Fee   $ 30,000       30,486       30,338  

PH Group Holdings(13)(17)
950 N Glebe Rd., Suite 4000
Arlington, VA 22203

  Healthcare Services, Other   Senior Secured   September 2020   Interest rate PRIME + 7.45% or Floor rate of 10.95%   $ 20,000       19,889       19,806  
  Healthcare Services, Other   Senior Secured   September 2020   Interest rate PRIME + 7.45% or Floor rate of 10.95%   $ 10,000       9,938       9,896  
         

 

 

   

 

 

   

 

 

 

Total PH Group Holdings

          $ 30,000       29,827       29,702  
           

 

 

   

 

 

 

Subtotal: 1-5 Years Maturity

              60,313       60,040  
           

 

 

   

 

 

 

Subtotal: Healthcare Services, Other (6.28%)*

              60,313       60,040  
           

 

 

   

 

 

 

 

12


Table of Contents

Portfolio Company

 

Sub-Industry

 

Type of
Investment(1)

 

Maturity
Date

 

Interest Rate and
Floor(2)

  Principal
Amount
    Cost(3)     Value(4)  

Information Services

             

1-5 Years Maturity

             

MDX Medical, Inc.(14)(15)(19)
160 Chubb Avenue, Suite 301
Lyndhurst, NJ 07071

  Information Services   Senior Secured   December 2020   Interest rate PRIME + 4.00% or Floor rate of 8.25%, PIK Interest 1.70%   $ 15,288       15,037       14,987  
           

 

 

   

 

 

 

Subtotal: 1-5 Years Maturity

              15,037       14,987  
           

 

 

   

 

 

 

Subtotal: Information Services (1.57%)*

              15,037       14,987  
           

 

 

   

 

 

 

Internet Consumer & Business Services

             

Under 1 Year Maturity

             

LogicSource
20 Marshall Street
South Norwalk, CT 06854

  Internet Consumer & Business Services   Senior Secured   October 2019   Interest rate PRIME + 6.25% or Floor rate of 9.75%, 5.00% Exit Fee   $ 3,099     $ 3,486     $ 3,486  

The Faction Group LLC(11)
1660 Lincoln St., Suite 1600
Denver, CO 80264

  Internet Consumer & Business Services   Senior Secured   January 2019   Interest rate PRIME + 4.75% or Floor rate of 8.25%   $ 2,000       2,000       2,000  
           

 

 

   

 

 

 

Subtotal: Under 1 Year Maturity

              5,486       5,486  
           

 

 

   

 

 

 

1-5 Years Maturity

             

AppDirect, Inc.(11)(19)
650 California Street, Fl 25
San Francisco, CA 94108

  Internet Consumer & Business Services   Senior Secured   January 2022   Interest rate PRIME + 5.70% or Floor rate of 9.95%, 3.45% Exit Fee   $ 20,000       20,006       19,941  

Art.com, Inc.(12)(14)(15)
2100 Powell Street 13th Floor
Emeryville, CA 94608

  Internet Consumer & Business Services   Senior Secured   April 2021   Interest rate PRIME + 5.40% or Floor rate of 10.15%, PIK Interest 1.70%, 1.50% Exit Fee   $ 10,117       10,020       10,028  

Cloudpay, Inc.(5)(10)
Kingsgate House, Newbury Road Andover
Hampshire, United Kingdom SP10 4DU

  Internet Consumer & Business Services   Senior Secured   April 2022   Interest rate PRIME + 4.05% or Floor rate of 8.55%, 6.95% Exit Fee   $ 11,000       11,017       11,020  

Contentful, Inc.(5)(10)(14)
150 Spear Street,
San Francisco, CA 94105

  Internet Consumer & Business Services   Senior Secured   July 2022   Interest rate PRIME + 2.95% or Floor rate of 7.95%, PIK Interest 1.25%   $ 3,750       3,692       3,692  

Convercent, Inc.(14)(15)(17)
5995 Greenwood Plaza Blvd Suite 110
Greenwood Village, CO 80111

  Internet Consumer & Business Services   Senior Secured   July 2022   Interest rate PRIME + 2.55% or Floor rate of 7.80%, PIK Interest 2.95%, 1.00% Exit Fee   $ 7,500       7,419       7,419  

EverFi, Inc.(11)(14)(16)
3299 K Street N.W., 4th Floor
Washington, DC 20007

  Internet Consumer & Business Services   Senior Secured   May 2022   Interest rate PRIME + 3.90% or Floor rate of 8.65%, PIK Interest 2.30%   $ 60,729       60,687       60,408  

Fastly, Inc.(17)(19)
475 Brannan St., Suite 300
San Francisco, CA 94107

  Internet Consumer & Business Services   Senior Secured   December 2021   Interest rate PRIME + 4.25%, 1.50% Exit Fee   $ 6,667       6,563       6,563  

 

13


Table of Contents

Portfolio Company

 

Sub-Industry

 

Type of
Investment(1)

 

Maturity
Date

 

Interest Rate and
Floor(2)

  Principal
Amount
    Cost(3)     Value(4)  

First Insight, Inc.(15)
2000 Ericsson Drive, Suite 200
Warrendale, PA 15086

  Internet Consumer & Business Services   Senior Secured   November 2021   Interest rate PRIME + 6.25% or Floor rate of 11.25%   $ 7,500       7,368       7,375  

Greenphire, Inc.(17)
630 Allendale Road, Suite 250
King of Prussia, PA 19406

  Internet Consumer & Business Services   Senior Secured   January 2021   Interest rate 3-month LIBOR + 8.00% or Floor rate of 9.00%   $ 2,776       2,776       2,785  
  Internet Consumer & Business Services   Senior Secured   January 2021   Interest rate PRIME + 3.75% or Floor rate of 7.00%   $ 1,500       1,500       1,498  
         

 

 

   

 

 

   

 

 

 

Total Greenphire, Inc.

          $ 4,276       4,276       4,283  

Intent Media, Inc.(12)(17)
75 Varick St.,
New York, NY 10013

  Internet Consumer & Business Services   Senior Secured   September 2021   Interest rate PRIME + 5.13% or Floor rate of 10.125%, 2.00% Exit Fee   $ 12,200       12,210       12,147  

Interactions Corporation(11)(19) 31 Hayward Street., Suite E
Franklin, MA 02038

  Internet Consumer & Business Services   Senior Secured   March 2021   Interest rate 3-month LIBOR + 8.60% or Floor rate of 9.85%, 1.75% Exit Fee   $ 25,000       25,092       24,987  

Postmates, Inc.(17)(19)
201 Third Steet 2nd Floor
San Francisco, CA 94105

  Internet Consumer & Business Services   Senior Secured   September 2022   Interest rate PRIME + 3.85% or Floor rate of 8.85%, 8.05% Exit Fee   $ 20,000       19,666       19,666  

RumbleON, Inc.
4521 Sharon Road, Suite 370
Charlotte, NC 28211

  Internet Consumer & Business Services   Senior Secured   May 2021   Interest rate PRIME + 5.75% or Floor rate of 10.25%, 4.55% Exit Fee   $ 5,000       5,018       4,984  
  Internet Consumer & Business Services   Senior Secured   October 2021   Interest rate PRIME + 5.75% or Floor rate of 10.25%, 2.95% Exit Fee   $ 5,000       4,941       4,941  
         

 

 

   

 

 

   

 

 

 

Total RumbleON, Inc.

          $ 10,000       9,959       9,925  

Snagajob.com, Inc.(13)(14)

1919 N Lynn Street, 7th Floor

Arlington, VA 22209

  Internet Consumer & Business Services   Senior Secured   July 2020   Interest rate PRIME + 5.15% or Floor rate of 9.15%, PIK Interest 1.95%, 2.55% Exit Fee   $ 41,841       42,139       42,075  
  Internet Consumer & Business Services   Senior Secured   July 2020   Interest rate PRIME + 5.65% or Floor rate of 10.65%, PIK Interest 1.95%, 2.55% Exit Fee   $ 5,033       4,867       4,867  
         

 

 

   

 

 

   

 

 

 

Total Snagajob.com, Inc.

          $ 46,874       47,006       46,942  

Tectura Corporation(7)(8)(9)(14)
951 Old County Road, Suite 2-317
Belmont, CA 94002

  Internet Consumer & Business Services   Senior Secured   June 2021   Interest rate FIXED 6.00%, PIK Interest 3.00%   $ 20,924       20,924       18,128  
  Internet Consumer & Business Services   Senior Secured   June 2021   PIK Interest 8.00%   $ 10,680       240       —    
         

 

 

   

 

 

   

 

 

 

Total Tectura Corporation

          $ 31,604       21,164       18,128  

The Faction Group LLC(11)
1660 Lincoln St., Suite 1600
Denver, CO 80264

  Internet Consumer & Business Services   Senior Secured   January 2021   Interest rate 3-month LIBOR + 9.25% or Floor rate of 10.25%   $ 6,667       6,667       6,653  

Wheels Up Partners LLC(11)
220 West 42nd Street 16th Floor
New York, NY 10036

  Internet Consumer & Business Services   Senior Secured   July 2022   Interest rate 3-month LIBOR + 8.55% or Floor rate of 9.55%   $ 20,241       20,076       19,921  

 

14


Table of Contents

Portfolio Company

 

Sub-Industry

 

Type of
Investment(1)

 

Maturity
Date

 

Interest Rate and
Floor(2)

  Principal
Amount
    Cost(3)     Value(4)  

Xometry, Inc.(13)(17)(19)
7940 Cessna Avenue
Gaithersburg, MD 20879

  Internet Consumer & Business Services   Senior Secured   November 2021   Interest rate PRIME + 3.95% or Floor rate of 8.45%, 7.09% Exit Fee   $ 11,000       10,997       10,995  
           

 

 

   

 

 

 

Subtotal: 1-5 Years Maturity

              303,885       300,093  
           

 

 

   

 

 

 

Subtotal: Internet Consumer & Business Services (31.98%)*

              309,371       305,579  
           

 

 

   

 

 

 

Media/Content/Info

             

1-5 Years Maturity

             

Bustle(14)(15)
315 Park Avenue South 12th Floor
New York, NY 10010

  Media/Content/Info   Senior Secured   June 2021   Interest rate PRIME + 4.10% or Floor rate of 8.35%, PIK Interest 1.95%, 3.12% Exit Fee   $ 15,315     $ 15,336     $ 15,453  
           

 

 

   

 

 

 

Subtotal: 1-5 Years Maturity

              15,336       15,453  
           

 

 

   

 

 

 

Subtotal: Media/Content/Info (1.62%)*

              15,336       15,453  
           

 

 

   

 

 

 

Medical Devices & Equipment

             

Under 1 Year Maturity

             

Micell Technologies, Inc.(11)
801 Capitola Drive, Suite 1
Durham, NC 27713

  Medical Devices & Equipment   Senior Secured   August 2019   Interest rate PRIME + 7.25% or Floor rate of 10.50%, 5.00% Exit Fee   $ 2,323       2,724       2,405  
           

 

 

   

 

 

 

Subtotal: Under 1 Year Maturity

              2,724       2,405  
           

 

 

   

 

 

 

1-5 Years Maturity

             

Flowonix Medical, Inc.(11)(14)
500 International Drive, Suite 200
Mount Olive, NJ 07828

  Medical Devices & Equipment   Senior Secured   October 2021   Interest rate PRIME + 4.00% or Floor rate of 9.00%, PIK Interest 0.5%, 7.95% Exit Fee   $ 15,007       14,673       14,673  

Intuity Medical, Inc.(11)(15)
3500 West Warren Avenue.
Fremont, CA 94538

  Medical Devices & Equipment   Senior Secured   June 2021   Interest rate PRIME + 5.00% or Floor rate of 9.25%, 5.95% Exit Fee   $ 17,500       17,504       17,417  

Quanta Dialysis Technologies(5)(10)
Tything Road
Alcester, UK B49 6EU

  Medical Devices & Equipment   Senior Secured   April 2020   Interest rate PRIME + 8.05% or Floor rate of 11.55%, 5.00% Exit Fee   $ 5,806       6,324       6,344  

Quanterix Corporation(11)
113 Hartwell Avenue
Lexington, MA 02421

  Medical Devices & Equipment   Senior Secured   March 2020   Interest rate PRIME + 2.75% or Floor rate of 8.00%, 0.58% Exit Fee   $ 7,688       7,656       7,577  

Rapid Micro Biosystems, Inc.(11)(15)
1001 Pawtucket Blvd West, Suite 280
Lowell, MA 01854

  Medical Devices & Equipment   Senior Secured   April 2022   Interest rate PRIME + 5.15% or Floor rate of 9.65%, 7.25% Exit Fee   $ 18,000       18,143       18,013  

Sebacia, Inc.(11)(15)
2905 Premiere Parkway, Suite 150
Duluth, GA 30097

  Medical Devices & Equipment   Senior Secured   January 2021   Interest rate PRIME + 4.35% or Floor rate of 8.85%, 6.05% Exit Fee   $ 11,000       11,151       11,071  

Transenterix, Inc.(10)(11)
635 Davis Drive, Suite 300
Morrisville, NC 27560

  Medical Devices & Equipment   Senior Secured   June 2022   Interest rate PRIME + 4.55% or Floor rate of 9.55%, 6.95% Exit Fee   $ 30,000       29,972       29,852  
           

 

 

   

 

 

 

Subtotal: 1-5 Years Maturity

              105,423       104,947  
           

 

 

   

 

 

 

Subtotal: Medical Devices & Equipment (11.24%)*

              108,147       107,352  
           

 

 

   

 

 

 

 

15


Table of Contents

Portfolio Company

 

Sub-Industry

 

Type of
Investment(1)

 

Maturity
Date

 

Interest Rate and
Floor(2)

  Principal
Amount
    Cost(3)     Value(4)  

Software

             

Under 1 Year Maturity

             

Pollen, Inc.(15)
2000 Shawnee Mission Parkway, Suite 200
Mission Woods, KS 66205

  Software   Senior Secured   April 2019   Interest rate PRIME + 4.25% or Floor rate of 8.50%, 4.00% Exit Fee   $ 7,000       7,214       7,214  
           

 

 

   

 

 

 

Subtotal: Under 1 Year Maturity

              7,214       7,214  
           

 

 

   

 

 

 

1-5 Years Maturity

             

Abrigo (p.k.a. Banker’s Toolbox, Inc.)(13)(18)
4, 12331-B Riata Trace Pkwy #200
Austin, TX 78727

  Software   Senior Secured   March 2023   Interest rate 3-month LIBOR + 7.88% or Floor rate of 7.88%   $ 39,701     $ 38,871     $ 38,617  

Businessolver.com, Inc.(16)(17)
1025 Ashworth Road Suite 101
West Des Moines, IA 50265

  Software   Senior Secured   May 2023   Interest rate 3-month LIBOR + 7.50% or Floor rate of 7.50%   $ 52,913       51,958       51,417  
  Software   Senior Secured   May 2023   Interest rate 3-month LIBOR + 7.50% or Floor rate of 7.50%   $ 2,550       2,551       2,550  
         

 

 

   

 

 

   

 

 

 

Total Businessolver.com, Inc.

          $ 55,463       54,509       53,967  

Clarabridge, Inc.(12)(14)(17)
11400 Commerce Park Drive., Suite 500
Reston, VA 20191

  Software   Senior Secured   April 2022   Interest rate PRIME + 4.80% or Floor rate of 8.55%, PIK Interest 2.25%   $ 42,300       41,843       41,921  

Cloudian, Inc.
177 Bovet Road, Suite 450
San Mateo, CA 94402

  Software   Senior Secured   November 2022   Interest rate PRIME + 3.25% or Floor rate of 8.25%, 9.75% Exit Fee   $ 15,000       14,814       14,814  

Couchbase, Inc.(15)(17)(19)
3250 Olcott Street
Santa Clara, CA 95054

  Software   Senior Secured   September 2021   Interest rate PRIME + 5.25% or Floor rate of 10.75%   $ 15,000       14,921       14,921  

Credible Behavioral Health, Inc.(14)(17)
1 Choice Hotels Circle, 11th Floor
Rockville, MD 20850

  Software   Senior Secured   September 2021   Interest rate PRIME + 3.20% or Floor rate of 7.95%, PIK Interest 3.30%   $ 7,573       7,493       7,493  

Dashlane, Inc.(14)(19)
156 5th Avenue, #504
New York, NY 10010

  Software   Senior Secured   April 2022   Interest rate PRIME + 4.05% or Floor rate of 8.55%, PIK Interest 1.10%, 9.25% Exit Fee   $ 10,067       10,107       10,137  

DocuTAP, Inc.(17)
4701 West Research Drive Suite 102
Sioux Falls, SD 57107

  Software   Senior Secured   October 2023   Interest rate 3-month LIBOR + 8.00% or Floor rate of 8.00%   $ 14,000       13,609       13,609  

Emma, Inc.(17)(18)
9 Lea Avenue
Nashville, TN 37210

  Software   Senior Secured   September 2022   Interest rate 3-month LIBOR + 8.39% or Floor rate of 8.39%   $ 37,037       35,858       35,251  
  Software   Senior Secured   September 2022   Interest rate 3-month LIBOR + 8.18% or Floor rate of 8.18%   $ 6,000       5,827       5,826  
         

 

 

   

 

 

   

 

 

 

Total Emma, Inc.

          $ 43,037       41,685       41,077  

 

16


Table of Contents

Portfolio Company

 

Sub-Industry

 

Type of
Investment(1)

 

Maturity
Date

 

Interest Rate and
Floor(2)

  Principal
Amount
    Cost(3)     Value(4)  

Evernote Corporation(14)(15)(17)(19)
305 Walnut Street
Redwood City, CA 94063

  Software   Senior Secured   October 2020   Interest rate PRIME + 5.45% or Floor rate of 8.95%   $ 5,549       5,537       5,592  
  Software   Senior Secured   July 2021   Interest rate PRIME + 6.00% or Floor rate of 9.50%, PIK Interest 1.25%   $ 4,074       4,058       4,074  
  Software   Senior Secured   July 2022   Interest rate PRIME + 6.00% or Floor rate of 9.50%, PIK Interest 1.25%   $ 5,015       4,982       4,993  
         

 

 

   

 

 

   

 

 

 

Total Evernote Corporation

          $ 14,638       14,577       14,659  

Fuze, Inc.(13)(14)(15)(16)(19)
2 Copley Place, Floor 7
Boston, MA 02116

  Software   Senior Secured   July 2021   Interest rate PRIME + 3.70% or Floor rate of 7.95%, PIK Interest 1.55%, 3.55% Exit Fee   $ 51,129       51,284       51,943  

Impact Radius Holdings, Inc.(11)(14)
223 East De La Guerra Street
Santa Barbara, CA 93101

  Software   Senior Secured   December 2020   Interest rate PRIME + 4.25% or Floor rate of 8.75%, PIK Interest 1.55%, 1.75% Exit Fee   $ 10,191       10,271       10,237  
  Software   Senior Secured   December 2020   Interest rate PRIME + 4.25% or Floor rate of 8.75%, PIK Interest 1.55%   $ 2,014       2,014       2,008  
         

 

 

   

 

 

   

 

 

 

Total Impact Radius Holdings, Inc.

          $ 12,205       12,285       12,245  

Insurance Technologies Corporation(17)(18)
1415 Halsey Way #314
Carrollton, TX 75007

  Software   Senior Secured   March 2023   Interest rate 3-month LIBOR + 7.82% or Floor rate of 8.75%   $ 12,500       12,258       12,071  

Lightbend, Inc.(14)(15)
625 Market St 10th Floor
San Francisco, CA 94105

  Software   Senior Secured   February 2022   Interest rate PRIME + 4.25% or Floor rate of 8.50%, PIK Interest 2.00%   $ 16,179       15,850       15,741  

Lithium Technologies, Inc.(11)(16)(17)
Pier 1, Bay 1A
San Francisco, CA 94111

  Software   Senior Secured   October 2022   Interest rate 1-month LIBOR + 8.00% or Floor rate of 9.00%   $ 12,000       11,785       11,659  
  Software   Senior Secured   October 2022   Interest rate 1-month LIBOR + 8.00% or Floor rate of 9.00%   $ 43,000       42,047       42,047  
         

 

 

   

 

 

   

 

 

 

Total Lithium Technologies, Inc.

          $ 55,000       53,832       53,706  

Microsystems Holding Company, LLC(13)(19)
535 Madison Ave., Fl 4
New York, NY 10022

  Software   Senior Secured   July 2022   Interest rate 3-month LIBOR + 8.25% or Floor rate of 9.25%   $ 12,000       11,854       11,842  

Quid, Inc.(14)(15)
600 Harrison Street, Suite 400
San Francisco, CA 94107

  Software   Senior Secured   February 2021   Interest rate PRIME + 4.75% or Floor rate of 8.25%, PIK Interest 2.25%, 3.00% Exit Fee   $ 8,494       8,632       8,619  

RapidMiner, Inc.(12)(14)
10 Milk Street., 11th Floor
Boston, MA 02108

  Software   Senior Secured   December 2020   Interest rate PRIME + 5.50% or Floor rate of 9.75%, PIK Interest 1.65%   $ 7,119     $ 7,018     $ 6,965  

 

17


Table of Contents

Portfolio Company

 

Sub-Industry

 

Type of
Investment(1)

 

Maturity
Date

 

Interest Rate and
Floor(2)

  Principal
Amount
    Cost(3)     Value(4)  

Regent Education(14)
340 East Patrick Street, Suite 210
Frederick, MD 21701

  Software   Senior Secured   January 2021   Interest rate FIXED 10.00%, PIK Interest 2.00%, 6.35% Exit Fee   $ 3,092       3,115       1,579  

Salsa Labs, Inc.(11)(17)
7200 Wisconsin Avenue, Suite 200
Bethesda, MD 20814

  Software   Senior Secured   April 2023   Interest rate 3-month LIBOR + 8.15% or Floor rate of 9.15%   $ 6,000       5,894       5,823  

Signpost, Inc.(11)(14)
127 W 26th St., Floor 2
New York, NY 10001

  Software   Senior Secured   February 2020   Interest rate PRIME + 4.15% or Floor rate of 8.15%, PIK Interest 1.75%, 5.75% Exit Fee   $ 15,787       16,293       16,267  

ThreatConnect, Inc.(14)(15)(19)
3865 Wilson Blvd., Suite 550
Arlington, VA 22203

  Software   Senior Secured   October 2022   Interest rate PRIME + 4.95% or Floor rate of 9.95%, PIK Interest 1.05%, 2.20% Exit Fee   $ 7,519       7,443       7,443  

Vela Trading Technologies(11)(18)
211 East 43 Street 5th Floor
New York, NY 10017

  Software   Senior Secured   July 2022   Interest rate 3-month LIBOR + 9.50% or Floor rate of 10.50%   $ 19,750       19,345       19,309  

YouEarnedIt, Inc.(18)
206 East 9th Street, Floor 18
Austin, TX 78701

  Software   Senior Secured   July 2023   Interest rate 1-month LIBOR + 8.66%   $ 8,978       8,735       8,735  

ZocDoc(11)(19)
568 Broadway Floor 9
New York, NY 10012

  Software   Senior Secured   August 2021   Interest rate PRIME + 6.20% or Floor rate of 10.95%, 2.00% Exit Fee   $ 30,000       30,003       29,875  
           

 

 

   

 

 

 

Subtotal: 1-5 Years Maturity

              516,270       513,378  
           

 

 

   

 

 

 

Subtotal: Software (54.49%)*

              523,484       520,592  
           

 

 

   

 

 

 

Sustainable and Renewable Technology

             

Under 1 Year Maturity

             

Solar Spectrum Holdings LLC (p.k.a. Sungevity,
Inc.)(6)(14)(19)
150 Linden Street
Oakland, CA 94607

  Sustainable and Renewable Technology   Senior Secured   August 2019   Interest rate PRIME + 8.70% or Floor rate of 12.95%, 5.00% Exit Fee   $ 10,000       10,151       10,151  
  Sustainable and Renewable Technology   Senior Secured   February 2019   PIK Interest 10.00%   $ 649       650       650  
  Sustainable and Renewable Technology   Senior Secured   February 2019   Interest rate PRIME + 10.70% or Floor rate of 15.70%, PIK Interest 2.00%   $ 603       603       603  
         

 

 

   

 

 

   

 

 

 

Total Solar Spectrum LLC

          $ 11,252     $ 11,404     $ 11,404  

Subtotal: Under 1 Year Maturity

              11,404       11,404  
           

 

 

   

 

 

 

1-5 Years Maturity

             

FuelCell Energy, Inc.(12)
3 Great Pasture Road
Danbury, CT 06810

  Sustainable and Renewable Technology   Senior Secured   April 2020   Interest rate PRIME + 5.40% or Floor rate of 9.90%, 6.68% Exit Fee   $ 13,091       13,362       13,330  
  Sustainable and Renewable Technology   Senior Secured   April 2020   Interest rate PRIME + 5.40% or Floor rate of 9.90%, 8.50% Exit Fee   $ 11,909       11,908       11,874  
         

 

 

   

 

 

   

 

 

 

Total FuelCell Energy, Inc.

          $ 25,000     $ 25,270     $ 25,204  

 

18


Table of Contents

Portfolio Company

 

Sub-Industry

 

Type of
Investment(1)

 

Maturity
Date

 

Interest Rate and
Floor(2)

  Principal
Amount
    Cost(3)     Value(4)  

Impossible Foods, Inc.(12)(17)
400 Saginaw Drive
Redwood City, CA 94063

  Sustainable and Renewable Technology   Senior Secured   January 2022   Interest rate PRIME + 3.95% or Floor rate of 8.95%, 9.00% Exit Fee   $ 30,000       29,981       29,680  

Metalysis Limited(5)(10)(11)
Unit 2, Farfield Park Manvers Way, Wath upon Dearne
Rotherham, South Yorkshire, UK S63 5DB

  Sustainable and Renewable Technology   Senior Secured   March 2021   Interest rate PRIME + 5.00% or Floor rate of 9.25%, 6.95% Exit Fee   $ 7,254       7,400       7,360  

Proterra, Inc.(11)(14)
1 Whitlee Ct.
Greenville, SC 29607

  Sustainable and Renewable Technology   Senior Secured   November 2020   Interest rate PRIME + 3.70% or Floor rate of 7.95%, PIK Interest 1.75%, 5.95% Exit Fee   $ 25,484       26,775       26,888  
  Sustainable and Renewable Technology   Senior Secured   November 2020   Interest rate PRIME + 3.70% or Floor rate of 7.95%, PIK Interest 1.75%, 7.00% Exit Fee   $ 5,097       5,381       5,386  
         

 

 

   

 

 

   

 

 

 

Total Proterra, Inc.

          $ 30,581       32,156       32,274  
           

 

 

   

 

 

 

Subtotal: 1-5 Years Maturity

              94,807       94,518  
           

 

 

   

 

 

 

Subtotal: Sustainable and Renewable Technology (11.09%)*

              106,211       105,922  
           

 

 

   

 

 

 

Total: Debt Investments (181.43%)*

              1,752,945       1,733,492  
           

 

 

   

 

 

 

(dollars in thousands)

 

Portfolio Company

  

Sub-Industry

   Type of
Investment(1)
     Percentage
Ownership
   

Series

   Shares      Cost(3)      Value(4)  

Equity Investments
Communications & Networking

                   

GlowPoint, Inc.(4)
430 Mountain Ave Suite 301
Murray Hill, NJ 7974

   Communications & Networking      Equity        0.23   Common Stock      114,192      $ 102      $ 14  

Peerless Network

Holdings, Inc.
222 South Riverside
Plaza, Suite 2730
Chicago, IL 60606

   Communications & Networking      Equity        3.41   Preferred Series A      1,135,000        1,229        4,847  
                

 

 

    

 

 

 

Subtotal: Communications & Networking (0.51%)*

                   1,331        4,861  
                

 

 

    

 

 

 

Diagnostic

                   

Singulex, Inc.
1701 Harbor Way
Parkway, Suite 200
Alameda, CA 94502

   Diagnostic      Equity        0.36   Common Stock      937,998        750        348  
                

 

 

    

 

 

 

Subtotal: Diagnostic (0.04%)*

                   750        348  
                

 

 

    

 

 

 

Diversified Financial Services

                   

Gibraltar Business Capital, LLC.(7)
400 Skokie Blvd #375
Northbrook, IL 60062

   Diversified Financial Services      Equity        7.26   Common Stock      830,000        1,884        1,688  
   Diversified Financial Services      Equity        92.74   Preferred Series A      10,602,752        26,122        23,402  
                

 

 

    

 

 

 

Total Gibraltar Business Capital, LLC

                11,432,752        28,006        25,090  
                

 

 

    

 

 

 

Subtotal: Diversified Financial Services (2.63%)*

                   28,006        25,090  
                

 

 

    

 

 

 

 

19


Table of Contents

Portfolio Company

  

Sub-Industry

   Type of
Investment(1)
     Percentage
Ownership
   

Series

   Shares      Cost(3)      Value(4)  

Drug Delivery

                   

AcelRx Pharmaceuticals, Inc.(4)
351 Galveston Drive
Redwood City,
CA 94063

   Drug Delivery      Equity        0.22   Common Stock      176,730        1,329        318  

BioQ Pharma

Incorporated(15)
1325 Howard St San
Francisco,
CA 94107

   Drug Delivery      Equity        0.47   Preferred Series D      165,000        500        599  

Edge Therapeutics, Inc.(4)
300 Connell Dr., Suite 4000
Berkeley Heights, NJ 07922

   Drug Delivery      Equity        0.16   Common Stock      49,965        309        16  

Neos Therapeutics, Inc.(4)(15)
2940 N. Highway 360, Suite 400 Grand Prarie, TX 75050

   Drug Delivery      Equity        0.42   Common Stock      125,000        1,500        206  
                

 

 

    

 

 

 

Subtotal: Drug Delivery (0.12%)*

                   3,638        1,139  
                

 

 

    

 

 

 

Drug Discovery & Development

                   

Aveo Pharmaceuticals, Inc.(4)(15)
One Broadway, 14th Floor
Cambridge, MA 02142

   Drug Discovery & Development      Equity        1.52   Common Stock      1,901,791        1,715        3,112  

Axovant Sciences Ltd.(4)(5)(10)(16)
11 Times Square 33rd Floor
New York, NY 10036

   Drug Discovery & Development      Equity        0.08   Common Stock      129,827        1,269        129  

BridgeBio Pharma LLC(16)
421 Kipling Street
Palo Alto, CA 94301

   Drug Discovery & Development      Equity        0.20   Preferred Series D      1,008,929        2,000        1,819  

Cerecor, Inc.(4)
400 East Pratt Street,
Suite 606
Baltimore, MD 21202

   Drug Discovery & Development      Equity        0.29   Common Stock      119,087        1,000        385  

Dare Biosciences, Inc. (p.k.a. Cerulean Pharma, Inc.)(4)
35 Gatehouse Drive
Waltham, MA 02451

   Drug Discovery & Development      Equity        0.12   Common Stock      13,550        1,000        10  

Dicerna Pharmaceuticals, Inc.(4)
87 Cambridge Park Dr
Cambridge, MA 02140

   Drug Discovery & Development      Equity        0.23   Common Stock      142,858        1,000        1,527  

Dynavax Technologies(4)(10)
2929 Seventh Street, Suite 100
Berkeley, CA 94710

   Drug Discovery & Development      Equity        0.03   Common Stock      20,000        550        183  

Eidos Therapeutics, Inc.(4)(10)
101 Montgomery Street, Suite 2550
San Francisco, CA 94104

   Drug Discovery & Development      Equity        0.04   Common Stock      15,000        255        206  

Genocea Biosciences, Inc.(4)
100 Acorn Park Drive, 5th Floor
Cambridge, MA 02140

   Drug Discovery & Development      Equity        0.26   Common Stock      223,463        2,000        64  

Insmed, Incorporated(4)
10 Finderne Ave Building 10
Bridgewater, NJ 8807

   Drug Discovery & Development      Equity        0.09   Common Stock      70,771        1,000        929  

Melinta Therapeutics, Inc.(4)
300 TriState International, Suite 272
Lincolnshire, IL 60069

   Drug Discovery & Development      Equity        0.46   Common Stock      51,821        2,000        42  

Paratek Pharmaceuticals, Inc. (p.k.a. Transcept Pharmaceuticals, Inc.)(4)(10)(16)
75 Park Plaza, 4th Floor
Boston, MA 02116

   Drug Discovery & Development      Equity        0.24   Common Stock      76,362        2,744        392  

 

20


Table of Contents

Portfolio Company

  

Sub-Industry

   Type of
Investment(1)
     Percentage
Ownership
   

Series

   Shares      Cost(3)      Value(4)  

Rocket Pharmaceuticals, Ltd (p.k.a. Inotek Pharmaceuticals Corporation)(4)
131 Hartwell Ave Suite 105
Lexington, MA 2421

   Drug Discovery & Development      Equity        0.00   Common Stock      944        1,500        14  

Tricida, Inc.(4)
7000 Shoreline Ct #201
South San Francisco, CA 94080

   Drug Discovery & Development      Equity        0.25   Common Stock      105,260        2,000        2,481  
                

 

 

    

 

 

 

Subtotal: Drug Discovery & Development (1.18%)*

                   20,033        11,293  
                

 

 

    

 

 

 

Electronics & Computer Hardware

                   

Identiv, Inc.(4)
1900-B Carnegie Avenue Building B
Santa Ana, CA 92705

   Electronics & Computer Hardware      Equity        0.04   Common Stock      6,700        34        24  
                

 

 

    

 

 

 

Subtotal: Electronics & Computer Hardware (0.00%)*

                   34        24  
                

 

 

    

 

 

 

Information Services

                   

DocuSign, Inc.(4)
221 Main St. Suite 1000
San Francisco, CA 94105

   Information Services      Equity        0.23   Common Stock      385,000        6,081        15,431  
                

 

 

    

 

 

 

Subtotal: Information Services (1.62%)*

                   6,081        15,431  
                

 

 

    

 

 

 

Internet Consumer & Business Services

                   

Blurb, Inc.
580 California St., Suite 300
San Francisco, CA 94104

   Internet Consumer & Business Services      Equity        0.36   Preferred Series B      220,653      $ 175      $ 44  

Brigade Group, Inc. (p.k.a. Philotic, Inc.)
314 Lytton Avenue, Suite 200
Palo Alto, CA 94301

   Internet Consumer & Business Services      Equity        0.05   Common Stock      9,023        93        —    

Contentful, Inc.(5)(10)
150 Spear Street,
San Francisco, CA 94105

   Internet Consumer & Business Services      Equity        0.16   Preferred Series D      217        500        504  

DoorDash, Inc.
901 Market Street 6th Floor
San Francisco, CA 94103

   Internet Consumer & Business Services      Equity        0.30   Common Stock      105,000        6,051        6,051  

Lightspeed POS, Inc.(5)(10)
700 St-Antoine Est, Suite 300
Montreal, Canada H2Y1A6

   Internet Consumer & Business Services      Equity        0.08   Preferred Series C      230,030        250        363  
   Internet Consumer & Business Services      Equity        0.07   Preferred Series D      198,677        250        326  
             

 

 

    

 

 

    

 

 

 

Total Lightspeed POS, Inc.

                428,707        500        689  

Lyft, Inc.
185 Berry St., Suite 5000
San Francisco, CA 94107

   Internet Consumer & Business Services      Equity        0.03   Preferred Series F      91,648        4,819        4,819  

Nextdoor.com, Inc.
875 Stevenson Street, Suite 700
San Francisco, CA 94103

   Internet Consumer & Business Services      Equity        0.61   Common Stock      328,190        4,854        4,854  

OfferUp, Inc.
701 5th Avenue, Suite 5100
Seattle, WA 98104

   Internet Consumer & Business Services      Equity        0.21   Preferred Series A      286,080        1,663        1,565  
   Internet Consumer & Business Services      Equity        0.08   Preferred Series A-1      108,710        632        595  
             

 

 

    

 

 

    

 

 

 

Total OfferUp, Inc.

                394,790        2,295        2,160  

 

21


Table of Contents

Portfolio Company

  

Sub-Industry

   Type of
Investment(1)
     Percentage
Ownership
   

Series

   Shares      Cost(3)      Value(4)  

Oportun (p.k.a. Progress Financial)
2 Circle Star Way
San Carlos, CA 94070

   Internet Consumer & Business Services      Equity        0.08   Preferred Series G      218,351        250        537  
   Internet Consumer & Business Services      Equity        0.03   Preferred Series H      87,802        250        279  
             

 

 

    

 

 

    

 

 

 

Total Oportun (p.k.a. Progress Financial)

                306,153        500        816  

Tectura Corporation(7)
951 Old County Road, Suite 2-317
Belmont, CA 94002

   Internet Consumer & Business Services      Equity        49.39   Common Stock      414,994,863        900        —    
   Internet Consumer & Business Services      Equity        0.12   Preferred Series BB      1,000,000        —          —    
             

 

 

    

 

 

    

 

 

 

Total Tectura Corporation

                415,994,863        900        —    
                

 

 

    

 

 

 

Subtotal: Internet Consumer & Business Services (2.09%)*

                   20,687        19,937  
                

 

 

    

 

 

 

Media/Content/Info

                   

Pinterest, Inc.
651 Brannan Street
San Francisco, CA 94103

   Media/Content/Info      Equity        0.05   Preferred Series Seed      620,000        4,085        3,787  
                

 

 

    

 

 

 

Subtotal: Media/Content/Info (0.40%)*

                   4,085        3,787  
                

 

 

    

 

 

 

Medical Devices & Equipment

                   

AtriCure, Inc.(4)(15)
7555 Innovation Way
Mason, OH 45040

   Medical Devices & Equipment      Equity        0.03   Common Stock      10,119        266        310  

Flowonix Medical, Inc.
500 International Drive, Suite 200
Mount Olive, NJ 07828

   Medical Devices & Equipment      Equity        0.07   Preferred Series AA      221,893        1,500        27  

Gelesis, Inc.
500 Boylston Street, Suite 1600
Boston, MA 02116

   Medical Devices & Equipment      Equity        1.03   Common Stock      198,202        —          677  
   Medical Devices & Equipment      Equity        0.99   Preferred Series A-1      191,210        425        729  
   Medical Devices & Equipment      Equity        0.99   Preferred Series A-2      191,626        500        691  
             

 

 

    

 

 

    

 

 

 

Total Gelesis, Inc.

                581,038        925        2,097  

Medrobotics Corporation(15)
475 Paramount Drive
Raynham, MA 02767

   Medical Devices & Equipment      Equity        0.12   Preferred Series E      136,798        250        24  
   Medical Devices & Equipment      Equity        0.07   Preferred Series F      73,971        155        26  
   Medical Devices & Equipment      Equity        0.14   Preferred Series G      163,934        500        87  
             

 

 

    

 

 

    

 

 

 

Total Medrobotics Corporation

                374,703        905        137  

Optiscan Biomedical, Corp.(6)
24590 Clawiter Road
Hayward, CA 94545

   Medical Devices & Equipment      Equity        0.34   Preferred Series B      61,855        3,000        393  
   Medical Devices & Equipment      Equity        0.11   Preferred Series C      19,273        655        111  

 

22


Table of Contents

Portfolio Company

  

Sub-Industry

   Type of
Investment(1)
     Percentage
Ownership
   

Series

   Shares      Cost(3)      Value(4)  
   Medical Devices & Equipment      Equity        3.05   Preferred Series D      551,038        5,257        3,524  
   Medical Devices & Equipment      Equity        1.72   Preferred Series E      311,989        2,609        2,771  
             

 

 

    

 

 

    

 

 

 

Total Optiscan Biomedical, Corp.

                944,155        11,521        6,799  

Outset Medical, Inc. (p.k.a. Home Dialysis Plus, Inc.)
1830 Bering Drive
San Jose, CA 95112

   Medical Devices & Equipment      Equity        0.12   Preferred Series B      232,061        527        473  

Quanterix Corporation(4)
113 Hartwell Avenue
Lexington, MA 02421

   Medical Devices & Equipment      Equity        0.38   Common Stock      84,778        1,000        1,553  
                

 

 

    

 

 

 

Subtotal: Medical Devices & Equipment (1.19%)*

                   16,644        11,396  
                

 

 

    

 

 

 

Software

                   

CapLinked, Inc.
2015 Manhattan Beach Blvd, #108
Redondo Beach, CA 90278

   Software      Equity        0.33   Preferred Series A-3      53,614        51        87  

Docker, Inc.
144 Townsend Street
San Francisco, CA 94107

   Software      Equity        0.63   Common Stock      200,000        4,284        4,284  

Druva, Inc.
150 Mathilda Place, Suite 450
Sunnyvale, CA 94041

   Software      Equity        0.29   Preferred Series 2      458,841        1,000        1,972  
   Software      Equity        0.06   Preferred Series 3      93,620        300        433  
             

 

 

    

 

 

    

 

 

 

Total Druva, Inc.

                552,461        1,300        2,405  

HighRoads, Inc.
3 Burlington Woods Dr
Burlington, MA 01803

   Software      Equity        0.00   Common Stock      190        307        —    

Palantir Technologies
100 Hamilton Avenue
Palo Alto, CA 94301

   Software      Equity        0.00   Preferred Series D      9,535        47        47  
   Software      Equity        0.19   Preferred Series E      1,749,089        10,489        8,662  
   Software      Equity        0.04   Preferred Series G      326,797        2,211        1,618  
             

 

 

    

 

 

    

 

 

 

Total Palantir Technologies

                2,085,421        12,747        10,327  

Sprinklr, Inc.
29 West 35th Street, 7th Floor
New York, NY 10001

   Software      Equity        0.68   Common Stock      700,000        3,749        3,226  

WildTangent, Inc.
18578 NE 67th Court, Building 5
Redmond, WA 98052

   Software      Equity        0.16   Preferred Series 3      100,000        402        176