PSEC 8-K
Prospect Capital Corp (PSEC)
8-K
2023-12-29
For: 2023-12-29
View Original
Added on
April 10, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): December 29, 2023 (December 28, 2023)
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction | (Commission File Number) | (IRS Employer | ||||||||||||
| of incorporation) | Identification No.) | |||||||||||||
(Address of principal executive offices, including zip code)
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | ||||||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | ||||||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | ||||||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | ||||||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Item 1.01. Entry into a Material Definitive Agreement.
On December 29, 2023, Prospect Capital Corporation (the “Company”) entered into an amendment (the “Amendment”) to the Amended and Restated Dealer Manager Agreement, dated February 25, 2021, with Preferred Capital Securities, LLC (the “Dealer Manager”) (the “Dealer Manager Agreement”), pursuant to which the Dealer Manager has agreed to serve as the Company’s agent and dealer manager for the Company’s offering of up to 80,000,000 shares of any combination of its 5.50% Series A1 Preferred Stock, 5.50% Series M1 Preferred Stock, 5.50% Series M2 Preferred Stock, 6.50% Series A3 Preferred Stock, 6.50% Series M3 Preferred Stock, Floating Rate Series A4 Preferred Stock and Floating Rate Series M4 Preferred Stock, each par value $0.001 per share, and with a $2,000,000,000 aggregate liquidation preference (together, the "Preferred Stock”). The Company may offer any future series of Preferred Stock, provided that the aggregate number of shares issued across all series of Preferred Stock offered pursuant to the Dealer Manager Agreement shall not exceed 80,000,000 shares.
The Preferred Stock is registered with the Securities and Exchange Commission pursuant to an automatic shelf registration statement on Form N-2 (File No. 333-269714) under the Securities Act of 1933, as amended (the “Registration Statement”), and will be offered and sold pursuant to a prospectus supplement dated December 29, 2023, and a base prospectus dated February 10, 2023, relating to the Registration Statement (collectively, the “Prospectus”).
The foregoing description of the Amendment is only a summary and is qualified in its entirety by reference to the full text of the Amendment, a copy of which is filed as Exhibit 1.1 to this Current Report on Form 8-K and incorporated herein by reference.
Venable LLP, special Maryland counsel to the Company, has issued a legal opinion relating to the validity of the shares of Preferred Stock, a copy of which is attached to this Form 8-K as Exhibit 5.1.
Item 3.03. Material Modification to Rights of Security Holders.
On December 28, 2023, the Company filed two Articles Supplementary (the “Articles Supplementary”) with the State Department of Assessments and Taxation of Maryland (“SDAT”). One Articles Supplementary reclassified and designated 160,000,000 shares of the Company’s authorized and unissued shares of common stock, par value $0.001 per share (the “Common Stock”), into 80,000,000 shares of a series of preferred stock, designated as “Preferred Stock, Series A4”, par value $0.001 per share (the “Series A4 Shares”) and 80,000,000 shares of a series of preferred stock, designated as “Preferred Stock, Series M4”, par value $0.001 per share (the “Series M4 Shares”).
The other Articles Supplementary reclassified (i) 8,000,000 authorized but unissued shares of Common Stock as additional shares of Convertible Preferred Stock, Series A1, par value $0.001 per share, (ii) 8,000,000 authorized but unissued shares of Common Stock as additional shares of Convertible Preferred Stock, Series A3, par value $0.001 per share, (iii) 8,000,000 authorized but unissued shares of Common Stock as additional shares of Convertible Preferred Stock, Series M1, par value $0.001 per share, (iv) 8,000,000 authorized but unissued shares of Common Stock as additional shares of Convertible Preferred Stock, Series M2, par value $0.001 per share, and (v) 8,000,000 authorized but unissued shares of Common Stock as additional shares of Convertible Preferred Stock, Series M3, par value $0.001 per share.
The foregoing reclassifications decreased the number of shares classified as Common Stock from 1,552,100,000 shares immediately prior to the reclassification to 1,352,100,000 shares immediately after the reclassification. The description of the Preferred Stock contained in the section of the Prospectus entitled “Description of the Preferred Stock” is incorporated herein by reference.
The foregoing description of the Preferred Stock is only a summary and is qualified in its entirety by reference to the full text of the Articles Supplementary, copies of which are filed as Exhibits 3.1 and 3.2 to this Current Report on Form 8-K and incorporated herein by reference.
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Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
Item 3.03 above with respect to the Articles Supplementary is incorporated in this Item 5.03 in its entirety.
Item 8.01. Other Events.
Preferred Stock Dividend Reinvestment Plan
Effective as of December 29, 2023, the Company amended and restated its Preferred Stock Distribution Reinvestment Plan (the “DRIP”). Under the DRIP, holders of the Preferred Stock (“preferred stockholders”) series will have dividends on their Preferred Stock series automatically reinvested in additional shares of such Preferred Stock series at a price per share (i) of $25.00 for Floating Rate Series A4 Preferred Stock and Floating Rate Series M4 Preferred Stock and (ii) of $23.75 per share (95% of the stated value of $25.00 per share of Preferred Stock) for 5.50% Series A1 Preferred Stock, 5.50% Series M1 Preferred Stock, 5.50% Series M2 Preferred Stock, 5.50% Series AA1 Preferred Stock, 5.50% Series A2 Preferred Stock, 5.50% Series MM1 Preferred Stock, 6.50% Series A3 Preferred Stock, 6.50% Series M3 Preferred Stock, 6.50% Series AA2 Preferred Stock and 6.50% Series MM2 Preferred Stock, if they so elect. Once enrolled in the DRIP, preferred stockholders may elect to reinvest all, but not less than all, of their dividends in additional shares of the Preferred Stock series, until they terminate their participation in the DRIP. The Company will pay all fees or other charges on shares of the Preferred Stock series purchased through the DRIP.
Shares of the Preferred Stock series purchased under the DRIP will come from the Company’s authorized but unissued shares of the Preferred Stock series. Shares of the Preferred Stock series received through the DRIP will be of the same series and have the same original issue date for purposes of calculating the fee associated with a preferred stockholder’s election to convert shares or redeem shares, as applicable, of the Preferred Stock series held by the preferred stockholder prior to the listing of the Preferred Stock series on a national securities exchange and for other terms of the Preferred Stock series based on issuance date as the Preferred Stock series for which the dividend was declared. The Company may terminate the DRIP at any time in its sole discretion. The description of the DRIP contained in the section of the Prospectus entitled “Preferred Stock Dividend Reinvestment Plan” is incorporated herein by reference.
The foregoing description of the DRIP is only a summary and is qualified in its entirety by reference to the full text of the DRIP, a copy of which is filed as Exhibit 99.1 to this Current Report on Form 8-K and incorporated herein by reference.
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Item 9.01. Financial Statements and Exhibits
(d) Exhibits
1.1 Amendment No. 4 to Amended and Restated Dealer Manager Agreement, dated December 29, 2023,
between the Company and Preferred Capital Securities, LLC.
3.1 Articles Supplementary to the Articles of Amendment and Restatement of Prospect Capital Corporation - Preferred Stock, Series A4, Preferred Stock Series M4
3.2 Articles Supplementary to the Articles of Amendment and Restatement of Prospect Capital Corporation - Convertible Preferred Stock
5.1 Opinion of Venable LLP
99.1 Amended and Restated Preferred Stock Dividend Reinvestment Plan
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Current Report on Form 8-K to be signed on its behalf by the undersigned hereunto duly authorized.
Prospect Capital Corporation
By: /s/ M. Grier Eliasek
Name: M. Grier Eliasek
Title: Chief Operating Officer
Date: December 29, 2023
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Index to Exhibits
| Exhibit Number | Description | ||||
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Exhibit 1.1
PROSPECT CAPITAL CORPORATION
AMENDMENT NO. 4
TO
AMENDED AND RESTATED DEALER MANAGER AGREEMENT
This amendment (this “Amendment No. 4”) to the Amended and Restated Dealer Manager Agreement (the “A&R Dealer Manager Agreement”) dated as of February 25, 2021 is by and between Prospect Capital Corporation, a corporation organized under the laws of Maryland (the “Company”), and Preferred Capital Securities, LLC, a Georgia limited liability company (the “Dealer Manager”), and shall be effective as of the date hereof (the “Effective Date”).
The Company and the Dealer Manager wish to amend the A&R Dealer Manager Agreement as follows.
1. The first paragraph located on first page of the A&R Dealer Manager Agreement, directly under the salutation “Ladies and Gentlemen:”, is hereby deleted and replaced in its entirety with the following:
Prospect Capital Corporation, a corporation organized under the laws of Maryland (the “Company”), proposes to offer up to 80,000,000 shares, par value $0.001 per share, of preferred stock, with a $2,000,000,000 aggregate liquidation preference (the “Preferred Stock”). The Preferred Stock will be issued in multiple series, including the 5.50% Series Al Preferred Stock (“Series Al Preferred Stock”), the 5.50% Series M1 Preferred Stock (“Series M1 Preferred Stock”), the 5.50% Series M2 Preferred Stock (“Series M2 Preferred Stock”), the 6.50% Series A3 Preferred Stock (“Series A3 Preferred Stock”), the 6.50% Series M3 Preferred Stock (“Series M3 Preferred Stock”), the floating rate Series A4 Preferred Stock (“Series A4 Preferred Stock”), and the floating rate Series M4 Preferred Stock (“Series M4 Preferred Stock”), and the Company may offer any future series of Preferred Stock, provided that the aggregate number of shares issued across all series of Preferred Stock offered pursuant to this Dealer Manager Agreement (this “Agreement”) shall not exceed 80,000,000 shares (the “Offering”). Each share of Preferred Stock will be sold at a public offering price of $25.00 per share (the “Stated Value”). The minimum investment amount is $5,000, but purchases of less than $5,000 may be permitted by the Company in the Company’s sole discretion.
2. Section 3(c) of the A&R Dealer Manager Agreement is hereby deleted and replaced in in its entirety with the following:
(c) Submission of Orders. The Company will sell Preferred Stock using two closing services provided by the Depository Trust Company (“DTC”). The first service is DTC closing (“DTC Settlement”), and the second service is Direct Registration Service (“DRS Settlement”). Investors purchasing through DTC
Settlement will coordinate with their registered representatives to pay the full purchase price for their shares of Preferred Stock by the settlement date, and such payments will not be held in escrow. Investors permitted to purchase through DRS Settlement must complete and sign subscription agreements, which will be delivered to the Escrow Agent. In addition, investors utilizing the DRS Settlement service must pay the full purchase price for their shares of Preferred Stock to the Escrow Agent, to be held in trust for the investor’s benefit pending release to the Company.
The Company will deliver the Series A1 Preferred Stock, the Series A3 Preferred Stock and the Series A4 Preferred Stock and the Series M1 Preferred Stock, the Series M3 Preferred Stock and the Series M4 Preferred Stock through the facilities of DTC Settlement or DRS Settlement, and the Series M2 Preferred Stock only through DRS Settlement. The method of delivery of any future series of Preferred Stock will be agreed by the Company and the Dealer Manager from time to time in writing.
The methods of delivery of investors’ subscriptions to the Company are detailed as follows:
(i) DTC Settlement. Registered representatives whose clients are investing through DTC Settlement must coordinate with their clients to pay the full purchase price for the Preferred Stock by the settlement date. Investor payments under the DTC Settlement option will not be held in escrow. Investors must warrant and represent to the registered representative that they have received a copy of the Prospectus and have had time to review it.
(ii) DRS Settlement. Subject to compliance with Rule 15c2-4 of the Exchange Act, in connection with purchases using DRS Settlement, the Dealer Manager or Soliciting Dealer, as applicable, will promptly deposit any checks received from subscribers in an escrow account maintained by the Escrow Agent. When the Dealer Manager’s or a Soliciting Dealer’s internal supervisory procedures are conducted at the site at which the Subscription Agreement and check were initially received from the subscriber, the Dealer Manager or Soliciting Dealer, as applicable, shall transmit the Subscription Agreement and check to the Escrow Agent by the end of the next business day following receipt of the check and Subscription Agreement. When, pursuant to the Dealer Manager’s or the Soliciting Dealer’s internal supervisory procedures, final internal supervisory procedures are conducted at a different location (the “Final Review Office”), the Dealer Manager or Soliciting Dealer, as applicable, shall transmit the check and Subscription Agreement to the Final Review Office by the end of the next business day following the receipt of the Subscription Agreement and check. The Final Review Office will, by the end of the next business day following its receipt of the Subscription Agreement and check, forward both the Subscription Agreement and check to the Escrow Agent. If any Subscription Agreement is rejected by the Dealer Manager or the Company, then the Subscription Agreement and check will be returned to the rejected subscriber within 10 business days from
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the date of rejection. If accepted, the funds will be transferred into the Company’s general account by the Escrow Agent on the next closing date. The Company will provide investors a confirmation of their purchase subsequent to closing, and will generally admit stockholders on a semimonthly basis.
3.Section 3(e)(ii) of the A&R Dealer Manager Agreement is hereby deleted and replaced in in its entirety with the following:
(ii) Subject to the special circumstances described in or otherwise provided in the “Plan of Distribution” section of the Prospectus or this Section 3(e) Dealer-Manager Compensation, as compensation for acting as the dealer manager, the Company will pay the Dealer Manager a dealer manager fee in an amount equal to three percent (3.0%) of the Stated Value per share of Preferred Stock sold in the Offering (the “Dealer Manager Fee”). The Dealer Manager may retain or re-allow all or a portion of the Dealer Manager Fee, subject to federal and state securities laws, to the Soliciting Dealer who sold the Preferred Stock, as described more fully in the Financial Intermediary Agreement.
4.Section 3(i) of the A&R Dealer Manager Agreement is hereby deleted and replaced in in its entirety with the following:
(i) Notwithstanding anything to the contrary in this Agreement, including this Section 3, it is expressly acknowledged and agreed between the Company and the Dealer Manager that the Company is permitted to sell up to $300,000,000 in aggregate liquidation preference of Preferred Stock in the Offering directly to investors in negotiated transactions in which neither the Dealer Manager nor any other entity is acting as an underwriter, dealer or agent. Accordingly, the Dealer Manager shall not receive any dealer manager fee or selling commission in connection with the Company’s direct sale of shares of Preferred Stock to an investor. The Dealer Manager shall not have any obligations or liabilities under this Agreement with respect to any such direct sales of shares of Preferred Stock by the Company to investors and, for the avoidance of doubt, Section 7 of this Agreement shall apply to the Company’s direct sale of shares of Preferred Stock. The gross proceeds the Company receives from any such direct sales will not be included in the gross proceeds from the sale of the Preferred Stock for purposes of calculating FINRA’s 10% cap.
5.Section 9(i) of the A&R Dealer Manager Agreement is hereby deleted and replaced in in its entirety with the following:
9. Termination of this Agreement.
i. Term; Expiration.
1. This Agreement shall automatically terminate at the first occurrence of any of the following events: (A) the settlement of the sale of all 80,000,000 shares of Preferred Stock that are the subject of the Offering or the termination date of the Offering or (B) the date the
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Dealer Manager’s license or registration to act as a broker-dealer is revoked or suspended by any federal, self-regulatory or state agency and such revocation or suspension is not cured within ten (10) days from the date of such occurrence (and this Agreement shall be deemed to be suspended during such revocation or suspension period).
2. This Agreement may be terminated by either party upon 60 calendar days’ written notice to the other party.
6.The form of Exhibit A of the A&R Dealer Manager Agreement is hereby deleted and replaced in its entirety with the form of Exhibit A hereto. In accordance with Section 17(i) of the form of Exhibit A, any prior selection made on Schedule II with respect to the Series A1 Preferred Stock or Series A3 Preferred Stock will be deemed to also be made with respect to the Series A4 Preferred Stock, and any prior selection made on Schedule II with respect to the Series M1 Preferred Stock or Series M3 Preferred Stock will be deemed to also be made with respect to the Series M4 Preferred Stock.
7.The form of Exhibit B of the A&R Dealer Manager Agreement is hereby deleted and replaced in its entirety with the form of Exhibit B hereto.
Except as specifically set forth herein, all other terms and conditions of the A&R Dealer Manager Agreement shall remain unmodified and in full force and effect, the same being confirmed and republished hereby.
This Amendment may be executed by the parties hereto on any number of counterparts, delivery of which may occur by facsimile or as an attachment to an electronic communication, each of which shall be deemed an original, and all of said counterparts taken together shall be deemed to constitute one and the same instrument.
[Signatures on following page]
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IN WITNESS WHEREOF, the parties hereto have each duly executed this Amendment No. 4 on this 29th day of December, 2023.
THE COMPANY:
PROSPECT CAPITAL CORPORATION
By: /s/ M. Grier Eliasek
Name: M. Grier Eliasek
Title: Chief Operating Officer
Name: M. Grier Eliasek
Title: Chief Operating Officer
THE DEALER MANAGER:
PREFERRED CAPITAL SECURITIES, LLC
By: /s/ Jeff Smith
Name: Jeff Smith
Title: Chief Executive Officer
Name: Jeff Smith
Title: Chief Executive Officer
[Signature Page to Amendment No. 4 to A&R Dealer Manager Agreement]
EXHIBIT A
FORM OF FINANCIAL INTERMEDIARY AGREEMENT
FORM OF FINANCIAL INTERMEDIARY AGREEMENT
PROSPECT CAPITAL CORPORATION
To:
RE: PROSPECT CAPITAL CORPORATION
Ladies and Gentlemen:
Preferred Capital Securities, LLC (the “Dealer Manager”) entered into an amended and restated dealer manager agreement, , February 25, 2021 (the “Dealer Manager Agreement”), with Prospect Capital Corporation, a Maryland corporation (the “Company”), under which the Dealer Manager agreed to use its reasonable best efforts to solicit subscriptions in connection with the public offering (the “Offering”) for up to 80,000,000 shares, par value $0.001 per share, of preferred stock, with a $2,000,000,000 aggregate liquidation preference (the “Preferred Stock”). The Preferred Stock will be issued in multiple series, including the 5.50% Series Al Preferred Stock (“Series Al Preferred Stock”), the 5.50% Series Ml Preferred Stock (“Series M1 Preferred Stock”), the 5.50% Series M2 Preferred Stock (“Series M2 Preferred Stock”), the 6.50% Series A3 Preferred Stock (“Series A3 Preferred Stock”), the 6.50% Series M3 Preferred Stock (“Series M3 Preferred Stock”), the floating rate Series A4 Preferred Stock (the “Series A4 Preferred Stock”) and the floating rate Series M4 Preferred Stock (the “Series M4 Preferred Stock”), and the Company may offer any future series of Preferred Stock, provided that the aggregate number of shares issued across all series of Preferred Stock shall not exceed 80,000,000 shares (the “Offering”). Each share of Preferred Stock will be sold at a public offering price of $25.00 per share (the “Stated Value”). The minimum investment amount is $5,000, but purchases of less than $5,000 may be permitted by the Company in the Company’s sole discretion. The Offering will commence on the initial Effective Date (as defined below). Unless otherwise defined herein, capitalized terms used herein shall have the respective meanings therefor as in the Dealer Manager Agreement.
In connection with the performance of the Dealer Manager’s obligations under Section 3 of the Dealer Manager Agreement, the Dealer Manager is authorized to retain the services of securities dealers (the “Soliciting Dealers”) who are members of the Financial Industry Regulatory Authority (“FINRA”) to solicit subscriptions for Preferred Stock in connection with the Offering. The Dealer Manager is also authorized to enter into agreements with selected investment advisers (“SIAs”) pursuant to which the SIAs have agreed to provide their clients with information concerning the Offering and the procedures for subscribing for shares of Preferred Stock (Soliciting Dealers and SIAs are referred to collectively as “Financial Intermediaries”). You are hereby invited to become a Financial Intermediary and, as such, to use your reasonable best efforts to solicit subscribers for Preferred Stock or otherwise provide information regarding the Preferred Stock, in accordance with the following terms and conditions of this Financial Intermediary Agreement (this “Agreement”). The Company will sell Preferred Stock using two closing services provided by the Depository Trust Company (“DTC”). The first service is DTC closing (“DTC Settlement”), and the second service is Direct Registration Service (“DRS Settlement”). The Company will deliver the Series A1 Preferred Stock, the Series M1 Preferred Stock, the Series A3 Preferred Stock, the Series M3 Preferred Stock, the Series A4
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Preferred Stock and Series M4 Preferred Stock through the facilities of DTC Settlement or DRS Settlement and the Series M2 Preferred Stock only through DRS Settlement.
1.Registration Statement and Prospectus. The Company has filed with the Securities and Exchange Commission (the “Commission”) an automatic shelf registration statement as defined in Rule 405 under the Securities Act of 1933, as amended (the “Securities Act”), and the rules and regulations promulgated thereunder (the “Securities Act Rules and Regulation”), as applied pursuant to the Small Business Credit Availability Act (“SBCAA”) or otherwise, on Form N-2 covering the registration of the Company’s securities under the Securities Act, and the offer and sale thereof from time to time in accordance with Rule 415 of the Securities Act Rules and Regulation. Such registration statement became effective immediately upon its filing with the Commission. Prior to the expiration of any currently effective registration statement covering the registration of the Company’s securities under the Securities Act, and the offer and sale thereof from time to time in accordance with Rule 415 of the Securities Act Rules and Regulation, the Company will prepare and file a new automatic shelf registration statement on Form N-2 covering the continued registration of the Company’s securities under the Securities Act, and the offer and sale thereof from time to time in accordance with Rule 415 of the Securities Act Rules and Regulation.
Except where the context otherwise requires, each such registration statement, as amended, including all documents filed as a part thereof or incorporated by reference therein, and including any Rule 430B information contained in a prospectus related to the Offering subsequently filed with the Commission pursuant to Rule 497, Rule 424 or such other Securities Act Rules and Regulations as may be applicable to the Company and deemed to be part of such registration statement and also including any Rule 462(b) Registration Statement, is herein called the “Registration Statement.”
“Prospectus” means the base prospectus relating to various securities of the Company that is included in the Registration Statement and any prospectus supplement (including a pricing supplement, if applicable) relating to the Offering, filed by the Company with the Commission pursuant to Rule 497 or Rule 424, as applicable, including, in each case, any document incorporated or deemed to be incorporated therein by reference pursuant to the SBCAA or the rules of the Commission promulgated thereunder or otherwise.
“Registration Statement” without reference to a time means such registration statement, as amended, as of the time of the first contract of sale of Preferred Stock of a particular series, which time shall be considered the new effective date of such registration statement, as amended, with respect to such series of Preferred Stock (within the meaning of Rule 430B(f)(2)). For purposes of this definition, information contained in a form of prospectus, prospectus supplement or pricing supplement that is retroactively deemed to be a part of such registration statement, as amended, pursuant to Rule 430B or Rule 430C shall be considered to be included in such registration statement, as amended, as of the time specified in Rule 430B or Rule 430C, as the case may be.
All references in this Agreement to financial statements and schedules and other information which is “included” or “stated” in the Registration Statement or the
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Prospectus (and all other references of like import) shall be deemed to mean and include all such financial statements and schedules and other information which is or is deemed to be incorporated by reference in or otherwise deemed under the SBCAA to be a part of or included in the Registration Statement or the Prospectus, as the case may be, as of any specified date; and all references in this Agreement to amendments or supplements to the Registration Statement or the Prospectus, including those made pursuant to Rule 497, Rule 424 or such other Securities Act Rules and Regulations as may be applicable to the Company, shall be deemed to mean and include, without limitation, the filing of any document under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which is or is deemed to be incorporated by reference in or otherwise deemed under the SBCAA or the rules of the Commission promulgated thereunder or otherwise to be a part of or included in the Registration Statement or the Prospectus, as the case may be, as of any specified date.
As used herein, the term “Effective Date” shall refer to the effective date of each Prospectus relating to the Offering, unless the context otherwise requires.
2.Compliance with Applicable Rules and Regulations; License, Association Membership and Registration Status.
(a)Upon the date of this Agreement, the undersigned securities dealer will become one of the “Soliciting Dealers” referred to in the Dealer Manager Agreement and is referred to herein as “Soliciting Dealer” or “Financial Intermediary,” as applicable.
Financial Intermediary agrees that solicitation and other activities by it hereunder shall comply with, and shall be undertaken only in accordance with, to the extent applicable to such Financial Intermediary, the terms of the Dealer Manager Agreement, the terms of this Agreement, the Securities Act, the Securities Act Rules and Regulations, the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the applicable rules and regulations promulgated thereunder (the “Exchange Act Rules and Regulations”), including Regulation Best Interest, the FINRA Rules applicable to the Offering from time to time in effect, specifically including, but not in any way limited to, FINRA Rules 2040 (Payments to Unregistered Persons), 2111 (Suitability), 2210 (Communications with the Public), 2231 (Customer Account Statements), 2310 (Direct Participation Programs), 5130 (Restrictions on the Purchase and Sale of Initial Equity Public Offerings), and 5141 (Sale of Securities in a Fixed Price Offering), the Investment Advisers Act of 1940, as amended (the “Advisers Act”), as applicable, and all other applicable federal and state laws and regulations promulgated thereunder.
(b)Registered or Licensed Broker-Dealer. This Section 2(b) applies to any Financial Intermediary who is a registered or licensed broker-dealer.
(i)Financial Intermediary’s acceptance of this Agreement constitutes a representation to the Company and to the Dealer Manager that Financial Intermediary is a properly registered or licensed broker-dealer, duly
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authorized to sell Preferred Stock under federal and state securities laws and regulations in all states where it offers or sells Preferred Stock, and that it is a member in good standing of FINRA. Financial Intermediary represents and warrants that it is currently licensed as a broker-dealer in the jurisdictions identified on Schedule I to this Agreement and that its independent contractors and registered representatives have the appropriate licenses to offer and sell the Preferred Stock in such jurisdictions.
(ii)Financial Intermediary represents and warrants that Financial Intermediary is duly registered as a broker-dealer under the provisions of the Exchange Act and the Exchange Act Rules and Regulations or is exempt from such registration. Financial Intermediary confirms that it and each salesperson acting on its behalf are members in good standing of FINRA and duly licensed by each regulatory authority in each jurisdiction in which the undersigned dealer or such salesperson will offer and sell Preferred Stock, or are exempt from registration with such authorities.
(iii)Financial Intermediary represents that it will comply with the Rules of FINRA and all rules and regulations promulgated by FINRA.
(iv)This Agreement shall automatically terminate with no further action by either party if Financial Intermediary ceases to be a member in good standing of FINRA or with the securities commission of the state in which Soliciting Dealer’s or SIA’s principal office is located. Financial Intermediary agrees to notify the Dealer Manager immediately if Financial Intermediary ceases to be a member in good standing of FINRA or with the securities commission of any state in which Financial Intermediary is currently registered or licensed.
(v)Financial Intermediary shall not execute a sale of the Preferred Stock in a discretionary account without the prior written approval of the transaction by the customer.
(c)Selected Investment Advisers. This Section 2(c) applies to SIAs.
(i)SIA (i) is an entity in good standing in the state in which it is organized, (ii) is registered as an investment adviser under the Advisers Act or if not registered under the Investment Advisers Act, then it is registered under the state securities acts in the states where it does business as an investment adviser, and (iii) has made such regulatory filings and obtained such regulatory approvals in each state in which SIA is required to make such filings or obtain such approvals.
(ii)SIA is and will continue to be registered as an investment advisor under the Advisers Act or, if not registered under the Advisers Act, then registered under the state securities acts in the states where it does
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business as an investment adviser, and will make or comply with any regulatory filings and other regulatory requirements applicable to it in each state in which SIA is required to make such filings or comply with such other requirements.
(iii)SIA is not registered as a broker-dealer with FINRA. While the associated persons of SIA may be registered as a registered representatives with FINRA, SIA agrees that it and its associated persons are subject to and will act in accordance with this Agreement when providing its clients with information concerning the Series M1 Preferred Stock, the Series M2 Preferred Stock, the Series M3 Preferred Stock and the Series M4 Preferred Stock and the procedures for subscribing for such series of Preferred Stock.
(iv)It is understood and agreed that the Series A1 Preferred Stock, Series A3 Preferred Stock and the Series A4 Preferred Stock will be purchased by clients of SIA without a selling commission.
(v)With respect to any purchase of the Series A1 Preferred Stock, Series M1 Preferred Stock, Series M2 Preferred Stock, Series A3 Preferred Stock, Series M3 Preferred Stock, Series A4 Preferred Stock and/or Series M4 Preferred Stock by a client of SIA or by the SIA on behalf of its clients where the SIA has been granted discretionary trading authority, such investment will be in conformity with all applicable provisions of SIA’s investment advisory agreement with such client (including without limitation any and all investment objectives, guidelines and restrictions applicable to the client’s account), and SIA shall have acted in conformity with the standard of care owed to the client under applicable law and any applicable provisions in SIA’s investment advisory agreement with the client.
(vi)This Agreement shall automatically terminate with no further action by either party if SIA ceases to conduct business as an investment adviser as set forth in Section 2(c)(i). SIA agrees to notify the Dealer Manager immediately if SIA ceases to be in good standing with the securities commission of any state in which SIA is currently registered.
(vii)In addition to the anti-money laundering requirements set forth in Section 14, below, the SIA represents, warrants, and agrees that it:
(1)has implemented its own anti-money laundering program consistent with the requirements of 31 U.S.C. 5318(h) and will update such anti-money laundering program as necessary to implement changes in applicable laws and guidance;
(2)or its agent, will perform the specified requirements of the Dealer Manager’s customer identification program (“CIP”) and/or
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beneficial ownership procedures in a manner consistent with Section 326 of the USA PATRIOT Act and the beneficial ownership requirements, respectively;
(3)will promptly disclose to the Dealer Manager potential suspicious or unusual activity detected as part of the CIP and/or beneficial ownership procedures being performed on the Dealer Manager’s behalf in order to enable the Dealer Manager to file a suspicious activity report, as appropriate, based on the Dealer Manager’s judgment;
(4)will certify annually to the Dealer Manager that the representations set forth herein remain accurate and that it is compliance with such representations;
(5)will promptly provide its books and records relating to its performance of the CIP and/or beneficial ownership procedures to the SEC, to a self-regulatory organization that has jurisdiction over the Dealer Manager, or to authorized law enforcement agencies either directly or through the Dealer Manager at the request of the Dealer Manager, the SEC, self-regulatory organization, or authorized law enforcement agency.
3.Limitation of Offer; Investor Suitability.
(a)Financial Intermediary will not offer Preferred Stock and will not permit any of its registered representatives to offer Preferred Stock in any jurisdiction unless both Financial Intermediary and such registered representative are duly licensed to transact securities business in such jurisdiction. In offering Preferred Stock, Financial Intermediary shall comply with the provisions of the FINRA Rules to the extent applicable.
(b)In offering the sale of Preferred Stock to any person, Financial Intermediary will have reasonable grounds to believe (based on such information obtained from the investor concerning the investor’s age, investment objectives, other investments, financial situation, needs or any other information known by Financial Intermediary after due inquiry) that: (A) such person is in a financial position appropriate to enable such person to realize to a significant extent the benefits described in the Prospectus, including the tax benefits where they are a significant aspect of the Company; (B) the investor has a fair market net worth sufficient to sustain the risks inherent in the program, including loss of investment and lack of liquidity; (C) an investment in the Preferred Stock is otherwise suitable for such person. Financial Intermediary further will use its best efforts to determine the suitability and appropriateness of an investment in the Preferred Stock of each proposed investor solicited by a person associated with Financial Intermediary by reviewing documents and records disclosing the basis upon which the determination as to suitability was reached as to each proposed investor, whether
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such documents and records relate to accounts which have been closed, accounts which are currently maintained or accounts hereinafter established. For Preferred Stock a Financial Intermediary has sold using DRS Settlement, Financial Intermediary shall maintain all Subscription Agreements (as defined below) for at least six years or for a period of time not less than that required in order to comply with all applicable federal and other regulatory requirements. Financial Intermediary may satisfy its obligation by contractually requiring Subscription Agreements to be maintained by the investment advisers or banks it engages. Financial Intermediary further agrees to comply with the record keeping requirements of the Exchange Act, including, but not limited to, Rules 17a-3 and 17a-4 promulgated under the Exchange Act and, as applicable, the records required by Section 204 of the Advisers Act and Rule 204-2 thereunder. Financial Intermediary agrees to make such documents and records available to the Dealer Manager and the Company upon request, and representatives of the Commission and FINRA upon Financial Intermediary’s receipt of an appropriate document subpoena or other appropriate request for documents from any such agency.
(c)For Preferred Stock a Financial Intermediary has sold using DRS Settlement, Financial Intermediary has or will obtain the consent of each person who subscribes for such Preferred Stock to access such person’s investor account at the Company’s transfer agent and view the account information contained in such person’s investor account at the Company’s transfer agent.
4.Delivery of Prospectus and Approved Sales Literature.
(a)Delivery of Prospectus and Approved Sales Literature. Financial Intermediary will:
(i)deliver a Prospectus, as then supplemented or amended, to each person who subscribes for Preferred Stock prior to the tender of such person’s subscription agreement (the “Subscription Agreement”), if using DRS Settlement, or prior to submitting orders, if using DTC Settlement;
(ii)promptly comply with the written request of any person for a copy of the Prospectus, as then supplemented or amended, during the period between the initial Effective Date and the termination of the Offering;
(iii)deliver to any person, in accordance with applicable law or as prescribed by any state securities administrator, a copy of any prescribed document included within or incorporated by reference in the Registration Statement and any supplements thereto during the course of the Offering;
(iv)not use any sales materials in connection with the solicitation of purchasers of Preferred Stock except Approved Sales Literature;
(v)to the extent the Company provides Approved Sales Literature, not use such materials unless accompanied or preceded by the Prospectus, as then
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currently in effect, and as may be amended or supplemented in the future; and
(vi)not give or provide any information or make any representation or warranty other than information or representations contained in the Prospectus or the Approved Sales Literature. Financial Intermediary will not publish, circulate or otherwise use any other advertisement or solicitation material in connection with the Offering without the Dealer Manager’s express prior written approval. As used in this Agreement, “Approved Sales Literature” has the meaning set forth in the Dealer Manager Agreement.
(b)Agency is Not Created. Nothing contained in this Agreement shall be deemed or construed to make Financial Intermediary an employee, agent, representative or partner of the Dealer Manager or the Company, and Financial Intermediary is not authorized to act for the Dealer Manager or the Company.
(c)Documents Must Be Accompanied or Preceded by a Prospectus. Financial Intermediary will not send or provide amendments or supplements to the Prospectus or any Approved Sales Literature to any investor unless it has previously sent or provided a Prospectus and all amendments and supplements thereto to that investor or has simultaneously sent or provided a Prospectus and all amendments and supplements thereto with such Prospectus amendment or supplement or Approved Sales Literature.
(d)Broker-Dealer Use Only Material. Financial Intermediary will not show to or provide any investor or reproduce any material or writing which is supplied to it by the Dealer Manager and marked “broker-dealer use only,” institutional communication, or otherwise bearing a legend denoting that it is not to be used in connection with the offer or sale of Preferred Stock to members of the public.
(e)Copies of Prospectuses and Approved Sales Literature. The Dealer Manager will supply Financial Intermediary with reasonable quantities of the Prospectus (including any supplements thereto), as well as any Approved Sales Literature, for delivery to investors.
(f)Prospectus Delivery Requirement. Financial Intermediary shall furnish a copy of any revised preliminary Prospectus to each person to whom it has furnished a copy of any previous preliminary Prospectus, and further agrees that it will mail or otherwise deliver all preliminary and final Prospectuses required for compliance with the provisions of Rule 15c2-8 under the Exchange Act.
(g)Reliance by Soliciting Dealer. Financial Intermediary agrees that it will rely upon no statement whatsoever, written or oral, other than the statements in the final Prospectus (as amended or supplemented from time to time) or in Approved Sales Literature. Financial Intermediary is not authorized by the Dealer Manager nor the Company to give any information or to make any representation not contained in
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the final Prospectus (as amended or supplemented from time to time) or in Approved Sales Literature in connection with the sale of Preferred Stock.
5.Submission of Orders; Right to Reject Orders.
(a)With respect to Financial Intermediary’s participation in any resales or transfers of Preferred Stock, Financial Intermediary agrees to comply with any applicable requirements set forth in Section 2.
(b)If using DRS Settlement:
(i)Payments for Preferred Stock shall be made by wire transfer to the Escrow Agent (as defined below) or checks payable to “UMB Bank, N.A., Escrow Agent for Prospect Capital Corporation”. Financial Intermediary shall forward original checks for the purchase of Preferred Stock together with an original Subscription Agreement, completed, executed and initialed where indicated by the subscriber as provided for in the Subscription Agreement, to UMB Bank, N.A. (the “Escrow Agent”) at the address provided in the Subscription Agreement;
(ii)When Financial Intermediary’s internal supervisory procedures are conducted at the site at which the Subscription Agreement and check for the purchase of Preferred Stock was initially received by Financial Intermediary from the subscriber, Financial Intermediary shall transmit the Subscription Agreement and check for the purchase of Preferred Stock to the Escrow Agent by the end of the next business day following receipt of the check and Subscription Agreement. When, pursuant to Financial Intermediary’s internal supervisory procedures, Financial Intermediary’s final internal supervisory procedures are conducted at a different location (the “Final Review Office”), Financial Intermediary shall transmit the check for the purchase of Preferred Stock and Subscription Agreement to the Final Review Office by the end of the next business day following Financial Intermediary’s receipt of the Subscription Agreement and check for the purchase of Preferred Stock. The Final Review Office will, by the end of the next business day following its receipt of the Subscription Agreement and check for the purchase of Preferred Stock, forward both the Subscription Agreement and check for the purchase of Preferred Stock to the Escrow Agent. If any Subscription Agreement solicited by Financial Intermediary is rejected by the Company, then the Subscription Agreement and check will be returned to the rejected subscriber within ten business days from the date of rejection. As used in this Agreement, “business day” means any day other than a Saturday, Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close; and
(c)If using DTC Settlement, Financial Intermediary will coordinate for payment in connection with their electronically placed orders.
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(d)All subscriptions and orders, whether initial or additional, are subject to acceptance by and shall become effective upon confirmation by the Company, which reserves the right to reject any subscription or order in its sole discretion for any or no reason. Thus, for orders settled using DTC Settlement, Financial Intermediary acknowledges that once an order has become effective upon confirmation by the Company, Financial Intermediary may not modify the order after 5:00 PM EST on the date the order is confirmed by the Company. After 5:00 PM EST on the date the order is confirmed by the Company, the order will be considered a firm order and Financial Intermediary is expected to settle the trade as follows: (i) if Financial Intermediary has receive payment in full from an investor for the investor’s purchase of Preferred Stock on or before 5:00 PM EST on the settlement date, such sale of Preferred Stock for which the Company has received the consideration applicable thereto as described herein, in the Dealer Manager Agreement and in the Prospectus, and for which no written notice of failure has been given, will be final, not subject to rescission or reversal; (ii) if Financial Intermediary has not received payment in full from the applicable investor on or before the second business day after the settlement date applicable to purchased shares of Preferred Stock, such investor’s order, upon written notice to the Dealer Manager, shall be canceled, treated as a failed trade and any exchange of funds and securities as between the Company and Financial Intermediary in anticipation of settling the purchase in the ordinary course shall be reversed and rescinded; and (iii) after 5:00 PM EST on the second business date after the settlement date, a sale of Preferred Stock for which the Company has received the consideration applicable thereto as described herein, in the Dealer Manager Agreement and in the Prospectus, and for which no written notice of failure has been given, will be final, not subject to rescission or reversal, and Financial Intermediary’s receipt of payment from applicable investors shall be at the sole risk of Financial Intermediary. Subscriptions and orders not accompanied by the required instrument of payment for Preferred Stock may be rejected. Issuance and delivery of a share of Preferred Stock will be made only after a sale of a share of Preferred Stock is deemed by the Company to be completed in accordance with Section 3(d) of the Dealer Manager Agreement. If a subscription or order is rejected, cancelled or rescinded for any reason, then Financial Intermediary will return to the Dealer Manager any selling commissions or Dealer Manager Fees theretofore paid with respect to such order, and, if Financial Intermediary fails to so return any such selling commissions or Dealer Manager Fees, the Dealer Manager shall have the right to offset amounts owned against future commissions or Dealer Manager Fees due and otherwise payable to Financial Intermediary (it being understood and agreed that such right to offset shall not be in limitation of any other rights or remedies that the Dealer Manager may have in connection with such failure).
(e)Notwithstanding the other provisions of this Section 5, the Dealer Manager and/or the Company have the sole right to determine and change without notice to Soliciting Dealer: (i) the number and timing of closings, including the ability to change the number and timing of closings after communicating the anticipated
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closing to Soliciting Dealer; (ii) to limit the total amount of Series A1 Preferred Stock, Series M1 Preferred Stock, Series M2 Preferred Stock, Series A3 Preferred Stock, Series M3 Preferred Stock, Series A4 Preferred Stock and/or Series M4 Preferred Stock sold by all Soliciting Dealers per closing; (iii) to limit the amount of Series A1 Preferred Stock, Series M1 Preferred Stock, Series M2 Preferred Stock, Series A3 Preferred Stock, Series M3 Preferred Stock, Series A4 Preferred Stock and/or Series M4 Preferred Stock sold by Soliciting Dealer per closing; and (iv) to limit the total number of shares of Series A1 Preferred Stock, Series M1 Preferred Stock, Series M2 Preferred Stock, Series A3 Preferred Stock, Series M3 Preferred Stock, Series A4 Preferred Stock and/or Series M4 Preferred Stock sold by Soliciting Dealer.
6.Soliciting Dealer Compensation.
(a)Selling Commissions. Subject to the terms and conditions set forth herein, in Schedule II, and in the Dealer Manager Agreement and, subject to the special circumstances and discounts described in the “Plan of Distribution” section of the Prospectus, the Dealer Manager shall pay to Soliciting Dealer a selling commission of up to and including 7% of the Stated Value per share of Series A1 Preferred Stock, Series A3 Preferred Stock and Series A4 Preferred Stock sold by it and accepted and confirmed by the Company. To the extent the selling commission is below 7%, the public offering price per share of Series A1 Preferred Stock, Series A3 Preferred Stock and Series A4 Preferred Stock shall be decreased in accordance with the schedule included in the “Plan of Distribution” section of the Prospectus.
Selling commissions on shares of Series A1 Preferred Stock, Series A3 Preferred Stock and Series A4 Preferred Stock will be waived for customers of Financial Intermediary with fee-based or “wrap” accounts. Additionally, no selling commissions will be paid for sales of Series M1 Preferred Stock, Series M2 Preferred Stock, Series M3 Preferred Stock or Series M4 Preferred Stock.
For purposes of this Section 6(a), shares of Series A1 Preferred Stock, Series A3 Preferred Stock and Series A4 Preferred Stock are “sold” for DTC Settlement only when electronically submitted orders are confirmed by the Dealer Manager.
Soliciting Dealer may choose to offer and sell Series A1 Preferred Stock, Series M1 Preferred Stock, Series M2 Preferred Stock, Series A3 Preferred Stock, Series M3 Preferred Stock, Series A4 Preferred Stock or Series M4 Preferred Stock, or any combination of the Preferred Stock and will indicate their selections by completing Schedule II to this Agreement.
(b)Authority to Issue Confirmation. Notwithstanding the foregoing, it is understood and agreed that no commission shall be payable with respect to particular shares of Series A1 Preferred Stock, Series A3 Preferred Stock and Series A4 Preferred Stock if the Dealer Manager or the Company rejects a proposed subscriber’s
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Subscription Agreement. Accordingly, Soliciting Dealer shall have no authority to issue a confirmation (pursuant to Exchange Act Rule 10b-10) to any subscriber.
(c)Reallowance of Dealer Manager Fee. The Dealer Manager may, in its sole discretion, re-allow all or a portion of the Dealer Manager Fee received by it to Soliciting Dealer as a marketing fee. Subject to the immediately succeeding paragraph, the Dealer Manager may, in its sole discretion, request the Company to reimburse, to Soliciting Dealer for reasonable accountable bona fide due diligence expenses, provided such expenses have actually been incurred, are supported by detailed and itemized invoices provided to the Company and the Dealer Manager, and the Company or the Dealer Manager had theretofore given its prior written approval of incurrence of such expenses.
(d)Marketing Expenses. Certain marketing expenses such as Soliciting Dealer conferences may be advanced to Soliciting Dealer and later deducted from the portion of the Dealer Manager Fee re-allowed to that Soliciting Dealer. Soliciting Dealer will repay any such advance to the extent not expended on marketing expenses. Any such advance shall be deducted from the maximum amount of the Dealer Manager Fee that may otherwise be re-allowable to Soliciting Dealer. Notwithstanding anything herein to the contrary, Soliciting Dealer will not be entitled to receive any Dealer Manager Fee which would cause the aggregate amount of selling commissions, dealer manager fees and other forms of underwriting compensation (as defined in accordance with FINRA Rule 2310(b)(4)(B)(ii)) received by the Dealer Manager and all Soliciting Dealers to exceed 10.0% of the gross proceeds raised from the sale of the Preferred Stock in the Offering (“FINRA’s 10% Cap”).
(e)Limitations on Dealer Manager’s Liability for Commissions. The Company will not be liable or responsible to any Soliciting Dealer for the payment of any selling commissions or any reallowance of fees to Soliciting Dealer, it being the sole and exclusive responsibility of the Dealer Manager for the payment of selling commissions or any reallowance to Soliciting Dealer. Soliciting Dealer hereby waives any and all rights to receive payments of commissions, or any other fees or reallowance payable to Soliciting Dealer, if any, until the Dealer Manager is in receipt of the selling commissions or other fees or reallowance. Soliciting Dealer acknowledges and agrees that the Dealer Manager’s liability for commissions or other fees or reallowances payable to Soliciting Dealer is limited solely to commissions received and the portion of the Dealer Manager fee which represents the Marketing Fee received by the Dealer Manager from the Company in connection with Soliciting Dealer’s sale of Preferred Stock.
7.No SIA Compensation. The Dealer Manager shall pay no commissions to the SIA.
8.Reserved Preferred Stock. The number of Preferred Stock, if any, to be reserved for sale by each Soliciting Dealer may be decided by the mutual agreement, from time to time, of the Dealer Manager and the Company. The Dealer Manager reserves the right to notify Soliciting Dealer by United States mail or by other means of the number of shares of
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Preferred Stock reserved for sale by Soliciting Dealer, if any. Such Preferred Stock will be reserved for sale by Soliciting Dealer until the time specified in the Dealer Manager’s notification to Soliciting Dealer. Sales of any reserved shares of Preferred Stock after the time specified in the notification to Soliciting Dealer or any requests for additional shares of Preferred Stock will be subject to rejection in whole or in part.
9.Dealer Manager’s Authority. Subject to the Dealer Manager Agreement, the Dealer Manager shall have full authority to take such action as it may deem advisable with respect to all matters pertaining to the Offering or arising thereunder. The Dealer Manager shall not be under any liability to Financial Intermediary, except (i) for its own lack of good faith and (ii) for obligations expressly assumed by the Dealer Manager hereunder.
10.Indemnification.
(a)Incorporation of Indemnification Obligations Under the Dealer Manager Agreement. Under the Dealer Manager Agreement, the Company has agreed to indemnify Financial Intermediary and the Dealer Manager and each of their respective Indemnified Parties, in certain instances and against certain liabilities, including liabilities under the Securities Act in certain circumstances. Financial Intermediary hereby agrees to indemnify the Company and each of its Indemnified Parties as provided in the Dealer Manager Agreement and to indemnify the Dealer Manager to the extent and in the manner that Financial Intermediary agrees to indemnify the Company in the Dealer Manager Agreement.
(b)Financial Intermediary’s Hold Harmless Obligation. In furtherance of, and not in limitation of the foregoing, Financial Intermediary will indemnify, defend and hold harmless the Dealer Manager and the Company, and their officers, directors, employees, members, partners, affiliates, agents and representatives, and each person, if any, who controls such entity within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, and each person who has signed the Registration Statement (“Indemnified Parties”), from and against any losses, claims, damages or liabilities to which any of the Indemnified Parties may become subject, under the Securities Act or the Exchange Act, or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon:
(i)any untrue statement or any alleged untrue statement of a material fact contained in any Registration Statement or any post-effective amendment thereto, the Prospectus or any amendment or supplement to the Prospectus, any Approved Sales Literature, or any other sales literature used by Financial Intermediary;
(ii)the omission or alleged omission to state a material fact required to be stated in the Registration Statement or any post-effective amendment thereof or necessary to make the statements therein not misleading, or the
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omission or alleged omission to state a material fact in the Prospectus or any amendment or supplement to the Prospectus, any Approved Sales Literature or any other sales literature used by Financial Intermediary necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that in each case described in clauses (i) and (ii) with respect to the Registration Statement, Prospectus or any amendment or supplement to the Prospectus or any Approved Sales Materials to the extent, but only to the extent, that such untrue statement or omission or alleged untrue statement or omission was made in reliance upon and in conformity with information furnished to the Company or the Dealer Manager by Financial Intermediary specifically for use with reference to Financial Intermediary in the preparation of the Registration Statement or any such post-effective amendments thereof or the Prospectus or any such amendment thereof or supplement thereto or any Approved Sales Literature;
(iii)any use of sales literature not authorized or approved by the Company, any use of any sales literature marked “broker-dealer use only,” “institutional” or otherwise bearing a legend denoting that it is not to be used in connection with the sale of Preferred Stock to members of the public with members of the public, or any use of sales literature in a particular jurisdiction if such literature bears a legend denoting that it is not to be used in connection with the sale of Preferred Stock to members of the public in such jurisdiction;
(iv)any untrue statement made by Financial Intermediary or Financial Intermediary’s representatives or agents or omission by Financial Intermediary or Financial Intermediary’s representatives or agents to state a fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading in connection with the offer and sale of Preferred Stock in each case, other than statements or omissions made in conformity with the Registration Statement, Prospectus, Approved Sales Literature or any other materials or information furnished by or on behalf of the Company;
(v)any failure by Financial Intermediary to comply with applicable laws governing money laundry abatement and anti-terrorist financing efforts in connection with the Offering, including applicable FINRA Rules, Exchange Act Rules and Regulations and the USA PATRIOT Act of 2001 (the “PATRIOT Act”); or
(vi)any other failure to comply with applicable rules of FINRA or federal or state securities laws and the rules and regulations promulgated thereunder.
Financial Intermediary will reimburse the aforesaid parties for any reasonable and documented legal or other expenses incurred in connection with investigation or defense of such loss, claim, damage, liability or
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action. This indemnity agreement will be in addition to any liability which Financial Intermediary may otherwise have.
(c)Notice of Claim. Promptly after receipt by any indemnified party under this Section 10 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 10, promptly notify the indemnifying party of the commencement thereof; provided, however, the failure to give such notice shall not relieve the indemnifying party of its obligations hereunder except to the extent it shall have been prejudiced by such failure. In case any such action is brought against any indemnified party, and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled, to the extent it may wish, jointly with any other indemnifying party similarly notified, to participate in the defense thereof, with separate counsel. Such participation shall not relieve such indemnifying party of the obligation to reimburse the indemnified party for reasonable legal and other expenses incurred by such indemnified party in defending itself, except for such expenses incurred after the indemnifying party has deposited funds sufficient to effect the settlement, with prejudice, of, and unconditional release of all liabilities from, the claim in respect of which indemnity is sought. Any such indemnifying party shall not be liable to any such indemnified party on account of any settlement of any claim or action effected without the consent of such indemnifying party, such consent not to be unreasonably withheld or delayed.
(d)Reimbursement. An indemnifying party under Section 10 of this Agreement shall be obligated to reimburse an indemnified party for reasonable legal and other expenses as follows: the indemnifying party shall pay all legal fees and expenses reasonably incurred by the indemnified party in the defense of such claims or actions; provided, however, that the indemnifying party shall not be obligated to pay legal expenses and fees to more than one law firm in connection with the defense of similar claims arising out of the same alleged acts or omissions giving rise to such claims notwithstanding that such actions or claims are alleged or brought by one or more parties against more than one indemnified party. If such claims or actions are alleged or brought against more than one indemnified party, then the indemnifying party shall only be obliged to reimburse the expenses and fees of the one law firm (in addition to local counsel) that has been participating by a majority of the indemnified parties against which such action is finally brought; and in the event a majority of such indemnified parties is unable to agree on which law firm for which expenses or fees will be reimbursable by the indemnifying party, then payment shall be made to the first law firm of record representing an indemnified party against the action or claim. Such law firm shall be paid only to the extent of services performed by such law firm and no reimbursement shall be payable to such law firm on account of legal services performed by another law firm.
11.Contribution. If the indemnification provided for in Section 10 hereof is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any
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losses, liabilities, claims or damages referred to therein, the contributions provisions set forth in Section 8 of the Dealer Manager Agreement shall be applicable.
12.Company as Party to Agreement. The Company shall be a third party beneficiary of Financial Intermediary’s representations, warranties, covenants and agreements contained in Sections 10 and 11. No provision of Section 10 or Section 11 may be amended or waived without the prior written consent of the Company. The Company shall have all enforcement rights in law and in equity with respect to those portions of this Agreement as to which it is third party beneficiary.
13.Privacy Laws; Compliance.
(a)Financial Intermediary agrees to:
(i)abide by and comply with (A) the privacy standards and requirements of the Gramm-Leach-Bliley Act of 1999 (the “GLB Act”); (B) the privacy standards and requirements of any other applicable federal or state law; and (C) Financial Intermediary’s own internal privacy policies and procedures, each as may be amended from time to time;
(ii)refrain from the use or disclosure of nonpublic personal information (as defined under the GLB Act) of all customers, except as necessary to service the customers or as otherwise necessary or required by applicable law; and
(iii)determine which customers have opted out of the disclosure of nonpublic personal information by periodically reviewing and, if necessary, retrieving an aggregated list of such customers (the “List”) as provided by each to identify customers that have exercised their opt-out rights. If either party uses or discloses nonpublic personal information of any customer for purposes other than servicing the customer, or as otherwise required by applicable law, that party will consult the List to determine whether the affected customer has exercised his or her opt-out rights. Each party understands that it is prohibited from using or disclosing any nonpublic personal information of any customer that is identified on the List as having opted out of such disclosures.
14.Anti-Money Laundering Compliance Programs. Financial Intermediary represents to the Dealer Manager and to the Company that it has established and implemented an anti-money laundering compliance program (“AML Program”) in accordance with Section 352 of the PATRIOT Act and FINRA Rule 3310, that complies with applicable anti-money laundering laws and regulations, including, but not limited to, the customer identification program requirements of Section 326 of the PATRIOT Act, and the suspicious activity reporting requirements of Section 356 of the PATRIOT Act, and the laws, regulations and Executive Orders administered by the Office of Foreign Assets Control (“OFAC”) of the U.S. Department of Treasury (collectively, “AML/OFAC Laws”). Financial Intermediary hereby covenants to remain in compliance with the AML/
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OFAC Laws and shall, upon request by the Dealer Manager and/or the Company, provide a certification to the Dealer Manager and/or the Company that, as of the date of such certification, its AML Program is compliant with the AML/OFAC Laws. Upon request by the Dealer Manager and/or the Company at any time, Financial Intermediary will (i) furnish a written copy of its AML Program, or a summary of its AML Program, to the Dealer Manager and/or the Company for review, and (ii) furnish any information that the Dealer Manager and/or the Company may request to satisfy applicable AML/OFAC laws.
15.Confidentiality. Each party to this Agreement agrees to maintain all information received from the other party pursuant to this Agreement in confidence, and each party to this Agreement agrees not to use any such information for any purpose, or disclose any such information to any person or entity, except as permitted by this Agreement or applicable laws, rules and regulations. This Section 15 shall survive the termination or expiration of this Agreement.
16.Non-Solicitation. Subject to this Section 16, the Dealer Manager agrees that it will not (and the Dealer Manager will use reasonable good faith efforts to ensure that its employees and representatives do not) solicit business from any of Financial Intermediary’s contacts or customers or knowingly recruit any of Financial Intermediary’s independent registered representatives. Notwithstanding the foregoing, the Dealer Manager may solicit Financial Intermediary’s contacts, customers or independent registered representatives but only to the extent that the Dealer Manager can demonstrate a relationship with such contacts, customers or independent registered representatives that was not derived through the efforts of Financial Intermediary’s representatives who are engaged in selling efforts directly in connection with the Offering. This Section 16 shall survive the termination or expiration of this Agreement.
17.Miscellaneous.
(a)Ratification of Dealer Manager Agreement. Financial Intermediary hereby authorizes and ratifies the execution and delivery of the Dealer Manager Agreement by the Dealer Manager as Dealer Manager for itself and on behalf of all Financial Intermediaries (including Financial Intermediary party hereto) and authorizes the Dealer Manager to agree to any variation of its terms or provisions and to execute and deliver any amendment, modification or supplement thereto. Financial Intermediary hereby agrees to be bound by all provisions of the Dealer Manager Agreement relating to Financial Intermediaries. Financial Intermediary also authorizes the Dealer Manager to exercise, in the Dealer Manager’s discretion, all the authority or discretion now or hereafter vested in the Dealer Manager by the provisions of the Dealer Manager Agreement and to take all such actions as the Dealer Manager may believe desirable in order to carry out the provisions of the Dealer Manager Agreement and of this Agreement.
(b)Ratification of Escrow Agreement. Financial Intermediary agrees that it is bound by the terms of the Escrow Agreement executed by the Dealer Manager and the Company.
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(c)Termination. This Agreement, except for the provisions of Sections 9 (Dealer Manager’s Authority), 10 (Indemnification), 11 (Contribution), 12 (Company as Party to Agreement), 13 (Privacy Laws; Compliance), 14 (Anti-Money Laundering Compliance Programs), 15 (Confidentiality), 16 (Non-Solicitation) and this Section 17 (Miscellaneous), may be terminated at any time by either party hereto by five days’ prior written notice to the other party and, in all events, this Agreement shall terminate on the termination date of the Dealer Manager Agreement, except for the provisions of Sections 9, 10, 11, 12, 13, 14, 15, 16 and this Section 17.
(d)Communications. Any communications from Financial Intermediary should be in writing addressed to the Dealer Manager at:
Preferred Capital Securities, LLC
3284 Northside Parkway, NW
Atlanta, Georgia 30327
Attention: Ms. Orit Small
3284 Northside Parkway, NW
Atlanta, Georgia 30327
Attention: Ms. Orit Small
with a copy to:
Kunzman & Bollinger, Inc.
5100 N. Brookline Ave., Suite 600
Oklahoma City, OK 73112
Attention: James Linhardt
Any notice from the Dealer Manager to Financial Intermediary shall be deemed to have been duly given if mailed, communicated by electronic delivery or facsimile or delivered by overnight courier to Financial Intermediary at Financial Intermediary’s address shown below.
(e)No Partnership. Nothing herein contained shall constitute the Dealer Manager, Financial Intermediaries, the other Financial Intermediaries or any of them as an association, partnership, limited liability company, unincorporated business or other separate entity.
(f)Notice of Registration Statement Effectiveness. If this Agreement is executed before an applicable Effective Date, then the Dealer Manager will notify Financial Intermediary in writing when such applicable Effective Date has occurred. Financial Intermediary agrees that Financial Intermediary will not make any offers to sell Preferred Stock or solicit purchasers for Preferred Stock until Financial Intermediary has received such written notice of the applicable Effective Date from the Dealer Manager or the Company. This Agreement shall be effective for all sales by Financial Intermediary on and after the applicable Effective Date.
(g)Transfer Agent. The Company may authorize its transfer agent to provide information to the Dealer Manager and Financial Intermediary regarding record
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holder information about the clients of Financial Intermediary who have invested with the Company on an on-going basis for so long as Financial Intermediary has a relationship with such client. Financial Intermediary shall not disclose any password for a restricted website or portion of a website provided to Financial Intermediary in connection with the Offering and shall not disclose to any person, other than an officer, director, employee or agent of Financial Intermediary, any material downloaded from such restricted website or portion of a restricted website.
(h)Assignment. Financial Intermediary shall have no right to assign this Agreement or any of its rights hereunder or to delegate any of its obligations. Any purported assignment or delegation by Financial Intermediary shall be null and void. The Dealer Manager shall have the right to assign any or all of its rights and obligations under this Agreement by written notice, and Financial Intermediary shall be deemed to have consented to such assignment by execution hereof. Dealer Manager shall provide written notice of any such assignment to Financial Intermediary.
(i)Amendment. This Agreement may be amended from time to time by consent of the parties hereto. Financial Intermediary’s consent will be deemed to have been given to an amendment to this Agreement, and such amendment will be effective, five business days following written notice to Financial Intermediary of such amendment if it does not notify the Dealer Manager in writing prior to the close of business on such fifth business day that Financial Intermediary does not consent to such amendment. Notwithstanding the foregoing, Financial Intermediary agrees that (i) it shall consent to any amendment, supplement or modification of the terms of this Agreement requested by FINRA, and (ii) any amendment, supplement or modification of the terms of this Agreement will be effective immediately and Financial Intermediary’s consent will be deemed to have been given to any such amendment, supplement or modification by its sale of Preferred Stock or otherwise receiving and retaining an economic benefit for participating in the Offering as a Financial Intermediary.
(j)Counterparts. This Agreement may be executed (including by facsimile transmission) with counterpart signature pages or in counterpart copies, each of which shall be deemed an original but all of which together shall constitute one and the same instrument comprising this Agreement.
(k)Invalidity. The invalidity or unenforceability of any provision of this Agreement shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provision were omitted.
(l)Strict Performance. The failure of any party to insist upon or enforce strict performance by any other party of any provision of this Agreement or to exercise any right under this Agreement shall not be construed as a waiver or relinquishment to any extent of such party’s right to assert or rely upon any such
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provision or right in that or any other instance; rather, such provision or right shall be and remain in full force and effect.
If the foregoing is in accordance with Financial Intermediary’s understanding and agreement, please sign and return the attached duplicate of this Agreement. Financial Intermediary’s indicated acceptance thereof shall constitute a binding agreement between Financial Intermediary and the Dealer Manager.
DEALER MANAGER:
PREFERRED CAPITAL SECURITIES, LLC
PREFERRED CAPITAL SECURITIES, LLC
By: Name:
Title:
The undersigned dealer confirms its agreement to act as a Financial Intermediary pursuant to all the terms and conditions of the above Financial Intermediary Agreement and the attached Dealer Manager Agreement.
Dated: ____________, 20____
Name of Financial Intermediary Federal Identification Number (If Applicable)
By: Name:
Authorized Signatory
Kindly have checks representing commissions forwarded as follows (if different than above): (Please type or print)
Name of Firm:
Address:
Street City
State and Zip Code
(Area Code) Telephone No.
Attention:
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SCHEDULE I
TO FINANCIAL INTERMEDIARY AGREEMENT WITH
PROSPECT CAPITAL CORPORATION
Soliciting Dealer represents and warrants that it is currently licensed as a broker-dealer in the following jurisdictions:
| ● Alabama | ● Nebraska | ||||
| ● Alaska | ● Nevada | ||||
| ● Arizona | ● New Hampshire | ||||
| ● Arkansas | ● New Jersey | ||||
| ● California | ● New Mexico | ||||
| ● Colorado | ● New York | ||||
| ● Connecticut | ● North Carolina | ||||
| ● Delaware | ● North Dakota | ||||
| ● District of Columbia | ● Ohio | ||||
| ● Florida | ● Oklahoma | ||||
| ● Georgia | ● Oregon | ||||
| ● Hawaii | ● Pennsylvania | ||||
| ● Idaho | ● Puerto Rico | ||||
| ● Illinois | ● Rhode Island | ||||
| ● Indiana | ● South Carolina | ||||
| ● Iowa | ● South Dakota | ||||
| ● Kansas | ● Tennessee | ||||
| ● Kentucky | ● Texas | ||||
| ● Louisiana | ● Utah | ||||
| ● Maine | ● Vermont | ||||
| ● Maryland | ● Virgin Islands | ||||
| ● Massachusetts | ● Virginia | ||||
| ● Michigan | ● Washington | ||||
| ● Minnesota | ● West Virginia | ||||
| ● Mississippi | ● Wisconsin | ||||
| ● Missouri | ● Wyoming | ||||
| ● Montana | |||||
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SCHEDULE II
TO
FINANCIAL INTERMEDIARY AGREEMENT WITH
PROSPECT CAPITAL CORPORATION
The following reflects the Preferred Stock the Financial Intermediary agrees to sell as set forth herein and in the Financial Intermediary Agreement. The terms of the Preferred Stock as set forth below are subject to and in no way modify the terms discussed in the Financial Intermediary Agreement and the Prospectus. This Schedule II is effective as of the date of the Financial Intermediary Agreement and may be modified at any time by written agreement of the Parties. Terms not defined herein shall have the meaning set forth in the Financial Intermediary Agreement.
Check each applicable box below:
Series A1 Preferred Stock, Series A3 Preferred Stock and Series A4 Preferred Stock.
Subject to any terms set forth in the Financial Intermediary Agreement and the Prospectus, if the Financial Intermediary elects to sell Series A1 Preferred Stock, Series A3 Preferred Stock or Series A4 Preferred Stock, it may qualify to receive a selling commission up to 7% of the Stated Value of $25.00 per share of Series A1 Preferred Stock, Series A3 Preferred Stock or Series A4 Preferred Stock sold. If Financial Intermediary agrees to less than 7% please indicate the selling commission here: ________. The selling commission on the Series A4 Shares cannot be waived below [5]%. If the selling commission is less than 7%, the Series A1 Preferred Stock, Series A3 Preferred Stock or Series A4 Preferred Stock will be sold at the corresponding price set forth in the “Plan of Distribution” section of the Prospectus.
RIA / Fee based share class options. Please check all the options that would be permitted.
Series A1 Preferred Stock at $23.25 per share. DTC or DRS eligible share class that can be traded into and redeemed out of a brokerage account electronically or purchased through a check and application process.
Series M1 Preferred Stock. DTC or DRS eligible class that can be traded into and redeemed out of a brokerage account electronically or purchased through a check and application process.
Series M2 Preferred Stock. DRS eligible class that can only be purchased through a check and application process.
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Series A3 Preferred Stock at $23.25 per share. DTC or DRS eligible share class that can be traded into and redeemed out of a brokerage account electronically or purchased through a check and application process.
Series M3 Preferred Stock. DTC or DRS eligible class that can be traded into and redeemed out of a brokerage account electronically or purchased through a check and application process.
Series A4 Preferred Stock at $[24.50] per share. DTC or DRS eligible share class that can be traded into and redeemed out of a brokerage account electronically or purchased through a check and application process.
Series M4 Preferred Stock. DTC or DRS eligible class that can be traded into and redeemed out of a brokerage account electronically or purchased through a check and application process.
Subject to any terms set forth in the Financial Intermediary Agreement and the Prospectus, if the Financial Intermediary elects to sell Series M1 Preferred Stock, Series M2 Preferred Stock, Series M3 Preferred Stock or Series M4 Preferred Stock, it will receive no selling commissions. Series M1 Preferred Stock, Series M2 Preferred Stock, Series M3 Preferred Stock and Series M4 Preferred Stock are sold at the public offering price of $25.00 per share.
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IN WITNESS WHEREOF, the parties have executed this Schedule II on the date and year shown above.
FINANCIAL INTERMEDIARY: DEALER MANAGER:
PREFERRED CAPITAL SECURITIES, LLC (Name of Financial Intermediary)
By: Name: Title: By:
Name: Title:
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EXHIBIT B
FORM OF SELECTED INVESTMENT ADVISOR AGREEMENT
FORM OF SELECTED INVESTMENT ADVISOR AGREEMENT
PROSPECT CAPITAL CORPORATION
__________ __, 20___
THIS SELECTED INVESTMENT ADVISOR AGREEMENT is made and entered into as of the date first written above (this “Agreement”), between Preferred Capital Securities, LLC, a Georgia limited liability company (the “Dealer Manager”), and ____________, a ___________ (the “SIA”).
WHEREAS, the Dealer Manager entered into an amended and restated dealer manager agreement, dated February 25, 2021, with Prospect Capital Corporation (the “Company”), a Maryland Corporation (the “Dealer Manager Agreement”), under which the Dealer Manager agreed to act as the agent, principal distributor and exclusive dealer manager for an offering by the Company of up to 80,000,000 shares, par value $0.001 per share, of preferred stock, with a $2,000,000,000 aggregate liquidation preference (the “Preferred Stock”). The Preferred Stock will be issued in multiple series, including the 5.50% Series Al Preferred Stock (“Series Al Preferred Stock”), the 5.50% Series Ml Preferred Stock (“Series Ml Preferred Stock”), the 5.50% Series M2 Preferred Stock (“Series M2 Preferred Stock”), the 6.50% Series A3 Preferred Stock (“Series A3 Preferred Stock”), the 6.50% Series M3 Preferred Stock (“Series M3 Preferred Stock,”), the floating rate Series A4 Preferred Stock (the “Series A4 Preferred Stock”) and the floating rate Series M4 Preferred Stock (the “Series M4 Preferred Stock”, and together with Series Ml Preferred Stock, the Series M2 Preferred Stock and the Series M3 Preferred Stock, “Series M Preferred Stock”), and the Company may offer any future series of Preferred Stock, provided that the aggregate number of shares issued across all series of Preferred Stock shall not exceed 80,000,000 shares, (the “Offering”). Each share of Preferred Stock will be sold at a public offering price of $25.00 per share. The minimum investment amount is $5,000, but purchases of less than $5,000 may be permitted by the Company in the Company’s sole discretion. The Offering will commence on the initial Effective Date (as defined below). Unless otherwise defined herein, capitalized terms used herein shall have the respective meanings therefor as in the Dealer Manager Agreement.
WHEREAS, the SIA (i) is an entity organized and presently in good standing in the state of its organization, (ii) is registered as an investment advisor under the Investment Advisers Act of 1940, as amended (the “Investment Advisers Act”) or if not registered under the Investment Advisers Act, then it is registered under the state securities acts in the states where it does business as an investment advisor, and (iii) has made such regulatory filings and obtained such regulatory approvals in each state in which the SIA is required to make such filings or obtain such approvals;
WHEREAS, the offer and sale of the Preferred Stock shall be made pursuant to the terms and conditions of (i) the Registration Statement and the Prospectus (each term as defined herein), and (ii) all applicable federal securities laws and the applicable securities laws of all states in which the Preferred Stock are offered and sold;
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WHEREAS, the Company will sell Preferred Stock using two closing services provided by the Depository Trust Company (“DTC”). The first service is DTC closing (“DTC Settlement”), and the second service is Direct Registration Service (“DRS Settlement”). The Company will deliver the Series A1 Preferred Stock, the Series M1 Preferred Stock, the Series A3 Preferred Stock, the Series M3 Preferred Stock, the Series A4 Preferred Stock and the Series M4 Preferred Stock through the facilities of DTC Settlement or DRS Settlement and the Series M2 Preferred Stock only through DRS Settlement; and
WHEREAS, the SIA is willing and desires to provide its clients with information concerning the Preferred Stock upon the terms and subject to the conditions contained herein;
NOW, THEREFORE, in consideration of the premises and upon the terms and subject to the conditions hereof, it is agreed between the Dealer Manager and the SIA as follows.
1.Registration Statement and Prospectus. The Company has filed with the Securities and Exchange Commission (the “Commission”) an automatic shelf registration statement as defined in Rule 405 under the Securities Act of 1933, as amended (the “Securities Act”), and the rules and regulations promulgated thereunder (the “Securities Act Rules and Regulation”), as applied pursuant to the Small Business Credit Availability Act (“SBCAA”) or otherwise, on Form N-2 covering the registration of the Company’s securities under the Securities Act, and the offer and sale thereof from time to time in accordance with Rule 415 of the Securities Act Rules and Regulation. Such registration statement became effective immediately upon its filing with the Commission. Prior to the expiration of any currently effective registration statement covering the registration of the Company’s securities under the Securities Act, and the offer and sale thereof from time to time in accordance with Rule 415 of the Securities Act Rules and Regulation, the Company will prepare and file a new automatic shelf registration statement on Form N-2 covering the continued registration of the Company’s securities under the Securities Act, and the offer and sale thereof from time to time in accordance with Rule 415 of the Securities Act Rules and Regulation.
Except where the context otherwise requires, each such registration statement, as amended, including all documents filed as a part thereof or incorporated by reference therein, and including any Rule 430B information contained in a prospectus related to the Offering subsequently filed with the Commission pursuant to Rule 497, Rule 424 or such other Securities Act Rules and Regulations as may be applicable to the Company and deemed to be part of such registration statement and also including any Rule 462(b) Registration Statement, is herein called the “Registration Statement.”
“Prospectus” means the base prospectus relating to various securities of the Company that is included in the Registration Statement and any prospectus supplement (including a pricing supplement, if applicable) relating to the Offering, filed by the Company with the Commission pursuant to Rule 497 or Rule 424, as applicable, including, in each case, any document incorporated or deemed to be incorporated therein by reference pursuant to the SBCAA or the rules of the Commission promulgated thereunder or otherwise.
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“Registration Statement” without reference to a time means such registration statement, as amended, as of the time of the first contract of sale of Preferred Stock of a particular series, which time shall be considered the new effective date of such registration statement, as amended, with respect to such series of Preferred Stock (within the meaning of Rule 430B(f)(2)). For purposes of this definition, information contained in a form of prospectus, prospectus supplement or pricing supplement that is retroactively deemed to be a part of such registration statement, as amended, pursuant to Rule 430B or Rule 430C shall be considered to be included in such registration statement, as amended, as of the time specified in Rule 430B or Rule 430C, as the case may be.
All references in this Agreement to financial statements and schedules and other information which is “included” or “stated” in the Registration Statement or the Prospectus (and all other references of like import) shall be deemed to mean and include all such financial statements and schedules and other information which is or is deemed to be incorporated by reference in or otherwise deemed under the SBCAA to be a part of or included in the Registration Statement or the Prospectus, as the case may be, as of any specified date; and all references in this Agreement to amendments or supplements to the Registration Statement or the Prospectus, including those made pursuant to Rule 497, Rule 424 or such other Securities Act Rules and Regulations as may be applicable to the Company, shall be deemed to mean and include, without limitation, the filing of any document under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which is or is deemed to be incorporated by reference in or otherwise deemed under the SBCAA or the rules of the Commission promulgated thereunder or otherwise to be a part of or included in the Registration Statement or the Prospectus, as the case may be, as of any specified date.
As used herein, the term “Effective Date” shall refer to the effective date of each Prospectus relating to the Offering, unless the context otherwise requires.
2.Purchase of Preferred Stock.
(a)The SIA hereby covenants, warrants and agrees that, in regard to any purchase of the Preferred Stock by its clients, it will comply with all the terms and conditions of the Registration Statement and the Prospectus, all applicable state and federal laws, including the Securities Act, the Investment Advisers Act and any and all regulations and rules pertaining thereto. Neither the SIA nor any other person shall have any authority to give any information or make any representations or warranties in connection with the Preferred Stock other than the information contained in the Registration Statement and Prospectus.
(b)Clients of the SIA, or the SIA on behalf of its clients where the SIA has been granted discretionary trading authority, may purchase the Preferred Stock according to all the terms and conditions as are contained in the Registration Statement and the Prospectus. Pursuant to FINRA Rule 2310(b)(2)(C), if the sale is made by a FINRA member from a discretionary account, then the SIA and FINRA member must obtain written approval of the transaction by the customer. The SIA shall comply with all requirements set forth in the Registration Statement
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and the Prospectus and shall use and distribute, in connection with the purchase of Preferred Stock by its clients, only the Prospectus and such sales literature supplied to the SIA by the Dealer Manager with the Prospectus. The Dealer Manager reserves the right to establish such additional procedures as it may deem necessary to ensure compliance with the requirements of the Registration Statement, the Prospectus and applicable laws, and the SIA shall comply with all such additional procedures to the extent that it has received written notice thereof.
(c)If using DRS Settlement:
(i)Clients of the SIA shall complete the subscription agreement which accompanies the Prospectus in connection with the purchase of the Preferred Stock. The SIA will process the subscription agreement and payment according to the SIA’s custodian’s applicable procedures. If any subscription agreement is rejected, the subscription agreement and funds for the purchase of Preferred Stock will be returned to the rejected subscriber within ten (10) business days from the date of rejection. As used in this Agreement, “business day” means any day other than a Saturday, Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close; and
(ii)Payments for Preferred Stock shall be made by wire transfer to the Escrow Agent (as defined below) or checks payable to “UMB Bank, N.A., Escrow Agent for Prospect Capital Corporation”. Financial Intermediary shall forward original checks for the purchase of Preferred Stock together with an original Subscription Agreement, completed, executed and initialed where indicated by the subscriber as provided for in the Subscription Agreement, to UMB Bank, N.A. (the “Escrow Agent”) at the address provided in the Subscription Agreement.
(d)If using DTC Settlement, the soliciting dealer that effects the sale will coordinate for payment in connection with their electronically placed orders.
(e)The Preferred Stock may be purchased by clients of the SIA only where the Preferred Stock may be legally offered and sold and only by such persons in such states in which the SIA has made such regulatory filings and obtained such regulatory approvals applicable to it.
(f)For Preferred Stock sold using DRS Settlement, the SIA has or will obtain the consent of each client who subscribes for Preferred Stock to access such client’s investor account at the Company’s transfer agent and view the account information contained in such client’s investor account at the Company’s transfer agent.
(g)The SIA shall have no obligation under this Agreement to advise its clients to purchase any of the Preferred Stock.
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(h)For Preferred Stock sold using DRS Settlement, the SIA shall retain in its files all subscription agreements for a period of time not less than required in order to comply with applicable federal and other regulatory requirements.
(i)The SIA hereby confirms that it is familiar with Securities Act Release No. 4968 and Rule 15c2-8 under the Exchange Act relating to the distribution of preliminary and final prospectuses, and confirms that it has complied and will comply therewith.
(j)For shares of Preferred Stock sold using DRS Settlement, a sale of Preferred Stock shall be deemed to be completed only after the Company receives a properly completed subscription agreement from the SIA (together with payment of the full purchase price of each purchased share of Preferred Stock) on behalf of the buyer who satisfies each of the terms and conditions of the Registration Statement and Prospectus, and only after such subscription agreement has been accepted in writing by the Company.
(k)Clients of the SIA will purchase the Series M Preferred Stock at the public offering price of $25.00 per share
(l)Clients of the SIA will not be charged any selling commissions in connection with their purchases of Series A1 Preferred Stock, Series A3 Preferred Stock and Series A4 Preferred Stock and will purchase the Series A1 Preferred Stock, Series A3 Preferred Stock and Series A4 Preferred Stock, respectively, at a per Series A1 Preferred Stock, Series A3 Preferred Stock and Series A4 Preferred Stock purchase price of $[24.50].
(m)It is understood and agreed that in connection with any completed sale of Preferred Stock to clients of the SIA, the Company shall pay the Dealer Manager a fee as set forth in the Prospectus.
(n)The SIA will make the determinations required to be made by it pursuant to subparagraphs (g) above and (o) below based on information it has obtained from each prospective client, including, at a minimum, but not limited to, the prospective client’s age, investment objectives, investment experience, income, net worth, financial situation and needs, other investments of the prospective client, as well as any other pertinent factors deemed by the SIA to be relevant.
(o)In addition to any other obligations of the SIA to determine suitability imposed by state or federal law, the SIA agrees that it will comply fully with the following provisions:
(i)The SIA shall have reasonable grounds to believe, based upon information provided by the client concerning such client’s investment objectives, other investments, financial situation and needs, and upon any other information known by the SIA, that (A) each client of the SIA that purchases Preferred Stock is or will be in a financial position appropriate
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to enable such client to realize to a significant extent the benefits (including tax benefits) of an investment in the Preferred Stock, (B) each client of the SIA that purchases Preferred Stock has a fair market net worth sufficient to sustain the risks inherent in an investment in the Preferred Stock, including potential loss of his entire investment, and (C) the Preferred Stock otherwise are or will be a suitable investment for each client of the SIA that purchases Preferred Stock, and the SIA shall maintain files disclosing the basis upon which the determination of suitability was made;
(ii)The SIA shall have reasonable grounds to believe, based upon the information made available to it, that all material facts are adequately and accurately disclosed in the Registration Statement and provide a basis for evaluating the Preferred Stock;
(iii)In making the determination set forth in subparagraph (ii) above, the SIA shall evaluate items of compensation, tax aspects, financial stability and experience of the Company, conflicts of interest and risk factors, as well as any other information deemed pertinent by it; and
(iv)The SIA shall inform each prospective nondiscretionary client of all pertinent facts relating to the liquidity and marketability of the Preferred Stock.
(p)The SIA agrees to retain in its files, for a period of at least six years, information which will establish that each purchaser of Preferred Stock falls within the permitted class of investors.
(q)The SIA either (i) shall not purchase Preferred Stock for its own account or (ii) shall hold for investment any Preferred Stock purchased for its own account.
3.Compensation to SIA.
The Dealer Manager shall pay no commissions to the SIA.
4.Association of the Dealer Manager with Other Advisors and Dealers.
It is expressly understood between the Dealer Manager and the SIA that the Dealer Manager may cooperate with broker-dealers who are registered as broker-dealers with the Financial Industry Regulatory Authority, Inc. (“FINRA”) or with other investment advisors registered under the Investment Advisers Act or, if not registered under the Investment Advisers Act, then the SIA is registered under the state securities acts in the states where it does business as an investment advisor. Such broker-dealers and investment advisors:
(a)may enter into agreements with the Dealer Manager on terms and conditions that may be identical or similar to, or materially different from, this Agreement; and
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(b)shall receive such rates of commission or other fees as are agreed to between the Dealer Manager and the respective broker-dealers and investment advisors and as are in accordance with the terms of the Registration Statement.
5.Conditions of the SIA’s Obligations.
The SIA’s obligations hereunder are subject, during the term of this Agreement and the Offering, to:
(a)the performance by the Dealer Manager of its obligations (including compliance by the Dealer Manager with its covenants and agreements set forth in Section 8); and
(b)the conditions that (i) the Registration Statement shall become and remain effective, and (ii) no stop order shall have been issued suspending the effectiveness of the Offering.
6.Conditions to the Dealer Manager’s Obligations.
The obligations of the Dealer Manager hereunder are subject, during the term of this Agreement and the Offering, to the conditions that:
(a)at the effective date of the Registration Statement and thereafter during the term of this Agreement while any Preferred Stock remain unsold, the Registration Statement shall remain in full force and effect authorizing the offer and sale of the Preferred Stock;
(b)no stop order suspending the effectiveness of the Offering or other order restraining the offer or sale of the Preferred Stock shall have been issued nor proceedings therefor initiated or threatened by any state regulatory agency or the SEC; and
(c)the SIA shall have satisfactorily performed all its obligations hereunder (including Section 7).
7.Representations, Warranties, Covenants and Agreements of the SIA.
The SIA covenants, agrees, warrants and represents during the term of this Agreement, as follows:
(a)The SIA is and will continue to be registered as an investment advisor under the Investment Advisers Act or, if not registered under the Investment Advisers Act, then registered under the state securities acts in the states where it does business as an investment advisor, and will make or comply with any regulatory filings and other regulatory requirements applicable to it in each state in which the SIA is required to make such filings or comply with such other requirements.
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(b)The SIA is not registered as a broker-dealer with FINRA. While the associated persons of the SIA may be registered as a registered representatives with FINRA, the SIA agrees that it and its associated persons are subject to and will act in accordance with this Agreement when providing its clients with information concerning the Preferred Stock and the procedures for subscribing for the Preferred Stock. Notwithstanding, if the SIA or the associated persons of the SIA are affiliated with a broker-dealer, the broker-dealer will sign a Financial Intermediary Agreement (as defined in the Dealer Manager Agreement) and will effect the sale and serve as the broker-dealer of record.
(c)The SIA shall comply with all applicable federal and state securities laws, including without limitation the disclosure requirements of the Investment Advisers Act and the provisions thereof requiring disclosure of the existence of this Agreement.
(d)The SIA shall maintain the records required by Section 204 of the Investment Advisers Act and Rule 204-2 thereunder, in the form and for the periods required thereby.
(e)The SIA and any person associated with the SIA has reasonably complied, in all material respects, with the identification, verification and documentation sections of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001.
(f)With respect to any purchase of the Preferred Stock by a client of the SIA, such investment will be in conformity with all applicable provisions of the SIA’s investment advisory agreement with such client (including without limitation any and all investment objectives, guidelines and restrictions applicable to the client’s account), and the SIA shall have acted in conformity with the standard of care owed to the client under applicable law and any applicable provisions in the SIA’s investment advisory agreement with the client.
8.Covenants and Agreements of the Dealer Manager.
The Dealer Manager covenants and agrees during the term of this Agreement as follows:
(a)It shall inform the SIA whenever and as soon as it receives or learns of any order issued by the Commission or any other regulatory agency which suspends the effectiveness of the Registration Statement or prevents the use of the Prospectus or which otherwise prevents or suspends the offering or sale of the Preferred Stock, or receives notice of any proceedings regarding any such order.
(b)It shall deliver to the SIA such number of copies of the Registration Statement or the Prospectus, and any supplements and post-effective amendments thereto, as the SIA may reasonably request.
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9.Payment of Costs and Expenses.
Each party shall pay all costs and expenses incident to the performance of its obligations under this Agreement.
10.SIA represents to the Dealer Manager and to the Company that it has established and implemented an anti-money laundering compliance program (“AML Program”) in accordance with Section 352 of the PATRIOT Act and FINRA Rule 3310, that complies with applicable anti-money laundering laws and regulations, including, but not limited to, the customer identification program requirements of Section 326 of the PATRIOT Act, and the suspicious activity reporting requirements of Section 356 of the PATRIOT Act, and the laws, regulations and Executive Orders administered by the Office of Foreign Assets Control (“OFAC”) of the U.S. Department of Treasury (collectively, “AML/OFAC Laws”). SIA hereby covenants to remain in compliance with the AML/OFAC Laws and shall, upon request by the Dealer Manager and/or the Company, provide a certification to the Dealer Manager and/or the Company that, as of the date of such certification, its AML Program is compliant with the AML/OFAC Laws. Upon request by the Dealer Manager and/or the Company at any time, SIA will (i) furnish a written copy of its AML Program, or a summary of its AML Program, to the Dealer Manager and/or the Company for review, and (ii) furnish any information that the Dealer Manager and/or the Company may request to satisfy applicable AML/OFAC laws.
(a)Additionally, SIA represents, warrants, and agrees that it:
(i)has implemented its own anti-money laundering program consistent with the requirements of 31 U.S.C. 5318(h) and will update such anti-money laundering program as necessary to implement changes in applicable laws and guidance;
(ii)or its agent, will perform the specified requirements of the Dealer Manager’s customer identification program (“CIP”) and/or beneficial ownership procedures in a manner consistent with Section 326 of the USA PATRIOT Act and the beneficial ownership requirements, respectively;
(iii)will promptly disclose to the Dealer Manager potential suspicious or unusual activity detected as part of the CIP and/or beneficial ownership procedures being performed on the Dealer Manager’s behalf in order to enable the Dealer Manager to file a suspicious activity report, as appropriate, based on the Dealer Manager’s judgment;
(iv)will certify annually to the Dealer Manager that the representations set forth herein remain accurate and that it is compliance with such representations;
(v)will promptly provide its books and records relating to its performance of the CIP and/or beneficial ownership procedures to the SEC, to a self-regulatory organization that has jurisdiction over the Dealer Manager, or to authorized law enforcement agencies either directly or through the
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Dealer Manager at the request of the Dealer Manager, the SEC, self-regulatory organization, or authorized law enforcement agency.
11.Indemnification.
(a)Under the Dealer Manager Agreement, the Company has agreed to indemnify the SIA and the Dealer Manager and each of their respective Indemnified Parties, in certain instances and against certain liabilities, including liabilities under the Securities Act in certain circumstances. The SIA hereby agrees to indemnify the Company and each of its Indemnified Parties as provided in the Dealer Manager Agreement and to indemnify the Dealer Manager to the extent and in the manner that the SIA agrees to indemnify the Company in the Dealer Manager Agreement. This indemnity provision shall survive the termination of this Agreement.
(b)In furtherance of, and not in limitation of the foregoing, SIA will indemnify, defend and hold harmless the Dealer Manager and the Company, and their officers, directors, employees, members, partners, affiliates, agents and representatives, and each person, if any, who controls such entity within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, and each person who has signed the Registration Statement (“Indemnified Parties”), from and against any losses, claims, damages or liabilities to which any of the Indemnified Parties may become subject, under the Securities Act or the Exchange Act, or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon:
i.any untrue statement or any alleged untrue statement of a material fact contained in any Registration Statement or any post-effective amendment thereto or the Prospectus or any amendment or supplement to the Prospectus;
ii.the omission or alleged omission to state a material fact required to be stated in the Registration Statement or any post-effective amendment thereof or necessary to make the statements therein not misleading, or the omission or alleged omission to state a material fact in the Prospectus or any amendment or supplement to the Prospectus necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that in each case described in clauses (i) and (ii) with respect to the Registration Statement, Prospectus or any amendment or supplement to the Prospectus to the extent, but only to the extent, that such untrue statement or omission or alleged untrue statement or omission was made in reliance upon and in conformity with information furnished to the Company or the Dealer Manager by SIA specifically for use with reference to SIA in the preparation of the Registration Statement or any such post-effective amendments thereof or the Prospectus or any such amendment thereof or supplement thereto;
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iii.any untrue statement made by SIA or SIA’s representatives or agents or omission by SIA or SIA’s representatives or agents to state a fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading in connection with the offer and sale of Preferred Stock in each case, other than statements or omissions made in conformity with the Registration Statement, Prospectus or any other materials or information furnished by or on behalf of the Company;
iv.any failure by SIA to comply with applicable laws governing money laundry abatement and anti-terrorist financing efforts in connection with the Offering, including applicable FINRA Rules, Exchange Act Rules and Regulations and the USA PATRIOT Act of 2001 (the “PATRIOT Act”); or
v.any other failure to comply with applicable rules of FINRA or federal or state securities laws, including but not limited to the Investment Advisers Act or if not registered under the Investment Advisers Act then it is registered under the state securities acts in the states where it does business as an investment adviser, and the rules and regulations promulgated thereunder.
SIA will reimburse the aforesaid parties for any reasonable and documented legal or other expenses incurred in connection with investigation or defense of such loss, claim, damage, liability or action. This indemnity agreement will be in addition to any liability which SIA may otherwise have.
This indemnity provision shall survive the termination of this Agreement.
(c)No indemnifying party shall be liable under the indemnity provisions contained in subparagraphs (a) and (b) above unless the party to be indemnified shall have notified such indemnifying party in writing promptly after the summons or other first legal process giving information of the nature of the claim served upon the party to be indemnified, but failure to notify an indemnifying party of any such claim shall not relieve it from any liabilities which it may have to the indemnified party against whom action is brought.
In the case of any such claim, if the party to be indemnified notified the indemnifying party of the commencement thereof as aforesaid, the indemnifying party shall be entitled to participate at its own expense in the defense of such claim. If it so elects, in accordance with arrangements satisfactory to any other indemnifying party or parties similarly notified, the indemnifying party has the option to assume the entire defense of the claim, with counsel who shall be reasonably satisfactory to such indemnified party and all other indemnified parties who are defendants in such action, unless such indemnified parties reasonably objects to such assumption on the ground that there may be legal defenses available to it which are different from or in addition to those available to such
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indemnifying party. Any indemnified party shall have the right to employ a separate counsel in any such action and to participate in the defense thereof but the reasonable fees and expenses of such counsel shall be borne by such party unless such party has objected in accordance with the preceding sentence, in which event such fees and expenses shall be borne by the indemnifying parties. Except as set forth in the preceding sentence, if an indemnifying party assumes the defense of such action, the indemnifying party shall not be liable for any fees and expenses of separate counsel for the indemnified parties incurred thereafter in connection with such action.
In no event shall the indemnifying parties be liable for the reasonable fees and expenses of more than one counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances.
12.Term of Agreement.
This Agreement shall become effective on the date on which this Agreement is executed by all the parties hereto. After this Agreement becomes effective, any party may terminate it at any time for any reason by giving 5 days’ prior notice to the other party; provided, however, that this Agreement shall in any event automatically terminate at the first occurrence of the SIA’s license or registration to act as an investment advisor being revoked or suspended by any federal, self-regulatory or state agency and such revocation or suspension is not cured within ten days from the date of such occurrence. Notwithstanding anything herein to the contrary, this Agreement shall be deemed suspended during any period for which the SIA’s registration under the Investment Advisers Act is revoked or suspended or, if the SIA is not registered under the Investment Advisers Act, then under the state securities acts in the states where it does business as an investment advisor. SIA agrees to notify the Dealer Manager immediately if the SIA’s registration under the Investment Advisers Act is revoked or suspended.
13.Notices.
All notices, requests, demands, approvals, consents, waivers and other communications required or permitted to be given under this Agreement (each, a “Notice”) shall be in writing and shall be (a) delivered personally, (b) mailed by first-class, registered or certified mail, return receipt requested, postage prepaid, (c) sent by next-day or overnight mail or delivery, or (d) sent by facsimile transmission (provided, however, that the original copy thereof also is sent by one of the other means specified above in this Section 13):
If to the Dealer Manager:
Preferred Capital Securities, LLC
3284 Northside Parkway NW, Suite 150
Atlanta, Georgia 30329
Attention: Mr. Orit Small
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with a copy to:
Kunzman & Bollinger, Inc.
5100 N. Brookline Ave., Suite 600
Oklahoma City, OK 73112
Attention: James Linhardt
If sent to the SIA: To the person whose name and address are identified on the signature page of this Agreement; or
to such other person or address as any party shall specify by Notice in writing to the other parties in accordance with this Section 13. Each Notice shall be deemed effective and given upon actual receipt or refusal of receipt.
14.Successors.
This Agreement shall be binding upon and inure to the benefit of the parties hereto, and shall not be assigned by the SIA, whether by contract, operation of law or otherwise.
15.Miscellaneous.
(a)This Agreement shall be construed, without regard to conflicts of law provisions, in accordance with the applicable laws of the State of Georgia.
(b)Nothing in this Agreement shall constitute the SIA as in association with or in partnership with the Dealer Manager or the Company.
(c)If any party hereto initiates any legal action arising out of or in connection with this Agreement, the prevailing party shall be entitled to recover from the other party all reasonable attorneys’ fees, expert witness fees and other costs and expenses incurred by the prevailing party in connection therewith. If any party to this Agreement (the “First Party”) becomes involved in a litigation, arbitration or other dispute proceeding (a “Proceeding”) made or brought by any person who is not a party to this Agreement or an affiliate of a party to this Agreement and which arises out of or otherwise involves the acts or omissions of another party to this Agreement (the “Second Party”), and the First Party is dismissed from the Proceeding or otherwise found to have prevailed in the Proceeding, the Second Party shall be responsible for paying any and all costs and expenses (including without limitation reasonable attorneys’ fees) incurred by the First Party in connection with defending itself in the Proceeding, including without limitation costs and expenses of investigation and expert witness fees.
(d)The terms of this Agreement may be extended to cover additional offerings of Preferred Stock or other securities of the Company by the execution by the parties hereto of an addendum identifying the Preferred Stock or other securities of the Company and registration statement relating to such additional offering. Upon execution of such addendum, the terms “Preferred Stock”, “Offering”,
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“Registration Statement” and “Prospectus” set forth herein shall be deemed to be amended as set forth in such addendum.
(e)This Agreement embodies the entire agreement and understanding, and supersedes all prior agreements and understanding (whether written or oral), among the parties hereto with respect to the subject matter hereof.
(f)No amendment to, or waiver of, any provision of this Agreement shall be deemed valid or effective unless it is in writing and signed by all the parties hereto.
(g)If any provision of this Agreement shall be deemed void, invalid or ineffective for any reason, the remainder of the Agreement shall remain in full force and effect.
(h)This Agreement may be executed (including by facsimile transmission) with counterpart signature pages or in counterpart copies, each of which shall be deemed an original but all of which together shall constitute one and the same instrument comprising this Agreement.
(i)
[Signatures on following page]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first written above.
Dealer Manager:
PREFERRED CAPITAL SECURITIES, LLC
By: Print Name: Title:
Selected Investment Advisor:
Firm Name:________________________________
By: Print Name: Title:
Date:_____________________________________
Address:__________________________________
City, State, Zip:____________________________
Telephone:_______________________________
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Exhibit 3.1
PROSPECT CAPITAL CORPORATION
ARTICLES SUPPLEMENTARY
PREFERRED STOCK, SERIES A4
PREFERRED STOCK, SERIES M4
Prospect Capital Corporation, a Maryland corporation (the “Corporation”), hereby certifies to the State Department of Assessments and Taxation of Maryland as follows:
1.Pursuant to the authority expressly vested in the Board of Directors of the Corporation (the “Board”) by Section 5.3 of its charter (including these Articles Supplementary, the “Charter”) and Section 2-208 of the Maryland General Corporation Law (“MGCL”), the Board has duly adopted resolutions reclassifying 160,000,000 authorized but unissued shares of common stock, par value $0.001 per share, of the Corporation (the “Common Stock”) into shares of preferred stock, par value $0.001 per share, of the Corporation, classified and designated as Preferred Stock, having such designation or designations as to series as is set forth herein (collectively, the “Shares”).
2.The designations, preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications, terms and conditions of redemption and other provisions of the Shares are as follows:
(1)Designation; Number of Shares. The Board has duly adopted resolutions designating the following series of Floating Rate Preferred Stock:
(a)80,000,000 shares of a series of preferred stock, designated as “Preferred Stock, Series A4”, par value $0.001 per share (the “Series A4 Shares”).
(b)80,000,000 shares of a series of preferred stock, designated as “Preferred Stock, Series M4”, par value $0.001 per share (the “Series M4 Shares”).
(c)From time to time, the Board may designate additional series of the Shares and may reallocate shares between series by adoption of Articles Supplementary.
(2)Voting Rights.
(a)Except as otherwise provided in the Charter or as otherwise required by law, (i) each holder of Shares shall be entitled to one vote for each Share held by such holder on each matter submitted to a vote of stockholders of the Corporation, and (ii) the holders of outstanding Shares, the holders of outstanding Common Stock and the holders of any other outstanding Preferred Stock shall vote together as a single class; provided, however, that, for so long as the Corporation is subject to the Investment Company Act of 1940, as amended (the “1940 Act”), the holders of Shares and the holders of any other outstanding Preferred Stock, voting separately as a single class, shall have the right to elect two (2) members of the Board at all times, and the balance of the directors shall be elected by the holders of the Common Stock, the Shares and any other outstanding Preferred Stock voting together. The directors to be elected separately by the holders of Shares and the holders of any other outstanding Preferred Stock shall be designated by the Board and, if the Board is classified, the Board shall designate the classes in which such directors shall serve. Any director elected solely by the holders of Shares and the holders of any other outstanding Preferred Stock may be removed at any time with or without cause by and only by the vote of the holders of a majority of the Shares and any
other Preferred Stock then outstanding at any annual or special meeting of the stockholders of the Corporation, or by a written consent in lieu of a meeting undertaken by the holders of at least a majority of the outstanding Shares and other Preferred Stock, and any vacancy occurring by reason of such removal or by reason of death, resignation or inability to serve of any director so elected, shall be filled by and only by a vote of the holders of a majority of the Shares and other Preferred Stock then outstanding at any annual or special meeting of the stockholders of the Corporation or by a written consent in lieu of a meeting undertaken by the holders of at least a majority of the outstanding Shares and other Preferred Stock. Any director so elected under this paragraph shall serve until his or her successor is duly elected and qualified or his or her earlier death, resignation or removal as provided herein. The foregoing right to elect two directors shall be unaffected by any failure by the Corporation in the payment of dividends to holders of Shares and other Preferred Stock, subject to any additional rights afforded such holders in the event of such non-payment under the 1940 Act, including Section 18 thereof.
(b)During any period in which any one or more of the conditions described below shall exist (such period, a “Voting Period”), the number of directors constituting the Board shall be automatically increased by the smallest number that, when added to the two directors elected exclusively by the holders of Shares and the holders of any other Preferred Stock, as described above, would constitute a majority of the Board as so adjusted, and the holders of outstanding Shares and the holders of other outstanding Preferred Stock, voting separately as one class, subject to compliance with the 1940 Act and the rules thereunder, shall have the power to elect such additional directors.
(c)In addition to any approval by stockholders that might otherwise be required by law or the Charter, the approval of the holders of a majority of any outstanding Shares, voting together as one class (and not separately by individual series) and separately from any other class of stock, shall be required to, among other actions, (i) amend, alter or repeal the rights, preferences or privileges of the Shares or amend the Charter in a manner that materially and adversely affects the Shares (provided that any such action that would materially and adversely affect the rights, preferences or privileges of one or more series of Shares (the “Affected Series”) in a manner different from any other series of Shares shall require the approval of a majority of the outstanding Shares of the Affected Series (with such Affected Series voting as a class), or (ii) create (by reclassification or otherwise) any new class of shares having rights, preferences or privileges senior to the Shares. Notwithstanding the foregoing or anything expressed or implied to the contrary in these Articles Supplementary, but subject to applicable law, the Board may, without any approval of the holders of the Shares, adopt Articles Supplementary or amend or supplement these Articles Supplementary (i) to supply any omission, or cure, correct or supplement any ambiguous, defective or inconsistent provision hereof, to the extent not adverse to any holder of Shares; (ii) to the extent the Board deems necessary to conform these Articles Supplementary to the requirements of applicable law, including the 1940 Act; (iii) to designate additional series of Shares (and the terms relating thereto) and/or reallocate shares between series; and (iv) for the purpose of converting, exchanging, reorganizing or combining two or more series of Shares into a single series of shares of Preferred Stock having materially the same rights, preferences or privileges as set forth herein, including in connection with a Listing Event, and may cause the Corporation to conduct a mandatory tender, exchange, conversion, or other reorganization for the purpose of effecting such combination into a single series of shares of Preferred Stock, which conversion, combination, exchange or reorganization shall not be deemed to materially and adversely affect the rights, preferences or privileges of the Shares or of one or more series of the Shares, notwithstanding that in connection with any such conversion, combination, exchange or reorganization holders may receive
cash in lieu of fractional shares, and which conversion, combination, exchange or reorganization shall be effective at such time as approved by the Board.
In addition, the vote of the holders of a majority of the Preferred Stock then outstanding of the Corporation, including the Shares, shall be required to approve any plan of reorganization adversely affecting such shares or any action requiring a vote of stockholders under Section 13(a) of the 1940 Act. For purposes of the preceding sentence, the phrase “vote of the holders of a majority of the Preferred Stock then outstanding” shall have the meaning set forth in the 1940 Act. The holders of Shares shall have exclusive voting rights on a Charter amendment that would alter only the contract rights of the Shares, as expressly set forth in these Articles Supplementary. Any such Charter amendment shall first be declared advisable by the Board and then approved by the affirmative vote or consent of the holders of a majority of the outstanding Shares, voting together as a single class (and not separately by individual series).
A Voting Period shall commence: (i) if at any time accumulated dividends and distributions (whether or not earned or declared, and whether or not funds are then legally available in an amount sufficient therefor) on the outstanding Shares equal to at least two full years’ dividends and distributions shall be due and unpaid; or (ii) if at any time holders of any other Preferred Stock are entitled to elect a majority of the directors of the Corporation under the 1940 Act or Articles Supplementary creating such shares.
If the Corporation thereafter pays, or declares and sets apart for payment in full, all dividends payable on all outstanding Shares for all past dividend periods, the additional voting rights of the holders of Shares as described above will cease, and the terms of office of all of the additional directors elected by the holders of Shares (but not of the directors with respect to whose election the holders of shares of Common Stock were entitled to vote or the two directors the holders of Shares have the right to elect in any event) will terminate immediately and automatically, subject always, however, to the reverting of such voting rights in the holders of Shares so entitled to vote upon the further occurrence of any of the events described in this Section 2(b).
(3)[Reserved]
(4)Dividends.
(a)The holders of the Shares shall be entitled to receive, when, as and if authorized by the Board and declared by the Corporation, out of funds legally available therefor, cumulative dividends at an annualized floating rate equal to one-month Term SOFR plus 2.00% of the initial stated value of $25 per share (the “Stated Value”) (computed on the basis of a 360-day year consisting of twelve 30-day months). In no event shall the dividend rate be lower than 6.50% per annum (the “Cap Rate”) or in excess of 8.00% per annum. If (a) the one-month Term SOFR rate plus 2.00% is less than 6.50% per annum or (b) the Corporation or its designee determines that a SOFR Rate Transition Event and its related SOFR Rate Replacement Date have occurred in respect of any determination of Term SOFR on any date, the dividend rate will be deemed to be the Cap Rate. Dividends shall be payable in cash or in additional Shares pursuant to the terms of any dividend reinvestment plan adopted by the Corporation, payable monthly in arrears, in preference to dividends on shares of Common Stock and any other stock of the Corporation ranking junior to the Shares in payment of dividends. The floating dividend rate on the Shares will reset upon each dividend authorization by the Board, will be based on the floating rate dividend rate determined as of two U.S.
Government Securities Business Days prior to such dividend authorization, and shall apply to all Dividend Periods that are the subject of the Board authorization without regard to any subsequent change in the one-month Term SOFR.
(b)Dividends on each Share shall accumulate from the date on which such Share was originally issued (and the amount payable shall be prorated based on the number of days such Share was issued and outstanding and may vary among the holders of Shares of any series of Shares) or, if later, shall accumulate from the most recent Dividend Payment Date on which dividends on the Shares have been paid in full. Dividends shall be payable as of the first day of each calendar month commencing on the first calendar month immediately following the month during which such Shares were issued (or if any such day is not a Business Day, then on the next succeeding Business Day) (each, a “Dividend Payment Date”), to holders of record of Shares as they appear on the stock register of the Corporation at 5:00 p.m. New York City time (the “close of business”) on the date designated by the Board as the record date for such Dividend Payment Date, which shall be a date not more than 20 days or less than 7 days prior to the applicable Dividend Payment Date. Each period beginning on and including a Dividend Payment Date (or the date on which the Share was originally issued in the case of the first dividend period after issuance of such shares) and ending on but excluding the next succeeding Dividend Payment Date is referred to herein as a “Dividend Period.” Dividends on account of arrears for any past Dividend Period may be declared and paid at any time, without reference to any Dividend Payment Date, to holders of record on such date.
(c)For so long as Shares are outstanding, (i) the Corporation shall not declare, pay or set apart for payment any dividend or other distribution (other than a dividend or distribution paid in shares of, or options, warrants or rights to subscribe for or purchase, Common Stock or other shares of capital stock, if any, ranking junior to the Shares as to dividends) with respect to Common Stock or any other shares of the Corporation ranking junior to or on a parity with the Shares as to dividends and (ii) no purchase, redemption or other acquisition for any consideration by the Corporation shall be made in respect of the Common Stock or any other class of shares of capital stock of the Corporation ranking junior to the Shares, unless in each case (i) immediately after such transaction the Corporation would have an asset coverage (as defined in Section 18(h) of the 1940 Act) of at least 150.00% after deducting the amount of such dividend or distribution, as the case may be, (ii) full cumulative dividends on the Shares payable for all past Dividend Periods have been declared and accrued, paid or set aside and (iii) the Corporation has redeemed the full number of Shares required to be redeemed by any provision for mandatory redemption contained in these Articles Supplementary.
(d)Any dividend payment made on the Shares shall first be credited against the dividends accumulated with respect to the earliest dividend period for which dividends have not been paid.
(5)Liquidation Rights.
(a)Upon the dissolution, liquidation or winding up of the affairs of the Corporation, whether voluntary or involuntary, the holders of Shares shall be entitled to receive and to be paid out of the assets of the Corporation (or the proceeds thereof) available for distribution to its stockholders after satisfaction of claims of creditors of the Corporation, but before any distribution or payment shall be made or set aside in respect of Common Stock, a liquidation preference equal to the Stated Value with respect to such Shares, plus an amount equal to all accumulated but unpaid dividends, if any, accumulated to (but excluding) the date fixed for distribution or payment, whether or not
earned or declared by the Corporation, but excluding interest on any such distribution or payment. In determining whether a distribution (other than upon voluntary or involuntary liquidation), by dividend, redemption or otherwise, is permitted under the MGCL, amounts that would be needed, if the Corporation were to be dissolved at the time of distribution, to satisfy the liquidation preference of the Shares will not be added to the Corporation’s total liabilities.
(b)If, upon any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, the assets of the Corporation available for distribution among the holders of all Preferred Stock of the Corporation, including the Shares, then outstanding shall be insufficient to permit the payment in full to the holders thereof of the amounts to which they are entitled, then the available assets shall be distributed among such holders ratably in any distribution of assets according to the respective amounts which would be payable on all the shares if all amounts thereon were paid in full.
(c)Upon the dissolution, liquidation or winding up of the affairs of the Corporation, whether voluntary or involuntary, until payment in full is made to the holders of Shares of the liquidation distribution to which they are entitled, (i) no dividend or other distribution shall be made to the holders of Common Stock or any other class of shares of capital stock of the Corporation ranking junior to the Shares upon dissolution, liquidation or winding up and (ii) no purchase, redemption or other acquisition for any consideration by the Corporation shall be made in respect of the Common Stock or any other class of shares of capital stock of the Corporation ranking junior to the Shares upon dissolution, liquidation or winding up.
(d)After payment to the holders of Shares of the full preferential amounts provided for in this Section 5, the holders of Shares as such shall have no right or claim to any of the remaining assets of the Corporation.
(e)Subject to the rights of the holders of shares of any series or class or classes of stock ranking on a parity with the Shares with respect to the distribution of assets upon dissolution, liquidation or winding up of the affairs of the Corporation, after payment shall have been made in full to the holders of the Shares as provided in Section 5(a), but not prior thereto, any other series or class or classes of stock ranking junior to the Shares with respect to the distribution of assets upon dissolution, liquidation or winding up of the affairs of the Corporation shall, subject to any respective terms and provisions (if any) applying thereto, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Shares shall not be entitled to share therein.
(f)The consolidation or merger of the Corporation with or into any other corporation, trust or other entity, the consolidation or merger of any other corporation, trust or entity with or into the Corporation, the sale or transfer of any or all of the Corporation’s assets or business or a statutory share exchange will not be deemed to constitute a liquidation, dissolution or winding-up of the affairs of the Corporation for purposes of this Section 5.
(6)Optional Redemption by the Corporation.
(a)(i) Upon approval by the Board, including a majority of the directors that are not “interested persons,” as such term is defined under the 1940 Act (the “Independent Directors”), the Board may, in its sole discretion, redeem any of the then outstanding Eligible Shares of any series for cash at a price equal to its Stated Value, plus an amount equal to all accumulated but unpaid dividends, if any, accumulated to (but
excluding) the date fixed for redemption, whether or not earned or declared by the Corporation, but excluding interest on any such distribution or payment (the “Redemption Price”). In case of any redemption pursuant to this Section 6(a)(i) of less than all Eligible Shares of a series at the time outstanding, the Eligible Shares of such series to be redeemed shall be selected pro rata or by lot.
(ii) Upon a determination by the Board, in its sole discretion, that the redemption of Shares is necessary to cause the Corporation to comply with the asset coverage requirements of the 1940 Act applicable to the Corporation or to maintain the Corporation’s status as a “regulated investment company” under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), the Board, including a majority of the Independent Directors, may, in its sole discretion, redeem all or any part of the then outstanding Shares of any series for cash at a price equal to its Stated Value, plus an amount equal to all accumulated but unpaid dividends, if any, accumulated to (but excluding) the date fixed for redemption, whether or not earned or declared by the Corporation, but excluding interest on any such distribution or payment. In the case of any redemption pursuant to this Section 6(a)(ii), the Board shall cause the Corporation to redeem the minimum number of outstanding Eligible Shares necessary to cause the Corporation to comply with the asset coverage requirements of the 1940 Act applicable to the Corporation or to maintain the Corporation’s status as a “regulated investment company” under Subchapter M of the Code, and, if the redemption of all Eligible Shares is insufficient to cause the Corporation to comply with the asset coverage requirements of the 1940 Act applicable to the Corporation or to maintain the Corporation’s status as a “regulated investment company” under Subchapter M of the Code, the Board shall cause the Corporation to redeem the minimum number of then outstanding Shares that are not Eligible Shares, together with the redemption of all Eligible Shares, necessary to cause the Corporation to comply with the asset coverage requirements of the 1940 Act applicable to the Corporation or to maintain the Corporation’s status as a “regulated investment company” under Subchapter M of the Code. In case of any redemption pursuant to this Section 6(a)(ii) of less than all Shares of a series that are at the time outstanding, the Shares of such series to be redeemed shall be selected pro rata or by lot.
(iii) In connection with any redemption pursuant to this Section 6(a), the Corporation shall provide notice to the holders of Shares that the shares will be redeemed. In connection with such redemption, holders would receive payment for all declared and unpaid dividends on the Shares as of the date of redemption, but after the redemption, holders shall no longer be entitled to the dividends, liquidation preference or other rights attributable to holders of the Shares.
(b)Notice of any redemption pursuant to Section 6(a) shall be sent by or on behalf of the Corporation, upon not less than 10 calendar days nor more than 90 calendar days prior to the date fixed for redemption, by first class mail, postage prepaid, to all holders of record of Shares at their last addresses as they shall appear on the books of the Corporation; provided, however, that no failure to give such notice or any defect therein or in the mailing thereof shall affect the validity of the proceedings for the redemption of any Shares except as to the holder to whom the Corporation has failed to give notice or except as to the holder to whom notice was defective. In addition to any information required by law, such notice shall state: (i) the redemption date, (ii) the redemption price, (iii) the procedures that the holders must follow to redeem such shares, and (iv) that dividends on the shares to be redeemed will cease to accumulate on the redemption date.
(c)To the extent that any redemption for which notice has been provided is not made by reason of the absence of legally available assets therefor in accordance with hereby and applicable law, such redemption shall be made as soon as practicable to the extent such assets become available.
(d)Subject to the provisions hereof, the Corporation shall have full power and authority to prescribe the terms and conditions upon which Shares shall be redeemed from time to time. If fewer than all the shares represented by any certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without charge to the holder thereof.
(7)Optional Redemption by the Holders.
(a)Holder Optional Redemption.
(i)From time to time, prior to the occurrence of a Listing Event, holders of Shares may require the Corporation to redeem such Shares pursuant to this Section 7(a) (the “Holder Optional Redemption”).
(ii)A Holder may exercise the Holder Optional Redemption only by delivering to the Corporation or its designee at any time a written notice to redeem stating that the holder elects to redeem all or a stated number of such holder’s Shares (a “Holder Redemption Notice”).
(iii)A Holder Redemption Notice will be effective as of the last Business Day of the month after a Holder Redemption Notice is duly received by the Corporation or its designee (each such date, a “Holder Redemption Deadline Date”). Any Holder Redemption Notice received after 5:00 p.m. (Eastern time) on a Holder Redemption Deadline Date will be effective as of the next Holder Redemption Deadline Date.
(iv)For all Shares duly submitted for redemption pursuant to the Holder Optional Redemption on or before a Holder Redemption Deadline Date, the Corporation shall determine the HOR Settlement Amount on any Business Day occurring after the applicable Holder Redemption Deadline Date but before the second Holder Redemption Deadline Date following the applicable Holder Redemption Deadline Date (such date, as determined by the Corporation, the “Holder Redemption Exercise Date”).
(v)The Corporation or its designee may, in its sole discretion, allow a holder to revoke their Holder Redemption Notice pursuant to notice of revocation delivered to the Corporation or its designee at any time prior to 5:00 p.m. (Eastern time) on the Business Day immediately preceding the Holder Redemption Exercise Date.
(vi)Each Series A4 Share is subject to a fee (the “Holder Optional Redemption Fee”) if it is redeemed by its holder within five years of its issuance, which Holder Optional Redemption Fee may be waived by the Board in its sole discretion. The amount of the fee equals a percentage of the Offering Price based on the year in which the redemption occurs after the Share is issued as follows:
(1)Prior to the third anniversary of the issuance of such Share: 10.00% of the Offering Price;
(2)On or after the third anniversary but prior to the fourth anniversary: 8.00% of the Offering Price;
(3)On or after the fourth anniversary but prior to the fifth anniversary: 5.00% of the Offering Price; and
(4)On or after the fifth anniversary: 0.00%.
(vii)The Corporation shall settle any Holder Optional Redemption by paying the HOR Settlement Amount in cash.
(viii)The aggregate amount of Holder Optional Redemptions by the holders of Series A4 Shares and Series M4 Shares will be subject to the following redemption limits: (1) no more than 2% of the outstanding Series A4 Shares and Series M4 Shares, in aggregate, as of the end of the most recent fiscal quarter will be redeemed per calendar month; (2) no more than 5% of the outstanding Series A4 Shares and Series M4 Shares, in aggregate, as of the end of the most recent fiscal quarter will be redeemed per fiscal quarter; and (3) no more than 20% of the outstanding Series A4 Shares and Series M4 Shares, in aggregate, as of the end of the most recent fiscal quarter will be redeemed per Annual Redemption Period. An “Annual Redemption Period” means the Corporation’s current fiscal quarter and the three fiscal quarters immediately preceding its current fiscal quarter. The Corporation may waive the foregoing redemption limits in its sole discretion. Any redemptions of Shares in accordance with Section 9 shall count towards the calculations of these limits, but the foregoing limits shall not apply to any Shares redeemed in accordance with Section 6 or Section 9.
(ix)If, after applying the redemption limits set forth in subsection (viii) above, (1) a holder would own less than one Series A4 Share or Series M4 Share, then all of such holder’s Series A4 Shares or Series M4 Shares, as applicable, will be redeemed or (2) the number of Series A4 Shares or Series M4 Shares to be redeemed is less than the number of Series A4 Shares or Series M4 Shares, as applicable, submitted for redemption by a holder, then the excess Series A4 Shares or Series M4 Shares, as applicable, will not be deemed submitted for redemption for future periods and if a holder wishes to redeem additional Shares, such holder will need to submit any remaining Series A4 Shares or Series M4 Shares they hold and wish to redeem on a subsequent Holder Redemption Deadline. Redemption capacity of the Series A4 Shares and the Series M4 Shares will be allocated on a pro rata basis based on the number of Series A4 Shares and Series M4 Shares, as applicable, submitted in the event that a monthly redemption is oversubscribed based on any of the redemption limits set forth in subsection (viii) above.
(x)The right of holders of Shares to exercise the Holder Optional Redemption shall terminate in connection with a Listing Event.
(b)Listing Event. The Corporation may, in its sole discretion, cause the Shares to be listed for trading on a national stock exchange (a “Listing Event”). Any listing of the Series A4 Shares or the Series M4 Shares shall require the approval of the holders of the Series A4 Shares or the Series M4 Shares, as applicable, voting as a separate class. The vote required to approve such a proposal for listing is a majority of Series A4 Shares or Series M4 Shares, as applicable, voting on such proposal at a meeting where a quorum of Series A4 Shares or Series M4 Shares, as applicable, is present. For purposes of voting on any such proposal to list the Series A4 Shares or Series
M4 Shares, the quorum required for voting on such proposal shall be 33 1/3% of the outstanding Series A4 Shares or Series M4 Shares, as applicable, entitled to vote on such proposal, unless the Board by resolution establishes a higher quorum. A favorable vote on any such proposal shall be non-binding and the Board shall retain sole discretion as to whether to complete such Listing Event.
(8)[Reserved]
(9)Survivor’s Option.
(a)Beginning on the Date of Original Issue and prior the occurrence of a Listing Event, upon request by the authorized representative of the beneficial owner of any Shares who is a natural person (including a natural person who beneficially owns Shares through an Individual Retirement Account or personal trust), following the death of the beneficial owner of such Shares, the Corporation will, at its option and subject to the restrictions herein redeem such Shares; provided that in order to exercise the Survivor’s Option, the beneficial owner (or his or her estate) of Shares must have held such Shares for a minimum of six months. No redemption fee shall apply to any redemption pursuant to this Section 9. The Survivor’s Option shall terminate upon the occurrence of a Listing Event.
(b)With respect to any redemption pursuant to this Section 9, the Corporation will redeem Shares for cash at the Redemption Price.
(c)To be valid, any Survivor’s Option must be exercised by or on behalf of the person who has authority to act on behalf of the deceased beneficial owner of Shares (including, without limitation, the personal executor of the deceased beneficial owner or the surviving joint beneficial owner with the deceased beneficial owner) under the laws of the applicable jurisdiction.
(d)The death of a person holding a beneficial ownership interest in any Shares as a joint tenant or tenant by the entirety with another person, or as a tenant in common with the deceased beneficial owner’s spouse, will be deemed the death of a beneficial owner of that Shares, and the entirety of the Shares so beneficially owned will be eligible for the Survivor’s Option. However, the death of a person holding a beneficial ownership interest any Shares as tenant in common with a person other than such deceased beneficial owner’s spouse will be deemed the death of a beneficial owner only with respect to such deceased person’s interest in the Shares, and only a corresponding portion of the Shares so beneficially owned will be eligible for the Survivor’s option.
(e)The death of a person who, during his or her lifetime, was entitled to substantially all of the beneficial ownership interests in any Shares will be deemed the death of the beneficial owner of those Shares for purposes of any Survivor’s Option, regardless of whether that beneficial owner was the registered holder of such Shares, if entitlement to those interests can be established to the satisfaction of the Corporation. A beneficial ownership interest will be deemed to exist in typical cases of nominee ownership, ownership under the Uniform Transfers to Minors Act or Uniform Gifts to Minors Act, community property or other joint ownership arrangements between spouses. In addition, a beneficial ownership interest will be deemed to exist in custodial and trust arrangements where one person has all of the beneficial ownership interests in the applicable Shares during his or her lifetime.
(f)With respect to any Shares held in “street name” through a DTC Participant for which DTC or its nominee is the record holder of the Shares, DTC or its
nominee, as record holder of the Shares, will be the only entity that can exercise any Survivor’s Option for such Shares. With respect to any Shares held through direct register, the record holder of the Shares will be the only entity that can exercise any Survivor’s Option for such Shares.
(g)To exercise the Survivor’s Option for any Shares, the authorized representative of the deceased beneficial owner (or his or her estate) must provide to the Corporation or its designee:
(i)appropriate evidence (A) that the deceased was the beneficial owner of the Shares at the time of death and his or her interest in the Shares was owned by the deceased beneficial owner or his or her estate at least six months prior to the exercise of the Survivor’s Option, (B) that the death of the beneficial owner has occurred (including a certificate of death), (C) of the date of death of the beneficial owner, and (D) that the representative has authority to act on behalf of the beneficial owner;
(ii)a written request to exercise the Survivor’s Option signed by the authorized representative of the deceased beneficial owner with the signature guaranteed by a member firm of a registered national securities exchange or of the Financial Industry Regulatory Authority or a commercial bank or trust company having an office or correspondent in the United States;
(iii)if applicable, a properly executed assignment or endorsement;
(iv)tax waivers and any other instruments or documents that the Corporation reasonably requires in order to establish the validity of the beneficial ownership of the Shares and the claimant’s entitlement to payment; and
(v)any additional information the Corporation reasonably requires to evidence satisfaction of any conditions to the exercise of any Survivor’s Option or to document beneficial ownership or authority to exercise the Survivor’s Option.
In the case of shares held through a broker or nominee, the authorized representative of the deceased beneficial owner (or his or her estate) must deliver the foregoing information to the applicable broker or nominee, along with a written instruction to such broker or nominee to exercise the Survivor’s option on behalf of the deceased beneficial owner (or his or her estate). In turn, the broker or other nominee will deliver each of these items to the Corporation or other nominee, along with evidence satisfactory to the Corporation from the broker or other nominee stating that it represents the deceased beneficial owner.
(h)The Corporation shall not be obligated to redeem any Shares pursuant to this Section 9 to the extent that (i) the Corporation does not have sufficient funds available to fund such redemption or (ii) the Corporation is restricted by applicable law, including the asset coverage requirements of the 1940 Act applicable to the Corporation, or by the terms of any then outstanding senior securities of the Corporation from making such redemption.
(i)The Corporation has the discretionary right to limit the aggregate amount of Shares as to which exercises of any Survivor’s Option shall be accepted by the Corporation from authorized representatives of all deceased holders in any calendar year to an amount equal to the greater of $10,000,000 of Stated Value or 5% of the Shares outstanding as of the end of the most recent calendar year. An otherwise valid election to
exercise any Survivor’s Option may not be withdrawn. Each election to exercise any Survivor’s Option will be accepted in the order that elections are received by the Corporation, except for any request the acceptance of which would contravene any of the limitations described in the preceding paragraph. Shares accepted for redemption through the exercise of any Survivor’s Option normally will be redeemed monthly. Each tendered Share that is not accepted in any calendar year due to the application of any of the limitations described in the preceding paragraph will be deemed to be tendered in the following calendar year in the order in which all such Shares were originally tendered. If any Shares tendered through a valid exercise of any Survivor’s Option are not accepted, the Corporation will deliver a notice by first-class mail to the registered holder, at that holder’s last known address as indicated in the Corporation’s stockholder register, that states the reason the Shares have not been accepted for redemption.
(j)The Corporation retains the right to limit the aggregate amount of Shares as to which exercises of any Survivor’s Option applicable to the Shares will be accepted in any one calendar year as described above.
(k)All other questions regarding the eligibility or validity of any exercise of any Survivor’s Option will be determined by the Corporation, in its sole discretion, which determination will be final and binding on all parties.
(10)Miscellaneous.
(a)Notices. Whenever (i) the Corporation shall declare any dividend upon the shares of its capital stock payable in stock or other securities or make any other distribution of stock or other securities to the holders of shares of its capital stock, (ii) the Corporation shall offer for subscription to the holders of the shares of its capital stock any additional shares of stock of any class or other rights, (iii) there shall be any capital reorganization or reclassification of the capital stock of the Corporation, or a consolidation or merger of the Corporation with or into, or a sale of all or substantially all its assets to, another entity or entities, or (iv) there shall be a liquidation, dissolution or winding up of the Corporation, then, in each such event, the Corporation shall give, by first class mail, postage prepaid, addressed to each holder of Shares at the address of such holder as shown on the books of the Corporation, a notice stating (A) in the case of any dividend or distribution referred to in clause (i) above, the date on which the books of the Corporation shall close or a record shall be taken for determining stockholders entitled to receive such dividend or distribution and (B) in the case of any reorganization, reclassification, consolidation, merger, share exchange, sale or liquidation, dissolution or winding up of the Corporation, the date on which the books of the Corporation shall close or a record shall be taken for determining stockholders entitled to vote upon such transaction and the date, if any is to be fixed, on which the holders of shares of Common Stock shall be entitled to exchange such shares for securities or other property in connection with any such transaction.
(b)Rank. Each series of Shares shall rank, with respect to the payment of dividends and rights upon liquidation, dissolution or winding up, on parity with each other series of Shares. The Shares shall rank, with respect to the payment of dividends and rights upon liquidation, dissolution or winding up, (a) senior to the Corporation’s Common Stock, (b) on parity with the Corporation’s Convertible Preferred Stock, Series A1, par value $0.001 per share, Convertible Preferred Stock, Series A3, par value $0.001 per share, Convertible Preferred Stock, Series M1, par value $0.001 per share, Convertible Preferred Stock, Series M2, par value $0.001 per share, Preferred Stock, Series M3, par value $0.001 per share, and 5.35% Series A Fixed Rate Cumulative Perpetual Preferred Stock, par value $0.001 per share, and with all other equity securities
issued by the Corporation with terms specifically providing that those securities rank on a parity with the Shares with respect to rights to the payment of dividends and distribution of assets upon any liquidation, dissolution or winding up of the Corporation, and (c) junior to the Corporation’s existing and future secured and unsecured indebtedness. For so long as the Shares are outstanding, the Corporation will not exercise any option that the Corporation has to convert Shares, or any other preferred stock of the Corporation, into Common Stock or any other security ranking junior to the Shares or other such preferred stock of the Corporation.
(c)Other Rights. The Shares shall not have any voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Charter.
(d)No Reissuance of Redeemed Shares or Acquired Shares. Each Share redeemed as provided herein or otherwise acquired by the Corporation shall be canceled and retired and shall not be reissued, and shall be returned to the status of authorized but unissued Common Stock.
(e)No Conversion. The Shares shall not be convertible into or exchangeable for any other property or securities of the Corporation.
3.The definitions used in these Articles Supplementary shall be as follows:
“1940 Act” has the meaning specified in Section 2(a).
“Board” has the meaning specified in the First Article.
“Business Day” means a day on which the New York Stock Exchange is open for trading and which is not a Saturday, Sunday or other day on which banks in New York, New York are authorized or obligated by law to close.
“Cap Rate” has the meaning specified in Section 4(a).
“Charter” has the meaning specified in the First Article.
“close of business” has the meaning specified in Section 4(b).
“Code” has the meaning specified in Section 6(a)(ii).
“Common Stock” has the meaning specified in the First Article.
“Corporation” has the meaning specified in the preamble.
“Date of Original Issue” shall mean the first date on which Shares were issued.
“Dividend Payment Date” has the meaning specified in Section 4(b).
“Dividend Period” has the meaning specified in Section 4(b).
“Eligibility Date” means, with respect to a Share, the second anniversary of the Issuance Reference Date of such Share provided that following a Listing Event the Eligibility Date of any Share shall mean the second anniversary of the Date of Original Issue.
“Eligible Shares” means Shares for which the Eligibility Date has occurred.
“Holder Optional Redemption” has the meaning specified in Section 7(a)(i).
“Holder Optional Redemption Fee” has the meaning specified in Section 7(a)(vi).
“Holder Redemption Deadline Date” has the meaning specified in Section 7(a)(iii).
“Holder Redemption Exercise Date” has the meaning specified in Section 7(a)(iv).
“Holder Redemption Notice” has the meaning specified in Section 7(a)(ii).
“HOR Settlement Amount” means:
(i)with respect to any exercise of the Holder Optional Redemption for a Series A4 Share, (1) the Stated Value, plus (2) an amount equal to accumulated but unpaid dividends, if any, on such Share (whether or not earned or declared, but excluding interest on such dividends) to, but excluding, the Holder Redemption Exercise Date, minus (3) the Holder Optional Redemption Fee, if any;
(ii)with respect to any exercise of the Holder Optional Redemption for a Series M4 Share:
(1)upon a Holder Redemption Exercise Date within 24 months after the Issuance Reference Date of such Share, (A) the Stated Value, plus (B) an amount equal to accumulated but unpaid dividends, if any, on such Share (whether or not earned or declared, but excluding interest on such dividends) to, but excluding, the Holder Redemption Exercise Date, minus (C) (y) during the first twelve months after the Issuance Reference Date, an amount equal to the aggregate amount of all dividends, whether paid or accrued, on such Series M4 Share in the six months prior to the Holder Redemption Exercise Date or (z) during the second twelve months after the Issuance Reference Date, an amount equal to the aggregate amount of all dividends, whether paid or accrued, on such Series M4 Share in the three months prior to the Holder Redemption Exercise Date; and
(2)upon a Holder Redemption Exercise Date occurring 24 months or more after the Issuance Reference Date of such Share, (A) the Stated Value, plus (B) an amount equal to accumulated but unpaid dividends, if any, on such Share (whether or not earned or declared, but excluding interest on such dividends) to, but excluding, the Holder Redemption Exercise Date.
The Corporation, in its sole discretion, may decrease or waive any amounts referenced in paragraph (ii)(1)(C) of this definition by giving public announcement of the terms and duration of this waiver.
“Independent Directors” has the meaning specified in Section 6(a).
“Issuance Reference Date” means, with respect to any Share, the date on which such Share was originally issued; provided that from time to time the Board may, without approval of holders of Shares, designate a different date as the Issuance Reference Date, provided that such date is not later than the date on which such Share was originally issued and not earlier than six
months prior to the date on which such Share was originally issued. The Board may cause the Corporation to conduct a mandatory tender, exchange, conversion or other reorganization solely for the purpose of designating a different Issuance Reference Date as permitted hereby, which conversion, combination, exchange or reorganization shall not be deemed to materially and adversely affect the rights, preferences or privileges of the Shares or of one or more series of the Shares, notwithstanding that in connection with any such conversion, combination, exchange or reorganization holders may receive cash in lieu of fractional shares, and which conversion, combination, exchange or reorganization shall be effective at such time as approved by the Board. Shares issued pursuant to a dividend reinvestment plan adopted by the Corporation shall, in accordance with the terms of such dividend reinvestment plan, be of the same series and be deemed to have the Issuance Reference Date based on the series and Issuance Reference Date of the Share for which the dividend was declared.
“MGCL” has the meaning specified in the First Article.
“Offering Price” means, with respect to any Share, the stated maximum gross public offering price of the Shares (before deducting any selling commission, dealer manager fee or others sales load or fee) as set forth in the prospectus or prospectus supplement relating to the offering of the Shares at the time the Share was originally issued.
“Periodic Term SOFR Determination Day” has the meaning set forth in the definition of Term SOFR.
“person” means any individual, corporation, partnership, limited liability company, limited liability partnership, trust, unincorporated association or other entity.
“Preferred Stock” means the Shares and any other class or series of stock of the Corporation designated as preferred stock and ranking on a parity with the Shares.
“Redemption Price” has the meaning set forth in Section 6(a)(i).
“Series A4 Shares” has the meaning set forth in Section 1(a).
“Series M4 Shares” has the meaning set forth in Section 1(b).
“Shares” has the meaning set forth in the First Article.
“SOFR Rate Replacement Date” means the earliest to occur of the following events with respect to Term SOFR:
(i) in the case of clause (i) of the definition of “SOFR Rate Transition Event,” the date of the determination referenced therein;
(ii) in the case of clause (ii) or (iii) of the definition of “SOFR Rate Transition Event,” the later of (A) the date of the public statement or publication of information referenced therein and (B) the date on which the administrator of the Term SOFR permanently or indefinitely ceases to provide the Term SOFR; or
(iii) in the case of clause (iv) of the definition of “SOFR Rate Transition Event,” the date of the public statement or publication of information referenced therein.
“SOFR Rate Transition Event” means the occurrence of one or more of the following events with respect to Term SOFR:
(i) the Corporation or its designee, after consulting with the Corporation, determines that the use of a forward-looking rate for the tenor specified based on Term SOFR is not administratively feasible;
(ii) a public statement or publication of information by or on behalf of the administrator of the Term SOFR announcing that such administrator has ceased or will cease to provide the Term SOFR, permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the Term SOFR;
(iii) a public statement or publication of information by the regulatory supervisor for the administrator of the Term SOFR, the central bank for the currency of the Term SOFR, an insolvency official with jurisdiction over the administrator for the Term SOFR, a resolution authority with jurisdiction over the administrator for the Term SOFR or a court or an entity with similar insolvency or resolution authority over the administrator for the Term SOFR, which states that the administrator of the Term SOFR has ceased or will cease to provide the Term SOFR permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the Term SOFR; or
(iv) a public statement or publication of information by the regulatory supervisor for the administrator of the Term SOFR announcing that the Term SOFR is no longer representative.
“Stated Value” has the meaning specified in Section 4(a).
“Survivor’s Option” means, where applicable, the right of the estate of a holder of Shares to require the Corporation to redeem such Shares upon the death of the holder of such Shares, subject to the provisions hereof relating to such option.
“Term SOFR” means, with respect to any Dividend Period: (i) the Term SOFR Reference Rate for a one-month tenor determined on the day (such day, the “Periodic Term SOFR Determination Day”) that is two U.S. Government Securities Business Days prior to the date of declaration of dividends on the Shares, as such rate is published by the Term SOFR Administrator; or (ii) if as of 5:00 p.m. (New York City time) on any Periodic Term SOFR Determination Day the Term SOFR Reference Rate for the applicable tenor has not been published by the Term SOFR Administrator and a SOFR Rate Replacement Date with respect to the Term SOFR Reference Rate has not occurred, then Term SOFR will be the Term SOFR Reference Rate for such tenor as published by the Term SOFR Administrator on the first preceding U.S. Government Securities Business Day for which such Term SOFR Reference Rate for such tenor was published by the Term SOFR Administrator so long as such first preceding U.S. Government Securities Business Day is not more than three U.S. Government Securities Business Days prior to such Periodic Term SOFR Determination Day.
“Term SOFR Administrator” means CME Group Benchmark Administration Limited (CBA) (or a successor administrator of the Term SOFR Reference Rate).
“Term SOFR Reference Rate” means the forward-looking term rate based on the Secured Overnight Financing Rate published by the Term SOFR Administrator.
“U.S. Government Securities Business Day” is any day other than a Saturday, Sunday or a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in U.S. Government Securities.
“Voting Period” has the meaning specified in Section 2(b).
4.The Shares have been classified and designated by the Board under the authority contained in the Charter.
5.These Articles Supplementary have been approved by the Board in the manner and by the vote required by law.
6.These Articles Supplementary shall become effective on December 28, 2023, at 5:00 p.m.
7.The undersigned [President] of the Corporation acknowledges these Articles Supplementary to be the act of the Corporation and, as to all matters or facts required to be verified under oath, the undersigned [President] acknowledges that, to the best of such officer’s knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury.
IN WITNESS WHEREOF, the Corporation has caused these Articles Supplementary to be executed in its name and on its behalf by its President and attested to by its Secretary on this 28th day of December, 2023.
PROSPECT CAPITAL CORPORATION
By: /s/ M. Grier Eliasek_______________
Name: M. Grier Eliasek
Title: President & Chief Operating Officer
Name: M. Grier Eliasek
Title: President & Chief Operating Officer
ATTEST:
By: /s/ Kristin Van Dask______________
Name: Kristin Van Dask
Title: Chief Financial Officer, Chief
Name: Kristin Van Dask
Title: Chief Financial Officer, Chief
Compliance Officer & Secretary
Exhibit 3.2
PROSPECT CAPITAL CORPORATION
ARTICLES SUPPLEMENTARY
CONVERTIBLE PREFERRED STOCK
Prospect Capital Corporation, a Maryland corporation (the “Corporation”), hereby certifies to the State Department of Assessments and Taxation of Maryland as follows:
1.Pursuant to the authority expressly vested in the Board of Directors of the Corporation (the “Board”) by Section 5.3 of its charter (including these Articles Supplementary, the “Charter”) and Section 2-208 of the Maryland General Corporation Law, the Board has duly adopted resolutions reclassifying (i) 8,000,000 authorized but unissued shares of common stock, par value $0.001 per share (the “Common Stock”), of the Corporation, as additional shares (the “Additional Series A1 Shares”) of Convertible Preferred Stock, Series A1, par value $0.001 per share (the “Series A1 Shares”), (ii) 8,000,000 authorized but unissued shares of Common Stock as additional shares (the “Additional Series A3 Shares”) of Convertible Preferred Stock, Series A3, par value $0.001 per share (the “Series A3 Shares”), (iii) 8,000,000 authorized but unissued shares of Common Stock as additional shares (the “Additional Series M1 Shares”) of Convertible Preferred Stock, Series M1, par value $0.001 per share (the “Series M1 Shares”), (iv) 8,000,000 authorized but unissued shares of Common Stock as additional shares (the “Additional Series M2 Shares”) of Convertible Preferred Stock, Series M2, par value $0.001 per share (the “Series M2 Shares”), and (v) 8,000,000 authorized but unissued shares of Common Stock as additional shares (the “Additional Series M3 Shares” and, together with the Additional Series A1 Shares, the Additional Series A3 Shares, the Additional Series M1 Shares and the Additional M2 Shares, the “Additional Shares”) of Convertible Preferred Stock, Series M3, par value $0.001 per share (the “Series M3 Shares”), each having the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms of such series as set forth in the Charter.
2.The Additional Shares have been classified and designated by the Board under the authority contained in the Charter. After giving effect to the classification of the Additional Shares set forth herein, the total number of (i) Series A1 Shares that the Corporation has authority to issue is 80,000,000, (ii) Series A3 Shares that the Corporation has authority to issue is 80,000,000, (iii) Series M1 Shares that the Corporation has authority to issue is 80,000,000, (iv) Series M2 Shares that the Corporation has authority to issue is 80,000,000 and (v) Series M3 Shares that the Corporation has authority to issue is 80,000,000.
3.These Articles Supplementary have been approved by the Board in the manner and by the vote required by law.
4. The undersigned officer of the Corporation acknowledges these Articles Supplementary to be the act of the Corporation and, as to all matters or facts required to be verified under oath, the undersigned officer acknowledges that, to the best of such officer’s knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury.
IN WITNESS WHEREOF, the Corporation has caused these Articles Supplementary to be executed in its name and on its behalf by its President and Chief Operating Officer and attested to by its Chief Financial Officer, Chief Compliance Officer and Secretary on this 28th day of December, 2023.
PROSPECT CAPITAL CORPORATION
By: /s/ M. Grier Eliasek_______________
Name: M. Grier Eliasek
Title: President & Chief Operating
Name: M. Grier Eliasek
Title: President & Chief Operating
Officer
ATTEST:
By: /s/ Kristin Van Dask______________
Name: Kristin Van Dask
Title: Chief Financial Officer, Chief
Name: Kristin Van Dask
Title: Chief Financial Officer, Chief
Compliance Officer & Secretary
Exhibit 5.1
[Letterhead of Venable LLP]
December 29, 2023
Prospect Capital Corporation
10 East 40th Street, 44th Floor
New York, New York 10016
Re: Registration Statement on Form N-2 (File No. 333-269714) Ladies and Gentlemen:
We have served as Maryland counsel to Prospect Capital Corporation, a Maryland corporation (the “Company”) and a business development company under the Investment Company Act of 1940, as amended (the “1940 Act”), in connection with certain matters of Maryland law arising out of the issuance of up to 40,000,000 shares of preferred stock, par value $0.001 per share (the “Preferred Stock”), of the Company, classified and designated as Convertible Preferred Stock, Series A1, Series A3, Series M1, Series M2 and Series M3 (collectively, the “Convertible Preferred Shares”), and up to 160,000,000 shares of Preferred Stock classified and designated as Preferred Stock, Series A4 and Series M4 (together with the Convertible Preferred Shares, the “Shares”), covered by the above-referenced Registration Statement (the “Registration Statement”), filed by the Company with the United States Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “1933 Act”). The Shares are to be issued in a public offering (the “Offering”) pursuant to the Prospectus Supplement (as defined herein).
In connection with our representation of the Company, and as a basis for the opinion hereinafter set forth, we have examined originals, or copies certified or otherwise identified to our satisfaction, of the following documents (collectively, the “Documents”):
1.The Registration Statement;
2.The Prospectus, dated February 10, 2023, as supplemented by a Prospectus Supplement, dated December 28, 2023 (the “Prospectus Supplement”), filed by the Company with the Commission pursuant to Rule 424(b) under the 1933 Act;
3.The charter of the Company (the “Charter”), certified by the State Department of Assessments and Taxation of Maryland (the “SDAT”);
4.The Amended and Restated Bylaws of the Company, certified as of the date hereof by an officer of the Company;
Prospect Capital Corporation
December 29, 2023
Page 2
5.A certificate of the SDAT as to the good standing of the Company, dated as of a recent date;
6.Resolutions adopted by the Board of Directors of the Company (the “Resolutions”), relating to, among other matters, the sale and issuance of the Shares and the Conversion Shares (as defined herein), certified as of the date hereof by an officer of the Company;
7.A certificate executed by an officer of the Company, dated as of the date hereof; and
8.Such other documents and matters as we have deemed necessary or appropriate to express the opinion set forth below, subject to the assumptions, limitations and qualifications stated herein.
In expressing the opinion set forth below, we have assumed the following:
1.Each individual executing any of the Documents, whether on behalf of such individual or another person, is legally competent to do so.
2.Each individual executing any of the Documents on behalf of a party (other than the Company) is duly authorized to do so.
3.Each of the parties (other than the Company) executing any of the Documents has duly and validly executed and delivered each of the Documents to which such party is a signatory, and such party’s obligations set forth therein are legal, valid and binding and are enforceable in accordance with all stated terms.
4.All Documents submitted to us as originals are authentic. The form and content of all Documents submitted to us as unexecuted drafts do not differ in any respect relevant to this opinion from the form and content of such Documents as executed and delivered. All Documents submitted to us as certified or photostatic copies conform to the original documents. All signatures on all Documents are genuine. All public records reviewed or relied upon by us or on our behalf are true and complete. All representations, warranties, statements and information contained in the Documents are true and complete. There has been no oral or written modification of or amendment to any of the Documents, and there has been no waiver of any provision of any of the Documents, by action or omission of the parties or otherwise.
5.Upon the issuance of any shares (the “Conversion Shares”) of common stock, $0.001 par value per share (the “Common Stock”), of the Company issuable upon the conversion of the Convertible Preferred Shares, the total number of shares of Common Stock issued and outstanding will not exceed the total number of shares of Common Stock that the Company is then authorized to issue under the Charter.
Prospect Capital Corporation
December 29, 2023
Page 3
Based upon the foregoing, and subject to the assumptions, limitations and qualifications stated herein, it is our opinion that:
1.The Company is a corporation duly incorporated and existing under and by virtue of the laws of the State of Maryland and is in good standing with the SDAT.
2.The issuance of the Shares has been duly authorized and, when issued and delivered by the Company pursuant to the Registration Statement, the Prospectus Supplement and the Resolutions against payment of the consideration set forth therein, the Shares will be validly issued, fully paid and nonassessable.
3.The issuance of the Conversion Shares has been duly authorized and, when and to the extent issued and delivered by the Company upon conversion of the Shares in accordance with the Registration Statement, the Prospectus Supplement, the Resolutions and the Charter, the Conversion Shares will be validly issued, fully paid and nonassessable.
The foregoing opinion is limited to the laws of the State of Maryland and we do not express any opinion herein concerning the laws of any other jurisdiction. We express no opinion as to the 1940 Act, or other federal securities laws, or state securities laws, including the securities laws of the State of Maryland, or as to federal or state laws regarding fraudulent transfers. To the extent that any matter as to which our opinion is expressed herein would be governed by the laws of any jurisdiction other than the State of Maryland, we do not express any opinion on such matter. The opinion expressed herein is subject to the effect of any judicial decision which may permit the introduction of parol evidence to modify the terms or the interpretation of agreements.
The opinion expressed herein is limited to the matters specifically set forth herein and no other opinion shall be inferred beyond the matters expressly stated. We assume no obligation to supplement this opinion if any applicable law changes after the date hereof or if we become aware of any fact that might change the opinion expressed herein after the date hereof.
This opinion is being furnished to you for submission to the Commission as an exhibit to the Company’s Current Report on Form 8-K relating to the Shares (the “Form 8-K”), which is incorporated by reference in the Registration Statement. We hereby consent to the filing of this opinion as an exhibit to the Form 8-K and the said incorporation by reference and to the use of the name of our firm therein. In giving this consent, we do not admit that we are within the category of persons whose consent is required by Section 7 of the 1933 Act.
Very truly yours,
/s/ Venable LLP
Exhibit 99.1
PREFERRED STOCK DIVIDEND REINVESTMENT PLAN
OF
PROSPECT CAPITAL CORPORATION
Effective December 29, 2023
Prospect Capital Corporation, a Maryland corporation (the “Corporation”), hereby adopts the following plan (the “Preferred Stock Dividend Reinvestment Plan”) with respect to dividends declared by its Board of Directors on shares of its 5.50% Series A1 Preferred Stock, 5.50% Series M1 Preferred Stock, 5.50% Series M2 Preferred Stock, 5.50% Series AA1 Preferred Stock, 5.50% Series A2 Preferred Stock, 5.50% Series MM1 Preferred Stock, 6.50% Series A3 Preferred Stock, 6.50% Series M3 Preferred Stock, 6.50% Series AA2 Preferred Stock, 6.50% Series MM2 Preferred Stock, Floating Rate Series A4 Preferred Stock and Floating Rate Series M4 Preferred Stock (together with such other series as may be distinguished by the Board of Directors from time to time, the “Preferred Stock”). As used herein, “dividends” means dividends on Preferred Stock.
1.At the election of a stockholder, all dividends hereafter declared by the Board of Directors shall be payable in shares of Preferred Stock. In order to enroll in the Preferred Stock Dividend Reinvestment Plan, a stockholder must submit authorization to Computershare Trust Company, N.A., as agent for the stockholders in administering the Preferred Stock Dividend Reinvestment Plan (the “Plan Administrator”).
2.By enrolling in the Preferred Stock Dividend Reinvestment Plan, a stockholder is directing the Administrator to apply all, but not less than all, dividends to the purchase of additional shares of Preferred Stock in accordance with the Preferred Stock Dividend Reinvestment Plan’s terms and conditions. Unless otherwise instructed, the Plan Administrator will thereafter automatically reinvest all, but not less than all, dividends declared on shares of Preferred Stock held under the Preferred Stock Dividend Reinvestment Plan. If a stockholder who has enrolled in the Preferred Stock Dividend Reinvestment Plan pursuant to the terms and conditions stated herein (each a “Participant”), wants to discontinue the reinvestment of all dividends paid on their shares of Preferred Stock, they must provide written or telephonic notice to the Plan Administrator.
3.Dividends shall be payable on such date or dates as may be fixed from time to time by the Board of Directors to stockholders of record at the close of business on the record date(s) established by the Board of Directors for the dividend involved. If a Participant’s request to participate in the Preferred Stock Dividend Reinvestment Plan is received after the record date for a dividend, such dividend will be paid in cash and the initial dividend reinvestment will commence with the following dividend payment.
4.Shares of Preferred Stock received through the Preferred Stock Dividend Reinvestment Plan will be of the same series or sub-series and have the same original issue date for
purposes of the Holder Optional Conversion Fee and for other terms of the Preferred Stock based on issuance date as the Preferred Stock for which the dividend was declared. Shares of Preferred Stock issued under the Preferred Stock Dividend Reinvestment Plan will come from our authorized but unissued shares of Preferred Stock. Fractional shares of Preferred Stock may be issued under the Preferred Stock Dividend Reinvestment Plan, subject to operating procedures of Depository Trust Company. Dividends on fractional shares, as well as on whole shares, will be reinvested in additional shares of Preferred Stock, which will be credited to a Participant’s Preferred Stock Dividend Reinvestment Plan account.
5.With respect to reinvested dividends, the price for purchases of shares of Preferred Stock directly from the Corporation will be $25.00 for Floating Rate Series A4 Preferred Stock and Floating Rate Series M4 Preferred Stock, $23.75 per share (95% of the stated value of $25.00 per share of Preferred Stock) for 5.50% Series A1 Preferred Stock, 5.50% Series M1 Preferred Stock, 5.50% Series M2 Preferred Stock, 5.50% Series AA1 Preferred Stock, 5.50% Series A2 Preferred Stock, 5.50% Series MM1 Preferred Stock, 6.50% Series A3 Preferred Stock, 6.50% Series M3 Preferred Stock, 6.50% Series AA2 Preferred Stock and 6.50% Series MM2 Preferred Stock, and the investment date will be the dividend payment date for the month. Dividend payment dates generally occur on the first business day of each month. Subject to operating procedures of Depository Trust Company, each Participant’s account will be credited with a full and fractional number of shares of Preferred Stock, equal to the total amount to be invested by such Participant, divided by the applicable purchase price per share.
6.The Plan Administrator will set up a dividend reinvestment account for shares acquired pursuant to the Preferred Stock Dividend Reinvestment Plan for each Participant. The Plan Administrator will hold each Participant’s shares, together with the shares of other Participants, in non-certificated form in the Plan Administrator’s name or that of its nominee.
7.The Corporation will pay all fees, the annual cost of administration and, unless provided otherwise in the Preferred Stock Dividend Reinvestment Plan, all other charges incurred in connection with the purchase of shares of Preferred Stock acquired under the Preferred Stock Dividend Reinvestment Plan, if any.
8.Dividends paid on the shares accumulated in the Preferred Stock Dividend Reinvestment Plan are included in the Form 1099-DIV information return sent annually to each stockholder. When applicable, proceeds received from sales transactions are included in the Form 1099-B information return sent annually to each stockholder. The automatic reinvestment of distributions will not relieve stockholders of any U.S. federal, state or local income tax that may be payable (or required to be withheld) on such distributions.
9.Participation in the Preferred Stock Dividend Reinvestment Plan may be terminated by a Participant at any time by notice to that effect to the Plan Administrator. To be effective for any given distribution, the notice to terminate must be received by the Plan Administrator, in writing, via the internet or the Plan Administrator’s toll free number, no later than the record date for the next dividend. If the notice to terminate is received after
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the record date for a dividend, then that dividend will be reinvested; however, all subsequent dividends will be paid out in cash on all balances.
10.Generally, an eligible holder of shares of Preferred Stock may again become a Participant in the Preferred Stock Dividend Reinvestment Plan. However, the Corporation reserves the right to reject the enrollment of a previous Participant in the Preferred Stock Dividend Reinvestment Plan on grounds of excessive joining and termination. This reservation is intended to minimize administrative expense and to encourage use of the Preferred Stock Dividend Reinvestment Plan as a long-term investment service.
11.The Corporation reserves the right to interpret and regulate the Preferred Stock Dividend Reinvestment Plan. The Corporation also reserves the right to suspend, modify or terminate the Preferred Stock Dividend Reinvestment Plan at any time. Participants will be notified of any suspension, modification or termination of the Preferred Stock Dividend Reinvestment Plan. Upon the termination of the Preferred Stock Dividend Reinvestment Plan any whole book-entry shares owned will continue to be credited to a Participant’s account unless specifically requested otherwise.
12.Any shares of Preferred Stock distributed by the Corporation as a dividend on shares of Preferred Stock credited to a Participant’s account under the Preferred Stock Dividend Reinvestment Plan, or upon any split of such shares of Preferred Stock, will be credited to such Participant’s account. Stock dividends or splits distributed on all other shares of Preferred Stock held by a Participant and registered in their own name will be mailed directly to such Participant.
13.If a Participant disposes of all shares of Preferred Stock registered in their name, but does not give notice of withdrawal to the Plan Administrator, the Plan Administrator will continue to reinvest the dividends on any shares of Preferred Stock held in such Participant’s account under the Preferred Stock Dividend Reinvestment Plan until the Plan Administrator is otherwise notified.
14.Any voting rights attributable to the shares of Preferred Stock credited to a Participant’s account under the Preferred Stock Dividend Reinvestment Plan will be voted in accordance with such Participant’s instructions. If a Participant does not hold shares of Preferred Stock in their own name, such Participant will be furnished with a form of proxy covering the shares of Preferred Stock credited to such Participant’s account under the Preferred Stock Dividend Reinvestment Plan to which any such voting rights are attributable. If a Participant does hold shares of Preferred Stock in their own name, such Participant’s proxy will be deemed to include shares of Preferred Stock, if any, credited to their account under the Preferred Stock Dividend Reinvestment Plan to which any such voting rights are attributable, and the shares of Preferred Stock held under the Preferred Stock Dividend Reinvestment Plan will be voted in the same manner as the shares of Preferred Stock registered in their own name. If a proxy is not returned by a Participant, none of such Participant’s shares of Preferred Stock to which any such voting rights are attributable will be voted unless such Participant votes in person. If a Participant wants to vote in person at a meeting of stockholders, a proxy for shares of Preferred Stock credited
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to their account under the Preferred Stock Dividend Reinvestment Plan to which any such voting rights are attributable may be obtained upon written request received by the Plan Administrator at least 15 days before the meeting.
15.Participants may not pledge any shares of Preferred Stock held in their Preferred Stock Dividend Reinvestment Plan account. Any pledge of shares of Preferred Stock in a Preferred Stock Dividend Reinvestment Plan account is null and void. If a Participant wishes to pledge shares of Preferred Stock, they must first withdraw those shares of Preferred Stock from the Preferred Stock Dividend Reinvestment Plan.
16.Recordkeeping functions under the Preferred Stock Dividend Reinvestment Plan are provided by the Plan Administrator.
17.Neither the Administrator, nor any independent agent, will be liable in administering the Preferred Stock Dividend Reinvestment Plan for any act done in good faith or any omission to act in good faith in connection with the Preferred Stock Dividend Reinvestment Plan. This limitation includes, but is not limited to, any claims of liability relating to: (1) the failure to terminate a Participant’s Preferred Stock Dividend Reinvestment Plan account upon such Participant’s death prior to receiving written notice of such death; (2) the purchase prices reflected in a Participant’s Preferred Stock Dividend Reinvestment Plan account or the dates of purchases of Preferred Stock under the Preferred Stock Dividend Reinvestment Plan; or (3) any loss or fluctuation in the market value of shares of Preferred Stock after the purchase of shares of Preferred Stock under the Preferred Stock Dividend Reinvestment Plan. Further, in no event shall the Corporation, the Plan Administrator or their agents have any liability as to any inability to purchase shares of Preferred Stock, or as to the timing of any purchase. The foregoing limitation of liability does not represent a waiver of any rights a Participant may have under applicable securities laws.
18.The Participant agrees to notify the Plan Administrator promptly of any change of address. Notices to the Participant may be given by letter addressed to the Participant at the last address of record with the Plan Administrator.
19.These terms and conditions may be amended or supplemented by the Corporation at any time but, except when necessary or appropriate to comply with applicable law or the rules or policies of the Securities and Exchange Commission or any other regulatory authority, only by mailing an appropriate notice at least thirty (30) days prior to the effective date thereof to the Participant’s last address of record. The amendment or supplement shall conclusively be deemed to be accepted by the Participant unless prior to the effective date thereof the Plan Administrator receives written notice of the termination or participation in the Preferred Stock Dividend Reinvestment Plan. Any such amendment may include the appointment by the Plan Administrator in its stead and place a successor plan administrator under these terms and conditions, with full power and authority to perform all or any of the acts to be performed by the Plan Administrator under these terms and conditions. Upon any such appointment of any agent for the purpose of receiving dividends and distributions, the Corporation will be authorized to pay to such successor
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agent, for each Participant’s account, all dividends and distributions payable on shares of the Corporation held in the Participant’s name or under the Preferred Stock Dividend Reinvestment Plan for retention or application by such successor agent as provided in these terms and conditions.
20.The Plan Administrator will at all times act in good faith and use its best efforts within reasonable limits to ensure its full and timely performance of all services to be performed by it under this Plan and to comply with applicable law, but assumes no responsibility and shall not be liable for loss or damage due to errors unless such error is caused by the Plan Administrator’s negligence, bad faith, or willful misconduct or that of its employees or agents.
21.These terms and conditions shall be governed by and construed in accordance with the laws of the State of New York without regard to its conflicts of law principles and applicable rules and regulations of the Securities and Exchange Commission. These terms and conditions cannot be changed orally.
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