Hercules Capital, Inc. entered into a Letter of Credit Facility Agreement with Sumitomo Mitsui Banking Corporation, as issuing bank. The SMBC LC Facility provides for a letter of credit facility with a final maturity date ending on January 13, 2026 and an initial commitment amount of $100.0 million. The Company's obligations under the SMBC LC Facility may in the future be guaranteed by certain of the Company's subsidiaries and is primarily secured by a first priority security interest (subject to certain exceptions) in only certain specified property and assets of the Company and any subsidiary guarantors thereunder.

Each letter of credit issued by SMBC under the SMBC LC Facility will expire at or prior to the earlier to occur of the twelfth month after the date of each issuance and the final maturity date of the SMBC LC Facility, provided that the Company may elect to renew a letter of credit with a one-year term for additional one-year periods, subject to the terms and conditions set forth in the SMBC LC Facility. Extensions of credit under the SMBC LC Facility are subject to compliance with a borrowing base and an aggregate portfolio balance. Letters of credit that are drawn and funded may remain outstanding until the maturity date and shall bear interest at the following rates: for (i) any letter of credit disbursement for which the Company elects the base rate option, (A) if the borrowing base is equal to or greater than the product of 1.60 and the letter of credit exposure, the “alternate base rate” (which is the greater of (x) zero and (y) the highest of (a) the prime rate as published in the print edition of The Wall Street Journal, Money Rates Section, (b) the federal funds effective rate plus 0.5% and (c) the one-month Term SOFR rate plus 1% per annum) plus 0.350% per annum and (B) if the borrowing base is less than the product of 1.60 and the letter of credit exposure, the alternate base rate plus 0.475% per annum; and (ii) any letter of credit disbursement for which the Company elects the “term benchmark” or “RFR” option, (A) if the borrowing base is equal to or greater than the product of 1.60 and the letter of credit exposure, the “adjusted term benchmark rate” (being EURIBOR if the letter of credit disbursement is denominated in Euros, Term SOFR if the letter of credit disbursement is denominated in USD, CDOR if the letter of credit disbursement is denominated in Canadian Dollars and TIBOR if the letter of credit disbursement is denominated in Japanese Yen, in each case, subject to a floor of zero) or the “RFR” (being daily simple SONIA if the letter of credit disbursement is denominated in Sterling), as applicable, plus 1.350% per annum and (B) if the borrowing base is less than the product of 1.60 and the letter of credit exposure, the adjusted term benchmark rate or RFR (as applicable) plus 1.475% per annum.

The proceeds of letters of credit issued on the account of the Company under the SMBC LC Facility may be used, subject to certain restrictions set forth in the SMBC LC Facility, for funding amounts due under the unfunded portion of committed portfolio investments. The Company will be required to pay (i) letter of credit commitment fees at a rate per annum equal to 0.350% on the average daily unused amount of the then-current commitment of SMBC as the issuing bank and (ii) letter of credit fees at a rate per annum equal to (a) 1.10%, if the borrowing base is greater than or equal to the product of 1.60 and the letter of credit exposure, or (b) 1.225%, if the borrowing base is less than the product of 1.60 and the letter of credit exposure, on the average daily amount of the letter of credit exposure (excluding any portion thereof attributable to outstanding and unreimbursed letter of credit disbursements). In connection with the SMBC LC Facility, the Company has made certain representations and warranties, and must comply with certain affirmative and negative covenants, including, but not limited to, (i) maintaining minimum shareholders' equity, measured as of each fiscal quarter end, (ii) maintaining a minimum asset coverage ratio of 150% at all times and (iii) maintaining the Company's status as a regulated investment company under the Internal Revenue Code of 1986, as amended, and as a business development company under the Investment Company Act of 1940, as amended.

The SMBC LC Facility also permits SMBC to select an independent third-party valuation firm to determine valuations of certain portfolio investments for purposes of the borrowing base. In connection with the SMBC LC Facility, the Company also entered into new collateral documents. The SMBC LC Facility also contains customary events of default with customary cure and notice provisions, including, without limitation, nonpayment, misrepresentation of representations and warranties in a material respect, breach of covenant, cross-default and cross-acceleration to other indebtedness and bankruptcy.

Upon the occurrence of an event of default, SMBC, as issuing bank, may terminate its commitment under the SMBC LC Facility and declare the outstanding letter of credit disbursements and all other obligations of the Company under the SMBC LC Facility immediately due and payable. In the event that the letter of credit disbursements are declared due and payable, then, upon notice from SMBC demanding the deposit of cash collateral, the Company is required to immediately deposit into a letter of credit collateral account cash an amount equal to the then-current letter of credit exposure (excluding any portion thereof attributable to outstanding and unreimbursed letter of credit disbursements) as of such date plus any accrued and unpaid interest on such letter of credit exposure (excluding any portion thereof attributable to outstanding and unreimbursed letter of credit disbursements).