Item 1.01. Entry into a Material Definitive Agreement.
On August 3, 2020, Prospect Capital Corporation (the “Company”) entered into a Dealer Manager Agreement 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, principal distributor and exclusive dealer manager for the Company’s offering of up to 40,000,000 shares, par value $0.001 per share, of preferred stock, with a $1,000,000,000 aggregate liquidation preference (the “Preferred Stock”). The Preferred Stock will be issued in multiple series, including the 5.50% Series A1 Preferred Stock (“Series A1 Preferred Stock”), the 5.50% Series M1 Preferred Stock (“Series M1 Preferred Stock”), and the 5.50% Series M2 Preferred Stock (“Series M2 Preferred Stock”, and together with the Series M1 Preferred Stock, the “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 40,000,000 shares (the “Offering”).
The Series A1 Preferred Stock and Series M Preferred Stock are registered with the Securities and Exchange Commission pursuant to an automatic shelf registration statement on Form N-2 (File No. 333-236415) under the Securities Act of 1933, as amended (the “Registration Statement”), and will be offered and sold pursuant to a prospectus supplement dated August 3, 2020, and a base prospectus dated February 13, 2020 relating to the Registration Statement (collectively, the “Prospectus”).
The Dealer Manager Agreement requires the Dealer Manager to use its reasonable best efforts to sell shares of the Preferred Stock offered in the Offering. Each share of Preferred Stock will be sold at a public offering price of $25.00 per share (the “Stated Value”). Subject to the terms, conditions and limitations described in the Dealer Manager Agreement, the Company will pay to the Dealer Manager a dealer manager fee in an amount equal to 3% of the Stated Value per share of Preferred Stock sold in the Offering. With respect to the Series A1 Preferred Stock, the Company will pay to the Dealer Manager a selling commission of up to 7% of the Stated Value per share of Series A1 Preferred Stock. There will be no selling commission paid for the sale of shares of Series M Preferred Stock. The Company may pay reduced selling commissions or may eliminate commissions on certain sales of the Preferred Stock, including the reduction or elimination of selling commissions in accordance with, and on the terms set forth in, the Prospectus. The Company expects the Dealer Manager to authorize participating broker-dealers to sell the Preferred Stock. The Dealer Manager may reallow all or a portion of its selling commission attributable to a participating broker-dealer. The Dealer Manager may also reallow a portion of its dealer manager fee earned on the proceeds raised by a participating broker-dealer, to such participating broker-dealer as a marketing fee.
Pursuant to the Dealer Manager Agreement, the Company has agreed to indemnify the Dealer Manager and participating broker-dealers, and the Dealer Manager has agreed to indemnify the Company, against certain losses, claims, damages and liabilities, including but not limited to those arising out of (i) untrue statements of a material fact contained in the Registration Statement, Prospectus or any supplement thereto relating to the Offering or (ii) the omission or alleged omission to state a material fact required to be stated in the Registration Statement, Prospectus or any supplement thereto relating to the Offering.
The foregoing description of the Dealer Manager Agreement is only a summary and is qualified in its entirety by reference to the full text of the Dealer Manager Agreement, a copy of which is filed as Exhibit 10.1 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 offered in the Offering, a copy of which is attached to this Form 8-K as Exhibit 5.1.