Exhibit 10.1

[Hercules Letterhead]

 

Hercules Capital, Inc.

Amended and Restated 2004 Equity Incentive Plan

Retention Performance Stock Unit Award Agreement

The undersigned (i) acknowledges receipt of an award (the “Award”) of
performance stock units from Hercules Capital, Inc. (the “Company”) under the
Amended and Restated 2004 Equity Incentive Plan (the “Plan”), subject to the
terms set forth below and in the Plan; (ii) further acknowledges receipt of a
copy of the Plan as in effect on the date hereof and the currently effective
prospectus relating to such Plan and the most recent annual report; and (iii)
agrees with the Company as follows:

 

1.

Effective Date.  This Agreement shall take effect as of May 2, 2018, which is
the date of grant of the Award (the “Grant Date”).

 

2.

Performance Stock Unit.  Subject to the terms and provisions of the Plan and the
Award, the undersigned has been granted performance stock units (“PSUs”) for
[No. of Performance Stock Units] PSUs at Threshold Performance, [No. of
Performance Stock Units] PSUs at Target Performance and [No. of Performance
Stock Units] PSUs at Maximum Performance, as the case may be, in respect of and
for the four-year performance period beginning on the Grant Date and ending on
the fourth anniversary of the Grant Date (the “Performance Period”).  Threshold
Performance, Target Performance and Maximum Performance are set forth in Section
7 below.  Subject to earlier vesting pursuant to Section 7 below, the Award
shall cliff-vest on the fourth anniversary of the Grant Date.

 

3.

Settlement of Award.  Except as otherwise provided in this Agreement, subject to
the undersigned’s Continuous Service with the Company or an Affiliate, the
Company will settle the PSUs by delivering to the undersigned a number of shares
of common stock of the Company (the “Shares”) equal to the number of PSUs earned
and vested pursuant to Section 7 below by reference to the Relative TSR
Percentile Rank (as defined in Section 7).  The vested portion of the Award
shall be settled as soon as reasonably practicable following the Settlement Date
(as defined in Section 10 below), subject to the requirements set forth in
Section 10 below.

 

4.

Meaning of Certain Terms; Plan Controls.  The Award is subject to the applicable
terms and conditions of the Plan, which are incorporated herein by reference,
and in the event of any contradiction, distinction or difference between this
letter and the terms of the Plan, the terms of the Plan will control.  Unless
otherwise stated herein, capitalized terms used herein have the meanings set
forth in the Plan.

 

5.

Nontransferability of PSUs.  The PSUs acquired by the undersigned pursuant to
this Agreement shall not be sold, transferred, pledged, assigned or otherwise
encumbered or disposed of.

 

6.

Forfeiture Risk.  If the undersigned ceases to be an employee of the Company and
its Affiliates for any reason, other than as provided in Section 7 below, any
then outstanding and unvested PSUs shall be automatically and immediately
forfeited with no compensation due to the undersigned.  

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7.

Vesting of PSUs.  The PSUs shall vest, subject to the terms of this Agreement,
in accordance with the provisions of this Section 7 as follows:

The PSUs shall vest based on the Company’s relative total shareholder return
(“TSR”) over the Performance Period compared to the Peer Group (as defined
below) (the “Relative TSR Percentile Rank”).  TSR is calculated by dividing (i)
the 20 trading-day volume weighted average share price of the Company’s (or a
member of the Peer Group’s, as applicable) common stock at the end of the
Performance Period (with such 20 trading-day period to end on the last day of
the Performance Period or, if the last day of the Performance Period is not a
trading day, on the last trading day of the Performance Period), plus cumulative
dividends declared and paid during such Performance Period, if any (with any
such dividends deemed to have been reinvested on a compounded basis in shares of
the Company’s (or a member of the Peer Group’s, as applicable) common stock on
the dividend settlement date) by (ii) the closing share price of the Company’s
(or a member of the Peer Group’s, as applicable) common stock on the Grant
Date.  Dividends deemed reinvested shall be deemed to constitute outstanding
shares for purposes of subsequent dividends declared and paid by the Company (or
a member of the Peer Group, as applicable).

Relative TSR Percentile Rank

Number of PSUs Vesting

90% or greater

(“Maximum Performance”)

[No. of Performance Stock Units]

[200% of amount of PSUs vesting for Target Performance]

50%

(“Target Performance”)

[No. of Performance Stock Units]

[100% of amount of PSUs vesting for Target Performance]

25%

(“Threshold Performance”)

 

[No. of Performance Stock Units]

[50% of amount of PSUs vesting for Target Performance]

Less than 25%

0

 

No Retention PSUs will vest if the Company’s Relative TSR Percentile Rank is not
at or above the 25th percentile level of the Peer Group.  50% of the target
number of Retention PSUs will vest if the Company’s Relative TSR Percentile Rank
is at the 25th percentile level of the Peer Group.  100% of the target number of
Retention PSUs will vest if the Company’s Relative TSR Percentile Rank is at the
50th percentile level of the Peer Group.  200% of the

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target number of Retention PSUs will vest if the Company’s Relative TSR
Percentile Rank is at the 90th percentile level of the Peer Group.  If the
Company’s Relative TSR Percentile Rank is between the 25th percentile and the
50th percentile, or between the 50th percentile and the 90th percentile, of the
Peer Group, the number of vested and payable Retention PSUs will be determined
by linear interpolation between the foregoing metrics.  

For purposes of this Agreement, “Peer Group” means the public business
development companies listed on Schedule A.  Any such business development
company that is acquired during the Performance Period shall be eliminated from
the Peer Group.  Any such business development company that files for bankruptcy
under federal law during the Performance Period shall be deemed to have a final
TSR of -100%.  Any new business development company that emerges because of an
initial public offering or spin-off shall not be added to the Peer Group.

For purposes of and subject to this Agreement, “Vesting Date” shall mean the
earliest to occur of (1) the last day of the Performance Period, (2) the death
or disability (as defined in Treasury Regulation Section 1.409A-3(i)(4)(i)(A))
of the undersigned or (3) the consummation of a Covered Transaction.

Notwithstanding the foregoing, no PSUs shall vest on any Vesting Date or
otherwise if the undersigned terminates Continuous Service prior to such Vesting
Date or if the Company’s Relative TSR Percentile Rank is below the 25th
percentile level of the Peer Group; provided, however, that (i) upon the death
or disability (as defined in Treasury Regulation Section 1.409A-3(i)(4)(i)(A))
of the undersigned, the PSUs shall vest on the date of such death or disability,
with the Relative TSR Percentile Rank used to calculate such vesting to be the
greater of (a) 50% and (b) the actual Relative TSR Percentile Rank as of the
date of such death or disability, (ii) upon a termination of Continuous Service
by the Company without Cause (as defined below) prior to a Covered Transaction,
a pro-rata portion of the PSUs (pro-rated on a monthly basis to account for
service between the Grant Date and the date of termination of Continuation
Service) shall vest based on the actual Relative TSR Percentile Rank during the
entire Performance Period (for the avoidance of doubt, the Relative TSR
Percentile Rank shall be calculated following the completion of the Performance
Period) and (iii) upon the consummation of a Covered Transaction, the PSUs shall
vest based on the actual Relative TSR Percentile Rank as of the date of such
Covered Transaction.  In respect of (iii), total shareholder return shall be
calculated (x) for the Company, along with cumulative compounded reinvested
dividends, by using (1), in the case of a stock sale or merger, the value per
Share received or to be received in any delayed payment structure, earnout or
similar arrangement by the Company’s stockholders in such Covered Transaction,
(2) in the case of an asset sale, the value per Share received or to be received
in any delayed payment structure, earnout or similar arrangement by the
Company’s stockholders in such Covered Transaction adjusted upward to reflect a
sale of 100% of the Company’s assets (as determined by the Compensation
Committee in its sole discretion), (3) in the case of a majority board shift,
the closing per share price on the date of such Covered Transaction and (4) in
the case of a Covered Transaction pursuant to prong (v) of the definition in the
Plan or any other Covered Transaction not described in (1) – (3), the closing
price or other value per Share on the date of such Covered Transaction and all
other value received or to be received in any delayed payment structure, earnout
or similar arrangement by the Company’s stockholders in such Covered
Transaction, in each case as determined by the Compensation Committee in its
discretion and (y) for each member of the Peer Group, by calculating such Peer
Group member’s actual TSR during the period between the Grant Date and the date
of such Covered Transaction.  The provisions of the Retention Agreement between
the

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undersigned and the Company, dated as of October 26, 2017 (the “Retention
Agreement”) or any other employment, retention or separation agreement between
the undersigned and the Company shall not apply to this Award, notwithstanding
anything to the contrary in the Retention Agreement or any other agreement
between the undersigned and the Company.

Following the completion of the Performance Period or, in respect of any earlier
Vesting Date, the Compensation Committee shall review and certify in writing the
Relative TSR Percentile Rank and calculate and certify in writing the portion of
the PSU which shall vest based upon the level of achievement of the Relative TSR
Percentile Rank.

For purposes of the Award, “Cause” means (i) engaging in (A) willful or gross
misconduct or (B) willful or gross neglect; (ii) failing to adhere to the lawful
written directions of superiors or the Board or to the materially significant
written policies and practices of the Company or its Affiliates (in each case,
with circumstances giving rise to “Cause” to exist only following (x) a written
warning from the Board or the undersigned’s direct supervisor, delivered to the
undersigned following the Board or the undersigned’s direct supervisor becoming
aware of such conduct and (ii) the undersigned failing to cure such conduct
within forty-five (45) days following the delivery of such written warning);
(iii) the commission and conviction of a felony or a crime involving any of the
following: material moral turpitude, material dishonesty, material breach of
trust or unethical business conduct; or the commission and conviction of a
material crime involving the Company or its Affiliates; (iv) conviction of
material fraud, misappropriation or embezzlement; (v) a material breach of the
undersigned’s employment agreement (if any) with the Company or its Affiliates;
(vi) acts or omissions constituting a material failure to perform substantially
and adequately the duties assigned to the undersigned; (vii) any illegal act
detrimental to the Company or its Affiliates; or (viii) repeated failure to
devote substantially all of the undersigned’s business time and efforts to the
Company.

 

8.

Dividend Equivalents. The undersigned shall be entitled to receive dividend
equivalents on all vested PSUs payable in shares of Stock or, if the Plan (and
any restatement of the Plan) does not have sufficient shares of Stock available
for settlement of such dividend equivalents, such dividend equivalents shall be
payable in cash.  Any such dividend equivalents shall be credited, and shall be
deemed to be (or have been) hypothetically reinvested at fair market value in
shares of Stock, on the date on which any such dividend is paid by the Company
on its Stock (“Dividend Shares”).  Dividend Shares shall be deemed to constitute
outstanding shares for purposes of subsequent dividend payments by the Company. 
Dividend Shares and/or accumulated cash, as the case may be, shall be settled
and delivered or paid on the date that the PSUs to which they relate are settled
and delivered if, and only to the extent that, the related PSU is vested.  The
actual number of shares of Stock for which Dividend Shares are credited and paid
and/or the actual amount of accumulated cash paid, as the case may be, shall be
determined by the Compensation Committee at the end of the applicable
Performance Period by reference to, and taking into account, only the actual
level or levels of performance achieved by the Company.  To the extent that all
or any portion of the related PSU does not vest or is forfeited, any Dividend
Shares and/or accumulated cash, as the case may be, corresponding to the portion
of the PSU that does not vest or is forfeited shall similarly not vest and be
forfeited by the undersigned without any compensation therefore.

 

9.

Sale of Vested Shares.  The undersigned shall be free to sell any Share once it
has been transferred to the undersigned in settlement of any vested PSU, subject
to (i) satisfaction of any applicable tax withholding requirements with respect
to the settlement of such PSU; (ii) the completion of any administrative steps
(for example, but without limitation, the

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transfer of certificates) that the Company may reasonably impose; and (iii)
applicable requirements of federal and state securities laws.  

 

10.

Deferred Settlement.  Settlement of the Award shall be deferred until the fifth
anniversary of the Grant Date (the “Fixed Settlement Date”), subject to this
Section 10.  Notwithstanding the foregoing, upon the earlier to occur of (i) the
undersigned’s death or disability (as defined in Treasury Regulation Section
1.409A-3(i)(4)(i)(A)) or (ii) the consummation of a Covered Transaction
(provided that such Covered Transaction constitutes a “change in the ownership
or effective control” of the Company or a “change in the ownership of a
substantial portion of the assets” of the Company, in each case within the
meaning of Code Section 409A and the regulations promulgated thereunder) (any
such date, the “Alternative Settlement Date”), the vested portion of such Award
shall be payable on the Alternative Settlement Date, subject to this Section
10.  In each case, settlement of the Award is subject to the undersigned
executing a restrictive covenant agreement (containing nonsolicitation,
nondisparagement and nondisclosure provisions) which includes a general release
of claims in favor of the Company (such agreement, the “Release”) within sixty
(60) days following the Settlement Date (as defined below), with settlement to
be made within five (5) business days after the date the Release becomes
non-revocable; provided, however, that if such sixty (60) day period spans two
calendar years, settlement shall be made in the second calendar year, regardless
of when the Release becomes non-revocable; provided, further, that if the
undersigned is terminated for Cause prior to the Settlement Date (as defined
below), the entire Award shall be immediately forfeited with no compensation due
to the undersigned (including, without limitation, if at any time following the
undersigned’s termination of Continuous Service and prior to the Settlement
Date, the Board determines that grounds to terminate the undersigned’s
Continuous Service for Cause existed as the time of such termination).  Each of
the Fixed Settlement Date and the Alternative Settlement Date are sometimes
referred to herein as the “Settlement Date.”   For the avoidance of doubt, if
the Release does not become non-revocable within sixty (60) days following the
Settlement Date, the undersigned shall forfeit the Award.

The Award represents an unfunded and unsecured promise on behalf of the
Company.  The right of any Participant to receive settlement of the Award from
the Company shall be no greater than the right of any general unsecured creditor
of the Company or any Affiliate.

 

11.

Code Section 409A.  Awards under the Plan are intended either to qualify for an
exemption from Code Section 409A or to comply with the requirements thereof, and
shall be construed accordingly.  Notwithstanding anything in the Plan or any
Award or agreement thereunder to the contrary, any settlement, payments or
benefits due under the Plan or any Award or agreement thereunder that constitute
non-exempt “deferred compensation” (as defined in Code Section 409A) that are
otherwise payable by reason of a termination of Continuous Service will not be
settled, paid or provided until a Participant has undergone a “separation from
service” (as defined in Code Section 409A) and if a settlement, payment or
benefit provided for in the Plan or any Award or agreement thereunder would be
subject to additional tax under Code Section 409A if settled, paid or provided
within six (6) months after a Participant’s separation from service, then such
settlement, payment or benefit shall not be settled, paid or provided during the
six-month period immediately following such Participant’s separation from
service except as provided in the immediately following sentence.  In such an
event, any settlement, payment or benefits that otherwise would have been made
or provided during such six-month period and that would have incurred such
additional tax under Code Section 409A shall instead be settled, paid or
provided in a lump sum payment on the first day following the termination of
such six-month period or, if earlier,

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within ten days following the date of the Participant’s death.  A Participant’s
right to receive any installment settlements or payments under the Plan shall be
treated as a right to receive a series of separate payments and accordingly,
each such installment shall at all times be considered a separate and distinct
payment as permitted under Code Section 409A.  None of the Company, its
Affiliates or their respective directors, officers, employees or advisors will
be held liable for any taxes, interest or other amounts owed by any Participant
as a result of the application of Code Section 409A or otherwise.

 

12.

Certain Tax Matters.  The undersigned expressly acknowledges the vesting or
settlement of the PSUs acquired hereunder (including, without limitation, any
dividend equivalents) may give rise to "wages" subject to withholding.  The
undersigned expressly acknowledges and agrees that the rights hereunder are
subject to the undersigned promptly paying to the Company in cash (or by such
other means as may be acceptable to the Compensation Committee in its
discretion, including by the delivery of previously acquired Shares or by the
withholding of Shares from the settlement of any PSU hereunder) all taxes
required to be withheld in connection with the settlement of the Award.

 

13.

Investment Company Act of 1940.  The undersigned hereby acknowledges and agrees
that, pursuant to Sections 4(F) and 15 of the Plan, the Award of PSUs hereunder
may be cancelled or modified by the Company if such Award, at any time and for
any reason, would cause the Company to violate or contravene any applicable
provision of the Investment Company Act of 1940, as amended (and/or the
applicable rules and regulations promulgated thereunder).  Any such cancellation
or modification shall be effective and binding on the undersigned immediately
upon notification thereof.

 

14.

Certain Changes; Rights as a Stockholder.  The number and class of shares of
Stock or other securities which are distributable to the undersigned with
respect to any PSU covered by this Award shall be adjusted proportionately or as
otherwise appropriate to reflect any increase or decrease in the number of
issued shares of Stock resulting from a stock split, spin-off, split-off,
recapitalization, capital reorganization, reclassification of shares of Stock,
merger or consolidation, or any like capital adjustment, or the payment of any
Stock dividend, and/or to reflect a change in the character or class of shares
covered by the Plan arising from a readjustment or recapitalization of the
Company’s capital stock, in each case as determined by the Board or the
Committee.

 

15.

Additional Restrictions; Amendments; No Right to Continuous Service.  The
Company may impose additional conditions or restrictions on the Award as it
deems necessary or advisable to ensure that all rights granted under the Plan
satisfy the requirements of applicable securities laws.  The Company shall not
be obligated to issue or deliver any Stock if such action violates any provision
of any law or regulation of any governmental authority or national securities
exchange and which violation would have material adverse consequences to the
Company; provided, however, that if issuing or delivering any Stock under the
Award would violate any provision of any law or regulation of any governmental
authority or national securities exchange and result in such material adverse
consequences to the Company, the Company shall make an alternative payment to
the undersigned having substantially similar economic value within sixty (60)
days of the date the Award would otherwise be settled.  The Company may amend
the terms of this Award to the extent that it deems appropriate to carry out the
terms of the Plan, but no such amendment shall materially or adversely affect
the undersigned without the undersigned’s written consent.  The construction and
interpretation of any provision of this Award or the Plan shall be final and
conclusive when made by the Board or the Committee.  Nothing in this Award shall
confer

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on the undersigned the right, express or implied, to continued Continuous
Service or interfere in any way with the absolute right of the Company or its
Affiliates to terminate the undersigned’s Continuous Service at any time.

 

16.

Cooperation Following Termination of Continuous Service.  The undersigned agrees
to cooperate with the Company and its Affiliates following the termination of
the undersigned’s Continuous Service for any reason by making himself/herself
reasonably available to testify on behalf of the Company and its Affiliates in
any action, suit or proceeding, whether civil, criminal, administrative or
investigative, and to assist the Company and its Affiliates in any such action,
suit or proceeding by providing information and meeting and consulting with the
Company’s and its Affiliates’ representatives or counsel as requested; provided,
however, that such cooperation or participation does not materially interfere
with the undersigned’s then current professional activities.  The Company agrees
to (i) reimburse the undersigned, on an after-tax basis, for all reasonable
expenses actually incurred and (ii) pay to the undersigned, for each day on
which the undersigned provides testimony or assistance, cash in an amount
calculated by dividing the undersigned’s base salary immediately prior to the
termination of the undersigned’s Continuous Service by 365.

 

17.

Governing Law. This Agreement shall be governed by the laws of the state of
Maryland.

[SIGNATURE PAGE FOLLOWS]

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Very truly yours,

HERCULES CAPITAL, INC.

 

By_______________________________

Jorge Titinger

Director

Dated:  __________________

The foregoing Performance Stock Unit
Award Agreement is hereby agreed to and accepted:

 

By_______________________________

[Signature of Grantee]

 

 

 

_______________________________

Print Name

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Schedule A

 

Peer Group Members

 

•Alcentra Capital Corporation

•Monroe Capital Corporation

•Apollo Investment Corporation

•MVC Capital, Inc.

•Ares Capital Corporation

•New Mountain Finance Corporation

•BlackRock Capital Investment Corporation

•Newtek Business Services Corp.

•Capital Southwest Corporation

•Oaktree Specialty Lending Corporation

•Capitala Finance Corp.

•OFS Capital Corporation

•Fidus Investment Corporation

•PennantPark Investment Corporation

•FS Investment Corporation

•Prospect Capital Corporation

•Garrison Capital Inc.

•Saratoga Investment Corp.

•Gladstone Capital Corporation

•Solar Capital Ltd.

•Gladstone Investment Corporation

•Stellus Capital Investment Corp.

•Goldman Sachs BDC, Inc.

•TCP Capital Corp.

•Golub Capital BDC, Inc.

•THL Credit, Inc.

•Harvest Capital Credit Corporation

•TICC Capital Corp.

•Horizon Technology Finance Corporation

•TPG Specialty Lending, Inc.

•KCAP Financial, Inc.

•Triangle Capital Corporation

•Main Street Capital Corporation

•TriplePoint Venture Growth BDC Corp.

•Medley Capital Corporation

•WhiteHorse Finance, Inc.

 

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