Filed by Sierra Income Corporation
pursuant to Rule 425 under the Securities
Act of 1933
and deemed filed under Rule 14a-12 of the
Securities Exchange Act of 1934
Subject Company: Medley Capital Corporation
Commission File No. 814-00818
UNITED
STATES
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
Date
of Report (Date of earliest event reported): August 15, 2018 (August 9, 2018)
Medley
Capital Corporation
(Exact
Name of Registrant as Specified in its Charter)
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Delaware
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1-35040
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(State or other jurisdiction of incorporation)
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27-4576073
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(Commission File Number)
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(I.R.S. Employer Identification No.)
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280
Park Avenue, 6
th
Floor East
New York, NY 10017
(Address
of Principal Executive Offices and Zip Code)
Registrant’s
telephone number, including area code:
(212) 759-0777
Not
Applicable
(Former
Name or Former Address, if Changed Since Last Report)
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:
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x
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Indicate
by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR
§230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging
growth company
¨
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.
¨
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Item 1.01
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Entry into a Material Definitive Agreement.
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As previously announced,
on August 9, 2018, Sierra Income Corporation (
“Sierra”
), Medley Capital Corporation (
“MCC”
),
and Medley Management Inc. (
“Medley”
) jointly issued a press release announcing the execution of: (i) an
Agreement and Plan of Merger (the
“MCC Merger Agreement”
) by and between MCC and Sierra, pursuant to
which MCC will, on the terms and subject to the conditions set forth in the MCC Merger Agreement, merge with and into Sierra, with
Sierra as the surviving company in the merger (the
“MCC Merger”
); and (ii) an Agreement and Plan of Merger
(the
“MDLY Merger Agreement”
) by and among Medley, Sierra, and Sierra Management Inc., a wholly-owned
subsidiary of Sierra (
“Merger Sub”
), pursuant to which Medley will, on the terms and subject to the conditions
set forth in the MDLY Merger Agreement, merge with and into Merger Sub, with Merger Sub as the surviving company in the merger
(the
“MDLY Merger”
). As a result of the foregoing, the investment management function relating to the
operation of Sierra, as the surviving company, will be internalized. A description of the MCC Merger Agreement is set forth
below and is qualified in its entirety by the full text of the MCC Merger Agreement, which is attached hereto as Exhibit 2.1. For
a description of the MDLY Merger Agreement and a copy of the MDLY Merger Agreement, please refer to the Current Report on Form
8-K filed by Sierra on August 15, 2018 and the Current Report on Form 8-K filed by Medley on August 15, 2018. Subject to certain
required approvals and other closing conditions, as described above, the parties anticipate that the MCC Merger and the MDLY Merger
will close in the fourth quarter of 2018 or the first quarter of 2019.
MCC Merger Agreement
Pursuant to the MCC
Merger Agreement, subject to certain conditions described therein, at closing, MCC will merge with and into Sierra, and the separate
corporate existence of MCC shall cease. Sierra shall be the surviving company in the MCC Merger and shall continue its existence
as a corporation under the laws of the State of Maryland. The MCC Merger will become effective at the time set forth in a certificate
of merger to be filed with the Secretary of State of the State of Delaware and articles of merger to be filed with the State Department
of Assessments and Taxation for the State of Maryland (the
“MCC Merger Effective Time”
). MCC’s
board of directors (the
“MCC Board”
), including a special committee of its independent directors, has
unanimously approved the MCC Merger Agreement and the transactions contemplated thereunder, including the MCC Merger, upon the
terms and subject to the conditions and limitations set forth in the MCC Merger Agreement, and resolved to submit the MCC Merger
Agreement and the matters described therein to the stockholders of MCC for their approval at a special meeting of MCC’s stockholders
(the
“MCC Stockholder Meeting”
).
In the MCC Merger,
each share of common stock, par value $0.001 per share, of MCC (
“MCC Common Stock”
), other than shares
of MCC Common Stock held by MCC, Sierra or their respective wholly-owned subsidiaries, will be exchanged for the right to receive
0.805 shares of common stock, par value $0.001 per share, of Sierra (
“Sierra Common Stock”
and such ratio,
the
“Exchange Ratio”
); provided that cash will be paid in lieu of fractional shares of Sierra Common
Stock issuable in the MCC Merger. It is intended that the MCC Merger shall constitute a “reorganization” within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
“Code”
), and that the
MCC Merger Agreement shall constitute a “plan of reorganization” for such purposes.
If, between the date
of the MCC Merger Agreement and the MCC Merger Effective Time, the outstanding shares of Sierra Common Stock are increased, decreased,
changed into or exchanged for a different number or kind of shares or securities as a result of a reclassification, stock dividend,
stock split, reverse stock split, or other similar change (excluding sales of Sierra Common Stock, sales of Sierra equity-linked
securities, and issuance of Sierra Common Stock pursuant to Sierra’s dividend reinvestment plan or otherwise in lieu of a
portion of any cash dividend declared by Sierra), an appropriate and proportionate adjustment shall be made to the Exchange Ratio.
Pursuant to the MCC
Merger Agreement, the Sierra Board will review and approve an amendment and restatement of the charter of Sierra (the
“Sierra
Charter”
and, as so amended and restated, the
“Amended and Restated Charter”
), which Amended
and Restated Charter shall be reasonably acceptable to MCC’s board of directors (the
“MCC Board”
),
in order to remove terms inconsistent with, and to add terms advisable to reflect, the publicly traded nature of Sierra, as the
surviving company in the MCC Merger, following the MCC Merger Effective Time. Following such approval, the Sierra Board shall submit
the Amended and Restated Charter to the stockholders of Sierra for their approval at the special meeting of Sierra’s stockholders
being held to approve the MCC Merger Agreement and related matter (the
“Sierra Stockholder Meeting”
).
The Sierra Board will review and approve any amendments to, or amendments and restatements of, the bylaws of Sierra (the
“Sierra
Bylaws”
), which shall be reasonably acceptable to the MCC Board, in order to remove terms inconsistent with, and
to add terms advisable to reflect, the publicly traded nature of Sierra, as the surviving company in the MCC Merger, following
the MCC Merger Effective Time. The Sierra Bylaws, as in effect immediately prior to the MCC Merger Effective Time, shall remain
the bylaws of Sierra, as the surviving company, until thereafter amended in accordance with applicable law and the terms of such
bylaws.
Under the MCC Merger
Agreement, Sierra has agreed to take such actions as may be required by the Sierra Charter and Sierra Bylaws in order to appoint
the individuals to serve as directors of Sierra, as the surviving company in the MCC Merger, effective as of the MCC Merger Effective
Time, which individuals shall consist of the current independent directors of Sierra, one interested director of Sierra and two
independent directors of MCC. The identities of the individuals so appointed shall be reflected in the joint proxy statement/prospectus
to be provided to Sierra and MCC stockholders. The officers of Sierra, as the surviving company in the MCC Merger, shall be as
designated and appointed by the Sierra Board prior to the MCC Merger Effective Time.
The MCC Merger Agreement
contains: (a) representations and warranties from MCC to Sierra, including representations and warranties relating to, among others:
corporate organization, capitalization, corporate authority, absence of conflicts, third party and governmental consents and approvals,
reports and regulatory matters, financial statements, broker’s fees, absence of certain changes and events, legal proceedings,
taxes and tax returns, compliance with applicable law, material contracts, matters relating to MCC’s investments and MCC’s
ownership thereof, property, intellectual property, state takeover laws, the fairness opinion received by the special committee
of the MCC Board, MCC information to be provided for inclusion in the joint proxy statement/prospectus, insurance, environmental
matters, and MCC’s knowledge regarding reorganization and approval matters; (b) representations and warranties from Sierra
to MCC, including representations and warranties relating to, among others: corporate organization, capitalization, corporate authority,
absence of conflicts, third party and governmental consents and approvals, reports and regulatory matters, financial statements,
broker’s fees, absence of certain changes and events, legal proceedings, taxes and tax returns, compliance with applicable
law, material contracts, matters relating to Sierra’s investments and ownership thereof, property, intellectual property,
state takeover laws, the fairness opinion received by the special committee of the Sierra Board, Sierra information to be provided
for inclusion in the joint proxy statement/prospectus, insurance, environmental matters, and Sierra’s knowledge regarding
reorganization and approval matters; (c) covenants of MCC, including to the effect that, until the MCC Merger is completed, MCC
will, and will cause its subsidiaries to, conduct its business in the ordinary course, use commercially reasonable efforts to maintain
and preserve intact MCC’s business organization and advantageous relationships, retain its key officers and employees, take
no action that would be reasonably expected to adversely affect or materially delay the ability of MCC to obtain any required governmental
approvals or to perform its obligations under the MCC Merger Agreement and to consummate the MCC Merger, and to forbear from taking
certain material actions; (d) covenants of Sierra, including to the effect that, until the MCC Merger is completed, Sierra will,
and will cause its subsidiaries to, conduct its business in the ordinary course, use commercially reasonable efforts to maintain
and preserve intact Sierra’s business organization and advantageous relationships, retain its key officers and employees,
and take no action that would be reasonably expected to adversely affect or materially delay the ability of Sierra to obtain any
required governmental approvals or to perform its obligations under the MCC Merger Agreement and to consummate the MCC Merger,
and forbear from taking certain material actions; (e) mutual covenants to cooperate with each other and use their respective commercially
reasonable efforts to promptly prepare and file all necessary documentation, to effect all applications, notices, petitions and
filings, to obtain as promptly as practicable all permits, consents, approvals and authorizations of all third parties and governmental
entities that are necessary or advisable to consummate the MCC Merger, including, among others, (i) filing a registration statement
on Form N-14 (the
“Form N-14 Registration Statement”
) with the Securities and Exchange Commission (the
“SEC”
) and mailing of a joint proxy statement/prospectus to solicit approval of MCC’s stockholders
and Sierra’s stockholders for the MCC Merger and related matters; (ii) if applicable, filing a notification and report form
with the U.S. Federal Trade Commission (the
“FTC”
) and the Antitrust Division of the U.S. Department
of Justice (the
“DOJ”
) as required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, amended
(the
“HSR Act”
); and (iii) submitting an application to the Staff of the Division of Investment Management
of the SEC seeking an exemptive order from the SEC granting relief to Sierra, MCC and Medley from Sections 12(d)(3), 57(a) and
60 of the Investment Company Act of 1940, as amended (the
“Investment Company Act”
), and Rule 17d-1 thereunder
to the extent necessary to permit the MCC Merger and the MDLY Merger and to permit Sierra to operate as an internally managed business
development company following the MCC Merger Effective Time (the
“SEC Exemptive Relief”
), and (f) certain
other covenants, including covenants regarding access to information filing of required periodic reports, seeking MCC and Sierra
stockholder approval, limitations on the Sierra Board and the MCC Board changing their recommendation to their respective stockholders,
listing of Sierra Common Stock on the New York Stock Exchange (the
“NYSE”
) and the Tel Aviv Stock Exchange
(the
“TASE”
), post-closing indemnification of officers and directors of MCC, non-solicitation of competing
offers from third parties, taking steps necessary for existing indebtedness of MCC and Sierra to remain outstanding and/or be consolidated,
the cessation of MCC’s dividend reinvestment plan as it relates to the issuance of MCC Common Stock, the suspension of Sierra’s
stock repurchase program, and certain other covenants relating to state takeover statutes, outstanding litigation, waivers of or
amendments to the MDLY Merger Agreement and repayment of amounts owed to MCC’s investment adviser as of the MCC Merger Effective
Time.
The obligations of
the parties to complete the MCC Merger are subject to certain conditions, including: (a) the receipt of Sierra stockholder approval
and MCC stockholder approval; (b) the Form N-14 Registration Statement having been declared effective and no stop order suspending
the effectiveness of the Form N-14 Registration Statement shall have been issued or threatened; (c) the outstanding Sierra Common
Stock, and the Sierra Common Stock to be issued in the MCC Merger and in the MDLY Merger, shall be authorized for listing on the
NYSE, subject to official notice of issuance; (d) the SEC Exemptive Relief shall have been granted and be in full force and effect
as of the closing date; (e) MCC shall have obtained from the Small Business Administration (
“SBA”
) such
approvals as may be necessary for all the debentures issued by Medley SBIC LP, a wholly-owned subsidiary of MCC, to the SBA to
remain outstanding in accordance with their terms following the MCC Merger Effective Time; (f) Sierra shall have made or obtained
such filings and approvals as are required to be made or obtained under the securities or “Blue Sky” laws of various
states in connection with the issuance of the shares of Sierra Common Stock in the MCC Merger; (g) no order, injunction or decree
issued by any court or agency of competent jurisdiction or other law preventing or making illegal the consummation of the MCC Merger
or any of the other transactions contemplated by the MCC Merger Agreement shall be in effect; (h) any applicable waiting period
(and any extension thereof) applicable to the MCC Merger under the HSR Act shall have expired or been terminated; (i) each of the
conditions to closing under the MDLY Merger Agreement shall have been satisfied or appropriately waived, and the MDLY Merger shall
be consummated simultaneously with the MCC Merger; (j) Sierra and MCC Advisors LLC shall have executed and delivered a new investment
advisory agreement, to be effective as of the MCC Merger Effective Time, and such agreement shall have been approved by the Sierra
Board and received requisite Sierra stockholder approval, each in accordance with all applicable requirements of Section 15 of
the Investment Company Act; (k) each of Sierra and MCC shall have executed termination agreements terminating their respective
existing investment management agreements, effective as of the closing date; (l) Sierra or MCC, as the case may be, shall have
obtained certain third party consents and approvals relating to joint venture arrangements; (m) certain consents relating private
funds and managed accounts shall have been obtained by Medley in connection with the MDLY Merger Agreement; (n) the SEC shall have
confirmed in a manner reasonably acceptable to the parties that the equity of the surviving company in the MDLY Merger shall, following
the MDLY Merger, be treated as a portfolio investment of Sierra and reflected in Sierra’s consolidated financial statements
at fair value for accounting purposes, and that such surviving company’s financial results will not be consolidated into
the financial statements of Sierra; (o) there shall be no pending suit, action or proceeding by any governmental entity challenging
the MCC Merger and related transactions or seeking to impose significant restrictions on Sierra, as the surviving company; (p)
the parties shall have received a legal opinion from Eversheds (US) LLP (or such other counsel as may be reasonably satisfactory
to the parties) regarding qualification of the MCC Merger as a reorganization within the meaning of Section 368(a) of the Code;
and (q) Seth Taube shall have resigned from the Sierra Board.
In addition to the
foregoing mutual conditions to closing, (a) Sierra’s obligation to consummate the MCC Merger is further conditioned upon
(i) the accuracy of the representations and warranties of MCC (subject to the interpretive standards set forth in the MCC Merger
Agreement), (ii) the performance by MCC, in all material respects, of its covenants and obligations under the MCC Merger Agreement,
(iii) MCC shall have delivered to Sierra fully executed copies of all consents and approvals required in order to keep MCC’s
existing debt documents (and the amounts outstanding thereunder), other than those relating to MCC’s existing revolving credit
facility and term loan, in full force and effect in accordance with their terms as of the date of the MCC Merger Agreement without
any breach or violation thereof, and (iv) MCC shall have complied with its obligation to make a final dividend if necessary to
comply with applicable tax law, and (b) MCC’s obligation to consummate the MCC Merger is further conditioned upon (i) the
accuracy of the representations and warranties of Sierra (subject to the interpretive standards set forth in the MCC Merger Agreement),
(ii) the performance by Sierra, in all material respects (or, in the case of Sierra’s obligation to not amend or waive the
terms of the MDLY Merger Agreement in a manner adverse to the MCC stockholders, in all respects), of its covenants and obligations
under the MCC Merger Agreement, (iii) Sierra shall have suspended all share repurchase programs or offers to repurchase, and (iv)
Sierra shall (A) have taken all actions, and executed all documents, reasonably required of Sierra by MCC’s existing debt
documents, other than those relating to MCC’s existing revolving credit facility and term loan (which will be consolidated
with Sierra’s existing facility), in order to keep the MCC debt documents in full force and effect in accordance with their
terms as of the date of the MCC Merger Agreement without any breach or violation thereof and to keep amounts outstanding thereunder
immediately after the MCC Merger Effective Time; (B) entered into amended and restated loan documents and taken such other actions
as may be required in order to assume the obligations under the MCC revolving loan documents and the MCC term loan documents and
to keep such amounts outstanding as of the MCC Merger Effective Time; and (C) Sierra shall have taken all actions, and executed
all documents, reasonably required of Sierra in order to keep the indebtedness represented by Sierra’s debt documents outstanding
and the Sierra debt documents in full force and effect in accordance with their terms as of the date of the MCC Merger Agreement
without any breach or violation thereof.
Sierra and MCC have
the right to terminate the MCC Merger Agreement under certain circumstances, including (subject to certain limitations set forth
in the MCC Merger Agreement): (a) by mutual written agreement of each party; or (b) by either Sierra or MCC if: (i) any governmental
entity whose consent or approval is a condition to closing set forth in Section 8.1 of the MCC Merger Agreement has denied the
granting of any such consent or approval and such denial has become final and nonappealable, or any governmental entity of competent
jurisdiction shall have issued a final and nonappealable order, injunction or decree permanently enjoining or otherwise prohibiting
or making illegal the consummation of the transactions contemplated by the MCC Merger Agreement; (ii) the MCC Merger has not closed
on or prior to March 31, 2019; (iii) if the requisite approval of Sierra stockholders or MCC stockholders is not obtained at the
MCC Stockholder Meeting or Sierra Stockholder Meeting at which a vote on the MCC Merger and related transactions is taken; (iv)
if the MDLY Merger Agreement is terminated; or (v) there is a material breach of any covenant, agreement, representation or warranty
by the other party that is not cured prior to the date of the closing of the MCC Merger, subject to the notice period set forth
in the MCC Merger Agreement.
Sierra may also terminate
the MCC Merger Agreement in the event (i) the MCC Board has made an adverse recommendation change regarding approval of the MCC
Merger and other matters to be voted on by MCC stockholders, (ii) the MCC Board shall have approved or authorized MCC or any of
its subsidiaries to enter into an agreement with a third party relating to a merger or other acquisition transaction involving
MCC, or (iii) MCC fails to include the MCC Board recommendation in favor of the MCC Merger and related matters in the joint proxy
statement/prospectus. Sierra may also terminate the MCC Merger Agreement in the event that, in connection with the receipt by Sierra
of a “superior proposal” from a third party, the Sierra Board desires to change its recommendation of the MCC Merger
and related matters or desires to accept such superior proposal, in each case subject to certain procedural requirements set forth
in the MCC Merger Agreement.
MCC may also terminate
the MCC Merger Agreement if (i) the Sierra Board has made an adverse recommendation change regarding approval of the MCC Merger
and other matters to be voted on by Sierra stockholders, (ii) the Sierra Board shall have approved or authorized Sierra or any
of its subsidiaries to enter into an agreement with a third party relating to a merger or other acquisition transaction involving
Sierra, or (iii) Sierra fails to include the Sierra Board recommendation in favor of the MCC Merger and related matters in the
joint proxy statement/prospectus. MCC may also terminate the MCC Merger Agreement if, in connection with the receipt by MCC of
a “superior proposal” from a third party, the MCC Board desires to change its recommendation of the MCC Merger and
related matters or desires to accept such superior proposal, in each case subject to certain procedural requirements set forth
in the MCC Merger Agreement.
Under the Merger Agreement,
either party may be obligated to pay the other party a termination fee of $6,000,000 in cash (the
“MCC Merger Termination
Fee”
). Generally, those circumstances relate to a party’s right to terminate the MCC Merger Agreement in connection
with an “adverse recommendation change” by the Sierra Board or the MCC Board, as applicable, or the acceptance by Sierra
or MCC, as applicable, of a superior proposal. In no event will a party have an obligation to pay a MCC Merger Termination Fee
more than once.
The MCC Merger Agreement
contains representations and warranties that Sierra and MCC have made as of specific dates. Except for its status as a contractual
document that establishes and governs the legal relations among the parties with respect to the transactions described therein,
the MCC Merger Agreement is not intended to be a source of factual, business or operational information about the parties. The
representations and warranties contained in the MCC Merger Agreement were made only for purposes of those agreements and as of
specific dates, may be subject to a contractual standard of materiality different from what an investor or a stockholder might
view as material, may have been used for purposes of allocating risk between the respective parties rather than establishing matters
as facts, and may have been qualified by certain disclosures not reflected in the MCC Merger Agreement that were made to the other
party in connection with the negotiation of the MCC Merger Agreement and generally were solely for the benefit of the parties to
that agreement. Investors or stockholders should read the MCC Merger Agreement together with the other information concerning the
Company that it files in reports and statements with the SEC.
***********
No Offer or Solicitation
The information in
this communication is for informational purposes only and shall not constitute an offer to sell or the solicitation of an offer
to sell or the solicitation of an offer to buy any securities or the solicitation of any vote or approval in any jurisdiction pursuant
to or in connection with the proposed transactions or otherwise, nor shall there be any sale, issuance or transfer of securities
in any jurisdiction in contravention of applicable law. No offer of securities shall be made except by means of a prospectus meeting
the requirements of Section 10 of the Securities Act of 1933, as amended.
Important Information and Where to Find It
In connection with
the proposed transactions, Sierra intends to file with the SEC and mail to its stockholders a Registration Statement on Form N-14
that will include a proxy statement and that also will constitute a prospectus of Sierra, and MCC and Medley intend to file with
the SEC and mail to their respective stockholders a proxy statement on Schedule 14A (collectively, the “
Joint Proxy
Statement/Prospectus
”). The definitive Joint Proxy Statement/Prospectus will be mailed to stockholders of Sierra,
MCC, and Medley, respectively. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS, AS WELL AS
ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION ABOUT SIERRA, MCC, AND MEDLEY, THE PROPOSED TRANSACTIONS AND RELATED MATTERS. When available, investors
and security holders will be able to obtain the Joint Proxy Statement/Prospectus and other documents filed with the SEC by Sierra,
MCC, and Medley, free of charge, from the SEC’s web site at www.sec.gov and from Sierra’s website (www.sierraincomecorp.com),
MCC’s website (www.medleycapitalcorp.com), or Medley’s website (www.mdly.com). Investors and security holders may also
obtain free copies of the Joint Proxy Statement/Prospectus and other documents filed with the SEC from Sierra, MCC, or Medley by
contacting Sam Anderson, Medley’s Investor Relations contact, at 212-759-0777.
Participants in the Potential Solicitation
Sierra, MCC, and Medley
and their respective directors, executive officers, other members of their management, employees and other persons may be deemed
to be participants in the anticipated solicitation of proxies in connection with the proposed transactions. Information regarding
Sierra’s directors and executive officers is available in its definitive proxy statement for its 2018 annual meeting of stockholders
filed with the SEC on March 14, 2018 (the “
Sierra 2018 Proxy Statement
”). Information regarding MCC’s
directors and executive officers is available in its definitive proxy statement for its 2018 annual meeting of stockholders filed
with the SEC on December 21, 2017 (the “
MCC 2018 Proxy Statement
”). Information regarding Medley’s
directors and executive officers is available in its annual report for the year ended December 31, 2017 on Form 10-K filed with
the SEC on March 29, 2018 (the “
Medley 2017 10-K
”). To the extent holdings of securities by such directors
or executive officers have changed since the amounts disclosed in the Sierra 2018 Proxy Statement, the MCC 2018 Proxy Statement,
and the Medley 2017 Form 10-K, such changes have been or will be reflected on Statements of Change in Ownership on Form 4 filed
by such directors or executive officers, as the case may be, with the SEC. More detailed information regarding the identity of
potential participants, and their direct or indirect interests, by security holdings or otherwise, will be set forth in the Joint
Proxy Statement/Prospectus when such documents become available and in other relevant materials to be filed with the SEC.
These documents may be obtained free of charge from the sources indicated above.
Cautionary Statement Regarding Forward-Looking Statements
This communication
contains “forward-looking” statements as that term is defined in Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995, including
statements regarding the proposed transactions. Such forward-looking statements reflect current views with respect to future events
and financial performance, and each of Sierra, MCC and Medley may make related oral forward-looking statements on or following
the date hereof. Statements that include the words “should,” “would,” “expect,” “intend,”
“plan,” “believe,” “project,” “anticipate,” “seek,” “will,”
and similar statements of a future or forward-looking nature identify forward-looking statements in this material or similar oral
statements for purposes of the U.S. federal securities laws or otherwise. Because forward-looking statements, such as the date
that the parties expect the proposed transactions to be completed and the expectation that the proposed transactions will provide
improved liquidity for Sierra, MCC, and Medley stockholders and will be accretive to net investment income for both Sierra and
MCC, include risks and uncertainties, actual results may differ materially from those expressed or implied and include, but are
not limited to, those discussed in each of Sierra’s, MCC’s and Medley’s filings with the SEC, and (i) the satisfaction
or waiver of closing conditions relating to the proposed transactions described herein, including, but not limited to, the requisite
approvals of the stockholders of each of Sierra, MCC, and Medley; Sierra successfully taking all actions reasonably required with
respect to certain outstanding indebtedness of MCC and Medley to prevent any material adverse effect relating thereto; certain
required approvals of the SEC and the Small Business Administration, the necessary consents of certain third-party advisory clients
of Medley; and any applicable waiting period (and any extension thereof) applicable to the transactions under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, shall have expired or been terminated, (ii) the parties’ ability to successfully
consummate the proposed transactions, and the timing thereof, and (iii) the possibility that competing offers or acquisition proposals
related to the proposed transactions will be made and, if made, could be successful. Additional risks and uncertainties specific
to Sierra, MCC and Medley include, but are not limited to, (i) the costs and expenses that Sierra, MCC and Medley have, and may
incur, in connection with the proposed transactions (whether or not they are consummated), (ii) the impact that any litigation
relating to the proposed transactions may have on any of Sierra, MCC and Medley, (iii) that projections with respect to dividends
may prove to be incorrect, (iv) Sierra’s ability to invest our portfolio of cash in a timely manner following the closing
of the proposed transactions, (v) the market performance of the combined portfolio, (vi) the ability of portfolio companies to
pay interest and principal in the future; (vii) the ability of Medley to grow its fee earning assets under management; (viii) whether
Sierra, as the surviving company, will trade with more volume and perform better than MCC and Medley prior to the proposed transactions;
and (ix) negative effects of entering into the proposed transactions on the trading volume and market price of the MCC’s
or Medley’s common stock.
The foregoing review
of important factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements
that will be included in the Joint Proxy Statement/Prospectus relating to the proposed transactions, and in the “Risk Factors”
sections of each of Sierra’s, MCC’s and Medley’s most recent Annual Report on Form 10-K and most recent Quarterly
Report on Form 10-Q. The forward- looking statements in this press release represent Sierra’s, MCC’s and Medley’s
views as of the date of hereof. Sierra, MCC and Medley anticipate that subsequent events and developments will cause their views
to change. However, while they may elect to update these forward-looking statements at some point in the future, none of Sierra,
MCC or Medley have the current intention of doing so except to the extent required by applicable law. You should, therefore, not
rely on these forward-looking statements as representing Sierra’s, MCC’s or Medley’s views as of any date subsequent
to the date of this material.
|
Item 9.01
|
Financial Statements and Exhibits.
|
Exhibit No.
|
|
Description
|
2.1
|
|
Agreement and Plan of Merger, dated as of August 9, 2018, by and between Medley Capital Corporation and Sierra Income Corporation
|
|
|
|
SIGNATURES
Pursuant to the requirements
of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
Date: August 15, 2018
|
|
|
MEDLEY CAPITAL CORPORATION
|
|
|
|
|
|
By:
|
|
/s/ Richard T. Allorto, Jr.
|
|
Name:
|
|
Richard T. Allorto, Jr.
|
|
Title:
|
|
Chief Financial Officer
|
Exhibit 2.1
EXECUTION COPY
AGREEMENT AND PLAN
OF MERGER
by and between
MEDLEY CAPITAL
CORPORATION
and
SIERRA INCOME CORPORATION
DATED AS OF AUGUST
9, 2018
TABLE OF CONTENTS
ARTICLE I DEFINED TERMS
|
2
|
|
|
|
1.1
|
Defined Terms
|
2
|
|
|
|
ARTICLE II THE MERGER
|
12
|
|
|
|
2.1
|
The Merger
|
12
|
|
|
|
2.2
|
Effective Time
|
12
|
|
|
|
2.3
|
Effects of the Merger
|
12
|
|
|
|
2.4
|
Conversion of Stock
|
12
|
|
|
|
2.5
|
Articles of Incorporation and Bylaws of the Surviving Company
|
13
|
|
|
|
2.6
|
Directors and Officers
|
13
|
|
|
|
2.7
|
Tax Consequences
|
13
|
|
|
|
ARTICLE III CLOSING; DELIVERY OF MERGER CONSIDERATION
|
14
|
|
|
|
3.1
|
Closing
|
14
|
|
|
|
3.2
|
Exchange Agent
|
14
|
|
|
|
3.3
|
Deposit of Merger Consideration
|
14
|
|
|
|
3.4
|
Delivery of Merger Consideration
|
14
|
|
|
|
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF MCC
|
17
|
|
|
|
4.1
|
Corporate Organization
|
17
|
|
|
|
4.2
|
Capitalization
|
18
|
|
|
|
4.3
|
Authority; No Violation
|
19
|
|
|
|
4.4
|
Consents and Approvals
|
19
|
|
|
|
4.5
|
Reports; Regulatory Matters
|
20
|
|
|
|
4.6
|
Financial Statements
|
21
|
|
|
|
4.7
|
Broker’s Fees
|
23
|
|
|
|
4.8
|
Absence of Certain Changes or Events
|
23
|
|
|
|
4.9
|
Legal Proceedings
|
23
|
|
|
|
4.10
|
Taxes and Tax Returns
|
23
|
|
|
|
4.11
|
Compliance with Applicable Law
|
24
|
|
|
|
4.12
|
Certain Contracts
|
24
|
|
|
|
4.13
|
Investment Securities
|
25
|
|
|
|
4.14
|
Property
|
25
|
|
|
|
4.15
|
Intellectual Property
|
25
|
|
|
|
4.16
|
State Takeover Laws
|
25
|
|
|
|
4.17
|
Opinion
|
25
|
|
|
|
4.18
|
MCC Information
|
25
|
4.19
|
Insurance
|
26
|
|
|
|
4.20
|
Environmental Matters
|
26
|
|
|
|
4.21
|
Reorganization; Approvals
|
26
|
|
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|
4.22
|
No Other Representations or Warranties
|
26
|
|
|
|
ARTICLE V REPRESENTATIONS AND WARRANTIES OF SIC
|
27
|
|
|
|
5.1
|
Corporate Organization
|
27
|
|
|
|
5.2
|
Capitalization
|
27
|
|
|
|
5.3
|
Authority; No Violation
|
28
|
|
|
|
5.4
|
Consents and Approvals
|
29
|
|
|
|
5.5
|
Reports; Regulatory Matters
|
30
|
|
|
|
5.6
|
Financial Statements
|
31
|
|
|
|
5.7
|
Broker’s Fees
|
32
|
|
|
|
5.8
|
Absence of Certain Changes or Events
|
32
|
|
|
|
5.9
|
Legal Proceedings
|
32
|
|
|
|
5.10
|
Taxes and Tax Returns
|
33
|
|
|
|
5.11
|
Compliance with Applicable Law
|
33
|
|
|
|
5.12
|
Certain Contracts
|
34
|
|
|
|
5.13
|
Investment Securities
|
34
|
|
|
|
5.14
|
Property
|
34
|
|
|
|
5.15
|
Intellectual Property
|
34
|
|
|
|
5.16
|
State Takeover Laws
|
35
|
|
|
|
5.17
|
Opinion
|
35
|
|
|
|
5.18
|
SIC Information
|
35
|
|
|
|
5.19
|
Insurance
|
35
|
|
|
|
5.20
|
Environmental Matters
|
35
|
|
|
|
5.21
|
Reorganization; Approvals
|
35
|
|
|
|
5.22
|
No Other Representations or Warranties
|
36
|
|
|
|
ARTICLE VI COVENANTS RELATING TO CONDUCT OF BUSINESS
|
36
|
|
|
|
6.1
|
Conduct of Businesses Prior to the Effective Time
|
36
|
|
|
|
6.2
|
MCC Forbearances
|
36
|
|
|
|
6.3
|
SIC Forbearances
|
38
|
|
|
|
ARTICLE VII ADDITIONAL AGREEMENTS
|
40
|
|
|
|
7.1
|
Regulatory and Other Matters
|
40
|
|
|
|
7.2
|
Access to Information
|
42
|
|
|
|
7.3
|
MCC Stockholder Approval
|
43
|
7.4
|
SIC Stockholder Approval
|
44
|
|
|
|
7.5
|
Exchange Listing
|
44
|
|
|
|
7.6
|
Indemnification; Directors’ and Officers’ Insurance
|
45
|
|
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|
7.7
|
Additional Agreements
|
46
|
|
|
|
7.8
|
Advice of Changes
|
46
|
|
|
|
7.9
|
Exemption from Liability Under Section 16(b)
|
46
|
|
|
|
7.10
|
No Solicitation
|
46
|
|
|
|
7.11
|
Treatment of Outstanding Indebtedness
|
49
|
|
|
|
7.12
|
Takeover Statutes
|
49
|
|
|
|
7.13
|
Dividend Reinvestment Plan; Stock Repurchases
|
50
|
|
|
|
7.14
|
Stockholder Litigation
|
50
|
|
|
|
7.15
|
Interaction with MDLY Merger Agreement
|
50
|
|
|
|
7.16
|
Other Matters
|
50
|
|
|
|
ARTICLE VIII CONDITIONS PRECEDENT
|
50
|
|
|
|
8.1
|
Conditions to Each Party’s Obligation To Effect the Merger
|
50
|
|
|
|
8.2
|
Conditions to Obligations of SIC
|
52
|
|
|
|
8.3
|
Conditions to Obligations of MCC
|
52
|
|
|
|
8.4
|
Standard
|
53
|
|
|
|
8.5
|
Frustration of Closing Conditions
|
54
|
|
|
|
ARTICLE IX TERMINATION AND AMENDMENT
|
54
|
|
|
|
9.1
|
Termination
|
54
|
|
|
|
9.2
|
Effect of Termination
|
56
|
|
|
|
9.3
|
Fees and Expenses
|
56
|
|
|
|
9.4
|
Termination Fee
|
56
|
|
|
|
9.5
|
Amendment
|
57
|
|
|
|
9.6
|
Extension; Waiver
|
57
|
|
|
|
ARTICLE X GENERAL PROVISIONS
|
57
|
|
|
|
10.1
|
Nonsurvival of Representations, Warranties and Agreements
|
57
|
|
|
|
10.2
|
Notices
|
57
|
|
|
|
10.3
|
Interpretation
|
58
|
|
|
|
10.4
|
Counterparts
|
58
|
|
|
|
10.5
|
Entire Agreement
|
58
|
|
|
|
10.6
|
Governing Law; Jurisdiction
|
59
|
|
|
|
10.7
|
PUBLICITY
|
59
|
|
|
|
10.8
|
Assignment; Third Party Beneficiaries
|
59
|
10.9
|
Remedies
|
60
|
|
|
|
10.10
|
Waiver of Jury Trial
|
61
|
|
|
|
10.11
|
Severability
|
61
|
Exhibit A
|
New Investment Advisory Agreement
|
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN
OF MERGER
, dated as of August 9, 2018 (this
“Agreement”
), by and between Medley Capital Corporation,
a Delaware corporation (
“MCC”
), and Sierra Income Corporation, a Maryland corporation (
“SIC”
).
RECITALS:
WHEREAS
, the
board of directors of MCC (the
“MCC Board”
) has determined that it is in the best interests of MCC and
its stockholders to consummate the acquisition of MCC by SIC as contemplated by this Agreement in which MCC will, on the terms
and subject to the conditions set forth in this Agreement, merge with and into SIC, with SIC as the surviving company in the merger
(the
“Merger”
and SIC, in its capacity as the surviving company in the Merger, sometimes referred to
herein as the
“Surviving Company”
);
WHEREAS
, the
board of directors of SIC (the “
SIC Board
”), acting upon the recommendation of a special committee thereof
consisting only of independent and disinterested directors (the “
SIC Special Committee
”), has unanimously
(i) determined that this Agreement and the transactions contemplated hereby, including the Merger, are advisable and fair to, and
in the best interests of, SIC and its stockholders, (ii) approved and declared advisable this Agreement and the transactions contemplated
hereby, including the Merger, (iii) resolved to submit this Agreement to the stockholders of SIC for its adoption, and (iv) recommended
that the stockholders of SIC approve the adoption of this Agreement;
WHEREAS
, for
federal income Tax purposes, it is the intent of the parties hereto that the Merger shall qualify as a “reorganization”
under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
“Code”
),
and this Agreement is intended to be and is adopted as a “plan of reorganization” for such purposes;
WHEREAS
, contemporaneously
herewith, SIC, Medley Management Inc. (
“MDLY”
) and Sierra Management Inc., a Delaware corporation (
“Merger
Sub”)
are entering into a merger agreement (the
“MDLY Merger Agreement”
) pursuant to which
MDLY will, on the terms and subject to the conditions set forth in the MDLY Merger Agreement, merge with and into Merger Sub, with
Merger Sub as the surviving company in the merger (the
“MDLY Merger”
and, together with the Merger, the
“Mergers”
);
WHEREAS,
the
Mergers are part of an integrated transaction designed to combine the BDC operations of SIC and MCC and internalize the investment
management function relating to the operation of SIC, as the Surviving Company in the Merger;
WHEREAS,
notwithstanding
the foregoing internalization of the investment management function, effective as of Closing, SIC, as the surviving company in
the Merger, will enter into an investment management agreement with MCC Advisors LLC, on the terms set forth in the New Investment
Advisory Agreement;
WHEREAS
, Eversheds
Sutherland, on behalf of the parties hereto and MDLY, has been in ongoing discussions with the Securities and Exchange Commission
(“
SEC
”) concerning the filing of an application with the SEC to obtain the SEC Exemptive Relief (as defined
herein) and each of the parties hereto and MDLY intends to file such application with the SEC promptly as soon as practical following
the date hereof and intends that the Mergers not be consummated unless and until the SEC Exemptive Relief is granted to the parties;
and
WHEREAS
, the
parties are entering into this Agreement and the MDLY Merger Agreement on the expectation that the SEC will confirm in a manner
reasonably acceptable to the parties that the equity of the surviving company in the MDLY Merger, following the MDLY Merger, will
be treated as a portfolio investment of SIC and reflected in SIC’s consolidated financial statements at fair value for accounting
purposes, and that such surviving company’s financial results will not be consolidated into the financial statements of SIC;
and
WHEREAS
, the
parties desire to make certain representations, warranties and agreements in connection with the Merger and to prescribe certain
conditions to the Merger.
NOW, THEREFORE
,
in consideration of the mutual covenants, representations, warranties and agreements contained in this Agreement, and other good
and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby,
the parties agree as follows:
ARTICLE
I
DEFINED TERMS
1.1
Defined
Terms
. For purposes of this Agreement, the following terms shall have the meanings set forth below:
“Acceptable
Confidentiality Agreement”
has the meaning set forth in Section 7.10(d).
“Adverse
Recommendation Change”
has the meaning set forth in Section 7.10(e).
“Affiliate”
means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common
control with such Person. The term “control” means possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or
otherwise; provided, however, that in no event shall the term “Affiliate” include any portfolio company of SIC or MCC.
“Agreement”
has the meaning set forth in the preamble to this Agreement.
“Alpine
Funding Loan Documents”
means that certain Amended and Restated Loan Agreement, dated as of September 29, 2017, by
and among Alpine Funding LLC, as borrower, JPMorgan Chase Bank, National Association, as Administrative Agent, the Financing Providers
from time to time party thereto, SIC Advisors LLC, as Portfolio Manager, and the Collateral Administrator, Collateral Agent and
Securities Intermediary party thereto.
“Amended
and Restated Charter”
has the meaning set forth in Section 2.5.
“Applicable
Law”
means, with respect to a specified Person, any federal, state, local, municipal, or foreign constitution, treaty,
law (including the common law), statute, code, ordinance, rule, regulation, permit, approval, judgment, order, writ, decree or
injunction applicable to the specified Person.
“Arbor
Funding Debt Documents”
means, collectively, (i) ISDA 2002 Master Agreement, together with the Schedule thereto and
Credit Support Annex to such Schedule, each dated as of August 27, 2013, by and between Arbor Funding LLC and Citibank, N.A., and
(ii) Fifth Amended and Restated Confirmation Letter Agreement, dated as of September 29, 2017, by and between Arbor Funding LLC
and Citibank, N.A.
“Articles
of Merger”
has the meaning set forth in Section 2.2.
“Bankruptcy
and Equity Exception”
has the meaning set forth in Section 4.3(a).
“BDC”
has the meaning set forth in Section 2(a)(48) of the Investment Company Act.
“
Book-Entry
Shares
” means shares of MCC Common Stock in non-certificated form represented by book entry.
“Business
Day”
means a day, other than Saturday, Sunday or other day on which commercial banks in New York, New York are authorized
or required by Applicable Law to close.
“Certificate”
has the meaning set forth in Section 2.4(d).
“Certificate of Merger”
has the meaning set forth
in Section 2.2.
“Claim”
means any claim, action, suit, proceeding or investigation, whether civil, arbitral, criminal or administrative.
“Closing”
has the meaning set forth in Section 3.1.
“Closing
Date”
has the meaning set forth in Section 3.1.
“Code”
has the meaning set forth in the Recitals to this Agreement.
“Competing
Proposal”
means any inquiry, proposal or offer made by any Third Party: (a) to purchase or otherwise acquire, directly
or indirectly, in one transaction or a series of transactions (including any merger, consolidation, tender offer, exchange offer,
stock acquisition, asset acquisition, binding share exchange, business combination, recapitalization, liquidation, dissolution,
joint venture or similar transaction), (i) beneficial ownership (as defined under Section 13(d) of the Exchange Act) of twenty
percent (20%) or more of any class of equity securities of MCC or SIC, as applicable, or (ii) any one or more assets or businesses
of MCC or its Subsidiaries or SIC or its Subsidiaries that constitute twenty percent (20%) or more of the revenues or assets of
MCC and its Subsidiaries, taken as a whole, or SIC and its Subsidiaries, taken as a whole, as applicable; or (b) any liquidation
of MCC or SIC, in each case other than the Merger and the other transactions to occur at Closing in accordance with this Agreement.
“Confidentiality
Agreement”
has the meaning set forth in Section 7.2(c).
“Delaware
Courts
” has the meaning set forth in Section 10.6.
“Delaware
Secretary”
has the meaning set forth in Section 2.2.
“DGCL”
means the Delaware General Corporation Law.
“DOJ”
means the Antitrust Division of the United States Department of Justice.
“DTC”
has the meaning set forth in Section 3.4(a).
“Effective
Time”
has the meaning set forth in Section 2.2.
“Environmental
Laws”
means, collectively, with respect to a specified Person, any and all environmental, health or safety matters
or any private or governmental environmental, health or safety investigations or remediation activities of any nature with respect
to any real property owned by the specified Person or its Subsidiaries seeking to impose, or that are reasonably likely to result
in, any liability or obligation of the specified Person or any of its Subsidiaries arising under any local, state or federal environmental,
health or safety statute, regulation, ordinance, or other requirement of any Governmental Entity, including the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, and any similar state laws.
“Exchange
Act”
means the Securities Exchange Act of 1934, as amended.
“Exchange
Agent”
has the meaning set forth in Section 3.2.
“Exchange
Agent Agreement”
has the meaning set forth in Section 3.2.
“Exchange
Fund”
has the meaning set forth in Section 3.3.
“Exchange
Ratio”
has the meaning set forth in Section 2.4(c).
“Excluded
MCC Shares”
means, collectively, the shares of MCC Common Stock owned by (a) MCC, (b) SIC or (c) any wholly-owned
Subsidiary of MCC or SIC.
“Final
MCC Dividend”
has the meaning set forth in Section 3.4(c).
“Form N-14
Registration Statement”
has the meaning set forth in Section 4.4(a).
“FTC”
means the United
States Federal Trade Commission.
“GAAP”
means United States generally accepted accounting principles, consistently applied during the periods involved.
“Governmental
Entity”
means any federal, state, provincial or local government or any court, administrative or regulatory agency
or commission or other governmental or quasi-governmental authority, department, bureau, office, commission, organization, official
or agency, domestic or foreign.
“HSR Act”
means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
“Indebtedness”
of any Person means (a) indebtedness created, issued or incurred by such Person for borrowed money (whether by loan or
the issuance and sale of debt securities or the sale of property of such Person to another Person subject to an understanding or
agreement, contingent or otherwise, to repurchase such property) and any accrued interest or prepayment premiums related thereto
(for the avoidance of doubt, excluding trade accounts payable or similar obligations to creditors for goods or services, operating
leases and other customary reservations or retentions under agreements with suppliers); (b) obligations of such Person to pay the
deferred purchase or acquisition price for any property of such Person, including earn-outs; (c) obligations of such Person in
respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for the account
of such Person; (d) obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the
right to use) any property to such Person to the extent such obligations are required to be classified and accounted for as a capital
lease on a balance sheet of such Person under GAAP; (e) all net obligations under any interest rate swap agreements or interest
rate hedge agreements; or (f) indebtedness of others as described in clauses (a) through (e) above in any manner guaranteed by
such Person or for which it is or may become contingently liable (but excluding any non-recourse carve-out guaranties, environmental
indemnities or similar guaranties).
“Indemnified
Parties”
has the meaning set forth in Section 7.6(a).
“Intellectual
Property Rights”
means, collectively, all trademarks, trade names, patent rights, copyrights, domain names, licenses,
approvals, trade secrets, software and other similar rights.
“Investment
Company Act”
means the Investment Company Act of 1940, as amended.
“IRS”
means the United States Internal Revenue Service.
“Israeli
Bond Documents”
means that certain Deed of Trust, made and entered into on January 23, 2018, between MCC and Mishmeret
Trust Company, Ltd.
“Joint
Proxy Statement/Prospectus”
has the meaning set forth in Section 4.4(a).
“Letter
of Transmittal”
has the meaning set forth in Section 3.4(a).
“Liens”
means liens, pledges, mortgages, charges, Claims and security interests and similar encumbrances.
“Material
Adverse Effect”
means, with respect to SIC or MCC, as the case may be, any occurrence, change, event, effect or development
that, individually, or taken together with all other occurrences, changes, events, effects or developments, has or would reasonably
be likely to have, a material adverse effect on (a) the financial condition, results of operations, properties, assets or business
of such party and its Subsidiaries taken as a whole;
provided, however,
that, with respect to this subsection (a), the determination
of whether a “Material Adverse Effect” exists or has occurred shall not include effects to the extent attributable
to (i) changes, after the date hereof, in GAAP or regulatory accounting requirements applicable generally to companies in the industry
in which such party and its Subsidiaries operate, (ii) changes, after the date hereof, in laws, rules or regulations or interpretations
thereof of general applicability to companies in the industry in which such party and its Subsidiaries operate, (iii) actions or
omissions taken with the prior written consent of the other party, (iv) changes, after the date hereof, in global or national political
conditions or general economic or market conditions generally affecting other companies in the industry in which such party and
its Subsidiaries operate, (v) conditions arising out of acts of terrorism, war, weather conditions or other force majeure events,
(vi) the public disclosure of this Agreement or the transactions contemplated hereby, (vii) any legal proceedings made or brought
by any of the current or former stockholders of such party (on their own behalf or on behalf of the such party) arising out of
or related to this Agreement or any of the transactions contemplated hereby, except, with respect to clauses (i), (ii), (iv) and
(v), to the extent that the effects of such change are disproportionately adverse to the financial condition, results of operations,
properties, assets or business of such party and its Subsidiaries, taken as a whole, as compared to other companies in the industry
in which such party and its Subsidiaries operate) or (b) the ability of such party to timely consummate the transactions contemplated
by this Agreement.
“MCC”
has the meaning set forth in the preamble to this Agreement.
“MCC Adverse
Recommendation Change”
has the meaning set forth in Section 7.3(b).
“MCC Board”
has the meaning set forth in the Recitals to this Agreement.
“MCC Board
Recommendation”
has the meaning set forth in Section 4.3(a).
“MCC Bylaws”
means the bylaws of MCC, as amended and/or restated through the date hereof.
“MCC Certificate”
means the certificate of incorporation of MCC, as amended and/or restated through the date hereof.
“MCC Common
Stock”
means common stock, par value $0.001 per share, of MCC.
“MCC Contracts”
has the meaning set forth in Section 4.3(b).
“MCC Debt
Documents”
means, collectively, (i) the MCC Note Documents; (ii) the MCC Revolving Loan Documents; (iii) the MCC
Term Loan Documents; (iv) the Israeli Bond Documents; (v) the SBA Debentures, and (vi) the MCC SPV Deutsche Bank Facilities.
“MCC Disclosure
Schedule”
means that certain disclosure schedule delivered by MCC to SIC prior to the execution of this Agreement,
which schedule sets forth, among other things, items the disclosure of which is necessary or appropriate either in response to
an express disclosure requirement contained in Article IV of this Agreement or as an exception to one or more representations or
warranties contained in Article IV of this Agreement, or to one or more of MCC’s covenants contained in this Agreement.
“MCC Investment
Management Agreement”
means that certain Amended and Restated Investment Management Agreement by and between MCC
and MCC Advisors LLC, dated January 19, 2014.
“MCC Material
Contract”
has the meaning set forth in Section 4.12(a).
“MCC Matters”
means, collectively, (i) the Merger, and (ii) any other matters required to be approved or adopted by the stockholders
of MCC in order to effect the Merger and the other transactions contemplated by this Agreement.
“MCC Note
Documents”
means, collectively, (i) the Indenture, dated February 7, 2012, between Medley Capital Corporation and
U.S. Bank National Association; (ii) the Second Supplemental Indenture, dated March 18, 2013, between Medley Capital Corporation
and U.S. Bank National Association; and (iii) Third Supplemental Indenture, dated December 17, 2015, between Medley Capital Corporation
and U.S. Bank National Association.
“MCC Preferred
Stock”
means common stock, par value $0.001 per share, of MCC.
“MCC Regulatory
Agreement”
has the meaning set forth in Section 4.5(b).
“MCC Required
Approvals”
has the meaning set forth in Section 4.4(a).
“MCC Revolving
Loan Documents”
means, collectively, (i) the Amended and Restated Senior Secured Revolving Credit Agreement, dated
as of July 28, 2015, by and among MCC, each of the subsidiary guarantors party thereto, the Lenders party thereto and ING Capital
LLC; (ii) Amendment No. 1 to Amended and Restated Senior Secured Revolving Credit Agreement, dated as of September 16, 2016, by
and among MCC as borrower, MCC Investment Holdings LLC, MCC Investment Holdings Sendero LLC, MCC Investment Holdings RT1 LLC, MCC
Investment Holdings Omnivere LLC, MCC Investment Holdings Amvestar, LLC, and MCC Investment Holdings AAR, LLC, as subsidiary guarantors,
the Lenders party thereto and ING Capital LLC, as Administrative Agent; (iii) Amendment No. 2 to Amended and Restated Senior Secured
Revolving Credit Agreement, dated as of February 8, 2017, by and among MCC as borrower, MCC Investment Holdings LLC, MCC Investment
Holdings Sendero LLC, MCC Investment Holdings RT1 LLC, MCC Investment Holdings Omnivere LLC, MCC Investment Holdings Amvestar,
LLC, and MCC Investment Holdings AAR, LLC, as subsidiary guarantors, the Lenders party thereto and ING Capital LLC, as Administrative
Agent; and (iv) Amendment No. 3 to Amended and Restated Senior Secured Revolving Credit Agreement, dated as of September 1, 2017,
by and among MCC as borrower, MCC Investment Holdings LLC, MCC Investment Holdings Sendero LLC, MCC Investment Holdings RT1 LLC,
MCC Investment Holdings Omnivere LLC, MCC Investment Holdings Amvestar, LLC, and MCC Investment Holdings AAR, LLC, as subsidiary
guarantors, the Lenders party thereto and ING Capital LLC, as Administrative Agent.
“MCC SEC
Reports”
has the meaning set forth in Section 4.5(c).
“MCC SPV
Deutsche Bank Facilities”
means, collectively, (i) Loan and Servicing Agreement, dated August 4, 2015, by and between
MCC JV SPV Funding I LLC, MCC Senior Loan Strategy JV I LLC, Lenders, Lender's Agent, Deutsche Bank and U.S. Bank National Association;
(ii) First Amendment to Loan Agreement, dated March 31, 2016; (iii) Second Amendment to Loan Agreement, dated July 13, 2016; and
(iv) Third Amendment to Loan Agreement, dated March 30, 2017.
“MCC Stockholder
Approval”
has the meaning set forth in Section 4.3(a).
“MCC Stockholder Meeting”
has the
meaning set forth in Section 4.4(a).
“MCC Term
Loan Documents”
means, collectively, (i) the Amended and Restated Senior Secured Term Loan Credit Agreement dated
as of July 28, 2015, by and among MCC as borrower, each of the subsidiary guarantors party thereto, the Lenders party thereto and
ING Capital LLC, as Administrative Agent; (ii) Amendment No. 1 to Amended and Restated Senior Secured Term Loan Credit Agreement
dated as of September 16, 2016, by and among MCC as borrower, MCC Investment Holdings LLC, MCC Investment Holdings Sendero LLC,
MCC Investment Holdings RT1 LLC, MCC Investment Holdings Omnivere LLC, MCC Investment Holdings Amvestar, LLC, and MCC Investment
Holdings AAR, LLC, as subsidiary guarantors, the Lenders party thereto and ING Capital LLC, as Administrative Agent; (iii) Amendment
No. 2 to Amended and Restated Senior Secured Term Loan Credit Agreement dated as of February 8, 2017, by and among MCC as borrower,
MCC Investment Holdings LLC, MCC Investment Holdings Sendero LLC, MCC Investment Holdings RT1 LLC, MCC Investment Holdings Omnivere
LLC, MCC Investment Holdings Amvestar, LLC, and MCC Investment Holdings AAR, LLC, as subsidiary guarantors, the Lenders party thereto
and ING Capital LLC, as Administrative Agent; and (iv) Amendment No. 3 to Amended and Restated Senior Secured Term Loan Credit
Agreement dated as of September 1, 2017, by and among MCC as borrower, MCC Investment Holdings LLC, MCC Investment Holdings Sendero
LLC, MCC Investment Holdings RT1 LLC, MCC Investment Holdings Omnivere LLC, MCC Investment Holdings Amvestar, LLC, and MCC Investment
Holdings AAR, LLC, as subsidiary guarantors, the Lenders party thereto and ING Capital LLC, as Administrative Agent.
“MCC Voting
Debt”
means bonds, debentures, notes or other Indebtedness of MCC having the right to vote on any matters on which
stockholders of MCC may vote.
“MDLY”
has the meaning set forth in the Recitals to this Agreement.
“MDLY Merger”
has the meaning set forth in the Recitals to this Agreement.
“Merger”
has the meaning set forth in the Recitals to this Agreement.
“Merger
Consideration”
has the meaning set forth in Section 2.4(c).
“Merger
Shares”
has the meaning set forth in Section 2.4(c).
“MGCL”
means the Maryland General Corporation Law.
“New Investment
Advisory Agreement”
means the investment advisory agreement between SIC and MCC Advisors LLC, to be effective as
of the Effective Time, substantially in the form of
Exhibit A
attached hereto, with such changes as may be required to address
regulatory or other concerns and as finally approved by the SIC Board and submitted to the stockholders of SIC for their approval.
“Notice
of Adverse Recommendation”
has the meaning set forth in Section 7.10(f).
“Notice
of Superior Proposal”
has the meaning set forth in Section 7.10(f).
“NYSE”
means the New York Stock Exchange.
“Organizational
Documents”
means, with respect to a Person other than a natural person, (i) the articles or certificate of incorporation
and the bylaws of a corporation; (ii) the certificate of formation or articles of organization and operating agreement of a limited
liability company; (iii) the partnership agreement and any statement of partnership of a general partnership; (iv) the certificate
of limited partnership and limited partnership agreement of a limited partnership; (v) any charter or similar document adopted
or filed in connection with the creation, formation, or organization of any other Person; (vi) any stockholder or similar agreement
among holders of securities of an issuer; and (vii) any amendment to any of the foregoing.
“Outside
Date”
has the meaning set forth in Section 9.1(c).
“Permit”
means any license, permit, variance, exemption, franchise, consent, approval, authorization, qualification, or order of
any Governmental Entity.
“Permitted
Liens”
means (i) Liens for Taxes and other statutory Liens securing payments not yet due and payable, (ii) Liens
arising under MCC Debt Documents or SIC Debt Documents, as applicable, (iii) easements, rights of way, and other similar encumbrances
that do not materially affect the use of the properties or assets subject thereto or affected thereby or otherwise materially impair
business operations at such properties and (iv) such imperfections or irregularities of title or Liens as do not materially affect
the use of the properties or assets subject thereto or affected thereby or otherwise materially impair business operations at such
properties.
“Person”
means a natural person, corporation, partnership, limited liability company, association, trust, joint venture, estate,
sole proprietorship, unincorporated organization, other entity, organization, group (as defined in Section 13(d) of the Exchange
Act), or any other business entity or any Governmental Entity, including a government or political subdivision or an agency or
instrumentality thereof.
“Required
Approvals”
has the meaning set forth in Section 5.4(a).
“Sandler
O’Neill”
has the meaning set forth in Section 4.7.
“Sarbanes-Oxley
Act”
means the Sarbanes-Oxley Act of 2002, as amended.
“SBA”
means the United States Small Business Administration.
“SBA Debentures”
means, collectively, all debentures issued by the SBIC Subsidiaries to the SBA.
“SBIC”
has the meaning set forth in Section 4.11(b).
“SBIC Subsidiary”
means Medley SBIC, LP.
“SDAT”
has the meaning set forth in Section 2.2.
“SEC”
means the United States Securities and Exchange Commission.
“SEC Exemptive
Relief”
means an exemptive order from the SEC granting relief to SIC, MCC and MDLY from Sections 12(d)(3), 57(a)(4)
and 60 of the 1940 Act and Rule 17d-1 thereunder to the extent necessary to contemplate the transactions contemplated by this Agreement
and the MDLY Merger Agreement and to thereafter operate as an internally managed business development company.
“Securities
Act”
means the Securities Act of 1933, as amended.
“SIC”
has the meaning set forth in the preamble to this Agreement.
“SIC Adverse
Recommendation Change”
has the meaning set forth in Section 7.4(b).
“SIC Board”
has the meaning set forth in the Recitals to this Agreement.
“SIC Board
Recommendation”
has the meaning set forth in Section 5.3(a).
“SIC Bylaws”
has the meaning set forth in Section 2.5.
“SIC Charter”
has the meaning set forth in Section 2.5.
“SIC Common
Stock”
means common stock, par value $0.001 per share, of SIC.
“SIC Contracts”
has the meaning set forth in Section 5.3(b).
“SIC Debt
Documents”
means, collectively, (i) the SIC Revolving Loan Documents; (ii) the Alpine Funding Loan Documents; and
(iii) the Arbor Funding Debt Documents.
“SIC Disclosure
Schedule”
means that certain disclosure schedule delivered by SIC to MCC prior to the execution of this Agreement,
which schedule sets forth, among other things, items the disclosure of which is necessary or appropriate either in response to
an express disclosure requirement contained in Article V of this Agreement or as an exception to one or more representations or
warranties contained in Article V of this Agreement, or to one or more of SIC’s covenants contained in this Agreement.
“SIC Investment
Advisory Agreement”
means that certain Investment Advisory Agreement by and between SIC and SIC Advisors LLC, dated
April 5, 2012.
“SIC Material
Contract”
has the meaning set forth in Section 5.12(a).
“SIC Matters”
means (i) the Merger, (ii) the New Investment Advisory Agreement, (iii) the Amended and Restated Charter, and (iv) any
other matters required to be approved or adopted by the stockholders of SIC in order to effect the Merger, the related issuance
of the Merger Shares, and the other transactions contemplated by this Agreement.
“SIC Regulatory
Agreement”
has the meaning set forth in Section 5.5(b).
“SIC Required
Approvals”
has the meaning set forth in Section 5.4(a).
“SIC Revolving
Loan Documents”
means, collectively, (i) Amended and Restated Senior Secured Revolving Credit Agreement, dated as
of August 12, 2016, among SIC, as Borrower, the Lenders party thereto, and ING Capital LLC, as Administrative Agent; (ii) Amended
and Restated Guarantee, Pledge and Security Agreement, dated December 4, 2013, among SIC, the Subsidiary Guarantors party thereto,
ING Capital LLC, as Administrative Agent, each Financial Agent and Designated Indebtedness Holder party thereto and ING Capital
LLC, as Collateral Agent; and (iii) Deposit Account Control Agreement, dated as of September 7, 2016, among SIC, ING Capital LLC,
as Collateral Agent, and Customers Bank, as Depository Institution.
“SIC SEC
Reports”
has the meaning set forth in Section 5.5(c).
“SIC Special
Committee”
has the meaning set forth in the Recitals to this Agreement.
“SIC Stockholder
Approval”
has the meaning set forth in Section 5.3(a).
“SIC Stockholder
Meeting”
has the meaning set forth in Section 4.4(a).
“SIC Voting
Debt”
means bonds, debentures, notes or other Indebtedness of SIC having the right to vote on any matters on which
stockholders of SIC may vote.
“SRO”
has the meaning set forth in Section 4.4(a).
“Subsidiary”
,
when used with respect to either party, means any corporation, partnership, limited liability company or other organization, whether
incorporated or unincorporated, that is consolidated with such party for financial reporting purposes under GAAP and, to the extent
applicable, Article 6 of Regulation S-X promulgated under the Exchange Act.
“Superior
Proposal”
means any bona fide written Competing Proposal made by a Third Party that the MCC Board or the SIC Board,
as applicable, determines in good faith, after consultation with its outside financial advisors and legal counsel, and taking into
account the terms and conditions of such proposal, the party making such proposal, all financial, legal, regulatory and other aspects
of such proposal, as well as the likelihood of consummation of the Competing Proposal relative to the Merger and such other factors
as the MCC Board or SIC Board, as applicable, considers to be appropriate, is more favorable to MCC’s stockholders or SIC’s
stockholders, as applicable, from a financial point of view than the Merger and the other transactions contemplated by this Agreement
(including any revisions to the terms of this Agreement committed to by SIC to MCC in writing in response to such Competing Proposal
made to MCC or by MCC to SIC in writing in response to such Competing Proposal made to SIC under the provisions of Section 7.10(f);
provided however, for these purposes, to the extent relevant to the Competing Proposal in question, all percentages in subsections
(a)(i) and (a)(ii) of the definition of Competing Proposal shall be increased to fifty percent (50%).
“Surviving
Company”
has the meaning set forth in the Recitals to this Agreement.
“Takeover
Statutes”
has the meaning set forth in Section 4.16.
“Tax”
or
“Taxes”
means (i) all federal, state, local, and foreign income, excise, gross receipts, gross
income,
ad valorem,
profits, gains, property, capital, sales, transfer, use, payroll, employment, severance, withholding,
duties, intangibles, franchise, backup withholding, value added and other taxes, charges, levies or like assessments together with
all penalties and additions to tax and interest thereon and (ii) any liability for Taxes described in clause (i) above under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law).
“Tax Return”
means, with respect to a Person, a report, return or other information (including any amendments) required to be supplied
to a Governmental Entity with respect to Taxes, including, where permitted or required, combined or consolidated returns for any
group of entities that includes the Person or any of its Subsidiaries.
“Termination
Fee”
has the meaning set forth in Section 9.4(a).
“Third
Party”
means a third party Person (or group of Persons) that is not an Affiliate of MCC or SIC.
ARTICLE
II
THE MERGER
2.1
The
Merger
. Subject to the terms and conditions of this Agreement, in accordance with the DGCL and the MGCL, at the Effective Time,
MCC shall merge with and into SIC and the separate corporate existence of MCC shall cease. SIC shall be the Surviving Company in
the Merger and shall continue its existence as a corporation under the laws of the State of Maryland.
2.2
Effective
Time
. Contemporaneously with the Closing, SIC shall file or cause to be filed (a) a certificate of merger (the
“Certificate
of Merger”
) with the Secretary of State of the State of Delaware (the
“Delaware Secretary”
),
and (b) articles of merger (the
“Articles of Merger”
) with the State Department of Assessments and Taxation
for the State of Maryland (
“SDAT”
). The Merger shall become effective at the time (the
“Effective
Time”
) set forth in the Certificate of Merger and Articles of Merger.
2.3
Effects
of the Merger
. At and after the Effective Time, the Merger shall have the effects set forth in this Agreement, the DGCL and
the MGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights,
privileges and powers of MCC and SIC shall be vested in SIC as the Surviving Company, and all debts, liabilities and duties of
MCC shall become the debts, liabilities and duties of SIC as the Surviving Company.
2.4
Conversion
of Stock
. At the Effective Time, by virtue of the Merger and without any action on the part of SIC, MCC or the holder of any
of the following securities:
(a) each
share of SIC Common Stock issued and outstanding immediately prior to the Effective Time shall remain issued and outstanding and
shall not be affected by the Merger;
(b) each
Excluded MCC Share issued and outstanding or held in treasury by MCC shall be cancelled and shall cease to exist and no Merger
Consideration or other amounts or consideration shall be delivered in exchange therefor;
(c) subject
to Section 2.4(e), at the Effective Time and subject to deduction for any required withholding Tax, each share of MCC Common Stock
other than the Excluded MCC Shares shall be converted into the right to receive 0.805 shares of SIC Common Stock (the
“Exchange
Ratio”
). The aggregate shares of SIC Common Stock to be issued in accordance with Section 2.4(c) (the
“Merger
Shares”
), together with any cash to be paid in lieu of fractional shares in accordance with Section 3.4(g), shall
be referred to collectively as the
“Merger Consideration”
;
(d) any
shares of MCC Common Stock converted into the right to receive the Merger Consideration pursuant to this Article II shall, upon
such conversion, no longer be outstanding and shall automatically be cancelled and shall cease to exist as of the Effective Time,
and each certificate previously representing any such shares of MCC Common Stock (each, a
“Certificate”
)
shall thereafter represent only the right to receive the Merger Consideration into which the shares of MCC Common Stock represented
by such Certificate have been converted pursuant to this Section 2.4 and Section 3.4(g), as well as any dividends to which former
holders of shares of MCC Common Stock become entitled in accordance with Article III; and
(e) if,
between the date of this Agreement and the Effective Time, the outstanding shares of SIC Common Stock shall have been increased,
decreased, changed into or exchanged for a different number or kind of shares or securities as a result of a reclassification,
stock dividend, stock split, reverse stock split, or other similar change and specifically excluding sales of SIC Common Stock,
sales of SIC equity-linked securities, and issuance of SIC Common Stock pursuant to SIC’s dividend reinvestment plan or otherwise
in lieu of a portion of any cash dividend declared by SIC, an appropriate and proportionate adjustment shall be made to the Exchange
Ratio.
2.5
Articles
of Incorporation and Bylaws of the Surviving Company
. Promptly following the date hereof, the SIC Board will review and approve
an amendment and restatement of the charter of SIC (the
“SIC Charter”
and, as so amended and restated,
the
“Amended and Restated Charter”
), which Amended and Restated Charter shall be reasonably acceptable
to the MCC Board, in order to remove terms inconsistent with, and to add terms advisable to reflect, the publicly traded nature
of SIC, as the Surviving Company, following the Closing. Following such approval, the SIC Board shall submit the Amended and Restated
Charter to the stockholders of SIC for their approval at the SIC Stockholder Meeting. Following the date hereof, the SIC Board
will review and approve any amendments to, or amendments and restatements of, the bylaws of SIC (the
“SIC Bylaws”
),
which shall be reasonably acceptable to the MCC Board, in order to remove terms inconsistent with, and to add terms advisable to
reflect, the publicly traded nature of SIC, as the Surviving Company, following the Closing. The SIC Bylaws, as in effect immediately
prior to the Effective Time, shall remain the bylaws of SIC, as the Surviving Company, until thereafter amended in accordance with
Applicable Law and the terms of such bylaws.
2.6
Directors
and Officers
. Promptly following the date hereof, SIC shall take such actions as may be required by the SIC Charter and SIC
Bylaws in order to appoint the individuals to serve as directors of the Surviving Company, effective as of the Effective Time,
which individuals shall consist of the current independent directors of SIC, one interested director of SIC and two independent
directors of MCC. Each of SIC and MCC shall include the identities of such directors in the Joint Proxy Statement/Prospectus to
be provided to SIC and MCC stockholders. Upon being duly elected, such directors shall serve from and after the Effective Time
until their respective successors shall have been duly elected, appointed or qualified or until their respective earlier death,
resignation or removal in accordance with the charter and bylaws of the Surviving Company. The officers of the Surviving Company
as of the Effective Time shall be as designated by the SIC Board and, prior to the Effective Time, the SIC Board shall take such
actions as may be necessary to appoint such individuals as the officers of the Surviving Company, effective as of the Effective
Time.
2.7
Tax
Consequences
. It is intended that the Merger shall constitute a “reorganization” within the meaning of Section
368(a) of the Code, and that this Agreement shall constitute a “plan of reorganization” for such purposes.
ARTICLE
III
CLOSING; DELIVERY OF MERGER CONSIDERATION
3.1
Closing
.
On the terms and subject to the conditions set forth in this Agreement, the closing of the Merger (the
“Closing”
)
shall take place at 10:00 a.m. on a date and at a place to be specified by the parties, which date shall be no later than five
Business Days after the satisfaction or waiver (subject to Applicable Law) of the latest to occur of the conditions set forth in
Article VIII (other than those conditions that by their nature are to be satisfied or waived at the Closing), unless extended by
mutual agreement of the parties (the
“Closing Date”
).
3.2
Exchange
Agent
. Prior to the Effective Time, SIC shall appoint a bank or trust company, or SIC’s transfer agent, in each case
reasonably acceptable to MCC, pursuant to an agreement (the
“Exchange Agent Agreement”
) to act as exchange
agent (the
“Exchange Agent”
) hereunder.
3.3
Deposit
of Merger Consideration
. At or prior to the Effective Time, SIC shall (i) authorize the Exchange Agent to issue an aggregate
number of shares of SIC Common Stock equal to the aggregate Merger Shares and (ii) deposit, or cause to be deposited with, the
Exchange Agent sufficient cash to make the payments to holders of shares of MCC Common Stock described in Section 3.4(g) (collectively,
the
“Exchange Fund”
). The Exchange Agent shall invest any cash included in the Exchange Fund as directed
by SIC;
provided, however,
that no gain or loss thereon shall affect the amounts payable to former holders of shares of
MCC Common Stock pursuant to Article II or Article III of this Agreement. Any interest or other income resulting from such investments
shall be the sole property of SIC.
3.4
Delivery
of Merger Consideration
.
(a) As
soon as reasonably practicable after the Effective Time, the Exchange Agent shall mail to each holder of record of a Certificate(s)
which immediately prior to the Effective Time represented outstanding shares of MCC Common Stock (other than Excluded MCC Shares)
(i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to such Certificate(s)
shall pass, only upon delivery of such Certificate(s) (or affidavits of loss in lieu of such Certificates)) to the Exchange Agent
and shall be substantially in such form and have such other provisions as shall be prescribed by the Exchange Agent Agreement (the
“Letter of Transmittal”
) and (ii) instructions for use in surrendering such Certificate(s) in exchange
for the Merger Consideration and any dividends or distributions to which such holder is entitled pursuant to Article II and this
Article III;
provided
,
however
, any holder of Book-Entry Shares shall not be required to deliver a Certificate
or an executed letter of transmittal to the Exchange Agent to receive the Merger Consideration that such holder is entitled to
receive as a result of the Merger. In lieu thereof, each holder of record of one or more Book-Entry Shares (other
than Excluded MCC Shares) shall upon receipt by the Exchange Agent of an “agent’s message” in customary form
(it being understood that the holders of Book-Entry Shares shall be deemed to have surrendered such shares upon receipt
by the Exchange Agent of such “agent’s message” or such other evidence, if any, as the Exchange Agent may reasonably
request), be entitled to receive, and SIC shall cause the Exchange Agent to pay and deliver as promptly as reasonably practicable
after the Effective Time, the Merger Consideration such holder is entitled to receive as a result of the Merger, and the Book-Entry Shares
so surrendered shall forthwith be cancelled. No interest will be paid or accrued on any amount payable upon due surrender of the Book-Entry Shares.
Prior to the Effective Time, the parties shall reasonably cooperate to establish procedures with the Exchange Agent and The Depository
Trust Company
(
“
DTC
”) designed to provide that the Exchange Agent will transmit to DTC
or its nominee, on the Closing Date, upon surrender of Book-Entry Shares held of record by DTC or its nominee in accordance with
DTC’s customary surrender procedures and such other procedures as agreed to by SIC, MCC, the Exchange Agent and DTC, the
Merger Consideration to which the beneficial owners thereof are entitled to receive as a result of the Merger.
(b) Upon
surrender to the Exchange Agent of its Certificate or Certificates, accompanied by a properly completed Letter of Transmittal,
a holder of shares of MCC Common Stock (other than Excluded MCC Shares) will be entitled to receive promptly after the Effective
Time the Merger Consideration in respect of the shares of MCC Common Stock represented by its Certificate or Certificates, as well
as any dividends payable with respect to such shares of MCC Common Stock at the time of surrender, and any dividends with respect
to shares of SIC Common Stock to which such holder is entitled. Until so surrendered, each such Certificate shall represent after
the Effective Time, for all purposes, only the right to receive, without interest, the Merger Consideration upon surrender of such
Certificate in accordance with, together with any dividends or distributions to which such holder is entitled pursuant to, Article
II or this Article III.
(c) Prior
to the Closing Date, in the event that MCC has undistributed investment company taxable income (as defined in Section 852(b)(2)
of the Code) or net capital gain (as defined in Section 1221(11) of the Code) for MCC's short taxable year ending on the Closing
Date, MCC shall declare a dividend, payable in cash or MCC Common Stock or a combination thereof (the
“Final MCC Dividend”
),
to holders of shares of MCC Common Stock. The Final MCC Dividend, together with all previous MCC dividends with respect to MCC's
taxable year ending on the Closing Date, shall result in MCC distributing to MCC's stockholders all of MCC's undistributed investment
company taxable income (as defined in Section 852(b)(2) of the Code) and all of MCC's net capital gain (as defined in Section 1221(11)
of the Code) for MCC's taxable year ending on the Closing Date. If MCC determines it necessary to declare a Final MCC Dividend,
it shall notify SIC at least ten (10) days prior to MCC Stockholder Meeting.
(d) No
dividends or other distributions declared with respect to SIC Common Stock to stockholders of record on or after the Effective
Time shall be paid to the holder of any unsurrendered Certificate with respect to the shares of SIC Common Stock to which the holder
of such Certificate is entitled upon exchange thereof in accordance with Article II and this Article III, in each case unless and
until the holder thereof shall surrender such Certificate in accordance with this Article III. Subject to the effect of applicable
abandoned property, escheat or similar laws, following surrender of any such Certificate in accordance with this Article III, the
record holder thereof shall be entitled to receive, without interest, (i) the amount of dividends or other distributions with a
record date after the Effective Time theretofore payable with respect to the whole shares of SIC Common Stock represented by such
Certificate and not paid prior to the date of surrender, and/or (ii) at the appropriate payment date, the amount of dividends or
other distributions payable with respect to whole shares of SIC Common Stock represented by such Certificate with a record date
after the Effective Time (but before such surrender date) and with a payment date subsequent to the surrender date.
(e) If
any Merger Consideration is to be issued or paid in a name other than that in which a Certificate formerly representing MCC Common
Stock surrendered in exchange therefor is registered, it shall be a condition to the issuance or payment of such Merger Consideration
that such Certificate shall be properly endorsed or otherwise be in proper form for transfer, and the Person requesting such payment
or issuance shall pay any transfer or other similar Taxes required by reason of the payment or issuance to a Person other than
the registered holder of the Certificate or establish to the satisfaction of SIC that the Tax has been paid or is not applicable.
(f) The
Exchange Agent (or, subsequent to the earlier of (x) the one-year anniversary of the Effective Time and (y) the expiration or termination
of the Exchange Agent Agreement, SIC) shall be entitled to deduct and withhold from any cash in lieu of fractional shares of SIC
Common Stock otherwise payable pursuant to this Agreement to any holder of shares of MCC Common Stock such amounts as the Exchange
Agent or SIC, as the case may be, is required to deduct and withhold under the Code, or any provision of state, local or foreign
Tax law, with respect to the making of such payment. To the extent the amounts are so withheld by the Exchange Agent or SIC, as
the case may be, and timely paid over to the appropriate Governmental Entity, such withheld amounts shall be treated for all purposes
of this Agreement as having been paid to the holder of shares of MCC Common Stock in respect of whom such deduction and withholding
was made by the Exchange Agent or SIC, as the case may be.
(g) After
the Effective Time, there shall be no transfers on the stock transfer books of MCC of the shares of MCC Common Stock that were
issued and outstanding immediately prior to the Effective Time other than to settle transfers of MCC Common Stock that occurred
prior to the Effective Time. If, after the Effective Time, Certificates or Book-Entry Shares representing such shares of MCC Common
Stock are presented for transfer to the Exchange Agent, they shall be cancelled and exchanged for the Merger Consideration payable
and issuable in respect of such Certificates, together with any dividends and distributions to which such holder is entitled in
accordance with this Article III.
(h) Notwithstanding
anything to the contrary contained in this Agreement, no fractional shares of SIC Common Stock shall be issued upon the surrender
of Certificates for exchange or presentation of Book-Entry Shares for transfer, no dividend or distribution with respect to SIC
Common Stock shall be payable on or with respect to any fractional share, and such fractional share interests shall not entitle
the owner thereof to vote or to any other rights of a stockholder of SIC. In lieu of the issuance of any such fractional share,
SIC shall pay to each former stockholder of MCC who otherwise would be entitled to receive such fractional share an amount in cash
(rounded to the nearest cent) determined by multiplying (i) the most recently determined net asset value per share by (ii) the
fraction of a share (after taking into account all shares of MCC Common Stock held by such holder at the Effective Time and rounded
to the nearest thousandth when expressed in decimal form) of SIC Common Stock to which such holder would otherwise be entitled
to receive pursuant to Section 2.4.
(i) Any
portion of the Exchange Fund that remains unclaimed by the stockholders of MCC as of the first anniversary of the Effective Time
may be paid to SIC. In such event, any former stockholders of MCC who have not theretofore complied with this Article III shall
thereafter look only to SIC with respect to the Merger Consideration, any cash in lieu of any fractional shares and any unpaid
dividends and distributions in respect of each share of SIC Common Stock such stockholder is entitled to, as determined pursuant
to this Agreement, in each case, without any interest thereon. Notwithstanding the foregoing, none of SIC, the Surviving Company,
the Exchange Agent or any other Person shall be liable to any former holder of shares of MCC Common Stock for any amount delivered
in good faith to a public official pursuant to applicable abandoned property, escheat or similar laws.
(j) In
the event any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if reasonably required by SIC or the Exchange Agent, the posting
by such Person of a bond in such amount as SIC may determine is reasonably necessary as indemnity against any claim that may be
made against it with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration and any unpaid dividends or distributions deliverable in respect thereof pursuant to this
Agreement.
ARTICLE
IV
REPRESENTATIONS AND WARRANTIES OF MCC
Except as disclosed
in (i) MCC SEC Reports (as defined in Section 4.5(c) below) filed prior to the date of this Agreement, or (ii) MCC Disclosure Schedule,
MCC hereby represents and warrants to SIC as follows:
4.1
Corporate
Organization
.
(a) MCC
is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. MCC has the
requisite corporate power and corporate authority to own or lease all of its properties and assets and to carry on its business
as it is now being conducted, and is duly licensed or qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed or qualified would not, individually or in the aggregate, have
a Material Adverse Effect on MCC.
(b) True,
complete and correct copies of MCC Certificate and MCC Bylaws have previously been made available to SIC. MCC is not in violation
of the MCC Certificate or the MCC Bylaws.
(c) Except
as set forth in Section 4.1(c) of MCC Disclosure Schedule, MCC has no Subsidiaries or other equity interest in any other Person.
Each of the Subsidiaries of MCC (i) is duly formed and validly existing and in good standing under the laws of the state of its
formation, (ii) has the requisite limited partnership or other organizational power and authority to own or lease all of its properties
and assets and to carry on its business as it is now being conducted and (iii) is duly licensed or qualified to do business in
each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets
owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed or qualified
would not, individually or in the aggregate, have a Material Adverse Effect on MCC. True, complete and correct copies of the Organizational
Documents of each Subsidiary of MCC have previously been made available to SIC. No Subsidiary of MCC is in violation of its Organizational
Documents.
4.2
Capitalization
.
(a) The
authorized capital stock of MCC consists of 200,000,000 shares, consisting of one hundred million (100,000,000) shares of MCC Common
Stock of which, as of the date of this Agreement, 54,474,211 shares were issued and outstanding, and one hundred million (100,000,000)
shares of MCC Preferred Stock of which, as of the date of this Agreement, no shares were issued and outstanding. All of the issued
and outstanding shares of MCC Common Stock have been duly authorized and validly issued and are fully paid, nonassessable, free
of any Liens, and are not subject to any preemptive rights, whether arising under the laws of the State of Delaware or the State
of Maryland or the MCC Certificate, MCC Bylaws or any MCC Contract, with no personal liability attaching to the ownership thereof.
As of the date of this Agreement, no MCC Voting Debt is issued or outstanding. As of the date of this Agreement, MCC does not have
and is not bound by any outstanding subscriptions, options, warrants, calls, rights, commitments or agreements of any character
calling for the purchase or issuance of, or the payment of any amount based on, any shares of MCC Common Stock, MCC Preferred Stock,
MCC Voting Debt or any other equity securities of MCC or any securities representing the right to purchase or otherwise receive
any shares of MCC Common Stock, MCC Preferred Stock, MCC Voting Debt or other equity securities of MCC. As of the date of this
Agreement, there are no contractual obligations of MCC or any of its Subsidiaries (A) to repurchase, redeem or otherwise acquire
any shares of capital stock of MCC or any equity security of MCC or its Subsidiaries or any securities representing the right to
purchase or otherwise receive any shares of capital stock or any other equity security of MCC or its Subsidiaries or (B) pursuant
to which MCC or any of its Subsidiaries is or could be required to register shares of MCC capital stock or other securities under
the Securities Act.
(b) Except
as set forth in Section 4.2(b) of MCC Disclosure Schedule, all of the issued and outstanding shares of capital stock or other equity
ownership interests of each Subsidiary of MCC are owned, directly or indirectly, by MCC, free and clear of any Liens, and all of
such shares or equity ownership interests are duly authorized and validly issued and are fully paid, nonassessable and free of
any preemptive rights. No Subsidiary of MCC has or is bound by any outstanding subscriptions, options, warrants, calls, commitments
or agreements of any character calling for the purchase or issuance of any shares of capital stock or any other equity security
of such Subsidiary or any securities representing the right to purchase or otherwise receive any shares of capital stock or any
other equity security of such Subsidiary.
(c) Except
for amounts outstanding under MCC Debt Documents, neither MCC nor any of its Subsidiaries has any Indebtedness for borrowed money.
4.3
Authority;
No Violation
.
(a) MCC
has full corporate power and authority to execute and deliver this Agreement and, subject to receipt of the MCC Stockholder Approval,
to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized and approved by MCC Board. MCC Board has approved and declared advisable
the Merger and this Agreement and determined that the Merger and the other transactions contemplated by this Agreement are advisable
and in the best interests of MCC and its stockholders, has approved the MCC Matters and has directed that the MCC Matters be submitted
to MCC’s stockholders for approval and adoption at a duly held meeting of such stockholders, together with the recommendation
of MCC Board that the stockholders approve and adopt MCC Matters (the
“MCC Board Recommendation”
) and
has adopted a resolution to the foregoing effect and to include such recommendation in the Joint Proxy Statement/Prospectus. Except
for the approval and adoption of MCC Matters by the affirmative vote of the holders of a majority of the outstanding shares of
MCC Common Stock (the “
MCC Stockholder Approval
”) at the MCC Stockholder Meeting, no other corporate
proceedings on the part of MCC are necessary to approve the Merger, this Agreement or the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by MCC and (assuming due authorization, execution and delivery by SIC)
constitutes the valid and binding obligation of MCC, enforceable against MCC in accordance with its terms, except as may be limited
by bankruptcy, insolvency, fraudulent transfer, moratorium, reorganization or similar laws of general applicability relating to
or affecting the rights of creditors generally and subject to general principles of equity (the
“Bankruptcy and Equity
Exception”
).
(b) Neither
the execution and delivery of this Agreement by MCC nor the consummation by MCC of the transactions contemplated hereby, nor compliance
by MCC with any of the terms or provisions of this Agreement, will (i) violate any provision of MCC Certificate or MCC Bylaws,
or (ii) assuming that the consents, approvals and filings referred to in Section 4.4 are duly obtained and/or made, (A) violate
any Applicable Law applicable to MCC or any of its Subsidiaries, or any of their respective properties or assets, or (B) except
as would not, individually or in the aggregate, have a Material Adverse Effect on MCC, violate, conflict with, result in a breach
of any provision of or the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate
the performance required by, or result in the creation of any Lien upon any of the respective properties or assets of MCC or any
of its Subsidiaries under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, franchise, agreement or other instrument or obligation to which MCC or any of its Subsidiaries is a party or by which any
of them or any of their respective properties or assets is bound (collectively, the
“MCC Contracts”
).
4.4
Consents
and Approvals
.
(a) Except
for (i) the filing with the SEC of a joint proxy statement in definitive form (the
“Joint Proxy Statement/Prospectus”
)
relating to the special meeting of MCC’s stockholders to be held in order to obtain MCC Stockholder Approval (the
“MCC
Stockholder Meeting”
) and the special meeting of SIC’s stockholders to be held to vote on the SIC Matters (the
“SIC Stockholder Meeting”
) and of a registration statement on Form N-14 (the
“Form N-14 Registration
Statement”
) in which the Joint Proxy Statement/Prospectus will be included as a prospectus, and declaration of effectiveness
of the Form N-14 Registration Statement by the SEC, (ii) the filing of the Certificate of Merger with the Delaware Secretary pursuant
to the DGCL and the filing of the Articles of Merger with SDAT, (iii) any notices, consents, authorizations, approvals, filings
or exemptions in connection with compliance with the rules and regulations of the NYSE, or any other applicable self-regulatory
organization (
“SRO”
), (iv) any notices, filings or consents of the SBA required to keep the SBA Debentures
outstanding following the Effective Time, (v) any notices or filings under the HSR Act and the expiration of applicable waiting
periods, (vi) such filings and approvals as are required to be made or obtained under the securities or “Blue Sky”
laws of various states in connection with the issuance of the shares of SIC Common Stock pursuant to this Agreement, (vii) receipt
of the SEC Exemptive Relief, or (viii) as set forth on Section 4.4(a) of MCC Disclosure Schedule (the foregoing (i) through (viii)
referred to collectively as the
“MCC Required Approvals”
), no other consents, authorizations, approvals,
or exemptions from, or notices to, or filings with, any Governmental Entity are necessary in connection with the execution and
delivery by MCC of this Agreement or the consummation by MCC of the Merger and the other transactions contemplated by this Agreement.
(b) Except
for (i) receipt of MCC Stockholder Approval, (ii) receipt of the relevant consents or releases, or the taking of other actions,
under MCC Debt Documents, (iii) receipt of the relevant consents or releases, or the taking of other actions, under MCC Contracts
set forth in Section 4.4(b) of MCC Disclosure Schedule, and (iv) matters covered in the immediately preceding Section 4.4(a), no
consents or approvals of any Person are necessary in connection with the execution and delivery by MCC of this Agreement or the
consummation by MCC of the Merger and the other transactions contemplated by this Agreement.
4.5
Reports;
Regulatory Matters
.
(a) MCC
and each of its Subsidiaries have timely filed all reports, registration statements and certifications, together with any amendments
required to be made with respect thereto, that they were required to file since December 31, 2014 with (i) the SEC, (ii) the NYSE,
and (iii) any other applicable SRO or Governmental Entity, and all other reports and statements required to be filed by them since
December 31, 2014, including any report or statement required to be filed pursuant to the laws, rules or regulations of the United
States, any state, any foreign entity, or any SRO or Governmental Entity, and have paid all fees and assessments due and payable
in connection therewith. Except for normal examinations of MCC and its Subsidiaries conducted by a SRO or Governmental Entity in
the ordinary course of the business, no SRO or Governmental Entity has initiated since December 31, 2014 or has pending any proceeding,
enforcement action or, to the knowledge of MCC, investigation into the business, disclosures or operations of MCC or any of its
Subsidiaries. Since December 31, 2014, no SRO or Governmental Entity has resolved any proceeding, enforcement action or, to the
knowledge of MCC, investigation into the business, disclosures or operations of MCC or any of its Subsidiaries. There is no unresolved,
or, to MCC’s knowledge, threatened criticism, comment, exception or stop order by any SRO or Governmental Entity with respect
to any report or statement relating to any examinations or inspections of MCC or any of its Subsidiaries. Since December 31, 2014,
there have been no formal or informal inquiries by, or disagreements or disputes with, any SRO or Governmental Entity with respect
to the business, operations, policies or procedures of MCC or any of its Subsidiaries (other than normal examinations conducted
by a SRO or Governmental Entity in MCC’s ordinary course of business). MCC has made available to SIC all correspondence between
MCC or any of its Subsidiaries and the SEC, the NYSE and any other SRO or Governmental Entity since December 31, 2014.
(b) Neither
MCC nor any of its Subsidiaries is subject to any cease-and-desist or other order or enforcement action issued by, or is a party
to any written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or has been ordered to pay any civil money penalty by, or has been
since December 31, 2014 a recipient of any supervisory letter from, or since December 31, 2014 has adopted any policies, procedures
or board resolutions at the request or suggestion of, any SRO or Governmental Entity that currently restricts in any material respect
the conduct of its business (or to MCC’s knowledge that, upon consummation of the Merger, would restrict in any material
respect the conduct of the business of SIC or any of its Subsidiaries), or that in any material manner relates to its credit, risk
management or compliance policies, its internal controls, its management or its business (each item in this sentence, a
“MCC
Regulatory Agreement”
), nor has MCC or any of its Subsidiaries been advised since December 31, 2014 by any SRO or
Governmental Entity that it is considering issuing, initiating, ordering, or requesting any such MCC Regulatory Agreement.
(c) MCC
has filed on the SEC’s EDGAR system each (i) registration statement, prospectus, report, schedule and definitive proxy statement
(including all exhibits, amendments and supplements thereto) required to be filed with or furnished to the SEC by MCC or any of
its Subsidiaries pursuant to the Securities Act or the Exchange Act since December 31, 2014 (the
“MCC SEC Reports”
)
and (ii) communication mailed by MCC to its stockholders since December 31, 2014. No such MCC SEC Report or communication, at the
time filed, furnished or communicated (and, in the case of registration statements, proxy statements and prospectuses, on the dates
of effectiveness, the dates of the relevant meetings and the dates of use, respectively), contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading, except that information contained in an MCC SEC Report
as of a later date (but before the date of this Agreement) shall be deemed to modify information as of an earlier date. As of their
respective dates, all MCC SEC Reports complied as to form in all material respects with the Securities Act, the Exchange Act and
the other rules and regulations of the SEC with respect thereto. No executive officer of MCC has failed in any respect to make
the certifications required of him or her under Section 302 or 906 of the Sarbanes-Oxley Act. As of the date of this Agreement,
there are no outstanding or unresolved comments from the SEC with respect to any MCC SEC Report and, as of the date of this Agreement,
to the knowledge of MCC, no MCC SEC Report is subject to any ongoing review by the SEC.
4.6
Financial
Statements
.
(a) The
consolidated financial statements of MCC and its Subsidiaries included in MCC SEC Reports (including the related notes, where applicable)
(i) have been prepared from, and are in accordance with, the books and records of MCC and its Subsidiaries, (ii) fairly present
in all material respects the consolidated results of operations, cash flows, changes in stockholders’ equity and consolidated
financial position of MCC and its Subsidiaries for the respective fiscal periods or as of the respective dates therein set forth
(subject in the case of unaudited statements to recurring year-end audit adjustments immaterial in nature and amount), (iii) complied
as to form, as of their respective dates of filing with the SEC, in all material respects with applicable accounting requirements
and with the published rules and regulations of the SEC with respect thereto and (iv) have been prepared in accordance with GAAP
consistently applied during the periods involved, except, in each case, as indicated in such statements or in the notes thereto.
(b) Neither
MCC nor any of its Subsidiaries has any liability or obligation of any nature whatsoever required by GAAP to be reflected or reserved
for in a balance sheet (whether absolute, accrued, contingent or otherwise and whether due or to become due), except for those
liabilities that are reflected or reserved against on the consolidated balance sheet of MCC included in its Annual Report on Form
10-K for the annual period ended December 31, 2017 (including any notes thereto) and for liabilities and obligations incurred in
a commercially reasonable manner and in the ordinary course of business consistent with past practice since the date of such balance
sheet.
(c) MCC
has established and maintains a system of “internal control over financial reporting” (as defined in Rules 13a-15(f)
and 15d-15(f) of the Exchange Act) that is designed to provide reasonable assurance (i) regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with GAAP, (ii) that receipts and expenditures
of MCC and its Subsidiaries are being made only in accordance with authorizations of MCC management and the MCC Board, and (iii)
regarding prevention or timely detection of the unauthorized acquisition, use or disposition of MCC and each of MCC’s Subsidiaries’
assets that could have a material effect on MCC’s consolidated financial statements. MCC has disclosed, based on its most
recent evaluation of such internal control over financial reporting prior to the date of this Agreement, to MCC’s auditors
and the audit committee of the MCC Board and in Section 4.6(c) of MCC Disclosure Schedule (x) any significant deficiency and material
weakness in the design or operation of MCC’s internal control over financial reporting that is reasonably likely to adversely
affect MCC’s ability to record, process, summarize or report financial information, and (y) any fraud, whether or not material,
that involves MCC management or other employees of MCC or any MCC Subsidiary who have a significant role in MCC’s internal
control over financial reporting. For purposes of this Agreement, the terms “significant deficiency” and “material
weakness” shall have the meaning assigned to them in the auditing standards of the Public Company Accounting Oversight Board,
as in effect on the date of this Agreement.
(d) MCC’s
“disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) are designed
to ensure that all information (both financial and non-financial) required to be disclosed by MCC in the reports that it files
or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules
and forms of the SEC, and that all such information is accumulated and communicated to MCC’s management as appropriate to
allow timely decisions regarding required disclosure and to make the certifications of the chief executive officer and chief financial
officer of MCC required under the Exchange Act with respect to such reports. MCC’s management has completed an assessment
of the effectiveness of MCC’s disclosure controls and procedures and, to the extent required by Applicable Law, presented
in any applicable MCC SEC Report that is a report on Form 10-K or Form 10-Q, or any amendment thereto, its conclusions about the
effectiveness of the disclosure controls and procedures as of the end of the period covered by such report or amendment based on
such evaluation.
(e) Since
December 31, 2014, MCC and its principal executive officer and principal financial officer have complied in all material respects
with (i) the applicable provisions of the Sarbanes-Oxley Act and the Exchange Act and (ii) the applicable listing and corporate
governance rules and regulations of the NYSE. The principal executive officer and the principal financial officer of MCC have made
all certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act with respect to each MCC SEC Report, and the statements
contained in such certifications were true and correct on the date such certifications were made . For purposes of the preceding
sentence, “principal executive officer” and “principal financial officer” shall have the meanings given
to such terms in the Sarbanes-Oxley Act.
4.7
Broker’s
Fees
. Except for the fees of Sandler O’Neill & Partners, L.P. (
“Sandler O’Neill
”),
none of MCC, any of its Subsidiaries or any of their respective officers or directors has used any broker, finder or financial
advisor or incurred any liability for any broker’s fees, commissions or finder’s fees in connection with the Merger
or any other transactions contemplated by this Agreement.
4.8
Absence
of Certain Changes or Events
. Since December 31, 2017, (a) the respective businesses of MCC and its Subsidiaries have been
conducted in the ordinary course of business consistent with past practice, (b) none of MCC or any of its Subsidiaries has taken
any action that, if taken after the date of this Agreement, would result in a breach of the covenants set forth in Section 6.2,
and (c) no event or events have occurred that have had or would reasonably be expected to have, either individually or in the aggregate,
a Material Adverse Effect on MCC.
4.9
Legal
Proceedings
.
(a) Except
as would not, individually or in the aggregate, have a Material Adverse Effect on MCC, neither MCC nor any of its Subsidiaries
is a party to any, and there are no pending or, to the best of MCC’s knowledge, threatened, legal, administrative, arbitral
or other proceedings, Claims, actions, suits or governmental or regulatory investigations of any nature against MCC or any of its
Subsidiaries or to which any of their assets are subject.
(b) Except
as would not, individually or in the aggregate, have a Material Adverse Effect on MCC, there is no judgment, settlement agreement,
order, injunction, decree or regulatory restriction (other than those of general application that apply to similarly situated companies
or their Subsidiaries) imposed upon MCC, any of its Subsidiaries or the assets of MCC or any of its Subsidiaries.
4.10
Taxes
and Tax Returns
.
(a) Each
of MCC and its Subsidiaries (i) has duly and timely filed (including all applicable extensions) all federal, state, local and foreign
income and other material Tax Returns required to be filed by it and all such Tax Returns are accurate and complete, (ii) has paid
all Taxes shown thereon as due and (iii) has duly paid or made provision for the payment of all Taxes that have been incurred or
are due or claimed to be due from it by the IRS or any other federal, state, foreign or local taxing authorities other than Taxes
that are not yet delinquent or are being contested in good faith, have not been finally determined and have been adequately reserved
against under GAAP. There are no material disputes pending, or written claims asserted, for Taxes or assessments upon MCC or any
Subsidiary for which MCC does not have reserves that are adequate under GAAP. Neither MCC nor any Subsidiary is a party to or is
bound by any Tax sharing, allocation or indemnification agreement or arrangement (other than such an agreement or arrangement exclusively
between or among MCC and its Subsidiaries as described in MCC Disclosure Schedule).
(b) Effective
for the year ending September 30, 2011, MCC made a valid election under Subchapter M of Chapter 1 of the Code to be taxed as a
regulated investment company. MCC has qualified as a regulated investment company at all times subsequent to such election, and
expects to qualify as such for its current taxable year. With respect to each relevant taxable year, MCC has satisfied the distribution
requirements imposed on a regulated investment company under Section 852 of the Code, and will either (i) satisfy such distribution
requirements for its current taxable year ending on the Closing Date or (ii) make a Final MCC Dividend declaration as set forth
in Section 3.4(c).
(c) MCC
and its Subsidiaries have complied in all material respects with all Applicable Laws relating to the payment and withholding of
Taxes and have, within the time and in the manner prescribed by Applicable Law, withheld from and paid over all amounts required
to be so withheld and paid over under Applicable Laws.
(d) There
are no Liens for Taxes upon the assets of MCC or any of the Subsidiaries, except for Liens for Taxes not yet due and payable and
Liens for Taxes that are both being contested in good faith and adequately reserved for in accordance with GAAP.
(e) Neither
MCC nor any Subsidiary has granted any waiver, extension, or comparable consent regarding the application of the statute of limitations
with respect to any Taxes or Tax Return that is outstanding, nor any request for such waiver or consent has been made.
4.11
Compliance
with Applicable Law
.
(a) MCC
and each of its Subsidiaries hold all Permits necessary for the lawful conduct of their respective businesses, and have complied
in all respects with and are not in default in any respect under any, any Permit or Applicable Law, except for such failures, noncompliance
or defaults that would not, individually or in the aggregate, have a Material Adverse Effect on MCC.
(b) The
SBIC Subsidiary is licensed to operate as a Small Business Investment Company (
“SBIC”
) by the SBA. The
SBIC Subsidiary’s SBIC license is in good standing with the SBA and no adverse regulatory findings contained in any examinations
reports prepared by the SBA regarding any of the SBIC Subsidiaries are outstanding or unresolved.
4.12
Certain
Contracts
.
(a) Except
as set forth in Section 4.12(a) of MCC Disclosure Schedule or as expressly contemplated by this Agreement, neither MCC nor any
of its Subsidiaries is a party to or bound by any MCC Contract that is a “material contract” (as such term is defined
in Item 601(b)(10) of Regulation S-K of the SEC) to be performed after the date of this Agreement that has not been filed or incorporated
by reference in MCC SEC Reports filed prior to the date hereof (each such MCC Contract, a
“MCC Material Contract”
).
(b) Except
as set forth in Section 4.12 of MCC Disclosure Schedule, (i) each MCC Material Contract is valid and binding on MCC or its applicable
Subsidiary, enforceable against it in accordance with its terms (subject to the Bankruptcy and Equity Exception), and is in full
force and effect, (ii) MCC and each of its Subsidiaries and, to MCC’s knowledge, each other party thereto has duly performed
all obligations required to be performed by it to date under each MCC Material Contract and (iii) no event or condition exists
that constitutes or, after notice or lapse of time or both, will constitute, a breach, violation or default on the part of MCC
or any of its Subsidiaries or, to MCC’s knowledge, any other party thereto under any such MCC Material Contract. Except as
set forth in Section 4.12 of MCC Disclosure Schedule, there are no disputes pending or, to MCC’s knowledge, threatened with
respect to any MCC Material Contract.
4.13
Investment
Securities
. Each of MCC and its Subsidiaries has good title to all securities (including any evidence of Indebtedness) owned
by it, free and clear of any Liens, except (a) for those Liens or restrictions arising under the Organizational Documents of the
issuers of such securities, (b) to the extent such securities are pledged in connection with MCC Debt Documents, (c) to the extent
arising under the requirements of the SBA, (d) for restrictions on transferability arising under federal or state securities laws
or (e) for Liens or restrictions which would not individually or in the aggregate be material with respect to the value, ownership
or transferability of such securities.
4.14
Property
.
MCC or one of its Subsidiaries (a) has good and marketable title to all the properties and assets (excluding securities, which
are addressed in Section 4.13 above) reflected in the latest audited balance sheet included in such MCC SEC Reports as being owned
by MCC or one of its Subsidiaries or acquired after the date thereof (except properties sold or otherwise disposed of since the
date thereof in the ordinary course of business), free and clear of all Liens of any nature whatsoever, except Permitted Liens,
and (b) is the lessee of all leasehold estates reflected in the latest audited financial statements included in such MCC SEC Reports
or acquired after the date thereof (except for leases that have expired by their terms since the date thereof), free and clear
of all Liens of any nature whatsoever, except for Permitted Liens, and is in possession of the properties purported to be leased
thereunder, and each such lease is valid without default thereunder by the lessee or, to MCC’s knowledge, the lessor.
4.15
Intellectual
Property
. MCC owns or possesses sufficient rights to use all Intellectual Property Rights used in the conduct of its business
as now conducted, all of which shall remain in effect following the Closing, except where the failure to own or possess such rights
would not reasonably be expected to result in a Material Adverse Effect on MCC; and the expected expiration or termination of any
of such Intellectual Property Rights would not result in a Material Adverse Effect on MCC.
4.16
State
Takeover Laws
. MCC Board has unanimously approved this Agreement and the transactions contemplated hereby as required to render
inapplicable to this Agreement and such transactions the restrictions on “business combinations” set forth in the DGCL
or any other “moratorium,” “control share,” “fair price,” “takeover” or “interested
stockholder” law (any such laws,
“Takeover Statutes”
).
4.17
Opinion
.
The Special Committee of the MCC Board has received the opinion of Sandler O’Neill, to the effect that, as of the date of
such opinion and subject to certain assumptions, limitations, qualifications and other matters, the Exchange Ratio set forth in
this Agreement is fair, from a financial point of view, to the holders of shares of MCC Common Stock (other than SIC, MDLY and
their respective Affiliates); it being agreed that SIC is not entitled to rely upon such opinion.
4.18
MCC
Information
. The information relating to MCC and its Subsidiaries that is provided by MCC or its representatives for inclusion
in the Form N-14 Registration Statement and/or Joint Proxy Statement/Prospectus, or in any application, notification or other document
filed with any other SRO or Governmental Entity (including the SEC) in connection with the transactions contemplated by this Agreement,
will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein,
in light of the circumstances in which they are made, not misleading. The Joint Proxy Statement/Prospectus as it relates to MCC
and its Subsidiaries and other portions within the reasonable control of MCC and its Subsidiaries will comply in all material respects
with the provisions of the Exchange Act and the rules and regulations thereunder.
4.19
Insurance
.
MCC and its Subsidiaries maintain, or are covered by, policies of insurance in such amounts and against such risks as are customary
in the industries in which MCC and its Subsidiaries operate. Except as would not be reasonably expected to have a Material Adverse
Effect on MCC, all such insurance policies are in full force and effect and will not in any way be affected by, or terminate or
lapse by reason of, the execution (but not the performance) of this Agreement.
4.20
Environmental
Matters
. Except as would not, individually or in the aggregate, have a Material Adverse Effect on MCC and its Subsidiaries,
taken as a whole, there are no legal, administrative, arbitral or other proceedings, Claims, actions, causes of action or notices
with respect to any Environmental Laws, pending or threatened against MCC or any of its Subsidiaries. Neither MCC nor any of its
Subsidiaries is subject to any agreement, order, judgment, decree, letter or memorandum by or with any Governmental Entity or Third
Party imposing any liability or obligation with respect to any of the foregoing.
4.21
Reorganization;
Approvals
. As of the date of this Agreement, MCC (a) is not aware of any fact or circumstance that could reasonably be expected
to prevent the Merger from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code, and (b)
knows of no reason why all regulatory approvals from any Governmental Entity required for the consummation of the transactions
contemplated by this Agreement should not be obtained on a timely basis.
4.22
No
Other Representations or Warranties
. Except for the representations and warranties contained in this Article IV and any closing
certificate delivered to SIC, neither MCC nor any other Person on behalf of MCC makes any express or implied representation or
warranty with respect to MCC, any of its Subsidiaries, any investment assets or portfolio company, or any other information provided
to SIC in connection with the Merger and the other transactions contemplated by this Agreement, including the accuracy, completeness
or timeliness thereof. Neither MCC nor any other Person will have or be subject to any claim, liability or indemnification obligation
to SIC or any other Person resulting from the distribution or failure to distribute to SIC, or SIC’s use of, any such information,
including any information, documents, projections, estimates, forecasts or other material made available to SIC in the electronic
data room maintained by MCC for purposes of the transactions contemplated by this Agreement or management presentations in expectation
of the transactions contemplated by this Agreement, unless and to the extent any such information is expressly included in a representation
or warranty contained in this Article IV.
ARTICLE
V
REPRESENTATIONS AND WARRANTIES OF SIC
Except as disclosed
in (i) the SIC SEC Reports (as defined in Section 5.5(c) below) filed prior to the date of this Agreement, or (ii) the SIC Disclosure
Schedule, SIC hereby represents and warrants to MCC as follows:
5.1
Corporate
Organization
.
(a) SIC
is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Maryland. SIC has the
requisite corporate power and corporate authority to own or lease all of its properties and assets and to carry on its business
as it is now being conducted, and is duly licensed or qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed or qualified would not, individually or in the aggregate, have
a Material Adverse Effect on SIC.
(b) True,
complete and correct copies of the SIC Charter and the SIC Bylaws have previously been made available to MCC. SIC is not in violation
of the SIC Charter or the SIC Bylaws.
(c) Except
as set forth in Section 5.1(c) of the SIC Disclosure Schedule, SIC has no Subsidiaries or other equity interest in any other Person.
Each of SIC’s Subsidiaries (i) is duly formed and validly existing and in good standing under the laws of the state of its
formation, (ii) has the requisite corporate or other organizational power and authority to own or lease all of its properties and
assets and to carry on its business as it is now being conducted and (iii) is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned
or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed or qualified would
not, individually or in the aggregate, have a Material Adverse Effect on SIC. True, complete and correct copies of the Organizational
Documents of each Subsidiary of SIC have previously been made available to MCC. No Subsidiary of SIC is in violation of its Organizational
Documents.
5.2
Capitalization
.
(a) The
authorized capital stock of SIC consists of 250,000,000 shares of SIC Common Stock of which, as of the date of this Agreement,
97,578,798 shares were issued and outstanding. As of the date of this Agreement, no shares of SIC Common Stock were reserved for
issuance. All of the issued and outstanding shares of SIC Common Stock have been duly authorized and validly issued and are fully
paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. As of the date
of this Agreement, no SIC Voting Debt is issued or outstanding. As of the date of this Agreement, except pursuant to this Agreement,
SIC does not have and is not bound by any outstanding subscriptions, options, warrants, calls, rights, commitments or agreements
of any character calling for the purchase or issuance of, or the payment of any amount based on, any shares of SIC Common Stock,
SIC Voting Debt or any other equity securities of SIC or any securities representing the right to purchase or otherwise receive
any shares of SIC Common Stock, SIC Voting Debt or other equity securities of SIC. As of the date of this Agreement, except pursuant
to this Agreement, there are no contractual obligations of SIC or any of its Subsidiaries (A) to repurchase, redeem or otherwise
acquire any shares of capital stock of SIC or any equity security of SIC or its Subsidiaries or any securities representing the
right to purchase or otherwise receive any shares of capital stock or any other equity security of SIC or its Subsidiaries or (B)
pursuant to which SIC or any of its Subsidiaries is or could be required to register shares of SIC capital stock or other securities
under the Securities Act.
(b) Except
as set forth in Section 5.2(b) of the SIC Disclosure Schedule, all of the issued and outstanding shares of capital stock or other
equity ownership interests of each Subsidiary of SIC are owned, directly or indirectly, by SIC, free and clear of any Liens, and
all of such shares or equity ownership interests are duly authorized and validly issued and are fully paid, nonassessable and free
of any preemptive rights. No Subsidiary of SIC has or is bound by any outstanding subscriptions, options, warrants, calls, commitments
or agreements of any character calling for the purchase or issuance of any shares of capital stock or any other equity security
of such Subsidiary or any securities representing the right to purchase or otherwise receive any shares of capital stock or any
other equity security of such Subsidiary.
(c) The
Merger Shares, when issued in compliance with the provisions of this Agreement and the Form N-14 Registration Statement, will be
validly issued and will be fully paid and nonassessable, free of any Liens, and will not be subject to any preemptive rights, whether
arising under the laws of the State of Maryland or the SIC Charter or the SIC Bylaws, as amended or restated, or any SIC Contract.
(d) Except
for amounts outstanding under the SIC Debt Documents, neither SIC nor any of its Subsidiaries has any Indebtedness for borrowed
money.
5.3
Authority;
No Violation
.
(a) SIC
has full corporate power and authority to execute and deliver this Agreement and, subject to receipt of the SIC Stockholder Approval,
to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized and approved by the SIC Board. The SIC Board has determined that the
Merger, this Agreement, the issuance of the Merger Shares and the other transactions contemplated by this Agreement are advisable
and in the best interests of SIC and its stockholders, has approved the SIC Matters and has directed that the SIC Matters be submitted
to the SIC’s stockholders for approval and adoption at a duly held meeting of such stockholders, together with the recommendation
of the SIC Board that the stockholders approve and adopt the SIC Matters (the
“SIC Board Recommendation”
)
and has adopted a resolution to the foregoing effect. Except for the approval and adoption of the SIC Matters by the affirmative
vote of the holders of a majority of the outstanding shares of SIC Common Stock (the
“SIC Stockholder Approval”
)
at the SIC Stockholder Meeting, no other corporate proceedings on the part of SIC are necessary to approve the Merger, this Agreement,
the issuance of the Merger Shares or the other transactions contemplated hereby. This Agreement has been duly and validly executed
and delivered by SIC and (assuming due authorization, execution and delivery by MCC) constitutes the valid and binding obligation
of SIC, enforceable against SIC in accordance with its terms (subject to the Bankruptcy and Equity Exception).
(b) Neither
the execution and delivery of this Agreement by SIC nor the consummation by SIC of the transactions contemplated hereby, nor compliance
by SIC with any of the terms or provisions of this Agreement, will (i) violate any provision of the SIC Charter or SIC Bylaws,
or (ii) assuming that the consents, approvals and filings referred to in Section 5.4 are duly obtained and/or made, (A) violate
any Applicable Law applicable to SIC or any of its Subsidiaries, or any of their respective properties or assets, or (B) except
as would not, individually or in the aggregate, have a Material Adverse Effect on SIC, violate, conflict with, result in a breach
of any provision of or the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate
the performance required by, or result in the creation of any Lien upon any of the respective properties or assets of SIC or any
of its Subsidiaries under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, franchise, agreement or other instrument or obligation to which SIC or any of its Subsidiaries is a party or by which any
of them or any of their respective properties or assets is bound (collectively, the
“SIC Contracts”
).
5.4
Consents
and Approvals
.
(a) Except
for (i) the filing with the SEC of the Form N-14 Registration Statement, and declaration of effectiveness thereof by the SEC, (ii)
the filing of the Certificate of Merger with the Delaware Secretary pursuant to the DGCL and the filing of the Articles of Merger
with SDAT, (iii) any notices, consents, authorizations, approvals, filings or exemptions in connection with compliance with the
rules and regulations of the NYSE or any SRO, (iv) any notices or filings under the HSR Act and the expiration of applicable waiting
periods, (v) such filings and approvals as are required to be made or obtained under the securities or “Blue Sky” laws
of various states in connection with the issuance of the shares of SIC Common Stock pursuant to this Agreement, (vi) compliance
with the Investment Company Act and the rules and regulations promulgated thereunder, (vii) the SEC Exemptive Relief and (viii)
as set forth on Section 5.4(a) of the SIC Disclosure Schedule (the foregoing (i) through (viii) referred to collectively as the
“SIC Required Approvals”
and together with the MCC Required Approvals, the
“Required Approvals”
),
no other consents, authorizations, approvals, or exemptions from, or notices to, or filings with, any Governmental Entity are necessary
in connection with the execution and delivery by SIC of this Agreement or the consummation by SIC of the Merger and the other transactions
contemplated by this Agreement.
(b) Except
for matters covered in the immediately preceding Section 5.4(a), no consents or approvals of any Person are necessary in connection
with the execution and delivery by SIC of this Agreement or the consummation by SIC of the Merger and the other transactions contemplated
by this Agreement or the conduct of the business of the Surviving Company immediately following the consummation of the Merger.
5.5
Reports;
Regulatory Matters
.
(a) SIC
and each of its Subsidiaries have timely filed all reports, registration statements and certifications, together with any amendments
required to be made with respect thereto, that they were required to file since December 31, 2014 with (i) the SEC and (ii) any
SROs and with each applicable Governmental Entity, and all other reports and statements required to be filed by them since December
31, 2014, including any report or statement required to be filed pursuant to the laws, rules or regulations of the United States,
any state, any foreign entity, or any SRO or Governmental Entity, and have paid all fees and assessments due and payable in connection
therewith. Except for normal examinations of SIC and its Subsidiaries conducted by a SRO or Governmental Entity in the ordinary
course of the business, no SRO or Governmental Entity has initiated since December 31, 2014 or has pending any proceeding, enforcement
action or, to the knowledge of SIC, investigation into the business, disclosures or operations of SIC or any of its Subsidiaries.
Since December 31, 2014, no SRO or Governmental Entity has resolved any proceeding, enforcement action or, to the knowledge of
SIC, investigation into the business, disclosures or operations of SIC or any of its Subsidiaries. There is no unresolved, or,
to SIC’s knowledge, threatened criticism, comment, exception or stop order by any SRO or Governmental Entity with respect
to any report or statement relating to any examinations or inspections of SIC or any of its Subsidiaries. Since December 31, 2014,
there have been no formal or informal inquiries by, or disagreements or disputes with, any SRO or Governmental Entity with respect
to the business, operations, policies or procedures of SIC or any of its Subsidiaries (other than normal examinations conducted
by a SRO or Governmental Entity in SIC’s ordinary course of business). SIC has made available to MCC all correspondence between
SIC or any of its Subsidiaries and the SEC and any other SRO or Governmental Entity since December 31, 2014.
(b) Neither
SIC nor any of its Subsidiaries is subject to any cease-and-desist or other order or enforcement action issued by, or is a party
to any written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or has been ordered to pay any civil money penalty by, or has been
since December 31, 2014 a recipient of any supervisory letter from, or since December 31, 2014 has adopted any policies, procedures
or board resolutions at the request or suggestion of, any SRO or Governmental Entity that currently restricts in any material respect
the conduct of its business, or that in any material manner relates to its credit, risk management or compliance policies, its
internal controls, its management or its business (each item in this sentence, a
“SIC Regulatory Agreement”
),
nor has SIC or any of its Subsidiaries been advised since December 31, 2014 by any SRO or Governmental Entity that it is considering
issuing, initiating, ordering, or requesting any such SIC Regulatory Agreement.
(c) SIC
has filed on the SEC’s EDGAR system each (i) registration statement, prospectus, report, schedule and definitive proxy statement
(including all exhibits, amendments and supplements thereto) filed with or furnished to the SEC by SIC or any of its Subsidiaries
pursuant to the Securities Act or the Exchange Act since December 31, 2014 (the
“SIC SEC Reports”
) and
(ii) communication mailed by SIC to its stockholders since December 31, 2014. No such SIC SEC Report or communication, at the time
filed, furnished or communicated (and, in the case of registration statements, proxy statements and prospectuses, on the dates
of effectiveness, the dates of the relevant meetings and dates of use, respectively), contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading, except that information contained in any SIC SEC Report
as of a later date (but before the date of this Agreement) shall be deemed to modify information as of an earlier date. As of their
respective dates, all SIC SEC Reports complied as to form in all material respects with the Securities Act, the Exchange Act and
the other rules and regulations of the SEC with respect thereto. No executive officer of SIC has failed in any respect to make
the certifications required of him or her under Section 302 or 906 of the Sarbanes-Oxley Act. As of the date of this Agreement,
there are no outstanding or unresolved comments from the SEC with respect to any SIC SEC Report and, as of the date of this Agreement,
to the knowledge of SIC, no SIC SEC Report is subject to any ongoing review by the SEC.
5.6
Financial
Statements
.
(a) The
consolidated financial statements of SIC and its Subsidiaries included in the SIC SEC Reports (including the related notes, where
applicable) (i) have been prepared from, and are in accordance with, the books and records of SIC and its Subsidiaries, (ii) fairly
present in all material respects the consolidated results of operations, cash flows, changes in stockholders’ equity and
consolidated financial position of SIC and its Subsidiaries for the respective fiscal periods or as of the respective dates therein
set forth (subject in the case of unaudited statements to recurring year-end audit adjustments immaterial in nature and amount),
(iii) complied as to form, as of their respective dates of filing with the SEC, in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with respect thereto and (iv) have been prepared in accordance
with GAAP consistently applied during the periods involved, except, in each case, as indicated in such statements or in the notes
thereto.
(b) Neither
SIC nor any of its Subsidiaries has any liability or obligation of any nature whatsoever required by GAAP to be reflected or reserved
for in a balance sheet (whether absolute, accrued, contingent or otherwise and whether due or to become due), except for those
liabilities that are reflected or reserved against on the consolidated balance sheet of SIC included in its Annual Report on Form
10-K for the annual period ended December 31, 2017 (including any notes thereto) and for liabilities and obligations incurred in
a commercially reasonable manner and in the ordinary course of business consistent with past practice since the date of such balance
sheet.
(c) SIC
has established and maintains a system of “internal control over financial reporting” (as defined in Rules 13a-15(f)
and 15d-15(f) of the Exchange Act) that is designed to provide reasonable assurance (i) regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with GAAP, (ii) that receipts and expenditures
of SIC and its Subsidiaries are being made only in accordance with authorizations of SIC management and the SIC Board, and (iii)
regarding prevention or timely detection of the unauthorized acquisition, use or disposition of SIC and each of SIC’s Subsidiaries’
assets that could have a material effect on SIC’s consolidated financial statements. SIC has disclosed, based on its most
recent evaluation of such internal control over financial reporting prior to the date of this Agreement, to SIC’s auditors
and the audit committee of the SIC Board and in Section 4.6(c) of the SIC Disclosure Schedule (x) any significant deficiency and
material weakness in the design or operation of SIC’s internal control over financial reporting that is reasonably likely
to adversely affect SIC’s ability to record, process, summarize or report financial information, and (y) any fraud, whether
or not material, that involves SIC management or other employees of SIC or any SIC Subsidiary who have a significant role in SIC’s
internal control over financial reporting. For purposes of this Agreement, the terms “significant deficiency” and “material
weakness” shall have the meaning assigned to them in the auditing standards of the Public Company Accounting Oversight Board,
as in effect on the date of this Agreement.
(d) SIC’s
“disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) are designed
to ensure that all information (both financial and non-financial) required to be disclosed by SIC in the reports that it files
or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules
and forms of the SEC, and that all such information is accumulated and communicated to SIC’s management as appropriate to
allow timely decisions regarding required disclosure and to make the certifications of the chief executive officer and chief financial
officer of SIC required under the Exchange Act with respect to such reports. SIC’s management has completed an assessment
of the effectiveness of SIC’s disclosure controls and procedures and, to the extent required by Applicable Law, presented
in any applicable SIC SEC Report that is a report on Form 10-K or Form 10-Q, or any amendment thereto, its conclusions about the
effectiveness of the disclosure controls and procedures as of the end of the period covered by such report or amendment based on
such evaluation.
(e) Since
December 31, 2014, SIC and its principal executive officer and principal financial officer of SIC have complied in all material
respects with the applicable provisions of the Sarbanes-Oxley Act and the Exchange Act. The principal executive officer and the
principal financial officer of SIC have made all certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act with
respect to each SIC SEC Report, and the statements contained in such certifications were true and correct on the date such certifications
were made. For purposes of the preceding sentence, “principal executive officer” and “principal financial officer”
shall have the meanings given to such terms in the Sarbanes-Oxley Act.
5.7
Broker’s
Fees
. Except for Broadhaven Capital Partners, none of SIC, any of its Subsidiaries or any of their respective officers or directors
has used any broker, finder or financial advisor or incurred any liability for any broker’s fees, commissions or finder’s
fees in connection with the Merger or any other transactions contemplated by this Agreement.
5.8
Absence
of Certain Changes or Events
. Since December 31, 2017, (a) the respective businesses of SIC and its Subsidiaries have been
conducted in the ordinary course of business consistent with past practice, (b) none of SIC or any of its Subsidiaries has taken
any action that, if taken after the date of this Agreement, would result in a breach of the covenants set forth in Section 6.3,
and (c) no event or events have occurred that have had or would reasonably be expected to have, either individually or in the aggregate,
a Material Adverse Effect on SIC.
5.9
Legal
Proceedings
.
(a) Except
as would not, individually or in the aggregate, have a Material Adverse Effect on SIC, neither SIC nor any of its Subsidiaries
is a party to any, and there are no pending or, to the best of SIC’s knowledge, threatened, legal, administrative, arbitral
or other proceedings, Claims, actions, suits or governmental or regulatory investigations of any nature against SIC or any of its
Subsidiaries or to which any of their assets are subject.
(b) Except
as would not, individually or in the aggregate, have a Material Adverse Effect on SIC, there is no judgment, settlement agreement,
order, injunction, decree or regulatory restriction (other than those of general application that apply to similarly situated companies
or their Subsidiaries) imposed upon SIC, any of its Subsidiaries or the assets of SIC or any of its Subsidiaries (or that, upon
consummation of the Merger, would apply to SIC or any of its Subsidiaries).
5.10
Taxes
and Tax Returns
.
(a) Each
of SIC and its Subsidiaries (i) has duly and timely filed (including all applicable extensions) all federal, state, local and foreign
income and other material Tax Returns required to be filed by it and all such Tax Returns are accurate and complete, (ii) has paid
all Taxes shown thereon as due and (iii) has duly paid or made provision for the payment of all Taxes that have been incurred or
are due or claimed to be due from it by the IRS or any other federal, state, foreign or local taxing authorities other than Taxes
that are not yet delinquent or are being contested in good faith, have not been finally determined and have been adequately reserved
against under GAAP. There are no material disputes pending, or written claims asserted, for Taxes or assessments upon SIC or any
Subsidiary for which SIC does not have reserves that are adequate under GAAP. Neither SIC nor any Subsidiary is a party to or is
bound by any Tax sharing, allocation or indemnification agreement or arrangement (other than such an agreement or arrangement exclusively
between or among SIC and its Subsidiaries as described in the SIC Disclosure Schedule).
(b) Effective
for the year ending December 31, 2012, SIC made a valid election under Subchapter M of Chapter 1 of the Code to be taxed as a regulated
investment company. SIC has qualified as a regulated investment company at all times subsequent to such election, and expects to
qualify as such for its current taxable year. With respect to each relevant taxable year, SIC has satisfied the distribution requirements
imposed on a regulated investment company under Section 852 of the Code.
(c) SIC
and its Subsidiaries have complied in all material respects with all Applicable Laws relating to the payment and withholding of
Taxes and have, within the time and in the manner prescribed by Applicable Law, withheld from and paid over all amounts required
to be so withheld and paid over under Applicable Laws.
(d) There
are no Liens for Taxes upon the assets of SIC or any of the Subsidiaries, except for Liens for Taxes not yet due and payable and
Liens for Taxes that are both being contested in good faith and adequately reserved for in accordance with GAAP.
(e) Neither
SIC nor any Subsidiary has granted any waiver, extension, or comparable consent regarding the application of the statute of limitations
with respect to any Taxes or Tax Return that is outstanding, nor any request for such waiver or consent has been made.
5.11
Compliance
with Applicable Law
.
(a) SIC
and each of its Subsidiaries hold all Permits necessary for the lawful conduct of their respective businesses, and have complied
in all respects with and are not in default in any respect under any, any Permit or Applicable Law, except for such failures, non-compliance
or defaults that would not, individually or in the aggregate, have a Material Adverse Effect on SIC.
(b) Neither
SIC nor, to the knowledge of SIC, any “affiliated person” of SIC has been convicted of any felony or misdemeanor, described
in Section 9(a)(1) of the Investment Company Act, nor, to the knowledge of SIC, has any affiliated person of SIC been the subject,
or presently is the subject, of any proceeding or investigation with respect to any disqualification that would be a basis for
denial, suspension or revocation of registration as an investment adviser under Section 203(e) of the Investment Advisers Act or
of a broker-dealer under Section 15 of the Exchange Act, or for disqualification as an investment adviser, employee, officer or
director of an investment company under Section 9 of the Investment Company Act.
5.12
Certain
Contracts
.
(a) Except
as set forth in Section 5.12(a) of the SIC Disclosure Schedule or as expressly contemplated by this Agreement, neither SIC nor
any of its Subsidiaries is a party to or bound by any SIC Contract that is a “material contract” (as such term is defined
in Item 601(b)(10) of Regulation S-K of the SEC) to be performed after the date of this Agreement that has not been filed or incorporated
by reference in the SIC SEC Reports filed prior to the date hereof (collectively, the
“SIC Material Contracts”
).
(b) Except
as set forth in Section 5.12(b) of the SIC Disclosure Schedule, (i) each SIC Material Contract is valid and binding on SIC or its
applicable Subsidiary, enforceable against it in accordance with its terms (subject to the Bankruptcy and Equity Exception), and
is in full force and effect, (ii) SIC and each of its Subsidiaries and, to SIC’s knowledge, each other party thereto has
duly performed all obligations required to be performed by it to date under each SIC Material Contract and (iii) no event or condition
exists that constitutes or, after notice or lapse of time or both, will constitute, a breach, violation or default on the part
of SIC or any of its Subsidiaries or, to SIC’s knowledge, any other party thereto under any such SIC Material Contract. Except
as set forth in Section 5.12 of the SIC Disclosure Schedule, there are no disputes pending or, to SIC’s knowledge, threatened
with respect to any SIC Material Contract.
5.13
Investment
Securities
. Each of SIC and its Subsidiaries has good title to all securities (including any evidence of Indebtedness) owned
by it, free and clear of any Liens, except (a) for those Liens or restrictions arising under the Organizational Documents of the
issuers of such securities, (b) to the extent such securities are pledged in connection with any loan documents or credit facilities,
(c) for restrictions on transferability arising under federal or state securities laws or (d) for Liens or restrictions which would
not individually or in the aggregate be material with respect to the value, ownership or transferability of such securities.
5.14
Property
.
SIC or one of its Subsidiaries (a) has good and marketable title to all the properties and assets (excluding securities, which
are addressed in Section 5.13 above) reflected in the latest audited balance sheet included in such SIC SEC Reports as being owned
by SIC or one of its Subsidiaries or acquired after the date thereof (except properties sold or otherwise disposed of since the
date thereof in the ordinary course of business), free and clear of all Liens of any nature whatsoever, except Permitted Liens,
and (b) is the lessee of all leasehold estates reflected in the latest audited financial statements included in such SIC SEC Reports
or acquired after the date thereof (except for leases that have expired by their terms since the date thereof), free and clear
of all Liens of any nature whatsoever, except for Permitted Liens, and is in possession of the properties purported to be leased
thereunder, and each such lease is valid without default thereunder by the lessee or, to SIC’s knowledge, the lessor.
5.15
Intellectual
Property
. SIC owns or possesses sufficient Intellectual Property Rights reasonably necessary to conduct its business as now
conducted and as described in the SIC SEC Reports, except where the failure to own or possess such rights would not reasonably
be expected to result in a Material Adverse Effect on SIC; and the expected expiration of any of such Intellectual Property Rights
would not result in a Material Adverse Effect on SIC.
5.16
State
Takeover Laws
. To the knowledge of SIC, within the past five years, none of MCC, its Affiliates or its “associates”
(as defined in Section 3-601 of the MGCL) has been an “interested stockholder” of SIC. The SIC Board has taken all
action necessary to render inapplicable to the Merger the restrictions on business combinations contained in Subtitle 6 of Title
3 of the MGCL. The restrictions on control share acquisitions contained in Subtitle 7 of Title 3 of the MGCL are not applicable
to the Merger. To the knowledge of SIC, no other Takeover Statutes are applicable to this Agreement or the Merger.
5.17
Opinion
.
The SIC Special Committee has received the opinion of Broadhaven Capital Partners to the effect that, subject to certain assumptions,
limitations and qualifications set forth therein, the consideration to be issued by SIC as set forth in this Agreement and the
MDLY Merger Agreement, considered as a whole and not in separate parts, is fair, from a financial point of view, to SIC from a
financial point of view; it being agreed that MCC is not entitled to rely upon such opinion.
5.18
SIC
Information
. The information relating to SIC and its Subsidiaries that is provided by SIC or its representatives for inclusion
in the Form N-14 Registration Statement and/or Joint Proxy Statement/Prospectus, or in any application, notification or other document
filed with any other SRO or Governmental Entity (including the SEC) in connection with the transactions contemplated by this Agreement,
will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein,
in light of the circumstances in which they are made, not misleading. The Form N-14 Registration Statement will comply in all material
respects with the provisions of the Exchange Act and the rules and regulations thereunder.
5.19
Insurance
.
SIC and its Subsidiaries maintain, or are covered by, policies of insurance in such amounts and against such risks as are customary
in the industries in which SIC and its Subsidiaries operate. Except as would not be reasonably expected to have a Material Adverse
Effect on SIC, all such insurance policies are in full force and effect and will not in any way be affected by, or terminate or
lapse by reason of, the execution (but not the performance) of this Agreement.
5.20
Environmental
Matters
. Except as would not, individually or in the aggregate, have a Material Adverse Effect on SIC and its Subsidiaries,
taken as a whole, there are no legal, administrative, arbitral or other proceedings, Claims, actions, causes of action or notices
with respect to any Environmental Laws, pending or threatened against SIC or any of its Subsidiaries. Neither SIC nor any of its
Subsidiaries is subject to any agreement, order, judgment, decree, letter or memorandum by or with any Governmental Entity or Third
Party imposing any liability or obligation with respect to any of the foregoing.
5.21
Reorganization;
Approvals
. As of the date of this Agreement, SIC (a) is not aware of any fact or circumstance that could reasonably be expected
to prevent the Merger from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code, and (b)
knows of no reason why all regulatory approvals from any Governmental Entity required for the consummation of the transactions
contemplated by this Agreement should not be obtained on a timely basis.
5.22
No
Other Representations or Warranties
. Except for the representations and warranties contained in this Article V and any closing
certificate delivered to MCC, neither SIC nor any other Person on behalf of SIC makes any express or implied representation or
warranty with respect to SIC, any of its Subsidiaries, any investment assets or portfolio company, or any other information provided
to MCC in connection with the Merger and the other transactions contemplated by this Agreement, including the accuracy, completeness
or timeliness thereof. Neither SIC nor any other Person will have or be subject to any claim, liability or indemnification obligation
to MCC or any other Person resulting from the distribution or failure to distribute to MCC, or MCC’s use of, any such information,
including any information, documents, projections, estimates, forecasts or other material made available to MCC in the electronic
data room maintained by SIC for purposes of the transactions contemplated by this Agreement or management presentations in expectation
of the transactions contemplated by this Agreement, unless and to the extent any such information is expressly included in a representation
or warranty contained in this Article V.
ARTICLE
VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
6.1
Conduct
of Businesses Prior to the Effective Time
. Except as expressly contemplated by or permitted by this Agreement or the MDLY Merger
Agreement or with the prior written consent of the other party, during the period from the date of this Agreement to the Effective
Time, (a) each of MCC and SIC shall, and shall cause each of its respective Subsidiaries to, (i) conduct its business in the ordinary
course in all material respects, as such business is being conducted as of the date hereof, and (ii) use commercially reasonable
efforts to maintain and preserve intact its business organization and advantageous business relationships and retain the services
of its key officers and key employees, and (b) each of MCC and SIC shall, and shall cause each of its respective Subsidiaries to,
take no action that is intended to or would reasonably be expected to adversely affect or materially delay the ability of MCC or
SIC either to obtain any necessary approvals of any SRO or Governmental Entity required for the transactions contemplated hereby
or to perform its covenants and agreements under this Agreement or to consummate the transactions contemplated hereby or thereby.
6.2
MCC
Forbearances
. During the period from the date of this Agreement to the Effective Time, except as expressly contemplated or
permitted by this Agreement or as provided in Section 6.2 of MCC Disclosure Schedule, MCC shall not, and shall not permit any of
its Subsidiaries to, without the prior written consent of SIC (which consent shall not be unreasonably withheld, conditioned or
delayed):
(a) other
than in the ordinary course of business consistent with past practice, incur any Indebtedness for borrowed money, assume, guarantee,
endorse or otherwise as an accommodation become responsible for the obligations of any other individual, corporation or other entity,
or, make any loan or advance or capital contribution to, or investment in, any Person;
(b) (i) adjust,
split, combine or reclassify any of its capital stock;
(ii) make,
declare or pay any dividend, other than (A) the Final MCC Dividend, (B) its regular quarterly dividend consistent with past practice
of no more than $0.10 per share (or in such lower amount as may be determined by MCC in the MCC Board’s discretion), and
(C) dividends paid by any of the Subsidiaries of MCC to MCC or to any of its wholly-owned Subsidiaries;
(iii) make
any other distribution on, or directly or indirectly redeem, purchase or otherwise acquire, any shares of its capital stock or
other ownership interests or any securities or obligations other than in the ordinary course of business consistent with past practice
or as required under Subchapter M of Chapter 1 of the Code; or
(iv) grant
any stock options or restricted shares or restricted units or restricted stock units, or grant any Person any right to acquire
any shares of its capital stock or other ownership interests or other securities or issue or sell any additional shares of capital
stock or other ownership interests or securities or rights convertible (whether currently convertible or convertible only after
the passage of time or the occurrence of certain events) into or exchangeable for any shares of its capital stock or other ownership
interest;
(c) sell,
transfer, pledge, lease, license, mortgage, encumber or otherwise dispose of any material amount of its properties or assets (including
pursuant to securitizations) to any Person other than a wholly owned Subsidiary or cancel, release or assign any material amount
of Indebtedness owed to or any claims held by MCC or any of its Subsidiaries, in each case other than pursuant to contracts in
force as of the date of this Agreement and set forth in Section 6.2(c) of MCC Disclosure Schedule;
(d) take
any action, or knowingly fail to take any action, which action or failure to act is reasonably likely to prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code or take any action, or knowingly fail to take any
action, inconsistent with the treatment of the Merger as a reorganization for federal income Tax purposes;
(e) amend
the MCC Certificate or MCC Bylaws or the Organizational Documents of any Subsidiary of MCC, or take any action to exempt any Person
(other than SIC or its Subsidiaries) or any action taken by any Person from any Takeover Statute or similarly restrictive provisions
of its Organizational Documents;
(f) enter
into, renew, modify, amend or terminate, or waive, release, compromise or assign any rights or claims under, any MCC Material Contract
(or any contract that, if existing as of the date hereof, would be a MCC Material Contract), other than (A) any termination or
renewal in accordance with the terms of any existing MCC Material Contract that occurs automatically without any action (other
than notice of renewal) by MCC or any of its Subsidiaries, (B) the entry into any modification or amendment of, or waiver or consent
under, any MCC Material Contract as required or necessitated to obtain any MCC Required Approval, (C) the termination of a MCC
Material Contract specifically contemplated by this Agreement or (D) amendments, waivers or consents to or under the MCC Debt Documents
in the ordinary course of business consistent with past practice;
(g) form
any Person that would comprise a Subsidiary or dissolve or liquidate any Subsidiary, in each case other than a wholly-owned Subsidiary;
(h) (i)
materially amend any income Tax Return or any other material Tax Return, (ii) settle or compromise any material U.S. federal, state,
local or foreign income Tax liability, audit, Claim or assessment or (iii) enter into any material closing agreement related to
Taxes, except in each case unless required by Tax law or necessary or appropriate to preserve the status of any Subsidiary of MCC
as a disregarded entity or partnership for U.S. federal income Tax purposes;
(i) acquire
the assets, business, or properties of any non-Affiliated entity, or make any loans, advances or capital contributions to, or investments
in, any Person (other than any wholly owned Subsidiary of MCC);
(j) allow
the lapse or termination of policies of insurance covering material assets and businesses (other than the replacement of existing
policies with substantially comparable policies);
(k) take
any action or willfully fail to take any action that is intended or may reasonably be expected to result in any of the conditions
to the Merger set forth in Article VIII not being satisfied;
(l) implement
or adopt any change in its Tax accounting or financial accounting principles, practices or methods, other than as may be required
by Applicable Law, GAAP or regulatory guidelines;
(m) take
any action that would be reasonably expected to prevent, materially impede or delay beyond the date set forth in Section 9.1(c)
the consummation of the transactions contemplated by this Agreement; or
(n) agree
to take, or publicly announce an intention to take, any of the actions prohibited by this Section 6.2.
6.3
SIC
Forbearances
. During the period from the date of this Agreement to the Effective Time, except as expressly contemplated or
permitted by this Agreement or as provided in Section 6.3 of the SIC Disclosure Schedule, SIC shall not, and shall not permit any
of its Subsidiaries to, without the prior written consent of MCC (which consent shall not be unreasonably withheld, conditioned
or delayed):
(a) (i) adjust,
split, combine or reclassify any of its capital stock;
(ii) make,
declare or pay any dividend, other than (A) its regular quarterly dividend consistent with past practice, (B) dividends paid by
any of the Subsidiaries of SIC to SIC or to any of its wholly-owned Subsidiaries and (C) any dividend necessary to comply with
Subchapter M of Chapter 1 of the Code;
(iii) make
any other distribution on, or directly or indirectly redeem, purchase or otherwise acquire, any shares of its capital stock or
other ownership interests or any securities or obligations other than in the ordinary course of business consistent with past practice
or as required by the SIC Charter or SIC Bylaws or under Subchapter M of Chapter 1 of the Code;
(iv) grant
any stock options or restricted shares or restricted stock units, or grant any Person any right to acquire any shares of its capital
stock, or other ownership interests or other securities or issue or sell any additional shares of capital stock or other ownership
interests or securities or rights convertible (whether currently convertible or convertible only after the passage of time or the
occurrence of certain events) into or exchangeable for any shares of its capital stock or other ownership interest, other than
in the ordinary course of business consistent with past practice or as contemplated by the SIC SEC Reports; or
(v) issue
any additional shares of capital stock or other securities other than in the ordinary course of business consistent with past practice
or as contemplated by the SIC SEC Reports;
(b) sell,
transfer, pledge, lease, license, mortgage, encumber or otherwise dispose of any material amount of its properties or assets (including
pursuant to securitizations) to any Person other than a wholly owned Subsidiary or cancel, release or assign any material amount
of Indebtedness owed to or any claims held by any such Person, in each case other than pursuant to contracts in force at the date
of this Agreement, except in furtherance of its investment objective as set forth in the SIC SEC Reports;
(c) take
any action, or knowingly fail to take any action, which action or failure to act is reasonably likely to prevent the Merger from
qualifying as a “reorganization” within the meaning of Section 368(a) of the Code;
(d) enter
into any agreement with respect to, or amend any agreements relating to, its capital stock or Indebtedness;
(e) except
as permitted by Section 2.5, amend, repeal or otherwise modify any provision of the SIC Charter, the SIC Bylaws, the Merger Sub
Certificate or the Merger Sub Bylaws in a manner that would adversely affect MCC, the stockholders of MCC or the transactions contemplated
by this Agreement;
(f) enter
into, renew, modify, amend or terminate, or waive, release, compromise or assign any rights or claims under, any SIC Material Contract
(or any contract that, if existing as of the date hereof, would be a SIC Material Contract), other than (A) any termination or
renewal in accordance with the terms of any existing SIC Material Contract that occurs automatically without any action (other
than notice of renewal) by SIC or any of its Subsidiaries, (B) the entry into any modification or amendment of, or waiver or consent
under, any SIC Material Contract as required or necessitated to obtain any SIC Required Approval, or (C) the termination of a SIC
Material Contract specifically contemplated by this Agreement;
(g) form
any Person that would comprise a Subsidiary or dissolve or liquidate any Subsidiary, in each case, other than a wholly-owned Subsidiary;
(h) (i)
materially amend any income Tax Return or any other material Tax Return, (ii) settle or compromise any material U.S. federal, state,
local or foreign income Tax liability, audit, Claim or assessment or (iii) enter into any material closing agreement related to
Taxes, except in each case unless required by Tax law or necessary or appropriate to preserve the status of any Subsidiary of SIC
as a disregarded entity or partnership for U.S. federal income Tax purposes;
(i) take
any action, or permit the taking of any action, that will result in SIC not having in cash or cash equivalents amounts sufficient
to make payment of the cash portion of the Merger Consideration due at Closing;
(j) enter
into any contract involving or relating to, or otherwise approve, any liquidation, dissolution, merger, consolidation, restructuring,
recapitalization, reorganization or similar transaction;
(k) take
any action or willfully fail to take any action that is intended or may reasonably be expected to result in any of the conditions
to the Merger set forth in Article VIII not being satisfied;
(l) take
any action that would be reasonably expected to prevent, materially impede or delay beyond the date set forth in Section 9.1(c)
the consummation of the transactions contemplated by this Agreement; or
(m) agree
to take, or publicly announce an intention to take, any of the actions prohibited by this Section 6.3.
ARTICLE
VII
ADDITIONAL AGREEMENTS
7.1
Regulatory
and Other Matters
.
(a) The
parties shall, and shall cause their respective Subsidiaries to, cooperate with each other and use their respective commercially
reasonable efforts to promptly prepare and file all necessary documentation, to effect all applications, notices, petitions and
filings with any Third Party or Governmental Entity and to take any further actions reasonably requested by the other party to
obtain as promptly as practicable the Required Approvals and other consents required to be obtained in connection with the Merger
and the other transactions contemplated by this Agreement. MCC and SIC shall have the right to review in advance, and, to the extent
practicable, each will consult with the other on, in each case subject to Applicable Laws relating to the confidentiality of information,
all information relating to MCC or SIC, as the case may be, and any of their respective Subsidiaries, that appear in any filing
made with, or written materials submitted to, any Third Party or any Governmental Entity in connection with obtaining the Required
Approvals. In exercising the foregoing right, each of the parties shall act reasonably and as promptly as reasonably practicable.
The parties shall consult with each other with respect to the obtaining of the Required Approvals and each party will keep the
other apprised of the status of matters relating to completion of the transactions contemplated by this Agreement.
(b) Without
in any way limiting the foregoing Section 7.1(a):
(i) SIC
and MCC shall as promptly as reasonably practicable prepare and file with the SEC the Form N-14 Registration Statement. Each of
SIC and MCC shall use its reasonable best efforts to have the Form N-14 Registration Statement declared effective under the Securities
Act as promptly as practicable after such filing, and MCC and SIC shall promptly mail or deliver the Joint Proxy Statement/Prospectus
to their respective stockholders upon such effectiveness. SIC shall also use its reasonable best efforts to obtain all necessary
state securities Law or “Blue Sky” Permits required to issue the Merger Shares, and MCC shall use reasonable best efforts
to furnish all information concerning MCC and the holders of shares of MCC Common Stock as may be reasonably requested in connection
with any such action. Each of SIC and MCC shall, upon request, furnish to the other all information concerning itself, its Subsidiaries,
directors, officers and stockholders and such other matters as may be reasonably necessary or advisable in connection with the
Form N-14 Registration Statement or any other statement, filing, notice or application made by or on behalf of SIC, MCC or any
of their respective Subsidiaries to any Governmental Entity in connection with the Merger and the other transactions contemplated
by this Agreement and provide the other party with a reasonable opportunity to review and comment on any such document. The information
supplied or to be supplied by either SIC or MCC, as the case may be, for inclusion in the Form N-14 Registration Statement shall
not at the time the Form N-14 Registration Statement is filed with the SEC or declared effective by the SEC contain any untrue
statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were made, not misleading. Without limiting the generality
of the foregoing, prior to the Effective Time each party shall notify the other party as promptly as practicable (i) upon becoming
aware of any event or circumstance that should be described in an amendment to the Form N-14 Registration Statement or in a supplement
to the Joint Proxy Statement/Prospectus, and MCC and SIC shall cooperate in the prompt filing with the SEC of any necessary amendment
to the Form N-14 Registration Statement or supplement to the Joint Proxy Statement/Prospectus and, to the extent required by Law,
in disseminating the information contained in such amendment or supplement to stockholders of MCC and SIC and (ii) promptly after
the receipt by it of any written or oral comments of the SEC with respect to, or of any written or oral request by the SEC for
amendments or supplements to, the Form N-14 Registration Statement or the Joint Proxy Statement/Prospectus, and shall promptly
supply the other party with copies of all correspondence between it or any of its Representatives and the SEC with respect to any
of the foregoing filings.
(ii) Each
of SIC and MCC shall, if and to the extent required, file with the FTC and the DOJ a Notification and Report Form relating to this
Agreement and the transactions contemplated hereby if required by the HSR Act as promptly as reasonably practicable following the
execution and delivery of this Agreement. Each of SIC and MCC shall (A) cooperate and coordinate with the other in the making of
such filings (if required), (B) supply the other with any information that may be required in order to make such filings, (C) supply
any additional information that reasonably may be required or requested by the FTC or the DOJ, and (D) take all other actions reasonably
necessary to cause the expiration or termination of any applicable waiting period under the HSR Act applicable to the Merger as
soon as practicable. Each of SIC and MCC shall promptly inform the other of any communication from any Governmental Entity regarding
any of the transactions contemplated by this Agreement in connection with such filings. If any party hereto or Affiliate thereof
shall receive a request for additional information or documentary material from any Governmental Entity with respect to the transactions
contemplated by this Agreement pursuant to the HSR Act, then such party shall make (or cause to be made), as soon as reasonably
practicable and after consultation with the other party, an appropriate response in compliance with such request.
(iii) Promptly
following the date hereof, the Parties will submit the application for the SEC Exemptive Relief to the Staff of the Division of
Investment Management of the SEC and thereafter each Party shall provide all such supplemental information reasonably requested
by the Staff in connection therewith and shall use its commercially reasonable efforts to obtain the SEC Exemptive Relief. In the
event the SEC conditions the granting of SEC Exemptive Relief upon a change to the transaction structure or other matters contemplated
by this Agreement and the MDLY Merger Agreement, the Parties shall work together in good faith to make such changes and, if and
to the extent necessary, to amend this Agreement to reflect such modified terms; provided, however, in no event shall any Party
be obligated to agree to any term that adversely changes the economic terms of this Agreement in any material respect or is inconsistent
with the assumptions or other provisions set forth in the opinions of such party’s financial advisor.
(c) Subject
to Applicable Law, each of SIC and MCC shall promptly advise the other upon receiving any communication from any Governmental Entity
the consent or approval of which is required for consummation of the transactions contemplated by this Agreement that causes such
party to believe that there is a reasonable likelihood that any Required Approval will not be obtained or that the receipt of any
such approval may be materially delayed.
7.2
Access
to Information
.
(a) Upon
reasonable notice and subject to Applicable Laws relating to the confidentiality of information, each of MCC and SIC shall, and
shall cause each of its Subsidiaries to, afford to the officers, employees, accountants, counsel, advisors, agents and other representatives
of the other party, reasonable access, during normal business hours during the period prior to the Effective Time, to all its properties,
books, contracts, commitments and records, and, during such period, such party shall, and shall cause its Subsidiaries to, make
available to the other party (i) a copy of each report, schedule, registration statement and other document filed or received by
it during such period pursuant to the requirements of federal securities laws (other than reports or documents that such party
is not permitted to disclose under Applicable Law) and (ii) all other information concerning its business, properties and personnel
as the other party may reasonably request. Neither MCC nor SIC, nor any of their respective Subsidiaries, shall be required to
provide access to or to disclose information where such access or disclosure would jeopardize the attorney-client privilege of
such party or its Subsidiaries or contravene any Applicable Law, fiduciary duty or binding confidentiality agreement with a Third
Party entered into prior to the date of this Agreement. The parties shall make appropriate substitute disclosure arrangements under
circumstances in which the restrictions of the preceding sentence apply.
(b) MCC
shall file all periodic reports required to be filed by it between the date hereof and the Effective Time. Each such filing shall
be prepared in accordance with the applicable forms, rules and regulations of the SEC and shall satisfy the standard set forth
in Section 4.5(c) for MCC SEC Reports. SIC shall file all periodic reports required to be filed by it between the date hereof and
the Effective Time. Each such filing shall be prepared in accordance with the applicable forms, rules and regulations of the SEC
and shall satisfy the standard set forth in Section 5.5(c) for SIC SEC Reports.
(c) All
information and materials provided pursuant to this Agreement shall be subject to the provisions of the Confidentiality Agreement
entered into between the parties as of July 16, 2018 (the
“Confidentiality Agreement”
).
(d) Each
party acknowledges that it has had the opportunity to conduct due diligence and investigation with respect to the other party,
and in no event shall either party have any liability to the other party with respect to a breach of representation or warranty
under this Agreement to the extent that the non-breaching party knew of such breach as of the date hereof.
7.3
MCC
Stockholder Approval
.
(a) Subject
to the earlier termination of this Agreement in accordance with Article IX, MCC shall, as soon as practicable following the effectiveness
of the Form N-14 Registration Statement, duly call, take any action required by the DGCL, the MCC Certificate or MCC Bylaws and
any applicable requirements of the SEC or the NYSE necessary to give notice of, convene and hold, as promptly as practicable, MCC
Stockholder Meeting for the purpose of obtaining MCC Stockholder Approval. The record date for MCC Stockholder Meeting shall be
determined in prior consultation with and subject to the prior written approval of SIC (which prior written approval shall not
be unreasonably delayed, conditioned or withheld). In connection therewith, MCC Board shall be permitted to adjourn, delay or postpone
MCC Stockholder Meeting in accordance with Applicable Law (but not beyond the Outside Date) (i) to the extent necessary to allow
reasonable additional time for the filing and mailing of any supplemental or amended disclosure which MCC Board has determined
in good faith after consultation with outside counsel is reasonably likely to be necessary or appropriate under Applicable Law
and for such supplemental or amended disclosure to be disseminated and reviewed by MCC’s stockholders prior to MCC Stockholder
Meeting, (ii) if there are insufficient shares of MCC Common Stock represented (either in person or by proxy) to constitute a quorum
necessary to conduct the business of MCC Stockholder Meeting, or (iii) to allow reasonable additional time to solicit additional
proxies reasonably necessary in order to obtain MCC Stockholder Approval. Unless MCC Board has made a MCC Adverse Recommendation
Change, MCC shall, through MCC Board, make MCC Board Recommendation, and shall include such MCC Board Recommendation in the Joint
Proxy Statement/Prospectus, and use its commercially reasonable efforts to (x) solicit from MCC stockholders proxies in favor of
MCC Stockholder Approval, and (y) take all other action necessary or advisable to secure MCC Stockholder Approval.
(b) Except
as expressly permitted in Section 7.10(e), neither MCC Board nor any committee thereof shall (i) withhold, withdraw or modify or
qualify, or propose publicly to withhold, withdraw or modify or qualify the MCC Board Recommendation, (ii) fail to publicly announce,
within fifteen (15) Business Days after a tender offer or exchange relating to the securities of MCC shall have been commenced,
a statement disclosing that MCC Board recommends rejection of such tender offer or exchange offer, or (iii) approve, determine
to be advisable, or recommend, or propose publicly to approve, determine to be advisable, or recommend, any Competing Proposal
(any of the foregoing (i) through (iii) being referred to as an
“MCC Adverse Recommendation Change”
).
7.4
SIC
Stockholder Approval
.
(a) Subject
to the earlier termination of this Agreement in accordance with Article IX, SIC shall, as soon as practicable following the effectiveness
of the Form N-14 Registration Statement, duly call, take any action required by the MGCL, the SIC Charter or SIC Bylaws and any
applicable requirements of the SEC necessary to give notice of, convene and hold, as promptly as practicable, the SIC Stockholder
Meeting for the purpose of obtaining the SIC Stockholder Approval. The record date for the SIC Stockholders Meeting shall be determined
in prior consultation with and subject to the prior written approval of MCC (which prior written approval shall not be unreasonably
delayed, conditioned or withheld). In connection therewith, the SIC Board shall be permitted to delay or postpone, and the duly
appointed Chairman of the SIC Stockholder Meeting permitted to adjourn, the SIC Stockholder Meeting in accordance with Applicable
Law (but not beyond the Outside Date) (i) to the extent necessary to allow reasonable additional time for the filing and mailing
of any supplemental or amended disclosure which the SIC Board has determined in good faith after consultation with outside counsel
is reasonably likely to be necessary or appropriate under Applicable Law and for such supplemental or amended disclosure to be
disseminated and reviewed by the SIC’s stockholders prior to the SIC Stockholder Meeting, (ii) if there are insufficient
shares of SIC Common Stock represented (either in person or by proxy) to constitute a quorum necessary to conduct the business
of the SIC Stockholder Meeting, or (iii) to allow reasonable additional time to solicit additional proxies reasonably necessary
in order to obtain the SIC Stockholder Approval. Unless the SIC Board has made an SIC Adverse Recommendation Change, SIC shall,
through the SIC Board, make the SIC Board Recommendation, and shall include such SIC Board Recommendation in the Joint Proxy Statement/Prospectus,
and use its commercially reasonable efforts to (x) solicit from SIC stockholders proxies in favor of the SIC Stockholder Approval,
and (y) take all other action necessary or advisable to secure the SIC Stockholder Approval.
(b) Except
as expressly permitted in Section 7.10(e), neither the SIC Board nor any committee thereof shall (i) withhold, withdraw or modify
or qualify, or propose publicly to withhold, withdraw or modify or qualify the SIC Board Recommendation, (ii) fail to publicly
announce, within fifteen (15) Business Days after a tender offer or exchange relating to the securities of SIC shall have been
commenced, a statement disclosing that SIC Board recommends rejection of such tender offer or exchange offer or (iii) approve,
determine to be advisable, or recommend, or propose publicly to approve, determine to be advisable, or recommend, any Competing
Proposal (any of the foregoing (i) through (iii) being referred to as a
“SIC Adverse Recommendation Change”
).
7.5
Exchange
Listing
. SIC shall (i) take all steps as may be reasonably necessary to cause the outstanding SIC Common Stock, the Merger
Shares and the shares of SIC Common Stock to be issued in the MDLY Merger to be listed for trading on the NYSE, and (ii) use its
commercially reasonable efforts to cause the outstanding SIC Common Stock, the Merger Shares and the shares of SIC Common Stock
to be issued in the MDLY Merger to be listed for trading on the Tel Aviv Stock Exchange.
7.6
Indemnification;
Directors’ and Officers’ Insurance
.
(a) In
the event of any threatened or actual Claim against any individual who is now, or has been at any time prior to the date of this
Agreement, or who becomes prior to the Effective Time, a director or officer of MCC or any of its Subsidiaries or who is or was
serving at the request of MCC or any of its Subsidiaries as a director or officer of another person (the
“Indemnified
Parties”
), based in whole or in part on, or arising in whole or in part out of, or pertaining to (i) the fact that
he or she is or was a director or officer of MCC or any of its Subsidiaries prior to the Effective Time or (ii) this Agreement
or any of the transactions contemplated by this Agreement, whether asserted or arising before or after the Effective Time, the
parties shall cooperate and use their commercially reasonable efforts to defend against and respond thereto. All rights to indemnification
and exculpation from liabilities for acts or omissions occurring at or prior to the Effective Time existing on the date of this
Agreement in favor of any Indemnified Party as provided in their respective certificates or articles of incorporation or by-laws
(or comparable Organizational Documents), and any existing indemnification agreements set forth in Section 7.6 of MCC Disclosure
Schedule (as may be modified or amended as provided below), shall, notwithstanding that the separate corporate existence of MCC
shall cease as of the Effective Time, survive the Merger as a contractual obligation of the Surviving Company and shall continue
in full force and effect in accordance with their terms for a period of six (6) years from the Closing Date, and shall not be amended,
repealed or otherwise modified in any manner that would adversely affect the rights thereunder of such individuals for acts or
omissions occurring at or prior to the Effective Time or taken at the request of SIC pursuant to Section 7.7 hereof (provided,
that such existing indemnification agreements may be amended prior to the Effective Time as expressly permitted by Section 6.2
of the MCC Disclosure Schedule, if such amendments are in form reasonably acceptable to SIC), it being understood that nothing
in this sentence shall require any amendment to the articles or certificate of incorporation or bylaws as the Surviving Company.
(b) For
a period of six (6) years from the Closing Date, the Surviving Company, shall to the fullest extent permitted by Applicable Law,
indemnify, defend and hold harmless, and provide advancement of expenses to, each Indemnified Party against all losses, Claims,
damages, costs, expenses, liabilities or judgments or amounts that are paid in settlement of or in connection with any Claim based
in whole or in part on or arising in whole or in part out of the fact that such person is or was a director or officer of MCC or
any of its Subsidiaries, and pertaining to any matter existing or occurring, or any acts or omissions occurring, at or prior to
the Effective Time, whether asserted or claimed prior to, or at or after, the Effective Time (including matters, acts or omissions
occurring in connection with the approval of this Agreement and the consummation of the transactions contemplated hereby) or taken
at the request of SIC pursuant to Section 7.7 hereof; provided, that the Surviving Company (i) shall not be liable for any amounts
paid in the settlement of any Claim without its prior written consent, which shall not be unreasonably withheld, and (ii) shall
be obligated to pay the fees and expenses of only one counsel for all Indemnified Parties with respect to any single Claim (each
such counsel to be approved in advance by the Surviving Company, such consent not to be unreasonably withheld) unless the Surviving
Company assumes the defense of such Claim, in which case it shall not be liable for any fees and expenses of counsel to the Indemnified
Parties in respect of such Claim;
provided
that if an Indemnified Party determines in good faith that (a) the use of counsel
chosen by the Surviving Company to represent such Indemnified Party would present such counsel with an actual or potential conflict,
(b) the named parties in any such claim (including any impleaded parties) include both the Surviving Company and such Indemnified
Party and such Indemnified Party shall conclude in good faith that there may be one or more legal defenses available to him or
her that are different from or in addition to those available to the Surviving Company, (c) any such representation by such counsel
would be precluded under the applicable standards of professional conduct then prevailing, or (d) or such Indemnified Party has
interests in the claim or underlying subject matter that are substantially different from or in addition to those of other Persons
against whom the claim has been made or might reasonably be expected to be made, then such Indemnified Party shall be entitled
to retain separate counsel (but not more than one law firm, plus, if applicable, local counsel in respect of any particular claim
for all indemnitees in such Indemnified Party’s circumstances) at the Surviving Company’s expense to the extent of
such counsel’s reasonable fees and expenses.
(c) MCC
shall, at its sole cost, cause the individuals serving as officers and directors of MCC or any of its Subsidiaries immediately
at or prior to the Effective Time to be covered for a period of six years from the Effective Time by the directors’ and officers’
liability insurance policy maintained by MCC through the purchase of so-called “tail” insurance with respect to acts
or omissions occurring prior to the Effective Time that were committed by such officers and directors in their capacity as such.
(d) The
provisions of this Section 7.6 are intended to be for the benefit of, and shall be enforceable by, each Indemnified Party and his
or her heirs and representatives.
7.7
Additional
Agreements
. In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes
of this Agreement or to vest the Surviving Company with full title to all properties, assets, rights, approvals, immunities and
franchises of either party to the Merger, the proper officers and directors of each party and their respective Subsidiaries shall,
at SIC’s sole expense, take all such necessary action as may be reasonably requested by SIC.
7.8
Advice
of Changes
. Each of SIC and MCC shall promptly advise the other of any change or event (i) having or reasonably likely to have
a Material Adverse Effect on it, (ii) that it believes would or would be reasonably likely to cause or constitute a breach of any
of its representations, warranties or covenants contained in this Agreement that would result in the conditions to Closing set
forth in Article VIII not being satisfied;
provided, however,
that no such notification shall affect the representations,
warranties, covenants or agreements of the parties (or remedies with respect thereto) or the conditions to the obligations of the
parties under this Agreement.
7.9
Exemption
from Liability Under Section 16(b)
. Prior to the Effective Time, SIC and MCC shall each take all such steps as may be necessary
or appropriate to cause any disposition of shares of MCC Common Stock or conversion of any derivative securities in respect of
such shares of MCC Common Stock in connection with the consummation of the transactions contemplated by this Agreement to be exempt
under Rule 16b-3 promulgated under the Exchange Act to the extent permitted thereunder.
7.10
No
Solicitation
.
(a) Subject
to Section 7.10(d), each of MCC and SIC shall, and shall use commercially reasonable efforts to cause its representatives to, immediately
cease and cause to be terminated any existing solicitation of, or discussions or negotiations with, any Third Party relating to
any Competing Proposal or any inquiry, discussion, offer or request that could reasonably be expected to lead to a Competing Proposal.
(b) Until
the earlier of the Effective Time and termination of this Agreement, each of MCC and SIC shall, as promptly as reasonably practicable,
and in any event within two (2) Business Days of receipt by it or any of its representatives of any Competing Proposal or any inquiry
that could reasonably be expected to lead to a Competing Proposal, deliver to the other party a written notice setting forth: (A)
the identity of the Third Party making such Competing Proposal or inquiry (to the extent not prohibited by any applicable confidentiality
agreement existing prior to the date of this Agreement) and (B) the material terms and conditions of any such Competing Proposal.
MCC and SIC shall keep the other party reasonably informed of any material amendment or modification of any such Competing Proposal
on a prompt basis, and in any event within two (2) Business Days thereafter.
(c) Except
as otherwise provided in this Agreement (including Section 7.10(d)), until the earlier of Effective Time and termination of this
Agreement in accordance with its terms, each of MCC and SIC shall not, and shall not permit its Subsidiaries to, and shall use
commercially reasonable efforts to cause its representatives not to, directly or indirectly, (i) initiate, solicit, induce or knowingly
encourage or facilitate any inquiry with respect to the making of any proposal or offer with respect to a Competing Proposal or
(ii) engage in negotiations or discussions with, or furnish any material nonpublic information to, or enter into any agreement,
arrangement or understanding with, any Third Party relating to a Competing Proposal or any inquiry or proposal that could reasonably
be expected to lead to a Competing Proposal; provided however, that notwithstanding the foregoing, (A) each of MCC and SIC may
inform Persons of the provisions contained in this Section 7.10, and (B) each of MCC and SIC shall be permitted to grant a waiver
of, or terminate, any “standstill” or similar obligation of any Third Party with respect to MCC or SIC, as applicable,
in order to allow such Third Party to submit a Competing Proposal, if the MCC Board or SIC Board, as applicable, determines in
good faith (after consultation with such party’s legal counsel) that a failure to take such action with respect to such “standstill”
or similar obligation could reasonably be expected to be inconsistent with its duties under Applicable Law.
(d) Notwithstanding
anything to the contrary contained in this Agreement, at any time prior to the date that MCC Stockholder Approval is obtained (in
the case of MCC) or SIC Stockholder Approval is obtained (in the case of SIC), in the event that MCC (or its representatives on
MCC’s behalf) or SIC (or its representatives on SIC’s behalf) receives a Competing Proposal from any Third Party, (i)
MCC and its representatives or SIC and its representatives, as applicable, may contact such Third Party to clarify any ambiguous
terms and conditions thereof (without the MCC Board or SIC Board, as applicable, being required to make the determination in clause
(ii) of this Section 7.10(d)) and (ii) MCC and the MCC Board and its representatives or SIC and the SIC Board and its representatives,
as applicable, may engage in negotiations or substantive discussions with, or furnish any information and other access to, any
Third Party making such Competing Proposal and its representatives and Affiliates if the MCC Board or SIC Board, as applicable,
determines in good faith (after consultation with its outside financial advisors and legal counsel) that (A) such Competing Proposal
either constitutes a Superior Proposal or could reasonably be expected to lead to a Superior Proposal and (B) failure to consider
such Competing Proposal could reasonably be expected to be inconsistent with the fiduciary duties of the directors of MCC or SIC,
as applicable, under Applicable Law; provided, that (x) such Competing Proposal did not result from any material breach of any
of the provisions set forth in this Section 7.10, (y) prior to furnishing any material non-public information concerning MCC or
SIC, as applicable, MCC or SIC, as applicable, receives from such Third Party, to the extent such Third Party is not already subject
to a confidentiality agreement with MCC or SIC, as applicable, a confidentiality agreement containing confidentiality terms that
are not less favorable in the aggregate to MCC or SIC, as the case may be, than those contained in the Confidentiality Agreement
(unless MCC or SIC, as applicable, offers to amend the Confidentiality Agreement to reflect such more favorable terms) (it being
understood and agreed that such confidentiality agreement need not restrict the making of Competing Proposals (and related communications)
to MCC or the MCC Board or to SIC or the SIC Board, as the case may be) (an
“Acceptable Confidentiality Agreement”
)
and (z) MCC or SIC, as the case may be, shall (subject to the terms of any confidentiality agreement existing prior to the date
hereof) promptly provide or make available to the other party any material written non-public information concerning it that it
provides to any Third Party given such access that was not previously made available to the other party or its representatives.
(e) Except
as otherwise provided in this Agreement, (i) the MCC Board shall not effect an MCC Adverse Recommendation Change and the SIC Board
shall not effect an SIC Adverse Recommendation Change (each, an
“Adverse Recommendation Change”
), (ii)
MCC Board shall not approve or recommend, or allow MCC to execute or enter into, any letter of intent, memorandum of understanding
or definitive merger or similar agreement with respect to any Competing Proposal (other than an Acceptable Confidentiality Agreement),
and (iii) the SIC Board shall not approve or recommend, or allow SIC to execute or enter into, any letter of intent, memorandum
of understanding or definitive merger or similar agreement with respect to any Competing Proposal (other than an Acceptable Confidentiality
Agreement); provided however, that notwithstanding anything in this Agreement to the contrary, if at any time prior to the receipt
of MCC Stockholder Approval (in the case of MCC) or the SIC Stockholder Approval (in the case of SIC), MCC or SIC, as the case
may be, has received a Competing Proposal that its board of directors has determined in good faith (after consultation with its
outside financial advisor and legal counsel) constitutes a Superior Proposal, the MCC Board or SIC Board, as applicable, may (x)
make an Adverse Recommendation Change in connection with such Superior Proposal if the board of directors effecting the Adverse
Recommendation Change determines in good faith (after consultation with its outside financial advisor and legal counsel) that failure
to make an Adverse Recommendation Change could reasonably be expected to be inconsistent with the fiduciary duties of the MCC Board
or SIC Board, as applicable, under Applicable Law, and/or (y) authorize, adopt or approve such Superior Proposal and cause or permit
MCC or SIC, as applicable, to enter into a definitive agreement with respect to such Superior Proposal concurrently with the termination
of this Agreement in accordance with Section 9.1(g) or 9.1(i), as applicable, but in each case only after providing the Notice
of Adverse Recommendation or Notice of Superior Proposal, as applicable, and entering into good faith negotiations as required
by Section 7.10(f).
(f) Notwithstanding
anything to the contrary in this Agreement, no Adverse Recommendation Change may be made and no termination of this Agreement pursuant
to Section 9.1(g) or Section 9.1(i), as applicable, may be effected, in each case until after the third (3
rd
) Business
Day following receipt of written notice from the party intending to effect any Adverse Recommendation Change to the other party
advising the other party that its board of directors intends to make an Adverse Recommendation Change (a
“Notice of
Adverse Recommendation”
) or terminate this Agreement pursuant to Section 9.1(g) or 9.1(i), as applicable (a
“Notice
of Superior Proposal”
), and specifying the reasons therefor, including, if the basis of the proposed action is a
Superior Proposal, the material terms and conditions of any such Superior Proposal. At the option of the party not seeking to terminate
this Agreement pursuant to Section 9.1(g) or 9.1(i), the parties shall negotiate in good faith during such period to amend this
Agreement in such a manner that the offer that was determined to constitute a Superior Proposal no longer constitutes a Superior
Proposal. In determining whether to make an Adverse Recommendation Change or in determining whether a Competing Proposal constitutes
a Superior Proposal, the applicable board of directors shall take into account any revisions to the terms of this Agreement proposed
in writing by the other party in response to a Notice of Adverse Recommendation, a Notice of Superior Proposal or otherwise. Any
material amendment to such Superior Proposal shall require a new Notice of Superior Proposal and the applicable party shall be
required to comply again with the requirements of this Section 7.10(f).
(g) Nothing
in this Agreement shall restrict MCC or SIC from taking or disclosing a position contemplated by Rules 14d-9 or 14e-2(a) under
the Exchange Act, or otherwise making disclosure to comply with Applicable Law (it being agreed that a “stop, look and listen”
communication by the MCC Board or SIC Board to its stockholders pursuant to Rule 14d-9(f) under the Exchange Act or a factually
accurate public statement by MCC or SIC that describes MCC’s or SIC’s receipt, as applicable, of a Competing Proposal
and the operation of this Agreement with respect thereto shall not be deemed to be an Adverse Recommendation Change).
7.11
Treatment
of Outstanding Indebtedness
. On or prior to the Closing, MCC and SIC shall each use commercially reasonable efforts to take
or cause to be taken all actions with respect to their respective Indebtedness and the Indebtedness of their respective Subsidiaries
that is necessary or advisable in connection with the Merger, including without limitation, obtaining all necessary consents of
the holders of such Indebtedness, executing and delivering all documents, instruments, certificates and opinions of counsel required
under the terms of such Indebtedness, making all necessary filings, and taking all other actions that the respective boards of
directors or officers of MCC and SIC determine to be necessary or advisable in connection with such Indebtedness, including any
assumption, refinancing or consolidation of such Indebtedness.
7.12
Takeover
Statutes
. The parties shall use their respective commercially reasonable efforts (a) to take all action necessary so that no
Takeover Statute is or becomes applicable to the Merger or any of the other transactions contemplated by this Agreement, and (b)
if any such Takeover Statute is or becomes applicable to any of the foregoing, to take all action necessary so that the Merger
and the other transactions contemplated by this Agreement may be consummated as promptly as reasonably practicable on the terms
contemplated by this Agreement and otherwise to eliminate or minimize the effect of such Takeover Statute on the Merger and the
other transactions contemplated by this Agreement.
7.13
Dividend
Reinvestment Plan; Stock Repurchases
.
(a) After
the date of this Agreement, MCC shall terminate promptly any feature of its dividend reinvestment plan providing for the issuance
of shares by MCC of MCC Common Stock.
(b) After
the date of this Agreement, SIC shall suspend promptly any share repurchase program or offers to repurchase.
7.14
Stockholder
Litigation
. Between the date hereof and the Effective Time, each party shall use commercially reasonably efforts to consult
with the other party on outstanding litigation, including stockholder litigation regarding this Agreement or the Merger, provided,
for the avoidance of doubt, that such other party shall have no right to participate in, or obligation to cooperate in, the defense
of such litigation.
7.15
Interaction
with MDLY Merger Agreement
. Without the consent of MCC, SIC agrees that it will not agree to any waiver or amendment of the
MDLY Merger Agreement to the extent such waiver or amendment would adversely affect the economic or other rights or interests of
MCC and its stockholders under this Agreement and the MDLY Merger Agreement in any material respect.
7.16
Other
Matters
. On or prior to the Closing Date, MCC shall pay all accrued but unpaid fees payable to MCC Advisors LLC pursuant to
the MCC Investment Management Agreement.
ARTICLE
VIII
CONDITIONS PRECEDENT
8.1
Conditions
to Each Party’s Obligation To Effect the Merger
. The respective obligations of the parties to effect the Merger shall
be subject to the satisfaction at or prior to the Effective Time of the following conditions:
(a)
Stockholder
Approval
. (i) MCC Stockholder Approval shall have been obtained, and (ii) the SIC Stockholder Approval shall have been obtained.
(b)
Form
N-14 Registration Statement
. The Form N-14 Registration Statement shall have been declared effective by the SEC under the Securities
Act and no stop order suspending the effectiveness of the Form N-14 Registration Statement shall have been issued and no proceedings
for that purpose shall have been initiated or threatened by the SEC.
(c)
Exchange
Listing
. The outstanding shares of SIC Common Stock, the Merger Shares and the shares of SIC Common Stock to be issued in the
MDLY Merger shall have been authorized for listing on the NYSE, subject to official notice of issuance.
(d)
SEC
Exemptive Relief
. The SEC Exemptive Relief shall have been granted and be in full force and effect as of the Closing Date.
(e)
SBA
Approval
. MCC shall have obtained from the SBA such approvals as may be necessary for the SBA Debentures to remain outstanding
in accordance with their terms following the Effective Time.
(f)
Blue
Sky Filing
s. SIC shall have made or obtained such filings and approvals as are required to be made or obtained under the securities
or “Blue Sky” laws of various states in connection with the issuance of the shares of SIC Common Stock pursuant to
this Agreement.
(g)
No
Injunctions or Restraints; Illegality
. No order, injunction or decree issued by any court or agency of competent jurisdiction
or other law preventing or making illegal the consummation of the Merger or any of the other transactions contemplated by this
Agreement shall be in effect.
(h)
HSR
Act
. Any applicable waiting period (and any extension thereof) applicable to the Merger under the HSR Act shall have expired
or been terminated.
(i)
MDLY
Merger
. Each of the conditions to closing under the MDLY Merger Agreement shall have been satisfied or appropriately waived,
and the MDLY Merger shall be consummated simultaneously with the Merger.
(j)
New
Investment Advisory Agreement
. SIC and MCC Advisors LLC shall have executed and delivered the New Investment Advisory Agreement,
to be effective as of the Effective Time, and such agreement shall have been approved by the SIC Board and received requisite SIC
Stockholder Approval each in accordance with all applicable requirements of Section 15 of the Investment Company Act.
(k)
MCC
Termination Agreement
. MCC and MCC Advisors LLC shall have executed a termination agreement terminating the MCC Investment
Management Agreement, effective as of the Closing Date.
(l)
SIC
Termination Agreement
. SIC and SIC Advisors shall have executed a termination agreement terminating the SIC Investment Advisory
Agreement, effective as of the Closing Date.
(m)
Certain
Third Party Consents
. (i) SIC or MCC, as the case may be, shall have obtained the consents and approvals set forth on Schedule
8.1(m) attached hereto, and (ii) in connection with the MDLY Merger Agreement, MDLY shall have obtained the consents required by
Section 8.1(k) of the MDLY Merger Agreement.
(n)
Accounting
Treatment
. The SEC shall have confirmed in a manner reasonably acceptable to the parties that the equity of the surviving company
in the MDLY Merger shall, following the MDLY Merger, will be treated as a portfolio investment of SIC and reflected in SIC’s
consolidated financial statements at fair value for accounting purposes, and that such surviving company’s financial results
will not be consolidated into the financial statements of SIC.
(o)
No
Governmental Actions
. There shall be no pending suit, action or proceeding by any Governmental Entity (i) challenging the acquisition
by SIC of any MCC Common Stock, seeking to restrain or prohibit the consummation of the Merger or any other transaction contemplated
by this Agreement or seeking to obtain from MCC or SIC any damages that are material in relation to MCC and its Subsidiaries taken
as a whole, or (ii) seeking to prohibit SIC or any of its Subsidiaries from effectively controlling in any material respect the
business or operations of MCC and its Subsidiaries.
(p)
Section
368 Opinion
. The parties shall have received the written opinion of Eversheds Sutherland (US) LLP (or such other counsel as
may be reasonably satisfactory to the parties), dated as of the Closing Date and in form and substance reasonably satisfactory
to the parties, to the effect that, on the basis of facts, representations and assumptions set forth or referred to in such opinion,
the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code.
(q)
Director
Resignation
. The parties shall have received the resignation of Seth Taube from the SIC Board.
8.2
Conditions
to Obligations of SIC
. The obligation of SIC to effect the Merger is also subject to the satisfaction, or waiver by SIC, at
or prior to the Effective Time, of the following conditions:
(a)
Representations
and Warranties
. Subject to the standard set forth in Section 8.4, the representations and warranties of MCC set forth in this
Agreement shall be true and correct as of the date of this Agreement and as of the Effective Time as though made on and as of the
Effective Time (except that representations and warranties that by their terms speak specifically as of the date of this Agreement
or another date shall be true and correct as of such date); and SIC shall have received a certificate signed on behalf of MCC by
the Chief Executive Officer or the Chief Financial Officer of MCC to the foregoing effect.
(b)
Performance
of Obligations of MCC
. MCC shall have performed in all material respects all obligations required to be performed by it under
this Agreement at or prior to the Effective Time; and SIC shall have received a certificate signed on behalf of MCC by the Chief
Executive Officer or the Chief Financial Officer of MCC to such effect.
(c)
Outstanding
Indebtedness
. MCC shall have delivered to SIC fully executed copies of all consents and approvals required in order to keep
the amounts outstanding under the MCC Debt Documents, other than the MCC Revolving Loan Documents and the MCC Tem Loan Documents,
outstanding following the Effective Time and to keep the MCC Debt Documents, other than the MCC Revolving Debt Documents and the
MCC Term Loan Documents, in full force and effect in accordance with their terms as of the date of this Agreement without any breach
or violation thereof.
(d)
Final
MCC Dividend
. MCC shall have complied with Section 3.4(c) of this Agreement.
8.3
Conditions
to Obligations of MCC
. The obligation of MCC to effect the Merger is also subject to the satisfaction or waiver by MCC at or
prior to the Effective Time of the following conditions:
(a)
Representations
and Warranties
. Subject to the standard set forth in Section 8.4, the representations and warranties of SIC set forth in this
Agreement shall be true and correct as of the date of this Agreement and as of the Effective Time as though made on and as of the
Effective Time (except that representations and warranties that by their terms speak specifically as of the date of this Agreement
or another date shall be true and correct as of such date); and MCC shall have received a certificate signed on behalf of SIC by
the Chief Executive Officer or the Chief Financial Officer of SIC to the foregoing effect.
(b)
Performance
of Obligations of SIC
. SIC shall have (i) performed in all material respects all obligations required to be performed by it
under this Agreement (other than its obligations under Section 7.15) at or prior to the Effective Time, and (ii) performed in all
respects all obligations required to be performed by it under Section 7.15 at or prior to the Effective Time; and MCC shall have
received a certificate signed on behalf of SIC by the Chief Executive Officer or the Chief Financial Officer of SIC to such effect.
(c)
Share
Repurchase Program
. SIC shall have terminated all share repurchase programs or offers to repurchase.
(d)
Outstanding
Indebtedness
.
(i) SIC
shall have taken all actions, and executed all documents, reasonably required of SIC by the MCC Debt Documents, other than the
MCC Revolving Loan Documents and the MCC Term Loan Documents, in order to keep the Indebtedness outstanding under the MCC Debt
Documents after the Effective Time and to keep the MCC Debt Documents in full force and effect in accordance with their terms as
of the date of this Agreement without any breach or violation thereof;
(ii) SIC
shall have entered into amended and restated SIC Revolving Loan Documents and taken such other actions as may be required in order
to assume the obligations under the MCC Revolving Loan Documents and the MCC Term Loan Documents and to keep such amounts outstanding
as of the Effective Time; and
(iii) SIC
shall have taken all actions, and executed all documents, reasonably required of SIC in order to keep the Indebtedness represented
by the SIC Debt Documents outstanding and the SIC Debt Documents in full force and effect in accordance with their terms as of
the date of this Agreement without any breach or violation thereof.
8.4
Standard
.
No representation or warranty of MCC contained in Article IV or of SIC contained in Article V shall be deemed untrue, inaccurate
or incorrect for purposes of Section 8.2(a) or 8.3(a), as applicable, under this Agreement, as a consequence of the existence or
absence of any fact, circumstance or event unless such fact, circumstance or event, individually or when taken together with all
other facts, circumstances or events inconsistent with any representations or warranties contained in Article IV, in the case of
MCC, or Article V, in the case of SIC, has had or would reasonably be expected to have a Material Adverse Effect with respect to
MCC or SIC, respectively (disregarding for purposes of this Section 8.4, except as it relates to Section 4.8 and Section 5.8, all
qualifications or limitations set forth in any representations or warranties as to “materiality,” “Material Adverse
Effect” and words of similar import). Notwithstanding the immediately preceding sentence, the representations and warranties
contained in (i) Section 4.2(a) and Section 5.2(a) shall be deemed untrue and incorrect if not true and correct except to a
de
minimis
extent (relative to Section 4.2(a) or Section 5.2(a), respectively, taken as a whole), and (ii) Sections 4.3(a) and
4.3(b)(i), in the case of MCC, and Sections 5.3(a) and 5.3(b)(i), in the case of SIC, shall be deemed untrue and incorrect if not
true and correct in all material respects.
8.5
Frustration
of Closing Conditions
. Neither MCC nor SIC may rely on the failure of any condition set forth in Section 8.1, Section 8.2 or
Section 8.3, as applicable, to be satisfied if such failure was primarily caused by the party relying on such failure to perform
any of its material obligations under this Agreement.
ARTICLE
IX
TERMINATION AND AMENDMENT
9.1
Termination
.
This Agreement may be terminated at any time prior to the Effective Time, whether before or after receipt of the MCC Stockholder
Approval or the SIC Stockholder Approval:
(a) by
mutual consent of MCC and SIC in a written instrument authorized by MCC Board and SIC Board;
(b) by
either MCC or SIC, if any Governmental Entity whose consent or approval is a condition to Closing set forth in Section 8.1 has
denied the granting of any such consent or approval and such denial has become final and nonappealable, or any Governmental Entity
of competent jurisdiction shall have issued a final and nonappealable order, injunction or decree permanently enjoining or otherwise
prohibiting or making illegal the consummation of the transactions contemplated by this Agreement;
(c) by
either MCC or SIC, if the Merger shall not have been consummated on or before March 31, 2019 (the
“Outside Date”
),
unless the failure of the Closing to occur by such date shall be due to the failure of the party seeking to terminate this Agreement
to perform or observe the covenants and agreements of such party set forth in this Agreement; provided that the terminating party
is not then in material breach of any representation, warranty, covenant or other agreement contained herein, and such breach has
caused or resulted in the failure of the Closing to occur by or prior to the Outside Date;
(d) by
either SIC or MCC, at any time prior to the Effective Time, in the event that (i) MCC or SIC, as the case may be, shall have failed
to obtain the MCC Stockholder Approval or the SIC Stockholder Approval, as applicable, at the MCC Stockholder Meeting or the SIC
Stockholder Meeting, respectively, at which a vote is taken on the Merger, or (ii) the MDLY Merger Agreement shall have been terminated;
(e) by
either MCC or SIC
(provided
that the terminating party is not then in material breach of any representation, warranty, covenant
or other agreement contained herein), if there shall have been a breach of any of the covenants or agreements or any of the representations
or warranties set forth in this Agreement on the part of MCC, in the case of a termination by SIC, or SIC, in the case of a termination
by MCC, which breach, either individually or in the aggregate, would result in, if occurring or continuing on the Closing Date,
the failure of the conditions set forth in Section 8.2 or 8.3, as the case may be, and which is not cured within thirty (30) days
following written notice to the party committing such breach or by its nature or timing cannot be cured within such time period;
(f) by
SIC, (i) within ten (10) Business Days after MCC Board shall have effected an Adverse Recommendation Change prior to receipt of
MCC Stockholder Approval, (ii) in the event MCC Board shall have approved or authorized MCC or any of its Subsidiaries to enter
into a merger agreement, letter of intent, acquisition agreement, purchase agreement or other similar agreement with respect to
a Competing Proposal or (iii) MCC fails to include the MCC Board Recommendation in the Joint Proxy Statement/Prospectus;
(g) by
MCC, in the event that
(i) (A)
MCC shall have received a Superior Proposal, (B) subject to MCC’s compliance with its obligations under Section 7.10(f),
MCC Board or any authorized committee thereof shall have authorized MCC to enter into a definitive agreement to consummate the
transaction contemplated by such Superior Proposal, and (C) concurrently with the termination of this Agreement, MCC pays SIC the
Termination Fee contemplated by Section 9.4 and enters into the definitive agreement to consummate the transaction contemplated
by such Superior Proposal; or
(ii) the
MCC Board or any authorized committee thereof shall have effected an Adverse Recommendation Change in accordance with the terms
of Section 7.10.
(h) by
MCC, (i) within ten (10) Business Days after the SIC Board shall have effected a SIC Adverse Recommendation Change prior to receipt
of SIC Stockholder Approval, (ii) in the event the SIC Board shall have approved, or authorized SIC or any of its Subsidiaries
to enter into, a merger agreement, letter of intent, acquisition agreement, purchase agreement or other similar agreement with
respect to a Competing Proposal or (iii) SIC fails to include the SIC Board Recommendation in the Joint Proxy Statement/Prospectus;
or
(i) by
SIC, in the event that:
(i) (A)
SIC shall have received a Superior Proposal, (B) subject to SIC’s compliance with its obligations under Section 7.10(f),
the SIC Board or any authorized committee thereof shall have authorized SIC to enter into a definitive agreement to consummate
the transaction contemplated by such Superior Proposal, and (C) concurrently with the termination of this Agreement, SIC pays MCC
the Termination Fee contemplated by Section 9.4 and enters into the definitive agreement to consummate the transaction contemplated
by such Superior Proposal; or
(ii) the
SIC Board or any authorized committee thereof shall have effected an Adverse Recommendation Change in accordance with the terms
of Section 7.10.
The party desiring to
terminate this Agreement pursuant to clause (b), (c), (d), (e), (f), (g), (h) or (i) of this Section 9.1 shall give written notice
of such termination to the other party in accordance with Section 10.2, specifying the provision or provisions hereof pursuant
to which such termination is effected.
9.2
Effect
of Termination
. In the event of termination of this Agreement by either MCC or SIC as provided in Section 9.1, this Agreement
shall become void and have no effect, and none of MCC, SIC, any of their respective Subsidiaries or any of the officers or directors
of any of them shall have any liability of any nature whatsoever under this Agreement, or in connection with the transactions contemplated
by this Agreement, except that (i) Sections 7.2(c), 9.2, 9.3, 9.4, and Article X shall survive any termination of this Agreement,
and (ii) except as provided in Section 10.9(c), neither MCC nor SIC shall be relieved or released from any liabilities or damages
arising out of its fraud or knowing and intentional breach of any provision of this Agreement.
9.3
Fees
and Expenses
. All fees and expenses incurred in connection with the Merger, this Agreement, and the transactions contemplated
by this Agreement shall be paid by the party incurring such fees or expenses;
provided,
that the costs and expenses of preparing,
filing, printing and mailing the Form N-14 Registration Statement and related Joint Proxy Statement/Prospectus, all other filing
fees and amounts paid to the SEC in connection with the Merger, and the fees of any HSR Act filing shall be borne equally by MCC
and SIC.
9.4
Termination
Fee
.
(a) In
the event that this Agreement is terminated pursuant to Section 9.1(f) or Section 9.1(g) then,
provided
that SIC was not
in material breach of its representations, warranties, covenants or agreements hereunder at the time of termination, MCC will pay
to SIC, as its sole recourse in connection with termination of this Agreement in accordance with Section 9.1(f) or Section 9.1(g),
as applicable, a fee in an amount equal to $6,000,000 (the
“Termination Fee”
).
(b) In
the event that this Agreement is terminated pursuant to Section 9.1(h) or Section 9.1(i) then,
provided
that MCC was not
in material breach of its representations, warranties, covenants or agreements hereunder at the time of termination, SIC will pay
to MCC, as its sole recourse in connection with termination of this Agreement in accordance with Section 9.1(h) or Section 9.1(i),
as applicable, the Termination Fee.
(c) The
Termination Fee, if applicable, shall be payable (i) no later than two Business Days after the date on which this Agreement is
terminated by SIC pursuant to Section 9.1(f) or by MCC pursuant to Section 9.1(h), and (ii) immediately prior to the time of termination
by MCC pursuant to Section 9.1(g) or by SIC pursuant to Section 9.1(i). The parties hereto acknowledge and hereby agree that in
no event shall any party be required to pay a Termination Fee on more than one occasion.
(d) Each
of the parties hereto acknowledges that (i) the agreements contained in this Section 9.4 are an integral part of the transactions
contemplated by this Agreement, (ii) the Termination Fee is not a penalty, but is liquidated damages, in a reasonable amount that
will compensate the other party, in the circumstances in which the Termination Fee is payable, for the efforts and resources expended
and opportunities foregone while negotiating this Agreement and in reliance on this Agreement and on the expectation of the consummation
of the transactions contemplated hereby, which amount would otherwise be impossible to calculate with precision and (iii) without
these agreements, the parties would not enter into this Agreement.
9.5
Amendment
.
This Agreement may be amended by the parties, by action taken or authorized by MCC Board and SIC Board, at any time before or after
receipt of MCC Stockholder Approval or SIC Stockholder Approval;
provided, however,
that after receipt of MCC Stockholder
Approval or SIC Stockholder Approval, there may not be, without further approval of such stockholders, any amendment of this Agreement
that requires further approval of the stockholders of MDLY or SIC under Applicable Law. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the parties.
9.6
Extension;
Waiver
. At any time prior to the Effective Time, the parties, by action taken or authorized by their respective board of directors,
may, to the extent legally allowed, (a) extend the time for the performance of any of the obligations or other acts of the other
party, (b) waive any inaccuracies in the representations and warranties contained in this Agreement or (c) waive compliance with
any of the agreements or conditions contained in this Agreement. Any agreement on the part of a party to any such extension or
waiver shall be valid only if set forth in a written instrument signed on behalf of such party, but such extension or waiver or
failure to insist on strict compliance with an obligation, covenant, agreement or condition shall not operate as a waiver of, or
estoppel with respect to, any subsequent or other failure.
ARTICLE
X
GENERAL PROVISIONS
10.1
Nonsurvival
of Representations, Warranties and Agreements
. None of the representations, warranties, covenants and agreements set forth
in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time, except for the matters
set forth in Section 7.6 and for those other covenants and agreements contained in this Agreement that by their terms apply or
are to be performed in whole or in part after the Effective Time.
10.2
Notices
.
All notices and other communications in connection with this Agreement shall be in writing and shall be deemed given if delivered
personally, sent via facsimile (with confirmation), mailed by registered or certified mail (return receipt requested) or delivered
by an express courier (with confirmation) to the parties at the following addresses (or at such other address for a party as shall
be specified by like notice):
(a) if
to MCC, to:
Medley Capital
Corporation
280 Park Avenue,
6th Floor East
New York, NY
10017
Attention:
Brook Taube
brook@mdly.com
with a copy to:
Kramer Levin Naftalis & Frankel LLP
1177 Avenue of the Americas
New York, New York 10036
Attention: George Silfen
gsilfen@kramerlevin.com
and
(b) If
to SIC, to:
Sierra Income
Corporation
280 Park Avenue,
6th Floor East
New York, NY
10017
Attention:
Oliver T. Kane
with a copy
to:
Sullivan & Worcester LLP
1666 K Street, NW
Washington, DC 20006
Attention: David M. Leahy
e-mail: dleahy@sandw.com
10.3
Interpretation
.
When a reference is made in this Agreement to Articles, Sections, Exhibits or Schedules, such reference shall be to an Article
or Section of or Exhibit or Schedule to this Agreement unless otherwise indicated. The table of contents and headings contained
in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall
be deemed to be followed by the words “without limitation.” MCC Disclosure Schedule and the SIC Disclosure Schedule,
as well as all other schedules and all exhibits hereto, shall be deemed part of this Agreement and included in any reference to
this Agreement. This Agreement shall not be interpreted or construed to require any Person to take any action, or fail to take
any action, if to do so would violate any Applicable Law.
10.4
Counterparts
.
This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall
become effective when counterparts have been signed by each of the parties and delivered to the other party, it being understood
that each party need not sign the same counterpart.
10.5
Entire
Agreement
. This Agreement (including the documents and the instruments referred to in this Agreement), together with the Confidentiality
Agreement, constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, between
the parties with respect to the subject matter of this Agreement, other than the Confidentiality Agreement.
10.6
Governing
Law; Jurisdiction
. This Agreement shall be governed and construed in accordance with the internal laws of the State of Delaware
applicable to contracts made and wholly-performed within such state, without regard to any applicable conflicts of law principles.
Each of the parties hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction
of the Delaware Court of Chancery, or, if (and only if) such court lacks subject matter jurisdiction, any Federal court of the
United States of America sitting in the State of Delaware, and the respective appellate courts from the foregoing (all of the foregoing,
collectively, the “
Delaware Courts
”), in any action or proceeding arising out of or relating to this
Agreement or the agreements delivered in connection herewith or the transactions contemplated hereby or thereby or for recognition
or enforcement of any judgment relating thereto, and each of the parties hereby irrevocably and unconditionally (i) agrees not
to commence any such action or proceeding except in the applicable Delaware Court, (ii) agrees that any claim in respect of any
such action or proceeding may be heard and determined in the applicable Delaware Court, (iii) waives, to the fullest extent it
may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any such action or
proceeding in the applicable Delaware Court, and (iv) waives, to the fullest extent permitted by Applicable Law, the defense of
an inconvenient forum to the maintenance of such action or proceeding in the applicable Delaware Court. Each of the parties agrees
that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on
the judgment or in any other manner provided by Applicable Law. Each party irrevocably consents to service of process in the manner
provided for by Applicable Law. Nothing in this Agreement will affect the right of any party to serve process in any other manner
permitted by Applicable Law.
10.7
PUBLICITY
.
THE INITIAL PRESS RELEASE CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT SHALL BE A JOINT PRESS RELEASE. NEITHER MCC
NOR SIC SHALL, AND NEITHER MCC NOR SIC SHALL PERMIT ANY OF ITS SUBSIDIARIES OR REPRESENTATIVES TO, ISSUE OR CAUSE THE PUBLICATION
OF ANY PRESS RELEASE OR OTHER PUBLIC ANNOUNCEMENT WITH RESPECT TO, OR OTHERWISE MAKE ANY PUBLIC STATEMENT CONCERNING, THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT WITHOUT THE PRIOR WRITTEN CONSENT OF SIC, IN THE CASE OF A PROPOSED ANNOUNCEMENT OR STATEMENT BY
MCC, OR MCC, IN THE CASE OF A PROPOSED ANNOUNCEMENT OR STATEMENT BY SIC;
PROVIDED, HOWEVER,
THAT EITHER PARTY MAY, AFTER
PRIOR WRITTEN NOTICE TO THE OTHER PARTY , ISSUE OR CAUSE THE PUBLICATION OF ANY PRESS RELEASE OR OTHER PUBLIC ANNOUNCEMENT OR FILING
TO THE EXTENT REQUIRED BY LAW OR BY THE RULES AND REGULATIONS OF THE NYSE; PROVIDED HOWEVER, THE PARTY ISSUING SUCH PRESS RELEASE
OR OTHER PUBLIC ANNOUNCEMENT OR FILING MUST CONSULT WITH THE OTHER PARTY BEFORE ISSUING SUCH PRESS RELEASE OR OTHER PUBLIC ANNOUNCEMENT
OR FILING AND PROVIDE SUCH PARTY AN OPPORTUNITY TO REVIEW AND COMMENT UPON SUCH PRESS RELEASE OR OTHER PUBLIC ANNOUNCEMENT OR FILING,
WHICH COMMENTS THE OTHER PARTY SHALL CONSIDER IN GOOD FAITH.
10.8
Assignment;
Third Party Beneficiaries
. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall
be assigned by either of the parties (whether by operation of law or otherwise) without the prior written consent of the other
party. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of and be enforceable by each
of the parties and their respective successors and assigns. Except as otherwise specifically provided in Section 7.6, this Agreement
(including the documents and instruments referred to in this Agreement) is not intended to and does not confer upon any Person
other than the parties hereto any rights or remedies under this Agreement. Except as provided in Section 7.6 only, SIC and MCC
hereby agree that their respective representations, warranties and covenants set forth herein are solely for the benefit of the
other parties hereto, in accordance with and subject to the terms of this Agreement, and this Agreement is not intended to, and
does not, confer upon any Person other than the parties hereto any rights or remedies hereunder, including, without limitation,
the right to rely upon such representations and warranties set forth herein. The parties hereto further agree that the rights of
Third Party beneficiaries under Section 7.6 shall not arise unless and until the Effective Time occurs. The representations and
warranties in this Agreement are the product of negotiations among the parties hereto and are for the sole benefit of the parties
hereto. In some instances, the representations and warranties in this Agreement may represent an allocation among the parties hereto
of risks associated with particular matters regardless of the knowledge of any of the parties hereto. Consequently, Persons other
than the parties hereto may not rely upon the representations and warranties in this Agreement as characterizations of actual facts
or circumstances as of the date of this Agreement or as of any other date.
10.9
Remedies
.
(a) Except
as otherwise provided in this Agreement, any and all remedies herein expressly conferred upon a party will be deemed cumulative
with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of
any one remedy will not preclude the exercise of any other remedy.
(b) The
parties hereto hereby agree that irreparable damage would occur in the event that any provision of this Agreement to be performed
by either party was not performed in accordance with its specific terms or was otherwise breached, and that money damages or other
legal remedies would not be an adequate remedy for any such damages. Accordingly, the parties hereto acknowledge and hereby agree
that in the event of any breach or threatened breach by either party of any of its respective covenants or obligations set forth
in this Agreement, the non-breaching party shall be entitled to an injunction or injunctions to prevent or restrain breaches or
threatened breaches of this Agreement and to specifically enforce the terms and provisions of this Agreement to prevent breaches
or threatened breaches of, or to enforce compliance with, the covenants and obligations of the other under this Agreement. Each
party hereby agrees not to raise any objections to the availability of the equitable remedy of specific performance to prevent
or restrain breaches or threatened breaches of this Agreement by such party, and to specifically enforce the terms and provisions
of this Agreement to prevent breaches or threatened breaches of, or to enforce compliance with, the covenants and obligations of
such party under this Agreement. The parties hereto further agree that (i) by seeking the remedies provided for in this Section
10.9(b), neither party shall in any respect waive its right to seek any other form of relief that may be available to a party under
this Agreement (including monetary damages) in the event that this Agreement has been terminated or in the event that the remedies
provided for in this Section 10.9(b) are not available or otherwise are not granted, and (ii) nothing set forth in this Section
10.9(b) shall require either party to institute any proceeding for (or limit such party’s right to institute any proceeding
for) specific performance under this Section 10.9(b) prior or as a condition to exercising any termination right under Section
9.1 (and pursuing damages after such termination), nor shall the commencement of any legal proceeding pursuant to this Section
10.9(b) or anything set forth in this Section 10.9(b) restrict or limit such party’s right to terminate this Agreement in
accordance with Section 9.1 or pursue any other remedies under this Agreement that may be available then or thereafter.
(c) Notwithstanding
anything to the contrary in this Agreement, the parties hereto expressly acknowledge and agree that the remedies set forth in Section
9.4 shall be the sole and exclusive remedies available to SIC, in the event this Agreement is terminated under Section 9.1(f) or
Section 9.1(g), and MCC, in the event this Agreement is terminated under Section 9.1(h) or Section 9.1(i). To the extent SIC or
MCC is entitled to receive the Termination Fee, the receipt of such amounts shall be deemed to be full and final payment for any
and all losses or damages suffered or incurred by SIC or MCC, as applicable, or any of their respective Affiliates or any other
Person in connection with this Agreement (and the termination hereof), the transactions contemplated hereby (and the abandonment
thereof) or any matter forming the basis for such termination, and none of SIC nor any of its Affiliates, or MCC or any of its
Affiliates, as applicable, or any other Person shall be entitled to bring or maintain any other Claim against MCC or SIC, as applicable,
or any of their Affiliates arising out of this Agreement, any of the transactions contemplated hereby or any matters forming the
basis for such termination.
10.10
Waiver
of Jury Trial
. EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED
IN CONNECTION HEREWITH OR THE MERGER AND OTHER TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES
THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS
OF SUCH WAIVERS, (C) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.10.
10.11
Severability
.
If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent
jurisdiction to be invalid, void or unenforceable, the remaining provisions, or the application of such provision to Persons or
circumstances other than those as to which it has been held invalid or unenforceable, will remain in full force and effect and
will in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated
by this Agreement is not affected in any manner materially adverse to any party. Upon such determination, the parties will negotiate
in good faith in an effort to agree upon a suitable and equitable substitute provision to effect the original intent of the parties.
[Signature page follows]
IN WITNESS WHEREOF,
the undersigned parties have caused this Agreement to be executed by their respective officers thereunto duly authorized as of
the date first above written.
|
MEDLEY CAPITAL CORPORATION
|
|
By:
|
/s/ Brook Taube
|
|
|
Name: Brook Taube
|
|
|
Title: Chief Executive Officer
|
|
|
|
|
SIERRA INCOME CORPORATION
|
|
By:
|
/s/ Seth Taube
|
|
|
Name: Seth Taube
|
|
|
Title: Chief Executive Officer
|
Signature Page
EXHIBIT A
[See attached.]
INVESTMENT ADVISORY AGREEMENT
BETWEEN
SIERRA INCOME CORPORATION.
AND
MCC ADVISORS LLC
This Investment Advisory
Agreement (the “
Agreement
”) is made as of [ ], by and between SIERRA INCOME
CORPORATION, a Maryland corporation (the “
Company
”), and MCC ADVISORS LLC, a Delaware limited liability
company (the “
Adviser
”).
WHEREAS, the Company
is a non-diversified, closed-end management investment company that intends to elect to be treated as a business development company
(“
BDC
”) under the Investment Company Act of 1940, as amended (together with the rules promulgated thereunder,
the “
1940 Act
”);
WHEREAS, the Adviser
is registered as an investment adviser under the Investment Advisers Act of 1940, as amended (together with the rules promulgated
thereunder, the “
Advisers Act
”);
WHEREAS, the Company
desires to retain the Adviser to provide investment advisory services to the Company in the manner and on the terms and conditions
hereinafter set forth; and
WHEREAS, the Adviser
is willing to provide investment advisory services to the Company in the manner and on the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in
consideration of the premises and the covenants hereinafter contained and for other good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the Company and the Adviser hereby agree as follows:
1.
Duties of the Adviser.
(a)
Retention of
Adviser
. The Company hereby appoints the Adviser to act as the investment adviser to the Company and to manage the investment
and reinvestment of the assets of the Company, subject to the supervision of the board of directors of the Company (the “
Board
of Directors
”), for the period and upon the terms herein set forth in accordance with:
(i) the
investment objective, policies and restrictions that are set forth in the Company’s Registration Statement on Form N-2 as
declared effective by the Securities and Exchange Commission (the “
SEC
”), as supplemented, amended or
superseded from time to time (the “
Registration Statement
”);
(ii) during
the term of this Agreement, all other applicable federal and state laws, rules and regulations, and the Company’s articles
of incorporation, as further amended from time to time (“
Articles of Incorporation
”);
(iii) such
investment policies, directives, regulatory restrictions as the Company may, from time to time, establish or issue and communicate
to the Adviser in writing; and
(iv) the
Company’s compliance policies and procedures as applicable to the Company’s investment adviser and as administered
by the Company’s chief compliance officer.
(b)
Responsibilities
of Adviser
. Without limiting the generality of the foregoing, the Adviser shall, during the term and subject to the provisions
of this Agreement:
(i) determine
the composition and allocation of the Company’s investment portfolio, the nature and timing of any changes therein and the
manner of implementing such changes;
(ii) identify,
evaluate and negotiate the structure of the investments made by the Company;
(iii) perform
due diligence on prospective portfolio companies;
(iv) execute, close, service
and monitor the Company’s investments;
(v) determine the securities
and other assets that the Company shall purchase, retain, or sell;
(vi) provide
the Company with such other investment advisory, research and related services as the Company may, from time to time, reasonably
require for the investment of its funds; and
(vii) to
the extent permitted under the 1940 Act and the Advisers Act, on the Company’s behalf, and in coordination with any Sub-Adviser
(as defined below) and administrator, provide significant managerial assistance to those portfolio companies to which the Company
is required to provide such assistance under the 1940 Act, including utilizing appropriate personnel of the Adviser to, among other
things, monitor the operations of the Company’s portfolio companies, participate in board and management meetings, consult
with and advise officers of portfolio companies and provide other organizational and financial consultation.
(c)
Power and Authority
.
To facilitate the Adviser’s performance of these undertakings, but subject to the restrictions contained herein, the Company
hereby delegates to the Adviser, and the Adviser hereby accepts, the power and authority to act on behalf of the Company to effectuate
investment decisions for the Company, including the execution and delivery of all documents relating to the Company’s investments
and the placing of orders for other purchase or sale transactions on behalf of the Company. In the event that the Company determines
to acquire debt financing, the Adviser shall use commercially reasonable efforts to arrange for such financing on the Company’s
behalf, subject to the oversight and approval of the Board of Directors. If it is necessary for the Adviser to make investments
on behalf of the Company through a special purpose vehicle, the Adviser shall have authority to create, or arrange for the creation
of, such special purpose vehicle and to make investments through such special purpose vehicle in accordance with applicable law.
The Company also grants to the Adviser power and authority to engage in all activities and transactions (and anything incidental
thereto) that the Adviser deems, in its sole discretion, appropriate, necessary or advisable to carry out its duties pursuant to
this Agreement.
(d)
Acceptance of
Appointment
. The Adviser hereby accepts such appointment and agrees during the term hereof to render the services described
herein for the compensation provided herein, subject to the limitations contained herein.
(e)
Sub-Advisers
.
The Adviser is hereby authorized to enter into one or more sub-advisory agreements (each a “
Sub-Advisory Agreement
”)
with other investment advisers (each a “
Sub-Adviser
”) pursuant to which the Adviser may obtain the services
of the Sub-Adviser(s) to assist the Adviser in fulfilling its responsibilities hereunder, subject to the oversight of the Adviser
and/or the Company, with the scope of such services and oversight to be set forth in each Sub-Advisory Agreement.
(i) The
Adviser and not the Company shall be responsible for any compensation payable to any Sub-Adviser; provided, however, that the Adviser
shall have the right to direct the Company to pay directly any Sub-Adviser but only with respect to the amounts due and payable
to such Sub-Adviser from the fees and expenses payable to the Adviser under this Agreement.
(ii) Any
Sub-Advisory Agreement entered into by the Adviser shall be in accordance with the requirements of the 1940 Act and the Advisers
Act, including without limitation, the requirements of the 1940 Act relating to Board of Directors and Company stockholder approval
thereunder, and other applicable federal and state law.
(iii) Any
Sub-Adviser shall be subject to the same fiduciary duties as are imposed on the Adviser pursuant to this Agreement, the 1940 Act
and the Advisers Act, as well as other applicable federal and state law.
(f)
Independent
Contractor Status
. The Adviser shall, for all purposes herein provided, be deemed to be an independent contractor and, except
as expressly provided or authorized herein, shall have no authority to act for or represent the Company in any way or otherwise
be deemed an agent of the Company.
(g)
Record Retention
.
Subject to review by and the overall control of the Board of Directors, the Adviser shall maintain and keep all books, accounts
and other records of the Adviser that relate to activities performed by the Adviser hereunder as required under the 1940 Act and
the Advisers Act. The Adviser agrees that all records that it maintains and keeps for the Company shall at all times remain the
property of the Company, shall be readily accessible during normal business hours, and shall be promptly surrendered to the Company
upon the termination of this Agreement or otherwise on written request by the Company. The Adviser further agrees that the records
that it maintains and keeps for the Company shall be preserved in the manner and for the periods prescribed by the 1940 Act, unless
any such records are earlier surrendered as provided above. The Adviser shall have the right to retain copies, or originals where
required by Rule 204-2 promulgated under the Advisers Act, of such records to the extent required by applicable law, subject to
observance of its confidentiality obligations under this Agreement. The Adviser shall maintain records of the locations where books,
accounts and records are maintained among the persons and entities providing services directly or indirectly to the Adviser or
the Company.
(h)
State Administrator
.
The Adviser shall, upon by request by an official or agency administering the securities laws of a state, province, or commonwealth
(a “
State Administrator
”), submit to such State Administrator the reports and statements required to
be distributed to Company stockholders pursuant to this Agreement, the Registration Statement and applicable federal and state
law.
(i)
Fiduciary Duty
:
It is acknowledged that the Adviser shall have a fiduciary responsibility for the safekeeping and use of all funds and assets of
the Company, whether or not in the Adviser’s immediate possession or control. The Adviser shall not employ, or permit another
to employ, such funds or assets in any manner except for the exclusive benefit of the Company. The Adviser shall not, by entry
into an agreement with any stockholder of the Company or otherwise, contract away the fiduciary obligation owed to the Company
and the Company’s stockholders under common law or otherwise.
2. Expenses Payable by the Company.
(a)
Adviser Personnel
.
All investment personnel of the Adviser, when and to the extent engaged in providing investment advisory services and managerial
assistance hereunder, and the compensation and routine overhead expenses of such personnel allocable to such services, shall be
provided and paid for by the Adviser and not by the Company.
(b)
Costs
. Subject
to the limitations on expense reimbursement of the Adviser as set forth in Section 2(c), the Company, either directly or through
reimbursement to the Adviser, shall bear all costs and expenses of its investment operations and its investment transactions, including,
without limitation, costs and expenses relating to: all direct and indirect costs and expenses incurred by the Adviser for office
space rental, office equipment, utilities and other non-compensation related overhead allocable to performance of investment advisory
services hereunder by the Adviser; organizational and offering expenses; corporate and organizational expenses relating to offerings
of shares of the Company’s common stock, subject to limitations included in the Agreement; the cost of calculating the Company’s
net asset value, including the cost of any third-party valuation firms; offerings of the Corporation’s common stock and other
securities; fees and expenses associated with performing due diligence reviews of prospective investments; transfer agent and custodial
fees, fees and expenses associated with marketing efforts (including attendance at investment conferences and similar events);
federal and state registration fees; all costs of registration and listing the Corporation’s shares on any securities exchange;
federal, state and local taxes; independent directors’ fees and expenses; brokerage commissions for the Company’s investments;
costs of proxy statements, stockholders’ reports and notices; fidelity bond, directors and officers errors and omissions
liability insurance and other insurance premiums; direct costs such as printing, mailing, long distance telephone and staff costs
associated with the Company’s reporting and compliance obligations under the 1940 Act and applicable federal and state securities
laws, including compliance with the Sarbanes-Oxley Act of 2002; fees and expenses associated with accounting, independent audits
and outside legal costs; and all other expenses incurred by the Company’s Adviser, any Sub-Adviser or the Company in connection
with administering the Company’s business, including expenses incurred by the Company’s administrator in performing
administrative services for the Company, and the reimbursement of the compensation of the Company’s chief financial officer
and chief compliance officer and their respective staffs paid by the Company’s administrator.
(c)
Limitations on Reimbursement of Expenses
.
(i) In addition
to the compensation paid to the Adviser pursuant to Section 3, the Company shall reimburse the Adviser for all expenses of the
Company incurred by the Adviser as well as the actual cost of goods and services used for or by the Company and obtained from entities
not affiliated with the Adviser. The Adviser may be reimbursed for the administrative services performed by it on behalf of the
Company; provided, however, the reimbursement shall be an amount equal to the lower of the Adviser’s actual cost or the amount
the Company would be required to pay third parties for the provision of comparable administrative services in the same geographic
location; and provided, further, that such costs are reasonably allocated to the Company on the basis of assets, revenues, time
records or other method conforming with generally accepted accounting principles. No reimbursement shall be permitted for services
for which the Adviser is entitled to compensation by way of a separate fee. Excluded from the allowable reimbursement shall be:
(A) rent
or depreciation, utilities, capital equipment, and other administrative items of the Adviser; and
(B) salaries,
fringe benefits, travel expenses and other administrative items incurred or allocated to any executive officer or board member
of the Adviser (or any individual performing such services) or a holder of 10% or greater equity interest in the Adviser (or any
person having the power to direct or cause the direction of the Adviser, whether by ownership of voting securities, by contract
or otherwise).
(d)
Periodic Reimbursement.
Expenses incurred by
the Adviser on behalf of the Company and payable pursuant to this section shall be reimbursed no less than monthly to the Adviser.
The Adviser shall prepare a statement documenting the expenses of the Company and the calculation of the reimbursement and shall
deliver such statement to the Company prior to full reimbursement.
3.
Compensation of the Adviser
.
The Company agrees
to pay, and the Adviser agrees to accept, as compensation for the services provided by the Adviser hereunder, a base management
fee (“
Base Management Fee
”) and an incentive fee (“
Incentive Fee
”) as hereinafter
set forth. The Adviser may, in its sole discretion, elect or agree to temporarily or permanently waive, defer, reduce or modify,
in whole or in part, the Base Management Fee and/or the Incentive Fee. Any of the fees payable to the Adviser under this Agreement
for any partial month or calendar quarter shall be appropriately prorated. The fees payable to the Adviser as set forth in this
Agreement shall be calculated using a detailed calculation policy and procedures approved by the Adviser and the Board of Directors,
including a majority of the Independent Directors (as defined below), and shall be consistent with the calculation of such fees
as set forth in this Section. See
Appendix A
for examples of how these fees are calculated.
(a)
Base Management
Fee
. The Base Management Fee will be calculated at an annual rate of 1.75% of gross assets payable quarterly in arrears. For
purposes of calculating the Base Management Fee, the term “gross assets” includes any assets acquired with the proceeds
of leverage. For the first quarter of the Company’s operations, the Base Management Fee will be calculated based on the initial
value of the Company’s gross assets. Subsequently, the Base Management Fee will be calculated based on the Company’s
gross assets at the end of each completed calendar quarter. Base Management Fees for any partial quarter will be appropriately
prorated
.
(b)
Incentive Fee
.
The Incentive Fee will
be divided into two parts: (1) a subordinated incentive fee on income, and (2) an incentive fee on capital gains. Each part of
the Incentive Fee is outlined below.
The subordinated incentive
fee on income is earned on pre-incentive fee net investment income and shall be determined and payable in arrears as of the end
of each calendar quarter during which the Investment Advisory Agreement is in effect. If this Agreement is terminated, the fee
will also become payable as of the effective date of such termination.
The subordinated incentive fee on income for each
quarter will be calculated as follows:
|
·
|
No subordinated incentive fee on income will be payable in any calendar quarter in which the pre-incentive fee net investment income does not exceed a quarterly return to stockholders of 1.75% per quarter on our net assets at the end of the immediately preceding fiscal quarter (the “quarterly preferred return”).
|
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·
|
For any quarter in which pre-incentive fee net investment income exceeds the quarterly preferred return,
but is less than or equal to 2.1875% of our net assets at the end of the immediately preceding fiscal quarter (the “
catch up
”), the subordinated incentive fee on income shall equal 100% of pre-incentive fee net investment income.
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·
|
For any quarter in which pre-incentive fee net investment income exceeds 2.1875% of our net assets at the end of the immediately preceding fiscal quarter, the subordinated incentive fee on income shall equal 20% of pre-incentive fee net investment income.
|
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·
|
“Pre-incentive fee net investment income” is defined as interest income, dividend income and any other income accrued during the calendar quarter, minus operating expenses for the quarter, including the Base Management Fee, expenses payable to the Company’s administrator, any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the Incentive Fee. Pre-incentive fee net investment income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation.
|
The incentive fee on
capital gains will be earned on investments sold and shall be determined and payable in arrears as of the end of each calendar
year during which this Agreement is in effect. If this Agreement is terminated, the fee will also become payable as of the effective
date of such termination. The fee is equal to 20% of realized capital gains, less the aggregate amount of any previously paid incentive
fee on capital gains. Incentive fee on capital gains is equal to realized capital gains on a cumulative basis from inception, computed
net of all realized capital losses and unrealized capital depreciation on a cumulative basis.
(c)
Waiver or Deferral of
Fees
.
The Adviser shall have
the right to elect to waive or defer all or a portion of the Base Management Fee and/or Incentive Fee that would otherwise be paid
to it. Prior to the payment of any fee to the Adviser, the Company shall obtain written instructions from the Adviser with respect
to any waiver or deferral of any portion of such fees. Any portion of a deferred fee payable to the Adviser and not paid over to
the Adviser with respect to any month, calendar quarter or year shall be deferred without interest and may be paid over in any
such other month prior to the occurrence of the termination of this Agreement, as the Adviser may determine upon written notice
to the Company.
4.
Covenant of the Adviser
.
(a)
Registration of Adviser
The Adviser covenants
that it is or will be registered as an investment adviser under the Advisers Act on the effective date of this Agreement as set
forth in Section 9 herein, and shall maintain such registration until the expiration or termination of this Agreement. The Adviser
agrees that its activities shall at all times comply in all material respects with all applicable federal and state laws governing
its operations and investments. The Adviser agrees to observe and comply with applicable provisions of the code of ethics adopted
by the Company pursuant to Rule 17j-1 under the 1940 Act, as such code of ethics may be amended from time to time.
(b)
Reports to Stockholders
.
The Adviser shall prepare
or shall cause to be prepared and distributed to stockholders during each year the following reports of the Company (either included
in a periodic report filed with the SEC or distributed in a separate report):
(i)
Quarterly Reports.
Within 60 days of the end of each quarter, a report containing the same financial information contained in the Company’s
Quarterly Report on Form 10-Q filed by the Company under the Securities Exchange Act of 1934, as amended.
(ii)
Annual Report.
Within 120 days after the end of the Company’s fiscal year, an annual report containing:
(A) A balance
sheet as of the end of each fiscal year and statements of income, equity, and cash flow, for the year then ended, all of which
shall be prepared in accordance with generally accepted accounting principals and accompanied by an auditor’s report containing
an opinion of an independent certified public accountant;
(B) A report of the activities
of the Company during the period covered by the report;
(C) Where
forecasts have been provided to the Company’s shareholders, a table comparing the forecasts previously provided with the
actual results during the period covered by the report;
(D) A report
setting forth distributions by the Company for the period covered thereby and separately identifying distributions from (i) cash
flow from operations during the period; (ii) cash flow from operations during a prior period which have been held as reserves;
and (iii) proceeds from disposition of Company assets.
(iii)
Previous
Reimbursement Reports
. The Adviser shall prepare or shall cause to be prepared a report, prepared in accordance with the American
Institute of Certified Public Accountants United States Auditing Standards relating to special reports, and distributed to stockholders
not less than annually, containing an itemized list of the costs reimbursed to the Adviser for the previous fiscal year. The special
report shall at a minimum provide:
(A) A review of the time records
of individual employees, the costs of whose services were reimbursed; and
(B) A review of the specific
nature of the work performed by each such employee.
(iv)
Proposed
Reimbursement Reports
. The Adviser shall prepare or shall cause to be prepared a report containing an itemized estimate of
all proposed expenses for which it shall receive reimbursements pursuant to Section 2(c) of this Agreement for the next fiscal
year, together with a breakdown by year of such expenses reimbursed in each of the last five public programs formed by the Adviser.
(c)
Reports to State Administrators
.
The Adviser shall,
upon written request of any State Administrator, submit any of the reports and statements to be prepared and distributed by it
to such State Administrator.
(d)
Recommendations Regarding Reviews
.
From time to time and
not less than quarterly, the Adviser must review the Company’s accounts to determine whether cash distributions are appropriate.
The Company may, subject to authorization by the Board of Directors, distribute pro rata to the stockholders funds received by
the Company which the Adviser deems unnecessary to retain in the Company.
(e)
Temporary Investments
.
The Adviser shall,
in its sole discretion, temporarily place proceeds from offerings by the Company into short term, highly liquid investments which,
in its reasonable judgment, afford appropriate safety of principal during such time as it is determining the composition and allocation
of the portfolio of the Company and the nature, timing and implementation of any changes thereto pursuant to Section 1(b); provided
however, that the Adviser shall be under no fiduciary obligation to select any such short-term, highly liquid investment based
solely on any yield or return of such investment. The Adviser shall cause any proceeds of the offering of Company securities not
committed for investment within the later of two years from the date of effectiveness of the Registration Statement or one year
from termination of the offering, unless a longer period is permitted by the applicable State Administrator, to be paid as a distribution
to the stockholders of the Company as a return of capital without deduction of Front End Fees (as defined below).
5.
Brokerage Commissions
.
The Adviser is hereby
authorized, to the fullest extent now or hereafter permitted by law, to cause the Company to pay a member of a national securities
exchange, broker or dealer an amount of commission for effecting a securities transaction in excess of the amount of commission
another member of such exchange, broker or dealer would have charged for effecting that transaction, if the Adviser determines
in good faith, taking into account factors, including without limitation, price (including the applicable brokerage commission
or dealer spread), size of order, difficulty of execution, and operational facilities of the firm and the firm’s risk and
skill in positioning blocks of securities, that such amount of commission is reasonable in relation to the value of the brokerage
and/or research services provided by such member, broker or dealer, viewed in terms of either that particular transaction or its
overall responsibilities with respect to the Company’s portfolio, and is consistent with the Adviser’s duty to seek
the best execution on behalf of the Company. Notwithstanding the foregoing, with regard to transactions with or for the benefit
of the Company, the Adviser may not pay any commission or receive any rebates or give-ups, nor participate in any business arrangements
which would circumvent this restriction.
6.
Other Activities of the Adviser
.
The services of the
Adviser to the Company are not exclusive, and the Adviser may engage in any other business or render similar or different services
to others including, without limitation, the direct or indirect sponsorship or management of other investment-based accounts or
commingled pools of capital, however structured, having investment objectives similar to or different from those of the Company,
and nothing in this Agreement shall limit or restrict the right of any officer, director, stockholder (and their stockholders or
members, including the owners of their stockholders or members), officer or employee of the Adviser to engage in any other business
or to devote his or her time and attention in part to any other business, whether of a similar or dissimilar nature, or to receive
any fees or compensation in connection therewith (including fees for serving as a director of, or providing consulting services
to, one or more of the Company’s portfolio companies, subject to applicable law). The Adviser assumes no responsibility under
this Agreement other than to render the services set forth herein. It is understood that directors, officers, employees and stockholders
of the Company are or may become interested in the Adviser and its affiliates, as directors, officers, employees, partners, stockholders,
members, managers or otherwise, and that the Adviser and directors, officers, employees, partners, stockholders, members and managers
of the Adviser and its affiliates are or may become similarly interested in the Company as stockholders or otherwise.
7.
Indemnification
.
(a)
Indemnification
.
Subject to Section 8, the Adviser, any Sub-Adviser, each of their directors, officers, stockholders or members (and their stockholders
or members, including the owners of their stockholders or members), agents, employees, controlling persons (as determined under
the 1940 Act (“
Controlling Persons
”)) and any other person or entity affiliated with, or acting on behalf
of, the Adviser or any Sub-Adviser (each an “
Indemnified Party
” and, collectively, the “
Indemnified
Parties
”) shall not be liable to the Company for any action taken or omitted to be taken by the Adviser or any Sub-Adviser
in connection with the performance of any of their duties or obligations under this Agreement or otherwise as an investment adviser
of the Company (except to the extent specified in Section 36(b) of the 1940 Act concerning loss resulting from a breach of fiduciary
duty with respect to the receipt of compensation for services), and the Company shall indemnify, defend and protect the Indemnified
Parties (each of whom shall be deemed a third party beneficiary hereof) and hold them harmless from and against all losses, damages,
liabilities, costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) (“
Losses
”)
incurred by the Indemnified Parties in or by reason of any pending, threatened or completed action, suit, investigation or other
proceeding (including an action or suit by or in the right of the Company or its security holders) arising out of or otherwise
based upon the performance of any of the Indemnified Parties’ duties or obligations under this Agreement, any Sub-Advisory
Agreement, or otherwise as an investment adviser of the Company to the extent such Losses are not fully reimbursed by insurance
and otherwise to the fullest extent such indemnification would not be inconsistent with the Articles of Incorporation, the 1940
Act, or the laws of the State of Maryland law.
(b)
Advancement
of Funds
. The Company shall be permitted to advance funds to the Indemnified Parties for legal expenses and other costs incurred
as a result of any legal action for which indemnification is being sought only if all of the following conditions are met:
(i) The
legal action relates to acts or omissions with respect to the performance of duties or services on behalf of the Company;
(ii) the
Indemnified Party provides the Company with written affirmation of the Indemnified Party’s good faith belief that the Indemnified
Party has met the standard of conduct necessary for indemnification by the Company;
(iii) The
legal action is initiated by a third party who is not a Company stockholder, or the legal action is initiated by a Company stockholder
and a court of competent jurisdiction specifically approves such advancement; and
(iv) The
Indemnified Party provides the Company with a written agreement to repay the advanced funds to the Company, allocated as advanced,
together with the applicable legal rate of interest thereon, in cases in which the Indemnified Party is not found to be entitled
to indemnification pursuant to a final, non-appealable decision of a court of competent jurisdiction.
(c) The Adviser shall
indemnify the Company, and its affiliates and Controlling Persons, for any Losses that the Company or its Affiliates and Controlling
Persons may sustain as a result of the Adviser’s willful misfeasance, bad faith, gross negligence, reckless disregard of
its duties hereunder or violation of applicable law, including, without limitation, the federal and state securities laws.
8.
Limitation on Indemnification.
Notwithstanding Section
7(a) to the contrary, the Company shall not provide for indemnification of the Indemnified Parties for any liability or loss suffered
by the Indemnified Parties, nor shall the Company provide that any of the Indemnified Parties be held harmless for any loss or
liability suffered by the Company, unless all of the following conditions are met:
(i) the
Indemnified Party has determined, in good faith, that the course of conduct which caused the loss or liability was in the best
interests of the Company;
(ii) the
Indemnified Party was acting on behalf of or performing services for the Company;
(iii) such
liability or loss was not the result of willful misfeasance, bad faith, gross negligence or reckless disregard of its duties by
the Indemnified Party; and
(iv) such
indemnification or agreement to hold harmless is recoverable only out of the Company’s net assets and not from stockholders.
Furthermore, the Indemnified
Party shall not be indemnified for any losses, liabilities or expenses arising from or out of an alleged violation of federal or
state securities laws unless one or more of the following conditions are met:
(i) there
has been a successful adjudication on the merits of each count involving alleged material securities law violations;
(ii) such
claims have been dismissed with prejudice on the merits by a court of competent jurisdiction; or
(iii) a
court of competent jurisdiction approves a settlement of the claims against a particular indemnitee and finds that indemnification
of the settlement and related costs should be made, and the court of law considering the request for indemnification has been advised
of the position of the SEC and the published position of any state securities regulatory authority in which securities of the Company
were offered or sold as to indemnification for violations of securities laws.
9.
Effectiveness, Duration and Termination of Agreement
.
(a)
Term and Effectiveness
.
This Agreement shall become effective as of [ ]. Once effective, this Agreement shall remain in effect
for two years, and thereafter shall continue automatically for successive one-year periods, provided that such continuance is specifically
approved at least annually by: (i) the vote of the Board of Directors, or by the vote of a majority of the outstanding voting securities
of the Company and (ii) the vote of a majority of the Company’s directors who are not parties to this Agreement or “interested
persons” (as such term is defined in Section 2(a)(19) of the 1940 Act) of any such party (“
Independent Directors
”),
in accordance with the requirements of the 1940 Act.
(b)
Termination
.
This Agreement may be terminated at any time, without the payment of any penalty: (i) by the Company upon 60 days’ prior
written notice to the Adviser: (A) upon the vote of a majority of the outstanding voting securities of the Company (as defined
in Section 2(a)(42) of the 1940 Act) or (B) by the vote of the Company’s Independent Directors; or (ii) by the Adviser upon
not less than 120 days’ prior written notice to the Company. This Agreement shall automatically terminate in the event of
its “assignment” (as such term is defined for purposes of construing Section 15(a)(4) of the 1940 Act). The provisions
of Sections 8 and 9 of this Agreement shall remain in full force and effect, and the Adviser shall remain entitled to the benefits
thereof, notwithstanding any termination of this Agreement.
(c)
Payments to and Duties of Adviser Upon Termination
.
(i) After
the termination of this Agreement, the Adviser shall not be entitled to compensation for further services provided hereunder except
that it shall be entitled to receive from the Company within 30 days after the effective date of such termination all unpaid reimbursements
and all earned but unpaid fees payable to the Adviser prior to termination of this Agreement, including any deferred fees.
(ii) The Adviser shall promptly
upon termination:
(a) deliver
to the Board of Directors a full accounting, including a statement showing all payments collected by it and a statement of all
money held by it, covering the period following the date of the last accounting furnished to the Board of Directors;
(b) deliver
to the Board of Directors all assets and documents of the Company then in custody of the Adviser; and
(c) cooperate
with the Company to provide an orderly transition of services.
10.
Notices.
Any notice under this
Agreement shall be given in writing, addressed and delivered or mailed, postage prepaid, to the other party at the address listed
below or at such other address for a party as shall be specified in a notice given in accordance with this Section.
11.
Amendments
.
This Agreement may be amended by mutual
written consent of the parties, subject to the provisions of the 1940 Act.
12.
Counterparts
.
This Agreement may
be executed in counterparts, each of which shall be deemed to be an original copy and all of which together shall constitute one
and the same instrument binding on all parties hereto, notwithstanding that all parties shall not have signed the same counterpart.
13.
Governing Law
.
Notwithstanding the
place where this Agreement may be executed by any of the parties hereto and the provisions of Section 7, this Agreement shall be
construed in accordance with the laws of the State of New York. For so long as the Company is regulated as a BDC under the 1940
Act, this Agreement shall also be construed in accordance with the applicable provisions of the 1940 Act and the Advisers Act.
In such case, to the extent the applicable laws of the State of New York or any of the provisions herein conflict with the provisions
of the 1940 Act or the Advisers Act, the latter shall control. Any reference in this Agreement to a statute or provision of the
1940 Act shall be construed to include any successor statute or provision to such statute or provision and any reference to any
rule promulgated under the Advisers Act shall be construed to include any successor promulgated rule.
IN WITNESS WHEREOF,
the parties hereto have caused this Agreement to be duly executed on the date above written.
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SIERRA INCOME CORPORATION,
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a Maryland corporation
|
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By:
|
/s/
|
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Name: Seth Taube
|
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Title: Chief Executive Officer
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MCC ADVISORS LLC,
|
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a Delaware limited liability company
|
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By:
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/s/
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Name: Richard T. Allorto, Jr.
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Title: Chief Financial Officer
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Appendix A
Below are examples of the two-part incentive fee:
Example Subordinated Incentive Fee on Income, Determined
on a Quarterly Basis
Assumptions
First Quarter:
|
Pre-incentive fee net investment income equals 0.5500%.
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Second Quarter:
|
Pre-incentive fee net investment income equals 1.9500%.
|
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Third Quarter:
|
Pre-incentive fee net investment income equals 2.800%.
|
|
|
The subordinated incentive fee on income in this example would be:
|
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|
First Quarter:
|
Pre-incentive fee net investment income does not exceed the 1.75% preferred return rate, therefore
there is no catch up or split incentive fee on pre-incentive fee net investment income.
|
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Second Quarter:
|
Pre-incentive fee net investment income falls between the 1.75% preferred return rate and the catch up of 2.1875%, therefore the incentive fee on pre-incentive fee net investment income is 100% of the pre-incentive fee above the 1.75% preferred return of 1.95%.
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Third Quarter:
|
Pre-incentive fee net investment income exceeds the 1.75% preferred return and the 2.1875% catch up provision. Therefore the catch up provision is fully satisfied by the 2.8% of pre-incentive fee net investment income above the 1.75% preferred return rate and there is a 20% incentive fee on pre-incentive fee net investment income above the 2.1875%
“
catch up.
”
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Example Incentive Fee on Capital Gains (Millions)
|
Alternative 1 — Assumptions
|
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Year 1:
|
$20 million investment made in company A (
“
Investment A
”
), and $30 million investment made in company B (
“
Investment B
”
)
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Year 2:
|
Investment A sold for $50 million and fair market value, or FMV, of Investment B determined to be $32 million
|
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Year 3:
|
FMV of Investment B determined to be $25 million
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Year 4:
|
Investment B sold for $31 million
|
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The capital gains portion of the incentive fee would be:
|
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Year 1:
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None, because no investments were sold
|
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Year 2:
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Capital gains incentive fee of $6 million ($30 million realized capital gains on sale of Investment A multiplied by 20%)
|
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Year 3:
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None, because no investments were sold
|
Year 4:
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Capital gains incentive fee of $200,000 ($6.2 million ($31 million cumulative realized capital gains multiplied by 20%) less $6 million (capital gains fee taken in Year 2)
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Alternative 2 — Assumptions
|
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Year 1:
|
$20 million investment made in Company A (
“
Investment A
”
), $30 million investment made in Company B (
“
Investment B
”
), $25 million investment made in Company C (
“
Investment C
”
) and the cost basis of Other Portfolio Investments is $25 million
|
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Year 2:
|
Investment A sold for $50 million ($20 million cost basis to be reinvested into Other Portfolio Investments and the $30 million capital gain is available for distribution), fair market value, or FMV, of Investment B determined to be $25 million (creates $5 million in unrealized capital depreciation), the FMV of Investment C determined to be $25 million and FMV of Other Portfolio Investments determined to be $25 million
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Year 3:
|
FMV of Investment B determined to be $27 million (creates $3 million in unrealized capital depreciation), Investment C sold for $30 million ($25 million cost basis to be reinvested into Other Portfolio Investments and the $5 million capital gain is available for distribution) and FMV of Other Portfolio Investments determined to be $45 million
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Year 4:
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FMV of Investment B determined to be $30 million and FMV of Other Portfolio Investments determined to be $45 million
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Year 5:
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Investment B sold for $20 million ($20 million cost basis to be reinvested into Other Portfolio Investments and $10 million capital loss) and FMV of Other Portfolio Investments determined to be $45 million
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Year 6:
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Total Portfolio is sold for $80 million ($15 million capital gain computed based on a cumulative cost basis in Other Portfolio Investments of $65 million)
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The incentive fee on capital gains in this example would be:
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Year 1:
|
None, because no investments were sold
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Year 2:
|
$5 million incentive fee on capital gains (20% multiplied by $25 million ($30 million realized capital gains on Investment A less unrealized capital depreciation on Investment B))
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Year 3:
|
$1.4 million incentive fee on capital gains ($6.4 million (20% multiplied by $32 million ($35 million cumulative realized capital gains less $3 million unrealized capital depreciation))) less $5 million incentive fee on capital gains received in Year 2
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Year 4:
|
None, because capital gains incentive fees are paid on realized capital gains only
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Year 5:
|
None, because $5 million (20% multiplied by $25 million (cumulative realized capital gains of $35 million less realized capital losses of $10 million)) is less than $6.4 million cumulative incentive fee on capital gains paid in prior years
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Year 6:
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$1.6 million incentive fee on capital gains (20% multiplied by $40 million ($25 million cumulative realized capital gains plus $15 million realized capital gains)) less $6.4 million cumulative incentive fee on capital gains received in prior years
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Medley Capital (NYSE:MCC)
Historical Stock Chart
From Mar 2024 to Apr 2024
Medley Capital (NYSE:MCC)
Historical Stock Chart
From Apr 2023 to Apr 2024