Document:

Exhibit 10.2

 

SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT
(this "Agreement"), is entered into as of February 26, 2020, by VerifyMe, Inc., a Nevada corporation (the "Borrower"),
on behalf of each of the persons who is a holder of the Debentures, as defined below, and each of whom shall be an express third
party beneficiary of this Agreement and able to enforce the terms hereof in accordance with the provisions hereof as if such person
was an original signatory hereto (each, a "Secured Party" or the "Secured Parties," as defined
below). All capitalized terms not otherwise defined herein shall the meanings ascribed to them in that certain Securities Purchase
Agreement by and between Borrower and the Secured Parties of even date (the "Securities Purchase Agreement").

 

RECITALS

 

WHEREAS, the Secured
Parties have loaned monies to Borrower, as more particularly described in the Securities Purchase Agreement and as evidenced by
senior secured convertible debentures issued by Borrower to the Secured Parties on February 26, 2020 (the "Debentures");

 

WHEREAS, the term
"Secured Parties" as used in this Agreement shall mean, collectively, all holders of the Debentures, including
those persons who become holders of the Debenture subsequent to the date hereof; and

 

WHEREAS, this Agreement is being executed
and delivered by Borrower to secure the obligations of Borrower under the Debentures.

 

NOW, THEREFORE, for
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each of the parties hereto hereby
agrees as follows:

 

1.            Obligations
Secured. This Agreement secures, in part, the prompt payment and performance of all obligations of Borrower under the Debentures,
and all renewals, extensions, modifications, amendments, and/or supplements thereto (collectively, the "Secured Obligations").

 

2.            Grant
of Security.

 

a.           Collateral.
Borrower hereby grants, pledges, and assigns for the benefit of the Secured Parties, and there is hereby created in favor of each
of the Secured Parties, a security interest in and to all of Borrower’s (inclusive of all of Borrower’s subsidiaries)
right, title, and interest in, to, and under all of the collateral set forth on Exhibit A hereto (collectively,
"Collateral").

 

b.          Effective
Date. This grant of security shall be effective as of the date hereof.

 

c.           Subordination.
The Debenture and the Secured Obligations shall not be subordinated, or junior in right of interest, to any other obligations of
Borrower, subject to the liens incurred under clause (ii) of the definition of Permitted Liens herein.

 

d.          Filings
to Perfect Security. Borrower will (and is hereby authorized to) file with any filing office such financing statements, amendments,
addenda, continuations, terminations, assignments and other records (whether or not executed by Borrower) to perfect and to maintain
perfected security interests in the Collateral by the Secured Parties, whereby (a) promptly upon the execution of this Agreement,
a Financing Statement on Form UCC-1 (the "Financing Statement'') shall be filed in the appropriate jurisdiction(s)
on behalf of the Secured Parties with respect to the Collateral. The Financing Statement shall designate each of the Secured Parties
as a Secured Party and Borrower as the debtor, shall identify the security interest in the Collateral, and contain any other items
required by law.

 

    	 	 	 

    	 	 

    

 

3.            Transfers
and Other Liens. Except as set forth herein or in the Debenture, Borrower shall not, without the prior written consent of all
of the Secured Parties, at their sole and absolute discretion:

 

		a.	Sell, transfer, assign, or dispose of (by operation of law or otherwise), any of the Collateral
outside of the ordinary course of business; or

 

		b.	Create or suffer to exist any lien, security interest, or other charge or encumbrance upon or with
respect to any of the Collateral, except (i) the security interests created hereby and (ii) Permitted Liens (as defined herein);
or

 

		c.	Permit any of the Collateral to be levied upon under any legal process.

 

For purposes of this Agreement, the term
“Permitted Liens” means (i) mechanic’s, materialmen’s, warehousemen’s, carriers’, landlord’s,
or manufacturer's liens on assets acquired by the Borrower after the date of this Agreement in the ordinary course of business
(which do not materially impair the use of such assets in the operation of business) with respect to obligations which are not
overdue for a period longer than thirty (30) days or which are being contested in good faith by appropriate proceedings and for
which adequate reserves have been established in accordance with generally accepted accounting principles, (ii) purchase money
liens held by a regional bank or national bank securing indebtedness incurred after the date of this Agreement for the purchase
of fixed or capital assets after the date of this Agreement, which, if properly perfected, shall be senior in priority to the security
interest of the Debentures as to the fixed or capital asset so purchased, (iii) liens for taxes or other governmental charges which
are not delinquent or which are being contested in good faith and for which a reserve shall have been established in accordance
with generally accepted accounting principles, (iv) other liens, security interests and charges in existence on the date hereof
of which the Secured Parties are aware, and (v) checks deposited by the Borrower into the Borrower's bank account which have bounced
within five (5) business days thereafter due to insufficient funds in the payor's bank account.

 

4.            Representations
and Warranties. Borrower hereby represents and warrants to the Secured Parties as follows: (a) to Borrower's knowledge, Borrower
is the owner of the Collateral (or, in the case of after-acquired Collateral, at the time Borrower acquires rights in the Collateral,
will be the owner thereof) and that, except as expressly provided herein, no other person has (or, in the case of after-acquired
Collateral, at the time Borrower acquires rights therein, will have) any right, title, claim or interest (by way of Lien or otherwise)
in, against or to the Collateral; (b) to Borrower's knowledge, except as expressly provided herein, upon the filing of a Financing
Statement as provided herein, the Secured Parties (or in the case of after-acquired Collateral, at the time Borrower acquires rights
therein, will have) will have a perfected security interest in the Collateral to the extent that a security interest in the Collateral
can be perfected by such filing; (c) all Accounts Receivable (as defined in Exhibit A) are genuine and
enforceable against the party obligated to pay the same; (d) Borrower has full power and authority to enter into the transactions
provided for in this Agreement and the Debenture; (e) this Agreement and the Debenture, when executed and delivered by Borrower,
will constitute the legal, valid and binding obligations of Borrower enforceable in accordance with their respective terms (subject
to general principles of equity and to bankruptcy, insolvency, moratorium, and other similar laws affecting the enforcement of
creditors’ rights generally); (f) the execution and delivery by Borrower of this Agreement and the Debenture and the performance
and consummation of the transactions contemplated hereby and thereby do not and will not violate Borrower's articles of incorporation
or by-laws or any material judgment, order, writ, decree, statute, rule or regulation applicable to Borrower; (g) there does not
exist any default or violation by Borrower of or under any of the terms, conditions or obligations of (i) any indenture, mortgage,
deed of trust, franchise, permit, contract, agreement, or other instrument to which Borrower is a party or by which Borrower is
bound, or (ii) any law, ordinance, regulation, ruling, order, injunction, decree, condition or other requirement applicable to
or imposed upon Borrower by any law, the action of any court or any governmental authority or agency; and the execution, delivery
and performance of this Agreement will not result in any such default or violation; (h) there is no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand pending or, to the knowledge, of Borrower, threatened which adversely affects
Borrower's business or financial condition and there is no basis known to Borrower for any action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand which could result in the same; and (i) this Agreement and the Debenture, taken as a whole,
do not contain any untrue statement of material fact or omit to state a material fact necessary in order to make the statements
contained in this Agreement and the Debenture not misleading.

 

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5.            Events
of Default. For purposes of this Agreement, the term "Event of Default" shall mean and refer to any of the
following:

 

		a.	Failure of Borrower to perform or observe any covenant set forth in this Agreement, or to perform
or observe any other term, condition, covenant, warranty, agreement or other provision contained in this Agreement, where such
failure continues for fifteen (15) days after receipt of written notice from Lender specifying such failure;

 

		b.	Any representation or warranty made or furnished by Borrower in writing in connection with this
Agreement and the Debenture or any statement or representation made in any certificate, report or opinion delivered pursuant to
this Agreement or in connection with this Agreement is false, incorrect or incomplete in any material respect at the time it is
furnished; or

 

		c.	Occurrence of any Event of Default as defined in the Debenture.

 

6.            Remedies.
Upon the occurrence and during the continuance of an Event of Default (subject to the notice and cure provisions provided for herein,
if any), each Secured Party shall have the rights of a secured creditor under the Uniform Commercial Code of the applicable jurisdiction(s),
all rights granted by the Debenture, this Security Agreement and by law, including the right to require Borrower to assemble the
Collateral and make it available to the Secured Parties at a place to be designated by Borrower. The rights and remedies provided
in this Agreement and the Debenture are cumulative and may be exercised independently or concurrently, and are not exclusive of
any other right or remedy provided at law or in equity. No failure to exercise or delay by the Secured Parties in exercising any
right or remedy under this Agreement or the Debenture shall impair or prohibit the exercise of any such rights or remedies in the
future or be deemed to constitute a waiver or limitation of any such right or remedy or acquiescence therein. Every right and remedy
granted to the Secured Parties under this Agreement and the Debenture or by law or in equity may be exercised by the Secured Parties
only upon the election of the Secured Parties holding at least a majority in principal amount of the outstanding Debentures at
the time of the action to be taken. In the event that the Secured Parties elect to pursue remedies hereunder, the Secured Parties
shall designate a Secured Party representative to act on behalf of all of the Secured Parties in all dealings with the Company
under this Agreement, with such representative to serve pursuant to an agreement among the Secured Parties on mutually acceptable
terms regarding the representative’s authority, limitation of liability and other relevant items.

 

7.             Further
Assurances. Borrower agrees that, from time to time, at its own expense, it will:

 

		a.	Protect and defend the Collateral against all claims and demands of all persons at any time claiming
the same or any interest therein, and preserve and protect Secured Party's security interest in the Collateral.

 

		b.	Promptly execute and deliver to Secured Parties all instruments and documents, and take all further
action necessary or desirable, as any Secured Party may reasonably request to (i) continue, perfect, or protect any security interest
granted or purported to be granted hereby, and (ii) enable a Secured Party to exercise and enforce any of Secured Party's rights
and remedies hereunder with respect to any Collateral.

 

		c.	Permit a Secured Party's representatives to inspect and make copies of all books and records relating
to the Collateral, wherever such books and records are located, and to conduct an audit relating to the Collateral at any reasonable
time or times.

 

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8.             Notices.
All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery
to the party to be notified, (b) when sent by confirmed telex, e-mail or facsimile if sent during normal business hours of the
recipient, if not, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return
receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying
next day delivery, with written verification of receipt. All communications shall be sent as follows:

 

If to the Borrower, to:

 

VERIFYME, INC.

75 S. Clinton Ave., Suite 510

Rochester, NY 14604

e-mail : ap@verifyme.com

 

With copies to (which shall not constitute notice):

 

Harter Secrest & Emery LLP

1600 Bausch & Lomb Place

Rochester, NY 14604

Attention: Alex R. McClean

Email: amcclean@hselaw.com

 

If to Secured Party:

 

At the address stated in the Securities
Purchase Agreement

 

or to such other address or telecopy number as the
party to whom notice is to be given may have furnished to the other party in writing in accordance herewith.

 

9.           Amendments
and Waivers. No modification, amendment or waiver of any provision of, or consent required by, this Agreement, nor any consent
to any departure herefrom, shall be effective unless it is in writing and signed by each of the parties hereto. Such modification,
amendment, waiver or consent shall be effective only in the specific instance and for the purpose for which given.

 

10.          Exclusivity
and Waiver of Rights. No failure to exercise and no delay in exercising on the part of any party, any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude
any other right, power or privilege. The rights and remedies herein provided are cumulative and are not exclusive of any other
rights or remedies provided by law.

 

11.          Invalidity.
Any term or provision of this Agreement shall be ineffective to the extent it is declared invalid or unenforceable, without rendering
invalid or enforceable the remaining terms and provisions of this Agreement.

 

12.          Headings.
Headings used in this Agreement are inserted for convenience only and shall not affect the meaning of any term or provision of
this Agreement.

 

13.         Counterparts.
This Agreement may be executed in one or more counterparts, each of which shall be deemed an original instrument, but all of which
collectively shall constitute one and the same agreement.

 

14.         Assignment.
This Agreement and the rights and obligations hereunder shall not be assignable or transferable by the any of the parties without
the prior written consent of all Secured Parties, at their sole and absolute discretion.

 

15.        Survival.
Unless otherwise expressly provided herein, all representations warranties, agreements and covenants contained in this Agreement
shall survive the execution hereof and shall remain in full force and effect until the earliest to occur of (a) the payment in
full of the Debenture, and (b) the conversion of the principal and accrued and unpaid interest and all other amounts owing under
the Debenture into common stock of Borrower.

 

16.         Miscellaneous.
This Agreement shall inure to the benefit of each of the parties hereto and all their respective successors and permitted assigns.
Nothing in this Agreement is intended or shall be construed to give to any other person, firm or corporation any legal or equitable
right, remedy or claim under or in respect of this Agreement or any provision herein contained.

 

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17.         GOVERNING
LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING
EFFECT TO ANY CHOICE OR CONFLICT OF LAWS PROVISIONS).

 

18.         CONSENT
TO JURISDICTION. EACH OF THE PARTIES CONSENTS TO THE EXCLUSIVE JURISDICTION AND
VENUE OF THE FEDERAL COURTS LOCATED IN MONROE COUNTY, NEW YORK IN CONNECTION WITH ANY DISPUTE ARISING UNDER THIS AGREEMENT, AND
EACH WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS. THIS PROVISION IS INTENDED TO BE A “MANDATORY” FORUM SELECTION
CLAUSE AND GOVERNED BY AND INTERPRETED CONSISTENT WITH NEW YORK LAW. EACH OF THE PARTIES HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION
AND VENUE OF ANY FEDERAL COURT HAVING ITS SITUS IN MONROE COUNTY, NEW YORK, AND EACH WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS.

 

19.         Attorneys'
Fees. In the event that any suit or action is instituted to enforce any provision in this Agreement, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs and expenses of enforcing any right of such prevailing
party under or with respect to this Agreement, including without limitation, such reasonable fees and expenses of attorneys and
accountants, which shall include, without limitation, all fees, costs and expenses of appeals.

 

20.          Entire
Agreement. This Agreement and the agreements specifically referenced herein contain the entire agreement among the parties
with respect to the transactions contemplated by this Agreement and supersede all prior agreements or understandings among the
parties with respect to the subject matter hereof.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, this Security Agreement
has been executed as of the date first set written above.

 

 

"BORROWER"

 

VERIFYME, INC.

 

 

 

	By: 	/s/ Patrick White	 
	Name: Patrick White
	Title: Chief Executive Officer

 

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EXHIBIT A COLLATERAL

 

Borrower hereby grants,
pledges, and assigns for the benefit of each Secured Party, and there is hereby created in favor of the Secured Parties, a security
interest in and to all of Borrower's right, title, and interest in, to, and under all assets and all personal property of Borrower
and its subsidiaries, whether now or hereafter existing, or now owned or hereafter acquired, including but not limited to the following
(collectively, "Collateral"):

 

1.         
All accounts, chattel paper, contracts, contract rights, accounts receivable, tax refunds, note receivable, documents, other choses
in action and general intangibles, including, but not limited to, proceeds of inventory and returned goods and proceeds from the
sale of goods and services, and all rights, liens, securities, guaranties, remedies and privileges related thereto, including the
right of stoppage in transit and rights and property of any kind forming the subject matter of any of the foregoing ("Accounts
Receivable");

 

2.         
All time, savings, demand, certificate of deposit or other accounts in the name of Borrower or in which Borrower has any right,
title or interest, including but not limited to all sums now or at any time hereafter on deposit, and any renewals, extensions
or replacements of and all other property which may from time to time be acquired directly or indirectly using the proceeds of
any of the foregoing;

 

3.         
All inventory and equipment of every type or description wherever located, including, but not limited to all raw materials, parts,
containers, work in process, finished goods, goods in transit, wares, merchandise furniture, fixtures, hardware, machinery, tools,
parts, supplies, automobiles, trucks, other intangible property of whatever kind and wherever located associated with the Borrower's
business, tools and goods returned for credit, repossessed, reclaimed or otherwise reacquired by Borrower;

 

4.         
All documents of title and other property from time to time received, receivable or otherwise distributed in respect of, exchange
or substitution for or addition to any of the foregoing including, but not limited to, any documents of title;

 

5.       All
know-how, information, permits, patents, copyrights, goodwill, trademarks, trade names, licenses and approvals held by Borrower,
including all other intangible property of Borrower;

 

6.          
All assets of any type or description that may at any time be assigned or delivered to or come into possession of Borrower for
any purpose for the account of Borrower or as to which Borrower may have any right, title, interest or power, and property in the
possession or custody of or in transit to anyone for the account of Borrower, as well as all proceeds and products thereof and
accessions and annexations thereto; and

 

7.          
All proceeds (including but not limited to insurance proceeds) and products of and accessions and annexations to any of the foregoing.

 

 

7Exhibit 4.7

 

DESCRIPTION OF SECURITIES

 

The following is a brief description of the securities of Stellus
Capital Investment Corporation (the “Company,” “we,” “our” or “us”),
registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This description
of our securities does not purport to be complete and is subject to and qualified in its entirety by reference to the applicable
provisions of Maryland General Corporation Law (the “MGCL”), and the full text of our charter, bylaws and the relevant
indenture and supplemental indenture governing the debt securities described herein. As of December 31, 2019 and the date hereof,
our common stock and the debt securities described herein are the only securities that we have registered under Section 12 of the
Exchange Act.

 

		A.	Common Stock

 

As of December 31, 2019, our authorized stock consists of 100,000,000
shares of stock, par value $0.001 per share, all of which are initially designated as common stock. Our common stock is listed
on the New York Stock Exchange under the ticker symbol “SCM.” There are no outstanding options or warrants to purchase
our stock. No stock has been authorized for issuance under any equity compensation plans. Our fiscal year-end is December 31st.
Under Maryland law, our stockholders generally are not personally liable for our debts or obligations.

 

Under our charter, our board of directors is authorized to classify
and reclassify any unissued shares of stock into other classes or series of stock without obtaining stockholder approval. As permitted
by the MGCL, our charter provides that the board of directors, without any action by our stockholders, may amend the charter from
time to time to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series
that we have authority to issue.

 

All shares of our common stock have equal rights as to earnings,
assets, voting, and distributions and, when they are issued, will be duly authorized, validly issued, fully paid and nonassessable.
Distributions may be paid to the holders of our common stock if, as and when authorized by our board of directors and declared
by us out of assets legally available therefor. Shares of our common stock have no preemptive, conversion or redemption rights
and are freely transferable, except where their transfer is restricted by federal and state securities laws or by contract. In
the event of our liquidation, dissolution or winding up, each share of our common stock would be entitled to share ratably in all
of our assets that are legally available for distribution after we pay all debts and other liabilities and subject to any preferential
rights of holders of our preferred stock, if any preferred stock is outstanding at such time. Each share of our common stock is
entitled to one vote on all matters submitted to a vote of stockholders, including the election of directors. Except as provided
with respect to any other class or series of stock, the holders of our common stock possess exclusive voting power. There is no
cumulative voting in the election of directors, which means that holders of a majority of the outstanding shares of common stock
can elect all of our directors, and holders of less than a majority of such shares will be unable to elect any director.

 

     

     

    

 

Certain Provisions of the MGCL and Our Charter and Bylaws

 

The MGCL and our charter and bylaws contain provisions that
could make it more difficult for a potential acquirer to acquire us by means of a tender offer, proxy contest or otherwise. These
provisions are expected to discourage certain coercive takeover practices and inadequate takeover bids and to encourage persons
seeking to acquire control of us to negotiate first with our board of directors. We believe that the benefits of these provisions
outweigh the potential disadvantages of discouraging any such acquisition proposals because, among other things, the negotiation
of such proposals may improve their terms.

 

Classified Board of Directors

 

Our board of directors is divided into three classes of directors
serving staggered three-year terms. Upon expiration of their terms, directors of each class will be elected to serve for three-year
terms and until their successors are duly elected and qualify and each year one class of directors will be elected by the stockholders.
A classified board may render a change in control of us or removal of our incumbent management more difficult. We believe, however,
that the longer time required to elect a majority of a classified board of directors will help to ensure the continuity and stability
of our management and policies.

 

Election of Directors

 

Our charter and bylaws provide that the affirmative vote of
the holders of a plurality of the outstanding shares of stock entitled to vote in the election of directors cast at a meeting of
stockholders duly called and at which a quorum is present will be required to elect a director. Pursuant to our charter our board
of directors may amend the bylaws to alter the vote required to elect directors.

 

Number of Directors; Vacancies; Removal

 

Our charter provides that the number of directors will be set
only by the board of directors in accordance with our bylaws. Our bylaws provide that a majority of our entire board of directors
may at any time increase or decrease the number of directors. However, unless our bylaws are amended, the number of directors may
never be less than one or more than nine. Our charter provides that, at such time as we have at least three independent directors
and our common stock is registered under the Exchange Act, we elect to be subject to the provision of Subtitle 8 of Title 3 of
the MGCL regarding the filling of vacancies on the board of directors. Accordingly, at such time, except as may be provided by
the board of directors in setting the terms of any class or series of preferred stock, any and all vacancies on the board of directors
may be filled only by the affirmative vote of a majority of the remaining directors in office, even if the remaining directors
do not constitute a quorum, and any director elected to fill a vacancy will serve for the remainder of the full term of the directorship
in which the vacancy occurred and until a successor is elected and qualifies, subject to any applicable requirements of the Investment
Company Act of 1940, as amended (the “1940 Act”).

 

     

     

    

 

Our charter provides that a director may be removed only for
cause, as defined in our charter, and then only by the affirmative vote of at least two-thirds of the votes entitled to be cast
in the election of directors.

 

Action by Stockholders

 

Under the MGCL, stockholder action can be taken only at an annual
or special meeting of stockholders or (unless the charter provides for stockholder action by less than unanimous written consent,
which our charter does not) by unanimous written consent in lieu of a meeting. These provisions, combined with the requirements
of our bylaws regarding the calling of a stockholder-requested special meeting of stockholders discussed below, may have the effect
of delaying consideration of a stockholder proposal until the next annual meeting.

 

Advance Notice Provisions for Stockholder Nominations
and Stockholder Proposals

 

Our bylaws provide that with respect to an annual meeting of
stockholders, nominations of persons for election to the board of directors and the proposal of business to be considered by stockholders
may be made only (a) pursuant to our notice of the meeting, (b) by the board of directors or (c) by a stockholder who is entitled
to vote at the meeting and who has complied with the advance notice procedures of our bylaws. With respect to special meetings
of stockholders, only the business specified in our notice of the meeting may be brought before the meeting. Nominations of persons
for election to the board of directors at a special meeting may be made only (1) pursuant to our notice of the meeting, (2) by
the board of directors or (3) provided that the board of directors has determined that directors will be elected at the meeting,
by a stockholder who is entitled to vote at the meeting and who has complied with the advance notice provisions of the bylaws.
The purpose of requiring stockholders to give us advance notice of nominations and other business is to afford our board of directors
a meaningful opportunity to consider the qualifications of the proposed nominees and the advisability of any other proposed business
and, to the extent deemed necessary or desirable by our board of directors, to inform stockholders and make recommendations about
such qualifications or business, as well as to provide a more orderly procedure for conducting meetings of stockholders. Although
our bylaws do not give our board of directors any power to disapprove stockholder nominations for the election of directors or
proposals recommending certain action, they may have the effect of precluding a contest for the election of directors or the consideration
of stockholder proposals if proper procedures are not followed and of discouraging or deterring a third party from conducting a
solicitation of proxies to elect its own slate of directors or to approve its own proposal without regard to whether consideration
of such nominees or proposals might be harmful or beneficial to us and our stockholders.

 

Calling of Special Meetings of Stockholders

 

Our bylaws provide that special meetings of stockholders may
be called by our board of directors and certain of our officers. Additionally, our bylaws provide that, subject to the satisfaction
of certain procedural and informational requirements by the stockholders requesting the meeting, a special meeting of stockholders
will be called by the secretary of the corporation upon the written request of stockholders entitled to cast not less than a majority
of all the votes entitled to be cast at such meeting.

  

     

     

    

 

Approval of Extraordinary Corporate Action; Amendment
of Charter and Bylaws

 

Under Maryland law, a Maryland corporation generally cannot
dissolve, amend its charter, merge, sell all or substantially all of its assets, engage in a share exchange or engage in similar
transactions outside the ordinary course of business, unless approved by the affirmative vote of stockholders entitled to cast
at least two-thirds of the votes entitled to be cast on the matter. However, a Maryland corporation may provide in its charter
for approval of these matters by a lesser percentage, but not less than a majority of all of the votes entitled to be cast on the
matter. Our charter generally provides for approval of charter amendments and extraordinary transactions by the stockholders entitled
to cast at least a majority of the votes entitled to be cast on the matter. Our charter also provides that certain charter amendments,
any proposal for our conversion, whether by charter amendment, merger or otherwise, from a closed-end company to an open-end company
and any proposal for our liquidation or dissolution requires the approval of the stockholders entitled to cast at least 80% of
the votes entitled to be cast on such matter. However, if such amendment or proposal is approved by a majority of our continuing
directors (in addition to approval by our board of directors), such amendment or proposal may be approved by a majority of the
votes entitled to be cast on such a matter. In either event, in accordance with the requirements of the 1940 Act, any such amendment
or proposal that would have the effect of changing the nature of our business so as to cause us to cease to be, or to withdraw
our election as, a BDC would be required to be approved by a majority of our outstanding voting securities, as defined under the
1940 Act. The “continuing directors” are defined in our charter as (a) our current directors, (b) those directors whose
nomination for election by the stockholders or whose election by the directors to fill vacancies is approved by a majority of our
current directors then on the board of directors or (c) any successor directors whose nomination for election by the stockholders
or whose election by the directors to fill vacancies is approved by a majority of continuing directors or the successor continuing
directors then in office.

 

Our charter and bylaws provide that the board of directors have
the exclusive power to make, alter, amend or repeal any provision of our bylaws.

 

No Appraisal Rights

 

Except with respect to appraisal rights arising in connection
with the Control Share Act discussed below, as permitted by the MGCL, our charter provides that stockholders will not be entitled
to exercise appraisal rights unless a majority of the board of directors shall determine such rights apply.

 

Control Share Acquisitions

 

The MGCL provides that control shares of a Maryland corporation
acquired in a control share acquisition have no voting rights except to the extent approved by a vote of two-thirds of the votes
entitled to be cast on the matter, or the Control Share Act. Shares owned by the acquirer, by officers or by directors who are
employees of the corporation are excluded from shares entitled to vote on the matter. Control shares are voting shares of stock
which, if aggregated with all other shares of stock owned by the acquirer or in respect of which the acquirer is able to exercise
or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquirer to exercise voting
power in electing directors within one of the following ranges of voting power:

 

     

     

    

 

	 	•	one-tenth or more but less than one-third;

 

	 	•	one-third or more but less than a majority; or

 

	 	•	a majority or more of all voting power.

 

The requisite stockholder approval must be obtained each time
an acquirer crosses one of the thresholds of voting power set forth above. Control shares do not include shares the acquiring
person is then entitled to vote as a result of having previously obtained stockholder approval. A control share acquisition means
the acquisition of control shares, subject to certain exceptions.

 

A person who has made or proposes to make a control share acquisition
may compel the board of directors of the corporation to call a special meeting of stockholders to be held within 50 days of demand
to consider the voting rights of the shares. The right to compel the calling of a special meeting is subject to the satisfaction
of certain conditions, including an undertaking to pay the expenses of the meeting. If no request for a meeting is made, the corporation
may itself present the question at any stockholders meeting.

 

If voting rights are not approved at the meeting or if the acquiring
person does not deliver an acquiring person statement as required by the statute, then the corporation may redeem for fair value
any or all of the control shares, except those for which voting rights have previously been approved. The right of the corporation
to redeem control shares is subject to certain conditions and limitations, including, as provided in our bylaws, compliance with
the 1940 Act. Fair value is determined, without regard to the absence of voting rights for the control shares, as of the date of
the last control share acquisition by the acquirer or of any meeting of stockholders at which the voting rights of the shares are
considered and not approved. If voting rights for control shares are approved at a stockholders meeting and the acquirer becomes
entitled to vote a majority of the shares entitled to vote, all other stockholders may exercise appraisal rights. The fair value
of the shares as determined for purposes of appraisal rights may not be less than the highest price per share paid by the acquirer
in the control share acquisition.

 

The Control Share Act does not apply (a) to shares acquired
in a merger, consolidation or share exchange if the corporation is a party to the transaction or (b) to acquisitions approved or
exempted by the charter or bylaws of the corporation. Our bylaws contain a provision exempting from the Control Share Act any and
all acquisitions by any person of our shares of stock. There can be no assurance that such provision will not be amended or eliminated
at any time in the future. However, we will amend our bylaws to be subject to the Control Share Act only if the board of directors
determines that it would be in our best interests and if the Securities and Exchange Commission (the “SEC”) staff does
not object to our determination that our being subject to the Control Share Act does not conflict with the 1940 Act.

 

     

     

    

 

Business Combinations

 

Under Maryland law, “business combinations” between
a Maryland corporation and an interested stockholder or an affiliate of an interested stockholder are prohibited for five years
after the most recent date on which the interested stockholder becomes an interested stockholder, or the Business Combination Act.
These business combinations include a merger, consolidation, share exchange or, in circumstances specified in the statute, an asset
transfer or issuance or reclassification of equity securities. An interested stockholder is defined as:

 

	 	•	any person who beneficially owns 10% or more of the voting power of the corporation’s outstanding voting stock; or

 

	 	•	an affiliate or associate of the corporation who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of the voting power of then outstanding voting stock of the corporation.

 

 

A person is not an interested stockholder under this statute
if the board of directors approved in advance the transaction by which the stockholder otherwise would have become an interested
stockholder. However, in approving a transaction, the board of directors may provide that its approval is subject to compliance,
at or after the time of approval, with any terms and conditions determined by the board. After the five-year prohibition, any business
combination between the Maryland corporation and an interested stockholder generally must be recommended by the board of directors
of the corporation and approved by the affirmative vote of at least:

 

	 	•	80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation; and

 

	 	•	two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the interested stockholder with whom or with whose affiliate the business combination is to be effected or held by an affiliate or associate of the interested stockholder.

These super-majority vote requirements do not apply if the corporation’s
common stockholders receive a minimum price, as defined under Maryland law, for their shares in the form of cash or other consideration
in the same form as previously paid by the interested stockholder for its shares.

 

The statute permits various exemptions from its provisions,
including business combinations that are exempted by the board of directors before the time that the interested stockholder becomes
an interested stockholder. Our board of directors has adopted a resolution that any business combination between us and any other
person is exempted from the provisions of the Business Combination Act, provided that the business combination is first approved
by the board of directors, including a majority of the directors who are not interested persons as defined in the 1940 Act. This
resolution may be altered or repealed in whole or in part at any time; however, our board of directors will adopt resolutions so
as to make us subject to the provisions of the Business Combination Act only if the board of directors determines that it would
be in our best interests and if the SEC staff does not object to our determination that our being subject to the Business Combination
Act does not conflict with the 1940 Act. If this resolution is repealed, or the board of directors does not otherwise approve a
business combination, the statute may discourage others from trying to acquire control of us and increase the difficulty of consummating
any offer.

 

     

     

    

 

Conflict with 1940 Act

 

Our bylaws provide that, if and to the extent that any provision
of the MGCL, including the Control Share Act (if we amend our bylaws to be subject to such Act) and the Business Combination Act,
or any provision of our charter or bylaws conflicts with any provision of the 1940 Act, the applicable provision of the 1940 Act
will control.

 

		B.	Debt Securities – 5.75% Notes due 2022

 

On August 21, 2017, we issued $42.5 million in aggregate principal
amount of 5.75% fixed-rate notes due 2022 (the “2022 Notes”) under an indenture dated as of May 5, 2014 and the second
supplemental indenture thereto, dated August 21, 2017, entered into between us and U.S. Bank National Association, as trustee (together,
the “Indenture”). On September 8, 2017, the Company issued an additional $6.4 million in aggregate principal amount
of the 2022 Notes pursuant to a full exercise of the underwriters’ overallotment option.

 

The 2022 Notes will mature on September 15, 2022. The principal
payable at maturity will be 100% of the aggregate principal amount. The interest rate of the 2022 Notes is 5.75% per year and will
be paid every March 15, June 15, September 15 and December 15, which began December 15, 2017, and the regular record dates for
interest payments will be every March 1, June 1, September 1 and December 1 of each year, beginning December 1, 2017. If an interest
payment date falls on a non-business day, the applicable interest payment will be made on the next business day and no additional
interest will accrue as a result of such delayed payment. The initial interest period was the period from and including August
21, 2017, to, but excluding, the initial interest payment date, and the subsequent interest periods are the periods from and including
an interest payment date to, but excluding, the next interest payment date or the stated maturity date, as the case may be.

 

The 2022 Notes are issued in denominations of $25 and integral
multiples of $25 in excess thereof. The 2022 Notes are not subject to any sinking fund and holders of the 2022 Notes (the “Noteholders”)
do not have the option to have the 2022 Notes repaid prior to the stated maturity date.

 

The Indenture does not contain any provisions that give the
Noteholders protection in the event we issue a large amount of debt or are acquired by another entity.

 

     

     

    

 

We have the ability to issue indenture securities with terms
different from the 2022 Notes and, without the consent of the holders thereof, to reopen the 2022 Notes and issue additional 2022
Notes.

 

Optional Redemption

The 2022 Notes may be redeemed in whole or in part at any time
or from time to time at our option on or after September 15, 2019 upon not less than 30 days nor more than 60 days written notice
by mail prior to the date fixed for redemption thereof, at a redemption price of 100% of the outstanding principal amount of the
2022 Notes to be redeemed plus accrued and unpaid interest payments otherwise payable thereon for the then-current quarterly interest
period accrued to the date fixed for redemption.

 

The Noteholders may be prevented from exchanging or transferring
the 2022 Notes when they are subject to redemption. In case any 2022 Notes are to be redeemed in part only, the redemption notice
will provide that, upon surrender of such Note, the Noteholders will receive, without a charge, a new 2022 Note or 2022 Notes of
authorized denominations representing the principal amount of the Noteholders remaining unredeemed 2022 Notes. Any exercise of
our option to redeem the 2022 Notes will be done in compliance with the 1940 Act.

 

If we redeem only some of the 2022 Notes, the trustee will determine
the method for selection of the particular 2022 Notes to be redeemed, in accordance with the Indenture and in accordance with the
rules of any national securities exchange or quotation system on which the 2022 Notes are listed. Unless we default in payment
of the redemption price, interest will cease to accrue on the 2022 Notes called for redemption on and after the date of redemption.

 

Events of Default

 

The Noteholders have rights if an Event of Default occurs in
respect of the 2022 Notes, as described later in this subsection. The term “Event of Default” in respect of the 2022
Notes means any of the following:

 

	 	•	We do not pay the principal of (or premium, if any, on) any 2022 Note within five days of its due date.

 

	 	•	We do not pay interest on any 2022 Note when due, and such default is not cured within 30 days.

 

	 	•	We remain in breach of any other covenant with respect to the 2022 Notes for 60 days after we receive a written notice of default stating we are in breach. The notice must be sent by either the Trustee or holders of at least 25% of the principal amount of the 2022 Notes.

 

	 	•	We file for bankruptcy or certain other events of bankruptcy, insolvency or reorganization occur and in the case of certain orders or decrees entered against us under any bankruptcy law, such order or decree remains undischarged or unstayed for a period of 60 days.

 

	 	•	On the last business day of each of twenty-four consecutive calendar months, the 2022 Notes have an asset coverage of less than 100%, after giving effect to any exemptive relief granted to us by the SEC.

 

     

     

    

 

No periodic evidence is required to be furnished as to the absence
of default or as to compliance with the terms of the Indenture. An Event of Default for the 2022 Notes does not necessarily constitute
an Event of Default for any other series of debt securities issued under the same or any other indenture. The trustee may withhold
notice to the holders of the 2022 Notes of any default, except in the payment of principal or interest, if it in good faith considers
the withholding of notice to be in the best interests of the holders.

 

Remedies if an Event of Default Occurs

 

If an Event of Default has occurred and is continuing, the trustee
or the holders of not less than 25% in principal amount of the 2022 Notes may declare the entire principal amount of all the 2022
Notes to be due and immediately payable. This is called a declaration of acceleration of maturity. In certain circumstances, a
declaration of acceleration of maturity may be canceled by the holders of a majority in principal amount of the 2022 Notes if (1)
we have deposited with the trustee all amounts due and owing with respect to the 2022 Notes (other than principal that has become
due solely by reason of such acceleration) and certain other amounts, and (2) any other Events of Default have been cured or waived.

 

The trustee is not required to take any action under the Indenture
at the request of any holders unless the holders offer the trustee protection from expenses and liability reasonably satisfactory
to it (called an “indemnity”). If indemnity reasonably satisfactory to the trustee is provided, the holders of a majority
in principal amount of the 2022 Notes may direct the time, method and place of conducting any lawsuit or other formal legal action
seeking any remedy available to the trustee. The trustee may refuse to follow those directions in certain circumstances. No delay
or omission in exercising any right or remedy will be treated as a waiver of that right, remedy or Event of Default.

 

Before the Noteholders are allowed to bypass the trustee and
bring their own lawsuit or other formal legal action or take other steps to enforce their rights or protect their interests relating
to the 2022 Notes, the following must occur:

 

	 	•	The Noteholders must give the trustee written notice that an Event of Default has occurred and remains uncured;

 

	 	•	the holders of at least 25% in principal amount of all the 2022 Notes must make a written request that the trustee take action because of the default and must offer reasonable indemnity to the trustee against the costs, expenses and other liabilities of taking that action;

 

     

     

    

 

	 	•	the trustee must not have taken action for 60 days after receipt of the above notice and offer of indemnity; and

 

	 	•	the holders of a majority in principal amount of the 2022 Notes must not have given the trustee a direction inconsistent with the above notice during that 60-day period.

 

However, the Noteholders are entitled at any time to bring a
lawsuit for the payment of money due on their 2022 Notes on or after the due date.

 

Book-entry and other indirect holders should consult their
banks or brokers for information on how to give notice or direction to or make a request of the trustee and how to declare or cancel
an acceleration of maturity.

 

Each year, we will furnish to the trustee a written statement
of certain of our officers certifying that to their knowledge we are in compliance with the Indenture and the 2022 Notes, or else
specifying any default.

 

Waiver of Default

The holders of a majority in principal amount of the 2022 Notes
may waive any past defaults other than a default:

 

	 	•	the payment of principal of (or premium, if any) or interest; or

 

	 	•	in respect of a covenant that cannot be modified or amended without the consent of each holder.

 

Modification or Waiver

 

There are three types of changes we can make to the Indenture
and the 2022 Notes issued thereunder.

 

Changes Requiring the Noteholders’ Approval

 

First, there are changes that we cannot make to the Noteholders’
2022 Notes without their specific approval. The following is a list of those types of changes:

 

	 	•	change the stated maturity of the principal of or interest on the 2022 Notes;

 

	 	•	reduce any amounts due on the 2022 Notes;

 

     

     

    

 

	 	•	reduce the amount of principal payable upon acceleration of the maturity of a 2022 Note following a default;

 

	 	•	change the place or currency of payment on a 2022 Note;

 

	 	•	impair the Noteholders’ right to sue for payment;

 

	 	•	adversely affect any rights to convert or exchange any note in accordance with its terms;

 

	 	•	reduce the percentage of the Noteholders whose consent is needed to modify or amend the Indenture;

 

	 	•	reduce the percentage of the Noteholders whose consent is needed to waive compliance with certain provisions of the Indenture or to waive certain defaults; and

 

	 	•	modify any other material aspect of the Indenture dealing with supplemental indentures, modification and waiver of past defaults, reduction of the quorum or voting requirements or the waiver of certain covenants.

 

Changes Not Requiring Approval

 

The second type of change does not require any vote by the Noteholders.
This type is limited to clarifications and certain other changes that would not adversely affect the Noteholders in any material
respect.

 

Changes Requiring Majority Approval

 

Any other change to the Indenture and the 2022 Notes would require
the following approval:

 

	 	•	if the change affects only the 2022 Notes, it must be approved by the holders of a majority in principal amount of the 2022 Notes; and

 

	 	•	if the change affects more than one series of debt securities issued under the same indenture, it must be approved by the holders of a majority in principal amount of all of the series affected by the change, with all affected series voting together as one class for this purpose.

 

In each case, the required approval must be given by written
consent.

 

The holders of a majority in principal amount of all of the
series of debt securities issued under an indenture, voting together as one class for this purpose, may waive our compliance with
some of our covenants in that indenture. However, we cannot obtain a waiver of a payment default or of any of the matters covered
by the bullet points included above under “— Changes Requiring the Noteholders’ Approval.”

 

     

     

    

 

Further Details Concerning Voting

 

When taking a vote, we use the principal amount that would be
due and payable on the voting date if the maturity of the 2022 Notes were accelerated to that date because of a default, to decide
how much principal to attribute to the 2022 Notes:

 

The 2022 Notes will not be considered outstanding, and therefore
not eligible to vote, if we have deposited or set aside in trust money for their payment or redemption. The 2022 Notes will also
not be eligible to vote if they have been fully defeased as described later under “— Defeasance — Full
Defeasance.”

 

We are generally entitled to set any day as a record date for
the purpose of determining the Noteholders that are entitled to vote or take other action under the Indenture. However, the record
date may not be more than 30 days before the date of the first solicitation of holders to vote on or take such action. If we set
a record date for a vote or other action to be taken by the Noteholders, that vote or action may be taken only by persons who are
the Noteholders on the record date and must be taken within eleven months following the record date.

 

Defeasance

 

The following defeasance provisions are applicable to the 2022
Notes. “Defeasance” means that, by depositing with a trustee an amount of cash and/or government securities sufficient
to pay all principal and interest, if any, on the 2022 Notes when due and satisfying any additional conditions noted below, we
will be deemed to have been discharged from our obligations under the 2022 Notes. In the event of a “covenant defeasance,”
upon depositing such funds and satisfying similar conditions discussed below we would be released from certain covenants under
the Indenture relating to the 2022 Notes. The consequences to the Noteholders would be that, while they would no longer benefit
from certain covenants under the Indenture, and while the 2022 Notes could not be accelerated for any reason, the Noteholders nonetheless
would be guaranteed to receive the principal and interest owed to them.

 

Covenant Defeasance

 

Under current U.S. federal tax law and the Indenture, we can
make the deposit described below and be released from some of the restrictive covenants in the Indenture under which the 2022 Notes
were issued. This is called “covenant defeasance.” In that event, the Noteholders would lose the protection of those
restrictive covenants but would gain the protection of having money and government securities set aside in trust to repay their
2022 Notes. If we achieve covenant defeasance and the Noteholders’ 2022 Notes were subordinated as described under “Indenture
Provisions — Ranking” below, such subordination would not prevent the trustee under the Indenture from applying
the funds available to it from the deposit described in the first bullet below to the payment of amounts due in respect of such
debt securities for the benefit of the subordinated debtholders. In order to achieve covenant defeasance, we must do the following:

 

	 	•	Since the 2022 Notes are denominated in U.S. dollars, we must deposit in trust for the benefit of all the Noteholders a combination of cash and U.S. government or U.S. government agency notes or bonds that will generate enough cash to make interest, principal and any other payments on the 2022 Notes on their various due dates;

 

     

     

    

 

	 	•	we must deliver to the trustee a legal opinion of our counsel confirming that, under current U.S. federal income tax law, we may make the above deposit without causing the Noteholders to be taxed on the 2022 Notes any differently than if we did not make the deposit;

 

	 	•	we must deliver to the trustee a legal opinion of our counsel stating that the above deposit does not require registration by us under the 1940 Act, and a legal opinion and officers’ certificate stating that all conditions precedent to covenant defeasance have been complied with;

 

	 	•	defeasance must not result in a breach or violation of, or result in a default under, the Indenture or any of our other material agreements or instruments; and

 

	 	•	no default or event of default with respect to the 2022 Notes shall have occurred and be continuing and no defaults or events of default related to bankruptcy, insolvency or reorganization shall occur during the next 90 days.

If we accomplish covenant defeasance, the Noteholders can still
look to us for repayment of the 2022 Notes if there were a shortfall in the trust deposit or the trustee is prevented from making
payment. In fact, if one of the remaining Events of Default occurred (such as our bankruptcy) and the 2022 Notes became immediately
due and payable, there might be a shortfall. Depending on the event causing the default, the Noteholders may not be able to obtain
payment of the shortfall.

 

Full Defeasance

 

If there is a change in U.S. federal tax law, as described below,
we can legally release ourselves from all payment and other obligations on the 2022 Notes (called “full defeasance”)
if we put in place the following other arrangements for the Noteholders to be repaid:

 

	 	•	Since the 2022 Notes are denominated in U.S. dollars, we must deposit in trust for the benefit of all the Noteholders a combination of money and U.S. government or U.S. government agency notes or bonds that will generate enough cash to make interest, principal and any other payments on the 2022 Notes on their various due dates;

 

	 	•	we must deliver to the trustee a legal opinion confirming that there has been a change in current U.S. federal tax law or an IRS ruling that allows us to make the above deposit without causing the Noteholders to be taxed on the 2022 Notes any differently than if we did not make the deposit;

 

     

     

    

 

	 	•	we must deliver to the trustee a legal opinion of our counsel stating that the above deposit does not require registration by us under the 1940 Act, and a legal opinion and officers’ certificate stating that all conditions precedent to defeasance have been complied with;

 

	 	•	defeasance must not result in a breach or violation of, or constitute a default under, of the Indenture or any of our other material agreements or instruments; and

 

	 	•	no default or event of default with respect to the 2022 Notes shall have occurred and be continuing and no defaults or events of default related to bankruptcy, insolvency or reorganization shall occur during the next 90 days.

 

If we ever did accomplish full defeasance, as described above,
the Noteholders would have to rely solely on the trust deposit for repayment of the 2022 Notes. The Noteholders could not look
to us for repayment in the unlikely event of any shortfall. Conversely, the trust deposit would most likely be protected from claims
of our lenders and other creditors if we ever became bankrupt or insolvent. If the Noteholders’ 2022 Notes were subordinated
as described later under “— Indenture Provisions — Ranking,” such subordination would not
prevent the trustee under the Indenture from applying the funds available to it from the deposit referred to in the first bullet
of the preceding paragraph to the payment of amounts due in respect of such 2022 Notes for the benefit of the subordinated debtholders.

 

Other Covenants

 

In addition to any other covenants described in this description,
as well as standard covenants relating to payment of principal and interest, maintaining an office where payments may be made or
securities can be surrendered for payment, payment of taxes by the Company and related matters, the following covenants apply to
the 2022 Notes:

 

	 	•	We agree that for the period of time during which the 2022 Notes are outstanding, we will not violate Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act or any successor provisions, whether or not we continue to be subject to such provisions of the 1940 Act, but giving effect, in either case, to any exemptive relief granted to us by the SEC. Currently, these provisions generally prohibit us from making additional borrowings, including through the issuance of additional debt or the sale of additional debt securities, unless our asset coverage, as defined in the 1940 Act, equals at least 150% after such borrowings.

 

	 	•	We agree that for the period of time during which the 2022 Notes are outstanding, we will not violate Section 18(a)(1)(B) as modified by (i) Section 61(a)(1) of the 1940 Act or any successor provisions and (ii) the exception set forth below, despite the fact that we are not currently subject to such provisions of the 1940 Act, except that we are permitted to declare a cash dividend or distribution notwithstanding the prohibition contained in Section 18(a)(1)(B) as modified by Section 61(a)(1) of the 1940 Act, but only up to such amount as is necessary in order for us to maintain our status as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986 and, provided that, any such prohibition will not apply until such time as our asset coverage has been below the minimum asset coverage required pursuant to clause (i) above for more than six consecutive months. If Section 18(a)(1)(B) as modified by Section 61(a)(1) of the 1940 Act were currently applicable to us in connection with this offering, these provisions would generally prohibit us from declaring any cash dividend or distribution upon any class of our capital stock, or purchasing any such capital stock if our asset coverage, as defined in the 1940 Act, were below 150% at the time of the declaration of the dividend or distribution or the purchase and after deducting the amount of such dividend, distribution or purchase.

 

	 	•	If, at any time, we are not subject to the reporting requirements of Sections 13 or 15(d) of the Exchange Act, to file any periodic reports with the SEC, we agree to furnish to the Noteholders and the Trustee, for the period of time during which the 2022 Notes are outstanding, our audited annual consolidated financial statements, within 90 days of our fiscal year end, and unaudited interim consolidated financial statements, within 45 days of our fiscal quarter end (other than our fourth fiscal quarter). All such financial statements are prepared, in all material respects, in accordance with applicable United States generally accepted accounting principles.

 

     

     

    

 

Indenture Provisions — Ranking

 

The 2022 Notes are designated as Senior Securities and, therefore,
Senior Indebtedness under the Indenture. Senior Indebtedness is defined in the Indenture as the principal of (and premium, if any)
and unpaid interest on:

 

	 	•	our indebtedness (including indebtedness of others guaranteed by us), whenever created, incurred, assumed or guaranteed, for money borrowed, that we have designated as “Senior Indebtedness” for purposes of the Indenture and in accordance with the terms of the Indenture (including any indenture securities designated as Senior Indebtedness), and

 

	 	•	renewals, extensions, modifications and refinancings of any of this indebtedness.

The 2022 Notes are not secured by any assets of the Company.
As unsecured obligations of the Company designated as Senior Indebtedness under the Indenture, the 2022 Notes rank

 

	 	•	pari passu, or equal, with our future senior unsecured indebtedness;

 

	 	•	senior to any of our future indebtedness that expressly provides it is subordinated to the 2022 Notes;

 

	 	•	effectively subordinated to all of our existing and future secured indebtedness (including indebtedness that is initially unsecured to which we subsequently grant security), to the extent of the value of the assets securing such indebtedness, including without limitation, borrowings under our $220.0 million senior secured revolving credit facility, or the Credit Facility, of which $161.6 million was outstanding as of December 31, 2019; and

 

	 	•	structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries.

 

     

     

    

 

In particular, as designated Senior Indebtedness under the Indenture,
the 2022 Notes will rank senior to any future securities we issue under the Indenture that are designated as subordinated debt
securities. Any such Indenture securities designated as subordinated debt securities will be subordinated in right of payment of
the principal of (and premium if any) and interest, if any, on such subordinated debt securities to the prior payment in full of
the 2022 Notes, and all other Senior Indebtedness under the Indenture, upon any distribution of our assets upon our dissolution,
winding up, liquidation or reorganization. In addition, no payment on account of principal (or premium, if any), sinking fund or
interest, if any, may be made on such subordinated debt securities at any time unless full payment of all amounts due in respect
of the principal (and premium, if any), sinking fund and interest on the 2022 Notes, and all other Senior Indebtedness, has been
made or duly provided for in money or money’s worth.

 

In the event that, notwithstanding the foregoing, any payment
by us is received by the trustee in respect of subordinated debt securities or by the holders of any of such subordinated debt
securities, upon our dissolution, winding up, liquidation or reorganization before the 2022 Notes, and all other Senior Indebtedness,
are paid in full, the payment or distribution must be paid over to the holders of our Senior Indebtedness, including the 2022 Notes,
or on their behalf for application to the payment of all Senior Indebtedness, including the 2022 Notes, remaining unpaid until
all Senior Indebtedness, including the 2022 Notes, have been paid in full, after giving effect to any concurrent payment or distribution
to the holders of our Senior Indebtedness, including the 2022 Notes. Subject to the payment in full of the all Senior Indebtedness,
including the 2022 Notes, upon this distribution by us, the holders of such subordinated debt securities will be subrogated to
the rights of the holders of our Senior Indebtedness, including the 2022 Notes, to the extent of payments made to the holders of
our Senior Indebtedness, including the 2022 Notes, out of the distributive share of such subordinated debt securities.

 

By reason of this subordination, in the event of a distribution
of our assets upon our insolvency, our Senior Indebtedness, including the 2022 Notes, and certain of our senior creditors, may
recover more, ratably, than holders of any subordinated debt securities or the holders of any indenture securities that are not
Senior Indebtedness. The Indenture provides that these subordination provisions will not apply to money and securities held in
trust under the defeasance provisions of the Indenture.

 

The Trustee under the Indenture

 

U.S. Bank National Association serves as the trustee under the
Indenture.

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