Document:

Exhibit 4.2
​
Execution Version

FIRST SUPPLEMENTAL INDENTURE
(Senior Notes due 2029)
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THIS FIRST SUPPLEMENTAL INDENTURE (this “First Supplemental Indenture”) is dated as of October 30, 2020, among OMEGA HEALTHCARE INVESTORS, INC., a Maryland corporation (the “Issuer”), OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP, a Delaware limited partnership, as the sole Subsidiary Guarantor (the “Subsidiary Guarantor”), and U.S. BANK NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America, as trustee (the “Trustee”).
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W I T N E S S E T H:
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WHEREAS, the Issuer and the Subsidiary Guarantor have heretofore executed and delivered to the Trustee an Indenture, dated as of September 20, 2019 (the “Indenture”) providing for the issuance of the Issuer’s 3.625% Senior Notes due 2029 (the “Notes”);
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WHEREAS, Section 9.01(a)(7) of the Indenture authorizes the Issuer, the Subsidiary Guarantors and the Trustee, together, to amend or supplement the Indenture, without notice to or consent of any Holder of the Notes, for the purpose of making any change to conform the Indenture, the Notes or the Subsidiary Guarantees to the “Description of the Notes” section of the Prospectus Supplement of the Issuer relating to the Notes dated September 17, 2019 (the “Description of the Notes”);
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WHEREAS, the Issuer and the Subsidiary Guarantor desire to amend the Indenture as hereafter set forth, in order to conform the provisions of the Indenture so modified to the corresponding provisions in the Description of the Notes, and the Trustee is willing to execute and deliver this First Supplemental Indenture on the terms hereinafter set forth.
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NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Issuer, the Subsidiary Guarantor and the Trustee mutually covenant and agree as follows:
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		1.	CAPITALIZED TERMS.  Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture.

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		2.	AMENDMENTS TO THE INDENTURE.  

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		(a)
	Section 4.09 of the Indenture, Limitation on Issuances of Guarantees by Subsidiaries, is hereby amended by inserting the word “unsecured” immediately before the word “Indebtedness” in the third line, such that said Section will hereafter read as follows:

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“The Issuer will not permit any of its Subsidiaries, directly or indirectly, at any time after the issuance of the Notes (including following any release of a Subsidiary Guarantor from its obligations under this Indenture) to Guarantee any unsecured Indebtedness of the Issuer (that would constitute Indebtedness under clauses (1) or (2) of the definition thereof) in an amount at least equal to $50 million, unless such Subsidiary simultaneously executes and delivers a supplemental indenture to this Indenture providing for a Subsidiary Guarantee by such Subsidiary.”
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		(b)
	Section 10.04 of the Indenture, Release of a Subsidiary Guarantor, is hereby amended by inserting the word “unsecured” immediately before the word “Indebtedness” in the second line of clause (4) thereof, such that said clause will hereafter read as follows:

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“(4)if a Subsidiary Guarantor ceases to guarantee the obligations of the Issuer under any such unsecured Indebtedness of the Issuer that would constitute Indebtedness under clauses (1) or (2) under the definition thereof in an amount at least equal to $50 million;”.
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		3.	NEW YORK LAW TO GOVERN.  The laws of the State of New York shall govern and be used to construe this First Supplemental Indenture.

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		4.	COUNTERPARTS.  The parties may sign any number of copies of this First Supplemental Indenture.  Each signed copy shall be an original, but all of them together shall represent the same agreement.

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		5.	EFFECT OF HEADINGS.  The Section headings herein are for convenience only and shall not affect the construction hereof.

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		6.	THE TRUSTEE.  The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this First Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Issuer and the Subsidiary Guarantor.

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[Remainder of Page Intentionally Left Blank]
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2

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IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be duly executed, all as of the date first above written.
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ISSUER:
​
OMEGA HEALTHCARE INVESTORS, INC.,
a Maryland corporation
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​
By:​ ​/s/ Robert O. Stephenson​ ​​ ​​ ​
Robert O. Stephenson
Chief Financial Officer, Treasurer and Assistant Secretary
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SUBSIDIARY GUARANTOR:
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OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
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		By:
	Omega Healthcare Investors, Inc., as its sole General Partner

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​
By:​ ​/s/ Robert O. Stephenson​ ​​ ​
Robert O. Stephenson
Chief Financial Officer, Treasurer and Assistant Secretary 
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​
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[Signatures continued on the following page]

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	U.S. BANK NATIONAL ASSOCIATION,
as Trustee

	By:
	/s/ David Ferrell
	​

	Name:David Ferrell
Title:Vice President
​

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​Exhibit
10.1

 

Execution
Version

 

INVESTMENT
ADVISORY AND

ADMINISTRATIVE
SERVICES AGREEMENT

BETWEEN

MSC
INCOME FUND, INC.

AND

MSC
ADVISER I, LLC

 

This
Investment Advisory and Administrative Services Agreement (the “Agreement”) is made as of the 30th day
of October 2020, by and between MSC INCOME FUND, INC., a Maryland corporation (the “Company”), and MSC
ADVISER I, LLC, a Delaware limited liability company (the “Adviser”).

 

WHEREAS,
the Company is a non-diversified, closed-end management investment company that has elected to be treated as a business development
company (“BDC”) under the Investment Company Act of 1940, as amended (the “Investment Company
Act”);

 

WHEREAS,
the Adviser is registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers
Act”); and

 

WHEREAS,
the Company desires to retain the Adviser to furnish investment advisory services to the Company and to provide for the administrative
services necessary for the operation of the Company on the terms and subject to the conditions hereinafter set forth, and the
Adviser wishes to be retained to provide such services.

 

NOW,
THEREFORE, in consideration of the premises and for other good and valuable consideration, the parties hereby agree as follows:

 

1.             Duties
of the Adviser.

 

(a)        Retention
of the Adviser. The Company hereby employs 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 (collectively,
the “Board”), for the period and upon the terms herein set forth:

 

(i)            in
accordance with the investment objectives, policies and restrictions that are set forth in the Company’s periodic reports
and/or registration statements, as amended from time to time, that the Company files with the Securities and Exchange Commission
(the “SEC”);

 

(ii)           in
accordance with the Investment Company Act and the rules and regulations thereunder, subject to the terms of any exemptive order
applicable to the Company; and

 

(iii)          in
accordance with all other applicable federal and state laws, rules and regulations, and the Company’s articles of incorporation
and bylaws, in each case as amended from time to time.

 

(b)        Responsibilities
of the Adviser. Without limiting the generality of the foregoing, the Adviser shall, during the term and subject to the provisions
of this Agreement, provide the following advisory services to the Company (the “Advisory Services”):

 

(i)            determine
the composition and allocation of the investment portfolio of the Company, 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)          execute
and close the acquisition of, and monitor and service, the Company’s investments;

 

     

     

    

 

(iv)          determine
the securities and other assets that the Company shall purchase, retain, or sell;

 

(v)           perform
due diligence on prospective investments and portfolio companies;

 

(vi)          provide
the Company with such other investment advisory, research and related services as the Company may, from time to time, reasonably
request or require for the investment of its funds; and

 

(vii)         to
the extent required under the Investment Company Act, on the Company’s behalf provide significant managerial assistance
to those portfolio companies to which the Company is required as a BDC to provide such assistance under the Investment Company
Act, including, without limitation, utilizing appropriate personnel of the Adviser to, among other things, participate in board
and management meetings of the Company’s portfolio companies, consult with and advise officers of the Company’s portfolio
companies and provide other organizational and financial consultation to the Company’s portfolio companies.

 

(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 on behalf of the
Company to provide the Advisory Services enumerated herein to the fullest extent, including, without limitation, the power and
authority to effectuate its 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 procure debt financing or otherwise utilize leverage, 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.
If it is necessary for the Adviser to make investments on behalf of the Company through a special purpose vehicle or a tax blocker
corporation, the Adviser shall have authority to create, or arrange for the creation of, such special purpose vehicle or tax blocker
corporation and to make investments through such special purpose vehicle or tax blocker corporation in accordance with applicable
law. The Company also grants to the Adviser the 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 perform the Advisory
Services enumerated herein and to otherwise carry out its duties pursuant to this Agreement.

 

(d)       Administrative
Services. Subject to the supervision, direction and control of the Board, the provisions of the Company’s articles of
incorporation and bylaws, and applicable federal and state law, in addition to the Advisory Services, the Adviser shall perform,
or cause to be performed by other persons, all administrative services required to be performed in connection with the proper
conduct and operation of the business of the Company, including, but not limited to, legal, accounting, tax, insurance and investor
relations services and other services described in Section 2(b) below (“Administrative Services”).

 

(e)        Acceptance
of Employment. The Adviser hereby accepts employment as the investment adviser and administrator of the Company and agrees
during the term hereof to render the services described herein for the compensation provided herein, subject to the limitations
contained herein.

 

(f)         Sub-Advisers.
The Adviser is hereby authorized to enter into one or more sub-advisory agreements 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. Specifically, but not by way of limitation, the Adviser may retain a Sub-Adviser to identify, evaluate, negotiate and
structure prospective investments, perform, or cause to be performed, due diligence procedures and provide due diligence information
to the Adviser, make investment and portfolio management recommendations for approval by the Adviser, monitor the Company’s
investment portfolio and provide certain ongoing administrative services.

 

(i)           The
Adviser and not the Company shall be responsible for any compensation for Advisory Services payable to any Sub-Adviser; provided,
however, that the Adviser shall have the right to direct the Company to pay directly any Sub-Adviser the amounts due and payable
to such Sub-Adviser from the fees and expenses payable to the Adviser under this Agreement.

 

    2 

     

    

 

(ii)           Any
sub-advisory agreement entered into by the Adviser shall be in accordance with the requirements of the Investment Company Act
and the Advisers Act, including, without limitation, the requirements of the Investment Company Act relating to Board and Company
stockholder approval thereunder, and other applicable federal and state law.

 

(iii)          Any
Sub-Adviser shall be subject to the same fiduciary duties imposed on the Adviser pursuant to this Agreement, the Investment Company
Act and the Advisers Act, as well as other applicable federal and state law.

 

(g)        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. Nothing contained herein shall be deemed to create a partnership, joint venture or employer-employee
relationship between the Company and the Adviser, the Company and any sub-adviser or the Adviser and any sub-adviser, and the
Company and the Adviser shall for tax purposes treat the relationship created hereby as a principal-independent contractor relationship.

 

(h)        Record
Retention. Subject to review by and the overall control of the Board, the Adviser, in its capacity as adviser and administrator
to the Company hereunder, shall keep and preserve for the period required by the Investment Company Act and the Advisers Act any
books and records relevant to the activities performed by the Adviser hereunder and shall specifically maintain all books and
records in accordance with Section 31(a) of the Investment Company Act and the rules thereunder, including with respect to the
Company’s portfolio transactions and activities performed by it as the Company’s administrator, and shall render to
the Board such periodic and special reports as the Board may reasonably request or as may be required under applicable federal
and state law, and shall make such records available for inspection by the Board and its authorized agents, at any time and from
time to time during normal business hours. The Adviser agrees that all records that it maintains for the Company are the property
of the Company and shall surrender promptly to the Company any such records upon the Company’s request and upon termination
of this Agreement pursuant to Section 9 herein. 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.

 

The
following provisions in this Section 1 shall apply for only so long as the shares of common stock of the Company (“Common
Shares”) are not listed on a national securities exchange.

 

(i)         State
Administrator. The Adviser shall, upon 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, any registration statement filed with the SEC,
and applicable federal and state law.

 

(j)         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.

 

2.             Payment
or Reimbursement of Costs and Expenses.

 

(a)        Expenses
of Providing Advisory Services. Subject to the limitations on expense reimbursement of the Adviser as set forth in the last
sentence of this Section 2(a) and 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
all third party fees and expenses incurred by the Adviser in connection with its provision of the Advisory Services to the Company
hereunder, including travel and related expenses incurred by the Adviser in connection with the purchase, consideration for purchase,
financing, refinancing, sale or other disposition of any investment or potential investment of the Company and the third party
fees and expenses in monitoring the Company’s investments and performing due diligence on the Company’s prospective
portfolio companies or otherwise related to, or associated with, evaluating and making investments, including expenses related
to unsuccessful portfolio acquisition efforts. Notwithstanding the foregoing, the costs of all personnel of the Adviser, when
and to the extent engaged in providing Advisory Services (but not Administrative Services) hereunder, and the compensation and
routine overhead expenses of such personnel allocable to such Advisory Services, shall be provided and paid by the Adviser and
shall not be paid separately or reimbursed by the Company.

 

    3 

     

    

 

(b)        Administrative
Expenses. Subject to the limitations on reimbursement of the Adviser as set forth in Sections 2(a) and 2(d) hereof, and in
addition to the compensation paid to the Adviser pursuant to Section 3 in its role as adviser to the Company, the Company,
either directly or through reimbursement to the Adviser, shall bear all other costs and expenses of its organization, operations
and administration. Without limiting the generality of the foregoing, the Company shall pay or reimburse to the Adviser all fees,
expenses and costs incurred in connection with any registration, offer and sale of the Company’s common stock (the “Common
Shares”) to the public, including (without limitation) registration fees, fees and expenses of qualifying the Common
Shares for sale under applicable federal and state laws, attorney and accountant fees related to the registration and offering
of the Common Shares, printing costs, mailing costs, salaries of employees while engaged in sales activity, charges of transfer
agents and all other organization and offering expenses. In addition, the Company shall pay or reimburse to the Adviser all costs
and expenses related to the day-to-day administration and management of the Company not related to the Advisory Services (“Administrative
Expenses”), including, without limitation the actual cost of the persons performing the functions of chief financial
officer and chief compliance officer and other personnel engaged to provide such Administrative Services (including, without limitation,
direct compensation costs including the allocable portion of salaries, bonuses, benefits and other direct costs associated therewith)
and related overhead costs, including rent, allocated by the Adviser to the Company in a reasonable manner, without markup; amounts
paid to third parties for Administrative Services; the cost of determining the value of the Company’s investments and calculating
the Company’s net asset value, including the cost of any third-party valuation firms; the cost of effecting sales and repurchases
of Common Shares and other securities; any exchange listing fees; federal, state and local taxes; independent directors’
fees and expenses; all travel and related expenses of directors, officers and agents and employees of the Company and the Adviser,
incurred in connection with attending meetings of the Board or holders of securities of the Company or performing other business
activities that relate to the Company; costs of proxy statements; stockholders’ reports and notices; costs of preparing
government filings, including periodic and current reports with the SEC; fidelity bond, liability insurance and other insurance
premiums; and direct costs such as printing, mailing, long distance telephone and staff costs associated with the Company’s
reporting and compliance obligations under the Investment Company 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 in connection with Administrative Services for the Company. For the avoidance of doubt,
Administrative Expenses shall include the allocable portion of personnel and related employment direct costs and overhead costs,
including rent, incurred by the Adviser or its affiliates in providing professional services for the Company in-house, including
legal services, tax services, internal audit services, technology-related services and services in connection with compliance
with the Sarbanes-Oxley Act of 2002. In the event that any affiliate of the Adviser incurs such costs or expenses on behalf of
the Company, the Company shall pay such affiliate to the same extent it would be obligated to pay the Adviser directly had the
Adviser incurred and paid such cost or expense, and any such affiliate of the Adviser shall be an intended third party beneficiary
of this Agreement for purposes of establishing such party’s right to payment hereunder. Specifically, Main Street Capital
Corporation and certain subsidiaries or affiliates thereof may incur, advance and/or pay such costs and expenses.

 

(c)        Portfolio
Company Compensation. In certain circumstances, the Adviser, any Sub-Adviser, or any of their respective affiliates, may receive
compensation from a portfolio company in connection with the Company’s investment in such portfolio company. Any compensation
received by the Adviser, any Sub-Adviser, or any of their respective affiliates attributable to the Company’s investment
in any portfolio company in excess of any of the limitations in or exemptions granted from the Investment Company Act, any interpretation
thereof by the staff of the SEC, or the conditions set forth in any exemptive relief granted to the Adviser, any Sub-Adviser,
or the Company by the SEC shall be delivered promptly to the Company and the Company shall retain such excess compensation for
the benefit of its stockholders.

 

The
following provisions in this Section 2 shall apply for only so long as the Common Shares of the Company are not listed on a national
securities exchange.

 

    4 

     

    

 

(d)        Limitations
on Reimbursement of Adviser Costs. The Adviser may be reimbursed for the cost of 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. The Company may also agree
to reimburse the Adviser under the Agreement whereby the Adviser, acting as the Company’s administrator, shall provide certain
Administrative Services for the Company, for the salaries, rent, fringe benefits, travel expenses and other administrative items
incurred or allocated to persons serving in the capacities of chief financial officer and chief compliance officer of the Company
and other personnel engaged to provide such Administrative Services.

 

(e)        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 pursuant to Section 2(d) for the
previous fiscal year. The special report shall at a minimum provide:

 

(i)            A
review of the time records of individual employees, the costs of whose services were reimbursed; and

 

(ii)           A
review of the specific nature of the work performed by each such employee.

 

(f)         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(d) 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.

 

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, agree to temporarily or permanently waive,
defer, or reduce, in whole or in part, the Base Management Fee and/or the Incentive Fee. See Appendix A for examples of how the
Incentive Fee is calculated.

 

(a)        Base
Management Fee. The Base Management Fee shall be calculated at an annual rate of 1.75% of the Company’s average gross
assets. The Base Management Fee shall be payable quarterly in arrears, and shall be calculated based on the average value of the
Company’s gross assets at the end of the two most recently completed calendar quarters. The determination of gross assets
will reflect changes in the fair market value of portfolio investments reflecting both realized and unrealized appreciation and
depreciation. All or any part of the Base Management Fee not taken as to any quarter shall be deferred without interest and may
be taken in such other quarter as the Adviser shall determine, unless the Adviser expressly and in writing delivered to the Company
permanently waives receipt of such Base Management Fee, in which event the Company shall forever be relieved of the obligation
to pay such Base Management Fee for such quarter. The Base Management Fee for any partial month or quarter shall be appropriately
pro rated.

 

(b)        Incentive
Fee. The Incentive Fee shall consist of 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.

 

(i)            The
first part of the Incentive Fee, referred to as the subordinated incentive fee on income, will be calculated and payable quarterly
in arrears based on the Company’s pre-incentive fee net investment income for the immediately preceding quarter. The payment
of the subordinated incentive fee on income will be subject to pre-incentive fee net investment income for the previous quarter,
expressed as a quarterly rate of return on adjusted capital at the beginning of the most recently completed calendar quarter,
exceeding 1.875% (7.5% annualized), subject to a “catch up” feature (as described below).

 

    5 

     

    

 

For
this purpose, pre-incentive fee net investment income means interest income, dividend income and any other income (including any
other fees, such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives
from portfolio companies) accrued during the calendar quarter, minus the Company’s operating expenses for the quarter (including
the Base Management Fee, Administrative Services expenses and the expenses payable under any other administration or similar agreement
and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the Incentive Fee). Pre-incentive
fee net investment income includes, in the case of investments with a deferred interest feature (such as original issue discount
debt instruments with payment-in-kind interest and zero coupon securities), accrued income that the Company has not yet received
in cash. Pre-incentive fee net investment income does not include any realized capital gains, realized capital losses or unrealized
capital appreciation or depreciation. For purposes of this calculation, adjusted capital means cumulative gross proceeds generated
from sales of the Common Shares (including proceeds from the Company’s distribution reinvestment plan) reduced for non-liquidating
distributions, other than distributions of profits, paid to the Company’s stockholders and amounts paid for share repurchases
pursuant to the Company’s share repurchase program.

 

The
calculation of the subordinated incentive fee on income for each quarter is as follows:

 

		·	No subordinated incentive fee on income shall be payable to the Adviser in any calendar quarter
in which the Company’s pre-incentive fee net investment income does not exceed the hurdle rate of 1.875% (or 7.5% annualized)
on adjusted capital;

 

		·	100% of the Company’s pre-incentive fee net investment income, if any, that exceeds the hurdle
rate but is less than or equal to 2.34375% in any calendar quarter (9.375% annualized) shall be payable to the Adviser. This portion
of the subordinated incentive fee on income is referred to as the “catch up” and is intended to provide the Adviser
with an incentive fee of 20.0% on all of the Company’s pre-incentive fee net investment income as if the hurdle rate did
not apply when the pre-incentive fee net investment income exceeds 2.34375% (9.375% annualized) in any calendar quarter; and
	 	 	 

		·	For any quarter in which the Company’s pre-incentive fee net investment income exceeds 2.34375%
(9.375% annualized), the subordinated incentive fee on income shall equal 20.0% of the amount of the Company’s pre-incentive
fee net investment income, as the hurdle rate and catch-up will have been achieved.

 

(ii)           The
second part of the Incentive Fee, referred to as the incentive fee on capital gains, shall be an incentive fee on realized capital
gains earned on liquidated investments from the portfolio of the Company and shall be determined and payable in arrears as of
the end of each calendar year (or upon termination of the Agreement). This fee shall equal (a) 20.0% of the Company’s incentive
fee capital gains, which shall equal the Company’s realized capital gains on a cumulative basis from inception, calculated
as of the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative
basis, less (b) the aggregate amount of any previously paid capital gain incentive fees.

 

4.             Covenants
of the Adviser.

 

(a)         Adviser
Status. The Adviser represents that it is registered as an investment adviser under the Advisers Act and covenants that it
will maintain such registration until the expiration or earlier termination of this Agreement. The Adviser agrees that its activities
will at all times be in compliance 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 Investment Company Act, as such code of ethics may be amended from time to time.

 

    6 

     

    

 

The
following provisions in this Section 4 shall apply for only so long as the Common Shares of the Company are not listed on a national
securities exchange.

 

(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 on Form 10-K 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 principles 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 stockholders, a table comparing the forecasts previously provided with the
actual results during the period covered by the report; and

 

(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)         Federal
Income Tax Information. Within 75 days after the end of the Company’s fiscal year, all information necessary for stockholders
to prepare their federal income tax returns.

 

(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 pursuant to this Section 4 to such State Administrator.

 

(d)        Reserves.
In performing its duties hereunder, the Adviser shall cause the Company to provide for adequate reserves for normal replacements
and contingencies (but not for payment of fees payable to the Adviser hereunder) by causing the Company to retain a reasonable
percentage of proceeds from offerings and revenues.

 

(e)        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, distribute pro rata
to the stockholders funds received by the Company that the Adviser deems unnecessary to retain in the Company.

 

(f)         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).

 

    7 

     

    

 

5.             Brokerage
Commissions, Limitations on Front End Fees; Period of Offering; Assessments.

 

(a)        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 such factors, including, without limitation, as 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.

 

The
following provisions in this Section 5 shall apply for only so long as the Common Shares of the Company are not listed on a national
securities exchange.

 

(b)         Limitations.
Notwithstanding anything herein to the contrary:

 

(i)            All
fees and expenses paid by any party for any services rendered to organize the Company and to acquire assets for the Company (“Front
End Fees”) shall be reasonable and shall not exceed 18% of the gross offering proceeds, regardless of the source
of payment. Any reimbursement to the Adviser or any other person for deferred Organizational and Offering Expenses (as defined
in the North American Securities Administrators Association Omnibus Guidelines), including any interest thereon, if any, will
be included within this 18% limitation.

 

(ii)           The
Adviser shall commit at least eighty-two percent (82%) of the gross offering proceeds towards the investment or reinvestment of
assets and reserves as set forth in Section 4(d) above on behalf of the Company. The remaining proceeds may be used to pay Front
End Fees.

 

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 those of the Company,
so long as its services to the Company hereunder are not impaired thereby, and nothing in this Agreement shall limit or restrict
the right of any manager, partner, member (including its members and the owners of its 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 called for hereunder. 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.             Responsibility
of Dual Directors, Officers and/or Employees.

 

If
any person who is a manager, partner, member, officer or employee of the Adviser or its affiliates is or becomes a director, officer
and/or employee of the Company and acts as such in any business of the Company, then such manager, partner, member, officer and/or
employee of the Adviser or its affiliates shall be deemed to be acting in such capacity solely for the Company, and not as a manager,
partner, member, officer or employee of the Adviser or its affiliates or under the control or direction of the Adviser or its
affiliates, even if paid by the Adviser or its affiliates.

 

    8 

     

    

 

8.             Indemnification.

 

(a)        Indemnification.
Subject to Section 8(b) below, the Adviser and any Sub-Adviser (and their respective officers, directors, managers, partners,
shareholders, members (and their shareholders or members, including the owners of their shareholders or members), agents, employees,
controlling persons and any other person or entity affiliated with or acting on behalf of the Adviser or any Sub-Adviser, as applicable
(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, any sub-advisory agreement or otherwise as an
investment adviser of the Company (except to the extent specified in Section 36(b) of the Investment Company Act concerning
loss resulting from a breach of fiduciary duty (as the same is finally determined by judicial proceedings) with respect to the
receipt of compensation for services), and the Company shall indemnify, defend and protect Indemnified Parties (each of whom shall
be 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) 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
Adviser’s duties or obligations under this Agreement or otherwise as an investment adviser of the Company or any of the
Sub-Adviser’s duties or obligations under any sub-advisory agreement, to the extent such losses, damages, liabilities, costs
and expenses are not fully reimbursed by insurance, and to the extent that such indemnification would not be inconsistent with
the laws of the State of Maryland, the Investment Company Act, the articles of incorporation of the Company and other applicable
law. Notwithstanding the preceding sentence of this Section 8(a) to the contrary, nothing contained herein shall protect
or be deemed to protect the Indemnified Parties against or entitle or be deemed to entitle the Indemnified Parties to indemnification
in respect of, any liability to the Company or its security holders to which the Indemnified Parties would otherwise be subject
by reason of fraud, willful misfeasance, bad faith or gross negligence in the performance of the Adviser’s duties or by
reason of the reckless disregard of the Adviser’s duties and obligations under this Agreement (as the same shall be determined
in accordance with the Investment Company Act and any interpretations or guidance by the SEC or its staff thereunder).

 

The
following provisions in this Section 8 shall apply for only so long as the Common Shares of the Company are not listed on a national
securities exchange.

 

(b)         Limitations
on Indemnification. Notwithstanding Section 8(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 negligence, willful misfeasance, bad faith, or misconduct 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:

 

    9 

     

    

 

(i)            there
has been a successful adjudication on the merits of each count involving alleged securities law violations as to the Indemnified
Party;

 

(ii)           such
claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the Indemnified Party; or

 

(iii)          a
court of competent jurisdiction approves a settlement of the claims against an Indemnified Party 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.

 

(c)         Advancement
of Funds. The Company shall be permitted to advance funds to the Indemnified Party 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 his or her good faith belief that the standard of conduct necessary
for indemnification by the Company has been met;

 

(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 undertakes, in a written agreement, to repay the advanced funds to the Company, together with the applicable
legal rate of interest thereon, in cases in which the Indemnified Party is not found to be entitled to indemnification.

 

9.              Effectiveness,
Duration and Termination of Agreement.

 

(a)         Term
and Effectiveness. This Agreement shall become effective as of the date hereof and shall remain in effect for two years, and
thereafter shall continue automatically for successive annual periods, provided that such continuance is specifically approved
at least annually by (i) the vote of the Board, 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 Investment Company Act) of any such party, in accordance with the requirements
of the Investment Company Act.

 

(b)         Termination.
This Agreement may be terminated at any time, without the payment of any penalty, (a) by the Company upon 60 days’ written
notice to the Adviser, (i) upon the vote of a majority of the outstanding voting securities of the Company, or (ii) by the vote
of the Company’s independent directors, or (b) by the Adviser upon 120 days’ written notice to the Company. This Agreement
shall automatically terminate in the event of its “assignment” (as such term is defined for purposes of Section 15(a)(4)
of the Investment Company Act). The provisions of Section 8 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 thirty (30) days after the effective date of such termination all
earned but unpaid reimbursements and all earned but unpaid fees payable to the Adviser prior to termination of this Agreement,
including any deferred fees. If the Company and the Adviser cannot agree on the amount of such reimbursements and fees, the parties
will submit to binding arbitration.

 

    10 

     

    

 

(ii)           The
Adviser shall promptly upon termination:

 

(A)           Deliver
to the Board 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;

 

(B)            Deliver
to the Board 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.

 

The
following provisions in this Section 9 shall apply for only so long as the Common Shares of the Company are not listed on a national
securities exchange.

 

(d)        Other
Matters. Without the approval of holders of a majority of the Common Shares entitled to vote on the matter, the Adviser shall
not: (i) amend this Agreement except for amendments that do not adversely affect the interests of the stockholders; (ii) voluntarily
withdraw as the Adviser unless such withdrawal would not affect the tax status of the Company and would not materially adversely
affect the stockholders; (iii) appoint a new adviser; (iv) sell all or substantially all of the Company’s assets other than
in the ordinary course of the Company’s business; or (v) cause the merger or other reorganization of the Company. In the
event that the Adviser should withdraw pursuant to (ii) above, the withdrawing Adviser shall pay all expenses incurred as a result
of its withdrawal. To the extent not prohibited by the Investment Company Act, the Company may terminate the Adviser’s interest
in the Company’s revenues, expenses, income, losses, distributions and capital by payment of an amount equal to the then
present fair market value of the terminated Adviser’s interest, determined by agreement of the terminated Adviser and the
Company. If the Company and the Adviser cannot agree upon such amount, then such amount will be determined in accordance with
the then current rules of the American Arbitration Association. The expenses of such arbitration shall be borne equally by the
terminated Adviser and the Company. The method of payment to the terminated Adviser must be fair and must protect the solvency
and liquidity of the Company.

 

(e)         With
respect to any shares owned by the Adviser, the Adviser may not vote or consent on matters submitted to the stockholders regarding
the removal of the Adviser or regarding any transaction between the Company and the Adviser. In determining the existence of the
requisite percentage of shares necessary to approve a matter on which the Adviser may not vote or consent, any shares owned by
the Adviser shall not be included.

 

10.           Conflicts
of Interests and Prohibited Activities.

 

The
following provisions in this Section 10 shall apply for only so long as the Common Shares of the Company are not listed on a national
securities exchange.

 

(a)         No
Exclusive Agreement. The Adviser is not hereby granted or entitled to an exclusive right to sell or exclusive employment to
sell assets for the Company.

 

(b)         Rebates,
Kickbacks and Reciprocal Arrangements.

 

(i)            The
Adviser agrees that it shall not (A) receive or accept any rebate, give-up or similar arrangement that is prohibited under applicable
federal or state securities laws, (B) participate in any reciprocal business arrangement that would circumvent provisions of applicable
federal or state securities laws governing conflicts of interest or investment restrictions, or (C) enter into any agreement,
arrangement or understanding that would circumvent the restrictions against dealing with affiliates or promoters under applicable
federal or state securities laws.

 

(ii)           The
Adviser agrees that it shall not directly or indirectly pay or award any fees or commissions or other compensation to any person
or entity engaged to sell the Company’s Common Shares or give investment advice to a potential stockholder; provided, however,
that this subsection shall not prohibit the payment of a registered broker-dealer or other properly licensed agent from sales
commissions for selling or distributing the Common Shares.

 

    11 

     

    

 

(c)         Commingling.
The Adviser covenants that it shall not permit or cause to be permitted the Company’s funds from being commingled with the
funds of any other entity. Nothing in this subsection 10(c) shall prohibit the Adviser from establishing a master fiduciary account
pursuant to which separate sub-trust accounts are established for the benefit of affiliated programs, provided that the Company’s
funds are protected from the claims of other programs and creditors of such programs.

 

11.            Notices.

 

Any
notice under this Agreement shall be given in writing, addressed and delivered or mailed, postage prepaid, to the other party
at its principal office.

 

12.            Amendments.

 

This
Agreement may be amended in writing by mutual consent of the Company and the Adviser, subject to the provisions of the Investment
Company Act.

 

13.            Counterparts.

 

This
Agreement may be executed in counterparts, each of which shall be deemed 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.

 

14.            Third
Party Beneficiaries.

 

Except
for any Sub-Adviser and Indemnified Party with respect to Section 8 hereof, such Sub-Adviser and the Indemnified Parties each
being an intended beneficiary of this Agreement for purposes of Section 8 hereof, this Agreement is for the sole benefit of the
parties hereto and their permitted assigns and nothing herein, express or implied, shall give or be construed to give to any person,
other than the parties hereto and such assigns, any legal or equitable rights hereunder.

 

15.            Survival.

 

The
provisions of Sections 8, 9, 16 and this Section 15 shall survive the expiration or earlier termination of this Agreement.

 

16.            Entire
Agreement; Governing Law.

 

This
Agreement contains the entire agreement of the parties and supersedes all prior agreements, understandings and arrangements with
respect to the subject matter hereof. Notwithstanding the place where this Agreement may be executed by any of the parties hereto,
this Agreement shall be construed in accordance with the laws of the State of Texas. For so long as the Company is regulated as
a BDC under the Investment Company Act, this Agreement shall also be construed in accordance with the applicable provisions of
the Investment Company Act. In such case, to the extent the applicable laws of the State of Texas, or any of the provisions herein,
conflict with the provisions of the Investment Company Act, the latter shall control.

 

[Signature
Page to Follow]

 

    12 

     

    

 

IN
WITNESS WHEREOF, the parties hereto have caused this Investment Advisory and Administrative Services Agreement to be duly
executed on the date above written.

 

	 	COMPANY:

 

	 	MSC
    INCOME FUND, INC.
	 	 
	 	By: 	/s/
    Dwayne L. Hyzak

	 	Name:
    	Dwayne
    L. Hyzak
	 	Title:	Chief
    Executive Officer

 

	 	ADVISER:

 

	 	MSC ADVISER I, LLC
	 	 
	 	By: 	/s/
    Dwayne L. Hyzak

	 	Name:
    	Dwayne
    L. Hyzak
	 	Title:	Chief
    Executive Officer

 

     

     

    

 

Appendix
A

 

Examples
of Quarterly Incentive Fee Calculation

 

Example
1: Subordinated Incentive Fee on Income (*):

 

Alternative 1— Assumptions

 

		·	Investment income (including interest, dividends, fees, etc.) = 1.25%

 

		·	Hurdle rate (1) = 1.875%

 

		·	Base Management fee (2) = 0.4375%

 

		·	Other expenses (legal, accounting, custodian, transfer agent, etc.) (3) = 0.20%

 

		·	Pre-incentive fee net investment income (investment income – (base management fee + other expenses)) = 0.6125%

 

Pre-incentive fee net investment income does not exceed hurdle
rate, therefore there is no subordinated incentive fee on income.

 

 

Alternative 2 — Assumptions

 

		·	Investment income (including interest, dividends, fees, etc.) = 2.70%

 

		·	Hurdle rate (1) = 1.875%

 

		·	Base Management fee (2) = 0. 4375%

 

		·	Other expenses (legal, accounting, custodian, transfer agent, etc.) (3) = 0.20%

 

		·	Pre-incentive fee net investment income (investment income – (base management fee + other expenses)) = 2.0625%

 

Pre-incentive net investment income exceeds hurdle rate, therefore
there is a subordinated incentive fee on income payable by the Company to the Adviser.

 

Subordinated incentive fee on income = 100% x pre-incentive
fee net investment income in excess of the hurdle rate, based on the “catch-up” provision (4)

 

= 100% x (2.0625% – 1.875%)

 

= 0.1875%

 

Alternative 3 — Assumptions

 

		·	Investment income (including interest, dividends, fees, etc.) = 3.20%

 

		·	Hurdle rate (1) = 1.875%

 

		·	Base Management fee (2) = 0.4375%

 

		·	Other expenses (legal, accounting, custodian, transfer agent, etc.) (3) = 0.20%

 

     

     

    

 

		·	Pre-incentive fee net investment income (investment income – (base management fee + other expenses)) = 2.5625%

 

		·	Subordinated incentive fee on income “catch-up” (4) = 2.34375% (9.375% annual “catch-up” ÷ 4
quarters)

 

Pre-incentive net investment income exceeds hurdle rate, therefore
there is a subordinated incentive fee on income payable by the Company to the Adviser.

 

		·	Subordinated incentive fee on income = 20% x pre-incentive fee net investment income, subject to “catch-up” (4)

 

		·	Subordinated incentive fee on income = 100% x “catch-up” + (20% x (pre-incentive fee net investment income –
2.34375%))

 

		·	Catch-up              = 2.34375% – 1.875%

= 0.46875%

 

		·	Subordinated incentive fee on income           = (100% x 0.46875%) + (20% x (2.5625% – 2.34375%))

= 0.46875% + (20% x 0.21875%)

= 0.46875% + 0.04375%

= 0.5125% (or 20% of 2.5625%)

 

 

		(1)	Represents
                                         7.5% annualized hurdle rate.

 

		(2)	Represents
                                         1.75% annualized base management fee.

 

		(3)	Excludes
                                         organizational and offering expenses.

 

		(4)	The
                                         “catch-up” provision is intended to provide the Adviser with a subordinated
                                         incentive fee on income of 20% on all pre-incentive fee net investment income as if a
                                         hurdle rate did not apply when the pre-incentive net investment income exceeds 2.34375%
                                         in any calendar quarter.

 

		(*)	The hypothetical
                                         amount of pre-incentive fee net investment income shown is based on a percentage of total
                                         net assets.

 

Example
2: Incentive Fee on Capital Gains:

 

Alternative
1: Assumptions

 

Year
1: $20 million investment made in company A (“Investment A”), and $30 million investment made in company B (“Investment
B”)

 

Year
2: Investment A sold for $50 million and fair market value, or FMV, of Investment B determined to be $32 million

 

Year
3: FMV of Investment B determined to be $25 million

 

Year
4: Investment B sold for $31 million

 

The
incentive fee on capital gains would be:

 

Year
1: None

 

Year
2: Incentive fee on capital gains of $6 million ($30 million realized capital gains on sale of Investment A multiplied by 20%;
no unrealized capital depreciation)

 

Year
3: None

 

     

     

    

 

Year
4: Incentive fee on capital gains of $200,000 ($6.2 million ($31 million cumulative realized capital gains multiplied by 20%)
less $6 million (incentive fee on capital gains fee paid in Year 2)

 

 

Alternative
2 — Assumptions

 

Year
1: $20 million investment made in company A (“Investment A”), $30 million investment made in company B (“Investment
B”) and $25 million investment made in company C (“Investment C”)

 

Year
2: Investment A sold for $50 million, FMV of Investment B determined to be $25 million and FMV of Investment C determined to be
$25 million

 

Year
3: FMV of Investment B determined to be $27 million and Investment C sold for $30 million

 

Year
4: FMV of Investment B determined to be $35 million

 

Year
5:Investment B sold for $20 million

 

The
incentive fee on capital gains, if any, would be:

 

Year
1: None

 

Year
2: $5 million incentive fee on capital gains (20% multiplied by $25 million ($30 million realized capital gains on Investment
A less $5 million unrealized capital depreciation on Investment B)

 

Year
3: $1.4 million incentive fee on capital gains $6.4 million (20% multiplied by $32 million ($35 million cumulative realized capital
gains on Investment A and Investment C less $3 million unrealized capital depreciation on Investment B)) less $5 million incentive
fee on capital gains paid in Year 2)

 

Year
4: Incentive fee on capital gains of $600,000 ($7 million ($35 million cumulative realized capital gains multiplied by 20%) less
$6.4 million (cumulative incentive fees on capital gains paid in Year 2 and Year 3))

 

Year
5: None. ($5 million (20% multiplied by $25 million (cumulative realized capital gains of $35 million less realized capital losses
of $10 million)) less $7.0 million cumulative incentive fees on capital gains paid in Year 2, Year 3 and Year 4)

 

The
returns shown are for illustrative purposes only and are all based on quarterly calculations. There is no guarantee that positive
returns will be realized and actual returns may vary from those shown in the examples above.

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