10-Q

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller Reporting company

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarter Ended March 31, 2020

☐	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 814-00849

SOLAR SENIOR CAPITAL LTD.

(Exact name of registrant as specified in its charter)


Maryland		27-4288022
(State of Incorporation)		(I.R.S. Employer Identification No.)

500 Park Avenue New York, N.Y.		10022
(Address of principal executive offices)		(Zip Code)

(212) 993-1670

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading

Symbol(s)

Name of Each Exchange

on Which Registered

Common Stock, par value

$0.01 per share

SUNS

The NASDAQ Global

Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the registrant’s Common Stock, $.01 par value, outstanding as of May 4, 2020 was 16,049,034.

SOLAR SENIOR CAPITAL LTD.

FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2020

TABLE OF CONTENTS


		PAGE
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Statements of Assets and Liabilities as of March 31, 2020 (unaudited) and December 31, 2019		3

	Consolidated Statements of Operations for the three months ended March 31, 2020 (unaudited) and the three months ended March 31, 2019 (unaudited)		4

	Consolidated Statements of Changes in Net Assets for the three months ended March 31, 2020 (unaudited) and the three months ended March 31, 2019 (unaudited)		5

	Consolidated Statements of Cash Flows for the three months ended March 31, 2020 (unaudited) and the three months ended March 31, 2019 (unaudited)		6

	Consolidated Schedule of Investments as of March 31, 2020 (unaudited)		7

	Consolidated Schedule of Investments as of December 31, 2019		10

	Notes to Consolidated Financial Statements (unaudited)		13

	Report of Independent Registered Public Accounting Firm		30

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		31

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		47

Item 4.	Controls and Procedures		48

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings		48

Item 1A.	Risk Factors		49

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		51

Item 3.	Defaults Upon Senior Securities		51

Item 4.	Mine Safety Disclosures		52

Item 5.	Other Information		52

Item 6.	Exhibits		52

	Signatures		53

PART I. FINANCIAL INFORMATION

In this Quarterly Report, “Solar Senior”, “Company”, “Fund”, “we”, “us”, and “our” refer to Solar Senior Capital Ltd. unless the context states otherwise.

Item 1. Financial Statements

SOLAR SENIOR CAPITAL LTD.

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

(in thousands, except share amounts)


	March 31, 2020 (unaudited)			December 31, 2019
Assets
Investments at fair value:
Companies less than 5% owned (cost: $327,117 and $363,947, respectively)	$	304,532		$	361,665
Companies more than 25% owned (cost: $98,439 and $98,439, respectively)		91,267			98,600
Cash		11,231			7,054
Cash equivalents (cost: $89,997 and $99,898, respectively)		89,988			99,898
Interest receivable		1,144			1,933
Dividends receivable		1,753			1,893
Receivable for investments sold		31			6,667
Prepaid expenses and other assets		381			248

Total assets	$	500,327		$	577,958

Liabilities
Debt ($174,403 and $211,202 face amounts, respectively, reported net of unamortized debt issuance costs of $2,348 and $1,901, respectively. See note 7)	$	172,055		$	209,301
Payable for investments and cash equivalents purchased		89,997			101,811
Distributions payable		1,886			1,885
Management fee payable (see note 3)		140			426
Interest payable (see note 7)		945			1,172
Administrative services payable (see note 3)		195			826
Other liabilities and accrued expenses		969			723

Total liabilities	$	266,187		$	316,144

Commitments and contingencies (see note 10)

Net Assets
Common stock, par value $0.01 per share, 200,000,000 and 200,000,000 common shares authorized, respectively, and 16,049,034 and 16,046,214 issued and outstanding, respectively	$	160		$	160
Paid-in capital in excess of par		282,229			282,181
Accumulated distributable net loss		(48,249	)		(20,527	)

Total net assets	$	234,140		$	261,814

Net Asset Value Per Share	$	14.59		$	16.32

See notes to consolidated financial statements.

SOLAR SENIOR CAPITAL LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(in thousands, except share amounts)


	Three months ended
	March 31, 2020			March 31, 2019
INVESTMENT INCOME:
Interest:
Companies less than 5% owned	$	6,623		$	7,814
Companies 5% to 25% owned		—			85
Dividends:
Companies more than 25% owned		2,125			2,265
Other income:
Companies less than 5% owned		27			70

Total investment income		8,775			10,234

EXPENSES:
Management fees (see note 3)	$	1,104		$	1,156
Performance-based incentive fees (see note 3)		56			544
Interest and other credit facility expenses (see note 7)		2,071			2,685
Administrative services expense (see note 3)		367			396
Other general and administrative expenses		540			335

Total expenses		4,138			5,116
Management fees waived (see note 3)		(964	)		—
Performance-based incentive fees waived (see note 3)		(56	)		(536	)

Net expenses		3,118			4,580

Net investment income	$	5,657		$	5,654

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, CASH EQUIVALENTS AND UNFUNDED COMMITMENTS:
Net realized gain on investments and cash equivalents (companies less than 5% owned)	$	119		$	105

Net change in unrealized gain (loss) on investments, cash equivalents and unfunded commitments:
Companies less than 5% owned		(20,508	)		(1,203	)
Companies 5% to 25% owned		—			280
Companies more than 25% owned		(7,333	)		2,550

Net change in unrealized gain (loss) on investments, cash equivalents and unfunded commitments		(27,841	)		1,627

Net realized and unrealized gain (loss) on investments, cash equivalents and unfunded commitments		(27,722	)		1,732

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS	$	(22,065	)	$	7,386

EARNINGS (LOSS) PER SHARE (see note 5)	$	(1.37	)	$	0.46

See notes to consolidated financial statements.

SOLAR SENIOR CAPITAL LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (unaudited)

(in thousands, except share amounts)


	Three months ended
	March 31, 2020			March 31, 2019
Increase (Decrease) in net assets resulting from operations:
Net investment income	$	5,657		$	5,654
Net realized gain		119			105
Net change in unrealized gain (loss)		(27,841	)		1,627

Net increase (decrease) in net assets resulting from operations		(22,065	)		7,386

Distributions to stockholders:
From net investment income		(5,657	)		(5,654	)

Capital transactions (see note 12):
Reinvestment of distributions		48			19

Net increase in net assets resulting from capital transactions		48			19

Total increase (decrease) in net assets		(27,674	)		1,751

Net assets at beginning of period		261,814			261,392

Net assets at end of period	$	234,140		$	263,143

Capital share activity (see note 12):
Common stock issued from reinvestment of distributions		2,820			1,119

Net increase from capital share activity		2,820			1,119

See notes to consolidated financial statements.

SOLAR SENIOR CAPITAL LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(in thousands)


	Three months ended
	March 31, 2020			March 31, 2019
Cash Flows from Operating Activities:
Net increase (decrease) in net assets resulting from operations	$	(22,065	)	$	7,386
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
Net realized gain on investments and cash equivalents		(119	)		(105	)
Net change in unrealized (gain) loss on investments		27,636			(1,627	)
(Increase) decrease in operating assets:
Purchase of investments		(35,430	)		(31,232	)
Proceeds from disposition of investments		72,654			15,848
Net accretion of discount on investments		(258	)		(313	)
Capitalization of payment-in-kind interest		(17	)		(133	)
Receivable for investments sold		6,636			27
Interest receivable		789			(29	)
Dividends receivable		140			—
Prepaid expenses and other assets		(133	)		(154	)
Increase (decrease) in operating liabilities:
Payable for investments and cash equivalents purchased		(11,814	)		(22,805	)
Management fee payable		(286	)		(33	)
Performance-based incentive fees payable		—			(98	)
Administrative services expense payable		(631	)		(840	)
Interest payable		(227	)		180
Other liabilities and accrued expenses		246			61

Net Cash Provided by (Used in) Operating Activities		37,121			(33,867	)

Cash Flows from Financing Activities:
Cash distributions paid		(5,608	)		(5,635	)
Deferred financing costs		157			93
Proceeds from issuance of unsecured debt		84,397			—
Proceeds from secured borrowings		45,400			53,382
Repayments of secured borrowings		(167,200	)		(12,400	)

Net Cash Provided by (Used in) Financing Activities		(42,854	)		35,440

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(5,733	)		1,573
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		106,952			4,875

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	101,219		$	6,448

Supplemental disclosure of cash flow information:
Cash paid for interest	$	2,298		$	2,505

Non-cash financing activities consist of the reinvestment of dividends of $48 and $19 for the three months ended March 31, 2020 and March 31, 2019, respectively.

See notes to consolidated financial statements.

SOLAR SENIOR CAPITAL LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS (unaudited)

March 31, 2020

(in thousands, except share/unit amounts)


Description	Industry	Spread above Index⁽³⁾			Libor Floor			Interest Rate⁽¹⁾			Acquisition Date		Maturity Date		Par Amount		Cost		Fair Value
Bank Debt/Senior Secured Loans—130.0%
1A Smart Start LLC⁽²⁾⁽⁹⁾	Electrical Equipment, Instruments & Components		L+450			1.00	%		5.57	%		12/21/2017		2/21/2022	$	13,759	$	13,726	$	13,209
Advantage Sales and Marketing, Inc.⁽²⁾	Professional Services		L+325			1.00	%		4.70	%		2/14/2018		7/23/2021		4,887		4,847		4,691
Advantage Sales and Marketing, Inc.	Professional Services		L+650			1.00	%		7.95	%		2/14/2013		7/25/2022		8,000		7,979		7,440
Aegis Toxicology Sciences Corporation⁽²⁾⁽⁹⁾	Health Care Providers & Services		L+550			1.00	%		7.23	%		5/7/2018		5/9/2025		10,835		10,681		9,210
Alimera Sciences, Inc.⁽²⁾	Pharmaceuticals		L+765			1.78	%		9.43	%		12/31/2019		7/1/2024		3,085		3,092		3,085
Alteon Health, LLC (fka Island Medical)⁽²⁾⁽⁹⁾	Health Care Providers & Services		L+650			1.00	%		7.95	%		3/31/2017		9/1/2022		7,361		7,324		6,699
Altern Marketing, LLC⁽²⁾	Household & Personal Products		L+600			2.00	%		8.00	%		10/25/2019		10/7/2024		6,359		6,300		6,169
American Teleconferencing Services, Ltd. (PGI)⁽²⁾	Communications Equipment		L+650			1.00	%		8.23	%		5/5/2016		6/8/2023		13,684		13,388		12,316
AQA Acquisition Holding, Inc.⁽²⁾	Software		L+425			1.00	%		5.70	%		9/7/2018		5/24/2023		5,743		5,702		5,513
Capstone Logistics Acquisition, Inc.⁽²⁾⁽⁹⁾	Professional Services		L+450			1.00	%		5.57	%		10/3/2014		10/7/2021		12,074		12,042		10,262
Cerapedics, Inc.⁽²⁾	Health Care Equipment & Supplies		L+695			2.50	%		9.45	%		3/22/2019		3/1/2024		2,885		2,908		2,899
Composite Technology Acquisition Corp. (ClockSpring)⁽²⁾⁽⁹⁾	Building Products		L+475			—			5.82	%		2/1/2019		2/1/2025		12,812		12,661		11,787
Confie Seguros Holding II Co.⁽²⁾⁽⁹⁾	Insurance		L+475			1.00	%		6.36	%		10/13/2016		4/19/2022		14,173		14,114		10,977
DISA Holdings Acquisition Subsidiary Corp.⁽²⁾	Professional Services		L+400			1.00	%		5.58	%		6/14/2018		6/30/2022		10,200		10,167		9,792
Drilling Info Holdings, Inc.⁽²⁾	IT Services		L+450			—			5.40	%		1/31/2020		7/30/2023- 7/30/2025		11,856		11,536		11,144
Edgewood Partners Holdings, LLC⁽²⁾⁽⁹⁾	Insurance		L+425			1.00	%		5.25	%		3/28/2018		9/8/2024		16,669		16,626		16,169
Empower Payments Acquisition, Inc. (RevSpring).⁽²⁾	Professional Services		L+400			1.00	%		5.45	%		11/28/2016		10/11/2025		4,938		4,927		4,283
ENS Holdings III Corp. & ES Opco USA LLC (BlueFin)⁽²⁾	Trading Companies & Distributors		L+475			1.00	%		5.75	%		12/31/2019		12/31/2025		6,176		6,056		5,867
GenMark Diagnostics, Inc⁽²⁾⁽⁴⁾	Health Care Providers & Services		L+590			2.51	%		8.41	%		2/1/2019		2/1/2023		7,598		7,676		7,712
Kindred Biosciences, Inc^(2)(10)	Pharmaceuticals		L+675			2.17	%		8.92	%		9/30/2019		9/30/2024		1,408		1,406		1,408
KORE Wireless Group, Inc.⁽²⁾	Wireless Telecommunication Services		L+550			—			6.57	%		12/21/2018		12/21/2024		11,895		11,697		10,944
Logix Holding Company, LLC⁽²⁾	Communications Equipment		L+575			1.00	%		6.75	%		8/11/2017		12/22/2024		10,547		10,470		9,492
MHE Intermediate Holdings, LLC (TFS-Miner)⁽²⁾⁽⁹⁾	Air Freight & Logistics		L+500			1.00	%		6.07	%		3/8/2017		3/10/2024		5,904		5,866		5,550
Ministry Brands, LLC⁽²⁾⁽⁹⁾	Software		L+400			1.00	%		5.62	%		11/21/2016		12/2/2022		14,138		14,070		13,572
MSHC, Inc. (Service Logic)⁽²⁾⁽⁹⁾	Commercial Services & Supplies		L+425			1.00	%		5.25	%		7/12/2018		12/31/2024		13,943		13,881		13,106
National Spine and Pain Centers, LLC⁽⁹⁾	Health Care Providers & Services		L+525			1.00	%		6.25	%		9/18/2018		6/2/2024		2,552		2,544		2,399
Neuronetics, Inc.⁽²⁾	Health Care Equipment & Supplies		L+765			1.66	%		9.31	%		3/2/2020		2/28/2025		2,400		2,390		2,388
Pet Holdings ULC & Pet Supermarket, Inc.⁽⁴⁾⁽⁹⁾	Specialty Retail		L+550			1.00	%		7.41	%		9/18/2018		7/5/2022		4,535		4,505		4,308
Pinnacle Treatment Centers, Inc.⁽⁹⁾	Health Care Providers & Services		L+625			1.00	%		8.03	%		1/22/2020		12/31/2022		3,749		3,714		3,637
PPT Management Holdings, LLC⁽²⁾ ††	Health Care Providers & Services		L+675	⁽⁸⁾		1.00	%		8.33	%		12/15/2016		12/16/2022		8,875		8,833		7,100
Rubius Therapeutics, Inc.⁽²⁾⁽⁴⁾	Pharmaceuticals		L+550			—			6.86	%		12/21/2018		12/21/2023		4,121		4,148		4,152
Rxsense Holdings LLC⁽²⁾	Diversified Consumer Services		L+525			1.00	%		6.25	%		3/17/2020		3/13/2026		8,359		8,193		7,857
scPharmaceuticals, Inc.⁽²⁾	Pharmaceuticals		L+795			2.23	%		10.18	%		9/17/2019		9/17/2023		719		721		720
SHO Holding I Corporation (Shoes for Crews)⁽²⁾	Footwear		L+500			1.00	%		6.78	%		11/20/2015		10/27/2022		5,745		5,723		5,056
Solara Medical Supplies, Inc.⁽²⁾⁽⁹⁾	Health Care Providers & Services		L+600			1.00	%		7.12	%		5/31/2018		2/27/2024		15,121		14,915		14,819
Unified Physician Management, LLC⁽²⁾⁽⁹⁾	Health Care Facilities		L+450			1.00	%		5.50	%		4/18/2019		11/27/2023		14,690		14,559		13,662
U.S. Acute Care Solutions, LLC⁽²⁾⁽⁹⁾	Health Care Providers & Services		L+500			1.00	%		6.07	%		12/22/2016		5/15/2021		6,289		6,271		5,974
US Radiology Specialists, Inc.⁽²⁾⁽⁹⁾	Health Care Providers & Services		L+475			1.00	%		5.82	%		11/27/2018		1/1/2024		14,200		14,063		12,780
Worldwide Facilities, LLC⁽²⁾	Insurance		L+450			—			5.47	%		9/13/2019		9/5/2026		6,321		6,202		6,131

Total Bank Debt/Senior Secured Loans																	$	325,923	$	304,279

Common Equity/Equity Interests/Warrants—39.1%																Shares/Units
Essence Group Holdings Corporation (Lumeris) Warrants†. ..	Health Care Technology											3/22/2017				52,000	$	16	$	96
Gemino Healthcare Finance, LLC⁽⁴⁾⁽⁵⁾	Diversified Financial Services											9/30/2013				32,839		31,439		35,017
North Mill Holdco LLC^(4)(5)(7)	Diversified Financial Services											10/20/2017				100		67,000		56,250
Senseonics Holdings, Inc. Warrants†	Health Care Equipment & Supplies											7/25/2019				80,838		18		22
TwentyEighty Investors, LLC†.	Professional Services											1/31/2017				17,214		1,126		130
Venus Concept Ltd. Warrants† (fka Restoration Robotics)	Health Care Equipment & Supplies											5/10/2018				6,078		34		5

Total Common Equity/Equity Interests/Warrants																	$	99,633	$	91,520

Total Investments⁽⁶⁾—169.1%																	$	425,556	$	395,799
Cash Equivalents—38.4%																Par Amount
U.S. Treasury Bill	Government											3/31/2020		6/9/2020	$	90,000	$	89,997	$	89,988

Total Investments & Cash Equivalents—207.5%																	$	515,553	$	485,787
Liabilities in Excess of Other Assets—(107.5%)																				(251,647	)

Net Assets—100.0%																		$ 234,140

See notes to consolidated financial statements.

SOLAR SENIOR CAPITAL LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS (unaudited) (continued)

March 31, 2020

(in thousands)

(1)

Floating rate debt investments typically bear interest at a rate determined by reference to either the London Interbank Offered Rate (“LIBOR” or “L”) index rate or the prime index rate (PRIME or “P”), and which typically reset monthly, quarterly or semi-annually. For each debt investment we have provided the current interest rate in effect as of March 31, 2020.

(2)

Indicates an investment that is wholly or partially held by Solar Senior Capital Ltd. through its wholly-owned financing subsidiary SUNS SPV LLC (the “SUNS SPV”). Such investments are pledged as collateral under the Senior Secured Revolving Credit Facility (the “Credit Facility”) (see Note 7 to the consolidated financial statements) and are not generally available to creditors, if any, of the Company.

(3)	Floating rate instruments accrue interest at a predetermined spread relative to an index, typically the LIBOR or PRIME rate. These instruments are often subject to a LIBOR or PRIME rate floor.

(4)

Indicates assets that the Company believes may not represent “qualifying assets” under Section 55(a) of the Investment Company Act of 1940 (“1940 Act”), as amended. If we fail to invest a sufficient portion of our assets in qualifying assets, we could be prevented from making follow-on investments in existing portfolio companies or could be required to dispose of investments at inappropriate times in order to comply with the 1940 Act. As of March 31, 2020, on a fair value basis, non-qualifying assets in the portfolio represented 21.5% of the total assets of the Company.

(5)

Denotes investments in which we are deemed to exercise a controlling influence over the management or policies of a company, as defined in the 1940 Act, due to beneficially owning, either directly or through one or more controlled companies, more than 25% of the outstanding voting securities of the investment. Transactions during the three months ended March 31, 2020 in these controlled investments are as follows:


Name of Issuer	Fair Value at December 31, 2019		Gross Additions		Gross Reductions		Realized Gain (Loss)		Change in Unrealized Gain (Loss)			Dividend/ Other Income		Fair Value at March 31, 2020
Gemino Healthcare Finance, LLC	$	36,100	$	—	$	—	$	—	$	(1,083	)	$	865	$	35,017
North Mill Capital LLC		62,500		—		—		—		(6,250	)		1,260		56,250

	$98,600		$ —		$ —		$ —		$(7,333)			$2,125		$91,267

(6)

Aggregate net unrealized depreciation for U.S. federal income tax purposes is $25,780; aggregate gross unrealized appreciation and depreciation for U.S. federal tax purposes is $10,099 and $35,879, respectively, based on a tax cost of $421,579. The Company generally acquires its investments in private transactions exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”). These investments are generally subject to certain limitations on resale, and may be deemed to be “restricted securities” under the Securities Act. All investments are Level 3 unless otherwise indicated.

(7)	Our equity investment in North Mill Capital LLC is partially held through ESP SSC Corporation, a taxable consolidated subsidiary.

(8)	Spread is 1.00% Cash / 5.75% PIK.

(9)

Indicates an investment that is wholly or partially held by Solar Senior Capital Ltd. through its wholly-owned financing subsidiary FLLP 2015-1 LLC (the “FLLP SPV”). Such investments are pledged as collateral under the FLLP 2015-1, LLC Revolving Credit Facility (the “FLLP Facility”) (see Note 7 to the consolidated financial statements) and are not generally available to creditors, if any, of the Company.

(10)	Kindred Biosciences, Inc., KindredBio Equine, Inc. and Centaur Biopharmaceutical Services, Inc. are co-borrowers.

†	Non-income producing security.

††	Investment contains a payment-in-kind (“PIK”) feature.

See notes to consolidated financial statements.

SOLAR SENIOR CAPITAL LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS (unaudited) (continued)

March 31, 2020


Industry Classification	Percentage of Total Investments (at fair value) as of March 31, 2020
Diversified Financial Services (includes Gemino Healthcare Finance, LLC and North Mill Holdco LLC)		23.1	%
Health Care Providers & Services		17.8	%
Professional Services		9.2	%
Insurance		8.4	%
Communications Equipment		5.5	%
Software		4.8	%
Health Care Facilities		3.5	%
Electronic Equipment, Instruments & Components		3.3	%
Commercial Services & Supplies		3.3	%
Building Products		3.0	%
IT Services		2.8	%
Wireless Telecommunication Services		2.8	%
Pharmaceuticals		2.4	%
Diversified Consumer Services		2.0	%
Household & Personal Products		1.5	%
Trading Companies & Distributors		1.5	%
Air Freight & Logistics		1.4	%
Health Care Equipment & Supplies		1.3	%
Footwear		1.3	%
Specialty Retail		1.1	%
Health Care Technology		0.0	%

Total Investments		100.0	%

See notes to consolidated financial statements.

SOLAR SENIOR CAPITAL LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS

December 31, 2019

(in thousands, except share/unit amounts)


Description	Industry		Spread above Index⁽³⁾			Libor Floor			Interest Rate⁽¹⁾			Acquisition Date		Maturity Date		Par Amount		Cost		Fair Value
Bank Debt/Senior Secured Loans—138.1%
1A Smart Start LLC^(2)(10)		Electrical Equipment, Instruments & Components		L+450			1.00	%		6.30	%		12/21/2017		2/21/2022	$	13,795	$	13,758	$	13,795
Acrisure, LLC⁽²⁾		Insurance		L+425			1.00	%		6.19	%		5/3/2017		11/22/2023		7,297		7,286		7,352
Advantage Sales and Marketing, Inc.⁽²⁾		Professional Services		L+325			1.00	%		5.05	%		2/14/2018		7/23/2021		4,899		4,852		4,899
Advantage Sales and Marketing, Inc.		Professional Services		L+650			1.00	%		8.30	%		2/14/2013		7/25/2022		8,000		7,977		7,880
Aegis Toxicology Sciences Corporation^(2)(10)		Health Care Providers & Services		L+550			1.00	%		7.40	%		5/7/2018		5/9/2025		10,863		10,703		10,319
Alera Group Intermediate Holdings, Inc.⁽²⁾		Insurance		L+450			—			6.30	%		7/27/2018		8/1/2025		4,942		4,936		4,998
Alimera Sciences, Inc.⁽²⁾		Pharmaceuticals		L+765			1.78	%		9.43	%		12/31/2019		7/1/2024		2,914		2,914		2,914
Alteon Health, LLC (fka Island Medical)^(2)(10)		Health Care Providers & Services		L+650			1.00	%		8.30	%		3/31/2017		9/1/2022		7,383		7,342		7,383
Altern Marketing, LLC⁽²⁾		Household & Personal Products		L+600			2.00	%		8.00	%		10/25/2019		10/7/2024		7,924		7,846		7,844
American Teleconferencing Services, Ltd. (PGI)⁽²⁾		Communications Equipment		L+650			1.00	%		8.32	%		5/5/2016		6/8/2023		13,690		13,371		12,869
AQA Acquisition Holding, Inc.⁽²⁾		Software		L+425			1.00	%		6.19	%		9/7/2018		5/24/2023		5,618		5,575		5,618
Capstone Logistics Acquisition, Inc.^(2)(10)		Professional Services		L+450			1.00	%		6.30	%		10/3/2014		10/7/2021		12,074		12,037		11,892
Cerapedics, Inc.⁽²⁾		Health Care Equipment & Supplies		L+695			2.50	%		9.45	%		3/22/2019		3/1/2024		2,885		2,899		2,899
Composite Technology Acquisition Corp. (ClockSpring)^(2)(10)		Building Products		L+475			—			6.69	%		2/1/2019		2/1/2025		11,733		11,577		11,616
Confie Seguros Holding II Co.^(2)(10)		Insurance		L+475			1.00	%		6.66	%		10/13/2016		4/19/2022		14,173		14,108		13,804
DISA Holdings Acquisition Subsidiary Corp.⁽²⁾		Professional Services		L+400			1.00	%		5.74	%		6/14/2018		6/30/2022		10,226		10,190		10,226
Edgewood Partners Holdings, LLC^(2)(10)		Insurance		L+425			1.00	%		6.05	%		3/28/2018		9/8/2024		16,712		16,667		16,545
Empower Payments Acquisition, Inc. (RevSpring).⁽²⁾		Professional Services		L+400			1.00	%		5.94	%		11/28/2016		10/11/2025		4,950		4,939		4,950
ENS Holdings III Corp. & ES Opco USA LLC (BlueFin)⁽²⁾		Trading Companies & Distributors		L+475			1.00	%		6.69	%		12/31/2019		12/31/2025		5,281		5,176		5,176
Falmouth Group Holdings Corp. (AMPAC)^(2)(10)		Chemicals		L+675			1.00	%		8.55	%		12/15/2016		12/14/2021		10,788		10,788		10,788
GenMark Diagnostics, Inc⁽²⁾⁽⁴⁾		Health Care Providers & Services		L+590			2.51	%		8.41	%		2/1/2019		2/1/2023		7,598		7,642		7,674
Kindred Biosciences, Inc^(2)(4)(12)		Pharmaceuticals		L+675			2.17	%		8.92	%		9/30/2019		9/30/2024		1,408		1,405		1,404
KORE Wireless Group, Inc.⁽²⁾		Wireless Telecommunication Services		L+550			—			7.44	%		12/21/2018		12/21/2024		11,926		11,718		11,836
Logix Holding Company, LLC⁽²⁾		Communications Equipment		L+575			1.00	%		7.55	%		8/11/2017		12/22/2024		10,575		10,494		10,575
MHE Intermediate Holdings, LLC (TFS-Miner)^(2)(10)		Air Freight & Logistics		L+500			1.00	%		6.94	%		3/8/2017		3/10/2024		5,919		5,879		5,890
Ministry Brands, LLC^(2)(10)		Software		L+400			1.00	%		5.85	%		11/21/2016		12/2/2022		14,174		14,101		14,139
MRI Software LLC^(2)(10)		Software		L+575			1.00	%		7.55	%		6/7/2017		6/30/2023		10,754		10,688		10,754
MSHC, Inc. (Service Logic)^(2)(10)		Commercial Services & Supplies		L+425			1.00	%		5.96	%		7/12/2018		12/31/2024		12,486		12,429		12,423
National Spine and Pain Centers, LLC⁽¹⁰⁾		Health Care Providers & Services		L+450			1.00	%		6.30	%		9/18/2018		6/2/2024		2,558		2,550		2,520
On Location Events, LLC & PrimeSport Holdings Inc.^(2)(10)		Media		L+500			1.00	%		6.94	%		12/7/2017		9/29/2021		13,767		13,683		13,767
Pet Holdings ULC & Pet Supermarket, Inc.^(4)(10)		Specialty Retail		L+550			1.00	%		7.60	%		9/18/2018		7/5/2022		4,547		4,514		4,535
PPT Management Holdings, LLC⁽²⁾ ††		Health Care Providers & Services		L+675	⁽¹¹⁾		1.00	%		8.44	%		12/15/2016		12/16/2022		8,878		8,832		8,168
Radiology Partners, Inc.⁽²⁾		Health Care Providers & Services		L+475			—			6.62	%		6/28/2018		7/9/2025		7,406		7,347		7,453
Rubius Therapeutics, Inc.⁽²⁾⁽⁴⁾		Pharmaceuticals		L+550			—			7.19	%		12/21/2018		12/21/2023		4,121		4,138		4,142
scPharmaceuticals, Inc.⁽²⁾		Pharmaceuticals		L+795			2.23	%		10.18	%		9/17/2019		9/17/2023		719		720		720
Senseonics Holdings, Inc.⁽²⁾		Health Care Equipment & Supplies		L+650			2.48	%		8.98	%		7/25/2019		7/1/2024		3,234		3,220		3,234
SHO Holding I Corporation (Shoes for Crews)⁽²⁾		Footwear		L+500			1.00	%		6.93	%		11/20/2015		10/27/2022		5,760		5,736		5,645
Solara Medical Supplies, Inc.^(2)(10)		Health Care Providers & Services		L+600			1.00	%		7.94	%		5/31/2018		2/27/2024		13,185		12,996		13,185
Unified Physician Management, LLC⁽²⁾		Health Care Facilities		L+450			1.00	%		6.30	%		4/18/2019		11/27/2023		13,130		13,007		12,998
U.S. Acute Care Solutions, LLC^(2)(10)††		Health Care Providers & Services		L+600	⁽⁹⁾		1.00	%		7.80	%		12/22/2016		5/15/2021		6,305		6,283		6,305
US Radiology Specialists, Inc.⁽²⁾		Health Care Providers & Services		L+475			1.00	%		6.55	%		11/27/2018		1/1/2024		12,073		11,971		11,832
WIRB-Copernicus Group, Inc.^(2)(10)		Professional Services		L+425			1.00	%		5.87	%		3/27/2017		8/15/2022		12,392		12,350		12,392
Worldwide Facilities, LLC⁽²⁾		Insurance		L+450			—			6.21	%		9/13/2019		9/5/2026		6,159		6,040		6,098

Total Bank Debt/Senior Secured Loans																		$	362,684	$	361,456

Common Equity/Equity Interests/Warrants—37.7%																	Shares/Units
Essence Group Holdings Corporation (Lumeris) Warrants†. ..		Health Care Technology											3/22/2017				52,000	$	16	$	67
Gemino Healthcare Finance, LLC⁽⁴⁾⁽⁵⁾		Diversified Financial Services											9/30/2013				32,839		31,439		36,100
North Mill Holdco LLC^(4)(5)(8)		Diversified Financial Services											10/20/2017				100		67,000		62,500
Senseonics Holdings, Inc. Warrants†		Health Care Equipment & Supplies											7/25/2019				80,838		18		11
TwentyEighty Investors, LLC†.		Professional Services											1/31/2017				17,214		1,195		130
Venus Concept Ltd. Warrants† (fka Restoration Robotics)		Health Care Equipment & Supplies											5/10/2018				6,078		34		1

Total Common Equity/Equity Interests/Warrants																		$	99,702	$	98,809

Total Investments⁽⁷⁾—175.8%																		$	462,386	$	460,265
Cash Equivalents — 38.2%																	Par Amount
U.S. Treasury Bill		Government											12/31/2019		1/28/2020	$	100,000	$	99,898	$	99,898

Total Investments & Cash Equivalents—214.0%																		$	562,284	$	560,163
Liabilities in Excess of Other Assets — (114.0%)																					(298,349	)

Net Assets—100.0%																				$	261,814

See notes to consolidated financial statements.

SOLAR SENIOR CAPITAL LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)

December 31, 2019

(in thousands)

(1)

(2)

(3)	Floating rate instruments accrue interest at a predetermined spread relative to an index, typically the LIBOR or PRIME rate. These instruments are often subject to a LIBOR or PRIME rate floor.

(4)

Indicates assets that the Company believes may not represent “qualifying assets” under Section 55(a) of the Investment Company Act of 1940 (“1940 Act”), as amended. If we fail to invest a sufficient portion of our assets in qualifying assets, we could be prevented from making follow-on investments in existing portfolio companies or could be required to dispose of investments at inappropriate times in order to comply with the 1940 Act. As of December 31, 2019, on a fair value basis, non-qualifying assets in the portfolio represented 20.1% of the total assets of the Company.

(5)

Denotes investments in which we are deemed to exercise a controlling influence over the management or policies of a company, as defined in the 1940 Act, due to beneficially owning, either directly or through one or more controlled companies, more than 25% of the outstanding voting securities of the investment. Transactions during the year ended December 31, 2019 in these controlled investments are as follows:


Name of Issuer	Fair Value at December 31, 2018		Gross Additions		Gross Reductions		Realized Gain (Loss)		Change in Unrealized Gain (Loss)			Dividend/ Other Income		Fair Value at December 31, 2019
Gemino Healthcare Finance, LLC	$	32,550	$	—	$	—	$	—	$	3,550		$	3,460	$	36,100
North Mill Holdco LLC		67,000		—		—		—		(4,500	)		5,600		62,500

	$	99,550	$	—	$	—	$	—	$	(950	)	$	9,060	$	98,600

(6)

Denotes investments in which we are an “Affiliated Person” but not exercising a controlling influence, as defined in the 1940 Act, due to beneficially owning, either directly or through one or more controlled companies, more than 5% but less than 25% of the outstanding voting securities of the investment. Transactions during the year ended December 31, 2019 in these affiliated investments are as follows:


Name of Issuer	Fair Value at December 31, 2018		Gross Additions		Gross Reductions		Realized Gain (Loss)		Change in Unrealized Gain (Loss)			Interest/ Dividend/ Other Income		Fair Value at December 31, 2019
Engineering Solutions & Products, LLC (1^st lien)	$	—	$	548	$	548	$	—	$	—		$	33	$	—
Engineering Solutions & Products, LLC (2^ndlien)	$	2,282		—		2,402		—		(125	)		380		—
Engineering Solutions & Products, LLC (equity interests)	$	68		—		3,245		1,979		1,299			—		—

	$	2,350	$	548	$	6,195	$	1,979	$	1,174		$	413	$	—

(7)

Aggregate net unrealized appreciation for U.S. federal income tax purposes is $1,855; aggregate gross unrealized appreciation and depreciation for U.S. federal tax purposes is $12,523 and $10,668, respectively, based on a tax cost of $458,410. The Company generally acquires its investments in private transactions exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”). These investments are generally subject to certain limitations on resale, and may be deemed to be “restricted securities” under the Securities Act. All investments are Level 3 unless otherwise indicated.

(8)	Our equity investment in North Mill Capital LLC is partially held through ESP SSC Corporation, a taxable consolidated subsidiary.

(9)	Spread is 5.00% Cash / 1.00% PIK.

(10)

Indicates an investment that is wholly or partially held by Solar Senior Capital Ltd. through its wholly-owned financing subsidiary FLLP 2015-1 LLC (the “FLLP SPV”). Such investments are pledged as collateral under the FLLP 2015-1, LLC Revolving Credit Facility (see Note 7 to the consolidated financial statements) and are not generally available to creditors, if any, of the Company.

(11)	Spread is 6.00% Cash / 0.75% PIK.

(12)	Kindred Biosciences, Inc., KindredBio Equine, Inc. and Centaur Biopharmaceutical Services, Inc. are co-borrowers.

†	Non-income producing security.

††	Investment contains a payment-in-kind (“PIK”) feature.

See notes to consolidated financial statements.

SOLAR SENIOR CAPITAL LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)

December 31, 2019


Industry Classification	Percentage of Total Investments (at fair value) as of December 31, 2019
Diversified Financial Services (includes Gemino Healthcare Finance, LLC and North Mill Holdco LLC)		21.4	%
Health Care Providers & Services		16.3	%
Professional Services		11.4	%
Insurance		10.6	%
Software		6.6	%
Communications Equipment		5.1	%
Electronic Equipment, Instruments & Components		3.0	%
Media		3.0	%
Health Care Facilities		2.8	%
Commercial Services & Supplies		2.7	%
Wireless Telecommunication Services		2.6	%
Building Products		2.5	%
Chemicals		2.4	%
Pharmaceuticals		2.0	%
Household & Personal Products		1.7	%
Health Care Equipment & Supplies		1.3	%
Air Freight & Logistics		1.3	%
Footwear		1.2	%
Trading Companies & Distributors		1.1	%
Specialty Retail		1.0	%
Health Care Technology		0.0	%

Total Investments		100.0	%

See notes to consolidated financial statements.

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

March 31, 2020

(in thousands, except share amounts)

Note 1. Organization

Solar Senior Capital Ltd. (“Solar Senior”, the “Company”, “SUNS”, “we”, “us”, or “our”), a Maryland corporation formed on December 16, 2010, is a closed-end, externally managed, non-diversified management investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). Furthermore, as the Company is an investment company, it continues to apply the guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946. In addition, for U.S. federal income tax purposes, we have elected to be treated, and intend to qualify annually, as a regulated investment company (“RIC”), under Subchapter M of the Internal Revenue Code of 1986, as amended (“the Code”).

On January 28, 2011, Solar Senior was capitalized with initial equity of $2 and commenced operations. On February 24, 2011, Solar Senior priced its initial public offering, selling 9.0 million shares, including the underwriters’ over-allotment, raising approximately $168,000 of net proceeds. Concurrent with this offering, our senior management team purchased an additional 500,000 shares through a private placement, raising another $10,000.

The Company’s investment objective is to seek to maximize current income consistent with the preservation of capital. We seek to achieve our investment objective by investing directly or indirectly in senior secured loans, including first lien, stretch-senior and second lien debt instruments, made primarily to leveraged private middle-market companies whose debt is rated below investment grade, which the Company refers to collectively as “senior loans.” From time to time, we may also invest in public companies that are thinly traded. Under normal market conditions, at least 80% of the value of the Company’s net assets (including the amount of any borrowings for investment purposes) will be directly or indirectly invested in senior loans.

Note 2. Significant Accounting Policies

The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in conformity with U.S. generally accepted accounting principles (“GAAP”), and include the accounts of the Company and certain wholly-owned subsidiaries. The consolidated financial statements reflect all adjustments and reclassifications which, in the opinion of management, are necessary for the fair presentation of the results of the operations and financial condition for the periods presented. All significant intercompany balances and transactions have been eliminated. Certain prior period amounts may have been reclassified to conform to current period presentation.

Interim consolidated financial statements are prepared in accordance with GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-X, as appropriate. Accordingly, they may not include all of the information and notes required by GAAP for annual consolidated financial statements. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reported periods. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ materially. The current period’s results of operations will not necessarily be indicative of results that ultimately may be achieved for the fiscal year ending on December 31, 2020.

In the opinion of management, all adjustments which are of a normal recurring nature considered necessary for the fair presentation of financial statements, have been included.

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

March 31, 2020

(in thousands, except share amounts)

The significant accounting policies consistently followed by the Company are:

(a)

Investment transactions are accounted for on the trade date;

(b)

The Company conducts the valuation of its assets in accordance with GAAP and the 1940 Act. The Company generally values its assets on a quarterly basis, or more frequently if required. Investments for which market quotations are readily available on an exchange are valued at the closing price on the date of valuation. The Company may also obtain quotes with respect to certain of its investments from pricing services or brokers or dealers in order to value assets. When doing so, management determines whether the quote obtained is sufficient according to GAAP to determine the fair value of the investment. If determined adequate, the Company uses the quote obtained. Debt investments with maturities of 60 days or less shall each be valued at cost plus accreted discount, or minus amortized premium, which is expected to approximate fair value, unless such valuation, in the judgment of Solar Capital Partners, LLC (the “Investment Adviser”), does not represent fair value, in which case such investments shall be valued at fair value as determined in good faith by or under the direction of the Company’s board of directors (the “Board”).

Investments for which reliable market quotations are not readily available or for which the pricing sources do not provide a valuation or methodology or provide a valuation or methodology that, in the judgment of the Investment Adviser or the Board does not represent fair value, shall be valued as follows: (i) each portfolio company or investment is initially valued by the investment professionals responsible for the portfolio investment; (ii) preliminary valuations are discussed with senior management of the Investment Adviser; (iii) independent valuation firms engaged by, or on behalf of, the Board will conduct independent appraisals and review the Investment Adviser’s preliminary valuations and make their own independent assessment for (a) each portfolio investment that, when taken together with all other investments in the same portfolio company, exceeds 10% of estimated total assets, plus available borrowings, as of the end of the most recently completed fiscal quarter, and (b) each portfolio investment that is presently in payment default and the Investment Adviser does not expect to reach an agreement with the portfolio company in the subsequent quarter; (iv) the Board will discuss the valuations and determine the fair value of each investment in our portfolio in good faith based on the input of the Investment Adviser and, where appropriate, the respective independent valuation firm.

The recommendation of fair value generally considers the following factors among others, as relevant: applicable market yields; the nature and realizable value of any collateral; the portfolio company’s ability to make payments; the portfolio company’s earnings and discounted cash flow; the markets in which the issuer does business; and comparisons to publicly traded securities, among others.

When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the Company will consider the pricing indicated by the external event to corroborate the valuation. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

March 31, 2020

(in thousands, except share amounts)

approach uses valuation approaches to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that we may take into account in fair value pricing our investments include, as relevant: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, call protection provisions, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, M&A comparables, and enterprise values, among other factors. When available, broker quotations and/or quotations provided by pricing services are considered as an input in the valuation process. For the three months ended March 31, 2020, there has been no change to the Company’s valuation approaches or techniques and the nature of the related inputs considered in the valuation process.

ASC Topic 820 classifies the inputs used to measure these fair values into the following hierarchy:

Level 1: Quoted prices in active markets for identical assets or liabilities, accessible by the Company at the measurement date.

Level 2: Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or other observable inputs other than quoted prices.

Level 3: Unobservable inputs for the asset or liability.

In all cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each investment. The exercise of judgment is based in part on our knowledge of the asset class and our prior experience.

(c)

Gains or losses on investments are calculated by using the specific identification method.

(d)

The Company records dividend income and interest, adjusted for amortization of premium and accretion of discount, on an accrual basis. Loan origination fees, original issue discount, and market discounts are capitalized and we amortize such amounts into income using the effective interest method. Upon the prepayment of a loan, any unamortized loan origination fees are recorded as interest income. We record call premiums on loans repaid as interest income when we receive such amounts. Capital structuring fees, amendment fees, consent fees, and any other non-recurring fee income as well as management fee and other fee income for services rendered, if any, are recorded as other income when earned.

(e)

The Company intends to comply with the applicable provisions of the Code pertaining to regulated investment companies to make distributions of taxable income sufficient to relieve it of substantially all U.S. federal income taxes. The Company, at its discretion, may carry forward taxable income in excess of calendar year distributions and pay a 4% excise tax on this income. The Company will accrue excise tax on such estimated excess taxable income as appropriate.

(f)

Book and tax basis differences relating to stockholder distributions and other permanent book and tax differences are typically reclassified among the Company’s capital accounts annually. In addition, the character of income and gains to be distributed is determined in accordance with income tax regulations that may differ from GAAP.

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

March 31, 2020

(in thousands, except share amounts)

(g)

Distributions to common stockholders are recorded as of the record date. The amount to be paid out as a distribution is determined by the Board. Net realized capital gains, if any, are generally distributed or deemed distributed at least annually.

(h)

In accordance with Regulation S-X and ASC Topic 810—Consolidation, the Company consolidates its interest in controlled investment company subsidiaries, financing subsidiaries and certain wholly-owned holding companies that serve to facilitate investment in portfolio companies. In addition, the Company may also consolidate any controlled operating companies substantially all of whose business consists of providing services to the Company.

(i)

The accounting records of the Company are maintained in U.S. dollars. Any assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the rate of exchange of such currencies against the U.S. dollar on the date of valuation. The Company will not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations would be included with the net unrealized gain or loss from investments. The Company’s investments in foreign securities, if any, may involve certain risks, including without limitation: foreign exchange restrictions, expropriation, taxation or other political, social or economic risks, all of which could affect the market and/or credit risk of the investment. In addition, changes in the relationship of foreign currencies to the U.S. dollar can significantly affect the value of these investments in terms of U.S. dollars and therefore the earnings of the Company.

(j)

In accordance with ASC 835-30, the Company reports origination and other expenses related to certain debt issuances, if any, as a direct deduction from the carrying amount of the debt liability. Applicable expenses are deferred and amortized using either the effective interest method or the straight-line method over the stated life. The straight-line method may be used on revolving facilities and/or when it approximates the effective yield method.

(k)

The Company records expenses related to shelf registration statements and applicable equity offering costs as prepaid assets. These expenses are typically charged as a reduction of capital upon utilization or expensed, in accordance with ASC 946-20-25.

(l)

Investments that are expected to pay regularly scheduled interest in cash are generally placed on non-accrual status when principal or interest cash payments are past due 30 days or more and/or when it is no longer probable that principal or interest cash payments will be collected. Such non-accrual investments are restored to accrual status if past due principal and interest are paid in cash, and in management’s judgment, are likely to continue timely payment of their remaining principal and interest obligations. Cash interest payments received on such investments may be recognized as income or applied to principal depending on management’s judgment.

(m)

The Company defines cash equivalents as securities that are readily convertible into known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Generally, only securities with a maturity of three months or less would qualify, with limited exceptions. The Company believes that certain U.S. Treasury bills, repurchase agreements and other high-quality, short-term debt securities would qualify as cash equivalents.

Recent Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in ASU 2018-13 modify and eliminate certain disclosure requirements on fair value measurements in

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

March 31, 2020

(in thousands, except share amounts)

Topic 820, Fair Value Measurement. ASU 2018-13 is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The Company has adopted ASU 2018-13 and determined that the adoption has not had a material impact on its consolidated financial statements and disclosures.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). The amendments in ASU 2020-04 provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. ASU 2020-04 is effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the impact of adopting ASU 2020-04 on its consolidated financial statements and disclosures.

Note 3. Agreements

Solar Senior has an Advisory Agreement with the Investment Adviser, under which the Investment Adviser manages the day-to-day operations of, and provides investment advisory services to, Solar Senior. For providing these services, the Investment Adviser receives a fee from Solar Senior, consisting of two components—a base management fee and a performance-based incentive fee. The base management fee is calculated at an annual rate of 1.00% of gross assets. For services rendered under the Advisory Agreement, the base management fee is payable quarterly in arrears. The base management fee is calculated based on the average value of our gross assets at the end of the two most recently completed calendar quarters. Base management fees for any partial month or quarter will be appropriately pro-rated. For purposes of computing the base management fee, gross assets exclude temporary assets acquired at the end of each fiscal quarter for purposes of preserving investment flexibility in the next fiscal quarter. Temporary assets include, but are not limited to, U.S. treasury bills, other short-term U.S. government or government agency securities, repurchase agreements or cash borrowings.

The performance-based incentive fee has two parts, as follows: one is calculated and payable quarterly in arrears based on our pre-incentive fee net investment income for the immediately preceding calendar quarter. For this purpose, pre-incentive fee net investment income means interest income, dividend income and any other income (other than fees for providing managerial assistance) accrued during the calendar quarter, minus our operating expenses for the quarter (excluding the performance-based incentive fee). Pre-incentive fee net investment income includes, in the case of investments, if any, with a deferred interest feature (such as original issue discount, debt instruments with pay-in-kind interest and zero-coupon securities), accrued income that we have not yet received in cash. Pre-incentive fee net investment income does not include any realized capital gains or losses or unrealized capital appreciation or depreciation. Pre-incentive fee net investment income, expressed as a rate of return on the value of our net assets at the end of the immediately preceding calendar quarter, is compared to a hurdle of 1.75% per quarter (7.00% annualized). The Company pays the Investment Adviser a performance-based incentive fee with respect to pre-incentive fee net investment income for each calendar quarter as follows:

•

no performance-based incentive fee in any calendar quarter in which our pre-incentive fee net investment income does not exceed the hurdle of 1.75%;

•

50% of pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle but is less than 2.9167% in any calendar quarter (11.67% annualized);

and

•

20% of the amount of pre-incentive fee net investment income, if any, that exceeds 2.9167% in any calendar quarter (11.67% annualized) will be payable to the Investment Adviser.

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

March 31, 2020

(in thousands, except share amounts)

The second part of the performance-based incentive fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date) and will equal 20% of the Company’s cumulative realized capital gains less cumulative realized capital losses, unrealized capital depreciation (unrealized depreciation on a gross investment-by-investment basis at the end of each calendar year) and all net capital gains upon which prior performance-based capital gains incentive fee payments were previously made to the Investment Adviser. For financial statement purposes, the second part of the performance-based incentive fee is accrued based upon 20% of cumulative net realized gains and net unrealized capital appreciation. No accrual was required for the three months ended March 31, 2020 and 2019.

For the three months ended March 31, 2020 and 2019 the Company recognized $1,104 and $1,156, respectively, in gross base management fees and $56 and $544, respectively, in gross performance-based incentive fees. For the three months ended March 31, 2020 and 2019, $964 and $0, respectively, of such base management fees were waived. For the three months ended March 31, 2020 and 2019, $56 and $536, respectively, of such performance-based incentive fees were waived. For the three months ended March 31, 2020 and 2019, there were no fees recaptured by the Investment Adviser. The below voluntary fee waivers were made at the Investment Adviser’s discretion and are subject to recapture by the Investment Adviser and reimbursement by the Company under the conditions noted below. No fees will be recouped by the Investment Adviser if (i) for the period in which recoupment occurs, the ratio of operating expenses to average net assets, when considering the reimbursement, exceeds the same ratio for the period in which the waiver occurred; (ii) for the period in which recoupment occurs, the annualized distribution rate cannot fall below the annualized distribution rate for the period in which the waiver occurred; and (iii) recoupment can only occur within three years from the date of the waiver. The table below presents a summary of fees waived that may be subject to recoupment:


Three Months Ended	Management and Performance- Based Incentive Fees Waived		Management and Performance- Based Incentive Fees Recouped		Unreimbursed Management and Performance- Based Incentive Fees		Ratio of Operating Expense to Average Net Assets for the Period⁽¹⁾			Annualized Distribution Rate for the Period⁽²⁾			Eligible for Recoupment Through
December 31, 2018	$	362	$	—	$	362		0.20	%		8.38	%		September 30, 2020
March 31, 2019		536		—		536		0.28	%		8.65	%		December 31, 2020
June 30, 2019		984		—		984		0.31	%		8.60	%		March 31, 2021
September 30, 2019		602		—		602		0.31	%		8.63	%		June 30, 2021
December 31, 2019		671		—		671		0.33	%		8.65	%		September 30, 2021
March 31, 2020		1,020		—		1,020		0.35	%		8.64	%		December 31, 2021

Total	$	4,175	$	—	$	4,175

(1)	Operating expense includes all expenses borne by the Company, except for organizational and offering costs, base management fees, performance-based incentive fees and interest expense. The ratios presented are not annualized.

(2)	Annualized distribution rate equals the annualized rate of distributions paid to stockholders based on the amount of the distributions declared prior to the date that the waivers of expenses related to management and performance-based incentive fees were incurred.

Solar Senior has also entered into an Administration Agreement with Solar Capital Management, LLC (the “Administrator”) under which the Administrator provides administrative services for Solar Senior. For providing these services, facilities and personnel, Solar Senior reimburses the Administrator for Solar Senior’s allocable

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

March 31, 2020

(in thousands, except share amounts)

portion of overhead and other expenses incurred by the Administrator in performing its obligations under the Administration Agreement, including rent. The Administrator will also provide, on Solar Senior’s behalf, managerial assistance to those portfolio companies to which Solar Senior is required to provide such assistance. The Company typically reimburses the Administrator on a quarterly basis.

For the three months ended March 31, 2020 and 2019, the Company recognized expenses under the Administration Agreement of $367 and $396, respectively. No managerial assistance fees were accrued or collected for the three months ended March 31, 2020 and 2019.

Note 4. Net Asset Value Per Share

At March 31, 2020, the Company’s total net assets and net asset value per share were $234,140 and $14.59, respectively. This compares to total net assets and net asset value per share at December 31, 2019 of $261,814 and $16.32, respectively.

Note 5. Earnings (Loss) Per Share

The following table sets forth the computation of basic and diluted net increase (decrease) in net assets per share resulting from operations, pursuant to ASC 260-10, for the three months ended March 31, 2020 and 2019:


	Three months ended March 31,
	2020			2019
Earnings (loss) per share (basic & diluted)
Numerator—net increase (decrease) in net assets resulting from operations:	$	(22,065	)	$	7,386
Denominator—weighted average shares:		16,048,002			16,040,870
Earnings (loss) per share:	$	(1.37	)	$	0.46

Note 6. Fair Value

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. GAAP establishes a framework for measuring fair value that includes a hierarchy used to classify the inputs used in measuring fair value. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The levels of the fair value hierarchy are as follows:

Level 1. Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company has the ability to access.

Level 2. Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:

Quoted prices for similar assets or liabilities in active markets;

Quoted prices for identical or similar assets or liabilities in non-active markets;

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

March 31, 2020

(in thousands, except share amounts)

Pricing models whose inputs are observable for substantially the full term of the asset or liability; and

Pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability.

Level 3. Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s and, if applicable, an independent third-party valuation firm’s own assumptions about the assumptions a market participant would use in pricing the asset or liability.

When the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. For example, a Level 3 fair value measurement may include inputs that are observable (Levels 1 and 2) and unobservable (Level 3).

Gains and losses for assets and liabilities categorized within the Level 3 table below may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3).

A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification for certain financial assets or liabilities. Such reclassifications involving Level 3 assets and liabilities are reported as transfers in/out of Level 3 as of the end of the quarter in which the reclassifications occur. Within the fair value hierarchy tables below, cash and cash equivalents are excluded but could be classified as Level 1.

The following tables present the balances of assets and liabilities measured at fair value on a recurring basis, as of March 31, 2020 and December 31, 2019:

Fair Value Measurements

As of March 31, 2020


	Level 1		Level 2		Level 3		Total
Assets:
Bank Debt/Senior Secured Loans	$	—	$	—	$	304,279	$	304,279
Common Equity/Equity Interests/Warrants		—		—		91,520		91,520

Total Investments	$	—	$	—	$	395,799	$	395,799

Liabilities:
Unfunded Commitments	$	—	$	—	$	196	$	196

Fair Value Measurements

As of December 31, 2019


	Level 1		Level 2		Level 3		Total
Assets:
Bank Debt/Senior Secured Loans	$	—	$	—	$	361,456	$	361,456
Common Equity/Equity Interests/Warrants		—		—		98,809		98,809

Total Investments$	$	—	$	—	$	460,265	$	460,265

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

March 31, 2020

(in thousands, except share amounts)

The following table provides a summary of the changes in fair value of Level 3 assets and liabilities for the three months ended March 31, 2020, as well as the portion of gains or losses included in income attributable to unrealized gains or losses related to those assets and liabilities still held at March 31, 2020:

Fair Value Measurements Using Level 3 Inputs


	Bank Debt/Senior Secured Loans			Common Equity/Equity Interests/ Warrants			Total
Fair value, December 31, 2019	$	361,456		$	98,809		$	460,265
Total gains or losses included in earnings:
Net realized gain (loss)		124			—			124
Net change in unrealized gain (loss)		(20,416	)		(7,220	)		(27,636	)
Purchase of investment securities		35,705			—			35,705
Proceeds from dispositions of investment securities		(72,590	)		(69	)		(72,659	)
Transfers in/out of Level 3		—			—			—

Fair value, March 31, 2020	$	304,279		$	91,520		$	395,799

Unrealized gains (losses) for the period relating to those Level 3 assets that were still held by the Company at the end of the period:
Net change in unrealized gain (loss):	$	(20,416	)	$	(7,220	)	$	(27,636	)

The following table shows a reconciliation of the beginning and ending balances for fair valued liabilities measured using significant unobservable inputs (Level 3) for the three months ended March 31, 2020:


Unfunded Commitments	For the three months ended March 31, 2020
Beginning fair value	$	—
Net realized (gain) loss		—
Net change in unrealized (gain) loss		196
Borrowings		—
Repayments		—
Transfers in/out of Level 3		—

Ending fair value	$	196

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

March 31, 2020

(in thousands, except share amounts)

The following table provides a summary of the changes in fair value of Level 3 assets for the year ended December 31, 2019, as well as the portion of gains or losses included in income attributable to unrealized gains or losses related to those assets still held at December 31, 2019:


	Bank Debt/Senior Secured Loans			Common Equity/Equity Interests/ Warrants			Total
Fair value, December 31, 2018	$	341,814		$	99,708		$	441,522
Total gains or losses included in earnings:
Net realized gain (loss)		(6,738	)		1,920			(4,818	)
Net change in unrealized gain (loss)		2,459			2,412			4,871
Purchase of investment securities		109,851			27			109,878
Proceeds from dispositions of investment securities		(93,288	)		(5,258	)		(98,546	)
Transfers into Level 3		7,358			—			7,358
Transfers out of Level 3		—			—			—

Fair value, December 31, 2019	$	361,456		$	98,809		$	460,265

Unrealized gains (losses) for the period relating to those Level 3 assets that were still held by the Company at the end of the period:
Net change in unrealized gain (loss):	$	2,459		$	2,412		$	4,871

The following table shows a reconciliation of the beginning and ending balances for fair valued liabilities measured using significant unobservable inputs (Level 3) for the year ended December 31, 2019:


Beginning fair value at December 31, 2018	$	51,371
Borrowings		5,082
Repayments		—
Transfers in/out of Level 3		(56,453	)

Ending fair value at December 31, 2019	$	—

The Company did not elect to apply the fair value option of accounting to the FLLP Facility, which was refinanced by way of amendment on May 31, 2019. As this refinancing was deemed to be a significant modification of debt, per ASC 825-10-25, a new election was triggered. As such, the FLLP Facility is shown as a transfer out of Level 3. During the fourth quarter of 2019, our investment in Acrisure, LLC was transferred from Level 2 to Level 3. At December 31, 2019, the Investment Adviser no longer believed the market quote to be representative of fair value due to its specific knowledge of transaction activity in the position.

Quantitative Information about Level 3 Fair Value Measurements

The Company typically determines the fair value of its performing debt investments utilizing a yield analysis. In a yield analysis, a price is ascribed for each investment based upon an assessment of current and expected market yields for similar investments and risk profiles. Additional consideration is given to current contractual interest rates, relative maturities and other key terms and risks associated with an investment. Among

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

March 31, 2020

(in thousands, except share amounts)

other factors, a significant determinant of risk is the amount of leverage used by the portfolio company relative to the total enterprise value of the company, and the rights and remedies of our investment within each portfolio company.

Significant unobservable quantitative inputs typically used in the fair value measurement of the Company’s Level 3 assets and liabilities primarily reflect current market yields, including indices, and readily available quotes from brokers, dealers, and pricing services as indicated by comparable assets and liabilities, as well as enterprise values, returns on equity and earnings before income taxes, depreciation and amortization (“EBITDA”) multiples of similar companies, and comparable market transactions for equity securities.

Quantitative information about the Company’s Level 3 asset and liability fair value measurements as of March 31, 2020 is summarized in the table below:

Asset or
Liability

Fair Value at
March 31,
2020

Principal
Valuation
Technique/
Methodology

Unobservable Input

Range (Weighted
Average)

Bank Debt / Senior Secured Loans

Asset

304,279

Income Approach

Market Yield

6.6% – 20.0% (9.7%)

Common Equity/Equity Interests/Warrants

Asset

91,520

Market Approach

Return on Equity

0.0% – 27.3% (15.0%)

Unfunded Commitments

Liability

196

Income Approach

Market Yield

6.6% – 9.6% (8.7%)

Significant increases or decreases in any of the above unobservable inputs in isolation, including unobservable inputs used in deriving bid-ask spreads, if applicable, would result in a significantly lower or higher fair value measurement for such assets and liabilities.

Quantitative information about the Company’s Level 3 asset fair value measurements as of December 31, 2019 is summarized in the table below:

Asset or
Liability

Fair Value at
December 31,
2019

Principal
Valuation
Technique/
Methodology

Unobservable Input

Range (Weighted
Average)

Bank Debt / Senior Secured Loans

Asset

361,456

Income Approach

Market Yield

5.2% – 12.0% (7.6%)

Common Equity/Equity Interests/Warrants

Asset

98,809

Market Approach

Return on Equity

0.0% – 28.6% (11.5%)

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

March 31, 2020

(in thousands, except share amounts)

Note 7. Debt

Our debt obligations consisted of the following as of March 31, 2020 and December 31, 2019:


	March 31, 2020					December 31, 2019
Facility	Face Amount		Carrying Value			Face Amount		Carrying Value
Credit Facility	$	45,300	$	44,108	⁽¹⁾	$	157,600	$	156,314	⁽¹⁾
FLLP Facility		44,103		43,550	⁽²⁾		53,602		52,987	⁽²⁾
2025 Unsecured Notes		85,000		84,397	⁽³⁾		—		—

	$174,403		$172,055			$211,202		$209,301

(1)

Carrying Value equals the Face Amount net of unamortized debt issuance costs of $1,192 and $1,286, respectively, as of March 31, 2020 and December 31, 2019.

(2)

Carrying Value equals the Face Amount net of unamortized debt issuance costs of $553 and $615, respectively, as of March 31, 2020 and December 31, 2019.

(3)

Carrying Value equals the Face Amount net of unamortized debt issuance costs of $603 as of March 31, 2020.

Unsecured Notes

On March 31, 2020, the Company closed a private offering of $85,000 of senior unsecured notes due 2025 (the “2025 Unsecured Notes”) with a fixed interest rate of 3.90% and a maturity date of March 31, 2025. Interest on the 2025 Unsecured Notes is due semi-annually on March 31 and September 30. The 2025 Unsecured Notes were issued in a private placement only to qualified institutional buyers.

Revolving Loan Facilities

On August 26, 2011, the Company established our wholly-owned subsidiary, SUNS SPV LLC (the “SUNS SPV”) which entered into the Credit Facility with Citigroup Global Markets Inc. acting as administrative agent. On January 10, 2017, commitments to the Credit Facility, as amended, were increased from $175,000 to $200,000 by utilizing the accordion feature. The commitment can also be expanded up to $600,000. The stated interest rate on the Credit Facility is LIBOR plus 2.00% with no LIBOR floor requirement and the current final maturity date is June 1, 2023. The Credit Facility is secured by all of the assets held by SUNS SPV. Under the terms of the Credit Facility, Solar Senior and SUNS SPV, as applicable, have made certain customary representations and warranties, and are required to comply with various covenants, including leverage restrictions, reporting requirements and other customary requirements for similar credit facilities. The Credit Facility also includes usual and customary events of default for credit facilities of this nature. The Credit Facility was amended on November 7, 2012, June 30, 2014 and May 29, 2015 to extend maturities and add greater investment flexibility, among other changes. On June 1, 2018, the Credit Facility was refinanced by way of amendment, allowing for greater investment flexibility and the extension of the maturity date, among other changes. On July 13, 2018, commitments to the Credit Facility, as amended, were increased from $200,000 to $225,000 by utilizing the accordion feature. There were $45,300 of borrowings outstanding as of March 31, 2020 under the Credit Facility.

On May 31, 2019, the Company as transferor and FLLP 2015-1, LLC, a wholly-owned subsidiary of the Company, as borrower entered into amendment number five to the $75,000 FLLP Facility with Wells Fargo Bank, NA acting as administrative agent. The Company acts as servicer under the FLLP Facility. The FLLP

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

March 31, 2020

(in thousands, except share amounts)

Facility is scheduled to mature on May 31, 2024. The FLLP Facility generally bears interest at a rate of LIBOR plus a range of 2.15-2.25%. The Company and FLLP 2015-1, LLC, as applicable, have made certain customary representations and warranties, and are required to comply with various covenants, including leverage restrictions, reporting requirements and other customary requirements for similar credit facilities. The FLLP Facility also includes usual and customary events of default for credit facilities of this nature. There were $44,103 of borrowings outstanding as of March 31, 2020.

The average annualized interest cost for all borrowings for the three months ended March 31, 2020 and the year ended December 31, 2019 was 4.99% and 4.51%, respectively. These costs are exclusive of other credit facility expenses such as unused fees and fees paid to the back-up servicer, if any. The maximum amount borrowed on the revolving credit facilities during the three months ended March 31, 2020 and the year ended December 31, 2019, was $174,372 and $224,553, respectively.

Note 8. Financial Highlights

The following is a schedule of financial highlights for the three months ended March 31, 2020 and 2019:


	Three months ended March 31, 2020			Three months ended March 31, 2019
Per Share Data:^(a)
Net asset value, beginning of year	$	16.32		$	16.30

Net investment income		0.35			0.35
Net realized and unrealized gain (loss)		(1.73	)		0.10

Net increase (decrease) in net assets resulting from operations		(1.38	)		0.45
Distributions to stockholders:
From net investment income		(0.35	)		(0.35	)

Net asset value, end of period	$	14.59		$	16.40

Per share market value, end of period	$	9.71		$	17.16
Total Return^(b)		(43.38	%)		15.89	%
Net assets, end of period	$	234,140		$	263,143
Shares outstanding, end of period		16,049,034			16,041,604

Ratios to average net assets^(c):
Net investment income		2.16	%		2.16	%

Operating expenses		0.40	%*		0.72	%*
Interest and other credit facility expenses		0.79	%		1.03	%

Total expenses		1.19	%*		1.75	%*

Average debt outstanding	$	137,719		$	198,549
Portfolio turnover ratio		8.3	%		3.4	%

(a)	Calculated using the average shares outstanding method.

(b)	Total return is based on the change in market price per share during the period and takes into account distributions, if any, reinvested in accordance with the dividend reinvestment plan. The market price per

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

March 31, 2020

(in thousands, except share amounts)

share as of December 31, 2019 and December 31, 2018 was $17.60 and $15.12, respectively. Total return does not include a sales load.

(c)	Not annualized for periods less than one year.

The ratio of operating expenses to average net assets and the ratio of total expenses to average net assets is shown net of voluntary management and/or incentive fee waivers (see note 3). For the three months ended March 31, 2020, the ratios of operating expenses to average net assets and total expenses to average net assets would be 0.79% and 1.58%, respectively, without the voluntary management and incentive fee waivers. For the three months ended March 31, 2019, the ratios of operating expenses to average net assets and total expenses to average net assets would be 0.93% and 1.96%, respectively, without the voluntary incentive fee waiver.

Note 9. Gemino Healthcare Finance, LLC

We acquired Gemino Healthcare Finance, LLC (d/b/a Gemino Senior Secured Healthcare Finance) (“Gemino”) on September 30, 2013. Gemino is a commercial finance company that originates, underwrites, and manages primarily secured, asset-based loans for small and mid-sized companies operating in the healthcare industry. Our initial investment in Gemino was $32,839. The management team of Gemino co-invested in the transaction and continues to lead Gemino. As of March 31, 2020, Gemino’s management team and Solar Senior own approximately 7% and 93% of the equity in Gemino, respectively.

Concurrent with the closing of the transaction, Gemino entered into a new, four-year, non-recourse, $100,000 credit facility with non-affiliates, which was expandable to $150,000 under its accordion feature. Effective March 31, 2014, the credit facility was expanded to $105,000 and again on June 27, 2014 to $110,000. On May 27, 2016, Gemino entered into a new $125,000 credit facility which replaced the previously existing facility. The new facility has similar terms as compared to the previous facility and includes an accordion feature increase to $200,000 and had a maturity date of May 27, 2020. On June 28, 2019, this $125,000 facility was amended, extending the maturity date to June 28, 2023.

Gemino currently manages a highly diverse portfolio of directly-originated and underwritten senior-secured commitments. As of March 31, 2020, the portfolio totaled approximately $208,259 of commitments with a total net investment in loans of $116,490 on total assets of $145,532. As of December 31, 2019, the portfolio totaled approximately $203,828 of commitments with a total net investment in loans of $110,968 on total assets of $122,124. At March 31, 2020, the portfolio consisted of 37 issuers with an average balance of approximately $3,148 versus 34 issuers with an average balance of approximately $3,264 at December 31, 2019. All of the commitments in Gemino’s portfolio are floating-rate, senior-secured, cash-pay loans. Gemino’s credit facility, which is non-recourse to us, had approximately $113,000 and $89,000 of borrowings outstanding at March 31, 2020 and December 31, 2019, respectively. For the three months ended March 31, 2020 and 2019, Gemino had net income of $791 and $932, respectively, on gross income of $3,239 and $3,155, respectively. Due to timing and non-cash items, there may be material differences between GAAP net income and cash available for distributions.

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

March 31, 2020

(in thousands, except share amounts)

Note 10. Commitments and Contingencies

The Company had unfunded debt and equity commitments to various revolving and delayed draw loans as well as to Gemino Healthcare Finance, LLC. The total amount of these unfunded commitments as of March 31, 2020 and December 31, 2019 is $17,074 and $25,009, respectively, comprised of the following:


	March 31, 2020		December 31, 2019
Altern Marketing, LLC.	$	2,401	$	1,201
Kindred Biosciences, Inc.		2,112		2,112
Worldwide Facilities, LLC.		2,102		2,278
Rubius Therapeutics, Inc.		2,061		2,061
Gemino Healthcare Finance, LLC*		1,400		1,400
Solara Medical Supplies, Inc.		1,216		3,186
Rxsense Holdings LLC.		1,216		—
Neuronetics, Inc.		1,028		—
MSHC, Inc.		955		2,448
Cerapedics, Inc.		824		824
Drilling Info Holdings, Inc.		685		—
ENS Holdings III Corp. & ES Opco USA LLC		559		1,453
Pinnacle Treatment Centers, Inc.		484		—
Composite Technology Acquisition Corp.		29		1,136
AQA Acquisition Holding, Inc.		2		142
US Radiology Specialists, Inc.		—		2,163
WIRB-Copernicus Group, Inc.		—		1,660
Unified Physician Management, LLC		—		1,593
MRI Software LLC		—		1,181
Alimera Sciences, Inc.		—		171

Total Commitments	$	17,074	$	25,009

*	The Company controls the funding of the Gemino commitment and may cancel it at its discretion.

The credit agreements of the above loan commitments contain customary lending provisions and/or are subject to the portfolio company’s achievement of certain milestones that allow relief to the Company from funding obligations for previously made commitments in instances where the underlying company experiences materially adverse events that affect the financial condition or business outlook for the company. Since these commitments may expire without being drawn upon, unfunded commitments do not necessarily represent future cash requirements or future earning assets for the Company. As of March 31, 2020 and December 31, 2019, the Company had sufficient cash available and/or liquid securities available to fund its commitments.

In the normal course of its business, we invest or trade in various financial instruments and may enter into various investment activities with off-balance sheet risk, which may include forward foreign currency contracts. Generally, these financial instruments represent future commitments to purchase or sell other financial instruments at specific terms at future dates. These financial instruments contain varying degrees of off-balance sheet risk whereby changes in the market value or our satisfaction of the obligations may exceed the amount recognized in our Consolidated Statements of Assets and Liabilities.

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

March 31, 2020

(in thousands, except share amounts)

Note 11. North Mill Holdco LLC

We acquired 100% of the equity interests of North Mill Capital LLC (“NMC”) on October 20, 2017. NMC is a leading asset-backed lending commercial finance company that provides senior secured asset-backed financings to U.S. based small-to-medium-sized businesses primarily in the manufacturing, services and distribution industries. We invested approximately $51,000 to effect the transaction. Subsequently, the Company contributed 1% of its equity interest in NMC to ESP SSC Corporation. Immediately thereafter, the Company and ESP SSC Corporation contributed their equity interests to NorthMill LLC (“North Mill”). On May 1, 2018, North Mill merged with and into NMC, with NMC being the surviving company. The Company and ESP SSC Corporation own 99% and 1% of the equity interests of NMC, respectively. The management team of NMC continues to lead NMC. On June 28, 2019, North Mill Holdco LLC (“NM Holdco”), a newly formed entity and ESP SSC Corporation acquired Summit Financial Resources, a Salt Lake City-based provider of asset-backed financing to small and medium-sized businesses. As part of this transaction, the Company’s 99% interest in the equity of NMC was contributed to NM Holdco. This approximately $15,500 transaction was financed with borrowings on NMC’s credit facility.

NM Holdco currently manages a highly diverse portfolio of directly-originated and underwritten senior-secured commitments. As of March 31, 2020, the portfolio totaled approximately $393,355 of commitments, of which $182,515 were funded, on total assets of $211,085. As of December 31, 2019, the portfolio totaled approximately $383,082 of commitments, of which $171,144 were funded, on total assets of $199,417. At March 31, 2020, the portfolio consisted of 157 issuers with an average balance of approximately $1,163 versus 159 issuers with an average balance of approximately $1,076 at December 31, 2019. NMC has a senior credit facility with a bank lending group for $160,000 which expires on October 20, 2020. Borrowings are secured by substantially all of NMC’s assets. NMC’s credit facility, which is non-recourse to us, had approximately $136,498 and $122,551 of borrowings outstanding at March 31, 2020 and December 31, 2019, respectively. For the three months ended March 31, 2020 and 2019, NM Holdco had net income of $1,264 and $370, respectively, on gross income of $5,603 and $3,887, respectively. Due to timing and non-cash items, there may be material differences between GAAP net income and cash available for distributions. As such, and subject to fluctuations in NM Holdco’s funded commitments, the timing of originations, and the repayments of financings, the Company cannot guarantee that NM Holdco will be able to maintain consistent dividend payments to us.

Note 12. Capital Share Transactions

As of March 31, 2020 and March 31, 2019, 200,000,000 shares of $0.01 par value capital stock were authorized.

Transactions in capital stock were as follows:


	Shares				Amount
	Three months ended March 31, 2020		Three months ended March 31, 2019		Three months ended March 31, 2020		Three months ended March 31, 2019
Shares issued in reinvestment of distributions		2,820		1,119	$	48	$	19

Net increase		2,820		1,119	$	48	$	19

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

March 31, 2020

(in thousands, except share amounts)

Note 13. Subsequent Events

The Company has evaluated the need for disclosures and/or adjustments resulting from subsequent events through the date the consolidated financial statements were issued.

On April 2, 2020, the Board declared a monthly distribution of $0.1175 per share payable on May 1, 2020 to holders of record as of April 23, 2020.

On May 7, 2020, the Board declared a monthly distribution of $0.10 per share payable on June 2, 2020 to holders of record as of May 22, 2020.

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Solar Senior Capital Ltd.:

Results of Review of Interim Financial Information

We have reviewed the consolidated statement of assets and liabilities of Solar Senior Capital Ltd. (and subsidiaries) (the Company), including the consolidated schedule of investments, as of March 31, 2020, the related consolidated statements of operations, changes in net assets, and cash flows for the three-month periods ended March 31, 2020 and 2019, and the related notes (collectively, the consolidated interim financial information). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial information for it to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statement of assets and liabilities, including the consolidated schedule of investments, of the Company as of December 31, 2019, and the related consolidated statements of operations, changes in net assets, and cash flows for the year then ended (not presented herein); and in our report dated February 20, 2020, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated statement of assets and liabilities, including the consolidated schedule of investments, as of December 31, 2019, is fairly stated, in all material respects, in relation to the consolidated statement of assets and liabilities, including the consolidated schedule of investments, from which it has been derived.

Basis for Review Results

This consolidated interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with the standards of the PCAOB. A review of consolidated interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

New York, New York

May 7, 2020

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The information contained in this section should be read in conjunction with our consolidated financial statements and notes thereto appearing elsewhere in this report.

Some of the statements in this report constitute forward-looking statements, which relate to future events or our future performance or financial condition. The forward-looking statements contained herein involve risks and uncertainties, including statements as to:

•

our future operating results, including our ability to achieve objectives as a result of the current COVID-19 pandemic;

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our business prospects and the prospects of our portfolio companies;

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the impact of investments that we expect to make;

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our contractual arrangements and relationships with third parties;

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the dependence of our future success on the general economy and its impact on the industries in which we invest and the impact of the COVID-19 pandemic thereon;

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the impact of any protracted decline in the liquidity of credit markets on our business and the impact of the COVID-19 pandemic thereon;

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the ability of our portfolio companies to achieve their objectives, including as a result of the current COVID-19 pandemic;

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the valuation of our investments in portfolio companies, particularly those having no liquid trading market, and the impact of the COVID-19 pandemic thereon;

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market conditions and our ability to access alternative debt markets and additional debt and equity capital, and the impact of the COVID-19 pandemic thereon;

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our expected financings and investments;

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the adequacy of our cash resources and working capital;

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the timing of cash flows, if any, from the operations of our portfolio companies and the impact of the COVID-19 pandemic thereon; and

•

the ability of our investment adviser to locate suitable investments for us and to monitor and administer our investments and the impacts of the COVID-19 pandemic thereon.

These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including without limitation:

•

an economic downturn, including as a result of the current COVID-19 pandemic, could impair our portfolio companies’ ability to continue to operate, which could lead to the loss of some or all of our investments in such portfolio companies;

•

a contraction of available credit and/or an inability to access the equity markets, including as a result of the current COVID-19 pandemic, could impair our lending and investment activities;

•

interest rate volatility could adversely affect our results, particularly because we use leverage as part of our investment strategy;

•

currency fluctuations could adversely affect the results of our investments in foreign companies, particularly to the extent that we receive payments denominated in foreign currency rather than U.S. dollars; and

•

the risks, uncertainties and other factors we identify in Item 1A.—Risk Factors contained in our Annual Report on Form 10-K for the year ended December 31, 2019, elsewhere in this Quarterly Report on Form 10-Q and in our other filings with the SEC.

We generally use words such as “anticipates,” “believes,” “expects,” “intends” and similar expressions to identify forward-looking statements. Our actual results could differ materially from those projected in the forward-looking statements for any reason, including any factors set forth in “Risk Factors” and elsewhere in this report.

We have based the forward-looking statements included in this report on information available to us on the date of this report, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including any annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

Overview

Solar Senior Capital Ltd. (“Solar Senior”, the “Company”, “we” or “our”), a Maryland corporation formed in December 2010, is a closed-end, externally managed, non-diversified management investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). Furthermore, as the Company is an investment company, it continues to apply the guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946. In addition, for tax purposes, the Company has elected to be treated, and intend to qualify annually, as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).

On February 24, 2011, we priced our initial public offering, selling 9.0 million shares, including the underwriters’ over-allotment, raising approximately $168 million in net proceeds. Concurrent with this offering, Solar Senior Capital Investors LLC, an entity controlled by Michael S. Gross, our Chairman, Co-Chief Executive Officer and President, and Bruce Spohler, our Co-Chief Executive Officer and Chief Operating Officer, purchased an additional 500,000 shares through a concurrent private placement, raising another $10 million.

We invest primarily in privately held U.S. middle-market companies, where we believe the supply of primary capital is limited and the investment opportunities are most attractive. We define “middle market” to refer to companies with annual revenues between $50 million and $1 billion. Our investment objective is to seek to maximize current income consistent with the preservation of capital. We seek to achieve our investment objective by directly and indirectly investing in senior loans, including first lien, stretch-senior, and second lien debt instruments, made to private middle-market companies whose debt is rated below investment grade, which we refer to collectively as “senior loans.” We may also invest in debt of public companies that are thinly traded or in equity securities. Under normal market conditions, at least 80% of the value of our net assets (including the amount of any borrowings for investment purposes) will be invested directly and indirectly in senior loans. Senior loans typically pay interest at rates which are determined periodically on the basis of a floating base lending rate, primarily LIBOR, plus a premium. Senior loans in which we invest are typically made to U.S. and, to a limited extent, non-U.S. corporations, partnerships and other business entities which operate in various industries and geographical regions. Senior loans typically are rated below investment grade. Securities rated below investment grade are often referred to as “leveraged loans,” “high yield” or “junk” securities, and may be considered “high risk” compared to debt instruments that are rated investment grade. In addition, some of our debt investments are not scheduled to fully amortize over their stated terms, which could cause us to suffer losses if the respective issuer of such debt investment is unable to refinance or repay their remaining indebtedness at maturity. While the Company does not typically seek to invest in traditional equity securities as part of its investment objective, the Company may occasionally acquire some equity securities in connection with senior

loan investments and in certain other unique circumstances, such as the Company’s equity investments in Gemino Healthcare Finance, LLC (“Gemino”) and North Mill Holdco LLC (“NM Holdco”).

We invest in senior loans made primarily to private, leveraged middle-market companies with approximately $20 million to $100 million of earnings before income taxes, depreciation and amortization (“EBITDA”). Our business model is focused primarily on the direct origination of investments through portfolio companies or their financial sponsors. Our direct investments in individual securities will generally range between $5 million and $30 million each, although we expect that this investment size will vary proportionately with the size of our capital base and/or strategic initiatives. In addition, we may invest a portion of our portfolio in other types of investments, which we refer to as opportunistic investments, which are not our primary focus but are intended to enhance our overall returns. These opportunistic investments may include, but are not limited to, direct investments in public companies that are not thinly traded and securities of leveraged companies located in select countries outside of the United States. We may invest up to 30% of our total assets in such opportunistic investments, including loans issued by non-U.S. issuers, subject to compliance with our regulatory obligations as a BDC under the 1940 Act. Our investment activities are managed by Solar Capital Partners, LLC (“Solar Capital Partners” or “Investment Adviser”) and supervised by our board of directors, a majority of whom are non-interested, as such term is defined in the 1940 Act. Solar Capital Management, LLC (“Solar Capital Management” or “Administrator”) provides the administrative services necessary for us to operate.

As of March 31, 2020, the Investment Adviser has directly invested approximately $9.3 billion in more than 400 different portfolio companies since 2006. Over the same period, the Investment Adviser completed transactions with approximately 200 different financial sponsors.

Recent Developments

On April 2, 2020, the Board declared a monthly distribution of $0.1175 per share payable on May 1, 2020 to holders of record as of April 23, 2020.

On May 7, 2020, the Board declared a monthly distribution of $0.10 per share payable on June 2, 2020 to holders of record as of May 22, 2020.

Investments

Our level of investment activity can and does vary substantially from period to period depending on many factors, including the amount of debt and equity capital available to middle market companies, the level of merger and acquisition activity for such companies, the general economic environment and the competitive environment for the types of investments we make. As a BDC, we must not acquire any assets other than “qualifying assets” specified in the 1940 Act unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets (with certain limited exceptions). Qualifying assets include investments in “eligible portfolio companies.” The definition of “eligible portfolio company” includes certain public companies that do not have any securities listed on a national securities exchange and companies whose securities are listed on a national securities exchange but whose market capitalization is less than $250 million.

Revenue

We generate revenue primarily in the form of interest and dividend income from the securities we hold and capital gains, if any, on investment securities that we may sell. Our debt investments generally have a stated term of three to seven years and typically bear interest at a floating rate usually determined on the basis of a benchmark London interbank offered rate (“LIBOR”), commercial paper rate, or the prime rate. Interest on our debt investments is generally payable monthly or quarterly but may be bi-monthly or semi-annually. In addition, our investments may provide payment-in-kind (“PIK”) interest. Such amounts of accrued PIK interest are added to the cost of the investment on the respective capitalization dates and generally become due at maturity of the

investment or upon the investment being called by the issuer. We may also generate revenue in the form of commitment, origination, structuring fees, fees for providing managerial assistance and, if applicable, consulting fees, etc.

Expenses

All investment professionals of the Investment Adviser and their respective staffs, when and to the extent engaged in providing investment advisory and management services, and the compensation and routine overhead expenses of such personnel allocable to such services, are provided and paid for by Solar Capital Partners. We bear all other costs and expenses of our operations and transactions, including (without limitation):

•

the cost of our organization and public offerings;

•

the cost of calculating our net asset value, including the cost of any third-party valuation services;

•

the cost of effecting sales and repurchases of our shares and other securities;

•

interest payable on debt, if any, to finance our investments;

•

fees payable to third parties relating to, or associated with, making investments, including fees and expenses associated with performing due diligence reviews of prospective investments and advisory fees;

•

transfer agent and custodial fees;

•

fees and expenses associated with marketing efforts;

•

federal and state registration fees, any stock exchange listing fees;

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federal, state and local taxes;

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independent directors’ fees and expenses;

•

brokerage commissions;

•

fidelity bond, directors and officers errors and omissions liability insurance and other insurance premiums;

•

direct costs and expenses of administration, including printing, mailing, long distance telephone and staff;

•

fees and expenses associated with independent audits and outside legal costs;

•

costs associated with our reporting and compliance obligations under the 1940 Act and applicable federal and state securities laws; and

•

all other expenses incurred by either Solar Capital Management or us in connection with administering our business, including payments under the Administration Agreement that will be based upon our allocable portion of overhead and other expenses incurred by Solar Capital Management in performing its obligations under the Administration Agreement, including rent, the fees and expenses associated with performing compliance functions, and our allocable portion of the costs of compensation and related expenses of our chief compliance officer and our chief financial officer and their respective staffs.

We expect our general and administrative operating expenses related to our ongoing operations to increase moderately in dollar terms. During periods of asset growth, we generally expect our general and administrative operating expenses to decline as a percentage of our total assets and increase during periods of asset declines. Incentive fees, interest expense and costs relating to future offerings of securities, among others, may also increase or reduce overall operating expenses based on portfolio performance, interest rate benchmarks, and offerings of our securities relative to comparative periods, among other factors.

Portfolio and Investment Activity

During the three months ended March 31, 2020, we invested $35.4 million across 13 portfolio companies. This compares to investing $31.2 million in 10 portfolio companies for the three months ended March 31, 2019. Investments sold or prepaid during the three months ended March 31, 2020 totaled $73.1 million versus $15.6 million for the three months ended March 31, 2019.

At March 31, 2020, our portfolio consisted of 45 portfolio companies and was invested 76.9% directly in senior secured loans and 23.1% in common equity/equity interests/warrants (of which 8.8% is Gemino and 14.2% is NM Holdco, through which the Company indirectly invests in senior secured loans), in each case, measured at fair value versus 49 portfolio companies invested 77.8% directly in senior secured loans and 22.2% in common equity/equity interests/warrants (of which 7.2% is Gemino and 14.6% is NMC) at March 31, 2019.

At March 31, 2020, 98.5% or $389.4 million of our income producing investment portfolio^* was floating rate and 1.5% or $6.1 million was fixed rate, measured at fair value. At March 31, 2019, 95.8% or $432.4 million of our income producing investment portfolio* was floating rate and 4.2% or $19.1 million was fixed rate, measured at fair value.

Since the initial public offering of Solar Senior on February 24, 2011 and through March 31, 2020, invested capital totaled over $1.7 billion in over 145 portfolio companies. Over the same period, Solar Senior completed transactions with more than 100 different financial sponsors.

Gemino Healthcare Finance, LLC

We acquired Gemino (d/b/a Gemino Senior Secured Healthcare Finance) on September 30, 2013. Gemino is a commercial finance company that originates, underwrites, and manages primarily secured, asset-based loans for small and mid-sized companies operating in the healthcare industry. Our initial investment in Gemino was $32.8 million. The management team of Gemino co-invested in the transaction and continues to lead Gemino. As of March 31, 2020, Gemino’s management team and Solar Senior own approximately 7% and 93% of the equity in Gemino, respectively.

Concurrent with the closing of the transaction, Gemino entered into a new, four-year, non-recourse, $100.0 million credit facility with non-affiliates, which was expandable to $150.0 million under its accordion feature. Effective March 31, 2014, the credit facility was expanded to $105.0 million and again on June 27, 2014 to $110.0 million. On May 27, 2016, Gemino entered into a new $125.0 million credit facility which replaced the previously existing facility. The new facility has similar terms as compared to the previous facility and includes an accordion feature increase to $200.0 million and had a maturity date of May 27, 2020. On June 28, 2019, this $125.0 million facility was amended, extending the maturity date to June 28, 2023.

Gemino currently manages a highly diverse portfolio of directly-originated and underwritten senior-secured commitments. As of March 31, 2020, the portfolio totaled approximately $208.3 million of commitments with a total net investment in loans of $116.5 million on total assets of $145.5 million. As of December 31, 2019, the portfolio totaled approximately $203.8 million of commitments with a total net investment in loans of $111.0 million on total assets of $122.1 million. At March 31, 2020, the portfolio consisted of 37 issuers with an average balance of approximately $3.1 million versus 34 issuers with an average balance of approximately $3.3 million at December 31, 2019. All of the commitments in Gemino’s portfolio are floating-rate, senior-secured, cash-pay loans. Gemino’s credit facility, which is non-recourse to us, had approximately $113.0 million and $89.0 million of borrowings outstanding at March 31, 2020 and December 31, 2019, respectively. For the three months ended March 31, 2020 and 2019, Gemino had net income of $0.8 million and $0.9 million, respectively, on gross income of $3.2 million and $3.2 million, respectively. Due to timing and non-cash items,

^*	We have included Gemino Healthcare Finance, LLC and North Mill Capital LLC within our income producing investment portfolio.

there may be material differences between GAAP net income and cash available for distributions. As such, and subject to fluctuations in Gemino’s funded commitments, the timing of originations, and the repayments of financings, the Company cannot guarantee that Gemino will be able to maintain consistent dividend payments to us.

North Mill Capital LLC

We acquired 100% of the equity interests of North Mill Capital LLC (“NMC”) on October 20, 2017. NMC is a leading asset-backed lending commercial finance company that provides senior secured asset-backed financings to U.S. based small-to-medium-sized businesses primarily in the manufacturing, services and distribution industries. We invested approximately $51 million to effect the transaction. Subsequently, the Company contributed 1% of its equity interest in NMC to ESP SSC Corporation. Immediately thereafter, the Company and ESP SSC Corporation contributed their equity interests to North Mill. On May 1, 2018, North Mill merged with and into NMC, with NMC being the surviving company. The Company and ESP SSC Corporation own 99% and 1% of the equity interests of NMC, respectively. The management team of NMC continues to lead NMC. On June 28, 2019, NM Holdco, a newly formed entity and ESP SSC Corporation acquired Summit Financial Resources, a Salt Lake City-based provider of asset-backed financing to small and medium-sized businesses. As part of this transaction, the Company’s 99% interest in the equity of NMC was contributed to NM Holdco. This approximately $15.5 million transaction was financed with borrowings on NMC’s credit facility.

NM Holdco currently manages a highly diverse portfolio of directly-originated and underwritten senior-secured commitments. As of March 31, 2020, the portfolio totaled approximately $393.4 million of commitments, of which $182.5 million were funded, on total assets of $211.1 million. As of December 31, 2019, the portfolio totaled approximately $383.1 million of commitments, of which $171.1 million were funded, on total assets of $199.4 million. At March 31, 2020, the portfolio consisted of 157 issuers with an average balance of approximately $1.2 million versus 159 issuers with an average balance of approximately $1.1 million at December 31, 2019. NMC has a senior credit facility with a bank lending group for $160.0 million which expires on October 20, 2020. Borrowings are secured by substantially all of NMC’s assets. NMC’s credit facility, which is non-recourse to us, had approximately $136.5 million and $122.6 million of borrowings outstanding at March 31, 2020 and December 31, 2019, respectively. For the three months ended March 31, 2020 and 2019, NM Holdco had net income of $1.3 million and $0.4 million, respectively, on gross income of $5.6 million and $3.9 million, respectively. Due to timing and non-cash items, there may be material differences between GAAP net income and cash available for distributions. As such, and subject to fluctuations in NM Holdco’s funded commitments, the timing of originations, and the repayments of financings, the Company cannot guarantee that NM Holdco will be able to maintain consistent dividend payments to us.

Critical Accounting Policies

The preparation of consolidated financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and revenues and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following items as critical accounting policies. Within the context of these critical accounting policies and disclosed subsequent events herein, we are not currently aware of any other reasonably likely events or circumstances that would result in materially different amounts being reported.

Valuation of Portfolio Investments

We conduct the valuation of our assets, pursuant to which our net asset value is determined, at all times consistent with GAAP, and the 1940 Act. Our valuation procedures are set forth in more detail below:

market quotations are readily available on an exchange are valued at the closing price on the date of valuation. The Company may also obtain quotes with respect to certain of its investments from pricing services or brokers or dealers in order to value assets. When doing so, management determines whether the quote obtained is sufficient according to GAAP to determine the fair value of the investment. If determined adequate, the Company uses the quote obtained. Debt investments with maturities of 60 days or less shall each be valued at cost plus accreted discount, or minus amortized premium, which is expected to approximate fair value, unless such valuation, in the judgment of the Investment Adviser, does not represent fair value, in which case such investments shall be valued at fair value as determined in good faith by or under the direction of the Company’s board of directors (the “Board”).

Investments for which reliable market quotations are not readily available or for which the pricing sources do not provide a valuation or methodology or provide a valuation or methodology that, in the judgment of the Investment Adviser or the Board does not represent fair value, each shall be valued as follows: (i) each portfolio company or investment is initially valued by the investment professionals responsible for the portfolio investment; (ii) preliminary valuations are discussed with senior management of the Investment Adviser; (iii) independent valuation firms engaged by, or on behalf of, the Board will conduct independent appraisals and review the Investment Adviser’s preliminary valuations and make their own independent assessment for (a) each portfolio investment that, when taken together with all other investments in the same portfolio company, exceeds 10% of estimated total assets, plus available borrowings, as of the end of the most recently completed fiscal quarter, and (b) each portfolio investment that is presently in payment default and the Investment Adviser does not expect to reach an agreement with the portfolio company in the subsequent quarter; (iv) the Board will discuss the valuations and determine the fair value of each investment in our portfolio in good faith based on the input of the Investment Adviser and, where appropriate, the respective independent valuation firm.

Investments are valued utilizing a market approach, an income approach, or both approaches, as appropriate. However, in accordance with ASC 820-10, certain investments that qualify as investment companies in accordance with ASC 946, may be valued using net asset value as a practical expedient for fair value. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation approaches to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that we may take into account in fair value pricing our investments include, as relevant: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, call protection provisions, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, M&A comparables, and enterprise values, among other factors. When available, broker quotations and/or quotations provided by pricing services are considered as an input in the valuation process. For the three months ended March 31, 2020, there has been no change to the Company’s valuation approaches or techniques and the nature of the related inputs considered in the valuation process.

Accounting Standards Codification (“ASC”) Topic 820 classifies the inputs used to measure these fair values into the following hierarchy:

Level 1: Quoted prices in active markets for identical assets or liabilities, accessible by the Company at the measurement date.

Level 3: Unobservable inputs for the asset or liability.

Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our consolidated financial statements express the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our consolidated financial statements.

Revenue Recognition

The Company records dividend income and interest, adjusted for amortization of premium and accretion of discount, on an accrual basis. Investments that are expected to pay regularly scheduled interest and/or dividends in cash are generally placed on non-accrual status when principal or interest/dividend cash payments are past due 30 days or more and/or when it is no longer probable that principal or interest/dividend cash payments will be collected. Such non-accrual investments are restored to accrual status if past due principal and interest or dividends are paid in cash, and in management’s judgment, are likely to continue timely payment of their remaining interest or dividend obligations. Interest or dividend cash payments received on investments may be recognized as income or applied to principal depending upon management’s judgment. Some of our investments may have contractual PIK interest or dividends. PIK interest and dividends computed at the contractual rate are accrued into income and reflected as receivable up to the capitalization date. PIK investments offer issuers the option at each payment date of making payments in cash or in additional securities. When additional securities are received, they typically have the same terms, including maturity dates and interest rates as the original securities issued. On these payment dates, the Company capitalizes the accrued interest or dividends receivable (reflecting such amounts as the basis in the additional securities received). PIK generally becomes due at the maturity of the investment or upon the investment being called by the issuer. At the point the Company believes PIK is not expected to be realized, the PIK investment will be placed on non-accrual status. When a PIK investment is placed on non-accrual status, the accrued, uncapitalized interest or dividends is reversed from the related receivable through interest or dividend income, respectively. The Company does not reverse previously capitalized PIK interest or dividends. Upon capitalization, PIK is subject to the fair value estimates associated with their related investments. PIK investments on non-accrual status are restored to accrual status if the Company again believes that PIK is expected to be realized. Loan origination fees, original issue discount, and market discounts are capitalized and amortized into income using the effective interest method. Upon the prepayment of a loan, any unamortized loan origination fees are recorded as interest income. We record prepayment premiums on loans and other investments as interest income when we receive such amounts. Capital structuring fees are recorded as other income when earned.

The typically higher yields and interest rates on PIK securities, to the extent we invested, reflects the payment deferral and increased credit risk associated with such instruments and that such investments may represent a significantly higher credit risk than coupon loans. PIK securities may have unreliable valuations

because their continuing accruals require continuing judgments about the collectability of the deferred payments and the value of any associated collateral. PIK interest has the effect of generating investment income and increasing the incentive fees payable at a compounding rate. In addition, the deferral of PIK interest also increases the loan-to-value ratio at a compounding rate. PIK securities create the risk that incentive fees will be paid to the Investment Adviser based on non-cash accruals that ultimately may not be realized, but the Investment Adviser will be under no obligation to reimburse the Company for these fees. For the three months ended March 31, 2020 and 2019, capitalized PIK income totaled $0.02 million and $0.1 million, respectively.

Net Realized Gain or Loss and Net Change in Unrealized Gain or Loss

We generally measure realized gain or loss by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized, but considering unamortized origination or commitment fees and prepayment penalties. The net change in unrealized gain or loss reflects the change in portfolio investment values during the reporting period, including the reversal of previously recorded unrealized gain or loss, when gains or losses are realized. Gains or losses on investments are calculated by using the specific identification method.

Income Taxes

Solar Senior Capital, a U.S. corporation, has elected to be treated, and intends to qualify annually, as a RIC under Subchapter M of the Code. In order to qualify for taxation as a RIC, the Company is required, among other things, to timely distribute to its stockholders at least 90% of investment company taxable income, as defined by the Code, for each year. Depending on the level of taxable income earned in a given tax year, we may choose to carry forward taxable income in excess of current year distributions into the next tax year and pay a 4% excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year distributions, the Company accrues an estimated excise tax, if any, on estimated excess taxable income.

Recent Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in ASU 2018-13 modify and eliminate certain disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement. ASU 2018-13 is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The Company has adopted ASU 2018-13 and determined that the adoption has not had a material impact on its consolidated financial statements and disclosures.

RESULTS OF OPERATIONS

Results comparisons are for the three months ended March 31, 2020 and 2019:

Investment Income

For the three months ended March 31, 2020 and 2019, gross investment income totaled $8.8 million and $10.2 million, respectively. The decrease in gross investment income for the year over year three month periods was primarily due to a reduction in portfolio yield, mainly as a result of the decrease in LIBOR.

Expenses

Net expenses totaled $3.1 million and $4.6 million, respectively, for the three months ended March 31, 2020 and 2019, of which $1.2 million and $1.7 million, respectively, were gross base management fees and gross performance-based incentive fees and $2.1 million and $2.7 million, respectively, were interest and other credit facility expenses. Over the same periods, $1.0 million and $0.5 million, respectively, of management and performance-based incentive fees were waived. Administrative services and other general and administrative expenses totaled $0.9 million and $0.7 million, respectively, for the three months ended March 31, 2020 and 2019. Expenses generally consist of management fees, performance-based incentive fees, administrative services expenses, insurance, legal expenses, directors’ expenses, audit and tax expenses, transfer agent fees and expenses, and other general and administrative expenses. Interest and other credit facility expenses generally consist of interest, unused fees, agency fees and loan origination fees, if any, among others. The decrease in net expenses year over year is primarily due to lower interest expense due to reductions in LIBOR and an increase in the waivers of fees.

Net Investment Income

The Company’s net investment income totaled $5.7 million and $5.7 million, or $0.35 and $0.35, per average share, respectively, for the three months ended March 31, 2020 and 2019.

Net Realized Gain

The Company had investment sales and prepayments totaling approximately $73.1 million and $15.6 million, respectively, for the three months ended March 31, 2020 and 2019. Net realized gains over the same periods were $0.1 million and $0.1 million, respectively. Net realized gains for the three months ended March 31, 2020 were primarily related to the Company’s sale of selected assets. Net realized gains for the three months ended March 31, 2019 were primarily related to the Company’s exit from its investment in Genmark Diagnostics, Inc.

Net Change in Unrealized Gain (Loss)

For the three months ended March 31, 2020 and 2019, net change in unrealized gain (loss) on the Company’s assets and liabilities totaled ($27.8) million and $1.6 million, respectively. Net unrealized loss for the three months ended March 31, 2020 is primarily due to depreciation on our investments in North Mill Capital LLC, Confie Seguros Holding II Co., Capstone Logistics Acquisition, Inc. and US Radiology Specialists, Inc., among others. Net unrealized gain for the three months ended March 31, 2019 is primarily due to appreciation on our investments in North Mill Capital LLC, Gemino Healthcare Finance LLC and TwentyEighty Investors, LLC, among others, partially offset by depreciation in Trident USA Health Services, among others. The year over year net change in unrealized loss is impacted by uncertainty due to the COVID-19 pandemic and its effect on market yields and fundamental portfolio company performance.

Net Increase (Decrease) in Net Assets From Operations

For the three months ended March 31, 2020 and 2019, the Company had a net increase (decrease) in net assets resulting from operations of ($22.1) million and $7.4 million, respectively. For the same periods, earnings (loss) per average share were ($1.37) and $0.46, respectively.

LIQUIDITY AND CAPITAL RESOURCES

The Company’s liquidity and capital resources are generally available through its revolving credit facilities, unsecured notes and through periodic follow-on equity offerings, as well as from cash flows from operations, investment sales and pre-payments of investments. At March 31, 2020, the Company had $174.4 million in

borrowings outstanding on its credit facilities and $210.6 million of unused capacity, subject to borrowing base limits.

On May 31, 2019, the Company as transferor and FLLP 2015-1, LLC, a wholly-owned subsidiary of the Company, as borrower entered into amendment number five to the $75 million credit facility with Wells Fargo Bank, NA acting as administrative agent (the “FLLP Facility”). The Company acts as servicer under the FLLP Facility. The FLLP Facility is scheduled to mature on May 31, 2024. The FLLP Facility generally bears interest at a rate of LIBOR plus a range of 2.15-2.25%.

On June 1, 2018, the $200 million senior secured revolving credit facility with our wholly-owned subsidiary SUNS SPV LLC as borrower and Citibank, N.A. acting as administrative agent (the “Credit Facility”) was refinanced by way of amendment, allowing for greater investment flexibility and the extension of the maturity date, among other changes. On July 13, 2018, commitments to the Credit Facility, as amended, were increased from $200 million to $225 million by utilizing the accordion feature.

In September 2016, the Company closed a follow-on public equity offering of 4.5 million shares of common stock at $16.76 per share raising approximately $75.0 million in net proceeds. In the future, the Company may raise additional equity or debt capital, among other considerations. The primary uses of funds will be investments in portfolio companies, reductions in debt outstanding and other general corporate purposes. The issuance of debt or equity securities will depend on future market conditions, funding needs and other factors and there can be no assurance that any such issuance will occur or be successful.

Cash Equivalents

We deem certain U.S. Treasury bills, repurchase agreements and other high-quality, short-term debt securities as cash equivalents. The Company makes purchases that are consistent with its purpose of making investments in securities described in paragraphs 1 through 3 of Section 55(a) of the 1940 Act. From time to time, including at or near the end of each fiscal quarter, we consider using various temporary investment strategies for our business. One strategy includes taking proactive steps by utilizing cash equivalents as temporary assets with the objective of enhancing our investment flexibility pursuant to Section 55 of the 1940 Act. More specifically, from time-to-time we may purchase U.S. Treasury bills or other high-quality, short-term debt securities at or near the end of the quarter and typically close out the position on a net cash basis subsequent to quarter end. We may also utilize repurchase agreements or other balance sheet transactions, including drawing down on our credit facilities, as deemed appropriate. The amount of these transactions or such drawn cash for this purpose is excluded from total assets for purposes of computing the asset base upon which the management fee is determined. We held approximately $90 million of cash equivalents as of March 31, 2020.

Debt

Unsecured Notes

On March 31, 2020, the Company closed a private offering of $85 million of the 2025 Unsecured Notes with a fixed interest rate of 3.90% and a maturity date of March 31, 2025. Interest on the 2025 Unsecured Notes is due semi-annually on March 31 and September 30. The 2025 Unsecured Notes were issued in a private placement only to qualified institutional buyers.

Revolving Loan Facilities

On August 26, 2011, the Company established our wholly-owned subsidiary, SUNS SPV LLC (the “SUNS SPV”) which entered into the Credit Facility with Citigroup Global Markets Inc. acting as administrative agent. On January 10, 2017, commitments to the Credit Facility, as amended, were increased from $175 million to $200 million by utilizing the accordion feature. The commitment can also be expanded up to $600 million. The stated interest rate on the Credit Facility is LIBOR plus 2.00% with no LIBOR floor requirement and the current final maturity date is June 1, 2023. The Credit Facility is secured by all of the assets held by SUNS SPV. Under the terms of the Credit Facility, Solar Senior and SUNS SPV, as applicable, have made certain customary representations and warranties, and are required to comply with various covenants, including leverage restrictions, reporting requirements and other customary requirements for similar credit facilities. The Credit Facility also includes usual and customary events of default for credit facilities of this nature. The Credit Facility was amended on November 7, 2012, June 30, 2014 and May 29, 2015 to extend maturities and add greater investment flexibility, among other changes. On June 1, 2018, the Credit Facility was refinanced by way of amendment, allowing for greater investment flexibility and the extension of the maturity date, among other changes. On July 13, 2018, commitments to the Credit Facility, as amended, were increased from $200 million to $225 million by utilizing the accordion feature. There were $45.3 million of borrowings outstanding as of March 31, 2020 under the Credit Facility.

On May 31, 2019, the Company as transferor and FLLP 2015-1, LLC, a wholly-owned subsidiary of the Company, as borrower entered into amendment number five to the $75 million FLLP Facility with Wells Fargo Bank, NA acting as administrative agent. The Company acts as servicer under the FLLP Facility. The FLLP Facility is scheduled to mature on May 31, 2024. The FLLP Facility generally bears interest at a rate of LIBOR plus a range of 2.15-2.25%. The Company and FLLP 2015-1, LLC, as applicable, have made certain customary representations and warranties, and are required to comply with various covenants, including leverage restrictions, reporting requirements and other customary requirements for similar credit facilities. The FLLP Facility also includes usual and customary events of default for credit facilities of this nature. There were $44.1 million of borrowings outstanding as of March 31, 2020. At March 31, 2020, the Company was in compliance with all financial and operational covenants required by its credit facilities.

Contractual Obligations


	Payments due by Period as of March 31, 2020 (dollars in millions)
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Revolving credit facilities⁽¹⁾	$	89.4	$	—	$	—	$	89.4	$	—
Unsecured senior notes		85.0		—		—		85.0		—

(1)	At March 31, 2020, we had a total of $210.6 million of unused borrowing capacity under our revolving credit facilities, subject to borrowing base limits.

Under the provisions of the 1940 Act, we are permitted, as a BDC, to issue senior securities in amounts such that our asset coverage ratio, as defined in the 1940 Act, equals at least 150% of gross assets less all liabilities and indebtedness not represented by senior securities, after each issuance of senior securities. If the value of our assets declines, we may be unable to satisfy the asset coverage test. If that happens, we may be required to sell a portion of our investments and, depending on the nature of our leverage, repay a portion of our indebtedness at a time when such sales may be disadvantageous. Also, any amounts that we use to service our indebtedness would not be available for distributions to our common stockholders. Furthermore, as a result of issuing senior securities, we would also be exposed to typical risks associated with leverage, including an increased risk of loss.

Senior Securities

Information about our senior securities is shown in the following table as of the quarter ended March 31, 2020 and each year ended December 31 since the Company commenced operations, unless otherwise noted. The

“—” indicates information which the SEC expressly does not require to be disclosed for certain types of senior securities.


Class and Year	Total Amount Outstanding⁽¹⁾		Asset Coverage Per Unit⁽²⁾		Involuntary Liquidating Preference Per Unit⁽³⁾		Average Market Value Per Unit⁽⁴⁾
Credit Facility
Fiscal 2020 (through March 31, 2020)	$	45,300	$	609	$	—		N/A
Fiscal 2019		157,600		1,671		—		N/A
Fiscal 2018		119,200		1,770		—		N/A
Fiscal 2017		124,200		3,175		—		N/A
Fiscal 2016		98,300		3,738		—		N/A
Fiscal 2015		116,200		2,621		—		N/A
Fiscal 2014		143,200		2,421		—		N/A
Fiscal 2013		61,400		4,388		—		N/A
Fiscal 2012		39,100		5,453		—		N/A
Fiscal 2011		8,600		21,051		—		N/A
FLLP Facility
Fiscal 2020 (through March 31, 2020)		44,103		592		—		N/A
Fiscal 2019		53,602		569		—		N/A
Fiscal 2018		51,371		762		—		N/A
2025 Unsecured Notes
Fiscal 2020 (through March 31, 2020)		85,000		1,142		—		N/A
Total Senior Securities

Fiscal 2020 (through March 31, 2020)	$	174,403	$	2,343	$	—		N/A
Fiscal 2019		211,202		2,240		—		N/A
Fiscal 2018		170,571		2,532		—		N/A
Fiscal 2017		124,200		3,175		—		N/A
Fiscal 2016		98,300		3,738		—		N/A
Fiscal 2015		116,200		2,621		—		N/A
Fiscal 2014		143,200		2,421		—		N/A
Fiscal 2013		61,400		4,388		—		N/A
Fiscal 2012		39,100		5,453		—		N/A
Fiscal 2011		8,600		21,051		—		N/A

(1)	Total amount of each class of senior securities outstanding (in thousands) at the end of the period presented.

(2)

The asset coverage ratio for a class of senior securities representing indebtedness is calculated as our consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by senior securities representing indebtedness. This asset coverage ratio is multiplied by one thousand to determine the Asset Coverage Per Unit. In order to determine the specific Asset Coverage Per Unit for each class of debt, the total Asset Coverage Per Unit was divided based on the amount outstanding at the end of the period for each. As of March 31, 2020, asset coverage was 234.3%.

(3)	The amount to which such class of senior security would be entitled upon the involuntary liquidation of the issuer in preference to any security junior to it.

(4)	Not applicable, we do not have senior securities that are registered for public trading.

We have also entered into two contracts under which we have future commitments: the Advisory Agreement, pursuant to which Solar Capital Partners has agreed to serve as our investment adviser, and the Administration Agreement, pursuant to which Solar Capital Management has agreed to furnish us with the facilities and administrative services necessary to conduct our day-to-day operations and provide on our behalf managerial assistance to those portfolio companies to which we are required to provide such assistance. Payments under the Advisory Agreement are equal to (1) a percentage of the value of our average gross assets

and (2) a two-part incentive fee. Payments under the Administration Agreement are equal to an amount based upon our allocable portion of the Administrator’s overhead in performing its obligations under the Administration Agreement, including rent, technology systems, insurance and our allocable portion of the costs of our chief financial officer and chief compliance officer and their respective staffs. Either party may terminate each of the Advisory Agreement and Administration Agreement without penalty upon 60 days’ written notice to the other. See note 3 to our Consolidated Financial Statements.

Off-Balance Sheet Arrangements

From time-to-time and in the normal course of business, the Company may make unfunded capital commitments to current or prospective portfolio companies. Typically, the Company may agree to provide delayed-draw term loans or, to a lesser extent, revolving loan or equity commitments. These unfunded capital commitments always take into account the Company’s liquidity and cash available for investment, portfolio and issuer diversification, and other considerations. Accordingly, the Company had the following unfunded capital commitments at March 31, 2020 and December 31, 2019, respectively:


	March 31, 2020		December 31, 2019
*(in millions)*
Altern Marketing, LLC	$	2.4	$	1.2
Kindred Biosciences, Inc		2.1		2.1
Worldwide Facilities, LLC.		2.1		2.3
Rubius Therapeutics, Inc		2.1		2.1
Gemino Healthcare Finance, LLC*		1.4		1.4
Solara Medical Supplies, Inc.		1.2		3.2
Rxsense Holdings LLC.		1.2		—
Neuronetics, Inc.		1.0		—
MSHC, Inc.		1.0		2.4
Cerapedics, Inc.		0.8		0.8
Drilling Info Holdings, Inc.		0.7		—
ENS Holdings III Corp. & ES Opco USA LLC		0.6		1.4
Pinnacle Treatment Centers, Inc.		0.5		—
Composite Technology Acquisition Corp.		0.0		1.1
AQA Acquisition Holding, Inc.		0.0		0.1
US Radiology Specialists, Inc.		—		2.2
WIRB-Copernicus Group, Inc.		—		1.7
Unified Physician Management, LLC		—		1.6
MRI Software LLC		—		1.2
Alimera Sciences, Inc.		—		0.2

Total Commitments	$	17.1	$	25.0

*	The Company controls the funding of the Gemino commitment and may cancel it at its discretion.

Generally, these financial instruments represent future commitments to purchase or sell other financial instruments at specific terms at future dates. These financial instruments contain varying degrees of off-balance sheet risk whereby changes in the market value or our satisfaction of the obligations may exceed the amount recognized in our Consolidated Statements of Assets and Liabilities.

Distributions

The following table reflects the cash distributions per share on our common stock for the two most recent fiscal years and the current fiscal year to date:

Date Declared

Record Date

Payment Date

Amount

Fiscal 2020

May 7, 2020

May 22, 2020

June 2, 2020

0.10

April 2, 2020

April 23, 2020

May 1, 2020

0.1175

February 20, 2020

March 19, 2020

April 3, 2020

0.1175

February 4, 2020

February 20, 2020

February 28, 2020

0.1175

January 8, 2020

January 23, 2020

January 31, 2020

0.1175

Total (2020)

0.57

Fiscal 2019

December 5, 2019

December 19, 2019

January 3, 2020

0.1175

November 4, 2019

November 21, 2019

December 3, 2019

0.1175

October 3, 2019

October 17, 2019

November 1, 2019

0.1175

September 3, 2019

September 20, 2019

October 2, 2019

0.1175

August 5, 2019

August 22, 2019

August 30, 2019

0.1175

July 2, 2019

July 25, 2019

August 1, 2019

0.1175

June 5, 2019

June 20, 2019

July 2, 2019

0.1175

May 6, 2019

May 23, 2019

June 4, 2019

0.1175

April 4, 2019

April 18, 2019

May 1, 2019

0.1175

February 21, 2019

March 21, 2019

April 3, 2019

0.1175

February 6, 2019

February 21, 2019

March 1, 2019

0.1175

January 8, 2019

January 24, 2019

February 1, 2019

0.1175

YTD Total (2019)

1.41

Fiscal 2018

December 6, 2018

December 20, 2018

January 4, 2019

0.1175

November 5, 2018

November 21, 2018

December 4, 2018

0.1175

October 4, 2018

October 24, 2018

November 1, 2018

0.1175

September 6, 2018

September 25, 2018

October 2, 2018

0.1175

August 2, 2018

August 23, 2018

August 31, 2018

0.1175

July 3, 2018

July 19, 2018

July 31, 2018

0.1175

June 6, 2018

June 21, 2018

July 3, 2018

0.1175

May 7, 2018

May 23, 2018

June 1, 2018

0.1175

April 3, 2018

April 19, 2018

May 2, 2018

0.1175

February 22, 2018

March 22, 2018

April 3, 2018

0.1175

February 7, 2018

February 22, 2018

March 1, 2018

0.1175

January 5, 2018

January 18, 2018

January 31, 2018

0.1175

Total (2018)

1.41

Tax characteristics of all distributions will be reported to stockholders on Form 1099 after the end of the calendar year. Future distributions, if any, will be determined by our Board. We expect that our distributions to

stockholders will generally be from accumulated net investment income, from net realized capital gains or non-taxable return of capital, if any, as applicable.

We have elected to be taxed as a RIC under Subchapter M of the Code. To maintain our RIC status, we must distribute at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, out of the assets legally available for distribution. In addition, although we currently intend to distribute realized net capital gains (i.e., net long-term capital gains in excess of short-term capital losses), if any, at least annually, out of the assets legally available for such distributions, we may in the future decide to retain such capital gains for investment.

We maintain an “opt out” dividend reinvestment plan for our common stockholders. As a result, if we declare a distribution, then stockholders’ cash distributions will be automatically reinvested in additional shares of our common stock, unless they specifically “opt out” of the dividend reinvestment plan so as to receive cash distributions.

We may not be able to achieve operating results that will allow us to make distributions at a specific level or to increase the amount of these distributions from time to time. In addition, due to the asset coverage test applicable to us as a business development company, we may in the future be limited in our ability to make distributions. Also, our revolving credit facility may limit our ability to declare distributions if we default under certain provisions. If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including possible loss of the tax benefits available to us as a regulated investment company. In addition, in accordance with GAAP and tax regulations, we include in income certain amounts that we have not yet received in cash, such as contractual payment-in-kind interest, which represents contractual interest added to the loan balance that becomes due at the end of the loan term, or the accrual of original issue or market discount. Since we may recognize income before or without receiving cash representing such income, we may have difficulty meeting the requirement to distribute at least 90% of our investment company taxable income to obtain tax benefits as a regulated investment company.

With respect to the distributions to stockholders, income from origination, structuring, closing and certain other upfront fees associated with investments in portfolio companies are treated as taxable income and accordingly, distributed to stockholders. For the three months ended March 31, 2020 and December 31, 2019, 18.0% and 12.3% of distributions were funded from the waiver of management and/or incentive fees.

Related Parties

We have entered into a number of business relationships with affiliated or related parties, including the following:

•

We have entered into the Advisory Agreement with Solar Capital Partners. Mr. Gross, our Chairman, Co-Chief Executive Officer and President and Mr. Spohler, our Co-Chief Executive Office, Chief Operating Officer and board member, are managing members and senior investment professionals of, and have financial and controlling interests in, the Investment Adviser. In addition, Mr. Peteka, our Chief Financial Officer, Treasurer and Secretary serves as the Chief Financial Officer for Solar Capital Partners.

•

The Administrator provides us with the office facilities and administrative services necessary to conduct day-to-day operations pursuant to our Administration Agreement. We reimburse the Administrator for the allocable portion of overhead and other expenses incurred by it in performing its obligations under the Administration Agreement, including rent, the fees and expenses associated with performing compliance functions, and the compensation of our chief compliance officer, our chief financial officer and their respective staffs.

•

We have entered into a license agreement with the Investment Adviser, pursuant to which the Investment Adviser has granted us a non-exclusive, royalty-free license to use the name “Solar Capital.”

The Investment Adviser may also manage other funds in the future that may have investment mandates that are similar, in whole and in part, with ours. For example, the Investment Adviser presently serves as investment adviser to Solar Capital Ltd., a publicly traded BDC, which focuses on investing in senior secured loans, including stretch-senior loans and to a lesser extent unsecured loans and equity securities, as well as SCP Private Income BDC LLC, an unlisted BDC that focuses primarily in senior secured loans, including asset-based loans and first lien loans. In addition, Michael S. Gross, our Chairman, Co-Chief Executive Officer and President, Bruce Spohler, our Co-Chief Executive Officer and Chief Operating Officer, and Richard L. Peteka, our Chief Financial Officer, serve in similar capacities for Solar Capital Ltd. and SCP Private Credit Income BDC LLC. The Investment Adviser and certain investment advisory affiliates may determine that an investment is appropriate for us and for one or more of those other funds. In such event, depending on the availability of such investment and other appropriate factors, the Investment Adviser or its affiliates may determine that we should invest side-by-side with one or more other funds. Any such investments will be made only to the extent permitted by applicable law and interpretive positions of the SEC and its staff, and consistent with the Investment Adviser’s allocation procedures. On June 13, 2017, the Adviser received an exemptive order that permits the Company to participate in negotiated co-investment transactions with certain affiliates, in a manner consistent with the Company’s investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors, and pursuant to various conditions (the “Order”). If the Company is unable to rely on the Order for a particular opportunity, such opportunity will be allocated first to the entity whose investment strategy is the most consistent with the opportunity being allocated, and second, if the terms of the opportunity are consistent with more than one entity’s investment strategy, on an alternating basis. Although the Adviser’s investment professionals will endeavor to allocate investment opportunities in a fair and equitable manner, the Company and its stockholders could be adversely affected to the extent investment opportunities are allocated among us and other investment vehicles managed or sponsored by, or affiliated with, our executive officers, directors and members of the Adviser.

Related party transactions may occur among Solar Senior Capital Ltd., Gemino and NM Holdco. These transactions may occur in the normal course of business. No administrative fees are paid to Solar Capital Partners by Gemino or NM Holdco.

In addition, we have adopted a formal code of ethics that governs the conduct of our officers and directors. Our officers and directors also remain subject to the duties imposed by both the 1940 Act and the Maryland General Corporation Law.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

We are subject to financial market risks, including changes in interest rates. Because we fund a portion of our investments with borrowings, our net investment income is affected by the difference between the rate at which we invest and the rate at which we borrow. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. In addition, in a prolonged low interest rate environment, including a reduction of LIBOR to zero, the difference between the total interest income earned on interest earning assets and the total interest expense incurred on interest bearing liabilities may be compressed, reducing our net interest income and potentially adversely affecting our operating results. During the three months ended March 31, 2020, certain of the investments in our comprehensive investment portfolio had floating interest rates. These floating rate investments were primarily based on floating LIBOR and typically have durations of one to three months after which they reset to current market interest rates. Additionally, some of these investments have LIBOR floors. The Company also has revolving credit facilities that are generally based on floating LIBOR. Assuming no changes to our balance sheet as of March 31, 2020 and no new defaults by portfolio companies, a hypothetical one percent decrease in LIBOR on our comprehensive floating rate assets and liabilities would increase our net investment income by seven cents per average share over the next twelve months. Assuming no changes to our balance sheet as of March 31, 2020 and no new defaults by portfolio companies, a hypothetical one percent increase in LIBOR on our comprehensive floating rate assets and liabilities would increase our net investment income by approximately six cents per average share

over the next twelve months. However, we may hedge against interest rate fluctuations from time-to-time by using standard hedging instruments such as futures, options, swaps and forward contracts subject to the requirements of the 1940 Act. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in any benefits of certain changes in interest rates with respect to our portfolio of investments. At March 31, 2020, we have no interest rate hedging instruments outstanding on our balance sheet.


Increase (Decrease) in LIBOR		(1.00	%)		1.00	%
Increase (Decrease) in Net Investment Income Per Share Per Year	$	0.07		$	0.06

Item 4.

Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

As of March 31, 2020 (the end of the period covered by this report), we, including our Co-Chief Executive Officers and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the 1934 Act). Based on that evaluation, our management, including the Co-Chief Executive Officers and Chief Financial Officer, concluded that our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed in our periodic SEC filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Co-Chief Executive Officers and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of such possible controls and procedures.

(b) Changes in Internal Controls Over Financial Reporting

Management has not identified any change in the Company’s internal control over financial reporting that occurred during the first quarter of 2020 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

We, Solar Capital Management, LLC and Solar Capital Partners, LLC are not currently subject to any material pending legal proceedings threatened against us. From time to time, we may be a party to certain legal proceedings incidental to the normal course of our business including the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our business, financial condition or results of operations beyond what has been disclosed with these financial statements.

Item 1A.

Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in “Risk Factors” in the February 20, 2020 filing of our Annual Report on Form 10-K, which could materially affect our business, financial condition and/or operating results. The risks described in our Annual Report are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results. Other than the risk factors set forth below, there have been no material changes during the period ended March 31, 2020 to the risk factors discussed in “Risk Factors” in the February 20, 2020 filing of our Annual Report on Form 10-K.

Events outside of our control, including public health crises, could negatively affect our portfolio companies and our results of our operations.

Periods of market volatility have occurred and could continue to occur in response to pandemics or other events outside of our control. These types of events have adversely affected and could continue to adversely affect operating results for us and for our portfolio companies. For example, in December 2019, a novel strain of coronavirus (also known as “COVID-19”) surfaced in China and has since spread to other countries, including the United States, which has resulted in restrictions on travel and the temporary closure of many corporate offices, retail stores, and manufacturing facilities and factories in the affected jurisdictions. In addition to these developments having adverse consequences for us and our portfolio companies have been, and could continue to be, adversely impacted, including through quarantine measures and travel restrictions imposed on its personnel or service providers based or temporarily located in affected countries, or any related health issues of such personnel or service providers. As the potential impact of COVID-19 is difficult to predict, the extent to which COVID-19 could negatively affect our and our portfolio companies’ operating results or the duration of any potential business or supply-chain disruption, is uncertain. Any potential impact to our results of operations will depend to a large extent on future developments and new information that could emerge regarding the duration and severity of COVID-19 and the actions taken by authorities and other entities to contain COVID-19 or treat its impact, all of which are beyond our control. These potential impacts, while uncertain, could adversely affect our and our portfolio companies’ operating results.

We are currently operating in a period of capital markets disruption and economic uncertainty.

The U.S. capital markets have experienced extreme volatility and disruption following the global outbreak of COVID-19 that began in December 2019. Some economists and major investment banks have expressed concern that the continued spread of the virus globally could lead to a world-wide economic downturn. Disruptions in the capital markets have increased the spread between the yields realized on risk-free and higher risk securities, resulting in illiquidity in parts of the capital markets. These and future market disruptions and/or illiquidity would be expected to have an adverse effect on our business, financial condition, results of operations and cash flows. Unfavorable economic conditions also would be expected to increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. These events have limited and could continue to limit our investment originations, limit our ability to grow and have a material negative impact on our operating results and the fair values of our debt and equity investments.

If the current period of capital market disruption and instability continues for an extended period of time, there is a risk that investors in our equity securities may not receive distributions consistent with historical levels or at all or that our distributions may not grow over time and a portion of our distributions may be a return of capital.

We intend to make distributions on a monthly basis to our stockholders out of assets legally available for distribution. We cannot assure you that we will achieve investment results that will allow us to make a specified level of cash distributions. Our ability to pay distributions might be adversely affected by the impact of one or

more of the risk factors described in this quarterly report or incorporated herein by reference, including the COVID-19 pandemic described above. For example, if the temporary closure of many corporate offices, retail stores, and manufacturing facilities and factories in the jurisdictions, including the United States, affected by the COVID-19 pandemic were to continue for an extended period of time it could result in reduced cash flows to us from our existing portfolio companies, which could reduce cash available for distribution to our stockholders. If we violate certain covenants under our existing or future credit facilities or other leverage, we may be limited in our ability to make distributions. If we declare a distribution and if more stockholders opt to receive cash distributions rather than participate in our dividend reinvestment plan, we may be forced to sell some of our investments in order to make cash distribution payments. To the extent we make distributions to stockholders that include a return of capital, such portion of the distribution essentially constitutes a return of the stockholder’s investment. Although such return of capital may not be taxable, such distributions would generally decrease a stockholder’s basis in our common stock and may therefore increase such stockholder’s tax liability for capital gains upon the future sale of such stock. A return of capital distribution may cause a stockholder to recognize a capital gain from the sale of our common stock even if the stockholder sells its shares for less than the original purchase price.

Due to the recent COVID-19 pandemic, shares of BDCs have traded below their respective NAVs. If our shares of common stock trade at a discount from NAV, it could limit our ability to raise equity capital.

As a result of the COVID-19 pandemic, the stocks of BDCs as an industry, including shares of our common stock, have traded below NAV, at or near historic lows as a result of concerns over liquidity, leverage restrictions and distribution requirements. If our common stock trades below its NAV, we will generally not be able to issue additional shares of our common stock at its market price without first obtaining the approval for such issuance from our stockholders and our independent directors. At our 2019 Annual Stockholders Meeting, our stockholders approved our ability to sell or otherwise issue shares of our common stock, not exceeding 25% of our then outstanding common stock immediately prior to each such offering, at a price or prices below the then current net asset value per share, in each case subject to the approval of our board of directors and compliance with the conditions set forth in the proxy statement pertaining thereto, during a period beginning on October 8, 2019 and expiring on the earlier of the one-year anniversary of the date of the 2019 Annual Stockholders Meeting and the date of our 2020 Annual Stockholders Meeting. However, notwithstanding such stockholder approval, since our initial public offering on February 24, 2011, we have not sold any shares of our common stock in an offering that resulted in proceeds to us of less than our then current net asset value per share. Any offering of our common stock that requires stockholder approval must occur, if at all, within one year after receiving such stockholder approval. If additional funds are not available to us, we could be forced to curtail or cease our new lending and investment activities, and our net asset value could decrease and our level of distributions could be impacted.

Due to the COVID-19 pandemic or other disruptions in the economy, we may not be able to increase our dividends and may reduce or defer our dividends and choose to incur U.S. federal excise tax in order preserve cash and maintain flexibility.

As a BDC, we are not required to make any distributions to shareholders other than in connection with our election to be taxed as a RIC under subchapter M of the Code. In order to maintain our tax treatment as a RIC, we must distribute to shareholders for each taxable year at least 90% of our investment company taxable income (i.e., net ordinary income plus realized net short-term capital gains in excess of realized net long-term capital losses). If we qualify for taxation as a RIC, we generally will not be subject to corporate-level US federal income tax on our investment company taxable income and net capital gains (i.e., realized net long-term capital gains in excess of realized net short-term capital losses) that we timely distribute to shareholders. We will be subject to a 4% U.S. federal excise tax on undistributed earnings of a RIC unless we distribute each calendar year at least the sum of (i) 98.0% of our ordinary income for the calendar year, (ii) 98.2% of our capital gains in excess of capital losses for the one-year period ending on October 31 of the calendar year, and (iii) any ordinary income and net capital gains for preceding years that were not distributed during such years and on which we paid no federal income tax.

Under the Code, we may satisfy certain of our RIC distributions with dividends paid after the end of the current year. In particular, if we pay a distribution in January of the following year that was declared in October, November, or December of the current year and is payable to shareholders of record in the current year, the dividend will be treated for all US federal tax purposes as if it were paid on December 31 of the current year. In addition, under the Code, we may pay dividends, referred to as “spillover dividends,” that are paid during the following taxable year that will allow us to maintain our qualification for taxation as a RIC and eliminate our liability for corporate-level U.S. federal income tax. Under these spillover dividend procedures, we may defer distribution of income earned during the current year until December of the following year. For example, we may defer distributions of income earned during 2020 until as late as December 31, 2021. If we choose to pay a spillover dividend, we will incur the 4% U.S. federal excise tax on some or all of the distribution.

Due to the COVID-19 pandemic or other disruptions in the economy, we may take certain actions with respect to the timing and amounts of our distributions in order to preserve cash and maintain flexibility. For example, we may not be able to increase our dividends. In addition, we may reduce our dividends and/or defer our dividends to the following taxable year. If we defer our dividends, we may choose to utilize the spillover dividend rules discussed above and incur the 4% U.S. federal excise tax on such amounts. To further preserve cash, we may combine these reductions or deferrals of dividends with one or more distributions that are payable partially in our stock as discussed below under “We may choose to pay distributions in our own stock, in which case our stockholders may be required to pay U.S. federal income taxes in excess of the cash distributions they receive.”

We may choose to pay distributions in our own common stock, in which case our stockholders may be required to pay U.S. federal income taxes in excess of the cash distributions they receive.

We may distribute taxable distributions that are payable in cash or shares of our common stock at the election of each stockholder. Under certain applicable provisions of the Code and the published guidance, distributions payable of a publicly offered RIC that are in cash or in shares of stock at the election of stockholders may be treated as taxable distributions. The Internal Revenue Service has issued a revenue procedure indicating that this rule will apply if the total amount of cash to be distributed is not less than 20% (which has been temporarily reduced to 10% for distributions declared on or after April 1, 2020, and on or before December 31, 2020) of the total distribution. Under this revenue procedure, if too many stockholders elect to receive their distributions in cash, the cash available for distribution must be allocated among the stockholders electing to receive cash (with the balance of distributions paid in stock). If we decide to make any distributions consistent with this revenue procedure that are payable in part in our stock, taxable stockholders receiving such distributions will be required to include the full amount of the distribution (whether received in cash, our stock, or a combination thereof) as ordinary income (or as long-term capital gain to the extent such distribution is properly reported as a capital gain distribution) to the extent of our current and accumulated earnings and profits for U.S. federal income tax purposes. As a result, a U.S. stockholder may be required to pay tax with respect to such distributions in excess of any cash received. If a U.S. stockholder sells the stock it receives as a distribution in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the distribution, depending on the market price of our stock at the time of the sale. Furthermore, with respect to non-U.S. stockholders, we may be required to withhold U.S. tax with respect to such distributions, including in respect of all or a portion of such distribution that is payable in stock. If a significant number of our stockholders determine to sell shares of our stock in order to pay taxes owed on distributions, it may put downward pressure on the trading price of our stock.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

We did not engage in unregistered sales of securities during the quarter ended March 31, 2020.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

Not applicable.

Item 5.

Other Information

None.

Item 6. Exhibits

The following exhibits are filed as part of this report or hereby incorporated by reference to exhibits previously filed with the SEC:


Exhibit Number		Description

3.1		Articles of Amendment and Restatement(1)

3.2		Amended and Restated Bylaws(1)

4.1		Form of Common Stock Certificate(1)

10.12		Form of Note Purchase Agreement by and between the Registrant and the lenders party thereto*

31.1		Certification of Co-Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.*

31.2		Certification of Co-Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.*

31.3		Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.*

32.1		Certification of Co-Chief Executive Officer pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.*

32.2		Certification of Co-Chief Executive Officer pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.*

32.3		Certification of Chief Financial Officer pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.*

(1)	Previously filed in connection with Solar Senior Capital Ltd.’s registration statement on Form N-2 (File No. 333-171330) filed on February 14, 2011.

*	Filed herewith.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on May 7, 2020.


SOLAR SENIOR CAPITAL LTD.

By:		/s/ MICHAEL S. GROSS
		Michael S. Gross
		Co-Chief Executive Officer (Principal Executive Officer)

By:		/s/ BRUCE J. SPOHLER
		Bruce J. Spohler
		Co-Chief Executive Officer (Principal Executive Officer)


By:		/s/ RICHARD L. PETEKA
		Richard L. Peteka
		Chief Financial Officer (Principal Financial and Accounting Officer)

EX-10.12

Exhibit 10.12

EXECUTION COPY

SOLAR SENIOR CAPITAL LTD.

$85,000,000 3.90% Series 2020A Senior Notes, due March 31, 2025

NOTE PURCHASE AGREEMENT

Dated as of March 31, 2020

TABLE OF CONTENTS

(Not a part of the Agreement)


SECTION	HEADING	PAGE

SECTION 1.	AUTHORIZATION OF NOTES; INTEREST RATE	1

Section 1.1.	Authorization of Notes	1
Section 1.2.	Changes in Interest Rate	1

SECTION 2.	SALE AND PURCHASE OF NOTES	2

Section 2.1.	Purchase and Sale of Notes	2
Section 2.2.	[Reserved]	3
Section 2.3.	Guarantee	3
Section 2.4.	Additional Series of Notes	3

SECTION 3.	CLOSING	4

SECTION 4.	CONDITIONS TO CLOSING	4
Section 4.1.	Representations and Warranties	4
Section 4.2.	Performance; No Default	4
Section 4.3.	Compliance Certificates	5
Section 4.4.	Opinions of Counsel	5
Section 4.5.	Purchase Permitted by Applicable Law, Etc.	5
Section 4.6.	Sale of Other Notes	5
Section 4.7.	Payment of Special Counsel Fees	5
Section 4.8.	Private Placement Number	6
Section 4.9.	Changes in Corporate Structure	6
Section 4.10.	Funding Instructions	6
Section 4.11.	Consent of Holders of Other Indebtedness	6
Section 4.12.	Proceedings and Documents	6
Section 4.13.	Conditions to Issuance of Additional Notes	6

SECTION 5.	REPRESENTATIONS AND WARRANTIES OF THE COMPANY	7

Section 5.1.	Organization; Power and Authority	7
Section 5.2.	Authorization, Etc.	7
Section 5.3.	Disclosure	7
Section 5.4.	Organization and Ownership of Shares of Subsidiaries	8
Section 5.5.	Financial Statements; Material Liabilities	9
Section 5.6.	Compliance with Laws	9
Section 5.7.	Governmental Authorizations, Compliance with Laws, Other Instruments Etc.	9
Section 5.8.	Litigation; Observance of Agreements, Statutes and Orders	9

-i-


Section 5.9.	Taxes	10
Section 5.10.	Title to Property; Leases	10
Section 5.11.	Licenses, Permits, Etc.	10
Section 5.12.	ERISA	10
Section 5.13.	Private Offering by the Company	10
Section 5.14.	Use of Proceeds; Margin Regulations	10
Section 5.15.	Existing Indebtedness; Future Liens	11
Section 5.16.	Foreign Assets Control Regulations, Etc.	11
Section 5.17.	Status under Certain Statutes	12
Section 5.18.	Notes Rank Pari Passu	12
Section 5.19.	Investments	12
Section 5.20.	Affiliate Agreements	13
SECTION 6.	REPRESENTATION AND COVENANT OF THE PURCHASERS	13
Section 6.1.	Purchase for Investment	13
Section 6.2.	Source of Funds	14
SECTION 7.	INFORMATION AS TO THE COMPANY	15
Section 7.1.	Financial and Business Information	15
Section 7.2.	Officer’s Certificate	17
Section 7.3.	Visitation, Etc.	18
SECTION 8.	PREPAYMENT OF THE NOTES	18
Section 8.1.	Maturity	18
Section 8.2.	Optional Prepayments with Make-Whole Amount	18
Section 8.3.	Change in Control	19
Section 8.4.	[Reserved]	19
Section 8.5.	Allocation of Partial Prepayments	19
Section 8.6.	Maturity; Surrender, Etc.	20
Section 8.7.	Purchase of Notes	20
Section 8.8.	Make-Whole Amount and Modified Make-Whole Amount	20
Section 8.9.	Prepayment for Tax Reasons	22
SECTION 9.	AFFIRMATIVE COVENANTS	23
Section 9.1.	Compliance with Law	23
Section 9.2.	Insurance	23
Section 9.3.	Maintenance of Properties	23
Section 9.4.	Payment of Taxes and Claims	24
Section 9.5.	Legal Existence, Etc.	24
Section 9.6.	Notes to Rank Pari Passu	24
Section 9.7.	Subsidiary Guarantors	24
Section 9.8.	Books and Records	25
Section 9.9.	Status of RIC and BDC	25

-ii-


Section 9.10.	Investment Policies	25
Section 9.11.	Rating Confirmation	26
Section 9.12.	Rating	26

SECTION 10.	NEGATIVE COVENANTS	26

Section 10.1.	[Reserved]	26
Section 10.2.	Liens	26
Section 10.3.	Fundamental Changes	26
Section 10.4.	[Reserved]	28
Section 10.5.	Restricted Payments	28
Section 10.6.	Certain Restrictions on Subsidiaries	29
Section 10.7.	Certain Financial Covenants	30
Section 10.8.	Transactions with Affiliates	33
Section 10.9.	Lines of Business	33
Section 10.10.	Economic Sanctions, Etc.	33

SECTION 11.	EVENTS OF DEFAULT	33

SECTION 12.	REMEDIES ON DEFAULT, ETC.	36

Section 12.1.	Acceleration	36
Section 12.2.	Other Remedies	36
Section 12.3.	Rescission	37
Section 12.4.	No Waivers or Election of Remedies, Expenses, Etc.	37

SECTION 13.	REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES	37

Section 13.1.	Registration of Notes	37
Section 13.2.	Transfer and Exchange of Notes	37
Section 13.3.	Replacement of Notes	38

SECTION 14.	PAYMENTS ON NOTES	39

Section 14.1.	Place of Payment	39
Section 14.2.	Home Office Payment	39
Section 14.3.	Taxation	39

SECTION 15.	EXPENSES, ETC.	42

Section 15.1.	Transaction Expenses	42
Section 15.2.	Survival	43

SECTION 16.	SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT	43

SECTION 17.	AMENDMENT AND WAIVER	43

Section 17.1.	Requirements	43

-iii-


Section 17.2.	Solicitation of Holders of Notes	45
Section 17.3.	Binding Effect, Etc.	45
Section 17.4.	Notes Held by Company, Etc.	46

SECTION 18.	NOTICES	46

SECTION 19.	REPRODUCTION OF DOCUMENTS	47

SECTION 20.	CONFIDENTIAL INFORMATION	47

SECTION 21.	SUBSTITUTION OF PURCHASER	49

SECTION 22.	MISCELLANEOUS	49

Section 22.1.	Successors and Assigns	49
Section 22.2.	Payments Due on Non-Business Days	49
Section 22.3.	Accounting Terms	49
Section 22.4.	Severability	50
Section 22.5.	Construction, Etc.	50
Section 22.6.	Counterparts	51
Section 22.7.	Governing Law	51
Section 22.8.	Jurisdiction and Process; Waiver of Jury Trial	51

-iv-


SCHEDULE A	—	INFORMATION RELATING TO PURCHASERS

SCHEDULE B	—	DEFINED TERMS

SCHEDULE 5.4	—	Subsidiaries, Affiliates and Directors and Senior Officers

SCHEDULE 5.7	—	Description of Necessary Consents, Approvals, Etc.

SCHEDULE 5.15	—	Liens and Indebtedness

SCHEDULE 5.19	—	Investments

SCHEDULE 6.1	—	Permitted Transferees

SCHEDULE 10.8(e)	—	Affiliate Transactions

EXHIBIT 1	—	Form of 3.90% Series 2020A Senior Note, due March 31, 2025

EXHIBIT S	—	Form of Supplement to Note Purchase Agreement

-v-

SOLAR SENIOR CAPITAL LTD.

40 East 52nd Street

New York, New York 10022

$85,000,000 3.90% SERIES 2020A SENIOR NOTES, DUE MARCH 31, 2025

Dated as of March 31, 2020

TO EACH OF THE PURCHASERS LISTED IN

SCHEDULE A HERETO:

Ladies and Gentlemen:

SOLAR SENIOR CAPITAL LTD., a Maryland corporation (the “Company”), agrees with each of the purchasers whose names appear at the end hereof (each, a “Purchaser” and, collectively, the “Purchasers”) as follows:

SECTION 1. AUTHORIZATION OF NOTES; INTEREST RATE.

Section 1.1. Authorization of Notes. The Company will authorize the issue and sale of $85,000,000 aggregate principal amount of its 3.90% Series 2020A Senior Notes, due March 31, 2025 (the “2020A Notes”; such term to include any such notes issued in substitution therefor pursuant to Section 13). The Notes shall be substantially in the form set out in Exhibit 1. Certain capitalized and other terms used in this Agreement are defined in Schedule B and, for purposes of this Agreement, the rules of construction set forth in Section 22.5 shall govern; and references to a “Schedule” or an “Exhibit” are, unless otherwise specified, to a Schedule or an Exhibit attached to this Agreement.

The Series 2020A Notes, together with each Series of Additional Notes which may from time to time be issued pursuant to the provisions of Section 2.4, are collectively referred to as the “Notes” (such term shall also include any such notes as amended, restated or otherwise modified from time to time pursuant to Section 17 and including any such notes issued in substitution therefor pursuant to Section 13).

Section 1.2. Changes in Interest Rate. (a) If at any time a Below Investment Grade Event occurs, then:

(i) as of the date of the occurrence of the Below Investment Grade Event to and until the date on which such Below Investment Grade Event is no longer continuing (as evidenced by the receipt and delivery to the holders of the Notes of evidence of a Rating necessary to cure such Below Investment Grade Event), the Notes shall bear interest at the Adjusted Interest Rate; and


SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

(ii) the Company shall promptly, and in any event within ten (10) Business Days after knowledge that a Below Investment Grade Event has occurred, notify the holders of the Notes in writing, sent in the manner provided in Section 18, that a Below

Investment Grade Event has occurred, which written notice shall confirm the effective date of the Below Investment Grade Event and that the Adjusted Interest Rate will accrue from the date of such Below Investment Grade Event and will be payable in respect of the Notes in consequence thereof.

(b) The fees and expenses of any NRSRO and all other costs incurred in connection with obtaining, affirming or appealing a Rating pursuant to this Section 1.2 shall be borne solely by the Company.

(c) As used herein, “Adjusted Interest Rate” means the interest rate on the Notes shall be the rate per annum which is 1.00% above the stated rate of such Notes. The Adjusted Interest Rate with respect to the Series 2020A Notes shall be 4.90% per annum.

(d) As used herein, a “Below Investment Grade Event” shall occur if

(i) at any time the Company has obtained a Rating of the Notes from only one NRSRO, the then most recent Rating from such NRSRO that is in full force and effect (not having been withdrawn) is less than Investment Grade; or

(ii) at any time the Company has obtained a Rating of the Notes from two NRSROs, the then lower of the most recent Ratings from the NRSROs that are in full force and effect (not having been withdrawn) is less than Investment Grade; or

(iii) at any time the Company has obtained a Rating of the Notes from three or more NRSROs, the then second lowest of the most recent Ratings from the NRSROs that is in full force and effect (not having been withdrawn) is less than Investment Grade (provided, for the avoidance of doubt, if two or more of the most recent Ratings are equal or equivalent as the lowest such Rating, then one of such equal or equivalent Ratings will be deemed to be the second lowest Rating for purposes of such determination); or

(iv) at any time the Company shall have failed to receive and deliver to the holders of the Notes a Rating of the Notes from at least one NRSRO as required pursuant to Section 9.11.

(e) Following the occurrence and during the continuance of an Event of Default, the Notes shall bear interest at the Default Rate.

SECTION 2. SALE AND PURCHASE OF NOTES.

Section 2.1. Purchase and Sale of Notes. Subject to the terms and conditions of this Agreement, the Company will issue and sell to each Purchaser and each Purchaser will purchase from the Company, at the Closing provided for in Section 3, Series 2020A Notes in the principal amount specified opposite such Purchaser’s name in Schedule A at the purchase price of 100% of the principal amount thereof. The Purchasers’ obligations hereunder are several and not joint obligations and no Purchaser shall have any liability to any Person for the performance or non-performance of any obligation by any other Purchaser hereunder.

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

Section 2.2. [Reserved].

Section 2.3 Guarantee. The payment by the Company of all amounts due with respect to the Notes and the performance by the Company of its obligations under this Agreement will be absolutely and unconditionally guaranteed by any Subsidiary that delivers a guaranty (other than, for the avoidance of doubt, Standard Security Undertakings or a Permitted SBIC Guarantee) pursuant to Section 9.7, pursuant to the Subsidiary Guarantee.

Section 2.4. Additional Series of Notes. The Company may, from time to time, in its sole discretion but subject to the terms hereof, issue and sell one or more additional Series of its promissory notes under the provisions of this Agreement pursuant to a supplement (a “Supplement”) substantially in the form of Exhibit S. Each additional Series of Notes (the “Additional Notes”) issued pursuant to a Supplement shall be subject to the following terms and conditions:

(i) each Series of Additional Notes, when so issued, shall be differentiated from all previous Series by sequential designation inscribed thereon;

(ii) Additional Notes of the same Series may consist of more than one different and separate tranches and may differ with respect to outstanding principal amounts, maturity dates, interest rates and premiums, if any, and price and terms of redemption or payment prior to maturity, but all such different and separate tranches of the same Series shall vote as a single class and constitute one Series;

(iii) each Series of Additional Notes shall be dated the date of issue, bear interest at such rate or rates, mature on such date or dates, be subject to such mandatory and optional prepayment on the dates and at the premiums, if any, have such additional or different conditions precedent to closing, such representations and warranties and such additional covenants as shall be specified in the Supplement under which such Additional Notes are issued and upon execution of any such Supplement, this Agreement shall be amended (a) to reflect such additional covenants without further action on the part of the holders of the Notes outstanding under this Agreement, provided, that any such additional covenants shall inure to the benefit of all holders of Notes so long as any Additional Notes issued pursuant to such Supplement remain outstanding, and (b) to reflect such representations and warranties as are contained in such Supplement for the benefit of the holders of such Additional Notes in accordance with the provisions of Section 16;

(iv) each Series of Additional Notes issued under this Agreement shall be in substantially the form of Exhibit 1 to Exhibit S hereto with such variations, omissions and insertions as are necessary or permitted hereunder;

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

(v) the minimum principal amount of any Note issued under a Supplement shall be $100,000, except as may be necessary to evidence the outstanding amount of any Note originally issued in a denomination of $100,000 or more;

(vi) all Additional Notes shall rank pari passu with all other outstanding Notes; and

(vii) no Additional Notes shall be issued hereunder if at the time of issuance thereof and after giving effect to the application of the proceeds thereof, any Default or Event of Default shall have occurred and be continuing.

SECTION 3. CLOSING.

The sale and purchase of the Series 2020A Notes to be purchased by each Purchaser shall occur at the offices of Chapman and Cutler LLP, 111 West Monroe Street, Chicago, Illinois 60603, at 9:00 A.M. Chicago time, at a closing (the “Closing”) on March 31, 2020. At the Closing, the Company will deliver to each Purchaser the Series 2020A Notes to be purchased by such Purchaser in the form of a single Note so to be purchased or such greater number of Notes in denominations of at least $100,000 as such Purchaser may request dated the date of the Closing and registered in such Purchaser’s name (or in the name of its nominee), against delivery by such Purchaser to the Company or its order of immediately available funds in the amount of the purchase price therefor by wire transfer of immediately available funds for the account of the Company to account number [Redacted] at Citibank, N.A., ABA:021-000-089, Account Name: Solar Senior Capital Ltd. If at the Closing the Company shall fail to tender such Notes to any Purchaser as provided above in this Section 3, or any of the conditions specified in Section 4 shall not have been fulfilled to such Purchaser’s satisfaction, such Purchaser shall, at its election, be relieved of all further obligations under this Agreement, without thereby waiving any rights such Purchaser may have by reason of such failure or such nonfulfillment.

SECTION 4. CONDITIONS TO CLOSING.

Each Purchaser’s obligation to execute and deliver this Agreement and to purchase and pay for the 2020A Notes to be sold to such Purchaser at the Closing is subject to the fulfillment to such Purchaser’s satisfaction, prior or at the Closing of the following conditions:

Section 4.1. Representations and Warranties. The representations and warranties of the Company in this Agreement shall be correct when made and (except as expressly limited to an earlier time) at the time of the Closing.

Section 4.2. Performance; No Default. The Company shall have performed and complied in all material respects with all agreements and conditions contained in this Agreement required to be performed or complied with by it prior to or at the Closing, and after giving effect to the issue and sale of the Series 2020A Notes (and the application of the proceeds thereof as contemplated by Section 5.14), no Default or Event of Default shall have occurred and be continuing. Neither the Company nor any Subsidiary shall have entered into any transaction since December 31, 2019 that would have been prohibited by Section 10 had such Section applied since such date.

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

Section 4.3. Compliance Certificates.

(a) Officer’s Certificate. The Company shall have delivered to such Purchaser an Officer’s Certificate, dated the date of the Closing, certifying that the conditions specified in Sections 4.1, 4.2 and 4.9 have been fulfilled in all material respects.

(b) Secretary’s Certificate. The Company shall have delivered to such Purchaser a certificate of its Secretary or Assistant Secretary, dated the date of Closing, certifying as to the resolutions attached thereto and other corporate proceedings relating to the authorization, execution and delivery of the Notes and this Agreement.

Section 4.4. Opinions of Counsel. Such Purchaser shall have received opinions in form and substance satisfactory to such Purchaser, dated the date of the Closing (a) from (i) Latham & Watkins LLP, special U.S. counsel for the Company and (ii) Venable LLP, Maryland counsel for the Company, covering the matters incident to the transactions contemplated hereby as such Purchaser or its counsel may reasonably request (and the Company hereby instructs its counsel to deliver such opinion to the Purchasers) and (b) from Chapman and Cutler LLP, the Purchasers’ special counsel, in connection with such transactions, covering such matters incident to such transactions as such Purchaser may reasonably request.

Section 4.5. Purchase Permitted by Applicable Law, Etc. On the date of the Closing such Purchaser’s purchase of Notes shall (a) be permitted by the laws and regulations of each jurisdiction to which such Purchaser is subject, without recourse to provisions (such as section 1405(a)(8) of the New York Insurance Law) permitting limited investments by insurance companies without restriction as to the character of the particular investment, (b) not violate any applicable law or regulation (including Regulation T, U or X of the Board of Governors of the Federal Reserve System) and (c) not subject such Purchaser to any tax, penalty or liability under or pursuant to any applicable law or regulation, which law or regulation was not in effect on the date of the Closing. If requested by such Purchaser, such Purchaser shall have received an Officer’s Certificate certifying as to such matters of fact as such Purchaser may reasonably specify to enable such Purchaser to determine whether such purchase is so permitted.

Section 4.6. Sale of Other Notes. Contemporaneously with the Closing, the Company shall sell to each other Purchaser, and each other Purchaser shall purchase, the Series 2020A Notes to be purchased by it at the Closing as specified in Schedule A.

Section 4.7. Payment of Special Counsel Fees. Without limiting the provisions of Section 15.1, the Company shall have paid on or before the Closing the reasonable fees, charges and disbursements of the Purchasers’ special counsel referred to in Section 4.4 to the extent reflected in a statement of such counsel rendered to the Company at least one Business Day prior to the Closing.

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

Section 4.8. Private Placement Number. A Private Placement Number issued by Standard & Poor’s CUSIP Service Bureau (in cooperation with the SVO) shall have been obtained for the Notes.

Section 4.9. Changes in Corporate Structure. The Company shall not have changed its jurisdiction of incorporation or organization, as applicable, or been a party to any merger or consolidation or succeeded to all or any substantial part of the liabilities of any other entity, at any time following the date of the most recent financial statements referred to in Section 5.5.

Section 4.10. Funding Instructions. At least three Business Days (or such shorter period as agreed to by the Purchasers) prior to the date of the Closing, each Purchaser shall have received written instructions signed by a Responsible Officer on letterhead of the Company confirming the information specified in Section 3 including (a) the name and address of the transferee bank, (b) such transferee bank’s ABA number and (c) the account name and number into which the purchase price for the Notes is to be deposited.

Section 4.11. Consent of Holders of Other Indebtedness. On or prior to the date of the Closing, any consents or approvals required to be obtained from any holder or holders of any outstanding Indebtedness of the Company or its Subsidiaries and any amendments of agreements pursuant to which any Indebtedness may have been issued which shall be necessary to permit the consummation of the transactions contemplated hereby shall have been obtained (and shall be in full force and effect on the date of the Closing) and shall be satisfactory to each Purchaser and its special counsel.

Section 4.12. Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated by this Agreement and all documents and instruments incident to such transactions shall be reasonably satisfactory to such Purchaser and its special counsel, and such Purchaser and its special counsel shall have received all such counterpart originals or certified or other copies of such documents as such Purchaser or such special counsel may reasonably request.

Section 4.13. Conditions to Issuance of Additional Notes. The obligations of the Additional Purchasers to purchase any Additional Notes shall be subject to the following conditions precedent, in addition to any conditions specified in the Supplement pursuant to which such Additional Notes may be issued:

(a) Compliance Certificate. A duly authorized Financial Officer shall execute and deliver to each Additional Purchaser and each holder of Notes an Officer’s Certificate dated the date of issue of such Series of Additional Notes stating that such officer has reviewed the provisions of this Agreement (including any Supplements hereto) and setting forth the information and computations (in sufficient detail) required in order to establish whether the Company is in compliance with the requirements of Section 10.7 on such date (based upon the financial statements for the most recent fiscal quarter ended prior to the date of such certificate but after giving effect to the issuance of the Additional Series of Notes and the application of the proceeds thereof).

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

(b) Execution and Delivery of Supplement. The Company and each such Additional Purchaser shall execute and deliver a Supplement substantially in the form of Exhibit S hereto.

(c) Representations of Additional Purchasers. Each Additional Purchaser shall have confirmed in the Supplement that the representations set forth in Section 6 are true with respect to such Additional Purchaser on and as of the date of issue of the Additional Notes.

(d) Execution and Delivery of Guaranty Ratification. Each Subsidiary Guarantor, if any, shall execute and deliver a ratification of its Subsidiary Guarantee.

SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

The Company represents and warrants to each Purchaser on the date of the Closing, that:

Section 5.1. Organization; Power and Authority. Each of the Company and its Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required of the Company or such Subsidiary, as applicable.

Section 5.2. Authorization, Etc. The Transactions are within the Company’s corporate powers and have been duly authorized by all necessary corporate action and, if required, by all necessary shareholder action. This Agreement has been duly executed and delivered by the Company and constitutes, and each of the other Note Documents to which it is a party when executed and delivered will constitute, a legal, valid and binding obligation of the Company, enforceable in accordance with its terms, except as such enforceability may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or similar laws of general applicability affecting the enforcement of creditors’ rights and (b) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

Section 5.3. Disclosure. The Company has disclosed to the Purchasers all agreements, instruments and corporate or other restrictions to which it or any of its Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. None of the reports, financial statements, certificates or other information furnished by or on behalf of the Company to the Purchasers in connection with the negotiation of this Agreement and the other Note Documents or delivered hereunder or thereunder (as modified or supplemented by other information so furnished) when taken together with the Company’s public filings contains any material misstatement of fact therein (or omits to state any material fact necessary to make the statements therein not misleading), in the light of the circumstances under which they were made; provided that, with respect to projected financial information, the Company represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

Since the date of the most recent Applicable Financial Statements, there has not been any event, development or circumstance that has had or could reasonably be expected to have a material adverse effect on (i) the business, Portfolio Investments and other assets, liabilities and financial condition of the Company and its Subsidiaries taken as a whole (excluding in any case a decline in the net asset value of the Company or a change in general market conditions or values of the Company’s or any of its Subsidiaries’ Portfolio Investments), or (ii) the validity or enforceability of any of the Note Documents or the rights or remedies of the Purchasers and the holders of the Notes thereunder.

Section 5.4. Organization and Ownership of Shares of Subsidiaries. (a) Schedule 5.4 contains (except as noted therein) complete and correct lists (i) of the Company’s Subsidiaries, showing, as to each Subsidiary, the correct name thereof, the jurisdiction of its organization, and the percentage of shares of each class of its capital stock or similar equity interests outstanding owned by the Company and each other Subsidiary (other than any Financing Subsidiary or tax blocker or investment held by such Financing Subsidiary or tax blocker), and (ii) of the Company’s directors and senior officers.

(b) All of the outstanding shares of capital stock or similar equity interests of each Subsidiary shown in Schedule 5.4 as being owned by the Company and its Subsidiaries have been validly issued, are fully paid and nonassessable and are owned by the Company or another Subsidiary free and clear of any Lien (except Permitted Liens or as otherwise disclosed in Schedule 5.4).

(c) Each Subsidiary identified in Schedule 5.4 is a corporation or other legal entity duly organized, validly existing and, where legally applicable, in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation or other legal entity and, where legally applicable, is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each such Subsidiary has the corporate or other power and authority to own or hold under lease the properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact.

(d) No Subsidiary (other than a Financing Subsidiary) is a party to, or otherwise subject to any legal, regulatory, contractual or other restriction (other than this Agreement, the agreements listed on Schedule 5.4 and customary limitations imposed by corporate law or similar statutes) restricting the ability of such Subsidiary to pay dividends out of profits or make any other similar distributions of profits to the Company or any of its Subsidiaries that owns outstanding shares of capital stock or similar equity interests of such Subsidiary.

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

Section 5.5. Financial Statements; Material Liabilities. The Company has heretofore delivered to each Purchaser the audited consolidated statement of assets and liabilities (or balance sheet) and statements of operations, changes in net assets and cash flows of the Company and its Subsidiaries as of and for the fiscal year ending on December 31, 2019; such financial statements present fairly, in all material respects, the consolidated financial position and results of operations and cash flows of the Company and its Subsidiaries as of such date in accordance with GAAP. The Company and its Subsidiaries do not have any Material liabilities that are not disclosed on such financial statements.

Section 5.6. Compliance with Laws. Each of the Company and its Subsidiaries is in compliance with all laws, regulations and orders of any Governmental Authority applicable to it or its property and all indentures, agreements and other instruments binding upon it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is subject to any contract or other arrangement, the performance of which by the Company could reasonably be expected to result in a Material Adverse Effect.

Section 5.7. Governmental Authorizations, Compliance with Laws, Other Instruments, Etc. The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except for such as have been or will be obtained or made and are in full force and effect and are described in Schedule 5.7, (b) will not violate any applicable law or regulation or the limited liability company operating agreement, charter, by-laws or other organizational documents of the Company or any of its Subsidiaries or any order of any Governmental Authority, (c) will not violate or result in a default in any material respect under any indenture, agreement or other instrument binding upon the Company or any of its Subsidiaries or assets, or give rise to a right thereunder to require any payment to be made by any such Person, and (d) will not result in the creation or imposition of any Lien on any asset of the Company or any of its Subsidiaries.

Section 5.8. Litigation; Observance of Agreements, Statutes and Orders. (a) There are no actions, suits, investigations or proceedings by or before any arbitrator or Governmental Authority now pending against or, to the knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries (i) as to which there is a reasonable possibility of an adverse determination and that if adversely determined could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect or (ii) that involve this Agreement or the Transactions.

(b) Neither the Company nor any Subsidiary is in default under any term of any agreement or instrument to which it is a party or by which it is bound, or any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority or is in violation of any applicable law, ordinance, rule or regulation of any Governmental Authority, which default or violation, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

Section 5.9. Taxes. Each of the Company and its Subsidiaries has timely filed or caused to be filed all material Tax returns and reports required to have been filed and has paid or caused to be paid all material Taxes required to have been paid by it, except (a) Taxes that are being contested in good faith by appropriate proceedings and for which such Person has set aside on its books adequate reserves or (b) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect. The charges, accruals and reserves on the books of the Company and its Subsidiaries in respect of Federal, state or other taxes for all fiscal periods are adequate in all material respects.

Section 5.10. Title to Property; Leases. Each of the Company and the other Obligors has good title to, or valid leasehold interests in, all its real and personal property material to its business, except for minor defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties for their intended purposes.

Section 5.11. Licenses, Permits, Etc. Each of the Company and its Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual property material to its business, and the use thereof by the Company and its Subsidiaries does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

Section 5.12. ERISA. (a) The execution and delivery of this Agreement and the issuance and sale of the Notes hereunder will not involve any transaction that is subject to the prohibitions of section 406 of ERISA or in connection with which a tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code. The representation by the Company in the first sentence of this Section 5.12(a) is made in reliance upon and subject to the accuracy of such Purchaser’s representation in Section 6.2 as to the sources of the funds used to pay the purchase price of the Notes to be purchased by such Purchaser.

(b) No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect.

Section 5.13. Private Offering by the Company. Neither the Company nor anyone acting on its behalf has offered the Series 2020A Notes or any similar Securities for sale to, or solicited any offer to buy any of the same from, or otherwise approached or negotiated in respect thereof with, any Person other than the Purchasers and not more than 6 other Institutional Investors, each of which has been offered the Series 2020A Notes at a private sale for investment. Neither the Company nor anyone acting on its behalf has taken, or will take, any action that would subject the issuance or sale of the Series 2020A Notes to the registration requirements of Section 5 of the Securities Act or to the registration requirements of any Securities or blue sky laws of any applicable jurisdiction.

Section 5.14. Use of Proceeds; Margin Regulations. The Company will apply the proceeds of the sale of the Series 2020A Notes to refinance existing indebtedness and for general corporate purposes and in compliance with all laws referenced in Section 5.16. Neither the Company nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose, whether immediate, incidental or ultimate, of buying or carrying Margin Stock, and no part of the proceeds of the sale of the Series 2020A

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

Notes hereunder will be used to buy or carry any Margin Stock, or to extend credit to others for the purpose of buying or carrying Margin Stock. After application of the proceeds of the sale of the Series 2020A Notes, not more than 25% of the value (as determined by any reasonable method) of the assets of the Company subject to any provision of this Agreement under which the sale, pledge or disposition of assets is restricted will consist of Margin Stock.

Section 5.15. Existing Indebtedness; Future Liens. (a) Part A of Schedule 5.15 is a complete and correct list of each note, bond, certificate, credit agreement, loan agreement, indenture, note purchase agreement, guarantee, letter of credit or other arrangement providing for or otherwise relating to any Indebtedness or any extension of credit (or commitment for any extension of credit) to, or guarantee by, the Company or any Subsidiary outstanding on the date of the Closing, and the aggregate principal or face amount outstanding or that is, or may become, outstanding, the interest rate, collateral and related guaranties under each such arrangement is correctly described in Part A of Schedule 5.15.

(b) Part B of Schedule 5.15 is a complete and correct list of each Lien securing Indebtedness of any Person outstanding or consented to on the date of the Closing covering any property of the Company or any Subsidiary, and the aggregate Indebtedness secured (or that may be secured) by each such Lien and the property covered by each such Lien is correctly described in Part B of Schedule 5.15.

(c) Neither the Company nor any Subsidiary is a party to, or otherwise subject to any provision contained in, any instrument evidencing Indebtedness of the Company or such Subsidiary, any agreement relating thereto or any other agreement (including, but not limited to, its charter or other organizational document) which limits the amount of, or otherwise imposes restrictions on the incurring of, Indebtedness of the Company, except as specifically indicated in Schedule 5.15.

Section 5.16. Foreign Assets Control Regulations, Etc. (a) Neither the Company nor any Controlled Entity (i) is a Blocked Person or Canada Blocked Person, (ii) has been notified that its name appears or may in the future appear on a State Sanctions List or (iii) is a target of sanctions that have been imposed by Canada, the United Nations or the European Union.

(b) Neither the Company nor any Controlled Entity (i) has violated, been found in violation of, or been charged or convicted under, any applicable U.S. Economic Sanctions Laws, Canadian Economic Sanctions Laws, Anti-Money Laundering Laws or Anti-Corruption Laws or (ii) to the Company’s knowledge, is under investigation by any Governmental Authority for possible violation of any U.S. Economic Sanctions Laws, Canadian Economic Sanctions Laws, Anti-Money Laundering Laws or Anti-Corruption Laws.

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

(i) constitutes or will constitute funds obtained on behalf of any Blocked Person or Canada Blocked Person or will otherwise be used by the Company or any Controlled Entity, directly or knowingly indirectly, (A) in connection with any investment in, or any transactions or dealings with, any Blocked Person or Canada Blocked Person, (B) for any purpose that would cause any Purchaser to be in violation of any U.S. Economic Sanctions Laws or Canadian Economic Sanctions or (C) otherwise in violation of any U.S. Economic Sanctions Laws or Canadian Economic Sanctions Laws;

(ii) will be used, directly or knowingly indirectly, in violation of, or cause any Purchaser to be in violation of, any applicable Anti-Money Laundering Laws; or

(iii) will be used, directly or knowingly indirectly, for the purpose of making any improper payments, including bribes, to any Governmental Official or commercial counterparty in order to obtain, retain or direct business or obtain any improper advantage, in each case which would be in violation of, or cause any Purchaser to be in violation of, any applicable Anti-Corruption Laws.

(d) The Company has established procedures and controls which it reasonably believes are adequate (and otherwise comply with applicable law) to ensure that the Company and each Controlled Entity is and will continue to be in compliance in all material respects with all applicable U.S. Economic Sanctions Laws, Canadian Economic Sanctions Laws, Anti-Money Laundering Laws and Anti-Corruption Laws.

Section 5.17. Status under Certain Statutes. (a) The Company is a company that has elected to be regulated as a “business development company” within the meaning of the Investment Company Act and qualifies as a RIC.

(b) The business and other activities of the Company and its Subsidiaries, including the issuance of the Notes hereunder, the application of the proceeds and repayment thereof by the Company and the consummation of the Transactions contemplated by the Note Documents do not result in a violation or breach in any material respect of the applicable provisions of the Investment Company Act or any rules, regulations or orders issued by the SEC thereunder.

(c) The Company is in compliance with its Investment Policies, except to the extent that the failure to so comply could not reasonably be expected to result in a Material Adverse Effect.

Section 5.18. Notes Rank Pari Passu. The obligations of the Company under this Agreement and the Notes rank at least pari passu in right of payment with all other Senior Unsecured Indebtedness (actual or contingent) of the Company, including all Senior Unsecured Indebtedness of the Company described in Schedule 5.15 hereto.

Section 5.19. Investments. Set forth in Schedule 5.19 is a complete and correct list of all Investments (other than (a) Investments by the Company and the Subsidiary Guarantors in the Company and the Subsidiary Guarantors, (b) Hedging Agreements entered into in the ordinary course of the Company’s and its Subsidiaries’ financial planning and not for speculative purposes, and (c) Portfolio Investments by the Company and its Subsidiaries; provided that (i) such Portfolio Investments are permitted under the Company’s Investment Policies and (ii) such

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

Portfolio Investments are permitted under the provisions of the Investment Company Act) held by the Company or any Subsidiary Guarantor in any Person on the date of the Closing and, for each such Investment, (x) the identity of the Person or Persons holding such Investment and (y) the nature of such Investment. Except as disclosed in Schedule 5.19, as of the date of the Closing each of the Company and the Subsidiary Guarantors owns, free and clear of all Liens (other than Permitted Liens), all such Investments.

Section 5.20. Affiliate Agreements. As of the date of the Closing, the Company has heretofore delivered (to the extent not otherwise publicly filed with the SEC) to each of the Purchasers true and complete copies of each of the Affiliate Agreements (including schedules and exhibits thereto, and any amendments, supplements or waivers executed and delivered thereunder). As of the date of the Closing, each of the Affiliate Agreements is in full force and effect.

SECTION 6. REPRESENTATION AND COVENANT OF THE PURCHASERS.

Section 6.1. Purchase for Investment. (a) Each Purchaser severally represents that it is purchasing the Notes for its own account or for one or more separate accounts maintained by such Purchaser or for the account of one or more pension or trust funds and not with a view to the distribution thereof; provided that the disposition of such Purchaser’s or their property shall at all times be within such Purchaser’s or their control. Each Purchaser understands that the Notes have not been registered under the Securities Act and may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is available, except under circumstances where neither such registration nor such an exemption is required by law, and that the Company is not required to register the initial sale or resale of the Notes.

(b) Each Purchaser acknowledges that the Notes will bear a restrictive legend in the form set forth on the form of Notes set out in Exhibit 1.

(c) Each Purchaser severally represents and warrants that such Purchaser (i) will not sell, transfer or otherwise dispose of the Notes or any interest therein except in a transaction exempt from or not subject to the registration requirements of the Securities Act and (ii) was given the opportunity to ask questions and receive answers concerning the terms and conditions of the offering and to obtain any additional information which the Company possesses or can acquire without unreasonable effort or expense.

(d) Each Purchaser for itself represents that it is an Institutional Accredited Investor acting for its own account or as a fiduciary or agent for others (which others are also Institutional Accredited Investors).

(e) Each Purchaser severally represents that the purchase of the Notes by such Purchaser has not been solicited by or through anyone other than the Company or the Placement Agent.

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

(f) Each holder of a Note covenants and agrees that it shall not directly or indirectly transfer all or any portion of any of its Notes to any Person that is a Competitor.

Section 6.2. Source of Funds. Each Purchaser severally represents that at least one of the following statements is an accurate representation as to each source of funds (a “Source”) to be used by such Purchaser to pay the purchase price of the Notes to be purchased by such Purchaser hereunder:

(a) the Source is an “insurance company general account” (as the term is defined in the United States Department of Labor’s Prohibited Transaction Exemption (“PTE”) 95-60) in respect of which the reserves and liabilities (as defined by the annual statement for life insurance companies approved by the NAIC (the “NAIC Annual Statement”)) for the general account contract(s) held by or on behalf of any employee benefit plan together with the amount of the reserves and liabilities for the general account contract(s) held by or on behalf of any other employee benefit plans maintained by the same employer (or affiliate thereof as defined in PTE 95-60) or by the same employee organization in the general account do not exceed ten percent (10%) of the total reserves and liabilities of the general account (exclusive of separate account liabilities) plus surplus as set forth in the NAIC Annual Statement filed with such Purchaser’s state of domicile; or

(b) the Source is a separate account that is maintained solely in connection with such Purchaser’s fixed contractual obligations under which the amounts payable, or credited, to any employee benefit plan (or its related trust) that has any interest in such separate account (or to any participant or beneficiary of such plan (including any annuitant)) are not affected in any manner by the investment performance of the separate account; or

(c) the Source is either (i) an insurance company pooled separate account, within the meaning of PTE 90-1, or (ii) a bank collective investment fund, within the meaning of the PTE 91-38 and, except as have been disclosed by such Purchaser to the Company in writing pursuant to this clause (c), no employee benefit plan or group of plans maintained by the same employer or employee organization beneficially owns more than 10% of all assets allocated to such pooled separate account or collective investment fund; or

(d) the Source constitutes assets of an “investment fund” (within the meaning of Part VI of PTE 84-14, as amended (the “QPAM Exemption”)) managed by a “qualified professional asset manager” or “QPAM” (within the meaning of Part VI of the QPAM Exemption), no employee benefit plan’s assets that are managed by the QPAM in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of Part VI(c)(1) of the QPAM Exemption) of such employer or by the same employee organization and managed by such QPAM, represent more than 20% of the total client assets managed by such QPAM, the conditions of Part I(c) and (g) of the QPAM

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

Exemption are satisfied, neither the QPAM nor a person controlling or controlled by the QPAM maintains an ownership interest in the Company that would cause the QPAM and the Company to be “related” within the meaning of Part VI(h) of the QPAM Exemption and (i) the identity of such QPAM and (ii) the names of any employee benefit plans whose assets in the investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of Part VI(c)(1) of the QPAM Exemption) of such employer or by the same employee organization, represent 10% or more of the assets of such investment fund, have been disclosed to the Company in writing pursuant to this clause (d); or

(e) the Source constitutes assets of a “plan(s)” (within the meaning of Part IV(h) of PTE 96-23, as amended (the “INHAM Exemption”)) managed by an “in-house asset manager” or “INHAM” (within the meaning of Part IV(a) of the INHAM Exemption), the conditions of Part I(a), (g) and (h) of the INHAM Exemption are satisfied, neither the INHAM nor a Person controlling or controlled by the INHAM (applying the definition of “control” in Part IV(d)(3) of the INHAM Exemption) owns a 10% or more interest in the Company and (i) the identity of such INHAM and (ii) the name(s) of the employee benefit plan(s) whose assets constitute the Source have been disclosed to the Company in writing pursuant to this clause (e); or

(f) the Source is a governmental plan; or

(g) the Source is one or more employee benefit plans, or a separate account or trust fund comprised of one or more employee benefit plans, each of which has been identified to the Company in writing pursuant to this clause (g); or

(h) the Source does not include assets of any employee benefit plan, other than a plan exempt from the coverage of ERISA.

As used in this Section 6.2, the terms “employee benefit plan”, “governmental plan”, “party in interest” and “separate account” shall have the respective meanings assigned to such terms in section 3 of ERISA.

SECTION 7. INFORMATION AS TO THE COMPANY.

Section 7.1. Financial and Business Information. The Company shall deliver to each holder of Notes that is an Institutional Investor:

(a) Annual Statements — within 90 days after the end of each fiscal year of the Company, the audited consolidated balance sheet and related statements of operations, changes in net assets or stockholders’ equity and cash flows of the Company and its Subsidiaries as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by KPMG LLP or other independent public accountants of recognized national standing to the effect that such consolidated financial statements present fairly in all material respects the financial

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

condition and results of operations of the Company and its Subsidiaries on a consolidated basis in accordance with GAAP consistently applied; provided that, the requirements set forth in this clause (a) may be fulfilled by providing to the holders of the Notes that are Institutional Investors the report of the Company to the SEC on Form 10-K for the applicable fiscal year;

(b) Quarterly Statements — within 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Company, the consolidated balance sheet and related statements of operations, changes in net assets or stockholders’ equity and cash flows of the Company and its Subsidiaries as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for (or, in the case of the statement of assets and liabilities or balance sheet, as of the end of) the corresponding period or periods of the previous fiscal year, all certified by a Financial Officer of the Company as presenting fairly in all material respects the financial condition and results of operations of the Company and its Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes; provided that, the requirements set forth in this clause (b) may be fulfilled by providing to the holders of the Notes that are Institutional Investors the report of the Company to the SEC on Form 10-Q for the applicable quarterly period;

(c) Audit Reports — promptly upon receipt thereof, copies of all significant reports submitted by the Company’s independent public accountants in connection with each annual, interim or special audit or review of any type of the financial statements or related internal control systems of the Company or any of its Subsidiaries delivered by such accountants to the management or Board of Directors of the Company;

(d) Employee Benefit Matters — promptly following any request therefor, copies of (i) any documents described in section 101(k) of ERISA that the Company or any of its ERISA Affiliates may request with respect to any Multiemployer Plan and (ii) any notices described in section 101(l) of ERISA that the Company or any of its ERISA Affiliates may request with respect to any Plan or Multiemployer Plan;

(e) SEC and Other Reports — promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by the Company or any Subsidiary Guarantor with the SEC, or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any national securities exchange, as the case may be;

(f) Management Agreement — within (i) five Business Days of any material amendment, supplementation or modification of the Management Agreement, notice of such material amendment, supplementation or modification and (ii) (y) within ninety (90) days after the end of each fiscal year of the Company and (z) within sixty (60) days after the end of each of the first three (3) fiscal quarters of each fiscal year of the Company, notice of any other amendment, supplementation or modification of the Management Agreement;

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

(g) Requested Information — promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of the Company or any of its Subsidiaries, or compliance with the terms of this Agreement and the other Note Documents, as any holders of the Notes that is an Institutional Investor may reasonably request;

(h) Notices of Material Events — notice of the following:

(i) the occurrence of any Default;

(ii) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting the Company or any of its Affiliates that, if adversely determined, could reasonably be expected to result in liability of the Company and its Subsidiaries in an aggregate amount exceeding $25,000,000;

(iii) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect; and

(iv) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect;

Each notice delivered under this clause shall be accompanied by a statement of a Financial Officer or other executive officer of the Company setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto; and

(i) Supplements — promptly, and in any event within 10 Business Days after the execution and delivery of any Supplement, a copy thereof.

Section 7.2. Officer’s Certificate. Each set of financial statements delivered to a holder of Notes pursuant to Section 7.1(a) or Section 7.1(b) shall be accompanied by a certificate of a Financial Officer of the Company (i) certifying as to whether the Company has knowledge that a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) setting forth reasonably detailed calculations demonstrating compliance with Sections 10.2, 10.5 and 10.7, including any Additional Financial Covenant, and (iii) stating whether any material change in GAAP as applied by (or in the application of GAAP by) the Company has occurred since the date of the most recent audited financial statements delivered pursuant to Section 7.1(a) and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate.

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

Section 7.3. Visitation, Etc. The Company will, and will cause each of its Subsidiaries (other than Financing Subsidiaries and Immaterial Subsidiaries) to, permit any representatives designated by the holder of a Note upon reasonable prior notice (which, prior to the occurrence of a Default or Event of Default, shall not be less than thirty (30) Business Days prior to the date of such inspection), to visit and inspect its properties during normal business hours, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times as reasonably requested, provided that the Company or such Subsidiary shall be entitled to have its representatives and advisors present during any inspection of its books and records, provided further that, so long as no Default has occurred and is continuing and if the Company has provided to each holder of the Notes written notice of the intent of a holder to exercise inspection rights set forth in this Section 7.3 not less than fifteen (15) Business Days prior to such inspection and permitting such holder to join in such scheduled inspection upon five (5) (rather than thirty (30)) Business Days’ prior notice, the inspection rights set forth in this Section 7.3 may, in the aggregate for all holders of the Notes, only be exercised once per calendar quarter, provided, further, if a Default or Event of Default then exists, the reasonable and documented out-of-pocket costs for such visit or inspection shall be at the expense of the Company.

SECTION 8. PREPAYMENT OF THE NOTES.

Section 8.1. Maturity. As provided therein, the entire unpaid principal balance of the Series 2020A Notes shall be due and payable on the stated maturity date thereof.

Section 8.2. Optional Prepayments with Make-Whole Amount. The Company may, at its option, upon notice as provided below, prepay at any time all, or from time to time any part of, the Notes, in an amount not less than 10% of the aggregate principal amount of the Notes then outstanding at 100% of the principal amount so prepaid, together with interest accrued thereon to, but excluding, the date of such prepayment, and the Make-Whole Amount determined for the prepayment date with respect to such principal amount. The Company will give each holder of Notes written notice of each optional prepayment under this Section 8.2 not less than 10 days and not more than 60 days prior to the date fixed for such prepayment. Each such notice shall specify such date (which shall be a Business Day), the aggregate principal amount of the Notes to be prepaid on such date, the principal amount of each Note held by such holder to be prepaid (determined in accordance with Section 8.5), and the interest to be paid on the prepayment date with respect to such principal amount being prepaid, and shall be accompanied by a certificate of a Financial Officer as to the estimated Make-Whole Amount due in connection with such prepayment (calculated as if the date of such notice were the date of the prepayment), setting forth the details of such computation. Two Business Days prior to such prepayment, the Company shall deliver to each holder of Notes a certificate of a Financial Officer specifying the calculation of such Make-Whole Amount as of the specified prepayment date.

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

Section 8.3. Change in Control.

(a) Notice of Change in Control. The Company will, within five Business Days after any Responsible Officer has knowledge of the occurrence of any Change in Control, give written notice of such Change in Control to each holder of Notes. Such notice shall contain and constitute an offer to prepay Notes as described in subparagraph (b) of this Section 8.3 and shall be accompanied by the certificate described in subparagraph (e) of this Section 8.3.

(b) Offer to Prepay Notes. The offer to prepay Notes contemplated by subparagraph (a) of this Section 8.3 shall be an offer to prepay, in accordance with and subject to this Section 8.3, all, but not less than all, the Notes held by each holder (in this case only, “holder” in respect of any Note registered in the name of a nominee for a disclosed beneficial owner shall mean such beneficial owner) on a date specified in such offer (the “Section 8.3 Proposed Prepayment Date”). Such date shall be not less than 10 days and not more than 60 days after the date of such offer (if the Section 8.3 Proposed Prepayment Date shall not be specified in such offer, the Section 8.3 Proposed Prepayment Date shall be the first Business Day after the 45th day after the date of such offer).

(c) Acceptance/Rejection. A holder of Notes may accept the offer to prepay made pursuant to this Section 8.3 by causing a notice of such acceptance to be delivered to the Company not later than 10 days after receipt by such holder of the most recent offer of prepayment. A failure by a holder of Notes to respond to an offer to prepay made pursuant to this Section 8.3 shall be deemed to constitute rejection of such offer by such holder.

(d) Prepayment. Prepayment of the Notes to be prepaid pursuant to this Section 8.3 shall be at 100% of the principal amount of such Notes, together with interest on such Notes accrued to, but excluding, the date of prepayment, but without Make-Whole Amount or other premium.

(e) Officer’s Certificate. Each offer to prepay the Notes pursuant to this Section 8.3 shall be accompanied by a certificate, executed by a Financial Officer of the Company and dated the date of such offer, specifying: (i) the Section 8.3 Proposed Prepayment Date; (ii) that such offer is made pursuant to this Section 8.3; (iii) the principal amount of each Note offered to be prepaid; (iv) the interest that would be due on each Note offered to be prepaid, accrued to, but excluding, the Section 8.3 Proposed Prepayment Date; (v) that the conditions of this Section 8.3 have been fulfilled; and (vi) in reasonable detail, the nature and date or proposed date of the Change in Control.

Section 8.4. [Reserved].

Section 8.5. Allocation of Partial Prepayments. In the case of each partial prepayment of the Notes pursuant to Section 8.2, the principal amount of the Notes to be prepaid shall be allocated among all of the Notes at the time outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts thereof not theretofore called for prepayment. All partial prepayments made pursuant to Section 8.3 or 8.9 shall be applied only to the Notes of the holders who have elected to participate in such prepayment.

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

Section 8.6. Maturity; Surrender, Etc. In the case of each prepayment of Notes pursuant to this Section 8, the principal amount of each Note to be prepaid shall mature and become due and payable on the date fixed for such prepayment (which shall be a Business Day), together with interest on such principal amount accrued to, but excluding, such date and the applicable Make-Whole Amount (to the fullest extent permitted by applicable law), if any. From and after such date, unless the Company shall fail to pay such principal amount when so due and payable, together with the interest and Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall cease to accrue. Any Note paid or prepaid in full shall be surrendered to the Company and cancelled and shall not be reissued, and no Note shall be issued in lieu of any prepaid principal amount of any Note.

Section 8.7. Purchase of Notes. The Company will not and will not permit any Affiliate to purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of the outstanding Notes or any part or portion except (a) upon the payment or prepayment of the Notes in accordance with the terms of this Agreement and the Notes or (b) pursuant to an offer to purchase all or any portion of the outstanding Notes made by the Company or an Affiliate pro rata to the holders of all Notes at the time outstanding upon the same terms and conditions. Any such offer shall provide each holder with sufficient information to enable it to make an informed decision with respect to such offer, and shall remain open for at least 10 Business Days. If the holders of more than 25% of the principal amount of the Notes then outstanding accept such offer, the Company shall promptly notify the remaining holders of such fact and the expiration date for the acceptance by holders of Notes of such offer shall be extended by the number of days necessary to give each such remaining holder at least 5 Business Days from its receipt of such notice to accept such offer. The Company will promptly cancel all Notes acquired by it or any Affiliate pursuant to any payment, prepayment or purchase of Notes pursuant to any provision of this Agreement and no Notes may be issued in substitution or exchange for any such Notes.

Section 8.8. Make-Whole Amount and Modified Make-Whole Amount. The terms “Make-Whole Amount” and “Modified Make-Whole Amount” mean, with respect to any Note, an amount equal to the excess, if any, of the Discounted Value of the Remaining Scheduled Payments with respect to the Called Principal of such Note over the amount of such Called Principal; provided that the Make-Whole Amount may in no event be less than zero. For the purposes of determining the Make-Whole Amount and the Modified Make-Whole Amount, the following terms have the following meanings:

“Applicable Percentage” in the case of the computation of the Modified Make-Whole Amount for purposes of Section 8.9 means 1.00% (100 basis points) and in the case of a computation of the Make-Whole Amount for any other purpose means 0.50% (50 basis points).

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

“Called Principal” means, with respect to any Note, the principal of such Note that is to be prepaid pursuant to Section 8.2 or 8.9 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires.

“Discounted Value” means, with respect to the Called Principal of any Note, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest on the Notes is payable) equal to the Reinvestment Yield with respect to such Called Principal.

“Reinvestment Yield” means, with respect to the Called Principal of any Note, the sum of (x) the Applicable Percentage plus (y) the yield to maturity implied by (i) the yields reported as of 10:00 a.m. (New York City time) on the second Business Day preceding the Settlement Date with respect to such Called Principal, on the display designated as “Page PX1” (or such other display as may replace Page PX1) on Bloomberg Financial Markets for the most recently issued actively traded on the run U.S. Treasury securities having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date, or (ii) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable (including by way of interpolation), the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the second Business Day preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H.15 (or any comparable successor publication) for U.S. Treasury securities having a constant maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date. In the case of each determination under clause (i) or clause (ii), as the case may be, of the preceding paragraph, such implied yield will be determined, if necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between (1) the applicable U.S. Treasury security with the maturity closest to and greater than such Remaining Average Life and (2) the applicable U.S. Treasury security with the maturity closest to and less than such Remaining Average Life. The Reinvestment Yield shall be rounded to the number of decimal places as appears in the interest rate of the applicable Note.

“Remaining Average Life” means, with respect to any Called Principal, the number of years (calculated to the nearest one-twelfth year) obtained by dividing (a) such Called Principal into (b) the sum of the products obtained by multiplying (i) the principal component of each Remaining Scheduled Payment with respect to such Called Principal by (ii) the number of years (calculated to the nearest one-twelfth year) that will elapse between the Settlement Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment.

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

“Remaining Scheduled Payments” means, with respect to the Called Principal of any Note, all payments of such Called Principal and interest thereon that would be due after the Settlement Date with respect to such Called Principal if no payment of such Called Principal were made prior to its scheduled due date; provided that if such Settlement Date is not a date on which interest payments are due to be made under the terms of the Notes, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such Settlement Date and required to be paid on such Settlement Date pursuant to Section 8.2, 8.9 or 12.1.

“Settlement Date” means, with respect to the Called Principal of any Note, the date on which such Called Principal is to be prepaid pursuant to Section 8.2 or 8.9 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires.

Section 8.9. Prepayment for Tax Reasons. (a) The Company shall have an option to prepay the affected Notes in whole, but not in part, at any time, on giving not less than 10 nor more than 60 days’ notice to the Foreign Holders (which notice shall be irrevocable) by payment of the principal amount, together with interest accrued to the date fixed for prepayment and with a premium in an amount equal to the Modified Make-Whole Amount, determined as of two Business Days prior to the date of such prepayment pursuant to this Section 8.9, if (i) the Company (a) has or will become obliged to pay additional amounts as provided or referred to in Section 14.3 as a result of any change in, or amendment to, the laws, regulations or rulings of the United States or any political subdivision or any authority thereof or therein having power to tax, or any change in the application or official interpretation of such laws, regulations or rulings (including a holding by a court of competent jurisdiction), which change or amendment becomes effective on or after the date of the Closing and (b) in its business judgment, determines that such obligation cannot be avoided by the use of reasonable measures available to it; or (ii) (a) any action has been taken by a taxing authority of, or any decision has been rendered by a court of competent jurisdiction in, the United States or any political subdivision or taxing authority thereof or therein, including any actions specified in (i) above, whether or not such action was taken or decision was rendered with respect to the Company, or any change, amendment, application or interpretation shall be officially proposed, which, in any such case, in the written opinion of independent legal counsel of recognized legal standing, will result in a material probability that the Company will become obligated to pay additional amounts and (b) in its business judgment the Company determines that such obligation cannot be avoided by the use of reasonable measures available to it; provided that no such notice of prepayment shall be given earlier than 60 days prior to the earliest date on which the Company would be obliged to pay such additional amounts if a payment in respect of such Notes held by the Foreign Holders were then due.

(b) Prior to the giving of any notice of prepayment pursuant to this Section 8.9, the Company shall deliver to the Foreign Holder of any Note to be prepaid (1) a certificate signed by two officers of the Company stating that the Company is entitled to effect such prepayment and setting forth a statement of facts showing that the conditions precedent to the right of the Company so to prepay have occurred and (2) in the case of a determination under (ii) above, an opinion of independent legal advisers of recognized standing to the effect that there is a material probability that the Company will become obliged to pay such additional amounts as a result of such change or amendment. Upon the expiry of any such notice as is referred to in this Section 8.9, the Company shall be bound to prepay such Note in accordance with this Section 8.9.

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

(c) Notwithstanding the foregoing, if the Company shall give a Foreign Holder notice of prepayment of any Note pursuant to Section 8.9(a), such Foreign Holder, if it then holds one or more such Notes in an aggregate amount equal to or greater than $5,000,000, shall have a one-time option to reject such prepayment with respect to the prepayment arising as a result of the circumstances described in such notice; provided, however, if such Foreign Holder rejects such prepayment, Section 14.3(a) shall no longer be operative with respect to any Notes held by such Foreign Holder arising out of the circumstances described in such notice, but not of such Foreign Holder’s right to receive payments pursuant to Section 14.3(a) that may arise out of circumstances not described in such notice. To exercise such option, such Foreign Holder shall provide a rejection notice to the Company within five Business Days after its receipt of the Company’s notice of prepayment. Such notice by a Foreign Holder shall be irrevocable and shall be binding on all subsequent Foreign Holders of such Foreign Holder’s Notes.

(d) The provisions of Sections 8.2 and 8.5 shall not apply to any prepayment pursuant to this Section 8.9.

SECTION 9. AFFIRMATIVE COVENANTS.

So long as any of the Notes are outstanding, the Company covenants that:

Section 9.1. Compliance with Law. The Company will, and will cause each of its Subsidiaries to, comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. Without limiting the generality of the foregoing, the Company will, and will cause its Subsidiaries to, conduct its business and other activities in compliance in all Material respects with the applicable provisions of the Investment Company Act (including, without limiting the foregoing, Section 18(a)(1)(A) and any applicable “asset coverage” maintenance requirement) and any applicable rules, regulations or orders issued by the SEC thereunder.

Section 9.2. Insurance. The Company will, and will cause each of its Subsidiaries to, maintain, with financially sound and reputable insurance companies, insurance in such amounts and against such risks as are customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations.

Section 9.3. Maintenance of Properties. The Company will, and will cause each of its Subsidiaries to, keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted.

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

Section 9.4. Payment of Taxes and Claims. The Company will, and will cause each of its Subsidiaries to, pay its obligations, including tax liabilities and material contractual obligations, that, if not paid, could reasonably be expected to result in a Material Adverse Effect before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) the Company or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect.

Section 9.5. Legal Existence, Etc. The Company will, and will cause each of its Subsidiaries to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges and franchises material to the conduct of its business; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 10.3.

Section 9.6. Notes to Rank Pari Passu. The Notes and all other obligations under this Agreement of the Company are and at all times shall rank at least pari passu in right of payment with all other present and future Senior Unsecured Indebtedness (actual or contingent) of the Company which is not expressed to be subordinate or junior in rank to any other Senior Unsecured Indebtedness of the Company.

Section 9.7. Subsidiary Guarantors. (a) The Company will cause each of its Subsidiaries that (i) guarantees indebtedness for borrowed money incurred pursuant to a Material Credit Facility or (ii) otherwise becomes liable at any time, whether as a borrower or an additional or co-borrower or otherwise, for or in respect of any indebtedness for borrowed money incurred under a Material Credit Facility (in each case, other than as a result of Standard Securitization Undertakings or a Permitted SBIC Guarantee) to concurrently therewith:

(A) enter into an agreement in form and substance reasonably satisfactory to the Required Holders providing for the guaranty by such Subsidiary, on a joint and several basis with all other such Subsidiaries, of (i) the prompt payment in full when due of all amounts payable by the Company pursuant to the Notes (whether for principal, interest, Make-Whole Amount or otherwise) and this Agreement, including all indemnities, fees and expenses payable by the Company thereunder and (ii) the prompt, full and faithful performance, observance and discharge by the Company of each and every covenant, agreement, undertaking and provision required pursuant to the Notes or this Agreement to be performed, observed or discharged by it (a “Subsidiary Guarantee”); and

(B) deliver the following to each holder of a Note:

(i) an executed counterpart of such Subsidiary Guarantee;

(ii) a certificate signed by an authorized responsible officer of such Subsidiary containing representations and warranties on behalf of such Subsidiary to the same effect, mutatis mutandis, as those contained in Sections 5.1, 5.2, 5.6, and 5.7 of this Agreement (but with respect to such Subsidiary and such Subsidiary Guarantee rather than the Company);

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

(iii) all documents as may be reasonably requested by the Required Holders to evidence the due organization, continuing existence and good standing of such Subsidiary and the due authorization by all requisite action on the part of such Subsidiary of the execution and delivery of such Subsidiary Guarantee and the performance by such Subsidiary of its obligations thereunder;

(iv) unless waived by the Required Holders, an opinion of counsel reasonably satisfactory to the Required Holders covering such matters relating to such Subsidiary and such Subsidiary Guarantee as the Required Holders may reasonably request.

(b) At the election of the Company and by written notice to each holder of Notes, any Subsidiary Guarantor that has provided a Subsidiary Guarantee under subparagraph (a) of this Section 9.7 may be discharged from all of its obligations and liabilities under its Subsidiary Guarantee and shall be automatically released from its obligations thereunder without the need for the execution or delivery of any other document by the holders, provided that (i) if such Subsidiary Guarantor is a guarantor or is otherwise liable for or in respect of any Material Credit Facility, then such Subsidiary Guarantor has been released and discharged (or will be released and discharged concurrently with the release of such Subsidiary Guarantor under its Subsidiary Guarantee) under such Material Credit Facility, (ii) at the time of, and after giving effect to, such release and discharge, no Default or Event of Default shall be existing, (iii) no amount is then due and payable under such Subsidiary Guarantee, (iv) if in connection with such Subsidiary Guarantor being released and discharged under any Material Credit Facility, any fee or other form of consideration is given to any holder of Indebtedness under such Material Credit Facility for such release, the holders of the Notes shall receive equivalent consideration substantially concurrently therewith and (v) each holder shall have received a certificate of a Responsible Officer certifying as to the matters set forth in clauses (i) through (iv).

Section 9.8. Books and Records. The Company will, and will cause each of its Subsidiaries to, keep or cause to be kept proper books of record and account in accordance with GAAP.

Section 9.9. Status of RIC and BDC. The Company shall (i) maintain its status as a RIC under the Code, and (ii) maintain its status as a “business development company” under the Investment Company Act.

Section 9.10. Investment Policies. The Company shall at all times be in compliance with its Investment Policies, except to the extent that the failure to so comply could not reasonably be expected to result in a Material Adverse Effect.

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

Section 9.11. Rating Confirmation. The Company covenants and agrees that, at its sole cost and expense, it shall cause to be maintained at all times a Rating from at least one NRSRO that indicates that it will monitor the rating on an ongoing basis. No later than April 30 of each year, commencing in 2021, the Company shall provide a notice to each of the holders of the Notes sent in the manner provided in Section 18 with respect to any then current Ratings, which shall include a Rating from at least one NRSRO, and which notice shall include a copy of such Rating.

Section 9.12. Rating. Within 30 days after the date of the Closing, the Company shall deliver to the Purchasers in the manner provided in Section 18 evidence in form and substance satisfactory to the Purchasers a Rating evidencing that the Notes have been rated Investment Grade or better by DBRS or another NRSRO.

SECTION 10. NEGATIVE COVENANTS.

So long as any of the Notes are outstanding, the Company covenants that:

Section 10.1. [Reserved].

Section 10.2. Liens. The Company will not, nor will it permit any of its Subsidiaries (other than Financing Subsidiaries) to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except Permitted Liens.

Section 10.3. Fundamental Changes. The Company will not, nor will it permit any of its Subsidiaries (other than Financing Subsidiaries and Immaterial Subsidiaries) to enter into any transaction of merger, consolidation or amalgamation or to liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution). The Company will not, nor will it permit any of its Subsidiaries (other than Financing Subsidiaries and Immaterial Subsidiaries) to acquire any business or property from, or capital stock of, or be a party to any acquisition of, any Person, except for purchases or acquisitions of Portfolio Investments and other assets in the normal course of the day-to-day business activities of the Company and its Subsidiaries and not in violation of the terms and conditions of this Agreement. The Company will not, nor will it permit any of its Subsidiaries (other than Financing Subsidiaries and Immaterial Subsidiaries) to, convey, sell, lease, transfer or otherwise dispose of, in one transaction or a series of transactions, any part of its assets, whether now owned or hereafter acquired, but excluding (x) assets sold or disposed of in the ordinary course of business (including to make expenditures of cash and dispositions of investments in connection with exits and work-outs (including assets abandoned for no consideration if the Company determines such assets have no value) in the normal course of the day-to-day business activities of the Company and its Subsidiaries) and (y) subject to the provisions of clause (d) below, Portfolio Investments (to the extent not otherwise included in clause (x) of this Section 10.3).

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

Notwithstanding the foregoing provisions of this Section 10.3:

(a) any Subsidiary Guarantor of the Company may be merged or consolidated with or into the Company or any other Subsidiary Guarantor; provided that (i) at the time thereof and after giving effect thereto, no Default shall have occurred or be continuing, (ii) if any such transaction shall be between a Subsidiary Guarantor and a wholly-owned Subsidiary Guarantor, the wholly-owned Subsidiary Guarantor shall be the continuing or surviving corporation and (iii) if any such transaction shall be between the Company and a Subsidiary Guarantor, the Company shall be the continuing or surviving corporation;

(b) any Subsidiary of the Company may sell, lease, transfer or otherwise dispose of any or all of its assets (upon voluntary liquidation or otherwise) to the Company or any wholly-owned Subsidiary Guarantor of the Company;

(c) the capital stock of any Subsidiary of the Company may be sold, transferred or otherwise disposed of to the Company or any wholly-owned Subsidiary Guarantor of the Company;

(d) the Obligors may sell, transfer or otherwise dispose of Portfolio Investments to a Financing Subsidiary so long as after giving effect to such sale, transfer or other disposition (and any concurrent acquisitions of Portfolio Investments) no Default shall have occurred or be continuing;

(e) the Company or any Subsidiary may merge or consolidate with any other Person so long as at the time thereof and after giving effect thereto, no Default shall have occurred or be continuing and provided that

(i) if any such transaction shall be between the Company and another Person, either

(A) the Company shall be the continuing or surviving corporation or

(B) (1) no Change in Control shall have occurred, (2) the successor formed by such consolidation or the survivor of such merger, shall be a solvent corporation or limited liability company organized and existing under the laws of the United States or any state thereof (including the District of Columbia), and (3)(x) such corporation or limited liability company shall have executed and delivered to each holder of any Notes its assumption of the due and punctual performance and observance of each covenant and condition of this Agreement and the Notes, (y) such corporation or limited liability company shall have caused to be delivered to each holder of any Notes an opinion of nationally recognized independent counsel, or other independent counsel reasonably satisfactory to the Required Holders, to the effect that all agreements or instruments effecting such assumption are enforceable in accordance with their terms and (z) each Subsidiary Guarantor under any Subsidiary Guarantee that is outstanding at the time such transaction or each transaction in such a series of transactions occurs reaffirms its obligations under such Subsidiary Guarantee in writing at such time pursuant to documentation that is reasonably acceptable to the Required Holders,

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

(ii) if any such transaction shall be between a wholly-owned Subsidiary Guarantor and another Person (other than the Company), a wholly-owned Subsidiary Guarantor shall be the continuing or surviving corporation,

(iii) if any such transaction shall be between a Subsidiary Guarantor and another Person (other than the Company or a wholly-owned Subsidiary Guarantor), a Subsidiary Guarantor shall be the continuing or surviving corporation;

(f) the Company and its Subsidiaries may sell, lease, transfer or otherwise dispose of equipment or other property or assets that do not consist of Portfolio Investments so long as the aggregate amount of all such sales, leases, transfer and dispositions does not exceed $25,000,000 in any fiscal year; and

(g) the Company or the other Obligors may dissolve or liquidate (i) any Subsidiary that does not own, legally or beneficially, assets which in aggregate have a value of $1,000,000 or more at such time of dissolution or liquidation or (ii) any SBIC Subsidiary, provided that no portion of any Indebtedness or any other obligations (contingent or otherwise) of such SBIC Subsidiary (A) is, or would as a result of dissolution or liquidation hereunder become, recourse to or obligate the Company or any other Obligor (other than any SBIC Subsidiary) in any way, or (B) subjects, or would as a result of dissolution or liquidation hereunder subject, any property of the Company or any other Obligor (other than any SBIC Subsidiary) to the satisfaction of such Indebtedness.

Section 10.4. [Reserved].

Section 10.5. Restricted Payments. The Company will not, nor will it permit any of its Subsidiaries (other than Financing Subsidiaries) to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, except that the Company may declare and pay:

(a) dividends with respect to the capital stock of the Company to the extent payable in additional shares of the Company’s common stock;

(b) dividends and distributions in either case in cash or other property (excluding for this purpose the Company’s common stock) in any taxable year of the Company in amounts not to exceed the amount that is estimated in good faith by the Company to be required to (i) reduce to zero for such taxable year or for the previous taxable year, its investment company taxable income (within the meaning of section 852(b)(2) of the Code), and reduce to zero the tax imposed by section 852(b)(3) of the Code, and (ii) avoid federal excise taxes for such taxable year or for the previous taxable year imposed by section 4982 of the Code;

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

(c) dividends and distributions in each case in cash or other property (excluding for this purpose the Company’s common stock) in addition to the dividends and distributions permitted under the foregoing clauses (a) and (b), so long as on the date of such Restricted Payment and after giving effect thereto:

(i) no Default shall have occurred and be continuing; and

(ii) the aggregate amount of Restricted Payments made during any taxable year of the Company after the date of the Closing under this clause (c) shall not exceed the sum of (x) an amount equal to 10% of the taxable income of the Company for such taxable year determined under section 852(b)(2) of the Code, but without regard to subparagraphs (A), (B) or (D) thereof, minus (y) the amount, if any, by which dividends and distributions made during such taxable year pursuant to the foregoing clause (b) (whether in respect of such taxable year or the previous taxable year) based upon the Company’s estimate of taxable income exceeded the actual amounts specified in subclauses (i) and (ii) of such foregoing clause (b) for such taxable year.

(d) other Restricted Payments so long as (i) on the date of such Restricted Payment and after giving effect thereto, no Default shall have occurred and be continuing and (ii) such payment shall not be prohibited under any Material Credit Facility, as confirmed in a certificate delivered to the holders of the Notes by a Financial Officer.

Nothing herein shall be deemed to prohibit the payment of Restricted Payments by any Subsidiary of the Company to the Company or to any other Subsidiary Guarantor.

Section 10.6. Certain Restrictions on Subsidiaries. Other than any Material Credit Facility and the other agreements in connection therewith, the Company will not permit any of its Subsidiaries (other than Financing Subsidiaries) to enter into or suffer to exist any indenture, agreement, instrument or other arrangement that prohibits or restrains, in each case in any material respect, or imposes materially adverse conditions upon, the incurrence or payment of Indebtedness, the granting of Liens, the declaration or payment of dividends, the making of loans, advances, guarantees or Investments or the sale, assignment, transfer or other disposition of property by any Obligor; provided that, the foregoing shall not apply to (i) indentures, agreements, instruments or other agreements pertaining to other Indebtedness permitted hereunder so long as it is not, in the Company’s good faith judgment, more restrictive or burdensome in respect of the foregoing activities than the Note Documents (provided that, in any event, such restrictions would not adversely affect the exercise of rights or remedies of the holder of the Notes under the Note Documents or impair the rights or ability of the Company or any Subsidiary Guarantor in any manner from performing its obligations under the Note Documents) and (ii) indentures, agreements, instruments or other agreements pertaining to any lease, sale or other disposition of any asset permitted by this Agreement or any Lien permitted

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

by this Agreement on such asset so long as the applicable restrictions only apply to the assets subject to such lease, sale, other disposition or Lien; provided further, that any Material Credit Facility that prohibits or restrains or imposes conditions upon such action may not be materially more restrictive upon the Company and its Subsidiaries than similar credit facilities for borrowers the general nature of the business of which is not substantially different from the general nature of the business of the Company and its Subsidiaries, taken as a whole.

Section 10.7. Certain Financial Covenants.

(a) Minimum Shareholders’ Equity. (i) The Company will not permit Shareholders’ Equity (as reflected in its Form 10-Q or Form 10-K without any deductions) at the last day of any fiscal quarter of the Company to be less than the greater of (i) 33% of the total assets of the Company and its Subsidiaries as of the last day of such fiscal quarter (determined on a consolidated basis, without duplication, in accordance with GAAP) and (ii) $130,000,000 plus 25% of the net proceeds of the sale of Equity Interests by the Company and its Subsidiaries after the date of the Closing.

(ii) If at any time (A) the SUNS SPV Credit Agreement contains a requirement to maintain a level of Shareholders’ Equity (regardless of whether such provision is labeled or otherwise characterized as a covenant, a definition or a default) of the Company (a “Shareholders’ Equity Covenant”) that is not set forth in this Agreement or (B) thereafter the Company or SUNS SPV LLC enters into any amendment, supplement, waiver, change, clarification, interpretation, consent or other modification to such Shareholders’ Equity Covenant (or to any defined term contained or used in any Shareholders’ Equity Covenant) (which, for the avoidance of doubt for purposes of this Section 10.7(a), shall include any such change effectuated pursuant to a replacement of the SUNS SPV Credit Agreement), then the Company shall provide a Shareholders Equity Notice in respect of such Shareholders Equity Covenant. Such Shareholders Equity Covenant shall be deemed automatically incorporated by reference into Section 10.7(a)(i) of this Agreement, mutatis mutandis, as if set forth in full herein, effective as of the date when such Shareholders Equity Covenant shall have become effective under such SUNS SPV Credit Agreement, unless waived in writing by the Required Holders within 60 days after each holder’s receipt of such notice of such Shareholders Equity Covenant.

(iii) Any Shareholders Equity Covenant incorporated into this Agreement (herein referred to as an “Incorporated Shareholders’ Equity Covenant”) pursuant to this Section 10.7(a) (A) shall be deemed automatically amended herein to reflect any subsequent amendments made to such Shareholders Equity Covenant under the SUNS SPV Credit Agreement; provided that, if a Default or an Event of Default then exists, such Incorporated Shareholders’ Equity Covenant shall only be deemed automatically amended at such time, if it should occur, when such Default or Event of Default no longer exists and (B) shall be deemed automatically deleted from this Agreement at such time as such Shareholders Equity Covenant is deleted or otherwise removed from the SUNS SPV Credit Agreement; provided, however, for the avoidance of doubt, in the event the SUNS SPV Credit Agreement shall be terminated and not replaced, the terms of Section 10.7(a)(i) as set forth on the date of this agreement shall

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

remain in effect unless and until an MFL Financial Covenant is incorporated into this Agreement in accordance with Section 10.7(d); provided that, if a Default or an Event of Default then exists, such Incorporated Shareholders’ Equity Covenant shall only be deemed automatically deleted from this Agreement at such time, if it should occur, when such Default or Event of Default no longer exists; provided further, however, that if any fee or other consideration shall be given to the lenders under such SUNS SPV Credit Agreement primarily to reflect such less restrictive amendment or deletion, the equivalent of such fee or other consideration shall be given, pro rata, to the holders of the Notes; provided that, if any such fees under the SUNS SPV Credit Agreement are payable only to consenting holders, to the extent the holders of the Notes hereunder have an ability to grant or withhold consent to such amendment or other modification pursuant to the terms hereof, such fees shall be payable to holders of Notes under this Agreement only to the extent such holders have approved the amendment or other modification.

(iv) “Most Favored Lender Shareholders’ Equity Notice” means, in respect of any Shareholders Equity Covenant, a written notice to each of the holders of the Notes delivered promptly, and in any event within twenty Business Days after the inclusion of such Shareholders Equity Covenant in the SUNS SPV Credit Agreement (including by way of amendment or other modification of any existing provision thereof) from a Responsible Officer referring to the provisions of this Section 10.7(a) and setting forth a reasonably detailed description of such Shareholders Equity Covenant (including any defined terms used therein) and related explanatory calculations, as applicable.

(v) The Company further covenants to promptly execute and deliver at its expense (including, without limitation, the reasonable fees and expenses of one counsel for the holders of the Notes) each and every amendment to this Agreement reasonably considered to be necessary or appropriate by the Required Holders for purposes of maintaining clarity and consistency between the applicable sections of the Shareholders’ Equity Covenant and related defined terms contained or used therein and Section 10.7 and related defined terms contained or used therein; provided that the execution and delivery of any such amendment shall not be a precondition to the effectiveness of such alteration or alterations, but shall merely be for the convenience of the parties hereto.

(b) Asset Coverage Ratio. The Company will not permit the Asset Coverage Ratio to be less than the Investment Company Act Asset Coverage at any time.

(d) Financial Covenant Most Favored Lender. (i) Without limiting Section 10.7(a), if at any time, including, for the avoidance of doubt, as of the date of the Closing, (A) any Material Credit Facility includes MFL Financial Covenants (individually an “Additional Financial Covenant” and, collectively, “Additional Financial Covenants”) not set forth in this Agreement or (B) thereafter the Company enters into any amendment, supplement, waiver, change, clarification, interpretation, consent or other modification to a Material Credit Facility (which, for the avoidance of doubt for purposes of this Section 10.7(d), shall include any such change effectuated pursuant to a replacement of any Material Credit Facility) (individually a “Financial

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

Covenant Modification” and, collectively, “Financial Covenant Modifications”) to any MFL Financial Covenant set forth in any Material Credit Facility or to an Additional Financial Covenant (or to any defined term contained or used in any MFL Financial Covenant or such Additional Financial Covenant), then and in any such event the Company shall give written notice thereof to each holder of the Notes not later than 10 Business Days following the date of any such Additional Financial Covenant(s) or Financial Covenant Modification(s), as the case may be. Effective on the date of such Additional Financial Covenant(s) or Financial Covenant Modification(s) under and pursuant to any Material Credit Facility, such Additional Financial Covenant(s) or Financial Covenant Modification(s), whether or not more or less restrictive upon the Company, shall then and thereupon be deemed to have been incorporated herein with respect to Section 10.7 and/or any defined term contained or used therein, as the case may be; provided that if a Default or Event of Default shall have occurred and be continuing at the time Section 10.7, such Additional Financial Covenant(s) or Financial Covenant Modification(s) (and/or any defined term contained or used therein, as the case may be) is or are to be so excluded, terminated, loosened, tightened, amended or modified under this Section 10.7(d), the prior written consent thereto of the Required Holders shall be required as a condition to the exclusion, termination, loosening, tightening or other amendment or modification of such Section 10.7, such Additional Financial Covenant(s) or Financial Covenant Modification(s) (and/or any defined term contained or used therein, as the case may be); provided further that, notwithstanding the foregoing and for the avoidance of doubt, in no event shall the minimum asset coverage required to be held by the Company pursuant to this Section 10.7 be less than the Investment Company Act Asset Coverage.

(ii) The Company further covenants to promptly execute and deliver at its expense (including the reasonable fees and expenses of one counsel for the holders of the Notes) each and every amendment to this Agreement reasonably considered to be necessary or appropriate by the Required Holders for purposes of maintaining clarity and consistency between the applicable sections of a Material Credit Facility and related defined terms contained or used therein and Section 10.7 and related defined terms contained or used therein; provided that the execution and delivery of any such amendment shall not be a precondition to the effectiveness of such alteration or alterations, but shall merely be for the convenience of the parties hereto.

(iii) The Company agrees that it will not, nor will it permit any Subsidiary or Affiliate to, directly or indirectly, pay or cause to be paid any consideration or remuneration, whether by way of supplemental or additional interest, fee or otherwise, to any creditor of the Company as consideration for or as an inducement to the entering into by any such creditor of any modification(s) primarily with respect to the principal terms of an Additional Financial Covenant(s) the effect of which modification is to exclude, terminate, loosen, or otherwise amend or modify an Additional Financial Covenant(s), which exclusion, termination, loosening, or other amendment or modification would require a similar change in this Agreement, unless such consideration or remuneration is concurrently paid, on the same terms, and in an amount bearing the same proportion to the aggregate outstanding principal amount of the Notes as the amount paid to such other creditor bears to the aggregate principal amount of indebtedness owing by the Company to such other creditor, ratably to all of the holders of the Notes then outstanding; provided that, if any such fees under the Material Credit Facility are payable only to consenting holders, to the extent the holders of the Notes hereunder have an ability to grant or withhold consent to such amendment or other modification pursuant to the terms hereof, such fees shall be payable to holders of Notes under this Agreement only to the extent such holders have approved the amendment or other modification.

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

Section 10.8. Transactions with Affiliates. The Company will not, and will not permit any of its Subsidiaries (other than Financing Subsidiaries and Immaterial Subsidiaries) to, enter into any material transactions with any of its Affiliates, even if otherwise permitted under this Agreement, except (a) transactions in the ordinary course of business at prices and on terms and conditions not less favorable to the Company or such Subsidiary than could be obtained on an arm’s-length basis from unrelated third parties; provided that, affiliate transactions that are expressly permitted to be undertaken by a business development company under the Investment Company Act and the rules and regulations promulgated thereunder will be deemed to be in the ordinary course of business for purposes of this Section 10.8, (b) transactions between or among the Company and its Subsidiaries, (c) Restricted Payments permitted by Section 10.5, (d) the transactions provided in the Affiliate Agreements, (e) transactions described on Schedule 10.8(e), (f) any Investment that results in the creation of an Affiliate, (g) Permitted Directing Body-Approved Affiliate Transactions, and (h) transactions between or among the Obligors and any SBIC Subsidiary at prices and on terms and conditions not less favorable to the Obligors than could be obtained at the time on an arm’s-length basis from unrelated third parties.

Section 10.9. Lines of Business. The Company will not, nor will it permit any of its Subsidiaries to, engage to any material extent in any business other than in accordance with its Investment Policies.

Section 10.10. Economic Sanctions, Etc. The Company will not, and will not permit any Controlled Entity to (a) become (including by virtue of being owned or controlled by a Blocked Person or Canada Blocked Person), own or control a Blocked Person or Canada Blocked Person or (b) directly or knowingly indirectly have any investment in or engage in any dealing or transaction (including any investment, dealing or transaction involving the proceeds of the Notes) with any Person if such investment, dealing or transaction (i) would cause any holder or any affiliate of such holder to be in violation of, or subject to sanctions under, any law or regulation applicable to such holder, or (ii) is prohibited by or subject to sanctions under any U.S. Economic Sanctions Laws or Canadian Economic Sanctions Laws.

SECTION 11. EVENTS OF DEFAULT.

An “Event of Default” shall exist if any of the following conditions or events shall occur and be continuing:

(a) the Company defaults in the payment of any principal or Make-Whole Amount, if any, on any Note when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise; or

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

(b) the Company defaults in the payment of any interest on any Note for a period of five or more Business Days after the same becomes due and payable; or

(c) the Company defaults in the performance of or compliance with any term contained in (i) Section 9.7 or Sections 10.1 through 10.7 hereof or (ii) Section 7.1(h) hereof and such failure shall continue unremedied for a period of five or more days after notice thereof by any holder of a Note to the Company or (iii) in each case of clause (i) or (ii) above, as applicable, any covenant in a Supplement which specifically provides that it shall have the benefit of this paragraph (c); or

(d) [Reserved];

(e) the Company defaults in the performance of or compliance with any term contained herein or in any Supplement (other than those referred to in Sections 11(a), (b) and (c)) and such default is not remedied within 30 days after the earlier of (i) a Responsible Officer obtaining actual knowledge of such default and (ii) the Company receiving written notice of such default from any holder of a Note (any such written notice to be identified as a “notice of default” and to refer specifically to this Section 11(e)); or

(f) any representation or warranty made in writing by or on behalf of the Company or a Subsidiary Guarantor or by any officer of the Company or a Subsidiary Guarantor in this Agreement, any Supplement or the Subsidiary Guarantee or in any writing furnished in connection with the transactions contemplated hereby proves to have been false or incorrect in any material respect on the date as of which made; or

(g) (i) the Company or any of its Subsidiaries (other than a Financing Subsidiary) shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Indebtedness, when and as the same shall become due and payable, or (ii) any event or condition (other than any condition which is a Change in Control (in which event the terms and conditions of Section 8.3 shall govern)) occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that this clause (g) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness; or

(h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Company or any of its Subsidiaries or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Company or any of its Subsidiaries or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed and unstayed for a period of 60 or more days or an order or decree approving or ordering any of the foregoing shall be entered; or

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

(i) the Company or any of its Subsidiaries shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (h) of this Section 11, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Company or any of its Subsidiaries or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) take any action for the purpose of effecting any of the foregoing or (vii) become unable, admit in writing its inability or fail generally, to pay its debts as they become due; or

(j) one or more judgments for the payment of money in an aggregate amount in excess of $25,000,000 shall be rendered against the Company or any of its Subsidiaries or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days following the entry of such judgment during which execution shall not be effectively stayed, discharged or bonded pending appeal, or liability for such judgment amount shall not have been admitted by an insurer of reputable standing reasonably acceptable to the Required Holders, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of the Company or any of its Subsidiaries to enforce any such judgment; or

(k) an ERISA Event shall have occurred that, in the opinion of the Required Holders, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect; or

(l) Solar Capital Partners, LLC, any affiliate thereof which is under common Control, or any successor thereto shall cease to be the investment advisor for the Company; or

(m) [Reserved]; or

(n) except for expiration in accordance with its terms, any of the Note Documents shall for whatever reason be terminated or cease to be in full force and effect in any material respect, or the enforceability thereof shall be contested by the Company; or

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

(o) the Company or any of its Subsidiaries shall cause or permit the occurrence of any condition or event that would result in any recourse to any Obligor under any Permitted SBIC Guarantee.

SECTION 12. REMEDIES ON DEFAULT, ETC.

Section 12.1. Acceleration. (a) If an Event of Default with respect to the Company described in Section 11(h) or (i) (other than an Event of Default described in clause (vii) of Section 11(i)) has occurred, all the Notes then outstanding shall automatically become immediately due and payable.

(b) If any other Event of Default has occurred and is continuing, the Required Holders may at any time at its or their option, by notice or notices to the Company, declare all the Notes then outstanding to be immediately due and payable.

(c) If any Event of Default described in Section 11(a) or (b) has occurred and is continuing, either (i) any original Purchaser or Affiliate thereof (provided, that notwithstanding the definition thereof, “Affiliate” shall include any Person that acts as investment adviser in the ordinary course of business on behalf of the account of any original Purchaser) which is a holder or holders of Notes at the time outstanding affected by such Event of Default or (ii) the Required Holders may at any time, at its or their option, by notice or notices to the Company, declare all the Notes held by it or them to be immediately due and payable.

Upon any Notes becoming due and payable under this Section 12.1, whether automatically or by declaration, such Notes will forthwith mature and the entire unpaid principal amount of such Notes, plus (i) all accrued and unpaid interest thereon (including, but not limited to, interest accrued thereon at the Default Rate) and (ii) the Make-Whole Amount determined in respect of such principal amount (to the full extent permitted by applicable law), shall all be immediately due and payable, in each and every case without presentment, demand, protest or further notice, all of which are hereby waived. The Company acknowledges, and the parties hereto agree, that each holder of a Note has the right to maintain its investment in the Notes free from repayment by the Company (except as herein specifically provided for), and that the provision for payment of a Make-Whole Amount by the Company in the event that the Notes are prepaid or are accelerated as a result of an Event of Default, is intended to provide compensation for the deprivation of such right under such circumstances.

Section 12.2. Other Remedies. If any Default or Event of Default has occurred and is continuing, and irrespective of whether any Notes have become or have been declared immediately due and payable under Section 12.1, the holder of any Note at the time outstanding may proceed to protect and enforce the rights of such holder by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein or in any Note, or for an injunction against a violation of any of the terms hereof or thereof, or in aid of the exercise of any power granted hereby or thereby or by law or otherwise.

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

Section 12.3. Rescission. At any time after any Notes have been declared due and payable pursuant to Section 12.1(b) or (c), the holders of more than 50% in principal amount of the Notes then outstanding, by written notice to the Company, may rescind and annul any such declaration and its consequences if (a) the Company has paid all overdue interest on the Notes, all principal of and Make-Whole Amount, if any, on any Notes that are due and payable and are unpaid other than by reason of such declaration, and all interest on such overdue principal and Make-Whole Amount, if any, and (to the extent permitted by applicable law) any overdue interest in respect of the Notes, at the Default Rate, (b) neither the Company nor any other Person shall have paid any amounts which have become due solely by reason of such declaration, (c) all Events of Default and Defaults, other than non-payment of amounts that have become due solely by reason of such declaration, have been cured or have been waived pursuant to Section 17, and (d) no judgment or decree has been entered for the payment of any monies due pursuant hereto or to the Notes. No rescission and annulment under this Section 12.3 will extend to or affect any subsequent Event of Default or Default or impair any right consequent thereon.

Section 12.4. No Waivers or Election of Remedies, Expenses, Etc. No course of dealing and no delay on the part of any holder of any Note in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice such holder’s rights, powers or remedies. No right, power or remedy conferred by this Agreement or by any Note upon any holder thereof shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise. Without limiting the obligations of the Company under Section 15, the Company will pay to the holder of each Note on demand such further amount as shall be sufficient to cover all costs and expenses of such holder incurred in any enforcement or collection under this Section 12, including reasonable attorneys’ fees, expenses and disbursements.

SECTION 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.

Section 13.1. Registration of Notes. The Company shall keep at its principal executive office a register for the registration and registration of transfers of Notes. The name and address of each holder of one or more Notes, each transfer thereof and the name and address of each transferee of one or more Notes shall be registered in such register. Prior to due presentment for registration of transfer, the Person in whose name any Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes hereof, and the Company shall not be affected by any notice or knowledge to the contrary. The Company shall give to any holder of a Note that is an Institutional Investor promptly upon request therefor, a complete and correct copy of the names and addresses of all registered holders of Notes.

Section 13.2. Transfer and Exchange of Notes. (a) Upon surrender of any Note to the Company at the address and to the attention of the designated officer (all as specified in Section 18(a)(C)) for registration of transfer or exchange (and in the case of a surrender for registration of transfer accompanied by a written instrument of transfer duly executed by the registered holder of such Note or such holder’s attorney duly authorized in writing and accompanied by the relevant name, address and other information for notices of each transferee

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

of such Note or part thereof), within ten Business Days thereafter, the Company shall execute and deliver, at the Company’s expense (except as provided below), one or more new Notes of the same Series (and of the same tranche if such Series has separate tranches) (as requested by the holder thereof) in exchange therefor, in an aggregate principal amount equal to the unpaid principal amount of the surrendered Note. Each such new Note shall be payable to such Person as such holder may request and shall be substantially in the form of Exhibit 1 or attached to the applicable Supplement with respect to any Additional Notes. Each such new Note shall be dated and bear interest from the date to which interest shall have been paid on the surrendered Note or dated the date of the surrendered Note if no interest shall have been paid thereon. The Company may require payment of a sum sufficient to cover any stamp tax or governmental charge imposed in respect of any such transfer of Notes. Notes shall not be transferred in denominations of less than $100,000; provided that if necessary to enable the registration of transfer by a holder of its entire holding of Notes, one Note may be in a denomination of less than $100,000. Any transferee, by its acceptance of a Note registered in its name (or the name of its nominee), shall be deemed to have made the representations and agreements set forth in Section 6.1(b), (d) and (f) and Section 6.2.

(b) Any transfer of a Note made in violation of Section 6.1(f) or this Section 13.2 shall be null and void and of no force and effect.

Section 13.3. Replacement of Notes. Upon receipt by the Company at the address and to the attention of the designated officer (all as specified in Section 18(C)) of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Note (which evidence shall be, in the case of an Institutional Investor, notice from such Institutional Investor of such ownership and such loss, theft, destruction or mutilation), and

(a) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it (provided that if the holder of such Note is, or is a nominee for, an original Purchaser or Additional Purchaser or another holder of a Note with a minimum net worth of at least $50,000,000 or a Qualified Institutional Buyer, such Person’s own unsecured agreement of indemnity shall be deemed to be satisfactory), or

(b) in the case of mutilation, upon surrender and cancellation thereof,

within ten Business Days thereafter, the Company at its own expense shall execute and deliver, in lieu thereof, a new Note of the same Series (and of the same tranche if such Series has separate tranches), dated and bearing interest from the date to which interest shall have been paid on such lost, stolen, destroyed or mutilated Note or dated the date of such lost, stolen, destroyed or mutilated Note if no interest shall have been paid thereon.

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

SECTION 14. PAYMENTS ON NOTES.

Section 14.1. Place of Payment. Subject to Section 14.2, payments of principal, Make-Whole Amount or Modified Make-Whole Amount, if any, and interest becoming due and payable on the Notes shall be made in New York, New York at the principal office of Goldman Sachs Bank USA in such jurisdiction. The Company may at any time, by notice to each holder of a Note, change the place of payment of the Notes so long as such place of payment shall be either the principal office of the Company in such jurisdiction or the principal office of a bank or trust company in such jurisdiction.

Section 14.2. Home Office Payment. So long as any Purchaser or Additional Purchaser or its nominee shall be the holder of any Note, and notwithstanding anything contained in Section 14.1 or in such Note to the contrary, the Company will pay all sums becoming due on such Note for principal, Make-Whole Amount or Modified Make-Whole Amount, if any, and interest by the method and at the address specified for such purpose below such Purchaser’s or Additional Purchaser’s name in Schedule A or attached to any Supplement to which such Additional Purchaser is a party, or by such other method or at such other address as such Purchaser or Additional Purchaser shall have from time to time specified to the Company in writing for such purpose, without the presentation or surrender of such Note or the making of any notation thereon, except that upon written request of the Company made concurrently with or reasonably promptly after payment or prepayment in full of any Note, such Purchaser or Additional Purchaser shall surrender such Note for cancellation, reasonably promptly after any such request, to the Company at its principal executive office or at the place of payment most recently designated by the Company pursuant to Section 14.1. Prior to any sale or other disposition of any Note held by a Purchaser or Additional Purchaser or such Person’s nominee, such Person will, at its election, either endorse thereon the amount of principal paid thereon and the last date to which interest has been paid thereon or surrender such Note to the Company in exchange for a new Note or Notes pursuant to Section 13.2. The Company will afford the benefits of this Section 14.2 to any Institutional Investor that is the direct or indirect transferee of any Note purchased by a Purchaser or Additional Purchaser under this Agreement, including via any Supplement, and that has made the same agreement relating to such Note as the Purchasers have made in this Section 14.2.

Section 14.3. Taxation. (a) All payments of principal, interest, Make-Whole Amount and Modified Make-Whole Amount in respect of the Notes shall be made free and clear of, and without withholding or deduction for, any taxes, duties, assessments or governmental charges of whatsoever nature imposed, levied, collected, withheld or assessed by the United States, any other taxing jurisdiction from which or through which the Company makes payments or any political subdivision or any authority thereof or therein having power to tax, unless such withholding or deduction is required by law. In that event, the Company shall pay such additional amounts as will result in the receipt by any holders that are not U.S. persons as defined in I.R.C. § 7701 (collectively, the “Foreign Holders”) or any other holder of such amounts as would have been received by the holder if no such withholding or deduction had been required, except that no such additional amounts shall be payable in respect of any tax, assessment or other governmental charge that:

(1) is imposed or withheld solely by reason of the existence of any present or former connection (other than the mere fact of being a Foreign Holder or the taxing of any enforcement action by a Foreign Holder under this Agreement) between any holder and the United States, including such holder being or having been a citizen or resident of the United States or treated as being or having been a resident thereof;

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

(2) in the case of a Foreign Holder, is imposed or withheld by reason of any Foreign Holder (or any partnership, trust, estate, limited liability company or other fiscally transparent entity of which such Foreign Holder is a partner, beneficiary, settlor or member) (i) being or having been present in, or engaged in a trade or business in, the United States, (ii) being treated as having been present in, or engaged in a trade or business in, the United States, or (iii) having or having had a permanent establishment in the United States;

(3) is an estate, inheritance, gift, sales, transfer, personal property or excise tax or any similar tax assessment or governmental charge;

(4) is, in respect of any payment to any Foreign Holder that is not qualified for the benefits of a U.S. tax treaty providing for zero withholding on interest on the date of this Agreement, imposed on a beneficial owner that actually or constructively owns 10% or more of the total combined voting power of all of the classes of stock of the Company that are entitled to vote within the meaning of Section 871(h)(3) of the Code (as in effect on the date of this Agreement or, in the case of a transfer to another Foreign Holder, as in effect on the date of such transfer) or that is a bank making a loan entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code (as in effect on the date of this Agreement, or in the case of a transfer to another Foreign Holder, as in effect on the date of such transfer);

(5) would not have been imposed but for the failure or inability (other than as a result of Change in Law) of the beneficial owner or any holder to comply with the requirements of Section 14.3(c) or any other certification, information, documentation or other reporting requirements (“Forms”) concerning the nationality, residence, identity or connection with the United States of such beneficial owner or such holder, if such compliance is required by statute or by regulation of the United States or of any political subdivision or taxing authority thereof or therein as a precondition to relief or exemption from such tax, duty, assessment or other governmental charge; provided that the filing of such Forms would not impose any unreasonable burden on such holder or result in any confidential or proprietary income tax return information being revealed, either directly or indirectly, to any Person (other than any tax authority), it being understood that the provision of United States Internal Revenue Service Forms W-9, W-8BEN, W-8BEN-E, W-8IMY, W-8ECI or W-8EXP does not impose an unreasonable burden on any holder or result in the disclosure of any confidential or proprietary income tax return information, and provided further that such holder shall be deemed to have satisfied the requirements of this clause (5) upon the good faith completion and submission of such Forms (including refilings or renewals of filings) as may be specified in a written request of the Company no later than 60 days after receipt by such holder of such written request (accompanied by copies of such Forms and related instructions);

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

(6) is payable otherwise than by withholding by the Company from payments on or in respect of any Note held by any Foreign Holder;

(7) is (i) an income, branch or franchise taxes imposed on (or measured by) the Foreign Holder’s net income by the United States of America, or by the jurisdiction (or any political subdivision thereof) under the laws of which such holder is organized or in which its principal office is located or in which its applicable lending office is located, (ii) is a withholding tax that is imposed on amounts payable to such holder at the time such holder becomes a party to this Agreement (or becomes a transferee of another holder) or is attributable to such holder’s failure or inability (other than as a result of a Change in Law) to comply with Section 14.3(c) or (iii) is any withholding tax imposed under Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with) (“FATCA”).

(8) any combination of items (1), (2), (3), (4), (5), (6) and (7).

(b) In addition, the Company will not pay additional amounts to any Foreign Holder if it is a partnership, trust, estate, limited liability company or other fiscally transparent entity, or to any Foreign Holder if it is not the sole beneficial owner of the Note held by it, as the case may be. This exception, however, will apply only to the extent that a beneficiary or settlor with respect to the trust or estate, or a beneficial owner or member of the partnership, limited liability company or other fiscally transparent entity, would not have been entitled to payment of an additional amount had the beneficiary, settlor, beneficial owner or member received directly its beneficial or distributive share of the payment.

(c) Within five days after the date that any Foreign Holder becomes eligible for the benefits of this Agreement, such Foreign Holder shall provide, the Company with a properly executed original United States Internal Revenue Service Form W-8BEN, W-8BEN-E, W-8ECI, W-8IMY or W-8EXP, as appropriate, or any successor or other form prescribed by the United States Internal Revenue Service, certifying that it is not a United States person for United States federal income tax purposes and that either (i) it is entitled to the benefits of a tax treaty with the United States that provides for a zero rate of withholding on interest on the date of this Agreement, (ii) it is receiving the interest payments under this Agreement in connection with a U.S. trade or business or (iii) it is a foreign governmental entity, international organization or other organization entitled to exemption from U.S. income tax on investment income. Thereafter such Foreign Holder shall provide additional Forms W-8BEN, W-8BEN-E, W-8ECI, W-8IMY or W-8EXP (or any successor or other form prescribed by the United States Internal Revenue Service) (i) to the extent a form previously provided has become inaccurate or invalid as a result of any action or change in regard to the Foreign Holder or (ii) as reasonably requested in writing by the Company within 60 days of such written request, unless such Foreign Holder is unable to provide such form solely as a result of any change in, or amendment to, the laws, regulations, or rulings of the United States or any political subdivision or any authority thereof or therein having power to tax, or any change in the application or official interpretation of such laws, regulations or rulings (including a holding by any court of competent jurisdiction), which change or amendment becomes effective on or after the date of the Closing. Any holder other than a Foreign Holder shall provide a Form W-9.

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

(d) if a payment made to a Foreign Holder would be subject to U.S. federal withholding tax imposed by FATCA if such Foreign Holder were to fail to comply with the applicable reporting requirements of FATCA, such Foreign Holder shall deliver to the Company at the time or times prescribed by law and at such time or times reasonably requested by the Company such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Company as may be necessary for the Company to comply with its obligations under FATCA and to determine that the Company has complied with the Company’s obligations under FATCA or to determine the amount to deduct and withhold from such payment.

(e) Any reference in this Agreement to principal, Make-Whole Amount, Modified Make-Whole Amount or interest shall be deemed to include any additional amounts in respect of principal or interest (as the case may be) which may be payable under this Section 14.3.

(f) This Section 14.3 shall apply only with respect to the Foreign Holders. It shall not apply to payments made to any Holder other than the Foreign Holders.

SECTION 15. EXPENSES, ETC.

Section 15.1. Transaction Expenses. The Company shall pay (i) all reasonable and documented out-of-pocket expenses incurred by the holders of the Notes, and their Affiliates, including the reasonable fees, charges and disbursements of counsel for the holders of the Notes, in connection with the preparation and administration of this Agreement and the other Note Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all documented out-of-pocket expenses incurred by the holders of the Notes, including the fees, charges and disbursements of any counsel or financial advisors for the holders of the Notes, in connection with the enforcement or protection of its rights in connection with this Agreement and the other Note Documents, including its rights under this Section, including all such out-of-pocket expenses incurred during any insolvency or bankruptcy involving the Company or any Subsidiary, workout, restructuring or negotiations in respect thereof, (iv) and all documented costs, expenses, taxes, assessments and other charges incurred in connection with any filing, registration, recording or perfection of any security interest and (v) the costs and expenses incurred in connection with the initial filing of this Agreement and all related documents and financial information with the SVO, provided, that such costs and expenses under this clause (v) shall not exceed $8,000 for any Series or tranche. The Company will pay, and will save each Purchaser, Additional Purchaser and each other holder of a Note harmless from, all claims in respect of any fees, costs or expenses, if any, of brokers and finders (other than those, if any, retained by a Purchaser or Additional Purchaser or other holder in connection with its purchase of the Notes).

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

Section 15.2. Survival. The obligations of the Company under this Section 15 will survive the payment or transfer of any Note, the enforcement, amendment or waiver of any provision of this Agreement, any Supplement or the Notes, and the termination of this Agreement.

SECTION 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.

All representations and warranties contained herein or in any of the Subsidiary Guarantee or in any Supplement shall survive the execution and delivery of this Agreement, such Supplement and the Notes, the purchase or transfer by any Purchaser or Additional Purchaser of any Note or portion thereof or interest therein and the payment of any Note and may be relied upon by any subsequent holder of a Note, regardless of any investigation made at any time by or on behalf of such Purchaser or any Additional Purchaser or any other holder of a Note. All statements contained in any certificate or other instrument delivered by or on behalf of the Company pursuant to this Agreement, any Supplement or the Subsidiary Guarantee shall be deemed representations and warranties of the Company under this Agreement. Subject to the preceding sentence, this Agreement, the Notes and each Subsidiary Guarantee embody the entire agreement and understanding between each Purchaser and Additional Purchaser and the Company and supersede all prior agreements and understandings relating to the subject matter hereof.

SECTION 17. AMENDMENT AND WAIVER.

Section 17.1. Requirements. (a) Subject in each case of this clause (a) to Sections 10.7(a), 10.7(d) and 17.1(b), this Agreement (including any Supplement) and the Notes may be amended, and the observance of any term hereof or of the Notes may be waived (either retroactively or prospectively), with (and only with) the written consent of the Company and the Required Holders, except that

(i) no amendment or waiver of any of the provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof or the corresponding provision of any Supplement, or any defined term (as it is used therein or in such corresponding provision of any Supplement), will be effective as to any Purchaser or Additional Purchaser unless consented to by such Purchaser or Additional Purchaser in writing, and

(ii) no such amendment or waiver may, without the written consent of the holder of each Note at the time outstanding affected thereby, (A) subject to the provisions of Section 12 relating to acceleration or rescission, change the amount or time of any prepayment or payment of principal of, or reduce the rate or change the time of payment or method of computation of interest or of the Make-Whole Amount on, the Notes, (B) change the percentage of the principal amount of the Notes the holders of which are required to consent to any such amendment or waiver, or (C) amend any of Section 8, 11(a), 11(b), 12, 17 or 20.

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

(b) Notwithstanding the terms of Section 17.1(a), but subject to Section 10.7(d), in the event the Company obtains any amendment, supplement, waiver, change, clarification, interpretation, consent or other modification to a covenant under any Corporate Facility that corresponds to Section 10, the threshold amount included in an event of default set forth in Section 11(g) (including any defined term used therein) or (j), or any defined term contained or used in Section 10, whether or not more or less restrictive upon the Company (a “Credit Amendment”) such amendment, supplement, waiver, change, clarification, interpretation, consent or other modification shall be automatically reflected mutatis mutandis through conforming amendments or modifications to this Agreement without any further action of the holders of the Notes (a “Corresponding Modification”). For purposes of the foregoing, an amendment, supplement, waiver, change, clarification, interpretation, consent or other modification of a covenant under any Corporate Facility that corresponds to Section 10, the threshold amount included in an event of default set forth in Section 11(g) (including any defined term used therein) or (j), and/or any defined term contained or used in Section 10 shall include any such change effectuated pursuant to a replacement of such Corporate Facility.

(c) If any consideration or remuneration, by way of supplemental or additional fee or otherwise (but excluding, in any event, principal repayments or adjustment of interest rate spreads), is paid to any of the lenders under the Corporate Facility in consideration for or as an inducement to the entering into by any such lender of modification(s) primarily to effect a Credit Amendment, such consideration or remuneration shall be concurrently paid, on the same terms, ratably to all of the holders of the Notes; provided that, if any such fees under the Corporate Facility are payable only to consenting holders, to the extent the holders of the Notes hereunder have an ability to grant or withhold consent to such amendment or other modification pursuant to the terms hereof, such fees shall be payable to holders of Notes under this Agreement only to the extent such holders have approved the amendment or other modification.

(d) The Subsidiary Guarantee may be amended or modified in accordance with the terms thereof, and all amendments to the Subsidiary Guarantee obtained in conformity with such requirements shall bind all holders of the Notes.

(e) Notwithstanding anything to the contrary in this Agreement (i) no consent shall be required from and no fees shall be payable to the holders of the Notes in connection with any renewal, refinancing or other extension of any Corporate Facility (or any amendments, modifications or supplements effected in connection therewith) and (ii) any such renewal, refinancing or other extension (and any amendment, modification or supplement to any of the terms and provisions of any Corporate Facility, this Agreement or any other Note Document in connection with such renewal, refinancing or other extension) shall be, to the extent applicable, automatically reflected mutatis mutandis through conforming amendments, modifications or supplements to this Agreement without any further action of the holders of the Notes.

(f) Supplements. Notwithstanding anything to the contrary contained herein, the Company may enter into any Supplement providing for the issuance of one or more Series of Additional Notes consistent with, and in compliance with, Sections 2.4 and 4.13 hereof without obtaining the consent of any holder of any other Series of Notes.

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

Section 17.2. Solicitation of Holders of Notes.

(a) Solicitation. The Company will provide each holder of the Notes (irrespective of the amount of Notes then owned by it), with substantially the same material information and substantially the same amount of time as it provides any other holder of the Notes, to enable such holder to make an informed and considered decision with respect to any proposed amendment, waiver or consent in respect of any of the provisions hereof or any Supplement or of the Notes or any of the Subsidiary Guarantee. The Company will deliver executed or true and correct copies of each amendment, waiver or consent effected pursuant to the provisions of this Section 17 to each holder of outstanding Notes promptly following the date on which it is executed and delivered by, or receives the consent or approval of, the requisite holders of Notes.

(b) Payment. Except as otherwise set forth in this Agreement, the Company will not directly or indirectly pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, or grant any security or provide other credit support, to any holder of Notes as consideration for or as an inducement to the entering into by any holder of Notes of any waiver or amendment of any of the terms and provisions hereof, any Supplement or of any of the Subsidiary Guarantee unless such remuneration is concurrently paid, or security is concurrently granted or other credit support concurrently provided, on the same terms, ratably to the holder of Notes then outstanding even if such holder did not consent to such waiver or amendment.

(c) Consent in Contemplation of Transfer. Any consent made pursuant to this Section 17.2 by the holder of any Note that has transferred or has agreed to transfer such Note to the Company, any Subsidiary or any Affiliated Entity of the Company and has provided or has agreed to provide such written consent as a condition to such transfer shall be void and of no force or effect except solely as to such holder, and any amendments effected or waivers granted or to be effected or granted that would not have been or would not be so effected or granted but for such consent (and the consents of all other holders of Notes that were acquired under the same or similar conditions) shall be void and of no force or effect except solely as to such transferring holder.

Section 17.3. Binding Effect, Etc. Any amendment or waiver consented to as provided in this Section 17 applies equally to all holders of Notes and is binding upon them and upon each future holder of any Note and upon the Company without regard to whether such Note has been marked to indicate such amendment or waiver. No such amendment or waiver will extend to or affect any obligation, covenant, agreement, Default or Event of Default not expressly amended or waived or impair any right consequent thereon. No course of dealing between the Company and the holder of any Note nor any delay in exercising any rights hereunder or under any Note shall operate as a waiver of any rights of any holder of such Note. As used herein, the term “this Agreement” and references thereto shall mean this Agreement as it may from time to time be amended or supplemented.

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

Section 17.4. Notes Held by Company, Etc. Solely for the purpose of determining whether the holders of the requisite percentage of the aggregate principal amount of Notes then outstanding approved or consented to any amendment, waiver or consent to be given under this Agreement, the Notes or Subsidiary Guarantee, or have directed the taking of any action provided herein or in the Notes to be taken upon the direction of the holders of a specified percentage of the aggregate principal amount of Notes then outstanding, Notes directly or indirectly owned by the Company or any of its Affiliates shall be deemed not to be outstanding.

SECTION 18. NOTICES.

(a) All notices and communications provided for hereunder shall be in writing and sent (i) by tele-facsimile if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or (ii) by registered or certified mail with return receipt requested (postage prepaid), or (iii) by a recognized overnight delivery service (with charges prepaid). Any such notice must be sent:

(A) if to any Purchaser or its nominee, to such Purchaser or nominee at the address specified for such communications in Schedule A, or at such other address as such Purchaser or nominee shall have specified to the Company in writing,

(B) if to any other holder of any Note, to such holder at such address as such other holder shall have specified to the Company in writing, or

(C) if to the Company, to the Company at its address set forth at the beginning hereof to the attention of the Chief Financial Officer, or at such other address as the Company shall have specified to the holder of each Note in writing.

(D) if to an Additional Purchaser or such Additional Purchaser’s nominee, to such Additional Purchaser or such Additional Purchaser’s nominee at the address specified for such communications in Schedule A to any Supplement, or at such other address as such Additional Purchaser or such Additional Purchaser’s nominee shall have specified to the Company in writing.

Notices under this Section 18 will be deemed given only when actually received. Notices delivered through electronic communications to the extent provided in paragraph (b) below, shall be effective as provided in said paragraph (b).

(b) Notices and other communications to the Purchasers, Additional Purchasers or other holders of any Note hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites); provided that the foregoing shall not apply to notices to a Purchaser, Additional Purchaser or other holder of any Note if such Purchaser, Additional Purchaser or holder has notified the Company that it is incapable of receiving notices under this Agreement by electronic communication. Notices and other communications (i) sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgment from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgment), provided that if such notice or other communication is not sent during normal business hours of the recipient, such notice or

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient, and (ii) posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor. Unless a Purchaser, Additional Purchaser or other holder of any Note has notified the Company that it is incapable of receiving notices by electronic communication, each Purchaser, Additional Purchaser or other holder of any Note agrees to notify the Company in writing (including by electronic communication) from time to time of any change in such Purchaser’s, Additional Purchaser’s or holder’s e-mail address to which the foregoing notice may be sent by electronic transmission and that the foregoing notice may be sent to such e-mail address.

SECTION 19. REPRODUCTION OF DOCUMENTS.

This Agreement and each Subsidiary Guarantee and all documents relating thereto, including (a) consents, waivers and modifications that may hereafter be executed, (b) documents received by any Purchaser or Additional Purchaser at a Closing (except the Notes themselves), and (c) financial statements, certificates and other information previously or hereafter furnished to any Purchaser or Additional Purchaser may be reproduced by such Purchaser or Additional Purchaser by any photographic, photostatic, electronic, digital or other similar process and such Purchaser or Additional Purchaser may destroy any original document so reproduced. The Company agrees and stipulates that, to the extent permitted by applicable law, any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by such Purchaser or Additional Purchaser in the regular course of business) and any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. This Section 19 shall not prohibit the Company or any other holder of Notes from contesting any such reproduction to the same extent that it could contest the original, or from introducing evidence to demonstrate the inaccuracy of any such reproduction.

SECTION 20. CONFIDENTIAL INFORMATION.

Each of the holders of the Notes agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and to its and its Affiliates’ respective managers, administrators, trustees, partners, directors, officers, employees, agents, advisors and other representatives (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority and the NAIC or the SVO or, in each case, any similar organization, or any nationally recognized rating agency that requires access to information about such holder’s investment portfolio), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Note Document or any action or proceeding relating to this Agreement or any other Note

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or participant in, or any prospective assignee of or participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective party (or its managers, administrators, trustees, partners, directors, officers, employees and other personnel, agents, advisors and other representatives) to any swap, derivative or similar transaction under which payments are to be made by reference to the Company and its obligations under this Agreement or payments hereunder, (iii) any rating agency or (iv) the CUSIP Service Bureau or any similar organization, (g) with the consent of the Company, (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to any holder of a Note or any of their respective Affiliates on a nonconfidential basis from a source other than the Company, (i) to Gold Sheets, private placement newsletters and other similar financial services industry trade publications; such information to consist of deal terms and other information regarding the issuance of securities evidenced by this Agreement customarily found in such publications, (j) to a Person that is an investor or prospective investor in a Securitization (as defined below) that agrees that its access to information regarding the Company and the Notes is solely for purposes of evaluating an investment in such Securitization, (k) to a Person that is a trustee, collateral manager, servicer, noteholder or secured party in a Securitization in connection with the administration, servicing and reporting on the assets serving as collateral for such Securitization, or (l) to a nationally recognized rating agency that requires access to information regarding the Obligors, the Notes and Note Documents in connection with ratings issued with respect to a Securitization.

For purposes of this Section, “Securitization” means a public or private offering by a holder of a Note or any of its Affiliates or their respective successors and assigns, of securities which represent an interest in, or which are collateralized, in whole or in part, by the Notes or the Note Documents.

For purposes of this Section, “Affiliate” shall, notwithstanding the definition thereof, include any Person that acts as an investment adviser in the ordinary course of business on behalf of the account of any Purchaser or any other subsequent holder of Notes.

For purposes of this Section, “Information” means all information received from the Company or any of its Subsidiaries relating to the Company or any of its Subsidiaries or any of their respective businesses, other than any such information that is available to any holder of a Note on a nonconfidential basis prior to disclosure by the Company or any of its Subsidiaries; provided that, in the case of information received from the Company or any of its Subsidiaries after the date of the Closing, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

SECTION 21. SUBSTITUTION OF PURCHASER.

Each Purchaser or Additional Purchaser shall have the right to substitute any one of its Affiliates as the purchaser of the Notes that it has agreed to purchase hereunder, by written notice to the Company, which notice shall be signed by both such Purchaser or Additional Purchaser, as the case may be, and such Affiliate, shall contain such Affiliate’s agreement to be bound by this Agreement and shall contain a confirmation by such Affiliate of the accuracy with respect to it of the representations set forth in Section 6. Upon receipt of such notice, any reference to such Purchaser in this Agreement (other than in this Section 21) or Additional Purchaser in any Supplement shall be deemed to refer to such Affiliate in lieu of such original Purchaser or Additional Purchaser. In the event that such Affiliate is so substituted as a Purchaser hereunder or Additional Purchaser in any Supplement and such Affiliate thereafter transfers to such original Purchaser or Additional Purchaser all of the Notes then held by such Affiliate, upon receipt by the Company of notice of such transfer, any reference to such Affiliate as a “Purchaser” in this Agreement (other than in this Section 21) shall no longer be deemed to refer to such Affiliate, but shall refer to such original Purchaser or Additional Purchaser, as the case may be, and such original Purchaser or Additional Purchaser shall again have all the rights of an original holder of the Notes under this Agreement.

SECTION 22. MISCELLANEOUS.

Section 22.1. Successors and Assigns. All covenants and other agreements contained in this Agreement by or on behalf of any of the parties hereto bind and inure to the benefit of their respective successors and assigns (including any subsequent holder of a Note) whether so expressed or not, except to the extent not prohibited by Section 10.3, the Company may not assign or otherwise transfer any of its rights or obligations hereunder or under the Notes without the prior written consent of each holder. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto and their respective successors and assigns permitted hereby) any legal or equitable right, remedy or claim under or by reason of this Agreement.

Section 22.2. Payments Due on Non-Business Days. Anything in this Agreement, the Notes or any Subsidiary Guarantee to the contrary notwithstanding (but without limiting the requirement in Section 8.5 that the notice of any optional prepayment specify a Business Day as the date fixed for such prepayment), any payment of principal of or Make-Whole Amount or interest on any Note that is due on a date other than a Business Day shall be made on the next succeeding Business Day without including the additional days elapsed in the computation of the interest payable on such next succeeding Business Day; provided that if the maturity date of any Note is a date other than a Business Day, the payment otherwise due on such maturity date shall be made on the next succeeding Business Day and shall include the additional days elapsed in the computation of interest payable on such next succeeding Business Day.

Section 22.3. Accounting Terms. (a) All accounting terms used herein which are not expressly defined in this Agreement have the meanings respectively given to them in accordance with GAAP. Except as otherwise specifically provided herein, (i) all computations made pursuant to this Agreement shall be made in accordance with GAAP and (ii) all financial statements shall be prepared in accordance with GAAP.

-49-


SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

(b) If the Company notifies the holders of the Notes that the Company requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date of the Closing in GAAP or in the application thereof on the operation of such provision (or if the Required Holders notifies the Company that the Required Holders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith.

(c) Notwithstanding any other provision contained herein, all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made, without giving effect to any election under Accounting Standard Codification Topic No. 825-10-25 – Fair Value Option (or any other Financial Accounting Standard having a similar result or effect) to value any Indebtedness or other liabilities of the Company or any Subsidiary at “fair value,” as defined therein.

Section 22.4. Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall (to the full extent permitted by law) not invalidate or render unenforceable such provision in any other jurisdiction.

Section 22.5. Construction, Etc. Each covenant contained herein shall be construed (absent express provision to the contrary) as being independent of each other covenant contained herein, so that compliance with any one covenant shall not (absent such an express contrary provision) be deemed to excuse compliance with any other covenant. Where any provision herein refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person.

Defined terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be construed to have the same meaning and effect as the word “shall.” Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein) and, for purposes of the Notes, shall also include any such notes issued in substitution therefor pursuant to Section 13, (b) subject to Section 22.1, any reference herein to any Person shall be construed to include such Person’s successors and

-50-


SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

assigns, (c) the words “herein,” “hereof” and “hereunder,” and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Sections and Schedules shall be construed to refer to Sections of, and Schedules to, this Agreement, and (e) any reference to any law or regulation herein shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time.

For the avoidance of doubt, all Schedules and Exhibits attached to this Agreement shall be deemed to be a part hereof.

Section 22.6. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto.

Section 22.7. Governing Law. This Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York, excluding choice-of-law principles of the law of such State that would permit the application of the laws of a jurisdiction other than such State.

Section 22.8. Jurisdiction and Process; Waiver of Jury Trial. (a) The Company irrevocably submits to the non-exclusive jurisdiction of any New York State or federal court sitting in the Borough of Manhattan, The City of New York, over any suit, action or proceeding arising out of or relating to this Agreement or the Notes. To the fullest extent permitted by applicable law, the Company irrevocably waives and agrees not to assert, by way of motion, as a defense or otherwise, any claim that it is not subject to the jurisdiction of any such court, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in any such court. Each party hereto irrevocably waives, to the full extent permitted by applicable law, any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

(b) Each party hereto consents to process being served by or on behalf of any holder of Notes in any suit, action or proceeding of the nature referred to in Section 22.8(a) by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, return receipt requested, to it at its address specified in Section 18 or at such other address of which such holder shall then have been notified pursuant to said Section. Each party hereto agrees that such service upon receipt (i) shall be deemed in every respect effective service of process upon it in any such suit, action or proceeding and (ii) shall, to the fullest extent permitted by applicable law, be taken and held to be valid personal service upon and personal delivery to it. Notices hereunder shall be conclusively presumed received as evidenced by a delivery receipt furnished by the United States Postal Service or any reputable commercial delivery service.

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

(c) Nothing in this Section 22.8 shall affect the right of any party hereto to serve process in any manner permitted by law, or limit any right that the holders of any of the Notes may have to bring proceedings against the Company in the courts of any appropriate jurisdiction or to enforce in any lawful manner a judgment obtained in one jurisdiction in any other jurisdiction.

(d) THE PARTIES HERETO HEREBY WAIVE TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS AGREEMENT, THE NOTES OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION HEREWITH OR THEREWITH.

* * * * *

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SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

If you are in agreement with the foregoing, please sign the form of agreement on a counterpart of this Agreement and return it to the Company, whereupon this Agreement shall become a binding agreement between you and the Company.



Very truly yours,

SOLAR SENIOR CAPITAL LTD.

By
		Name:
		Title:


SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

This Agreement is hereby accepted and agreed to as of the date thereof.


[PURCHASER]

By:
		Name:
		Title:

By:
		Name:
		Title:

INFORMATION RELATING TO PURCHASERS

NAME AND ADDRESS OF PURCHASER

PRINCIPAL AMOUNT

OF NOTES TO BE PURCHASED

SCHEDULE A

(to Note Purchase Agreement)

DEFINED TERMS

As used herein, the following terms have the respective meanings set forth below or set forth in the Section hereof following such term:

“Additional Financial Covenant” is defined in Section 10.7.

“Additional Notes” is defined in Section 2.4.

“Additional Purchasers” means purchasers of Additional Notes.

“Adjusted Interest Rate” is defined in Section 1.2(c).

“Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. Anything herein to the contrary notwithstanding, the term “Affiliate” shall not include (i) any Person that constitutes an Investment held by any Obligor in the ordinary course of business or (ii) any Person that acts as investment advisor in the ordinary course of business on behalf of the account of any Purchaser or any other subsequent holder of Notes. Unless the context otherwise clearly requires, any reference to an “Affiliate” is a reference to an Affiliate of the Company.

“Affiliate Agreements” means, collectively, (a) the Management Agreement, (b) the Amended and Restated Administration Agreement dated as of October 29, 2013, between the Company and Solar Capital Management, LLC, and (c) the Trademark License Agreement dated as of February 24, 2011, between the Company and Solar Capital Partners, LLC.

“Affiliated Entity” means any of the Subsidiaries of the Company and any of their or the Company’s respective Controlled Affiliates. As used in this definition, “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

“Anti-Corruption Laws” means any law or regulation in a U.S. or any non-U.S. jurisdiction regarding bribery or any other corrupt activity, including the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act 2010.

“Anti-Money Laundering Laws” means any law or regulation in a U.S. or any non-U.S. jurisdiction regarding money laundering, drug trafficking, terrorist-related activities or other money laundering predicate crimes, including the Currency and Foreign Transactions Reporting Act of 1970 (otherwise known as the Bank Secrecy Act) and the USA PATRIOT Act.

“Applicable Financial Statements” means the audited financial statements of the Company for the year ended December 31, 2019.

SCHEDULE B

(to Note Purchase Agreement)

“Asset Coverage Ratio” means the ratio, determined on a consolidated basis, without duplication, in accordance with GAAP, of (a) the value of total assets of the Company and its Subsidiaries, less all liabilities (other than Indebtedness, including Indebtedness hereunder) of the Company and its Subsidiaries, to (b) the aggregate amount of Indebtedness of the Company and its Subsidiaries. For the purposes of calculating the Asset Coverage Ratio, Indebtedness of an SBIC Subsidiary outstanding as of the date of such calculation shall be excluded from the calculation of Asset Coverage Ratio to the extent and in the manner that such Indebtedness may be excluded from the asset coverage requirements of sections 18(a) and 61(d) of the Investment Company Act pursuant to an effective exemptive order issued by the US Securities and Exchange Commission.

“Below Investment Grade Event” is defined in Section 1.2(d).

“Blocked Person” means (a) a Person whose name appears on the list of Specially Designated Nationals and Blocked Persons published by OFAC, (b) a Person, entity, organization, country or regime that is blocked or a target of sanctions that have been imposed under U.S. Economic Sanctions Laws or (c) a Person that is an agent, department or instrumentality of, or is otherwise beneficially owned by, controlled by or acting on behalf of, directly or indirectly, any Person, entity, organization, country or regime described in clause (a) or (b).

“Board” means the Board of Governors of the Federal Reserve System of the United States of America.

“Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed.

“Canada Blocked Person” means (i) a “terrorist group” as defined for the purposes of Part II.1 of the Criminal Code (Canada), or (ii) a Person identified in or pursuant to (w) Part II.1 of the Criminal Code (Canada), or (x) the Proceeds of Crime (Money Laundering) and Terrorist Finance Act, or (y) the Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law), or (z) regulations or orders promulgated pursuant to the Special Economic Measures Act (Canada), the United Nations Act (Canada), or the Freezing Assets of Corrupt Foreign Officials Act (Canada), in any case pursuant to this clause (ii) as a Person in respect of whose property or benefit a holder of Notes would be prohibited from entering into or facilitating a related financial transaction.

“Canadian Economic Sanctions Laws” means those laws, including enabling legislation, orders-in-council or other regulations administered and enforced by Canada or a political subdivision of Canada pursuant to which economic sanctions have been imposed on any Person, entity, organization, country or regime, including Part II.1 of the Criminal Code (Canada), the Special Economic Measures Act (Canada), the Proceeds of Crime (Money Laundering) and Terrorist Finance Act, the Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law), the United Nations Act (Canada), the Export and Import Permits Act (Canada), and the Freezing Assets of Corrupt Foreign Officials Act (Canada), and including all regulations promulgated under any of the foregoing, or any other similar sanctions program or action.

B-2

“Capital Lease Obligations” of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet or statement of assets and liabilities, as applicable, of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

“Change in Control” means (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the SEC thereunder as in effect on the date of the Closing) other than Solar Capital Partners, LLC, the Managing Member or any of their respective Affiliates, of shares representing more than 35% of the aggregate ordinary voting power represented by the issued and outstanding capital stock of the Company; (b) the occupation of a majority of the seats (other than vacant seats) on the Board of Directors of the Company by Persons who were neither (y) nominated by the requisite members of the Board of Directors of the Company nor (z) appointed by a majority of the directors so nominated; or (c) the acquisition of direct or indirect Control of the Company by any Person or group other than Solar Capital Partners, LLC, the Managing Member or any of their respective Affiliates.

“Closing” is defined in Section 3.

“Code” means the Internal Revenue Code of 1986, and the rules and regulations promulgated thereunder from time to time.

“Company” means Solar Senior Capital Ltd., a Maryland corporation or any successor that becomes such in the manner prescribed in Section 10.3(e).

“Competing Business” means at any particular time any “business development company” under the Investment Company Act.

“Competitor” means at any particular time any Person which at such time is engaged in a Competing Business or intends to become engaged in a Competing Business; provided that the initial Purchasers and any Permitted Transferee shall be deemed not to be Competitors; provided, further, in any event that any Private Placement Agent that would otherwise be deemed to be a Competitor pursuant to the foregoing provisions of this definition shall not be deemed to be a Competitor if such Private Placement Agent holds the Notes only in connection with its role as an intermediary in the prompt and expeditious sale in accordance with customary financial market conditions of the Note or Notes owned by one Institutional Investor who is not a Competitor to another purchasing Institutional Investor who is a Permitted Transferee that is not a Competitor and such Private Placement Agent has established procedures which will prevent confidential information supplied to either the selling or buying Institutional Investor by the Company from being transmitted or otherwise made available to such Private Placement Agent or any of its Affiliates in any capacity other than as the agent and intermediary in connection with such sale of any such Note or Notes.

“Confidential Information” is defined in Section 20.

B-3

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise; and the terms “Controlled” and “Controlling” shall have meanings correlative to the foregoing.

“Controlled Entity” means (a) any of the Subsidiaries of the Company and any of their or the Company’s respective Controlled Affiliates and (b) if the Company has a parent company, such parent company and its Controlled Affiliates.

“Corporate Facility” means a secured credit facility of the Company, with recourse to the Company, incurred pursuant to documentation containing financial covenants, covenants governing the borrowing base, if any, portfolio valuations and events of default other terms (other than interest) that are not materially more restrictive upon the Company and its Subsidiaries than those set forth in either (a) the corporate credit facility of Solar Capital Ltd. or (b) similar credit facilities for borrowers the general nature of the business of which is not substantially different from the general nature of the business of the Company and its Subsidiaries, taken as a whole.

“DBRS” means DBRS, Inc. and its successors.

“Default” means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.

“Default Rate” means with respect to any Note of any Series or tranche, that rate of interest per annum that is the greater of (a) 2.00% per annum above the rate of interest on the Notes then in effect for such Series or tranche or (b) 2.00% over the rate of interest publicly announced by Goldman Sachs Bank USA in New York, New York as its “base” or “prime” rate.

“Directing Body” means the Company’s Board of Directors.

“Dollars” or “$” refers to lawful money of the United States of America.

“Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity interest.

“ERISA” means the Employee Retirement Income Security Act of 1974, and the rules and regulations promulgated thereunder from time to time in effect.

“ERISA Affiliate” means any Person, trade or business (whether or not incorporated) that, together with the Company, is or was treated as a single employer under Section 414(b) or (c) of the Code, or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 (b), (c), (m) or (o) of the Code.

B-4

“ERISA Event” means (a) any “reportable event”, as defined in Section 4043(c) of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30 day notice period is waived); (b) any failure by any Plan to satisfy the minimum funding standards (within the meaning of Sections 412 and 430 of the Code or Sections 302 and 303 of ERISA) applicable to such Plan, whether or not waived; (c) the filing pursuant to Section 412(c) of the Code or Section 302(c) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Company or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan (other than for premiums due but not delinquent under Section 4007 of ERISA); (e) a determination that any Plan is, or is expected to be, in “at-risk” status (within the meaning of Section 303(i) of ERISA); (f) the receipt by the Company or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan under Section 4041 of ERISA or to appoint a trustee to administer any Plan under Section 4042 of ERISA; (g) the incurrence by the Company or any of its ERISA Affiliates of any liability with respect to the withdrawal from a Plan subject to Section 4063 of ERISA during a plan year in which it was a “substantial employer” (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA, or a “complete withdrawal” or “partial withdrawal” (as such terms are defined in Sections 4203 and 4205 of ERISA) from any Multiemployer Plan; or (h) the receipt by the Company or any ERISA Affiliate of any notice from any Multiemployer Plan concerning the imposition of Withdrawal Liability on the Company or any ERISA Affiliate or a determination that a Multiemployer Plan is “insolvent” (within the meaning of Section 4245 of ERISA), in “reorganization” (within the meaning of Section 4241 of ERISA) or in “endangered or critical status” within the meaning of Section 305 of ERISA.

“Event of Default” is defined in Section 11.

“Exchange Act” means the Securities Exchange Act of 1934, and the rules and regulations promulgated thereunder from time to time in effect.

“FATCA” is defined in Section 14.3.

“Financial Covenant Modification” and “Financial Covenant Modifications” are defined in Section 10.7(d).

“Financial Officer” means the chief financial officer, principal accounting officer, treasurer or controller of the Company.

“Financing Subsidiary” means

1. an SBIC Subsidiary; or

2. a direct or indirect Subsidiary of the Company to which any Obligor sells, conveys or otherwise transfers (whether directly or indirectly) Portfolio Investments, which engages in no material activities other than in connection with the purchase, holding, disposition and financing of such assets and which is designated by the Company (as provided below) as a Financing Subsidiary,

B-5


SOLAR SENIOR CAPITAL LTD.		NOTE PURCHASE AGREEMENT

(a) no portion of the Indebtedness or any other obligations (contingent or otherwise) of which (i) is Guaranteed by any Obligor (other than Guarantees in respect of Standard Securitization Undertakings), (ii) is recourse to or obligates any Obligor in any way other than pursuant to Standard Securitization Undertakings or (iii) subjects any property of any Obligor, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitization Undertakings or any Guarantee of any Standard Securitization Undertakings,

(b) with which no Obligor has any material contract, agreement, arrangement or understanding other than on terms no less favorable to such Obligor than those that might be obtained at the time from Persons that are not Affiliates of any Obligor, other than fees payable in the ordinary course of business in connection with servicing receivables, and

(c) to which no Obligor has any obligation to maintain or preserve such entity’s financial condition or cause such entity to achieve certain levels of operating results, other than pursuant to Standard Securitization Undertakings.

Any such designation by the Company shall be effected pursuant to a certificate of a Financial Officer delivered to the holders of the Notes, which certificate shall include a statement to the effect that, to the best of such officer’s knowledge, such designation complied with the foregoing conditions. Each Subsidiary of a Financing Subsidiary shall be deemed to be a Financing Subsidiary and shall comply with the foregoing requirements of this definition; provided that each of SUNS SPV LLC and FLLP 2015-1, LLC shall be deemed to be a Financing Subsidiary as of the Closing.

“Fitch” means Fitch Ratings Service, or its successors or assigns.

“Foreign Holders” is defined in Section 14.3.

“Forms” is defined in Section 14.3.

“GAAP” means generally accepted accounting principles in the United States of America, the American Institute of Certified Public Accountants Accounting Guide for Investment Companies or Article 6 of Regulation S-X under the Securities Act.

“Governmental Authority” means the government of the United States of America, or of any other nation, or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

B-6

“Guarantee” of or by any Person (the “guarantor”) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation, provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business.

“Hedging Agreement” means any interest rate protection agreement, foreign currency exchange protection agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement.

“holder” means, with respect to any Note, the Person in whose name such Note is registered in the register maintained by the Company pursuant to Section 13.1.

“Immaterial Subsidiary” means any Subsidiary of the Company that (a) owns, legally or beneficially, directly or indirectly, assets which in the aggregate have a value not in excess of the lesser of (y) $10,000,000 and (z) 1.0% of the total assets of the Company and its Subsidiaries determined on a consolidated basis in accordance with GAAP, and (b) is not designated a Financing Subsidiary or a Subsidiary Guarantor in accordance with the terms and provisions of this Agreement.

“Indebtedness” of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (d) all obligations of such Person in respect of the deferred purchase price of property or services (excluding accounts payable incurred in the ordinary course of business), (e) all Indebtedness of others secured by any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (f) all Guarantees by such Person of Indebtedness of others, (g) all Capital Lease Obligations of such Person, (h) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty and (i) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor.

B-7

“Independent” when used with respect to any specified Person means that such Person (a) does not have any direct financial interest or any material indirect financial interest in the Company or any of its Subsidiaries or Affiliates (including its investment advisor or any Affiliate thereof) and (b) is not connected with the Company or any of its Subsidiaries or Affiliates (including its investment advisor or any Affiliate thereof) as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions.

“INHAM Exemption” is defined in Section 6.2(e).

“Institutional Accredited Investor” means an “accredited investor” as that term is defined in Rule 501(a)(1), (a)(2), (a)(3) or (a)(7) of Regulation D promulgated under the Securities Act.

“Institutional Investor” means (a) any original purchaser of a Note, (b) any holder of a Note holding (together with one or more of its affiliates) more than 5% of the aggregate principal amount of the Notes then outstanding, (c) any bank, trust company, savings and loan association or other financial institution, any pension plan, any investment company, any insurance company, any broker or dealer, or any other similar financial institution or entity, regardless of legal form, and (d) any Related Fund of any holder of any Note.

“Investment” means, for any Person: (a) Equity Interests, bonds, notes, debentures or other securities of any other Person or any agreement to acquire any Equity Interests, bonds, notes, debentures or other securities of any other Person (including any “short sale” or any sale of any securities at a time when such securities are not owned by the Person entering into such sale); (b) deposits, advances, loans or other extensions of credit made to any other Person (including purchases of property from another Person subject to an understanding or agreement, contingent or otherwise, to resell such property to such Person); and (c) Hedging Agreements.

“Investment Company Act” means the Investment Company Act of 1940.

“Investment Company Act Asset Coverage” means the minimum asset coverage required to be maintained by the Company to comply with the Investment Company Act.

“Investment Grade” means a rating of at least “BBB-” (or its equivalent) or higher by DBRS or its equivalent by any other NRSRO without giving effect to any credit watch.

“Investment Policies” means the investment objectives, policies, restrictions and limitations set forth in the Registration Statement on Form N-2 as filed with the SEC on June 21, 2019 including any amendments, changes, supplements or modifications to such investment objectives, policies, restrictions and limitations; provided that any amendment, change, supplement or modification thereto that is, or could reasonably be expected to be, materially adverse to the holders of the Notes that was effected without their prior written consent shall be deemed excluded from the definition of “Investment Policies” for purposes of this Agreement.

B-8

“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities, except in favor of the issuer thereof.

“Make-Whole Amount” is defined in Section 8.8.

“Managing Member” means Solar Capital Partners, LLC or any successor thereto.

“Management Agreement” means the First Amended and Restated Investment Advisory and Management Agreement dated as of August 2, 2016, between the Company and Solar Capital Partners, LLC.

“Margin Stock” means “margin stock” within the meaning of Regulations T, U and X.

“Material” means material in relation to the business, Portfolio Investments and other assets, liabilities and financial condition of the Company and its Subsidiaries taken as a whole.

“Material Adverse Effect” means a material adverse effect on (a) the business, operations, Portfolio Investments and other assets, liabilities and financial condition of the Company and its Subsidiaries taken as a whole (excluding in any case a decline in the net asset value of the Company or a change in general market conditions or values of the Company’s or any of its Subsidiaries’ Portfolio Investments), or (b) the validity or enforceability of this Agreement, the Notes or any Subsidiary Guarantee or the rights or remedies of the holders of the Notes hereunder.

“Material Credit Facility” means, as to the Company, any agreement(s) creating or evidencing indebtedness for borrowed money entered into on or after the date of Closing by the Company, or in respect of which the Company is an obligor (“Credit Facility”), in a principal amount outstanding or available for borrowing equal to or greater than $25,000,000 (or the equivalent of such amount in the relevant currency of payment, determined as of the date of the closing of such facility based on the exchange rate of such other currency); and if no Credit Facility or Credit Facilities equal or exceed such amounts, then the largest Credit Facility shall be deemed to be a Material Credit Facility so long as the aggregate principal amount outstanding or available for borrowing under all such Credit Facilities exceeds such amount; provided that, the Corporate Facility shall, notwithstanding its principal amount outstanding or available for borrowing at any time thereunder, at all times constitute a “Material Credit Facility”; provided further that, Non Recourse Indebtedness shall, notwithstanding its principal amount outstanding or available for borrowing, not constitute a “Material Credit Facility.”

“Material Indebtedness” means (a) Indebtedness of any one or more of the Company and its Subsidiaries in an aggregate principal amount exceeding $25,000,000 and (b) obligations in respect of one or more Hedging Agreements under which the maximum aggregate amount (giving effect to any netting agreements) that the Company and the Subsidiaries (other than Financing Subsidiaries) would be required to pay if such Hedging Agreement(s) were terminated at such time would exceed $25,000,000; provided that “Material Indebtedness” shall not include any Non Recourse Indebtedness.

B-9

“MFL Financial Covenant” means any covenant that requires the Company to (i) maintain any level of financial performance (including any specified level of net worth, total assets, cash flows or net income, however expressed), (ii) maintain any relationship of any component of its capital structure to any other component thereof (including the relationship of indebtedness, senior indebtedness or subordinated indebtedness to total capitalization or to net worth, however expressed), (iii) to maintain any measure of its ability to service its indebtedness (including exceeding any specified ratio of revenues, cash flow or income to interest expense, rental expense, capital expenditures and/or scheduled payments of indebtedness, however expressed) or (iv) not to exceed any maximum level of indebtedness, however expressed; provided, however, that, for the avoidance of doubt, no borrowing base requirement or covenants, however expressed, shall constitute an MFL Financial Covenant.

“Modified Make-Whole Amount” is defined in Section 8.8.

“Moody’s” means Moody’s Investors Service, Inc. or any successor thereto.

“Multiemployer Plan” means a multiemployer plan as defined in section 4001(a)(3) of ERISA in respect of which the Company or any ERISA Affiliate is or within the six-year period immediately preceding the date hereof, was required to make contributions.

“NAIC” means the National Association of Insurance Commissioners or any successor thereto.

“NAIC Annual Statement” is defined in Section 6.2(a).

“Nationally Recognized Statistical Rating Organization” or “NRSRO” means a rating organization designated from time to time by the SEC as being nationally recognized whose status has been confirmed by the SVO other than Egan Jones Rating Company, Kroll Bond Rating Agency, Inc. and their successors.

“Non Recourse Indebtedness” means any Indebtedness of (a) a Financing Subsidiary or (b) any other Subsidiary on terms that recourse may be had by action against such Subsidiary that is an obligor of such Indebtedness or by enforcement of a security interest over certain assets of such Subsidiary and not by way of action against the Company or any other Subsidiary (other than any Subsidiary of such Subsidiary) (other than with respect to ownership interests in such Subsidiary or Guarantees in respect of Standard Securitization Undertakings or a Permitted SBIC Guarantee).

“Note Documents” means, collectively, this Agreement, the Notes and the Subsidiary Guarantee.

“Notes” is defined in Section 1.

“Obligor” means, collectively, the Company and the Subsidiary Guarantors.

B-10

“OFAC” means the Office of Foreign Assets Control of the United States Department of the Treasury.

“OFAC Sanctions Program” means any economic or trade sanction that OFAC is responsible for administering and enforcing. A list of OFAC Sanctions Programs may be found at http://www.treasury.gov/resource-center/sanctions/Programs/Pages/Programs.aspx.

“Officer’s Certificate” means a certificate of a Financial Officer or of any other officer of the Company whose responsibilities extend to the subject matter of such certificate.

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA or any successor thereto.

“Permitted Advisor” means, at any time, any entity listed on Schedule 6.1 that directly or indirectly through its Affiliates acts as an investment advisor to any Person.

“Permitted Directing Body-Approved Affiliate Transaction” means any transaction between the Company or any of its Subsidiaries, on the one hand, and any Affiliate of the Company, on the other hand (including any amendment, modification, supplement or waiver of an Affiliate Agreement), that (a) has been approved by the Directing Body (which shall mean the approval of a majority of the independent directors of the Board of Directors of the Company) and (b) has been consented to by either (a) the administrative agent (or the equivalent entity) under the Corporate Facility, if any, or (b) the Required Holders (in each case, such consent not to be unreasonably withheld or delayed).

“Permitted Liens” means (a) Liens imposed by any Governmental Authority for taxes, assessments or charges not yet due or that are being contested in good faith and by appropriate proceedings if adequate reserves with respect thereto are maintained on the books of the Company in accordance with GAAP; (b) Liens of clearing agencies, broker-dealers and similar Liens incurred in the ordinary course of business, provided that such Liens (i) attach only to the securities (or proceeds) being purchased or sold and (ii) secure only obligations incurred in connection with such purchase or sale, and not any obligation in connection with margin financing; (c) Liens imposed by law, such as materialmen’s, mechanics’, carriers’, workmens’, storage and repairmen’s Liens and other similar Liens arising in the ordinary course of business and securing obligations (other than Indebtedness for borrowed money); (d) Liens incurred or pledges or deposits made to secure obligations incurred in the ordinary course of business under workers’ compensation laws, unemployment insurance or other similar social security legislation (other than in respect of employee benefit plans subject to ERISA) or to secure public or statutory obligations; (e) Liens securing the performance of, or payment in respect of, bids, insurance premiums, deductibles or co-insured amounts, tenders, government or utility contracts (other than for the repayment of borrowed money), surety, stay, customs and appeal bonds and other obligations of a similar nature incurred in the ordinary course of business; (f) Liens arising out of judgments or awards that have been in force for less than the applicable period for taking an appeal so long as such judgments or awards do not constitute an Event of Default under clause (j) of Section 11; (g) customary rights of setoff and liens upon (i) deposits of cash in favor of banks or other depository institutions in which such cash is maintained in the ordinary

B-11

course of business, (ii) cash and financial assets held in securities accounts in favor of banks and other financial institutions with which such accounts are maintained in the ordinary course of business and (iii) assets held by a custodian in favor of such custodian in the ordinary course of business including securing payment of fees, indemnities and other similar obligations; (h) Liens arising solely from precautionary filings of financing statements under the Uniform Commercial Code of the applicable jurisdictions in respect of operating leases entered into by the Company or any of its Subsidiaries in the ordinary course of business; (i) easements, rights of way, zoning restrictions and similar encumbrances on real property and minor irregularities in the title thereto that do not (i) secure obligations for the payment of money or (ii) materially impair the value of such property or its use by any Obligor or any of its Subsidiaries in the normal conduct of such Person’s business; (j) Liens in favor of any escrow agent solely on and in respect of any cash earnest money deposits made by any Obligor in connection with any letter of intent or purchase agreement (to the extent that the acquisition or disposition with respect thereto is otherwise permitted hereunder); (k) precautionary Liens, and filings of financing statements under the Uniform Commercial Code, covering assets sold or contributed to any Person not prohibited hereunder; (l) Liens incurred in connection with any Hedging Agreement entered into with a Lender (or an Affiliate of a Lender) in the ordinary course of business and not for speculative purposes; (m) Liens which secure obligations under a Corporate Facility; and (n) Liens permitted under, or that would be permitted under, a Corporate Facility.

“Permitted SBIC Guarantee” means a guarantee by the Company of Indebtedness of an SBIC Subsidiary on the SBA’s then applicable form, provided that the recourse to the Company thereunder is expressly limited only to periods after the occurrence of an event or condition that is an impermissible change in the control of such SBIC Subsidiary (it being understood that, as provided in Section 11(o), it shall be an Event of Default hereunder if any such event or condition giving rise to such recourse occurs).

“Permitted Transferee” means at any time any Person (i) which is identified on Schedule 6.1 or (ii) for whom the investment management decisions are made by a Permitted Advisor.

“Person” means any natural person, vessel, corporation, limited liability company, trust, joint venture, association, company, partnership, governmental authority or other entity.

“Placement Agent” means Goldman, Sachs & Co.

“Plan” means any employee pension benefit plan within the meaning of Section 3(2) of ERISA (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Company or any ERISA Affiliate is or within the six-year period immediately preceding the date hereof, was (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be), an “employer” as defined in Section 3(5) of ERISA.

“Portfolio Investment” means any Investment held by the Obligors in their asset portfolio.

B-12

“Private Placement Agent” means any company organized as a “broker” or “dealer” (as each such term is defined in Section 3(a) (4) and (5), respectively, of the Exchange Act) of recognized national standing regularly engaged as an intermediary in the placement or sale to and among Institutional Investors of Indebtedness Securities exempt from registration under the Securities Act.

“property” or “properties” means, unless otherwise specifically limited, real or personal property of any kind, tangible or intangible, choate or inchoate.

“PTE” is defined in Section 6.2(a).

“Purchaser” is defined in the first paragraph of this Agreement.

“QPAM Exemption” means Prohibited Transaction Class Exemption 84-14 issued by the United States Department of Labor, as amended effective November 3, 2010.

“Qualified Institutional Buyer” means any Person who is a “qualified institutional buyer” within the meaning of such term as set forth in Rule 144A(a)(1) under the Securities Act.

“Rating” means a rating of the Notes, which rating shall specifically describe the Notes, including their interest rate, maturity and Private Placement Number, issued by a NRSRO.

“Regulations T, U and X” means, respectively, Regulations T, U and X of the Board of Governors of the Federal Reserve System (or any successor), as the same may be modified and supplemented and in effect from time to time.

“Related Fund” means, with respect to any holder of any Note, any fund or entity that (a) invests in Securities or bank loans, and (b) is advised or managed by such holder, the same investment advisor as such holder or by an affiliate of such holder or such investment advisor.

“Required Holders” means, at any time, the holders of more than 50% in principal amount of the Notes at the time outstanding (exclusive of Notes then owned by the Company or any of its Affiliates).

“Responsible Officer” means any Financial Officer and any other officer of the Company with responsibility for the administration of the relevant portion of this Agreement.

“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any shares of any class of capital stock of the Company or any of its Subsidiaries, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such shares of capital stock of the Company or any option, warrant or other right to acquire any such shares of capital stock of the Company.

B-13

“RIC” means a person qualifying for treatment as a “regulated investment company” under the Code.

“S&P” means S&P Global Ratings, or any successor thereto.

“SBA” means the United States Small Business Administration or any Governmental Authority succeeding to any or all of the functions thereof.

“SBIC Equity Commitment” means a commitment by the Company to make one or more capital contributions to an SBIC Subsidiary.

“SBIC Subsidiary” means any direct or indirect Subsidiary (including such Subsidiary’s general partner or managing entity to the extent that the only material asset of such general partner or managing entity is its equity interest in the SBIC Subsidiary) of the Company licensed as a small business investment company under the Small Business Investment Act of 1958 (or that has applied for such a license and is actively pursuing the granting thereof by appropriate proceedings promptly instituted and diligently conducted), and which is designated by the Company (as provided below) as an SBIC Subsidiary, so long as (a) no portion of the Indebtedness or any other obligations (contingent or otherwise) of such Subsidiary: (i) is Guaranteed by any Obligor (other than a Permitted SBIC Guarantee or analogous commitment), (ii) is recourse to or obligates any Obligor in any way (other than in respect of any SBIC Equity Commitment, Permitted SBIC Guarantee or analogous commitment), or (iii) subjects any property of any Obligor, directly or indirectly, contingently or otherwise, to the satisfaction thereof, (b) no Obligor has any obligation to maintain or preserve such Subsidiary’s financial condition or cause such entity to achieve certain levels of operating results (other than in respect of any SBIC Equity Commitment, Permitted SBIC Guarantee or analogous commitment), (c) other than pursuant to a Permitted SBIC Guarantee, neither the Company nor any of its Subsidiaries has any material contract, agreement, arrangement or understanding with such Person other than on terms no less favorable to the Company or such Subsidiary than those that might be obtained at the time from Persons that are not Affiliates of the Company or such Subsidiary and (d) such Person has not Guaranteed or become a co-borrower under, and has not granted a security interest in any of its properties to secure, and the Equity Interests it has issued are not pledged to secure, in each case, any indebtedness, liabilities or obligations of any one or more of the Obligors. Any such designation by the Company shall be effected pursuant to a certificate of a Financial Officer delivered to the holders of the Notes, which certificate shall include a statement to the effect that, to the best of such officer’s knowledge, such designation complied with the foregoing conditions.

“SEC” means the Securities and Exchange Commission.

“Section 8.3 Proposed Prepayment Date” is defined in Section 8.3(c).

“Securities Act” means the Securities Act of 1933, and the rules and regulations promulgated thereunder from time to time in effect.

B-14

“Senior Unsecured Indebtedness” means all Indebtedness of the Company that is not expressed to be subordinate or junior in rank to any other Indebtedness of the Company and that is not secured.

“Series” means any series of Notes issued pursuant to this Agreement or any Supplement hereto.

“Series 2020A Notes” is defined in Section 1.1 of this Agreement.

“Shareholders’ Equity” means, at any date, the amount determined on a consolidated basis, without duplication, in accordance with GAAP, of shareholders’ equity or net assets, as applicable, for the Company and its Subsidiaries at such date.

“Solar Capital Ltd.” means Solar Capital Ltd., a Maryland corporation.

“Solar Capital Partners, LLC” means Solar Capital Partners, LLC, a Delaware limited liability company.

“Source” is defined in Section 6.2.

“Standard Securitization Undertakings” means, collectively, (a) customary arm’s-length servicing obligations (together with any related performance guarantees), (b) obligations (together with any related performance guarantees) to refund the purchase price or grant purchase price credits for dilutive events or misrepresentations (in each case unrelated to the collectability of the assets sold or the creditworthiness of the associated account debtors or loan obligors) and (c) representations, warranties, covenants and indemnities (together with any related performance guarantees) of a type that are reasonably customary in accounts receivable or loan securitizations.

“State Sanctions List” means a list that is adopted by any state Governmental Authority within the United States of America pertaining to Persons that engage in investment or other commercial activities in Iran or any other country that is a target of economic sanctions imposed under U.S. Economic Sanctions Laws.

“Subsidiary” means, with respect to any Person (the “parent”) at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. Anything herein to the contrary notwithstanding, the term “Subsidiary” shall not include any Person that constitutes an Investment held by any Obligor in the ordinary course of business and that is not, under GAAP,

B-15

consolidated on the financial statements of the Company and its Subsidiaries, provided that a Person that constitutes such an Investment that is not consolidated pursuant to the foregoing at any time shall continue not to be a “Subsidiary” even if such Person is subsequently required to be consolidated on the financial statements of the Company as a result of any change in GAAP after the Closing. Unless otherwise specified, “Subsidiary” means a Subsidiary of the Company.

“Subsidiary Guarantee” is defined in Section 9.7(a).

“Subsidiary Guarantor” means any Subsidiary that is a Guarantor under a Subsidiary Guarantee.

“SUNS SPV Credit Agreement” means that certain Loan and Servicing Agreement, by and among SUNS SPV LLC, as the borrower, the Company, as the servicer and the transferor, Citigroup Global Markets Inc., as the administrative agent, and the other parties party thereto, as the same may be amended, restated, amended and restated, supplemented, refinanced, substituted or otherwise modified from time to time.

“SUNS SPV LLC” means SUNS SPV LLC, a Delaware limited liability company.

“Supplement” is defined in Section 2.4.

“SVO” means the Securities Valuation Office of the NAIC or any successor of such Office.

“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

“tranche” means all Notes of a Series having the same maturity, interest rate, currency and schedule for mandatory prepayments.

“Transactions” means the execution, delivery and performance by the Company of this Agreement and the other Note Documents to which it is a party, the issuance of the Notes and the use of the proceeds thereof.

“Uniform Commercial Code” means the Uniform Commercial Code as in effect from time to time in the State of New York.

“U.S. Economic Sanctions Laws” means those laws, executive orders, enabling legislation or regulations administered and enforced by the United States pursuant to which economic sanctions have been imposed on any Person, entity, organization, country or regime, including the Trading with the Enemy Act, the International Emergency Economic Powers Act, the Iran Sanctions Act, the Sudan Accountability and Divestment Act and any other OFAC Sanctions Program.

B-16

“U.S. Government Securities” means securities that are direct obligations of, and obligations the timely payment of principal and interest on which is fully guaranteed by, the United States or any agency or instrumentality of the United States the obligations of which are backed by the full faith and credit of the United States and in the form of conventional bills, bonds, and notes.

“USA PATRIOT Act” means United States Public Law 107-56, Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001 and the rules and regulations promulgated thereunder from time to time in effect.

“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a “complete withdrawal” or “partial withdrawal” from such Multiemployer Plan, as such terms are defined in Section 4203 and 4205 in Part I of Subtitle E of Title IV of ERISA.

B-17

SUBSIDIARIES AND DIRECTORS AND SENIOR OFFICERS

(i) Subsidiaries (other than any Financing Subsidiary, tax blocker or investment held by such tax blocker or Financing Subsidiary):

None.

(ii) The Company’s Directors and Senior Officers:


NAME		TITLE(S)
MICHAEL S. GROSS		CO-CHIEF EXECUTIVE OFFICER, PRESIDENT, AND CHAIRMAN OF THE BOARD OF DIRECTORS

BRUCE SPOHLER		CO-CHIEF EXECUTIVE OFFICER, CHIEF OPERATING OFFICER AND DIRECTOR

RICHARD PETEKA		CHIEF FINANCIAL OFFICER, TREASURER AND SECRETARY

GUY TALARICO		CHIEF COMPLIANCE OFFICER

STEVEN HOCHBERG		DIRECTOR

DAVID S. WACHTER		DIRECTOR

LEONARD A. POTTER		DIRECTOR

SCHEDULE 5.4

(to Note Purchase Agreement)

DESCRIPTION OF NECESSARY CONSENTS, APPROVALS, ETC.

None.

SCHEDULE 5.7

(to Note Purchase Agreement)

LIENS AND INDEBTEDNESS

Part A: Existing Indebtedness

•

SUNS SPV Credit Agreement

•

Total principal amount outstanding or that is, or may become, outstanding: $225,000,000

•

Interest rate: floating rate based on LIBOR

•

Loan and Servicing Agreement, dated as of August 26, 2011, by and among SUNS SPV LLC, as borrower, the Company, as servicer and as transferor, Citibank, N.A., as administrative agent and collateral agent, Wells Fargo Bank, National Association, as collateral custodian, backup servicer and account bank, and the lenders and lender agents from time to time party thereto, as amended, restated, supplemented or otherwise modified from time to time.

•

Contribution Agreement, dated as of August 26, 2011 (as amended, restated, supplemented or otherwise modified from time to time, the “SUNS SPV Contribution Agreement”), between the Company, as the contributor, and SUNS SPV LLC, as the contribute.

•

FLLP Loan and Servicing Agreement

•

Total principal amount outstanding or that is, or may become, outstanding: $75,000,000

•

Interest rate: floating rate based on LIBOR

•

Loan and Servicing Agreement, dated as of February 13, 2015 (as amended, restated, supplemented or otherwise modified from time to time, the “FLLP Loan and Servicing Agreement”), by and among FLLP 2015-1, LLC, as borrower, the Company, as servicer and as transferor, Wells Fargo Bank, National Association, as administrative agent, collateral agent, collateral custodian and account bank, and the lenders and lender agents from time to time party thereto.

•

Purchase and Sale Agreement, dated as of February 13, 2015 (as amended, restated, supplemented or otherwise modified from time to time, the “FLLP Purchase and Sale Agreement”), by and between FLLP 2015-1, LLC and the Company.

SCHEDULE 5.15

(to Note Purchase Agreement)

Part B: Liens:

•

Liens on loan assets securing the obligations of SUNS SPV LLC under the SUNS SPV Credit Agreement.

•

Liens on loan assets contributed by the Company to SUNS SPV LLC pursuant to the SUNS SPV Contribution Agreement.

•

Liens on loan assets securing the obligations of FLLP 2015-1, LLC under the FLLP Loan and Servicing Agreement.

•

Liens on loan assets sold by the Company to FLLP 2015, 1 LLC pursuant to the FLLP Purchase and Sale Agreement.

5.15 - 2

INVESTMENTS


Deposit Accounts

Bank	Name of Account	Account Number
Citibank, N.A.	Solar Senior Capital Ltd.	[Redacted]

Securities Accounts

Securities Intermediary	Name of Account	Account Number
Citibank, N.A.	Solar Senior Capital Ltd.	[Redacted]

SCHEDULE 5.19

(to Note Purchase Agreement)

PERMITTED TRANSFEREES/PERMITTED ADVISORS

[Redacted]

SCHEDULE 6.1

(to Note Purchase Agreement)

AFFILIATE TRANSACTIONS

None.

SCHEDULE 10.8(e)

(to Note Purchase Agreement)

[FORM OF SERIES 2020A NOTE]

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY JURISDICTION. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, ASSIGNED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT (I) PURSUANT TO A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES THAT IS EFFECTIVE UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS, OR (II) IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE ACT OR APPLICABLE STATE SECURITIES LAW, INCLUDING PURSUANT TO RULE 144 OR RULE 144A, PROVIDED THAT AN OPINION OF COUNSEL (WHICH MAY BE INTERNAL COUNSEL) SHALL BE FURNISHED TO THE COMPANY (IF REASONABLY REQUESTED BY THE COMPANY), IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION UNDER THE ACT AND/OR APPLICABLE STATE SECURITIES LAW.

SOLAR SENIOR CAPITAL LTD.

3.90% SERIES 2020A SENIOR NOTE, DUE MARCH 31, 2025


No. [_________]		[Date]
$[____________]		PPN 83416M A*6

FOR VALUE RECEIVED, the undersigned, SOLAR SENIOR CAPITAL LTD. (herein called the “Company”), a corporation organized and existing under the laws of the State of Maryland, hereby promises to pay to [________________], or registered assigns, the principal sum of [________________] DOLLARS (or so much thereof as shall not have been prepaid) on March 31, 2025, with interest (computed on the basis of a 360-day year of twelve 30-day months) on the unpaid balance hereof at the rate of (a) 3.90% per annum, as may be adjusted in accordance with Section 1.2 of the Note Purchase Agreement (as hereinafter defined), from the date hereof, payable semiannually, on the last day of March and September in each year, commencing with the March 31 or September 30 next succeeding the date hereof, and on the Maturity Date until the principal hereof shall have become due and payable, and (b) to the extent permitted by law, on any overdue payment of interest and, during the continuance of an Event of Default, on such unpaid balance and on any overdue payment of any Make-Whole Amount, at a rate per annum from time to time equal to the Default Rate (as defined in the hereinafter defined Note Purchase Agreement).

Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of Goldman Sachs Bank USA in New York, New York or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreement referred to below.

EXHIBIT 1

(to Note Purchase Agreement)

This Note is one of a series of Senior Notes (herein called the “Notes”) issued pursuant to the Note Purchase Agreement, dated as of March 31, 2020 (as from time to time amended, supplemented or modified, the “Note Purchase Agreement”), among the Company and the respective Purchasers named therein and Additional Purchasers of Notes from time to time issued pursuant to any Supplement to the Note Purchase Agreement. This Note and the holder hereof are entitled equally and ratably with the holders of all other Notes of all series from time to time outstanding under the Note Purchase Agreement to all the benefits provided for thereby or referred to therein. Each holder of this Note will be deemed, by its acceptance hereof, to have (i) agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreement, (ii) made the representations and agreements set forth in Sections 6.2 and 6.1(b), (d) and (f) of the Note Purchase Agreement and (iii) agreed that any transfer or other disposition of this Note is otherwise subject to the terms and conditions contained in the Note Purchase Agreement. Unless otherwise indicated, capitalized terms used in this Note shall have the respective meanings ascribed to such terms in the Note Purchase Agreement.

This Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder’s attorney duly authorized in writing, a new Note of the same Series and tranche for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the Person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary.

This Note and the holder hereof are entitled equally and ratably with the holders of all of the Notes to the rights and benefits provided pursuant to the terms and provisions of each Subsidiary Guarantee (as such term is defined in the Note Purchase Agreement), if any. Reference is hereby made to the foregoing for a statement of the nature and extent of the benefits for the Notes afforded thereby and the rights of the holders of the Notes.

This Note is subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreement, but not otherwise.

If an Event of Default occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreement.

E-1-2

This Note shall be construed and enforced in accordance with, and the rights of the Company and the holder of this Note shall be governed by, the law of the State of New York, excluding choice-of-law principles of the law of such State that would permit application of the laws of a jurisdiction other than such State.


SOLAR SENIOR CAPITAL LTD.

By
		Name:
		Title:

E-1-3

SOLAR SENIOR CAPITAL LTD.

[NUMBER] SUPPLEMENT TO NOTE PURCHASE AGREEMENT

Dated as of ______________________

Re: $____________ _____% Series _______ Senior Notes

Due

EXHIBIT S

(to Note Purchase Agreement)

SOLAR SENIOR CAPITAL LTD.

40 East 52nd Street

New York, New York 10022

Dated as of

____________________, 20__

To the Series [____] Additional

Purchaser(s) named in

Schedule A hereto

Ladies and Gentlemen:

This [Number] Supplement to Note Purchase Agreement (the “Supplement”) is among Solar Senior Capital Ltd., a Maryland corporation (the “Company”), and the institutional investors named on Schedule A attached hereto (the “Series [__] Additional Purchasers”).

Reference is hereby made to that certain Note Purchase Agreement dated as of March 31, 2020 (the “Note Purchase Agreement”) among the Company and the Purchasers listed on Schedule A thereto. All capitalized terms not otherwise defined herein shall have the same meanings as specified in the Note Purchase Agreement. Reference is further made to Section 4.18 of the Note Purchase Agreement which requires that, prior to the delivery of any Additional Notes, the Company and each Additional Purchaser shall execute and deliver a Supplement.

The Company hereby agrees with the Series [__] Additional Purchaser(s) as follows:

1. The Company has authorized the issue and sale of $__________ aggregate principal amount of its _____% Series ______ Senior Notes due _________, ____ (the “Series ______ Notes”). The Series ____ Notes, together with the Series 2020A Notes issued pursuant to the Note Purchase Agreement and each series of Additional Notes which may from time to time hereafter be issued pursuant to the provisions of Section 2.4 of the Note Purchase Agreement, are collectively referred to as the “Notes” (such term shall also include any such notes issued in substitution therefor pursuant to Section 13 of the Note Purchase Agreement). The Series _____ Notes shall be substantially in the form set out in Exhibit 1 hereto with such changes therefrom, if any, as may be approved by the Series [__] Additional Purchaser(s) and the Company.

2. Subject to the terms and conditions hereof and as set forth in the Note Purchase Agreement and on the basis of the representations and warranties hereinafter set forth, the Company agrees to issue and sell to each Series [__] Additional Purchaser, and each Series [__] Additional Purchaser agrees to purchase from the Company, Series _____ Notes in the principal amount set forth opposite such Series [__] Additional Purchaser’s name on Schedule A hereto at a price of 100% of the principal amount thereof on the closing date hereinafter mentioned.

3. The sale and purchase of the Series ______ Notes to be purchased by each Series [__] Additional Purchaser shall occur at the offices of [Chapman and Cutler LLP, 111 West Monroe Street, Chicago, Illinois 60603,] at 9:00 A.M. [Chicago time], at a closing (the “Series [____] Closing”) on ______, ____ or on such other Business Day thereafter on or prior to _______, ____ as may be agreed upon by the Company and the Series [__] Additional Purchasers. At the Series [____] Closing, the Company will deliver to each Series [__] Additional Purchaser the Series ______ Notes to be purchased by such Purchaser in the form of a single Series ______ Note (or such greater number of Series ______ Notes in denominations of at least $100,000 as such Series [__] Additional Purchaser may request) dated the date of the Series [____] Closing and registered in such Series [__] Additional Purchaser’s name (or in the name of such Series [__] Additional Purchaser’s nominee), against delivery by such Series [__] Additional Purchaser to the Company or its order of immediately available funds in the amount of the purchase price therefor by wire transfer of immediately available funds for the account of the Company to account number [__________________________] at ____________ Bank, [Insert Bank address, ABA number for wire transfers, and any other relevant wire transfer information]. If, at the Series [____] Closing, the Company shall fail to tender such Series ______ Notes to any Series [__] Additional Purchaser as provided above in this Section 3, or any of the conditions specified in Section 4 shall not have been fulfilled to any Series [__] Additional Purchaser’s satisfaction, such Series [__] Additional Purchaser shall, at such Series [__] Additional Purchaser’s election, be relieved of all further obligations under this Agreement, without thereby waiving any rights such Series [__] Additional Purchaser may have by reason of such failure or such nonfulfillment.

4. The obligation of each Series [__] Additional Purchaser to purchase and pay for the Series ______ Notes to be sold to such Series [__] Additional Purchaser at the Series [____] Closing is subject to the fulfillment to such Series [__] Additional Purchaser’s satisfaction, prior to the Series [____] Closing, of the conditions set forth in Section 4 of the Note Purchase Agreement with respect to the Series ______ Notes to be purchased at the Series [____] Closing as if each reference to “2020A Notes” or “Notes,” “Closing” and “Purchaser” set forth therein was modified to refer the “Series ______ Notes,” the “Series [____] Closing” and the “Series [__] Additional Purchaser” (each as defined in this Supplement) and to the following additional conditions:

(a) Each of the representations and warranties of the Company set forth in Exhibit A hereto shall be correct as of the date of the Series [____] Closing (except for representations and warranties which apply to a specific earlier date which shall be true as of such earlier date) and the Company shall have delivered to each Series [____] Additional Purchaser an Officer’s Certificate, dated the date of the Series [____] Closing certifying that such condition has been fulfilled.

(b) Contemporaneously with the Series [____] Closing, the Company shall sell to each Series [__] Additional Purchaser, and each Series [__] Additional Purchaser shall purchase, the Series ______ Notes to be purchased by such Series [__] Additional Purchaser at the Series [____] Closing as specified in Schedule A.

S-2

5. [Here insert special provisions for Series ______ Notes including mandatory prepayment provisions applicable to Series ______ Notes and any series-specific closing conditions applicable to Series ______ Notes].

6. (a) Each Series [__] Additional Purchaser represents and warrants that the representations and warranties set forth in Section 6 of the Note Purchase Agreement are true and correct on the date hereof with respect to the purchase of the Series ______ Notes by such Series [__] Additional Purchaser as if each reference to “2020A Notes” or “Notes,” “Series [____] Closing” and “Purchaser” set forth therein was modified to refer the “Series ______ Notes,” the “Series [____] Closing” and the “Series [__] Additional Purchaser” and each reference to “this Agreement” therein was modified to refer to the Note Purchase Agreement as supplemented by this Supplement.

(b) Each Series [____] Additional Purchaser for itself represents that it is either (i) an Institutional Accredited Investor acting for its own account or as a fiduciary or agent for others (which others are also Institutional Accredited Investors) or (ii) a “qualified institutional buyer” as defined under Rule 144A acting for its own account or as a fiduciary or agent for others (which others are also “qualified institutional buyers”).

7. The Company and each Series [__] Additional Purchaser agree to be bound by and comply with the terms and provisions of the Note Purchase Agreement as fully and completely as if such Series [__] Additional Purchaser were an original signatory to the Note Purchase Agreement.

8. This Supplement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York, excluding choice-of-law principles of the law of such State that would permit the application of the laws of a jurisdiction other than such State.

S-3

The execution hereof shall constitute a contract between the Company and the Series [__] Additional Purchaser(s) for the uses and purposes hereinabove set forth, and this agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement.


SOLAR SENIOR CAPITAL LTD.

By
		Name:
		Title:

Accepted as of __________, _____


[SERIES [____] ADDITIONAL PURCHASER]

By
		Name:
		Title:

S-4

INFORMATION RELATING TO SERIES [____] ADDITIONAL PURCHASERS


NAME AND ADDRESS OF SERIES [____] ADDITIONAL PURCHASER				PRINCIPAL AMOUNT OF SERIES ______ NOTES TO BE PURCHASED
[NAME OF SERIES [____] ADDITIONAL PURCHASER]				$

(1) All payments by wire transfer of immediately available funds to: with sufficient information to identify the source and application of such funds.
(2) All notices of payments and written confirmations of such wire transfers:
(3) All other communications:

SCHEDULE A

(to Supplement)

SUPPLEMENTAL REPRESENTATIONS

[FULL REPRESENTATIONS MODELLED ON NPA TO BE INCLUDED]

[ADD ANY ADDITIONAL SECTIONS AS APPROPRIATE AT THE TIME THE SERIES ______ NOTES ARE ISSUED]

[FORM OF SERIES _____ NOTE]

SOLAR SENIOR CAPITAL LTD.

% SERIES SENIOR NOTE, DUE


No. [_________]		[Date]
$[____________]		PPN 83416M [_____]

FOR VALUE RECEIVED, the undersigned, SOLAR SENIOR CAPITAL LTD. (herein called the “Company”), a corporation organized and existing under the laws of the State of Maryland, hereby promises to pay to [________________], or registered assigns, the principal sum of [________________] DOLLARS (or so much thereof as shall not have been prepaid) on _____, with interest (computed on the basis of a 360-day year of twelve 30-day months) on the unpaid balance hereof at the rate of (a) _____ % per annum, as may be adjusted in accordance with Section 1.2 of the Note Purchase Agreement (as hereinafter defined), from the date hereof, payable semiannually, on the [_____] day of _____ and _____ in each year, commencing with the _____ or _____ next succeeding the date hereof, and on the Maturity Date until the principal hereof shall have become due and payable, and (b) to the extent permitted by law, on any overdue payment of interest and, during the continuance of an Event of Default, on such unpaid balance and on any overdue payment of any Make-Whole Amount, at a rate per annum from time to time equal to the Default Rate (as defined in the hereinafter defined Note Purchase Agreement).

EXHIBIT 1

(to Supplement)

This Note is one of a series of Senior Notes (herein called the “Notes”) issued pursuant to a Supplement to the Note Purchase Agreement, dated as of March 31, 2020 (as from time to time amended, supplemented or modified, the “Note Purchase Agreement”), among the Company and the respective Purchasers named therein and Additional Purchasers of Notes from time to time issued pursuant to any Supplement to the Note Purchase Agreement. This Note and the holder hereof are entitled equally and ratably with the holders of all other Notes of all series from time to time outstanding under the Note Purchase Agreement to all the benefits provided for thereby or referred to therein. Each holder of this Note will be deemed, by its acceptance hereof, to have (i) agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreement, (ii) made the representations and agreements set forth in Sections 6.2 and 6.1(b), (d) and (f) of the Note Purchase Agreement and (iii) agreed that any transfer or other disposition of this Note is otherwise subject to the terms and conditions contained in the Note Purchase Agreement. Unless otherwise indicated, capitalized terms used in this Note shall have the respective meanings ascribed to such terms in the Note Purchase Agreement.

This Note is subject to [mandatory] [optional] prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreement, but not otherwise.

-2-


SOLAR SENIOR CAPITAL LTD.

By
		Name:
		Title:

-3-

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CO-CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael S. Gross, Co-Chief Executive Officer of Solar Senior Capital Ltd., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Solar Senior Capital Ltd.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated this 7th day of May, 2020

/S/ MICHAEL S. GROSS

Michael S. Gross

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CO-CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Bruce J. Spohler, Co-Chief Executive Officer of Solar Senior Capital Ltd., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Solar Senior Capital Ltd.;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated this 7th day of May, 2020

/S/ BRUCE J. SPOHLER

Bruce J. Spohler

EX-31.3

EXHIBIT 31.3

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Richard L. Peteka, Chief Financial Officer of Solar Senior Capital Ltd., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Solar Senior Capital Ltd.;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated this 7th day of May, 2020

/S/ RICHARD L. PETEKA

Richard L. Peteka

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CO-CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. 1350)

In connection with the Quarterly Report on Form 10-Q for the period ended March 31, 2020 (the “Report”) of Solar Senior Capital Ltd. (the “Registrant”), as filed with the Securities and Exchange Commission on the date hereof, I, MICHAEL S. GROSS, the Co-Chief Executive Officer of the Registrant, hereby certify, to the best of my knowledge, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.


		/S/ MICHAEL S. GROSS
Name:		Michael S. Gross
Date:		May 7, 2020

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF CO-CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. 1350)

In connection with the Quarterly Report on Form 10-Q for the period ended March 31, 2020 (the “Report”) of Solar Senior Capital Ltd. (the “Registrant”), as filed with the Securities and Exchange Commission on the date hereof, I, BRUCE J. SPOHLER, the Co-Chief Executive Officer of the Registrant, hereby certify, to the best of my knowledge, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.


		/S/ BRUCE J. SPOHLER
Name:		Bruce J. Spohler
Date:		May 7, 2020

EX-32.3

EXHIBIT 32.3

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. 1350)

In connection with the Quarterly Report on Form 10-Q for the period ended March 31, 2020 (the “Report”) of Solar Senior Capital Ltd. (the “Registrant”), as filed with the Securities and Exchange Commission on the date hereof, I, RICHARD L. PETEKA, the Chief Financial Officer of the Registrant, hereby certify, to the best of my knowledge, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.


		/S/ RICHARD L. PETEKA
Name:		Richard L. Peteka
Date:		May 7, 2020