UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

SCHEDULE 14A
(RULE 14a-101)

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934

Check the appropriate box:

RAND CAPITAL CORPORATION
(Name of Registrant as Specified In Its Charter)

N/A
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

PRELIMINARY PROXY STATEMENT – SUBJECT TO COMPLETION DATED MARCH 11, 2019

Rand Capital Corporation 2200 Rand Building Buffalo, New York 14203

Dear Fellow Shareholders:

You are cordially invited to attend the special meeting of the shareholders of Rand Capital Corporation (the “Company”) to be held on                , 2019, at               , local time, at The Buffalo Club,                  Room, 388 Delaware Avenue, Buffalo, New York, 14202 (Business Attire Required). Only shareholders of record at the close of business on                  , 2019 are entitled to notice of, and to vote at, the special meeting, or any adjournment or postponement thereof. You will find the details of the business to be conducted at the special meeting in the accompanying Notice of Special Meeting of Shareholders (“Notice”) and proxy statement.

Background

On January 25, 2019, the Company announced that it had entered into a stock purchase agreement (the “Stock Purchase Agreement”) with East Asset Management, LLC (“East”). Under the Stock Purchase Agreement, East will purchase approximately 8.3 million shares of the Company’s common stock, par value $0.10 per share (the “Common Stock”), at a price of $3.00 per share, for total consideration payable to the Company of $25.0 million (the “Stock Purchase Transaction”). The consideration will consist of a combination of cash and the contribution of income-producing portfolio assets. As a result of the stock purchase, East will hold approximately 57% of the outstanding shares of the Company. The sale price per share of Common Stock in the Stock Purchase Transaction represents a 33% premium over the closing price of the Common Stock on January 24, 2019, the day prior to the announcement of the Stock Purchase Transaction.

In connection with the closing of the Stock Purchase Transaction, which is described in greater detail in the Notice and the accompanying proxy statement, the Company and East will enter into a shareholder agreement. This shareholder agreement provides East with the right to designate two or three persons for nomination for election to the Board. The number of persons that East will be eligible to designate for nomination at any given time will depend upon the size of the Company’s board of directors (the “Board”).

In addition, a new entity, Rand Capital Management LLC (the “Adviser”), has been established as an external management company and will be retained by the Company to be its external investment adviser. The Company’s operations will remain in Buffalo, New York. Allen F. “Pete” Grum will be retained as the Adviser’s President and Chief Executive Officer and remain the President and Chief Executive Officer of the Company. Daniel P. Penberthy will be retained as the Adviser’s Executive Vice President and Chief Financial Officer and remain the Executive Vice President and Chief Financial Officer of the Company. Messrs. Grum and Penberthy, along with representatives of East and the Adviser, will also be members of the Adviser’s investment committee.

Future Plans and Expected Benefits to Shareholders

After the closing of the transactions, the Company intends to declare and pay a special dividend to shareholders in an amount equal to the Company’s “accumulated earnings and profits” for tax purposes since the Company’s inception (the “Special Dividend”). As of               , the estimated amount of the Special Dividend is approximately $               , or $                 per share, based on shares of Common Stock outstanding as of                ,2019. Shareholders will have the option to elect to receive the Special Dividend in cash or Common Stock, subject to the 20% cap on the cash portion of the Special Dividend. If too many shareholders elect to receive their distribution in cash, the amount of cash available for distribution will be allocated pro rata among the shareholders electing to receive the distribution in cash and the remaining portion of their distribution will be paid in shares of Common Stock.

After payment of the intended Special Dividend and contingent upon meeting certain tax-related conditions, the Company and its subsidiary, Rand Capital SBIC, Inc., each expect to elect to be taxed for U.S. tax purposes as a regulated investment company (“RIC”), and, in connection therewith, the Company expects to adopt a new dividend policy that includes regular cash dividends to shareholders.

However, despite it being our intention to declare and pay the Special Dividend to shareholders after the completion of the transactions, we cannot assure you that the Special Dividend, or any other dividend or distribution, will be paid to shareholders after the completion of the transactions or at all or that the Company will ever adopt a new dividend policy that includes regular cash dividends to shareholders.

We believe the transactions are important in the transformation of the Company to drive future growth and to increase shareholder value. We believe that with expanded resources to be made available to the Company from the proposed transactions, the Company will be able to broaden its pipeline of potential investment opportunities in order to build its portfolio and grow its net investment income. The Adviser, in its capacity as the investment adviser to the Company after the closing of the transactions, expects over time to transition the Company’s portfolio to include more interest-yielding debt securities. The Company anticipates that having the Adviser serve as investment adviser and administrator to the Company, under the Investment Management Agreement (as defined below) and the Administration Agreement, respectively, will reduce the Company’s expense-to-asset ratio.

The proposed transactions, which are subject to certain shareholder and regulatory approvals and consents, are expected to close during the third quarter of 2019.

Shareholder Proposals

We are holding a special meeting to ask our shareholders to approve several proposals that are required in order to complete the transactions. At the special meeting, we are asking you to approve the following items, which are more fully described in the Notice and in the accompanying proxy statement, both of which we encourage you to read in full.

Shareholder approval of proposals 1 through 4 listed above are contingent upon each other. In other words, we need all four of these proposals to be approved for any of the transactions to take place.

Your vote is very important. The Board unanimously recommends that you vote “FOR” the approval of (i) the Sale Below NAV Proposal, (ii) the Nasdaq Proposal, (iii) the Investment Management Agreement Proposal, (iv) the Certificate of Incorporation Amendment Proposal and (v) the Adjournment Proposal.

Whether or not you expect to be present in person at the special meeting, please sign the enclosed proxy card and return it promptly in the envelope provided, or vote via Internet or telephone. Instructions are provided on the proxy card. Returning the proxy card does not deprive you of your right to attend the special meeting and to vote your shares in person.

Abstentions and broker non-votes – which occur when you do not provide voting instructions to your bank, broker or other nominee when your shares are held in “street name” – will have the same effect as a vote “AGAINST” (i) the Sale Below NAV Proposal, (ii) the Investment Management Agreement Proposal and (iii) the Certificate of Incorporation Amendment Proposal. Abstentions will have the same effect as a vote “AGAINST” the Adjournment Proposal and broker non-votes will have no effect on the vote for the Adjournment Proposal. Abstentions and broker non-votes will have no effect on the Nasdaq Proposal.

If you have any questions concerning the special meeting or the accompanying proxy statement or need help voting your shares of Common Stock, please contact our proxy solicitor, Alliance Advisors, LLC, by calling Toll-Free: (844) 853-0931.

Again, your vote is very important and we ask that you submit your vote in a timely fashion. Thank you for your anticipated support.

Sincerely,

Buffalo, New York

                     , 2019

Rand Capital Corporation

2200 Rand Building

Buffalo, New York 14203

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

To be held at:

The Buffalo Club

              Room,

388 Delaware Avenue, Buffalo, New York, 14202

              , 2019,                , local time

A special meeting of the shareholders of Rand Capital Corporation (the “Company”) will be held on                , 2019, at                 , local time, at                  The Buffalo Club,                  Room, 388 Delaware Avenue, Buffalo, New York, 14202, (Business Attire Required), to consider and vote on the following proposals:

The Board unanimously recommends that you vote “FOR” the approval of (i) the Sale Below NAV Proposal, (ii) the Nasdaq Proposal, (iii) the Investment Management Agreement Proposal, (iv) the Certificate of Incorporation Amendment Proposal and (v) the Adjournment Proposal.

Only shareholders of record at the close of business on                     , 2019 are entitled to notice of, and to vote at, the special meeting or any adjournment or postponement thereof.

By the Order of the Board of Directors,

Buffalo, New York

                    , 2019

TABLE OF CONTENTS

Appendix A – Stock Purchase Agreement

Appendix B – Investment Management Agreement

Appendix C – Administration Agreement

Appendix D – Shareholder Agreement

Appendix E – Amendment to the Certificate of Incorporation

Appendix F – Opinion of Keefe, Bruyette & Woods, Inc.

Rand Capital Corporation

2200 Rand Building

Buffalo, New York 14203

PROXY STATEMENT

Special Meeting of Shareholders

SUMMARY TERM SHEET

This summary term sheet highlights selected information included in this proxy statement related to the transactions contemplated by the Stock Purchase Agreement, dated as of January 24, 2019 (the “Stock Purchase Agreement”), by and among Rand Capital Corporation (“we,” “us,” “our” or the “Company”), East Asset Management, LLC, a Delaware limited liability company (“East”) and, solely for purposes of Sections 7.10 and 10.9(a) and (b) thereof, Rand Capital Management LLC, a Delaware limited liability company (the “Adviser”). The transactions contemplated by the Stock Purchase Agreement, and the entry into the Investment Advisory and Management Agreement (the “Investment Management Agreement”) between the Company and the Adviser, are subject to, among other things, approval of the shareholders of the Company (the “Shareholders”). This proxy statement is first being sent or made available to Shareholders on or about                 , 2019.

Subject to, and contingent upon, approval by the Shareholders, and as a condition to the consummation of the Stock Purchase Transaction, immediately prior to the consummation of the Stock Purchase Transaction, the Company will amend its certificate of incorporation (the “Certificate of Incorporation”) to increase its number of authorized shares of Common Stock, as defined below, from 10 million shares of Common Stock to 100 million shares of Common Stock (the “Amendment”). Subject to, and contingent upon, approval by the Shareholders and the satisfaction or waiver of the other conditions to closing under the Stock Purchase Agreement, at the closing of the transactions contemplated by the Stock Purchase Agreement (the “Closing”), East will contribute cash and assets having an aggregate value of $25.0 million to the Company in exchange for 8,333,333.33 shares of the Company’s common stock, par value $0.10 per share (the “Common Stock”), subject to the other terms of the Stock Purchase Agreement (the “Stock Purchase Transaction”). If each of the proposals set forth in this proxy statement is approved by the Shareholders, concurrent with the consummation of the Stock Purchase Transaction, the Company will enter into a shareholder agreement with East (the “Shareholder Agreement”) providing East with the right to designate two or three persons, depending upon the size of the Company’s board of directors (the “Board”), for nomination for election to the Board.

Subject to, and contingent upon, approval by the Shareholders, and as a condition to the consummation of the Stock Purchase Transaction, the Company and the Adviser will enter into the Investment Management Agreement and hire the Adviser as the investment adviser for the Company (the “Externalization Transaction” and, together with the Stock Purchase Transaction, each, a “Transaction,” and collectively, the “Transactions”).

If each of the proposals set forth in this proxy statement is approved by the Shareholders, concurrent with the consummation of the Externalization Transaction, the Company will also enter into an administration agreement with the Adviser pursuant to which the Adviser will serve as the Company’s administrator (the “Administration Agreement”).

After the Closing, the Company intends to declare and pay a special dividend to Shareholders in an amount equal to the Company’s “accumulated earnings and profits” for tax purposes since the Company’s inception (the “Special Dividend”). After payment of the expected Special Dividend and contingent upon meeting certain tax-related conditions, the Company and Rand Capital SBIC, Inc. (“Rand SBIC”) each expect to elect to be taxed for U.S. federal tax purposes as a regulated investment company (a “RIC”) under the Internal Revenue Code (the “Code”), and in connection therewith the Company expects to adopt a new dividend policy that includes regular cash dividends to Shareholders, subject to Board approval. However, despite it being our intention to declare and pay the Special Dividend to Shareholders after the completion of the Transactions, we cannot assure you that the Special Dividend, or any other dividend or distribution, will be paid to Shareholders after the completion of the Transactions or at all or that the Company will ever adopt a new dividend policy that includes regular cash dividends to Shareholders. See “Risk Factors ‒ We may not declare or pay the Special Dividend or begin to declare and pay regular cash dividends” for additional information regarding the risks associated with the Special Dividend.

The Stock Purchase Agreement is attached as Appendix A to this proxy statement. The Investment Management Agreement is attached as Appendix B to this proxy statement. The Administration Agreement is attached as Appendix C to this proxy statement. The Shareholder Agreement is attached as Appendix D to this proxy statement. The Amendment is attached as Appendix E to this proxy statement. We encourage you to read each of these documents carefully and in their entirety.

Neither of the Transactions will be completed unless each of (i) the Sale Below NAV Proposal, (ii) the Nasdaq Proposal, (iii) the Investment Management Agreement Proposal and (iv) the Certificate of Incorporation Amendment Proposal are approved. Entry into the Investment Management Agreement, the Administration Agreement and the Shareholder Agreement are conditions to the Closing of the Stock Purchase Transaction.

This summary term sheet may not contain all of the information that is important to you. To understand the matters described in this summary term sheet more fully and for a more complete description of the terms of the Transactions, you should carefully read this entire proxy statement and the appendices to this proxy statement.

The Stock Purchase Transaction

Parties to the Stock Purchase Agreement

The parties to the Stock Purchase Agreement are the Company, East and, solely for purposes of Sections 7.10 and 10.9(a) and (b) of the Stock Purchase Agreement, the Adviser.

The Company was incorporated under the laws of New York in February 1969. We completed our initial public offering in 1971 as an internally managed, closed-end, diversified, management investment company. We have elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). As a BDC, we are required to comply with certain regulatory requirements. For instance, we generally have to invest at least 70% of our total assets in “qualifying assets” and make available managerial assistance to the portfolio companies in which we invest. The Company established a small business investment company (“SBIC”), Rand SBIC, in 2002, whereby the Company utilizes funds borrowed from the U.S. Small Business Administration (“SBA”) to invest in portfolio companies. The Company currently operates as an internally managed investment company whereby its officers and employees conduct the business of the Company under the general supervision of its Board. Neither the Company nor Rand SBIC have currently elected to qualify to be taxed as a RIC under Subchapter M of the Code.

Our office is located at 2200 Rand Building, Buffalo, New York 14203 and our telephone number is 716-853-0802.

East was formed in 2010 as a Delaware limited liability company to invest in private and public market securities, and has formed multiple investment vehicles that provide capital to a variety of industries including energy, media, real estate, hospitality, sports and entertainment. East is an entity owned by Terry and Kim Pegula, owners of Pegula Sports & Entertainment.

The Adviser is a newly formed investment adviser that intends to register with the Securities and Exchange Commission (the “SEC”) pursuant to the Investment Advisers Act of 1940, as amended (the “Advisers Act”). The Adviser will initially be owned by East and Brian Collins. The Adviser will establish an Investment Committee (as defined herein), as discussed in the section entitled “Proposal 3 – Approval of the Investment Management Agreement – About the Investment Process of the Adviser.”

Effect on the Company if the Stock Purchase Transaction is Completed

If the proposals set forth in this proxy statement are approved by the Shareholders, and the other conditions to Closing of the Stock Purchase Transaction are satisfied or waived, the Company will issue 8,333,333.33 shares of Common Stock to East in consideration for (i) Cash Consideration (as defined below) and (ii) Contributed Investment Assets Fair Value (as defined below), having an aggregate value of $25.0 million (the “Purchase Price”).

In connection with the Closing of the Stock Purchase Transaction, the Company will:

Effect on the Company if the Stock Purchase Transaction is not Completed

If the Stock Purchase Transaction is not completed, the Company will not affect the Externalization Transaction with the Adviser, and we will continue conducting our business as an internally managed BDC and may consider and evaluate other strategic alternatives.

Purchase Price

In connection with the Stock Purchase Transaction, East will pay the Company the Purchase Price, consisting of the following:

Under the Stock Purchase Agreement, the Contributed Investment Assets Fair Value is to be determined as of 5:00 p.m. (New York, New York time) on the second business day prior to the Closing date, and such amount is to be agreed upon between the Company and East prior to the Closing of the Stock Purchase Transaction. The sum of the Cash Consideration and the Contributed Investment Assets Fair Value will be $25.0 million.

Use of Proceeds

If the Stock Purchase Transaction is completed, the Company will hold the Contributed Investment Assets as investment assets of the Company and use a portion of the cash proceeds from the Stock Purchase Transaction to pay costs and expenses incurred in connection with the Transactions. The remainder of the cash proceeds from the Stock Purchase Transaction will be used by the Company for general corporate purposes, including, for use in payment of the cash portion of the intended Special Dividend, if declared.

The following table sets forth the proposed uses of the proceeds from the Stock Purchase Transaction and assumes:

Reasons for the Transactions

In recommending that the Shareholders approve (i) the Sale Below NAV Proposal, (ii) the Nasdaq Proposal, (iii) the Investment Management Agreement Proposal, (iv) the Certificate of Incorporation Amendment Proposal and (v) the Adjournment Proposal, the Board considered the terms of the Stock Purchase Agreement, the Investment Management Agreement, the Administration Agreement and the other transactions and agreements relating thereto, as well as a range of other potential strategic alternatives and proposals. As part of its evaluation, the Board considered the financial terms, risks, timing and uncertainties of other potential strategic alternatives and proposals, as well as financial information prepared by the Company’s management. The Board consulted with outside financial and legal advisors and the Company’s management, and considered a number of reasons, including, among others:

See “The Stock Purchase Transaction – Reasons for the Transactions” for more information.

Opinion of the Company’s Financial Advisor

In connection with the Stock Purchase Transaction, the Company’s financial advisor, Keefe, Bruyette & Woods, Inc. (“KBW”), delivered a written opinion, dated January 24, 2019, to the Board as to the fairness, from a financial point of view and as of the date of the opinion, to the Company of the consideration of $3.00 per share of Common Stock to be received in the Stock Purchase Transaction. The full text of KBW’s opinion, which describes the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by KBW in preparing the opinion, is attached as Appendix F to this proxy statement. The opinion was for the information of, and was directed to, the Board (in its capacity as such) in connection with its consideration of the financial terms of the Stock Purchase Transaction. The opinion did not address the underlying business decision of the Company to engage in the Stock Purchase Transaction or enter into the Stock Purchase Agreement or constitute a recommendation to the Board in connection with the Stock Purchase Transaction, and it does not constitute a recommendation to any Shareholder or any shareholder of any other entity as to how to vote in connection with the Stock Purchase Transaction, the Externalization Transaction or any other matter (including what election any holder of Common Stock should make in the Special Dividend, if it occurs, with respect to Common Stock or cash).

See “The Stock Purchase Transaction – Opinion of the Company’s Financial Advisor” for more information.

Interests of Certain Persons Related to the Company

Shareholders should be aware that the Company’s executive officers and employees may have interests in the Stock Purchase Transaction, the Externalization Transaction and the other transactions described herein that are different from, or in addition to, those of the Shareholders generally.

Upon the Closing of the Transactions, the Company’s current executive officers and employees will terminate their employment with the Company and become employees of the Adviser; however, Allen F. “Pete” Grum will remain as President and Chief Executive Officer of the Company and Daniel P. Penberthy will remain as Executive Vice President and Chief Financial Officer of the Company. Mr. Grum will be retained as President and Chief Executive Officer of the Adviser, and Mr. Penberthy will be retained as Executive Vice President and Chief Financial Officer of the Adviser. Messrs. Grum and Penberthy will also serve as members of the Adviser’s Investment Committee.

Additionally, the Company’s executive officers, employees and directors, to the extent that they remain Shareholders as of the record date for the payment of the intended Special Dividend, if any, following the Closing date, will participate in such Special Dividend based upon their respective ownership of shares of Common Stock as of such record date.

The Board was aware of these interests and considered them, among other matters, in approving the Stock Purchase Agreement and the Investment Management Agreement, and in making its recommendation that Shareholders vote “FOR” the proposals related to the Stock Purchase Transaction and the Externalization Transaction.

Closing of the Stock Purchase Transaction

Unless otherwise mutually agreed by the Company and East, the Closing will take place no later than the third business day after the satisfaction or waiver of the latest to occur of the conditions to the Closing (as set forth in the Stock Purchase Agreement and as described in the section of this proxy statement captioned “The Stock Purchase Agreement — Conditions to the Stock Purchase Transaction”), other than conditions that by their nature are to be satisfied at the Closing and subject to the satisfaction or waiver of such conditions.

Dissenters’ Rights

Pursuant to the New York Business Corporation Law (the “BCL”) and the Certificate of Incorporation, there are no appraisal or dissenters’ rights that apply to the execution, delivery and performance of the Stock Purchase Agreement or the consummation of the Transactions.

U.S. Federal Income Tax Consequences of the Stock Purchase Transaction

The following discussion is a general summary of the anticipated U.S. federal income tax consequences of the Stock Purchase Transaction to U.S. Shareholders. Its content is based upon the Code, its legislative history, currently applicable and proposed treasury regulations under the Code and published rulings and decisions, all as currently in effect as of the date of this proxy statement, and all of which are subject to change, possibly with retroactive effect. Tax considerations under state, local and non-U.S. laws, or federal laws other than those pertaining to income tax, are not addressed in this proxy statement. This discussion has no binding effect on the Internal Revenue Service (the “IRS”) or the courts.

The Stock Purchase Transaction is not a shareholder-level action, and our U.S. and non-U.S. Shareholders, in their capacities as such, are not expected to realize any gain or loss for U.S. federal income tax purposes solely as a result of the Stock Purchase Transaction. In addition, the Company does not expect to recognize income or gain in connection with the Stock Purchase Transaction.

Required Regulatory Approvals

The Stock Purchase Transaction will not occur until the following consents of, or actions with respect to, governmental or regulatory authorities have been obtained or completed: (i) approval of the Stock Purchase Transaction by the SBA or receipt of confirmation from the SBA that approval of the Stock Purchase Transaction from the SBA is not required; (ii) registration of the Adviser as an investment adviser under the Advisers Act for purposes of serving as investment adviser to the Company under the Investment Management Agreement; (iii) filing and acceptance of the Amendment with the Department of State of the State of New York; and (iv) satisfaction of applicable requirements of Nasdaq.

The Special Dividend

After the Closing of the Transactions, the Company intends to declare the Special Dividend, expected to be comprised of 20% cash and 80% Common Stock, payable to the Shareholders. The Special Dividend is expected to be in an amount equal to the Company’s then-current “accumulated earnings and profits” since inception. As of               , the estimated amount of the Special Dividend is approximately $               , or $               per share based on shares of Common Stock outstanding as of               , 2019. Shareholders will have the option to elect to receive the Special Dividend in cash or Common Stock, subject to the 20% cap on the cash portion of the Special Dividend. If too many Shareholders elect to receive their distribution in cash, the amount of cash available for distribution will be allocated pro rata among the Shareholders electing to receive the distribution in cash and the remaining portion of their distribution will be paid in shares of Common Stock. However, despite it being our intention to declare and pay the Special Dividend to Shareholders after the completion of the Transaction, we cannot assure you that the Special Dividend, or any other dividend or distribution, will be paid to Shareholders after the completion of the Transactions or at all.

Change in Dividend Policy

In connection with completion by the Company of it and Rand SBIC’s elections to be taxed as RICs for U.S. federal tax purposes (the “RIC Election”), the Board intends to adopt a new dividend policy that includes regular cash dividends to Shareholders. Under this new dividend policy, the Board intends to distribute at least 90% of the Company’s annual “investment company taxable income” to Shareholders through a quarterly cash dividend. We also cannot assure you that the Company will ever adopt a new dividend policy that includes regular cash dividends to Shareholders.

RIC Election

In order to qualify to make the RIC Election, the Company must, among other things, distribute the Company’s previously undistributed “accumulated earnings and profits” to Shareholders. RIC qualification also requires meeting specified source-of-income and asset-diversification requirements. In addition, we must distribute to our Shareholders, in respect of each taxable year, dividends for U.S. federal income tax purposes in an amount generally at least equal to 90% of our “investment company taxable income,” which is generally equal to the sum of our net ordinary income plus the excess of our realized net short-term capital gains over our realized net long-term capital losses, determined without regard to any deduction for distributions paid. As a RIC, we generally will not have to pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that we distribute to our Shareholders.

In connection with the RIC Election, the Company also expects that Rand SBIC will elect to be taxed as a RIC for U.S. federal tax purposes. To qualify to be taxed as a RIC, Rand SBIC will also be required to meet the source-of income, asset-diversification, and minimum distribution requirements. If Rand SBIC is unable to qualify to be taxed as a RIC, the Company will not be able to satisfy the requirements necessary to make the RIC Election.

Externalization Transaction

Parties to the Investment Management Agreement and Administration Agreement

The parties to each of the Investment Management Agreement and the Administration Agreement are the Company and the Adviser.

See above under the heading “Summary Term Sheet – The Stock Purchase Transaction – Parties to the Stock Purchase Agreement” for a description of the Company and the Adviser.

Effect on the Company if the Externalization Transaction is Completed

Assuming the Company receives Shareholder approval of the Investment Management Agreement Proposal and subject to, and contingent upon, the consummation of the Stock Purchase Transaction, the Company and the Adviser will enter into the Investment Management Agreement and the Administration Agreement, pursuant to which the Adviser will serve as the Company’s investment adviser and administrator, respectively, following the Closing.

The completion of the Externalization Transaction will result in the Company converting from an internally managed BDC to an externally managed BDC, with the Adviser acting as investment adviser and administrator for the Company.

The Adviser, in its capacity as the investment adviser to the Company after the Closing, expects over time to transition the Company’s portfolio to include more interest-yielding debt securities.

The form of the Investment Management Agreement is attached hereto as Appendix B. The form of the Administration Agreement is attached hereto as Appendix C. We encourage you to read the Investment Management Agreement and the Administration Agreement carefully and in their entirety.

For more information regarding the Investment Management Agreement, Administration Agreement, and related matters, see the section of this proxy statement captioned “Proposal 3 – Approval of the Investment Management Agreement Proposal.”

Effect on the Company if the Externalization Transaction is Not Completed

If the Externalization Transaction is not completed, the Company will not enter into the Investment Management Agreement and Administration Agreement with the Adviser, and will continue its focus on conducting business as an internally managed BDC and may consider and evaluate other strategic alternatives.

The Investment Management Agreement

At the Closing, the Company and the Adviser will enter into the Investment Management Agreement and the Administration Agreement pursuant to which the Adviser will serve as the Company’s investment adviser and administrator. Because the Company is currently internally managed by its executive officers under the supervision of the Board, the Company incurs the operating costs associated with employing officers and employees. If the Transactions are consummated and the Adviser becomes the Company’s external investment adviser, the Company will be responsible for paying the Adviser the investment advisory fees set forth in the Investment Management Agreement in connection with the Adviser’s management of the Company’s investment portfolio.

Under the terms of the Investment Management Agreement, the Adviser will manage the investment and reinvestment of our assets, and, without limiting the generality of the foregoing, the Adviser will:

The Adviser’s services under the Investment Management Agreement will not be exclusive, and the Adviser may furnish similar services to other entities.

Under the Investment Management Agreement, the Company will pay the Adviser, as compensation for the investment advisory and management services, fees consisting of two components: (i) a base management fee (the “Base Management Fee”) and (ii) an incentive fee (the “Incentive Fee”). The Base Management Fee will be 1.50% per annum of the Company’s total assets (other than cash or cash equivalents but including assets purchased with borrowed funds), determined according to procedures duly adopted by the Board.

The Incentive Fee payable under the Investment Management Agreement will consist of two parts: (1) a portion based on the Company’s pre-incentive fee net investment income (the “Income Based Fee”) and (2) a portion based on the net realized capital gains received on the Company’s portfolio of securities on a cumulative basis for each calendar year, net of all realized capital losses and all unrealized capital depreciation for that same calendar year (the “Capital Gains Fee”). The Income Based Fee will be paid in each calendar quarter as follows: (i) no Income Based Fee in any quarter in which the Pre-Incentive Fee Net Investment Income for such quarter does not exceed the hurdle rate of 1.75% (7.00% annualized); (ii) 100% of the Pre-Incentive Fee Net Investment Income for any calendar quarter with respect to that portion of the Pre-Incentive Fee Net Investment Income for such calendar quarter, if any, that exceeds the hurdle rate of 1.75% (7.00% annualized) but is less than 2.1875% (8.75% annualized) and (iii) 20% of the amount of the Pre-Incentive Fee Net Investment Income for any calendar quarter with respect to that portion of the Pre-Incentive Fee Net Investment Income for such calendar quarter, if any, that exceeds 2.1875% (8.75% annualized).

“Pre-Incentive Fee Net Investment Income” is defined as interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies) accrued by the Company during the relevant calendar quarter, minus the Company’s operating expenses for such calendar quarter (including the Base Management Fee, expenses payable under the Administration Agreement, and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding any portion of Incentive Fee).

Beginning two years and three months after execution of the Investment Management Agreement, the Income Based Fee will also be subject to a look-back requirement that builds up to a trailing twelve-quarter period whereby the Company will pay the Adviser no more than 20% of the aggregate Pre-Incentive Fee Net Investment Income earned during such period less any net capital losses incurred during such period. The Income Based Fee is subject to terms and conditions as described in “Proposal 3 – Approval of the Investment Management Agreement Proposal ‒ Incentive Fee.”

The Capital Gains Fee will be 20% of the cumulative net realized capital gains, which will be determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Management Agreement), commencing with the calendar year ending on December 31, 2019.

Entry into the Investment Management Agreement by the Company and the Adviser is a condition to Closing under the Stock Purchase Agreement. For more information regarding the Investment Management Agreement, please see the section of this proxy statement captioned “Proposal 3 – Approval of the Investment Management Agreement Proposal – Terms of the Investment Management Agreement.”

The Administration Agreement

Upon Closing, the Company will enter into the Administration Agreement with the Adviser. Under the terms of the Administration Agreement, the Adviser will agree to perform (or oversee, or arrange for, the performance of) the administrative services necessary for the operation of the Company, including, but not limited to, office facilities, equipment, clerical, bookkeeping, finance, accounting, compliance and record keeping services at such office facilities and such other services as the Adviser, subject to review by the Board, will from time to time determine to be necessary or useful to perform its obligations under the Administration Agreement. The Adviser will also, on behalf of the Company and subject to the Board’s approval, arrange for the services of, and oversee, custodians, depositories, transfer agents, dividend disbursing agents, other shareholder servicing agents, accountants, attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and such other persons in any such other capacity deemed to be necessary or desirable.

The Company will reimburse the Adviser for the costs and expenses incurred by it in performing its obligations and providing personnel and facilities under the Administration Agreement.

For more information regarding the Administration Agreement, please see the section of this proxy statement captioned “Proposal 3 – Approval of the Investment Management Agreement Proposal ‒ Terms of the Administration Agreement.”

Required Regulatory Approvals

The Company and the Adviser will not enter into the Investment Management Agreement until the Adviser has registered as an investment adviser under the Advisers Act. The Company and the Adviser will enter into the Investment Management Agreement as a condition to the Closing of the Stock Purchase Transaction.

Other than registration of the Adviser as an investment adviser under the Advisers Act, we are unaware of any other material federal, state or foreign regulatory requirements or approvals required to be received prior to entry into the Investment Management Agreement by the Company and the Adviser.

The Proposals To Be Voted on at the Special Meeting

In connection with the Transactions, the Board, pursuant to this proxy statement, is submitting the following proposals to the Shareholders for approval:

Neither of the Transactions will be completed unless each of (i) the Sale Below NAV Proposal, (ii) the Nasdaq Proposal, (iii) the Investment Management Agreement Proposal and (iv) the Certificate of Incorporation Amendment Proposal are approved. Entry into the Investment Management Agreement, the Administration Agreement and the Shareholder Agreement are conditions to Closing for the Stock Purchase Transaction.

For more information regarding the Sale Below NAV Proposal, please see the section of this proxy statement captioned “Proposal 1 – Approval of the Sale Below NAV Proposal.”

For more information regarding the Nasdaq Proposal, please see the section of this proxy statement captioned “Proposal 2 – Approval of the Nasdaq Proposal.”

For more information regarding the Investment Management Agreement Proposal, please see the section of this proxy statement captioned “Proposal 3 – Approval of the Investment Management Agreement Proposal.”

For more information regarding the Certificate of Incorporation Amendment Proposal, please see the section of this proxy statement captioned “Proposal 4 – Approval of the Certificate of Incorporation Amendment Proposal.”

For more information regarding the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve (i) the Sale Below NAV Proposal, (ii) the Nasdaq Proposal, (iii) the Investment Management Agreement Proposal or (iv) the Certificate of Incorporation Amendment Proposal, please see the section of this proxy statement captioned “Proposal 5 – Adjournment of the Special Meeting Proposal.”

Recommendation of the Board

The Board has unanimously determined that the transaction contemplated by the Stock Purchase Agreement and the Company’s entry into the Investment Management Agreement are advisable and in the best interests of the Company and its Shareholders.

The Board unanimously recommends that you vote “FOR” (i) the Sale Below NAV Proposal, (ii) the Nasdaq Proposal, (iii) the Investment Management Agreement Proposal, (iv) the Certificate of Incorporation Amendment Proposal, and (v) the Adjournment Proposal.

The Special Meeting

Date, Time and Place

The special meeting will be held on              , 2019, at              , local time, at The Buffalo Club,             Room, 388 Delaware Avenue, Buffalo, New York, 14202 (Business Attire Required).

Shares Entitled to Vote

If you are a holder of Common Stock, you are entitled to one vote at the special meeting for each share of Common Stock that you held as of the close of business on         , 2019 (the “Record Date”).

Quorum

As of the Record Date, there were          shares of Common Stock outstanding and entitled to vote at the special meeting. Under the BCL and our by-laws, the presence, in person or by proxy, of the holders of a majority of the outstanding shares of Common Stock entitled to vote at the special meeting is necessary to constitute a quorum of the Shareholders to take action at the special meeting. The shares of Common Stock that are present at the special meeting or represented by a proxy will be counted for quorum purposes. Proxies submitted with abstentions and broker non-votes will be counted in determining whether or not a quorum is present.

Approval Standards

Sale Below NAV Proposal: Approval of the Sale Below NAV Proposal requires the affirmative vote of holders of a “majority of the outstanding voting securities” as defined in the 1940 Act, of (i) the outstanding shares of Common Stock and (ii) the outstanding shares of Common Stock held by persons that are not affiliated persons, as defined in the 1940 Act, of the Company. Under the 1940 Act, the vote of holders of a “majority of the outstanding voting securities” means the vote of the holders of the lesser of (a) 67% or more of the voting securities present or represented by proxy at the special meeting if the holders of more than 50% of the voting securities are present or represented by proxy or (b) more than 50% of the outstanding voting securities. An “affiliated person” is defined under the 1940 Act to include officers, directors and employees of the Company and holders of 5% or more of the outstanding Common Stock.

Nasdaq Proposal: Approval of the Nasdaq Proposal requires the affirmative vote of the holders of a majority of the votes cast on this proposal at the special meeting.

Investment Management Agreement Proposal: Approval of the Investment Management Agreement Proposal requires the affirmative vote of holders of at least a “majority of the outstanding voting securities” as defined in the 1940 Act. Under the 1940 Act, the vote of holders of a “majority of the outstanding voting securities” means the vote of the holders of the lesser of (a) 67% or more of the voting securities present or represented by proxy at the special meeting if the holders of more than 50% of the voting securities are present or represented by proxy or (b) more than 50% of the outstanding voting securities.

Certificate of Incorporation Amendment Proposal: Approval of the Certificate of Amendment Proposal requires the affirmative vote of the holders of a majority of the outstanding shares of Common Stock.

Adjournment Proposal: Approval of the Adjournment Proposal requires the affirmative vote of the holders of a majority of shares of Common Stock present in person or represented by proxy and entitled to vote on the matter.

Abstentions and broker non-votes, which occur when you do not provide voting instructions to your bank, broker or other nominee when your shares are held in “street name,” will have the same effect as a vote “AGAINST” (i) the Sale Below NAV Proposal, (ii) the Investment Management Agreement Proposal, and (iii) the Certificate of Incorporation Amendment Proposal. Abstentions will have the same effect as a vote “against” the Adjournment Proposal and broker non-votes will have no effect on the vote for the Adjournment Proposal. Abstentions and broker non-votes will have no effect on the Nasdaq Proposal.

Share Ownership of Our Directors and Executive Officers

As of the Record Date, our directors and executive officers beneficially owned and were entitled to vote, in the aggregate,         shares of Common Stock, representing approximately        % of the combined voting power of the shares of Common Stock outstanding on the Record Date.

Voting and Proxies

Any Shareholder of record entitled to vote at the special meeting may submit a proxy by returning a signed proxy card by mail in the accompanying prepaid reply envelope or by granting a proxy electronically over the Internet or by telephone, or may vote in person by appearing at the special meeting. If you are a beneficial owner and you hold your shares of Common Stock in “street name” through a bank, broker or other nominee, you should instruct your bank, broker or other nominee as to how you wish to vote your shares of Common Stock using the instructions provided by your bank, broker or other nominee. Under applicable stock exchange rules, banks, brokers or other nominees have the discretion to vote on routine matters. The proposals to be considered at the special meeting are non-routine matters, and banks, brokers and other nominees cannot vote on these proposals without your instructions. Therefore, it is important that you cast your vote or instruct your bank, broker or nominee as to how you wish to vote your shares of Common Stock.

If you are a Shareholder of record, you may change your vote or revoke your proxy at any time before it is voted at the special meeting by (i) signing another proxy card with a later date and returning it prior to the special meeting, (ii) submitting a new proxy electronically over the Internet or by telephone after the date of the earlier submitted proxy, (iii) delivering a written notice of revocation to the Company or (iv) attending the special meeting and voting in person by ballot.

If you hold your shares of Common Stock in “street name,” you should contact your bank, broker or other nominee for instructions regarding how to change your vote. You may also vote in person at the special meeting if you obtain a “legal proxy” from your bank, broker or other nominee.

QUESTIONS AND ANSWERS

The following questions and answers address some commonly asked questions regarding the Stock Purchase Transaction, the Externalization Transaction and the special meeting. These questions and answers may not address all of the questions that are important to you. We encourage you to read carefully the more detailed information contained elsewhere in this proxy statement and the appendices to this proxy statement.

In order to complete the Transactions, we need Shareholder approval of the Certificate of Incorporation Amendment Proposal to increase the number of shares of Common Stock authorized for issuance under the Certificate of Incorporation and the Sale Below NAV Proposal and the Nasdaq Proposal to sell approximately 8.3 million shares of Common Stock at a price of $3.00 per share of Common Stock to East in the Stock Purchase Transaction. Because the price per share of Common Stock in the Stock Purchase Transaction is below the Company’s current net asset value (“NAV”) per share of Common Stock, this sale requires your approval under the Sale Below NAV Proposal.

We also need your approval to enter into the Investment Management Agreement and hire the Adviser as the investment adviser for the Company under the Investment Management Agreement Proposal in connection with the Externalization Transaction. We believe that the external management structure under the Investment Management Agreement whereby the Adviser is hired as the investment adviser for the Company, provides a better structure to grow our investment portfolio and is expected to reduce our expense-to-asset ratio as we grow.

Keep in mind that, despite it being our intention to declare and pay the Special Dividend to Shareholders after the completion of the Transactions, we cannot assure you that the Special Dividend, or any other dividend or distribution, will be paid to Shareholders after the completion of the Transactions or at all, or that the Company will ever adopt a new dividend policy that includes regular cash dividends to Shareholders.

If you hold your shares of Common Stock in “street name,” you should contact your bank, broker or other nominee for instructions regarding how to change your vote. You may also vote in person at the special meeting if you obtain a “legal proxy” from your bank, broker or other nominee.

Call Toll-Free: (844) 853-0931

200 Broadacres Drive, 3^rd Floor

Bloomfield, NJ 07003

FORWARD-LOOKING STATEMENTS

Some of the statements in this proxy statement may include “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than historical facts, including but not limited to statements regarding the expected timing of the Closing; the ability of the Company to complete the Transactions considering the various closing conditions set forth in the Stock Purchase Agreement, including receipt of necessary Shareholder approvals and approval from the SBA; the Company’s intention for it and Rand SBIC to elect to be taxed as RICs for U.S. federal tax purposes; the intention to declare and pay a Special Dividend after the Closing; the intention to pay a regular cash dividend after the Closing; the expected benefits of the Transactions such as a lower expense-to-asset ratio for the Company, increased net investment income, availability of additional resources, expanded access to and sourcing platform for new investments and streamlining of operations under the external management structure with the Adviser; the business strategy of originating additional income producing investments; the competitive ability and position of the Company following the Closing; and any assumptions underlying any of the foregoing, are forward-looking statements. Forward-looking statements concern future circumstances and results and other statements that are not historical facts and are sometimes identified by the words “may,” “will,” “should,” “potential,” “intend,” “expect,” “endeavor,” “seek,” “anticipate,” “estimate,” “overestimate,” “underestimate,” “believe,” “could,” “project,” “predict,” “continue,” “target” or other similar words or expressions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove to be incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. The inclusion of such statements should not be regarded as a representation that such plans, estimates or expectations will be achieved. Important factors that could cause actual results to differ materially from such plans, estimates or expectations include, among others, (1) that one or more closing conditions set forth in the Stock Purchase Agreement may not be satisfied or waived, on a timely basis or otherwise, including that the SBA may not approve the Stock Purchase Transaction or that the required approvals by the Shareholders may not be obtained; (2) the risk that the Transactions may not be completed in the time frame expected by parties, or at all; (3) the risk that the Company or Rand SBIC may be unable to fulfill the conditions required in order to elect to be treated as RICs for U.S. federal tax purposes; (4) uncertainty of the expected financial performance of the Company following completion of the Transactions; (5) failure to realize the anticipated benefits of the Transactions, including as a result of delay in completing the Transactions; (6) the risk that the Board is unable or unwilling to declare and pay the Special Dividend or declare and pay regular dividends on a going forward basis; (7) the occurrence of any event that could give rise to termination of the Stock Purchase Agreement; (8) the risk that shareholder litigation in connection with the Transactions may affect the timing or occurrence of the Transactions or result in significant costs of defense, indemnification and liability; (9) evolving legal, regulatory and tax regimes; and (10) changes in general economic and/or industry specific conditions.

The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this proxy statement and elsewhere, including the risk factors included herein and in the “Risk Factors” sections of the Company’s most recent Annual Report on Form 10-K and most recent Quarterly Report on Form 10-Q. The forward-looking statements in this proxy statement represent the Company’s views as of the date of this proxy statement. The Company anticipates that subsequent events and developments will cause its views to change. However, while the Company may elect to update these forward-looking statements at some point in the future, it has no current intention of doing so, except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing the Company’s views as of any date subsequent to the date of this proxy statement.

RISK FACTORS

In addition to the other information contained in this proxy statement and the risk factors cited in the “Risk Factors” sections of the Company’s most recent Annual Report on Form 10-K and most recent Quarterly Report on Form 10-Q, you should also consider the following risk factors when deciding whether to vote to approve the proposals described in this proxy statement.

We may not declare or pay the Special Dividend or begin to declare and pay regular cash dividends.

As described in this proxy statement, after the Closing, we intend to declare and pay the Special Dividend to Shareholders in an amount equal to the Company’s “accumulated earnings and profits” for tax purposes since the Company’s inception. In addition, in connection with our intended RIC Election, we expect to adopt a new dividend policy that includes regular cash dividends to Shareholders. While we intend to declare and pay the Special Dividend and intend to adopt a new dividend policy that includes regular cash dividends to Shareholders, we cannot assure you that we will declare and pay any dividends, including the Special Dividend. All dividends, including the Special Dividend, will be paid at the discretion of our Board and will depend on our earnings, our financial condition and, with respect to the payment of regular cash dividends, maintenance of our status as a RIC and such other factors as our Board may deem relevant from time to time. In addition, with respect to Rand SBIC, any dividend or distribution from Rand SBIC to the Company will need to be in compliance with the rules and regulations of the SBA and, if Rand SBIC is unable to comply with the SBA’s rules and regulations, require Rand SBIC to seek and obtain approval or a waiver from the SBA in order to make any such dividend or distribution. We cannot assure you that Rand SBIC will be able to obtain any such approval or waiver from the SBA. Furthermore, if the Transactions are not completed, without the Cash Consideration, we will likely be unable to pay the Special Dividend to Shareholders or distribute our “accumulated earnings and profits” as to be in the position to make the RIC Election, as we will have insufficient capital resources on hand to declare and pay the Special Dividend. Our ability to declare and pay regular cash dividends will depend upon whether we achieve investment results that will allow us to pay a specified level of cash dividends. Our ability to pay dividends might be adversely affected by, among other things, the Adviser’ inability to successfully or timely execute on its investment strategy and the impact of one or more of the other risk factors described herein.

East will exercise significant influence over us in connection with its ownership of Common Stock.

Following the Closing, East is expected to beneficially own approximately 57% of the Company’s outstanding Common Stock and, pursuant to the Shareholder Agreement, and will have the right to designate two or three persons, depending upon the size of the Board, for nomination for election to the Board. As a result, East will be able to direct the outcome of any matters submitted for Shareholder action after the Closing of the Transactions, including approval of significant corporate transactions, such as amendments to our governing documents, business combinations, consolidations and mergers. East will have substantial influence on us, including a substantial presence on the Board, and could exercise its influence in a manner that conflicts with the interests of other Shareholders. The presence of a significant Shareholder may also have the effect of making it more difficult for a third party to acquire us or for the Board to discourage a third party from seeking to acquire us following the Closing of the Transactions.

Completion of the Stock Purchase Transaction will result in substantial dilution to existing holders of Common Stock.

Pursuant to the Stock Purchase Transaction, we will issue 8,333,333.33 shares of Common Stock to East at a price per share below NAV, which will result in their ownership of approximately 57% of the Company’s outstanding Common Stock upon completion of the Transactions. Completion of the Transactions will result in significant dilution in the percentage ownership interest and voting power of existing holders of Common Stock. This substantial dilution may negatively impact the trading price for shares of our Common Stock. For more information, see the section of this proxy statement captioned “Proposal 1 – Approval of the Sale Below NAV Proposal.”

The Adviser has no prior experience managing or acting as an investment adviser for a BDC.

The Adviser is a newly formed entity that has no prior experience managing or acting as an investment adviser for a BDC. Although the Company’s existing officers and employees will become employed by the Adviser after the Closing, all investment decisions to be made by the Adviser will be made by its Investment Committee, which consists of five persons, of which the Company’s current executive officers will be two of the five persons on the Investment Committee. The investment philosophy and techniques to be used by the Adviser, and in particular its Investment Committee, to manage the Company may differ from the investment philosophy and techniques previously employed by the Adviser’s investment team in identifying and managing other investments and that of the Company’s current management. Accordingly, we can offer no assurance that the Adviser will be successful with respect to its investment decision in acting as our investment adviser, and our investment returns could be substantially lower than the returns we have achieved in the past.

The Contributed Investment Assets may be determined in the future to have a value that is less than the Contributed Investment Asset Fair Value attributed to such assets at Closing.

In connection with the Closing, the Company and East will agree upon a Contributed Investment Asset Fair Value for each of the Contributed Investment Asset to be contributed by East to the Company as consideration in the Stock Purchase Transaction. Given the Contributed Investment Assets consist of loans and other securities of privately held companies, determining the fair value of these Contributed Investment Assets is subjective and inherently uncertain. As a result, the parties could agree to attribute a Contributed Investment Asset Fair Value to any such Contributed Investment Asset that is later determined to be in excess of its actual fair market value. Furthermore, the Company’s due diligence investigation of the Contributed Investment Assets may not reveal risks inherent in any Contributed Investment Asset or the underlying portfolio companies. As a result, the business, results of operations or financial condition of any such portfolio company may decline after the Closing, resulting in Contributed Investment Assets having a fair value that is less than the Contributed Investment Assets Fair Value attributed to such assets at Closing.

After the Closing of the Transactions, we will be dependent upon the Adviser for our future success.

After the Closing, we will not have any employees. The Company’s operations will remain in Buffalo, New York. Allen F. “Pete” Grum will be retained as the Adviser’s President and Chief Executive Officer and remain the President and Chief Executive Officer of the Company. Daniel P. Penberthy will be retained as the Adviser’s Executive Vice President and Chief Financial Officer and remain the Executive Vice President and Chief Financial Officer of the Company. We will depend on the diligence, skill, investment expertise and network of business contacts of the Adviser’s investment professionals and the Investment Committee to source appropriate investments for us. We will depend on members of the Adviser’s investment team and the Investment Committee to appropriately analyze our investments and on members of the Adviser’s Investment Committee to make investment decisions for us. The Adviser’s investment team will evaluate, negotiate, structure, close and monitor our investments. Our future success will depend on the continued availability of the members of the Adviser’s investment team and the Investment Committee and the other investment professionals available to the Adviser. Although the current employees of the Company are expected to enter into employment letter agreements with the Adviser, the Company will not have employment agreements with these individuals or other key personnel of the Adviser, including members of the Investment Committee, and we cannot provide any assurance that unforeseen business, medical, personal or other circumstances would not lead any such individual to terminate his or her relationship with the Adviser. The loss of a material number of senior investment professionals to which the Adviser has access or members of the Investment Committee, could have a material adverse effect on our ability to achieve our investment objective as well as on our financial condition and results of operations. In addition, we cannot assure you that the Adviser will remain our investment adviser or that we will continue to have access to the Adviser’s investment professionals or the Investment Committee or its information and deal flow.

Our executive officers and employees may have interests in the Transactions other than, or in addition to, the interests of our Shareholders generally.

Our executive officers and employees may have interests in the Transactions that are different from, or are in addition to, the interests of our Shareholders generally. Upon the Closing of the Transactions, the Company’s current executive officers and employees will terminate their employment with the Company and become employees of the Adviser; however, Allen F. “Pete” Grum will remain as President and Chief Executive Officer of the Company and Daniel P. Penberthy will remain as Executive Vice President and Chief Financial Officer of the Company. Mr. Grum will be retained as President and Chief Executive Officer of the Adviser, and Mr. Penberthy will be retained as Executive Vice President and Chief Financial Officer of the Adviser. Messrs. Grum and Penberthy will also serve as members of the Adviser’s Investment Committee. See “The Stock Purchase Transaction – Interests of Certain Persons Related to the Company” for more information.

There are potential conflicts of interest, including the management of other investment funds and accounts by the principals and certain members of the Investment Committee of the Adviser, which could impact our investment returns.

The principals and certain members of the Investment Committee of the Adviser manage other funds and accounts for other entities affiliated with members of the Adviser’s Investment Committee. Accordingly, they have obligations to those investors, the fulfillment of which may not be in the best interests of, or may be adverse to the interests of, us or our Shareholders. Although the principals, members of the Investment Committee and other professional staff of the Adviser are expected to devote as much time to our management as appropriate to enable the Adviser to perform its duties in accordance with the Investment Management Agreement, the members of the Investment Committee and investment professionals of the Adviser may have conflicts in allocating their time and services among the Adviser, on the one hand, and the other investment vehicles managed by affiliated entities of the Adviser, on the other hand.

The Adviser, including members of its Investment Committee, may face conflicts in allocating investment opportunities between us and other investment vehicles affiliated with members of the Investment Committee that have overlapping investment objectives with ours. Although the Adviser, including members of the Investment Committee, will endeavor to allocate investment opportunities in a fair and equitable manner in accordance with its allocation policies and procedures, it is possible that, in the future, we may not be given the opportunity to participate in investments made by investment funds managed by the Adviser or members of the Investment Committee if such investment is prohibited by law.

Our ability to enter into transactions with affiliates of the Adviser will be restricted.

After the Closing of the Transactions, we and certain of our controlled affiliates will be prohibited under the 1940 Act from knowingly participating in certain transactions with our upstream affiliates, or the Adviser and its affiliates, without the prior approval of the “required majority” of our directors as defined in Section 57(o) of the 1940 Act and, in some cases, the SEC. Any person that owns, directly or indirectly, 5% or more of our outstanding voting securities is our upstream affiliate for purposes of the 1940 Act, and we are generally prohibited from buying or selling any security (other than our securities) from or to such affiliate, absent the prior approval of the “required majority” of our directors as defined in Section 57(o) of the 1940 Act. The 1940 Act also prohibits “joint” transactions with an upstream affiliate, or the Adviser or its affiliates, which could include investments in the same portfolio company (whether at the same or different times), without prior approval of the “required majority” of our directors as defined in Section 57(o) of the 1940 Act. In addition, we and certain of our controlled affiliates will be prohibited from buying or selling any security from or to, or entering into joint transactions with, the Adviser and its affiliates, or any person, including East, who owns more than 25% of our voting securities or is otherwise deemed to control, be controlled by, or be under common control with us, absent the prior approval of the SEC through an exemptive order (other than in certain limited situations pursuant to current regulatory guidance). The analysis of whether a particular transaction constitutes a joint transaction requires a review of the relevant facts and circumstances then existing.

As a BDC, we are required to comply with certain regulatory requirements. For example, we will generally not be permitted to make loans to companies controlled by the Adviser or other funds managed by the Adviser. We will also not be permitted to make any co-investments with the Adviser or its affiliates (including any fund managed by the Adviser or an investment adviser controlling, controlled by or under common control with the Adviser) without exemptive relief from the SEC, subject to certain exceptions.

The proposed fee structure under the Investment Management Agreement may induce the Adviser to pursue speculative investments and incur leverage, which may not be in the best interests of the Shareholders.

After the Closing, the Base Management Fee will be payable even if the value of your investment declines. The Base Management Fee will be calculated based on the total assets (other than cash or cash equivalents but including assets purchased with borrowed funds), as determined according to procedures duly adopted by the Board. Accordingly, the Base Management Fee will be payable regardless of whether the value of the Company’s total assets or your investment has decreased during the then-current quarter and creates an incentive for the Adviser to incur leverage, which may not be consistent with our Shareholders’ interests.

The Incentive Fee payable to the Adviser will be calculated based on a percentage of our return on invested capital. After the Closing, the Incentive Fee payable to the Adviser may create an incentive for the Adviser to make investments on our behalf that are risky or more speculative than would be the case in the absence of such a compensation arrangement. Unlike the Base Management Fee, the Income Based Fee is payable only if the hurdle rate is achieved. Because the portfolio earns investment income on gross assets while the hurdle rate is based on net assets, and because the use of leverage increases gross assets without any corresponding increase in net asset, the Adviser may be incentivized to incur leverage to grow the portfolio, which will tend to enhance returns where our portfolio has positive returns and increase the chances that such hurdle rate is achieved. Conversely, the use of leverage may increase losses where our portfolio has negative returns, which would impair the value of the Common Stock.

In addition, the Adviser receives the Incentive Fees based, in part, upon net capital gains realized on our investments under the Capital Gains Fee. Unlike the Income Based Fee, there is no hurdle rate applicable to the Capital Gains Fee. As a result, the Adviser may have a tendency to invest more capital in investments that are likely to result in capital gains as compared to income producing securities. Such a practice could result in our investing in more speculative securities than would otherwise be the case, which could result in higher investment losses, particularly during economic downturns.

The Adviser’s liability will be limited under the Investment Management Agreement and the Administration Agreement, and we will be required to indemnify the Adviser against certain liabilities, which may lead the Adviser to act in a riskier manner on our behalf than it would when acting for its own account.

Under the Investment Management Agreement and the Administration Agreement, the Adviser will not assume any responsibility to us other than to render the services described in the Investment Management Agreement and Administration Agreement, as applicable, and it will not be responsible for any action of our Board in declining to follow the Adviser’s advice or recommendations. Pursuant to the Investment Management Agreement and the Administration Agreement, the Adviser, its members and their respective officers, managers, partners, agents, employees, controlling persons, members and any other person affiliated with any of them will not be liable to us for their acts under the Investment Management Agreement and Administration Agreement, as applicable, absent willful misfeasance, bad faith, gross negligence or reckless disregard in the performance of their duties. We have agreed to indemnify, defend and protect the Adviser its members and their respective officers, managers, partners, agents, employees, controlling persons, members and any other person affiliated with any of them with respect to all damages, liabilities, costs and expenses arising out of or otherwise based upon the performance of any of the Adviser’s duties or obligations under the Investment Management Agreement or Administration Agreement, as applicable, or otherwise as investment adviser or administrator, as applicable, for us, and not arising out of willful misfeasance, bad faith, gross negligence or reckless disregard in the performance of their duties under the Investment Management Agreement or the Administration Agreement. These protections may lead the Adviser to act in a riskier manner when acting on our behalf than it would when acting for its own account.

We borrow money, which could magnify the potential for gain or loss on amounts invested in us and increase the risk of investing in us.

We borrow money as part of our business plan through Rand SBIC and may borrow money in the future. Borrowings, also known as leverage, magnify the potential for gain or loss on invested equity capital and may, consequently, increase the risk of investing in us. We expect to continue to use leverage to finance our investments, through senior securities issued by banks and other lenders. Lenders of these senior securities have fixed dollar claims on our assets that are superior to claims of our Shareholders and we would expect such lenders to seek recovery against our assets in the event of default. If the value of our assets decreases, leveraging would cause our net asset value to decline more sharply than it otherwise would have had we not been leveraged. Similarly, any decrease in our income would cause our net income to decline more sharply than it would have had we not borrowed monies. Such a decline could adversely affect our ability to make dividend payments, if any, in the future. In addition, because our investments may be illiquid, we may be unable to dispose of them or to do so at a favorable price in the event we need to do so if we are unable to refinance any indebtedness upon maturity and, as a result, we may suffer losses. Leverage is generally considered a speculative investment technique and increases the risks associated with investing in our Common Stock.

Our ability to service any debt that we incur depends largely on our financial performance and is subject to prevailing economic conditions and competitive pressures. Moreover, if the Transactions are completed, the Adviser’s Base Management Fee will be payable to the Adviser based on total assets, including those assets acquired through the use of leverage; this may cause the Adviser to have a financial incentive to incur leverage, which may not be consistent with our interests and the interests of our Shareholders. In addition, holders of our Common Stock will, indirectly, bear the burden of any increase in our expenses as a result of leverage, including any increase in the Base Management Fee payable to the Adviser.

If the Transactions are completed, we may experience fluctuations in our annual and quarterly results due to the nature of our business.

If the Transactions are completed, the Adviser, in its capacity as the investment adviser to the Company after the Closing, expects over time to transition the Company’s portfolio to include more interest-yielding debt securities. We could experience fluctuations in our annual and quarterly operating results due to a number of factors, some of which are beyond our control, including the Adviser’s ability or inability to make investments in companies that meet our investment criteria, the interest rate payable on the debt securities acquired and the default rate on such securities, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in the markets in which we operate and general economic conditions. As a result of these factors, results for any period should not be relied upon as being indicative of performance in any future periods.

The failure to complete the Transactions may result in a decrease in the market value of the Common Stock.

After the Transactions were announced, the market price for our Common Stock rose sharply. The Transactions are each subject to a number of contingencies, including approval by our Shareholders and the closing conditions set forth in the Stock Purchase Agreement. As a result, we cannot assure you that the Transactions will be completed. If the Transactions are not completed for any reason, the market price of the Common Stock may decline, including to a price per share that is below the price per share on the date that the Transactions were announced.

If the Transactions are not consummated, there may not be any other offers from potential acquirers or parties interested in a potential strategic transaction.

If the Transactions are not consummated, we may seek another strategic transaction. Although we have had such discussions with various parties in the past, these parties may no longer have an interest in a strategic transaction with the Company, or be willing to offer a reasonable purchase price or other consideration in connection therewith. See the section entitled “The Stock Purchase Transaction – Background of the Transactions.”

If we do not complete the Transactions, we will continue to face challenges and uncertainties in our ability to achieve business success.

Historically, the Company has focused on a total return strategy that involved seeking to achieve long-term capital appreciation on the Company’s equity investments, while maintaining a current cash flow from the Company’s debt investments and pass-through equity instruments to fund expenses. The Company has observed that this total return strategy has become disfavored among investors, resulting in an increasingly larger spread between the share price for the Common Stock and the Company’s NAV per share. If the Transactions are not completed, we may not be able to engage another external investment adviser to manage our investment strategy and will remain, for the time being, as an internally managed BDC that is likely to continue the same legacy total return strategy. Furthermore, without the Cash Consideration, we will likely be unable to pay the intended Special Dividend to Shareholders or distribute our “accumulated earnings and profits” as to be in the position to make the RIC Election. Therefore, if we are unable to complete the Transactions, we may need to continue to operate our business in a manner that is substantially similar to the manner in which it is currently operated, and would continue to face the same business challenges and uncertainties associated with our current business strategy, and possibly even on a more acute basis.

Under certain circumstances, a Termination Fee may be payable by the Company upon termination of the Stock Purchase Agreement.

The Stock Purchase Agreement provides for the payment by the Company of a Termination Fee (as defined herein) of up to $750,000 if the Stock Purchase Agreement is terminated under certain circumstances. Given the Company’s financial condition and amount of cash and cash equivalents on hand, payment of the Termination Fee in an amount up to $750,000 would likely have a material adverse effect on the Company’s financial condition and on its ability to make any significant new investments or follow-on investments in the near future.

The Stock Purchase Agreement limits the Company’s ability to pursue alternatives to the Transactions.

The Stock Purchase Agreement contains provisions that limit the Company’s ability to actively solicit, discuss or negotiate competing third-party proposals for strategic transactions. These provisions, which are typical for transactions of this type, and include the Termination Fee payable under certain circumstances, might discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of the Company from considering or proposing that acquisition even if it were prepared to pay consideration with a higher price than that to be paid by East in the Stock Purchase Transaction or might result in a potential competing acquirer proposing to pay a lower price to acquire the Company than it might otherwise have proposed to pay without the Company’s requirement to pay the Termination Fee in order to terminate the Stock Purchase Agreement to accept a superior proposal.

The Stock Purchase Transaction is subject to closing conditions, including receipt of Shareholder approvals, that, if not satisfied or appropriately waived, will result in the Transactions not being completed, which may result in material adverse consequences to the Company’s business and operations.

The Stock Purchase Transaction is subject to closing conditions, including certain approvals of Shareholders and approval of the Stock Purchase Transaction by the SBA, which, if not satisfied, will prevent the Transactions from being completed. The closing condition that the Shareholders approve the Stock Purchase Transaction, the Investment Management Agreement and certain other proposals described herein may not be waived under applicable law and must be satisfied for the Transactions to be completed. If the Shareholders do not approve (i) the Sale Below NAV Proposal, (ii) the Nasdaq Proposal, (iii) the Investment Management Agreement Proposal and (iv) the Certificate of Incorporation Amendment Proposal, the resulting failure to complete the Transactions could have a material adverse impact on the Company’s business and operations. In addition to the required approvals from the Shareholders, the Stock Purchase Transaction is subject to a number of other conditions, some of which are beyond the Company’s direct control. See “The Stock Purchase Agreement – Conditions to the Stock Purchase Transaction” for additional information regarding the conditions to Closing set forth in the Stock Purchase Agreement. The Company cannot predict when the conditions set forth in the Stock Purchase Agreement will be satisfied or if they will be satisfied at all.

The Company will be subject to operational uncertainties and contractual restrictions while the Transactions are pending.

Uncertainty about the effect of the Transactions may have an adverse effect on the Company while the Transactions are pending. These uncertainties may impair the Company’s ability to retain and motivate key personnel until the Transactions are consummated and could cause those that deal with the Company to seek to change their existing relationships with the Company. Furthermore, future potential portfolio companies may be unwilling to accept the Company’s investments or loans given the uncertainty that will exist while the Transactions are pending. In addition, the Stock Purchase Agreement imposes limitations on the Company with respect to actions that it can take while the Transactions are pending, which may result in the Company not pursuing or being unable to pursue certain business opportunities that may arise prior to the completion of the Transactions.

If the Transactions do not close, the Company will not benefit from the expenses incurred in furtherance of the Transactions.

The Transactions may not be completed. If the Transactions are not completed, the Company will have incurred substantial expenses for which no ultimate benefit will have been received. The Company has incurred out-of-pocket expenses in connection with the Transactions for investment banking, legal and accounting fees and financial printing and other related charges, much of which will be incurred even if the Transactions are not completed. In addition, in the event the Stock Purchase Agreement is terminated under certain circumstances, the Company may be required to pay a Termination Fee.

The Company may waive one or more conditions to the Stock Purchase Transaction without resoliciting Shareholder approval.

Certain conditions to the Company’s obligations to complete the Stock Purchase Transaction as set forth in the Stock Purchase Agreement may be waived, in whole or in part, to the extent legally allowed, either unilaterally or by agreement of the Company and East. In the event that any such waiver does not require re-solicitation of Shareholders, the Company and East will have the discretion to complete the Stock Purchase Transaction without seeking further Shareholder approval. The condition in the Stock Purchase Agreement that requires the Company to obtain approval of the Shareholders for the proposals set forth in this proxy statement, however, cannot be waived. See “The Stock Purchase Agreement – Conditions to the Stock Purchase Transaction” for more information.

THE SPECIAL MEETING

This proxy statement summarizes the information regarding the matters to be voted on at the special meeting. However, you do not need to attend the special meeting to vote your shares of Common Stock. You may simply complete, sign, and return the enclosed proxy card, or submit your vote by calling toll free at the telephone number indicated on the enclosed proxy card, or vote your shares through the Internet, as indicated on the proxy card. You may also grant a proxy (i.e., authorize someone to vote your shares). If you properly sign and date the accompanying proxy card or otherwise provide voting instructions, either via the Internet or telephone, as indicated on the proxy card and the Company receives the proxy card or such instruction in time for the special meeting, the persons named as proxies will vote the shares registered directly in your name in the manner that you specified.

As of the Record Date, there were                 shares of Common Stock outstanding and entitled to vote at the special meeting. If you are a holder of Common Stock, you are entitled to one vote at the special meeting for each share of Common Stock that you held as of the close of business on the Record Date. The Company began mailing this proxy statement on or about               , 2019 to all Shareholders entitled to vote their shares of Common Stock at the special meeting.

Time and Location

We will hold the special meeting on            , 2019 at               , local time, at The Buffalo Club,              Room, 388 Delaware Avenue, Buffalo, New York 14202 (Business Attire Required).

Attending the Special Meeting

You are entitled to attend the special meeting only if you were a Shareholder as of the close of business on the Record Date, or if you hold a valid proxy for the special meeting. You must present valid photo identification, such as a driver’s license or passport, for admittance. If you are not a Shareholder of record of the Company but hold shares as a beneficial owner in street name, in order to attend the special meeting, you must also provide proof of beneficial ownership, such as your most recent account statement prior to the Record Date, a copy of the voting instruction form provided by your broker, bank, or other nominee, or other similar evidence of ownership of shares of Common Stock. If you do not provide photo identification or comply with the other procedures outlined above, you will not be admitted to the special meeting.

Proposals to approve each of (i) the Sale Below NAV Proposal, (ii) the Nasdaq Proposal, (iii) the Investment Management Agreement Proposal, (iv) the Certificate of Incorporation Amendment Proposal and (v) the Adjournment Proposal.

At the special meeting, you will be asked to vote on each of (i) the Sale Below NAV Proposal, (ii) the Nasdaq Proposal, (iii) the Investment Management Agreement Proposal, (iv) the Certificate of Incorporation Amendment Proposal and (v) the Adjournment Proposal.

Recommendation of the Board

The Board unanimously recommends that you vote “FOR” each of (i) the Sale Below NAV Proposal, (ii) the Nasdaq Proposal, (iii) the Investment Management Agreement Proposal, (iv) the Certificate of Incorporation Amendment Proposal and (v) the Adjournment Proposal.

Shareholders Entitled to Vote

You are entitled to vote if you were a holder of record of Common Stock as of the close of business on the Record Date.

All holders of Common Stock as of the Record Date, voting together, will be entitled to vote for the approval of each of (i) the Nasdaq Proposal, (ii) the Investment Management Agreement Proposal, (iii) the Certificate of Incorporation Amendment Proposal and (iv) the Adjournment Proposal, in each case, at the special meeting.

In addition, all holders of Common Stock as of the Record Date, voting together, will be entitled to vote for the approval of the Sale Below NAV Proposal, but approval must obtained from both (i) the outstanding shares of Common Stock and (ii) the outstanding shares of Common Stock held by persons that are not affiliated persons, as defined in the 1940 Act, of the Company. See the section entitled “The Special Meeting – Approval Standards” for more information.

Quorum

To conduct business at the special meeting, a quorum of Shareholders must be present at the special meeting. Under the BCL and our by-laws, the presence, in person or by proxy, of the holders of a majority of the outstanding shares of Common Stock entitled to vote at the special meeting is necessary to constitute a quorum of the Shareholders to take action at the special meeting. The shares of Common Stock that are present at the special meeting or represented by a proxy will be counted for quorum purposes. Abstentions will be treated as shares present for quorum purposes. Shares for which brokers have not received voting instructions from the beneficial owner of the shares and do not have discretionary authority to vote on certain proposals (which are considered “broker non-votes” with respect to such proposals) will be treated as shares present for quorum purposes.

If a quorum is not present, the vote of a majority of the Shareholders present in person or by proxy and entitled to vote shall have the power to adjourn the special meeting from time to time, for a period not to exceed 30 days at any one time, until a quorum shall be present and the business of the meeting accomplished, without notice other than announcement at the special meeting.

Shareholders Holding Shares Through Brokers, Banks or Other Nominees

If you hold shares of Common Stock through a broker, bank or other nominee, you must follow the voting instructions you receive from your broker, bank or other nominee. If you hold shares of Common Stock through a broker, bank or other nominee and want to vote in person at the special meeting, you must obtain a legal proxy from the record holder of your shares and present it at the special meeting. Please instruct your broker, bank or other nominee so your vote can be counted.

Granting Authority to Vote to Brokers, Banks or Other Nominees

Brokers, banks and other nominees have discretionary authority to vote on “routine” matters, but not on “non-routine” matters. All proposals being considered at this special meeting are non-routine. If you hold your shares of Common Stock in street name (or “nominee name”) and do not provide your broker, bank or other nominee who holds such shares of record with specific instructions regarding how to vote on the proposals, your broker may not be permitted to vote your shares on any of the proposals. Please instruct your broker, bank or other nominee so your vote can be counted.

Voting by Proxy

If you are a record holder of shares of Common Stock, you may authorize a proxy to vote on your behalf by following the instructions provided on the enclosed proxy card. Authorizing your proxy will not limit your right to vote in-person at the special meeting. A properly completed and submitted proxy will be voted in accordance with your instructions, unless you subsequently revoke your instructions. If you authorize a proxy without indicating your voting instructions, the proxyholder will vote your shares “FOR” each of (i) the Sale Below NAV Proposal, (ii) the Nasdaq Proposal, (iii) the Investment Management Agreement Proposal, (iv) the Certificate of Incorporation Amendment Proposal and (v) the Adjournment Proposal. Internet and telephone voting procedures are designed to authenticate the Shareholder’s identity and to allow such Shareholders to vote their shares and confirm that their instructions have been properly recorded. Your Internet or telephone vote authorizes the named proxies to vote your shares in the same manner as if you had marked, signed and returned a proxy card.

Receiving Multiple Proxy Cards

Many Shareholders hold their shares in more than one account and may receive separate proxy cards or voting instruction forms for each of those accounts. To ensure that all of your shares are represented at the special meeting, we recommend that you vote by following the instructions on each proxy card or voting instruction form you receive.

Revocation of Proxy

If you are a Shareholder of record, you can revoke your proxy at any time before it is exercised by (i) delivering a written revocation notice prior to the special meeting to Rand Capital Corporation, 2200 Rand Building Buffalo, New York 14203, (ii) submitting a later-dated proxy that we receive no later than the conclusion of voting at the special meeting, (iii) voting in person at the special meeting or (iv) submitting a new proxy electronically over the Internet or by telephone as indicated on the proxy card after the date of the earlier submitted proxy. If you hold shares of Common Stock through a broker, bank or other nominee, you must follow the instructions you receive from them in order to revoke your voting instructions. Attending the special meeting does not revoke your proxy unless you also vote in person at the special meeting.

Approval Standards

Sale Below NAV Proposal: Approval of the Sale Below NAV Proposal requires the affirmative vote of holders of a “majority of the outstanding voting securities” as defined in the 1940 Act, of (i) the outstanding shares of Common Stock and (ii) the outstanding shares of Common Stock held by persons that are not affiliated persons, as defined in the 1940 Act, of the Company. Under the 1940 Act, the vote of holders of a “majority of the outstanding voting securities” means the vote of the holders of the lesser of (a) 67% or more of the voting securities present or represented by proxy at the special meeting if the holders of more than 50% of the voting securities are present or represented by proxy or (b) more than 50% of the outstanding voting securities. An “affiliated person” is defined under the 1940 Act to include officers, directors and employees of the Company and holders of 5% or more of the outstanding Common Stock. Abstentions and broker non-votes, which occur when you do not provide voting instructions to your bank, broker or other nominee when your shares are held in “street name,” will have the same effect as a vote “AGAINST” this proposal.

Nasdaq Proposal: Approval of the Nasdaq Proposal requires the affirmative vote of the holders of a majority of the votes cast on this proposal at the special meeting. Abstentions and broker non-votes will have no effect on the Nasdaq Proposal.

Investment Management Agreement Proposal: Approval of the Investment Management Agreement Proposal requires the affirmative vote of holders of at least a “majority of the outstanding voting securities” as defined in the 1940 Act. Under the 1940 Act, the vote of holders of a “majority of the outstanding voting securities” means the vote of the holders of the lesser of (a) 67% or more of the voting securities present or represented by proxy at the special meeting if the holders of more than 50% of the voting securities are present or represented by proxy or (b) more than 50% of the outstanding voting securities. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” this proposal.

Certificate of Incorporation Amendment Proposal: Approval of the Certificate of Amendment Proposal requires the affirmative vote of the holders of a majority of the outstanding shares of Common Stock. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” this proposal.

Adjournment Proposal: Approval of the Adjournment Proposal requires the affirmative vote of the holders of a majority of shares of Common Stock present in person or represented by proxy and entitled to vote on the matter. Abstentions will have the same effect as a vote “AGAINST” the Adjournment Proposal and broker non-votes will have no effect on the vote for the Adjournment Proposal.

Methods of Proxy Solicitation and Related Expenses

We have engaged the services of Alliance Advisors, LLC to assist in the solicitation of proxies. Alliance Advisors, LLC will not attempt to influence how you vote your shares, but only ask that you take the time to authorize your proxy. You may also be asked if you would like to vote over the telephone and to have your vote transmitted to the proxy tabulation firm.

In addition to the solicitation of proxies by the use of mail, proxies may be solicited in person and by telephone, electronic transmission or facsimile transmission by directors or officers of the Company without special compensation therefor.

We will bear all costs of soliciting proxies for the special meeting. We estimate that we will pay Alliance Advisors, LLC, our proxy solicitor, a fee of approximately $9,000 to solicit proxies, plus we will reimburse Alliance Advisors, LLC for all out-of-pocket expenses that they incur, though the cost of this proxy solicitation process could be lower or higher than our estimate. We may also reimburse brokers, nominees, fiduciaries and other custodians their reasonable fees and expenses for sending proxy materials to beneficial owners and obtaining their instructions.

Other Matters to Be Voted on at the Special Meeting

Pursuant to the BCL and our by-laws, no matters may properly be brought before the special meeting except as specified in the Notice of the Special Meeting.

Whether or not you expect to attend the special meeting, please complete, date, sign and promptly return the accompanying proxy card so that you may be represented at the special meeting.

Who to Contact if You Have Questions

If you have any questions concerning the special meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement or need help voting your shares of Common Stock, please contact Alliance Advisors, LLC:

Call Toll-Free: (844) 853-0931

200 Broadacres Drive, 3^rd Floor

Bloomfield, NJ 07003

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Unless otherwise indicated, the following table sets forth beneficial ownership of our shares on                , 2019, by (a) persons known by us to be beneficial owners of more than 5% of the outstanding shares of Common Stock, (b) the directors and the named executive officers of the Company, and (c) all directors and executive officers as a group. For purposes of the table, the address for each of our Directors and named executive officers is c/o 2200 Rand Building, Buffalo, NY 14203. Unless otherwise stated, each person named in the table has sole voting and investment power with respect to the shares indicated as beneficially owned by that person.

Approximate Value of Investments in the Company

The following table indicates the range of value as of             , 2019 of the shares of the Company beneficially owned by each director and executive officer. The Company is not part of a family of investment companies.

THE STOCK PURCHASE TRANSACTION

This discussion of the Stock Purchase Agreement and related Stock Purchase Transaction is qualified in its entirety by reference to the Stock Purchase Agreement, which is attached to this proxy statement as Appendix A and incorporated into this proxy statement by reference. You should carefully read the entire Stock Purchase Agreement as it is the legal document that governs the Stock Purchase Transaction.

Parties to the Stock Purchase Agreement

Rand Capital Corporation

The Company was incorporated under the laws of New York in February 1969. We completed our initial public offering in 1971 as an internally managed, closed-end, diversified, management investment company. We have elected to be regulated as a BDC under the 1940 Act. As a BDC, we are required to comply with certain regulatory requirements. For instance, we generally have to invest at least 70% of our total assets in “qualifying assets” and make available managerial assistance to the portfolio companies in which we invest. The Company established an SBIC, Rand SBIC, in 2002, whereby the Company utilizes funds borrowed from the SBA to invest in portfolio companies. The Company currently operates as an internally managed investment company whereby its officers and employees conduct the business of the Company under the general supervision of its Board. Neither the Company nor Rand SBIC have currently elected to qualify to be taxed as a RIC under Subchapter M of the Code.

The Company’s principal executive offices are located at 2200 Rand Building, Buffalo, New York 14203 and our telephone number is 716-853-0802.

East

East was formed in 2010 as a Delaware limited liability company to invest in private and public market securities, and has formed multiple investment vehicles that provide capital to a variety of industries including energy, media, real estate, hospitality, sports and entertainment. East is an entity owned by Terry and Kim Pegula, owners of Pegula Sports & Entertainment.

Adviser

The Adviser is a newly formed investment adviser that intends to register with the SEC pursuant to the Advisers Act. The Adviser will initially be owned by East and Brian Collins. The Adviser will establish an Investment Committee, as discussed in the section entitled “Proposal 3 – Approval of the Investment Management Agreement – About the Investment Process of the Adviser.”

Effect on the Company if the Stock Purchase Transaction Is Completed

If the proposals are approved by the Shareholders, and the other conditions to Closing of the Stock Purchase Transaction are satisfied or waived, the Company will issue 8,333,333.33 shares of Common Stock to East in consideration for the Purchase Price consisting of (i) Cash Consideration and (ii) Contributed Investment Assets Fair Value, having an aggregate value of $25.0 million.

In connection with the Closing of the Stock Purchase Transaction, the Company will:

Effect on the Company if the Stock Purchase Transaction Is Not Completed

If the Stock Purchase Transaction is not completed, the Company will not affect the Externalization Transaction with the Adviser, and we will continue conducting our business as an internally managed BDC and may consider and evaluate other strategic alternatives.

Purchase Price

In connection with the Stock Purchase Transaction, East will pay the Company the Purchase Price, consisting of the following:

Under the Stock Purchase Agreement, the Contributed Investment Assets Fair Value is to be determined as of 5:00 p.m. (New York, New York time) on the second business day prior to the Closing date, and such amount is to be agreed upon between the Company and East prior to the Closing of the Stock Purchase Transaction. The sum of the Cash Consideration and the Contributed Investment Assets Fair Value will be $25.0 million.

Use of Proceeds

If the Stock Purchase Transaction is completed, the Company will hold the Contributed Investment Assets as investment assets of the Company and use a portion of the cash proceeds from the Stock Purchase Transaction to pay costs and expenses incurred in connection with the Transactions. The remainder of the cash proceeds from the Stock Purchase Transaction will be used by the Company for general corporate purposes, including, for use in payment of the cash portion of the intended Special Dividend, if declared.

The following table sets forth the proposed uses of the proceeds from the Stock Purchase Transaction and assumes:

Background of the Transactions

Historically, the Company has focused on a total return strategy that involved seeking to achieve long-term capital appreciation on the Company’s equity investments, while maintaining a current cash flow from the Company’s debt investments and pass-through equity instruments to fund expenses. Under this total return strategy, the Company has not declared dividends to Shareholders, but instead has sought to return value to Shareholders through share price appreciation on the Common Stock based upon realizing gains in the Company’s equity investment portfolio. The Company’s management and the Board have observed that this total return strategy has become disfavored among investors resulting in an increasingly larger spread between the share price for the Common Stock and the Company’s net asset value per share.

Consequently, during 2015 and early 2016, the Board began to consider potential strategic alternatives to increase the price of the Common Stock and to enhance Shareholder value. In 2015, the Board established a strategic committee of the Board (the “Strategic Committee”) to assist in the ongoing evaluation of potential strategic transactions. During the relevant periods of 2018 and 2019 discussed below, the Strategic Committee consisted of Erland E. Kailbourne, Robert M. Zak and Allen F. Grum. During 2015, the Strategic Committee met with representatives of multiple investment banking firms, including KBW, an investment banking firm that would subsequently be engaged to act as the Company’s financial advisor, as part of its evaluation of potential strategic options.

As part of this process, the Board considered and evaluated various potential strategic options, including (i) voluntarily delisting from Nasdaq and “going dark” by suspending or terminating reporting obligations for the Company under the Exchange Act; (ii) electing RIC tax status for U.S. tax purposes and beginning regular dividend payments to Shareholders; (iii) allowing the Company’s portfolio to run-off and distributing the proceeds from the run-off to Shareholders; (iv) selling the Company to a third party acquirer; and (v) seeking to accelerate growth by increasing available borrowing capacity and boosting participation in transactions in order to increase the size of the Company’s investment portfolio. At the completion of this evaluation process and prior to the Company’s 2016 annual meeting of Shareholders, the Board determined to pursue the strategy of seeking to accelerate growth. The Company’s management reported on the Board’s evaluation process and determination during a presentation made at the Company’s 2016 annual meeting of Shareholders and in subsequent public communications to investors.

However, since the Company’s 2016 annual meeting of Shareholders, the Company’s management has consistently stated during the Company’s earnings calls and in other public comments and communications to investors that the Company was continuing to evaluate potential alternatives and was willing to consider pursuing potential transactions as they may arise. Also, during 2016 and 2017, the Company’s management continued to meet with representatives of KBW to gain additional perspective on the potential for strategic transactions and on ways the Company might consider enhancing Shareholder value.

In late 2017, the Company’s chief executive officer, Allen F. Grum, and chief financial officer, Daniel P. Penberthy (“Company Management”), received an inquiry from a representative of an affiliate of East based in Buffalo, NY requesting to introduce Company Management to other representatives of East.

On January 18, 2018, Company Management attended an introductory in-person meeting with representatives of East in which the parties discussed broadly the possibility of seeking to work together on a possible transaction. At the close of the meeting, Company Management and representatives of East agreed to arrange for additional follow-up discussions.

On January 29, 2018, the Company sent a non-disclosure agreement to East (the “East Non-Disclosure Agreement”), which, after a negotiation period, was signed by the parties. The East Non-Disclosure Agreement included a customary “standstill” provision and related provisions designed to protect the Board’s review process for potential strategic transactions.

On January 30, 2018, representatives of East held an initial telephonic due diligence discussion with Freed Maxick CPAs, P.C., the Company’s independent registered public accounting firm, to discuss certain tax-related due diligence questions regarding the Company.

On March 1, 2018, Company Management traveled to East’s offices located in Boca Raton, Florida to hold an in-person meeting to further discuss the potential for a transaction between East and the Company.

On March 14, 2018, Company Management, the Strategic Committee and representatives of Hodgson Russ LLP (“Hodgson Russ”), the Company’s outside legal counsel, held an in-person meeting in which Company Management provided the Strategic Committee a description of the initial discussions with East. During the meeting, representatives of Hodgson Russ discussed the Strategic Committee’s legal responsibilities as part of strategic transaction review process and the standard of conduct governing the acts of directors.

On March 22, 2018, at the direction of, and after review by, the Strategic Committee, Company Management sent a letter, via email, to East requesting additional specific information regarding East and the elements of a potential transaction involving the Company.

On April 2, 2018, East provided written responses to the Company’s letter dated March 22, 2018. As part of these responses, East described the specific elements of their proposed transaction, which were (i) East to contribute assets into Rand in exchange for shares of Common Stock; (ii) the Company to declare a dividend to Shareholders in an amount sufficient to distribute the Company’s “accumulated earnings and profits” and thereby allowing the Company to be in a position to elect RIC status for U.S. tax purposes; (iii) the Company to announce a new dividend policy going forward that was consistent with other dividend-paying BDCs; and (iv) externalization of the Company’s management function to a new management company, the Adviser, to seek to bring the Company’s expenses and management structure in-line with BDC industry norms.

On April 5, 2018, the Strategic Committee held a telephonic meeting, with Company Management and representatives of Hodgson Russ present at the invitation of the Strategic Committee. During the meeting, Company Management outlined the written response received from East to the Company’s letter dated March 22, 2018. The Strategic Committee discussed and reviewed these responses, including the proposed transaction structure. At the conclusion of the meeting, the Strategic Committee instructed Company Management to have an additional meeting with East to further discuss and understand some of the responses provided.

On April 9, 2018, Company Management held a telephonic meeting with representatives of East in which general transaction structuring matters were discussed.

On April 23, 2018, Company Management received an unsolicited inquiry from representatives of Party A to discuss a possible transaction between the Company and Party A.

On April 27, 2018, Company Management and representatives of Party A had a general discussion regarding the Company and discussed the broad terms of a possible strategic transaction between the Company and Party A.

On May 2, 2018, representatives of East sent an email to Company Management, describing the regulatory approvals that would need to be obtained to proceed with a proposed transaction, including approval of the Shareholders for purposes of compliance with the 1940 Act and approval from the SBA. This email was prepared based upon advice received by East from Eversheds Sutherland (US) LLP (“Eversheds Sutherland”), as outside legal counsel to East.

On May 3, 2018, Company Management held a telephonic meeting with representatives of East to discuss the responses received from East to the Company’s letter dated March 22, 2018 and the regulatory approvals that would be required to execute on the proposed transaction.

In addition, on May 3, 2018, Company Management received a memorandum preliminarily outlining a potential transaction that involved a reverse merger of an existing portfolio company of Party A into the Company in exchange for shares of Common Stock. The transaction contemplated that the Company would terminate its status as a BDC and effect a distribution of the Company’s portfolio company securities to the existing Shareholders.

On May 21, 2018, the Company executed a non-disclosure agreement with Party A, which included a customary “standstill” provision and related provisions designed to protect the Board’s review process for potential strategic transactions.

On June 1, 2018, the Company received a draft letter of intent and exclusivity agreement from East (collectively the “East Letter of Intent”). The East Letter of Intent proposed that East would contribute an unspecified amount of assets and cash into the Company in exchange for the issuance to East of shares of Common Stock using a predetermined share price formula. In addition, the East Letter of Intent provided that the Company would declare a dividend in an amount sufficient to distribute the Company’s “accumulated earnings and profits” in a ratio of 20% in cash and 80% in the Common Stock and, in connection with announcement of the transaction, announce to the Shareholders an intention to adopt a new dividend policy that would be consistent with other dividend-paying BDCs. The East Letter of Intent proposed creating a new external management company, the Adviser, to serve as the Company’s investment adviser. With regard to the Advisor’s fee structure, the East Letter of Intent provided for a base management fee of 1.50% on total gross assets of the Company and an undefined incentive fee structure with a 20% incentive fee payable to the Adviser, subject to a 7% hurdle rate and a catch-up feature between 7% and 8.75%. Given that East projected that the Adviser would operate at a loss in connection with its provision of investment advisory services to the Company, the East Letter of Intent contemplated that the Company would pay a one-time transition fee to the Adviser in an unspecified amount during the first year after completion of the transaction. The Adviser would employ the Company’s existing management and employees and would form an investment committee to approve new investments. The East Letter of Intent proposed that, after the closing of the transaction, the Board size would be fixed at seven members with East receiving the right to nominate four members. The East Letter of Intent was non-binding and included an exclusivity provision under which the parties would agree to negotiate exclusively with one another for three months.

On June 8, 2018, the Strategic Committee held a meeting during which Company Management presented the terms of the East Letter of Intent to the Strategic Committee. The Strategic Committee discussed the potential benefits of the transactions outlined in the East Letter of Intent, including the value that it could create for the Shareholders and the immediate increased scale and liquidity that the transaction would provide, as well as the execution risks associated therewith, noting specifically the need to obtain Shareholder approval of the transaction, among other matters. Thereafter, the Strategic Committee discussed other factors to consider in connection with the East Letter of Intent and instructed Company Management to seek additional clarity on certain elements of the proposed transaction, including the price at which the Common Stock would be issued to East and the assets that were proposed to be contributed by East.

On June 12, 2018, Party B purchased 1,455,993 shares of Common Stock at a price of $3.00 per share and filed a Schedule 13D with the SEC on June 21, 2018 reporting such purchase.

On June 19, 2018, Company Management held an in-person meeting with Party A in which Party A presented a letter of intent for a proposed transaction (“Party A Letter of Intent”). The Party A Letter of Intent proposed that the holding company for Party A’s existing portfolio of companies would complete a reverse merger with and into the Company. As consideration in the merger, Party A would receive shares of Common Stock using a value of $3.17 per share of Common Stock for purposes of the issuance to Party A. After the completion of the transaction, Party A would make an offer to purchase shares of Common Stock from the other existing Shareholders at a price of $2.83 per share. The Party A Letter of Intent provided that the Company’s existing management would be retained after the completion of the transaction to manage a planned private equity investment division of the combined company. The Party A Letter of Intent was non-binding and included an exclusivity provision under which the parties would agree to negotiate exclusively with one another until either party provided 30 days’ notice to terminate the Party A Letter of Intent.

On June 22, 2018, East sent a letter to the Company providing additional supplemental information regarding the proposals described in the East Letter of Intent (the “East Supplemental Letter”). With respect to its proposal to acquire shares of Common Stock, East proposed that the aggregate investment from East would be in the amount of $25.0 million with approximately 50% of the consideration to be paid in the form of cash and approximately 50% of the consideration to come in the form of the contribution by East of existing loans originated by East to the Company. East further proposed that the purchase price for the Common Stock to be purchased in the transaction would be based upon an average of the 30-day, 60-day and 90-day moving average stock price for the Common Stock as of the day prior to the transaction’s announcement. In addition, as originally described in the East Letter of Intent, East reiterated that it intended for the Company to declare a special dividend to Shareholders in an amount sufficient to distribute the Company’s “accumulated earnings and profits,” and thereby allow the Company to be in a position to elect RIC status for U.S. tax purposes. It was East’s expectation that it would participate in this dividend as a Shareholder and that a portion of the cash consideration received from East in the Stock Purchase Transaction would be used to fund a portion of the cash portion of this special dividend.

On June 26, 2018, the Company executed a non-disclosure agreement with Party B.

On June 28, 2018, the Strategic Committee held a telephonic meeting, with Company Management and representatives of KBW present at the invitation of the Strategic Committee. During the meeting, Company Management described the contents of the East Supplemental Letter. The Strategic Committee engaged in extensive discussions about the East Letter of Intent as supplemented by the East Supplemental Letter, including the benefit to Shareholders of the proposed special dividend and the view that the purchase price for the Common Stock as proposed by East in the East Supplement Letter undervalued the Common Stock given the control position to be obtained.

On July 2, 2018, Company Management held an in-person meeting with representatives of Party B. Company Management discussed the Company’s current strategy and the contents of its investment portfolio.

On July 5, 2018, Company Management held a telephonic meeting with representatives of East in which transaction structuring matters were discussed.

On July 9, 2018, the Strategic Committee held a telephonic meeting, with Company Management and representatives of Hodgson Russ present at the invitation of the Strategic Committee. The Strategic Committee discussed extensively the East Letter of Intent, the Party A Letter of Intent and Company Management’s discussions with Party B during the July 2, 2018 meeting.

On July 11, 2018, representatives of the Adviser sent a letter to the Company (the “Investment Adviser Supplemental Letter”), in which the Adviser clarified the scope of investment advisory services proposed to be provided by the Adviser, reiterated the fee structure described in the East Letter of Intent and proposed that the Adviser be paid a one-time transition fee by the Company at the end of first year after the completion of the Transactions in the amount of $500,000 (the “Transition Fee”).

On July 16, 2018, Company Management and representatives of KBW reviewed and discussed the information provided in the Investment Adviser Supplemental Letter.

On July 17, 2018, Company Management held a telephonic meeting with representatives of East and the Adviser in which the parties discussed the Investment Adviser Supplemental Letter, including the request for payment of the Transition Fee.

On July 18, 2018, Company Management held a telephonic meeting with representatives of Party B in which further information regarding the Company was exchanged.

On July 19, 2018, the Strategic Committee held a telephonic meeting with Company Management in which Company Management reviewed the additional information provided in the Investment Adviser Supplemental Letter and Company Management’s further discussions with Party B.

On July 26, 2018, Company Management held a telephonic meeting with representatives of East and the Adviser in which the parties discussed operational details regarding the external investment adviser structure and the role of the Adviser in the Company’s operations.

On July 26, 2018, the Board held a regular in-person board meeting. At this meeting, Company Management and the Strategic Committee presented an update to the full Board regarding the work of the Strategic Committee and the current status of the process with East and Party A and the discussion that had occurred with Party B. The full Board had a full discussion regarding the East Letter of Intent and Party A Letter of Intent, including a discussion of the associated risks related to each of the potential transactions. At the conclusion of this discussion, the Board directed the Strategic Committee to continue with and finalize its review of the potential transactions and to report back to the Board with a recommendation.

On July 31, 2018, the Strategic Committee held separate in-person meetings with representatives of East and the Adviser and representatives of Party A. At the meeting with representatives of East and the Adviser, the parties discussed the East Letter of Intent, including the information provided in the East Supplemental Letter and the Investment Adviser Supplemental Letter and associated business issues. At the meeting with the representatives of Party A, the parties discussed the Party A Letter of Intent and associated business issues.

On August 6, 2018, the Strategic Committee held a telephonic meeting, with Company Management, representatives of KBW and representatives of Hodgson Russ present at the invitation of the Strategic Committee. The Strategic Committee discussed the status of its review process with respect to the East Letter of Intent and Party A Letter of Intent.

On August 31, 2018, the Strategic Committee held a telephonic meeting, with Company Management, representatives of KBW and representatives of Hodgson Russ present at the invitation of the Strategic Committee. Representatives of KBW provided an update to the Strategic Committee regarding a telephonic discussion that KBW had during mid-August with representatives of Party B, in which Party B had indicated the possibility of contributing an existing portfolio company of Party B with a proposal value of $16 million to the Company in exchange for additional shares of Common Stock at an unspecified issuance price (the “Party B Indication”). Representatives of KBW then discussed the East Letter of Intent, the Party A Letter of Intent and the Party B Indication, noting that each of the transactions would result in a different strategic direction for the Company as they each contained structural differences and therefore were not directly comparable. The Strategic Committee, with input from representatives of KBW, Company Management and representatives of Hodgson Russ, held a discussion to consider each of the proposals. At the conclusion of this discussion, the Strategic Committee determined to recommend to the full Board that the Company focus its negotiations on the proposed transaction with East and the Adviser and seek to revise the East Letter of Intent to add provision for a “go shop” period, remove the proposed Transition Fee and increase the price at which the shares of Common Stock were to be issued to East to $3.00 per share.

On September 5, 2018, the Board held a special telephonic meeting, with Company Management, representatives of KBW and representatives of Hodgson Russ present at the invitation of the Board. Representatives of KBW discussed the East Letter of Intent, the Party A Letter of Intent and the Party B Indication with the full Board. The Strategic Committee then presented its recommendation that the Company focus its negotiations on the proposed transaction with East and seek to revise the East Letter of Intent to add provision for a “go shop” period, remove the proposed Transition Fee and increase the price at which the shares of Common Stock were to be issued to East to $3.00 per share. As part of this presentation to the Board, the Strategic Committee set forth its reasoning for its recommendation, including that it believed that the proposed transaction with East provided better value to the Shareholders and had greater certainty of completion as compared with the other alternatives that were considered by the Strategic Committee. The Board then, with input from representatives of KBW, Company Management and representatives of Hodgson Russ, held a discussion to consider each proposal and the recommendation of the Strategic Committee. At the conclusion of the meeting, the Board directed Company Management and KBW to seek to negotiate the changes to the East Letter of Intent.

On September 7, 2018, at the request of Company Management, representatives of KBW had a discussion with East in which they conveyed the request to revise the East Letter of Intent to add provision for a “go shop” period, remove the proposed Transition Fee and increase the price at which the shares of Common Stock were to be issued to East to $3.00 per share. East agreed that it was only willing to remove the proposed Transition Fee and increase the price at which the shares of Common Stock were to be issued to East to $3.00 per share.

On September 18, 2018, representatives of KBW, representatives of East and the Adviser and representatives of Party B had an in-person meeting in which East presented the proposed terms set forth in the East Letter of Intent to representatives of Party B. The participants discussed the proposed terms, but no further action was taken.

On October 5, 2018, the Company received an updated Party A Letter of Intent (the “Updated Party A Letter of Intent”) in which Party A revised its proposal to (i) increase the price per share of Common Stock to be used for purposes of the determining the number of shares to be issued to Party A as the merger consideration from $3.17 per share to $3.50 per share and (ii) increase the price at which Party A would offer to purchase shares of Common Stock after completion of the transaction from $2.83 per share to $3.00 per share.

On October 8, 2018, East presented an updated draft of the East Letter of Intent (the “Updated East Letter of Intent”) in which it removed the requirement for payment of a Transition Fee and increased the price at which the shares of Common Stock would be issued to East to $3.00 per share. In addition, East revised the provision regarding the size of the Board to provide that the size would be five members or seven members as determined after the closing of the transaction with East having the right to designate two persons for nomination to the Board.

On October 10, 2018, the Strategic Committee held a telephonic meeting, with Company Management, representatives of KBW and representatives of Hodgson Russ present at the invitation of the Strategic Committee. Representatives of KBW and Company Management provided an update on the status of negotiations with East, including the revisions to the prior transaction proposal as set forth in the Updated East Letter of Intent and reported that East was unwilling to agree to a “go shop” period as part of the transaction. The Strategic Committee discussed the Updated Party A Letter of Intent, but ultimately determined that the execution risks associated with the proposed transaction with Party A did not outweigh the enhanced financial terms as set forth in the Updated Party A Letter of Intent. The Strategic Committee also discussed the fact the Company has made numerous public statements that it was willing to consider potential transactions, and therefore determined that it was willing to proceed without a “go shop” period in the transaction agreement. At the completion of the meeting, the Strategic Committee determined to recommend approval of the Updated East Letter of Intent to the Board at the meeting to be held on October 11, 2018.

On October 11, 2018, the Board held an in-person meeting, with Company Management, representatives of KBW and representatives of Hodgson Russ present at the invitation of the Board. Representatives of KBW and Company Management provided an update on the status of negotiations with East to the full Board, including the revisions to the prior transaction proposal as set forth in the Updated East Letter of Intent. The members of the Strategic Committee discussed the negotiation process and their recommendation to approve the Updated East Letter of Intent. After a discussion by the Board, with input from representatives of KBW and representatives of Hodgson Russ, regarding the terms of the Updated East Letter of Intent, the Board approved the Updated East Letter of Intent and directed Company Management to finalize negotiation of the terms of the Updated East Letter of Intent, including providing for a maximum 60-day exclusivity period, and, upon being finalized, execute the Updated East Letter of Intent.

On October 12, 2018, Company Management sent a revised draft of the Updated East Letter of Intent to East, which, among other changes, shortened the exclusivity period to 60 days.

On October 31, 2018, representatives of East sent a further revised draft of the Updated East Letter of Intent to the Company in which they proposed a 90-day exclusivity period.

On November 6, 2018, a revised draft of the Updated East Letter of Intent was exchanged in which the parties agreed to set the exclusivity period to expire on December 31, 2018 with an automatic 30-day extension period if, as of such date, the parties were working in good faith towards the execution of definitive agreements with respect to the transaction. East and the Company then each executed the Updated East Letter of Intent.

On November 9, 2018, Company Management, representatives of Hodgson Russ, representatives of East and representatives of Eversheds Sutherland held a telephonic meeting to discuss documentation preparation responsibilities based upon the executed Updated East Letter of Intent, transaction structuring issues and a transaction timeline.

On November 21, 2018, representatives of the Company presented a questionnaire to be completed by the Adviser pursuant to Section 15(c) of the 1940 Act (the “15(c) Questionnaire”) for use by the Board in connection with its evaluation of the Adviser’s capacity and capabilities to serve as the investment adviser for the Company.

On November 26, 2018, representatives of Eversheds Sutherland delivered a draft of the Stock Purchase Agreement to the Company and Hodgson Russ.

On November 27, 2018, representatives of Eversheds Sutherland delivered an initial due diligence request list to the Company and Hodgson Russ. Responses to such request were subsequently delivered to Eversheds Sutherland by the Company and Hodgson Russ during December 2018 and January 2019.

On November 28, 2018, representatives of Eversheds Sutherland delivered a draft of the Administration Agreement to the Company and Hodgson Russ.

On November 29, 2018, representatives of DLA Piper LLP (US) (“DLA Piper”), as outside legal counsel to the Adviser, delivered a draft of the Investment Management Agreement to the Company and Hodgson Russ.

On November 30, 2018, representatives of Hodgson Russ delivered a revised draft of the Investment Management Agreement to DLA Piper and the Adviser, which included proposed revised terms on the calculation of the incentive-based fees that would be payable to the Adviser.

On December 3, 2018, representatives of Hodgson Russ delivered a revised draft of the Stock Purchase Agreement to Eversheds Sutherland and East.

On December 4, 2018, representatives of Hodgson Russ and representatives of DLA Piper held a telephonic conference call to discuss Hodgson Russ’ proposed revisions to the Investment Management Agreement, including revisions to the calculation of the incentive fees payable to the Adviser under the Investment Management Agreement.

On December 5, 2018, representatives of Hodgson Russ delivered a revised draft of the Administration Agreement to Eversheds Sutherland, East and the Adviser.

On December 10, 2018, representatives of DLA Piper delivered a revised draft of the Investment Management Agreement to the Company and Hodgson Russ. In addition, on December 10, 2018, representatives of Eversheds Sutherland delivered a revised draft of the Administration Agreement and an initial draft of the Shareholder Agreement to the Company and Hodgson Russ.

On December 12, 2018, Dansa, D’Arata Soucia LLP, as advisors to the Company, delivered summary memorandums describing the terms and providing other financial information regarding each of the loans and other securities proposed to be contributed by East to the Company as a portion of the consideration payable by East in the Stock Purchase Transaction. Company Management delivered each of these summary memorandums to the Board for its review.

On December 13, 2018, representatives of Hodgson Russ delivered a revised draft of the Investment Advisory Agreement to DLA Piper and the Adviser and delivered a revised draft of the Administration Agreement and the Shareholder Agreement to Eversheds Sutherland, East and the Adviser.

On December 17, 2018, the Board, with Company Management, representatives of KBW and representatives of Hodgson Russ in attendance at the invitation of the Board, held an in-person meeting to review in detail the then-proposed terms of the Stock Purchase Agreement, the Investment Management Agreement and the Administration Agreement. During this meeting, representatives of Hodgson Russ discussed the standard of conduct and the information to be reviewed by the Board, including the 15(c) Questionnaire and accompanying information, in connection with the Board’s evaluation of the Investment Management Agreement and consideration of the approval of the Adviser to serve as investment adviser to the Company. Representatives of KBW discussed the financial aspects of the proposed Stock Purchase Transaction on a preliminary basis. After the completion of this review, representatives of East and the Adviser were invited into the meeting and made an in-person presentation to the Board regarding their background and the business case for the Stock Purchase Transaction and the Externalization Transaction.

On December 21, 2018, representatives of Eversheds Sutherland delivered a draft of a completed 15(c) Questionnaire and a revised draft of the Administration Agreement to the Company and Hodgson Russ.

On December 28, 2018, representatives of Hodgson Russ and Company Management held an in-person meeting to review the draft 15(c) Questionnaire and related materials provided by the Adviser and to discuss open business and legal issues in the Administration Agreement and the Investment Management Agreement.

On January 2, 2019, representatives of Eversheds Sutherland delivered a revised draft of the Stock Purchase Agreement and the Shareholder Agreement to the Company and Hodgson Russ.

On January 3, 2019, representatives of Hodgson Russ delivered a list of comments and questions on the draft 15(c) Questionnaire to Eversheds Sutherland.

On January 7, 2019, representatives of Hodgson Russ and representatives of Eversheds Sutherland held a telephonic meeting to discuss Hodgson Russ’ previously circulated comments and questions on the draft 15(c) Questionnaire.

On January 13, 2019, representatives of the Company delivered a list of open business and legal issues with respect to the Stock Purchase Agreement, the Shareholder Agreement, the Investment Management Agreement and the Administration Agreement to East, the Adviser and Eversheds Sutherland.

On January 14, 2019, Company Management, representatives of Hodgson Russ, representatives of East, representatives of the Adviser and representatives of Eversheds Sutherland held a telephonic meeting to discuss the list of open business and legal issues with respect to the Stock Purchase Agreement, the Shareholder Agreement, the Investment Management Agreement and the Administration Agreement.

On January 16, 2019, representatives of Hodgson Russ delivered revised drafts of the Stock Purchase Agreement, the Shareholder Agreement and the Administration Agreement to East, the Adviser and Eversheds Sutherland.

On January 17, 2019, Eversheds Sutherland delivered an updated 15(c) Questionnaire to the Company and Hodgson Russ.

In the morning of January 18, 2019, the Strategic Committee held a telephonic meeting with Company Management and representatives of Hodgson Russ to discuss the open business and legal issues with respect to the Stock Purchase Agreement, the Shareholder Agreement, the Investment Management Agreement and the Administration Agreement.

In the afternoon of January 18, 2019, representatives of Eversheds Sutherland delivered a list of open business and legal issues with respect to the Stock Purchase Agreement and the Shareholder Agreement and revised drafts of the Stock Purchase Agreement, the Shareholder Agreement and the Administration Agreement to the Company and Hodgson Russ.

In the morning of January 22, 2019, representatives of Hodgson Russ delivered an updated list of open business and legal issues with respect to the Stock Purchase Agreement and the Shareholder Agreement to East and Eversheds Sutherland. In the afternoon of January 22, 2019, representatives of Eversheds Sutherland delivered responses to each of the items included on the updated list of open business and legal issues back to the Company and Hodgson Russ.

In the morning of January 23, 2019, representatives of Hodgson Russ and Company Management held a telephonic meeting in which the responses to the updated list of open business and legal issues were reviewed. In the afternoon of January 23, 2019, representatives of Hodgson Russ delivered updated drafts of the Stock Purchase Agreement, the Shareholder Agreement and the Administration Agreement to Eversheds Sutherland, the Adviser and East, and representatives of DLA Piper delivered an updated draft of the Investment Management Agreement to Hodgson Russ and the Company. In addition, on January 23, 2019, Eversheds Sutherland delivered a final completed 15(c) Questionnaire to the Company and Hodgson Russ.

In the morning of January 24, 2019, the Strategic Committee held a telephonic meeting with Company Management and representatives of Hodgson Russ to discuss the resolution of the open business and legal issues with respect to the Stock Purchase Agreement, the Shareholder Agreement, the Investment Management Agreement and the Administration Agreement.

In the afternoon of January 24, 2019, the Board held an in-person meeting, with Company Management, representatives of KBW and Hodgson Russ in attendance at the invitation of the Board, to consider approval of the Stock Purchase Agreement, the Shareholder Agreement, the Investment Management Agreement and the Administration Agreement, and to consider whether to approve those agreements and the transactions contemplated thereby, including the Amendment to the Certificate of Incorporation. At this meeting, KBW reviewed the financial aspects of the proposed Stock Purchase Transaction and rendered an opinion to the Board to the effect that, as of such date and subject to the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by KBW as set forth in such opinion, the consideration of $3.00 per share of Common Stock to be received in the Stock Purchase Transaction was fair, from a financial point of view, to the Company.

Later during the Board meeting of January 24, 2019, representatives of Hodgson Russ reiterated the applicable standard of conduct, fiduciary duties and the responsibilities of the Board before providing an overview of the Stock Purchase Agreement, the Shareholder Agreement, the Investment Management Agreement and the Administration Agreement, including a summary of the key terms and closing conditions in each, the interaction of the agreements and related matters. Representatives of Hodgson Russ also assisted the Board in reviewing the final completed 15(c) Questionnaire. After further discussion and deliberation, the Board unanimously determined that the Stock Purchase Agreement, the Investment Management Agreement, the Shareholder Agreement and the Administration Agreement and the transactions contemplated thereby and the Amendment to the Certificate of Incorporation were advisable and in the best interests of the Company and the Shareholders and unanimously voted to approve the Stock Purchase Agreement, the Investment Advisory Agreement, the Shareholder Agreement and the Administration Agreement and the transactions contemplated thereby and the Amendment to Certificate of Incorporation, and to recommend that the Shareholders approve (i) the Sale Below NAV Proposal, (ii) the Nasdaq Proposal, (iii) the Investment Management Agreement Proposal, (iv) the Certificate of Incorporation Amendment Proposal and (v) the Adjournment Proposal, and directed that the relevant matters be submitted to the Shareholders for approval and adoption at a special meeting of Shareholders together with the Board’s recommendation that the Shareholders approve those matters.

In the early evening of January 24, 2019, following the meeting of the Board, the Stock Purchase Agreement was circulated in final form, with the final form of each of the Shareholder Agreement, the Administration Agreement and the Investment Management Agreement attached thereto as exhibits, by representatives of Hodgson Russ to the Company, East and Eversheds Sutherland. Thereafter, later in the evening of January 24, 2019, the Company and East executed the Stock Purchase Agreement.

On the morning of January 25, 2019, prior to the opening of trading markets, the Company issued a press release announcing the Transactions.

Reasons for the Transactions

In recommending that the Shareholders approve (i) the Sale Below NAV Proposal, (ii) the Nasdaq Proposal, (iii) the Investment Management Agreement Proposal, (iv) the Certificate of Incorporation Amendment Proposal, and (v) the Adjournment Proposal, the Board considered the terms of the Stock Purchase Agreement, the Investment Management Agreement, the Administration Agreement and the other transactions and agreements relating thereto, as well as a range of other potential strategic alternatives and proposals. As part of its evaluation, the Board considered the financial terms, risks, timing and uncertainties of other potential strategic alternatives and proposals, as well as financial information prepared by the Company’s management. The Board consulted with outside financial and legal advisors and the Company’s management, and considered a number of reasons, including, among others:

In the course of reaching the determinations and decisions and making the recommendation described above, the Board considered the risks and potentially negative items relating to the Transactions, including the following material items (which are not necessarily presented in order of relative importance or significance):

The foregoing discussion of reasons considered by the Board contains the material reasons considered by the Board, but is not in any way intended to be exhaustive. In light of the variety of reasons considered in connection with its evaluation of the Transactions, the Board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific reasons considered in reaching its determinations and recommendations. Each member of the Board applied his own business judgment to the process and may have given different weight to different reasons. The Board did not undertake to make any specific determination as to whether any reason or any particular aspect of a reason supported or did not support their ultimate determination. The Board based its respective recommendations on the totality of the information presented.

Resolutions approving the Stock Purchase Agreement, the Investment Management Agreement, the Administration Agreement, the Shareholder Agreement, the Amendment to the Certificate of Incorporation and the transactions contemplated thereby were unanimously approved by the Board, including its independent directors, on January 24, 2019.

Opinion of the Company’s Financial Advisor

The Company engaged KBW to render financial advisory and investment banking services to the Company, including an opinion to the Board as to the fairness, from a financial point of view, to the Company of the consideration to be received in the Stock Purchase Transaction. The Company selected KBW because KBW is a nationally recognized investment banking firm with substantial experience in transactions similar to the Stock Purchase Transaction. As part of its investment banking business, KBW is regularly engaged in the valuation of securities of BDCs in connection with mergers and acquisitions.

As part of its engagement, representatives of KBW attended the meeting of the Board held on January 24, 2019 at which the Board evaluated the Stock Purchase Transaction. At this meeting, KBW reviewed the financial aspects of the Stock Purchase Transaction and rendered an opinion to the effect that, as of such date and subject to the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by KBW as set forth in such opinion, the consideration of $3.00 per share of Common Stock to be received in the Stock Purchase Transaction was fair, from a financial point of view, to the Company. The Board approved the Stock Purchase Agreement at this Board meeting.

The description of KBW’s opinion in this proxy statement is qualified in its entirety by reference to the full text of the opinion, which is attached as Appendix F to this proxy statement and is incorporated herein by reference, and describes the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by KBW in preparing the opinion.

KBW’s opinion speaks only as of the date of the opinion. The opinion was for the information of, and was directed to, the Board (in its capacity as such) in connection with its consideration of the financial terms of the Stock Purchase Transaction. The opinion addressed only the fairness, from a financial point of view, of the consideration of $3.00 per share of Common Stock to be received in the Stock Purchase Transaction to the Company. It did not address the underlying business decision of the Company to engage in the Stock Purchase Transaction or enter into the Stock Purchase Agreement or constitute a recommendation to the Board in connection with the Stock Purchase Transaction, and it does not constitute a recommendation to any Shareholder or any shareholder of any other entity as to how to vote or act in connection with the Stock Purchase Transaction, the Externalization Transaction or any other matter (including what election any holder of Common Stock should make in the Special Dividend, if it occurs, with respect to Common Stock or cash).

KBW’s opinion was reviewed and approved by KBW’s fairness opinion committee in conformity with its policies and procedures established under the requirements of Rule 5150 of the Financial Industry Regulatory Authority.

In connection with the opinion, KBW reviewed, analyzed and relied upon material bearing upon the financial and operating condition of the Company and bearing upon the Stock Purchase Transaction, including, among other things:

KBW’s consideration of financial information and other factors that it deemed appropriate under the circumstances or relevant to its analyses included, among others, the following:

KBW also performed such other studies and analyses as it considered appropriate and took into account its assessment of general economic, market and financial conditions and its experience in other transactions, as well as its experience in securities valuation and knowledge of the BDC industry generally. KBW also participated in discussions with the Company management regarding the past and current business operations, financial condition and future prospects of the Company and such other matters as KBW deemed relevant to its inquiry. KBW was not requested to, and did not, assist the Company with soliciting indications of interest from third parties other than East and another party regarding a potential transaction with the Company.

In conducting its review and arriving at its opinion, KBW relied upon and assumed the accuracy and completeness of all of the financial and other information that was provided to it or that was publicly available and did not independently verify the accuracy or completeness of any such information or assume any responsibility or liability for such verification, accuracy or completeness. In connection with its opinion, KBW did not perform any financial analyses to estimate the value of the Company’s existing investment assets or the Contributed Investment Assets, and KBW expressed no opinion as to the stated fair value of the Company’s existing investment assets as determined by Company management as of September 30, 2018 or the Contributed Investment Assets Fair Value as would be determined pursuant to the Stock Purchase Agreement. KBW did not rely upon a liquidation analysis for purposes of its opinion. The Company advised KBW that the fair value of its existing investment assets (the Company advised KBW that “fair value” was defined under the applicable accounting rules as the price that would be received to sell an asset in an orderly transaction between market participants on the measurement date) was not the same as the likely realizable value of those investment assets in a liquidation scenario where those assets would not be held to maturity or otherwise but would be sold immediately or over a relatively short period of time. Specifically, the Company advised KBW that: (i) all of the Company’s investment assets as of September 30, 2018 consisted of private securities of small or development stage companies that were not publicly traded and for which no orderly market existed; (ii) there was necessarily significant subjectivity and uncertainty involved in determining the fair value of investments for which there was no orderly market; (iii) in a liquidation scenario, there might be few or no independent, willing and able buyers for the Company’s investment assets; and (iv) as a result, the likely realizable value of the Company’s investment assets in a liquidation scenario at any measurement date, including giving effect to estimated costs to be incurred by the Company in connection with a liquidation and applying a reasonable discount rate to present value sale proceeds assumed to be received in the future, could be significantly below the value of those investment assets determined on a fair value basis at that same measurement date. Given this, the Company advised KBW that at September 30, 2018, the likely realizable value of its investment assets in a liquidation scenario, if determined and given effect as of that date, could reasonably be expected to result in a NAV per share of the Company of less than $3.00 per share. In addition, at the direction of the Company’s management and with the consent of the Board, KBW did not rely upon a dividend discount analysis for purposes of its opinion given that the Company’s management did not furnish to KBW financial and operating forecasts and projections of the Company that provided a reasonable basis upon which KBW could perform such analysis.

KBW assumed that there were no material changes in the assets, liabilities, financial condition, results of operations, business or prospects of the Company since the date of the last financial statements of the Company that were made available to KBW and that KBW was directed to use. In rendering its opinion, KBW did not make or obtain any evaluations or appraisals or physical inspection of the property, assets or liabilities (contingent or otherwise) of the Company or of or relating to any of the Contributed Investment Assets, the collateral securing any of such assets or liabilities, or the collectability of any such assets, nor did KBW examine any individual loan or credit files, nor did it evaluate the solvency, financial capability or fair value of the Company under any state or federal laws, including those relating to bankruptcy, insolvency or other matters. Estimates of values of companies and assets do not purport to be appraisals or necessarily reflect the prices at which companies or assets may actually be sold. Because such estimates are inherently subject to uncertainty, KBW assumed no responsibility or liability for their accuracy.

KBW assumed, in all respects material to its analyses:

For purposes of KBW’s opinion, no effect was given to the Externalization Transaction, the intended Special Dividend, if any, or any aspect, implication or effect thereof, including the planned RIC Election. KBW assumed that the Stock Purchase Transaction would be consummated in a manner that complied with the applicable provisions of the Securities Act of 1933, as amended, the Exchange Act, and all other applicable federal and state statutes, rules and regulations and the governing organizational documents of the Company. KBW was further advised by representatives of the Company that the Company relied upon advice from its advisors (other than KBW) or other appropriate sources as to all legal, financial reporting, tax, accounting and regulatory matters with respect to the Company, the Stock Purchase Transaction and any related transactions (including the Externalization Transaction and the intended Special Dividend), and the Stock Purchase Agreement. KBW did not provide advice with respect to any such matters.

KBW’s opinion addressed only the fairness, from a financial point of view, as of the date of such opinion, to the Company of the $3.00 per share consideration in the Stock Purchase Transaction. KBW expressed no view or opinion as to any other terms or aspects of the Stock Purchase Transaction or any term or aspect of any related transaction (including the Externalization Transaction or the intended Special Dividend), including without limitation, the form or structure of the Stock Purchase Transaction (including the form of the Stock Purchase Transaction consideration or the allocation thereof between the Contributed Investment Assets and the Cash Consideration) or any such related transaction, any consequences of the transaction to the Company, its Shareholders, creditors or otherwise (including the ownership dilution to existing holders of the Common Stock), or any terms, aspects, merits or implications of any agreements, arrangements or understandings contemplated or entered into in connection with the transaction, any such related transaction, or otherwise. KBW’s opinion was necessarily based upon conditions as they existed and could be evaluated on the date of such opinion and the information made available to KBW through such date. Developments subsequent to the date of KBW’s opinion may have affected, and may affect, the conclusion reached in KBW’s opinion and KBW did not and does not have an obligation to update, revise or reaffirm its opinion. KBW’s opinion did not address, and KBW expressed no view or opinion with respect to:

In performing its analyses, KBW made numerous assumptions with respect to industry performance, general business, economic, market and financial conditions and other matters, which are beyond the control of KBW and the Company. Any estimates contained in the analyses performed by KBW are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than suggested by these analyses. Additionally, estimates of the value of businesses or securities do not purport to be appraisals or to reflect the prices at which such businesses or securities might actually be sold. Accordingly, these analyses and estimates are inherently subject to substantial uncertainty. In addition, the KBW opinion was among several factors taken into consideration by the Board in making its determination to approve the Stock Purchase Agreement and the Stock Purchase Transaction. Consequently, the analyses described below should not be viewed as determinative of the decision of the Board with respect to the fairness of the consideration in the Stock Purchase Transaction. The type and amount of consideration payable in the Stock Purchase Transaction were determined through negotiation between the Company and East, and the decision of the Company to enter into the Stock Purchase Agreement was solely that of the Board.

The following is a summary of the material financial analyses presented by KBW to the Board in connection with its opinion. The summary is not a complete description of the financial analyses underlying the opinion or the presentation made by KBW to the Board, but summarizes the material analyses performed and presented in connection with such opinion. The financial analyses summarized below include information presented in tabular format. The tables alone do not constitute a complete description of the financial analyses. The preparation of a fairness opinion is a complex analytic process involving various determinations as to appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. Therefore, a fairness opinion is not readily susceptible to partial analysis or summary description. In arriving at its opinion, KBW did not attribute any particular weight to any analysis or factor that it considered, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. Accordingly, KBW believes that its analyses and the summary of its analyses must be considered as a whole and that selecting portions of its analyses and factors or focusing on the information presented below in tabular format, without considering all analyses and factors or the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the process underlying its analyses and opinion.

For purposes of the financial analyses summarized below, no effect was given to the Externalization Transaction, the intended Special Dividend, if any, or any aspect, implication or effect thereof, including the RIC Election.

Selected Public Companies Analysis – BDCs with Market Capitalization less than $300 Million. Using publicly available information, KBW compared the market performance of the Company to 25 selected publicly-traded internally and externally managed BDCs with market capitalization less than $300 million.

The selected companies were as follows:

To perform this analysis, KBW used market price information as of January 22, 2019 and reported NAV per share data as of the end of the most recent completed quarterly period available (which in the case of the Company was September 30, 2018). KBW also used 2019 earnings per share (“EPS”) estimates taken from consensus “street estimates” of the selected companies.

KBW’s analysis showed, among other things, the following concerning the market performance of the Company and the selected companies (excluding the impact of the 2019 EPS multiples for five of the selected companies, which multiples were considered to be not meaningful (“NM”)):

KBW then applied the minimum and median price-to-NAV per share multiples of the selected companies to the reported NAV per share of the Company as of September 30, 2018. This analysis indicated a range of the implied value per share of Common Stock of $2.18 to $3.48, as compared to the $3.00 per share consideration in the Stock Purchase Transaction.

No company used as a comparison in the above selected companies analysis is identical to the Company. Accordingly, an analysis of these results is not mathematical. Rather, it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies involved.

Selected Public Companies Analysis – Total Return BDCs. Using publicly available information, KBW compared the market performance of the Company to four selected publicly-traded BDCs that do not issue dividends, but seek to return value to shareholders through realized gains from their portfolio’s equity investments.

The selected companies were as follows:

To perform this analysis, KBW used market price information as of January 22, 2019 and reported NAV per share data as of the end of the most recent completed quarterly period available (which in the case of the Company was September 30, 2018). KBW also used 2019 EPS estimates taken from consensus “street estimates” of the selected companies.

KBW’s analysis showed, among other things, the following concerning the market performance of the Company and the selected companies (excluding the impact of the 2019 EPS multiples for three of the selected companies, which multiples were considered to be not meaningful):

KBW then applied the 25^th percentile and 75^th percentile price-to-NAV per share multiples of the selected companies to the reported NAV per share of the Company as of September 30, 2018. This analysis indicated a range of the implied value per share of Common Stock of $2.52 to $2.85, as compared to the $3.00 per share consideration in the Stock Purchase Transaction.

No company used as a comparison in the above selected companies analysis is identical to the Company. Accordingly, an analysis of these results is not mathematical. Rather, it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies involved.

Selected Transactions Analysis. KBW reviewed publicly available information related to 11 selected acquisitions of BDCs announced since the beginning of 2009.

The selected transactions were as follows:

For each selected BDC transaction, KBW derived the following implied transaction statistics, in each case based on the transaction consideration value paid for the acquired company (including contributions by external managers) and using financial data based on the acquired company’s then latest publicly available financial statements prior to the announcement of the respective transaction (adjusted to reflect announced pre-closing adjustments):

KBW’s analysis showed, among other things, the following concerning the implied transaction statistics of the selected BDC transactions:

KBW then applied the minimum and median price-to-NAV per share multiples of the selected transactions to the reported NAV per share of the Company as of September 30, 2018. This analysis indicated a range of the implied value per share of Common Stock of $1.91 to $4.31, as compared to the $3.00 per share consideration in the Stock Purchase Transaction.

KBW separately reviewed an implied transaction multiple for the Stock Purchase Transaction (based on the $3.00 per share consideration in the Stock Purchase Transaction) of 0.62x, the reported NAV per share of the Company as of September 30, 2018. The implied LTM NII multiple for the Stock Purchase Transaction was considered to be not meaningful because the Company’s LTM NII was negative.

No company or transaction used as a comparison in the above selected transaction analysis is identical to the Company or the Stock Purchase Transaction. Accordingly, an analysis of these results is not mathematical. Rather, it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies involved.

Miscellaneous. KBW acted as financial advisor to the Company in connection with the proposed transaction and did not act as an advisor to or agent of any other person. As part of its investment banking business, KBW is regularly engaged in the valuation of BDC securities in connection with acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements and valuations for various other purposes. In the ordinary course of KBW and its affiliates’ broker-dealer businesses, KBW and its affiliates may from time to time purchase securities from, and sell securities, to the Company and East. In addition, as a market maker in securities, KBW and its affiliates may from time to time have a long or short position in, and buy or sell, debt or equity securities of the Company for its and their own respective accounts and for the accounts of its and their respective customers and clients.

Pursuant to the KBW engagement letter, the Company agreed to pay KBW an aggregate cash fee of $500,000, $200,000 of which became payable with the rendering of KBW’s opinion and the balance of which is contingent upon the Closing. The Company also agreed to reimburse KBW for reasonable and documented out-of-pocket expenses and disbursements incurred in connection with its engagement and to indemnify KBW against certain liabilities relating to or arising out of KBW’s engagement or KBW’s role in connection therewith. Other than in connection with this present engagement, in the two years preceding the date of KBW’s opinion, KBW did not provide investment banking and financial advisory services to the Company. In the two years preceding the date of KBW’s opinion, KBW did not provide investment banking and financial advisory services to East. KBW may in the future provide investment banking and financial advisory services to the Company, East or the Adviser and receive compensation for such services.

Contributed Investment Assets

Under the terms of the Stock Purchase Agreement, a portion of consideration payable to the Company in the Stock Purchase Transaction will consist of the Contributed Investment Assets. The Contributed Investment Assets are comprised of six current investments of East. These Contributed Investment Assets consist of term loans and promissory notes with maturity dates ranging between April 2020 and December 2023 and, with respect to certain of the portfolio companies, also includes equity securities or warrants to acquire equity securities. As of December 31, 2018, the total Contributed Investment Assets Fair Value for the Contributed Investment Assets was determined by the parties to be $13.1 million.

The following table sets forth certain information as of December 31, 2018 for each portfolio company included in the Contributed Investment Assets. Percentages shown below for a class of investment securities represent the percentage of the class owned and do not necessarily represent a voting ownership percentage. Percentages shown for equity securities, other than warrants, represent the actual percentage of the class of security held before dilution. Percentages shown for warrants held represent the percentage of class of security East may acquire, assuming East exercises its warrants before dilution.

East directly or indirectly owns less than 5% of the outstanding voting securities, and is therefore not deemed to be an affiliate, of each of the portfolio companies listed on the table below. East offers to make significant managerial assistance to certain of East’s portfolio companies. East may also receive rights to observe the meetings of East’s portfolio companies’ boards of directors or other governing bodies.