N-14 8C

As filed with the Securities and Exchange Commission on October 21, 2022

Registration No. 333-

 

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM N-14

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

Pre-Effective Amendment No.  
Post-Effective Amendment No.  

(Check appropriate box or boxes)

 

 

Oaktree Specialty Lending Corporation

(Exact Name of Registrant as Specified in Charter)

 

 

333 South Grand Avenue, 28th Floor

Los Angeles, CA 90071

(Address of Principal Executive Offices)

 

 

(213) 830-6300

(Area Code and Telephone Number)

 

 

Mary Gallegly

Oaktree Specialty Lending Corporation

333 South Grand Avenue, 28th Floor

Los Angeles, CA 90071

(Name and Address of Agent for Service)

 

 

Copies to:

 

William J. Tuttle

Erin M. Lett

Kirkland & Ellis LLP

1301 Pennsylvania Avenue, NW

Washington, DC 20004

Telephone: (202) 389-5000

  

William G. Farrar

Melissa Sawyer

Sullivan & Cromwell LLP

125 Broad Street

New York, NY 10004

Telephone: (212) 558-4000

 

 

Approximate Date of Proposed Public Offering: As soon as practicable after this registration statement becomes effective and upon completion of the transactions described in the enclosed document.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the U.S. Securities and Exchange Commission. OCSL may not sell these securities until the registration statement filed with the U.S. Securities and Exchange Commission is effective. This document is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state or jurisdiction where such offer or sale is not permitted.

PRELIMINARY — SUBJECT TO COMPLETION — DATED OCTOBER 21, 2022

OAKTREE SPECIALTY LENDING CORPORATION

333 South Grand Avenue, 28th Floor

Los Angeles, CA 90071

MERGER PROPOSED — YOUR VOTE IS VERY IMPORTANT

[•], 2022

 

 

Dear Stockholder:

You are cordially invited to attend the 2023 Annual Meeting of Stockholders (the “OCSL Annual Meeting”) of Oaktree Specialty Lending Corporation, a Delaware corporation (“OCSL”), to be held virtually on [•], 2023, at [•] [a.m.][p.m.], Pacific Time, at the following website: www.virtualshareholdermeeting.com/OCSL2023. Stockholders of record of OCSL at the close of business on [•], 2022 are entitled to notice of, and to vote at, the OCSL Annual Meeting or any adjournment or postponement thereof.

The notice of annual meeting and the joint proxy statement/prospectus accompanying this letter provide an outline of the business to be conducted at the OCSL Annual Meeting. At the OCSL Annual Meeting, you will be asked to:

 

  (i)

elect two directors, who will each serve until the 2026 Annual Meeting of Stockholders and until his successor is duly elected and qualifies (the “Director Proposal”);

 

  (ii)

ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm for OCSL for the fiscal year ending September 30, 2023 (the “Auditor Proposal”);

 

  (iii)

approve the issuance of shares of common stock, par value $0.01 per share, of OCSL (“OCSL Common Stock”) to be issued pursuant to the Agreement and Plan of Merger, dated as of September 14, 2022 (the “Merger Agreement”), among Oaktree Strategic Income II, Inc., a Delaware corporation (“OSI2”), OCSL, Project Superior Merger Sub, Inc., a Delaware corporation and a direct wholly-owned subsidiary of OCSL (“Merger Sub”), and, for the limited purposes set forth therein, Oaktree Fund Advisors, LLC, a Delaware limited liability company and investment adviser to each of OCSL and OSI2 (the “Merger Stock Issuance Proposal”); and

 

  (iv)

approve an amendment to OCSL’s restated certificate of incorporation, as amended and corrected, to effect a 1-for-3 reverse stock split (the “Reverse Stock Split”) of OCSL Common Stock (such proposal, the “Reverse Stock Split Proposal” and collectively with the Director Proposal, the Auditor Proposal and the Merger Stock Issuance Proposal, the “OCSL Proposals”).

Closing of the Mergers (as defined below) is contingent upon (a) OCSL stockholder approval of the Merger Stock Issuance Proposal, (b) OSI2 stockholder approval of the Merger Agreement and (c) satisfaction or waiver of certain other closing conditions. If the Mergers do not close, then the OCSL Common Stock will not be issued pursuant to the Merger Stock Issuance Proposal, even if approved by the OCSL stockholders.

OCSL and OSI2 are proposing a combination of both companies by a merger and related transactions pursuant to the Merger Agreement in which Merger Sub would merge with and into OSI2 (the “Merger”), with OSI2 continuing as the surviving company and as a wholly-owned subsidiary of OCSL. Immediately after the effectiveness of the Merger, OSI2 will merge with and into OCSL (together with the Merger, the “Mergers”), with OCSL continuing as the surviving company.


Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each share of common stock, par value $0.001 per share, of OSI2 (“OSI2 Common Stock”) issued and outstanding immediately prior to the Effective Time (other than shares owned by OCSL or any of its consolidated subsidiaries (the “Cancelled Shares”)) will be converted into the right to receive a number of shares of OCSL Common Stock equal to the Exchange Ratio (as defined below), plus any cash in lieu of fractional shares.

Under the Merger Agreement, as of a mutually agreed date no earlier than 48 hours (excluding Sundays and holidays) prior to the Effective Time (such date, the “Determination Date”), each of OSI2 and OCSL will deliver to the other a calculation of its net asset value as of such date (such calculation with respect to OSI2, the “Closing OSI2 Net Asset Value” and such calculation with respect to OCSL, the “Closing OCSL Net Asset Value”), in each case based on the same assumptions and methodologies, and applying the same categories of adjustments to net asset value (except as may be mutually agreed by the parties), historically used in preparing the calculation of the net asset value per share by the applicable party. Based on such calculations, the parties will calculate the “OSI2 Per Share NAV”, which will be equal to (i) the Closing OSI2 Net Asset Value divided by (ii) the number of shares of OSI2 Common Stock issued and outstanding as of the Determination Date (excluding any Cancelled Shares), and the “OCSL Per Share NAV”, which will be equal to (A) the Closing OCSL Net Asset Value divided by (B) the number of shares of OCSL Common Stock issued and outstanding as of the Determination Date. The “Exchange Ratio” will be equal to the quotient (rounded to four decimal places) of (i) the OSI2 Per Share NAV divided by (ii) the OCSL Per Share NAV.

In connection with entry into the Merger Agreement and subject to completion of the transactions contemplated thereby, Oaktree Fund Advisors, LLC has agreed to waive $9.0 million of base management fees payable to it by OCSL as follows: $6.0 million at a rate of $1.5 million per quarter (with such amount appropriately prorated for any partial quarter) in the first year following closing of the Mergers and $3.0 million at a rate of $750,000 per quarter (with such amount appropriately prorated for any partial quarter) in the second year following closing of the Mergers.

Your vote is extremely important. The holders of at least a majority of the issued and outstanding shares of OCSL Common Stock must be present at the OCSL Annual Meeting for each of the OCSL Proposals to be voted on. The election of directors in connection with the Director Proposal requires the affirmative vote of the holders of at least a plurality of votes cast by holders of shares of OCSL Common Stock present at the OCSL Annual Meeting, virtually or represented by proxy, and entitled to vote thereat. The approval of each of the Auditor Proposal and the Merger Stock Issuance Proposal requires the affirmative vote of the holders of at least a majority of votes cast by holders of shares of OCSL Common Stock present at the OCSL Annual Meeting, virtually or represented by proxy, and entitled to vote thereat. The approval of the Reverse Stock Split Proposal requires the affirmative vote of the holders of a majority of the outstanding shares of OCSL Common Stock. Votes to “withhold authority” and broker non-votes (which occur when a beneficial owner does not instruct its broker, bank, trustee or nominee holding its shares of OCSL Common Stock how to vote such shares on its behalf), if any, will not be included in determining the number of votes cast and, as a result, will have no effect on the voting outcome of the Director Proposal. Abstentions and broker non-votes, if any, will not be included in determining the number of votes cast and, as a result, will have no effect on the voting outcome of the Auditor Proposal and the Merger Stock Issuance Proposal. Abstentions and broker non-votes, if any, will have the effect of a vote against the Reverse Stock Split Proposal.

After careful consideration and, with respect to the Merger Stock Issuance Proposal, on the recommendation of a special committee of the Board of Directors of OCSL (the “OCSL Board”) comprised entirely of certain independent directors, the OCSL Board unanimously recommends that OCSL’s stockholders vote “FOR” the election of each of the nominees proposed by the OCSL Board in connection with the Director Proposal, “FOR” the Auditor Proposal, “FOR” the Merger Stock Issuance Proposal and “FOR” the Reverse Stock Split Proposal.


It is important that your shares be represented at the OCSL Annual Meeting. Please follow the instructions on the enclosed proxy card and vote via the Internet, by telephone or by signing, dating and returning the enclosed proxy card. OCSL encourages you to vote via the Internet as it saves OCSL significant time and processing costs. Voting by proxy does not deprive you of your right to participate in the OCSL Annual Meeting.

This joint proxy statement/prospectus describes the OCSL Annual Meeting, the Mergers and the documents related to the Mergers (including the Merger Agreement) that OCSL’s stockholders should review before voting on the Merger Stock Issuance Proposal and should be retained for future reference. Please carefully read this entire document, including “Risk Factors beginning on page 23 and as otherwise incorporated by reference in this joint proxy statement/prospectus, for a discussion of the risks relating to the Mergers and OCSL. OCSL files periodic reports, current reports, proxy statements and other information with the U.S. Securities and Exchange Commission. This information is available free of charge, and stockholder inquiries can be made, by contacting OCSL at 333 South Grand Ave., 28th Floor, Los Angeles, CA 90071 or by calling OCSL collect at (213) 830-6300 or on OCSL’s website at www.oaktreespecialtylending.com. The Securities and Exchange Commission also maintains a website at www.sec.gov that contains such information. Except for the documents incorporated by reference into this joint proxy statement/prospectus, information on OCSL’s website is not incorporated into or a part of this joint proxy statement/prospectus.

No matter how many or few shares in OCSL you own, your vote and participation are very important to us.

 

Sincerely yours,
/s/ Armen Panossian
Armen Panossian
Chief Executive Officer of OCSL

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of the shares of OCSL Common Stock to be issued under this joint proxy statement/prospectus or determined if this joint proxy statement/prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

This joint proxy statement/prospectus is dated [•], 2022 and is first being mailed or otherwise delivered to OCSL stockholders on or about [•], 2022.

 

Oaktree Specialty Lending Corporation

333 South Grand Avenue, 28th Floor

Los Angeles, CA 90071

(213) 830-6300

  

Oaktree Strategic Income II, Inc.

333 South Grand Avenue, 28th Floor

Los Angeles, CA 90071

(213) 830-6300


OAKTREE SPECIALTY LENDING CORPORATION

333 South Grand Avenue, 28th Floor

Los Angeles, CA 90071

 

 

NOTICE OF VIRTUAL 2023 ANNUAL MEETING OF STOCKHOLDERS

Online Meeting Only — No Physical Meeting Location

www.virtualshareholdermeeting.com/OCSL2023

[•], 2023, [] [a.m.][p.m.], Pacific Time

 

 

Dear Stockholders:

The 2023 Annual Meeting of Stockholders (the “OCSL Annual Meeting”) of Oaktree Specialty Lending Corporation, a Delaware corporation (“OCSL”), will be conducted online on [•], 2023, at [•] [a.m.][p.m.], Pacific Time at the following website: www.virtualshareholdermeeting.com/OCSL2023.

At the OCSL Annual Meeting, in addition to transacting such other business as may properly come before the meeting and any adjournments and postponements thereof, the OCSL stockholders will consider and vote on the following proposals as to OCSL:

 

   

to elect two directors, who will each serve until the 2026 Annual Meeting of Stockholders and until his successor is duly elected and qualifies (the “Director Proposal”);

 

   

to ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm for OCSL for the fiscal year ending September 30, 2023 (the “Auditor Proposal”);

 

   

to approve the issuance of shares of common stock, par value $0.01 per share, of OCSL to be issued pursuant to the Agreement and Plan of Merger, dated as of September 14, 2022, among Oaktree Strategic Income II, Inc., a Delaware corporation (“OSI2”), OCSL, Project Superior Merger Sub, Inc., a Delaware corporation and a direct wholly-owned subsidiary of OCSL, and, for the limited purposes set forth therein, Oaktree Fund Advisors, LLC, a Delaware limited liability company and investment adviser to each of OCSL and OSI2 (the “Merger Stock Issuance Proposal”); and

 

   

to approve an amendment to OCSL’s restated certificate of incorporation, as amended and corrected, to effect a 1-for-3 reverse stock split of OCSL Common Stock (such proposal, the “Reverse Stock Split Proposal” and collectively with the Director Proposal, the Auditor Proposal and the Merger Stock Issuance Proposal, the “OCSL Proposals”).

AFTER CAREFUL CONSIDERATION AND, WITH RESPECT TO THE MERGER STOCK ISSUANCE PROPOSAL, ON THE RECOMMENDATION OF A SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS OF OCSL (THE “OCSL BOARD”) COMPRISED ENTIRELY OF CERTAIN INDEPENDENT DIRECTORS, THE OCSL BOARD UNANIMOUSLY RECOMMENDS THAT OCSL’S STOCKHOLDERS VOTE “FOR” THE ELECTION OF EACH OF THE NOMINEES PROPOSED BY THE OCSL BOARD IN CONNECTION WITH THE DIRECTOR PROPOSAL, “FOR” THE AUDITOR PROPOSAL, “FOR” THE MERGER STOCK ISSUANCE PROPOSAL AND “FOR” THE REVERSE STOCK SPLIT PROPOSAL.

You have the right to receive notice of, and to vote at, the OCSL Annual Meeting if you were a stockholder of record of OCSL at the close of business on [•], 2022. A joint proxy statement/prospectus is attached to this Notice that describes the matters to be voted upon at the OCSL Annual Meeting or any adjournment(s) or postponement(s) thereof. The enclosed proxy card will instruct you as to how you may vote your proxy via the Internet, by telephone or by signing, dating and returning the enclosed proxy card. In addition, information regarding how to find the logistical details of the OCSL Annual Meeting (including how to remotely access, participate in and vote during the virtual meeting) is included beginning on page 2 of the attached joint proxy statement/prospectus.


Whether or not you plan to participate in the OCSL Annual Meeting, we encourage you to vote your shares by following the instructions on the enclosed proxy card. Please note, however, that if you wish to vote during the OCSL Annual Meeting and your shares are held of record by a broker, bank, trustee or nominee, you must obtain a “legal” proxy issued in your name from that record holder.

We are not aware of any other business, or any other nominees for election as directors of OCSL, that may properly be brought before the OCSL Annual Meeting.

Thank you for your continued support of OCSL.

 

By order of the Board of Directors,
/s/ John B. Frank

John B. Frank

OCSL Chairman

Los Angeles, CA

[•], 2022

To ensure proper representation at the OCSL Annual Meeting, please follow the instructions on the enclosed proxy card to vote your shares via the Internet or telephone, or by signing, dating and returning the enclosed proxy card. Even if you vote your shares prior to the OCSL Annual Meeting, you still may participate in the OCSL Annual Meeting.


OAKTREE STRATEGIC INCOME II, INC.

333 South Grand Avenue, 28th Floor

Los Angeles, CA 90071

MERGER PROPOSED — YOUR VOTE IS VERY IMPORTANT

[•], 2022

 

 

Dear Stockholder:

You are cordially invited to attend the Special Meeting of Stockholders (the “OSI2 Special Meeting”) of Oaktree Strategic Income II, Inc., a Delaware corporation (“OSI2”), to be held virtually on [•], 2023, at [•] [a.m.][p.m.], Pacific Time, at the following website: www.virtualshareholdermeeting.com/OSI22023SM. Stockholders of record of OSI2 at the close of business on [•], 2022 are entitled to notice of, and to vote at, the OSI2 Special Meeting or any adjournment or postponement thereof.

The notice of special meeting and the joint proxy statement/prospectus accompanying this letter provide an outline of the business to be conducted at the OSI2 Special Meeting. At the OSI2 Special Meeting, you will be asked to adopt the Agreement and Plan of Merger, dated as of September 14, 2022 (the “Merger Agreement”), among OSI2, Oaktree Specialty Lending Corporation, a Delaware corporation (“OCSL”), Project Superior Merger Sub, Inc., a Delaware corporation and a direct wholly-owned subsidiary of OCSL (“Merger Sub”), and, for the limited purposes set forth therein, Oaktree Fund Advisors, LLC, a Delaware limited liability company and investment adviser to each of OCSL and OSI2, and approve the transactions contemplated thereby, including the Mergers (as defined below) (such proposal collectively, the “Merger Proposal”).

Closing of the Mergers (as defined below) is contingent upon (i) OSI2 stockholder approval of the Merger Proposal, (ii) OCSL stockholder approval of the issuance of shares of common stock, par value $0.01 per share, of OCSL (“OCSL Common Stock”) in connection with the Merger Agreement and (iii) satisfaction or waiver of certain other closing conditions.

OCSL and OSI2 are proposing a combination of both companies by a merger and related transactions pursuant to the Merger Agreement in which Merger Sub would merge with and into OSI2 (the “Merger”), with OSI2 continuing as the surviving company and as a wholly owned subsidiary of OCSL. Immediately after the effectiveness of the Merger, OSI2 will merge with and into OCSL (together with the Merger, the “Mergers”), with OCSL continuing as the surviving company.

Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each share of common stock, par value $0.001 per share, of OSI2 (“OSI2 Common Stock”) issued and outstanding immediately prior to the Effective Time (other than shares owned by OCSL or any of its consolidated subsidiaries, the “Cancelled Shares”)) will be converted into the right to receive a number of shares of OCSL Common Stock equal to the Exchange Ratio (as defined below), plus any cash in lieu of fractional shares.

Under the Merger Agreement, as of a mutually agreed date no earlier than 48 hours (excluding Sundays and holidays) prior to the Effective Time (such date, the “Determination Date”), each of OSI2 and OCSL will deliver to the other a calculation of its net asset value as of such date (such calculation with respect to OSI2, the “Closing OSI2 Net Asset Value” and such calculation with respect to OCSL, the “Closing OCSL Net Asset Value”), in each case based on the same assumptions and methodologies, and applying the same categories of adjustments to net asset value (except as may be mutually agreed by the parties), historically used in preparing the calculation of the net asset value per share by the applicable party. Based on such calculations, the parties will calculate the “OSI2 Per Share NAV”, which will be equal to (i) the Closing OSI2 Net Asset Value divided by (ii) the number


of shares of OSI2 Common Stock issued and outstanding as of the Determination Date (excluding any Cancelled Shares), and the “OCSL Per Share NAV”, which will be equal to (A) the Closing OCSL Net Asset Value divided by (B) the number of shares of OCSL Common Stock issued and outstanding as of the Determination Date. The “Exchange Ratio” will be equal to the quotient (rounded to four decimal places) of (i) the OSI2 Per Share NAV divided by (ii) the OCSL Per Share NAV.

The market value of the consideration to be received by OSI2’s stockholders will fluctuate with changes in the market price of OCSL Common Stock. OSI2 urges you to obtain current market quotations of OCSL Common Stock. OCSL Common Stock trades on the Nasdaq Global Select Market (“Nasdaq”) under the ticker symbol “OCSL”. The following table shows the closing sale prices of OCSL Common Stock, as reported on Nasdaq on September 13, 2022, the last trading day before the execution of the Merger Agreement, and on [•], 2022, the last trading day before printing this document.

 

     OCSL
Common Stock
 

Closing Sales Price on September 13, 2022

   $ 6.75  

Closing Sales Price on [•], 2022

   $ [•]  

Your vote is extremely important. At the OSI2 Special Meeting, you will be asked to vote on the Merger Proposal. The approval of the Merger Proposal requires the affirmative vote of the holders of a majority of the outstanding shares of OSI2 Common Stock. Abstentions and broker non-votes (which occur when a beneficial owner does not instruct its broker, bank, trustee or nominee holding its shares of OSI2 Common Stock how to vote such shares on its behalf) will not count as affirmative votes cast and will therefore have the same effect as votes “against” the Merger Proposal.

After careful consideration, on the recommendation of a special committee of the Board of Directors of OSI2, comprised solely of certain independent directors, the Board of Directors of OSI2 unanimously approved the Merger Agreement and the transactions contemplated thereby, including the Mergers, and unanimously recommends that OSI2’s stockholders vote “FOR” the Merger Proposal.

It is important that your shares be represented at the OSI2 Special Meeting. Please follow the instructions on the enclosed proxy card and vote via the Internet or by telephone. OSI2 encourages you to vote via the Internet as it saves OSI2 significant time and processing costs. However, you may also vote your proxy by signing, dating and returning the enclosed proxy card to OSI2 in the postage-paid envelope provided. Voting by proxy does not deprive you of your right to participate in the OSI2 Special Meeting.

This joint proxy statement/prospectus describes the OSI2 Special Meeting, the Mergers and the documents related to the Mergers (including the Merger Agreement) that OSI2’s stockholders should review before voting on the Merger Proposal and should be retained for future reference. Please carefully read this entire document, including “Risk Factors beginning on page 23 and as otherwise incorporated by reference in this joint proxy statement/prospectus, for a discussion of the risks relating to the Mergers, OCSL and OSI2. OSI2 files periodic reports, current reports, proxy statements and other information with the U.S. Securities and Exchange Commission. This information is available free of charge, and stockholder inquiries can be made, by contacting OSI2 at 333 South Grand Ave., 28th Floor, Los Angeles, CA 90071 or by calling OSI2 collect at (213) 830-6300. The Securities and Exchange Commission also maintains a website at www.sec.gov that contains such information. No matter how many or few shares in OSI2 you own, your vote and participation are very important to us.

 

Sincerely yours,
/s/ Armen Panossian
Armen Panossian
Chief Executive Officer of OSI2


Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of the shares of OCSL Common Stock to be issued under this joint proxy statement/prospectus or determined if this joint proxy statement/prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

This joint proxy statement/prospectus is dated [•], 2022 and is first being mailed or otherwise delivered to OSI2 stockholders on or about [•], 2022.

 

Oaktree Strategic Income II, Inc.

333 South Grand Avenue, 28th Floor

Los Angeles, CA 90071

(213) 830-6300

  

Oaktree Specialty Lending Corporation

333 South Grand Avenue, 28th Floor

Los Angeles, CA 90071

(213) 830-6300


OAKTREE STRATEGIC INCOME II, INC.

333 South Grand Avenue, 28th

Floor Los Angeles, CA 90071

 

 

NOTICE OF VIRTUAL SPECIAL MEETING OF STOCKHOLDERS

Online Meeting Only — No Physical Meeting Location

www.virtualshareholdermeeting.com/OSI22023SM

[•], 2023, [•] [a.m.][p.m.], Pacific Time

 

 

Dear Stockholders:

The Special Meeting of Stockholders (the “OSI2 Special Meeting”) of Oaktree Strategic Income II, Inc., a Delaware corporation (“OSI2”), will be conducted online on [], 2023, at [] [a.m.][p.m.], Pacific Time, at the following website: www.virtualshareholdermeeting.com/OSI22023SM.

At the OSI2 Special Meeting, in addition to transacting such other business as may properly come before the meeting and any adjournments and postponements thereof, stockholders of OSI2 will consider and vote on a proposal to adopt the Agreement and Plan of Merger, dated as of September 14, 2022 (the “Merger Agreement”), among OSI2, Oaktree Specialty Lending Corporation, a Delaware corporation (“OCSL”), Project Superior Merger Sub, Inc., a Delaware corporation and a direct wholly-owned subsidiary of OCSL (“Merger Sub”), and, for the limited purposes set forth therein, Oaktree Fund Advisors, LLC, a Delaware limited liability company and investment adviser to each of OCSL and OSI2, and approve the transactions contemplated thereby, including the Mergers (as defined below) (such proposal collectively, the “Merger Proposal”).

OSI2 is proposing a combination of OCSL and OSI2 by a merger and related transactions pursuant to the Merger Agreement in which Merger Sub would merge with and into OSI2 (the “Merger”), with OSI2 continuing as the surviving company and as a wholly owned subsidiary of OCSL. Immediately after the effectiveness of the Merger, OSI2 will merge with and into OCSL (together with the Merger, the “Mergers”), with OCSL continuing as the surviving company.

AFTER CAREFUL CONSIDERATION, ON THE RECOMMENDATION OF A SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS OF OSI2, COMPRISED SOLELY OF CERTAIN INDEPENDENT DIRECTORS, THE BOARD OF DIRECTORS OF OSI2 UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGERS, AND UNANIMOUSLY RECOMMENDS THAT OSI2’S STOCKHOLDERS VOTE “FOR” THE MERGER PROPOSAL.

You have the right to receive notice of, and to vote at, the OSI2 Special Meeting if you were a stockholder of record of OSI2 at the close of business on [], 2022. A joint proxy statement/prospectus is attached to this Notice that describes the matters to be voted upon at the OSI2 Special Meeting or any adjournment(s) or postponement(s) thereof. The enclosed proxy card will instruct you as to how you may vote your proxy via the Internet, by telephone or by signing, dating and returning the enclosed proxy card. In addition, information regarding how to find the logistical details of the OSI2 Special Meeting (including how to remotely access, participate in and vote during the virtual meeting) is included on page 3 of the attached joint proxy statement/prospectus.

Whether or not you plan to participate in the OSI2 Special Meeting, we encourage you to vote your shares by following the instructions on the enclosed proxy card. Please note, however, that if you wish to vote during the OSI2 Special Meeting and your shares are held of record by a broker, bank, trustee or nominee, you must obtain a “legal” proxy issued in your name from that record holder.


We are not aware of any other business that may properly be brought before the OSI2 Special Meeting.

Thank you for your continued support of OSI2.

 

By order of the Board of Directors,
/s/ Mary Gallegly

Mary Gallegly

General Counsel and Secretary

Los Angeles, CA

[•], 2022

To ensure proper representation at the OSI2 Special Meeting, please follow the instructions on the enclosed proxy card to vote your shares via the Internet or telephone, or by signing, dating and returning the enclosed proxy card. Even if you vote your shares prior to the OSI2 Special Meeting, you still may participate in the OSI2 Special Meeting.


TABLE OF CONTENTS

 

     Page  

ABOUT THIS DOCUMENT

     iii  

QUESTIONS AND ANSWERS ABOUT THE STOCKHOLDER MEETINGS AND THE PROPOSALS

     1  

SUMMARY OF THE MERGERS

     13  

RISK FACTORS

     23  

COMPARATIVE FEES AND EXPENSES

     28  

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     33  

CAPITALIZATION

     35  

THE OCSL ANNUAL MEETING

     36  

THE OSI2 SPECIAL MEETING

     39  

THE MERGERS

     42  

DESCRIPTION OF THE MERGER AGREEMENT

     82  

ACCOUNTING TREATMENT OF THE MERGERS

     102  

CERTAIN MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS

     103  

OCSL PROPOSAL 1 — ELECTION OF DIRECTORS

     117  

OCSL PROPOSAL 2 — RATIFY THE APPOINTMENT OF ERNST  & YOUNG LLP AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE 2023 FISCAL YEAR

     118  

OCSL PROPOSAL 3 — APPROVAL OF THE MERGER STOCK ISSUANCE PROPOSAL

     121  

OCSL PROPOSAL 4 — APPROVAL OF THE REVERSE STOCK SPLIT PROPOSAL

     122  

OSI2 PROPOSAL 1 — APPROVAL OF THE MERGER PROPOSAL

     129  

MARKET PRICE, DIVIDEND AND DISTRIBUTION INFORMATION

     130  

MANAGEMENT OF OCSL

     132  

MANAGEMENT OF OSI2

     144  

PORTFOLIO MANAGEMENT OF OCSL AND OSI2

     153  

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS OF OCSL

     154  

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS OF OSI2

     158  

BUSINESS OF OCSL

     163  

FINANCIAL HIGHLIGHTS OF OCSL

     163  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF OCSL

     163  

SENIOR SECURITIES OF OCSL

     163  

PORTFOLIO COMPANIES OF OCSL

     164  

CONTROL PERSONS AND PRINCIPAL STOCKHOLDERS OF OCSL

     192  

BUSINESS OF OSI2

     194  

FINANCIAL HIGHLIGHTS OF OSI2

     194  

SELECTED FINANCIAL DATA OF OSI2

     194  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF OSI2

     194  

 

i


SENIOR SECURITIES OF OSI2

     194  

PORTFOLIO COMPANIES OF OSI2

     195  

CONTROL PERSONS AND PRINCIPAL STOCKHOLDERS OF OSI2

     216  

DESCRIPTION OF CAPITAL STOCK OF OCSL

     217  

DESCRIPTION OF CAPITAL STOCK OF OSI2

     220  

DIVIDEND REINVESTMENT PLAN OF OCSL

     225  

COMPARISON OF OCSL AND OSI2 STOCKHOLDER RIGHTS

     227  

CUSTODIAN, TRANSFER AND DISTRIBUTION PAYING AGENT AND REGISTRAR OF OCSL

     233  

CUSTODIAN, TRANSFER AND DISTRIBUTION PAYING AGENT AND REGISTRAR OF OSI2

     233  

BROKERAGE ALLOCATION AND OTHER PRACTICES

     233  

LEGAL MATTERS

     233  

EXPERTS

     233  

STOCKHOLDER PROPOSALS

     235  

OTHER MATTERS

     235  

STOCKHOLDERS SHARING AN ADDRESS

     236  

WHERE YOU CAN FIND MORE INFORMATION

     236  

INCORPORATION BY REFERENCE FOR OCSL

     237  

INCORPORATION BY REFERENCE FOR OSI2

     237  

ANNEX A — MERGER AGREEMENT

     A-1  

ANNEX B — OPINION OF THE FINANCIAL ADVISOR TO THE OCSL SPECIAL COMMITTEE

     B-1  

ANNEX C — OPINION OF THE FINANCIAL ADVISOR TO THE OSI2 SPECIAL COMMITTEE

     C-1  

ANNEX D — CERTIFICATE OF AMENDMENT

     D-1  

 

ii


ABOUT THIS DOCUMENT

This document, which forms part of a registration statement on Form N-14 filed with the U.S. Securities and Exchange Commission (the “SEC”) by OCSL (File No. 333-    ), constitutes a prospectus of OCSL under Section 5 of the Securities Act of 1933, as amended (the “Securities Act”), with respect to the shares of OCSL Common Stock to be issued to OSI2 Stockholders pursuant to the Merger Agreement.

This document also constitutes a joint proxy statement of OCSL and OSI2 under Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). It also constitutes a notice of meeting with respect to: (1) the Annual Meeting of Stockholders of OCSL (the “OCSL Annual Meeting”), at which OCSL Stockholders will be asked to vote upon the Director Proposal (as defined below), the Auditor Proposal (as defined below), the Merger Stock Issuance Proposal (as defined below) and the Reverse Stock Split Proposal (as defined below); and (2) the Special Meeting of Stockholders of OSI2 (the “OSI2 Special Meeting”), at which OSI2 Stockholders will be asked to vote upon the Merger Proposal (as defined below).

You should rely only on the information contained in this joint proxy statement/prospectus, including in determining how to vote the shares of OCSL Common Stock or OSI2 Common Stock, as applicable. No one has been authorized to provide you with information that is different from that contained in this joint proxy statement/prospectus. This joint proxy statement/prospectus is dated [•], 2022. You should not assume that the information contained in this joint proxy statement/prospectus is accurate as of any date other than that date. Neither any mailing of this joint proxy statement/prospectus to OCSL Stockholders or OSI2 Stockholders nor the issuance of OCSL Common Stock in connection with the Mergers will create any implication to the contrary.

This joint proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction.

Except where the context otherwise indicates, information contained in this joint proxy statement/prospectus regarding OCSL has been provided by OCSL and information contained in this joint proxy statement/prospectus regarding OSI2 has been provided by OSI2.

When used in this document, unless otherwise indicated in this document or the context otherwise requires:

 

   

“Determination Date” refers to an agreed upon date no more than 48 hours (excluding Sundays and holidays) prior to the Effective Time;

 

   

“Effective Time” refers to the effective time of the Merger;

 

   

“Independent Director” refers to each director who is not an “interested person” of OCSL or OSI2, as applicable, as defined in Section 2(a)(19) of the Investment Company Act;

 

   

“Investment Company Act” refers to the Investment Company Act of 1940, as amended;

 

   

“Merger” refers to the merger of Merger Sub with and into OSI2, with OSI2 as the surviving company;

 

   

“Merger Agreement” refers to the Agreement and Plan of Merger, dated as of September 14, 2022, among OSI2, OCSL, Merger Sub and, for the limited purposes set forth therein, Oaktree;

 

   

“Merger Sub” refers to Project Superior Merger Sub, Inc., a Delaware corporation and a direct wholly-owned subsidiary of OCSL;

 

   

“Mergers” refers to the Merger, together with the Second Merger;

 

   

“NAV” refers to net asset value;

 

   

“Oaktree” refers to Oaktree Fund Advisors, LLC, a Delaware limited liability company and the investment adviser of OCSL and OSI2;

 

iii


   

“Oaktree Administrator” refers to Oaktree Fund Administration, LLC, a Delaware limited liability company and the administrator of OCSL and OSI2;

 

   

“OCM” refers to Oaktree Capital Management, L.P., a Delaware limited partnership;

 

   

“OCSI” refers to Oaktree Strategic Income Corporation, which was a Delaware corporation prior to completion of the OCSI Merger;

 

   

“OCSI Merger” refers to the two-step merger of OCSI with and into OCSL;

 

   

“OCSL” refers to Oaktree Specialty Lending Corporation and, where applicable, its consolidated subsidiaries;

 

   

“OCSL Administration Agreement” refers to the administration agreement, dated September 30, 2019, by and between OCSL and Oaktree Administrator;

 

   

“OCSL Board” refers to the board of directors of OCSL;

 

   

“OCSL Common Stock” refers to the shares of OCSL common stock, par value $0.01 per share;

 

   

“OCSL Independent Directors” refers to the Independent Directors of the OCSL Board in their capacity as such;

 

   

“OCSL Investment Advisory Agreement” refers to the Amended and Restated Investment Advisory Agreement, dated as of March 19, 2021, by and between OCSL and Oaktree, as may be subsequently amended in accordance with its terms and the requirements of the Investment Company Act;

 

   

“OCSL Special Committee” refers to the committee of the OCSL Board comprised solely of certain OCSL Independent Directors;

 

   

“OCSL Stockholders” refers to the holders of shares of OCSL Common Stock;

 

   

“OSI2” refers to Oaktree Strategic Income II, Inc. and, where applicable, its consolidated subsidiaries;

 

   

“OSI2 Administration Agreement” refers to the administration agreement, dated September 30, 2019, by and between OSI2 and Oaktree Administrator;

 

   

“OSI2 Board” refers to the board of directors of OSI2;

 

   

“OSI2 Common Stock” refers to the shares of OSI2 common stock, par value $0.001 per share;

 

   

“OSI2 Independent Directors” refers to the Independent Directors of the OSI2 Board in their capacity as such;

 

   

“OSI2 Investment Advisory Agreement” refers to the Amended and Restated Investment Advisory Agreement, dated as of May 11, 2020, by and between OSI2 and Oaktree;

 

   

“OSI2 Special Committee” refers to the committee of the OSI2 Board comprised solely of certain OSI2 Independent Directors;

 

   

“OSI2 Stockholders” refers to the holders of shares of OSI2 Common Stock;

 

   

“Second Effective Time” refers to the effective time of the Second Merger; and

 

   

“Second Merger” refers to the merger of OSI2 with and into OCSL, with OCSL continuing as the surviving company.

 

iv


QUESTIONS AND ANSWERS ABOUT THE STOCKHOLDER MEETINGS AND THE PROPOSALS

The questions and answers below highlight only selected information from this joint proxy statement/prospectus. They do not contain all of the information that may be important to you. You should read carefully this entire document to fully understand the Merger Agreement and the transactions contemplated thereby (including the Mergers) and the proposals to be presented at and the voting procedures for each of the OCSL Annual Meeting and the OSI2 Special Meeting.

Questions and Answers about the Stockholder Meetings

 

Q:

Why am I receiving these materials?

 

A:

OCSL is furnishing these materials in connection with the solicitation of proxies by the OCSL Board for use at the OCSL Annual Meeting to be held virtually on [•], 2023, at [•] [a.m.][p.m.], Pacific Time, at the following website: www.virtualshareholdermeeting.com/OCSL2023.

OSI2 is furnishing these materials in connection with the solicitation of proxies by the OSI2 Board for use at the OSI2 Special Meeting to be held virtually on [•], 2023, at [•] [a.m.][p.m.], Pacific Time, at the following website: www.virtualshareholdermeeting.com/OSI22023SM.

This joint proxy statement/prospectus and the accompanying materials are being mailed on or about [•], 2022 to stockholders of record of OCSL and OSI2 described below and are available at www.proxyvote.com.

 

Q:

What items will be considered and voted on at the OCSL Annual Meeting?

 

A:

At the OCSL Annual Meeting, OCSL Stockholders will be asked to (i) elect two directors, who will each serve until the 2026 Annual Meeting of Stockholders and until his successor is duly elected and qualifies (the “Director Proposal”); (ii) ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm for OCSL for the fiscal year ending September 30, 2023 (the “Auditor Proposal”); (iii) approve the issuance of shares of OCSL Common Stock to be issued pursuant to the Merger Agreement (the “Merger Stock Issuance Proposal”); and (iv) approve an amendment to OCSL’s restated certificate of incorporation, as amended and corrected (“OCSL’s certificate of incorporation”) to effect a 1-for-3 reverse stock split of OCSL Common Stock (the “Reverse Stock Split Proposal”, and collectively with the Director Proposal, the Auditor Proposal and Merger Stock Issuance Proposal, the “OCSL Proposals”).

 

Q:

What items will be considered and voted on at the OSI2 Special Meeting?

 

A:

At the OSI2 Special Meeting, OSI2 Stockholders will be asked to adopt the Merger Agreement and approve the transactions contemplated thereby, including the Mergers (such proposal collectively, the “Merger Proposal”).

 

Q:

How does the OCSL Board recommend voting on the proposals at the OCSL Annual Meeting?

 

A:

After careful consideration and, with respect to the Merger Stock Issuance Proposal, on the recommendation of the OCSL Special Committee, comprised solely of certain independent directors, the OCSL Board unanimously recommends that OCSL Stockholders vote “FOR” the election of each of the nominees proposed by the OCSL Board in connection with the Director Proposal, “FOR” the Auditor Proposal, “FOR” the Merger Stock Issuance Proposal and “FOR” the Reverse Stock Split Proposal.

 

Q:

How does the OSI2 Board recommend voting on the proposal at the OSI2 Special Meeting?

 

A:

After careful consideration, on the recommendation of the OSI2 Special Committee, comprised solely of certain independent directors, the OSI2 Board unanimously approved the Merger Agreement and

 

1


  the transactions contemplated thereby, including the Mergers, and unanimously recommends that OSI2 Stockholders vote “FOR” the Merger Proposal.

 

Q:

If I am an OCSL Stockholder, what is the “record date” and what does it mean?

 

A:

The record date for the OCSL Annual Meeting is [•], 2022 (the “OCSL Record Date”). The OCSL Record Date is established by the OCSL Board, and only holders of record of shares of OCSL Common Stock at the close of business on the OCSL Record Date are entitled to receive notice of the OCSL Annual Meeting and vote at the OCSL Annual Meeting. As of the OCSL Record Date, there were [•] shares of OCSL Common Stock outstanding.

 

Q:

If I am an OSI2 Stockholder, what is the “record date” and what does it mean?

 

A:

The record date for the OSI2 Special Meeting is [•], 2022 (the “OSI2 Record Date”). The OSI2 Record Date is established by the OSI2 Board, and only holders of record of shares of OSI2 Common Stock at the close of business on the OSI2 Record Date are entitled to receive notice of the OSI2 Special Meeting and vote at the OSI2 Special Meeting. As of the OSI2 Record Date, there were 17,401,121 shares of OSI2 Common Stock outstanding.

 

Q:

If I am an OCSL Stockholder, how many votes do I have?

 

A:

Each share of OCSL Common Stock held by a holder of record as of the OCSL Record Date has one vote on each matter considered at the OCSL Annual Meeting.

 

Q:

If I am an OSI2 Stockholder, how many votes do I have?

 

A:

Each share of OSI2 Common Stock held by a holder of record as of the OSI2 Record Date has one vote on each matter considered at the OSI2 Special Meeting.

 

Q:

If I am an OCSL Stockholder, how do I vote?

 

A:

The OCSL Annual Meeting will be hosted virtually via live Internet webcast. Any OCSL Stockholder can attend the OCSL Annual Meeting online at www.virtualshareholdermeeting.com/OCSL2023. If you were an OCSL Stockholder as of the OCSL Record Date, or you hold a valid proxy for the OCSL Annual Meeting, you can vote at the OCSL Annual Meeting. A summary of the information you need to attend the OCSL Annual Meeting online is as follows:

 

   

Instructions on how to attend and participate via the Internet, including how to demonstrate proof of ownership of OCSL Common Stock, are posted at www.virtualshareholdermeeting.com/OCSL2023;

 

   

Assistance with questions regarding how to attend and participate via the Internet will be provided at www.virtualshareholdermeeting.com/OCSL2023 on the day of the OCSL Annual Meeting;

 

   

The webcast will start at [•] [a.m.][p.m.], Pacific Time, on [•], 2023. Online check-in will begin at [•] [a.m.][p.m.], Pacific Time. Please allow time for online check-in procedures;

 

   

OCSL Stockholders may vote and submit questions while attending the OCSL Annual Meeting via the Internet; and

 

   

OCSL Stockholders will need a control number to enter the OCSL Annual Meeting.

An OCSL Stockholder may also authorize a proxy by telephone or through the Internet using the toll-free telephone numbers or web address printed on your proxy card. Authorizing a proxy by telephone or through the Internet requires you to input the control number located on your proxy card. After inputting the control

 

2


number, you will be prompted to direct your proxy to vote on each proposal. You will have an opportunity to review your directions and make any necessary changes before submitting your directions and terminating the telephone call or Internet link.

 

   

By Internet: www.proxyvote.com or scanning the QR Barcode on the enclosed proxy card.

 

   

By telephone: 800-690-6903 to reach a toll-free, automated touchtone voting line, or 844-557-9030 Monday through Friday 9:00 a.m. until 10:00 p.m. Eastern Time to reach a toll-free, live operator line.

 

   

By mail: You may also vote by mail by following the directions and indicating your instructions on the enclosed proxy card, dating and signing the proxy card, and promptly returning the proxy card in the envelope provided, which requires no postage if mailed in the United States. Please allow sufficient time for your proxy card to be received on or prior to 11:59 p.m., Eastern Time, on [•], 2023.

Important notice regarding the availability of proxy materials for the OCSL Annual Meeting. OCSL’s joint proxy statement/prospectus, OCSL’s Annual Report on Form 10-K for the year ended September 30, 2022 and the proxy card are available at www.proxyvote.com.

 

Q:

If I am an OSI2 Stockholder, how do I vote?

 

A:

The OSI2 Special Meeting will be hosted virtually via live Internet webcast. Any OSI2 Stockholder can attend the OSI2 Special Meeting online at www.virtualshareholdermeeting.com/OSI22023SM. If you were an OSI2 Stockholder as of the OSI2 Record Date, or you hold a valid proxy for the OSI2 Special Meeting, you can vote at the OSI2 Special Meeting. A summary of the information you need to attend the OSI2 Special Meeting online is as follows:

 

   

Instructions on how to attend and participate via the Internet, including how to demonstrate proof of ownership of OSI2 Common Stock, are posted at www.virtualshareholdermeeting.com/OSI22023SM;

 

   

Assistance with questions regarding how to attend and participate via the Internet will be provided at www.virtualshareholdermeeting.com/OSI22023SM on the day of the OSI2 Special Meeting;

 

   

The webcast will start at [•] [a.m.][p.m.], Pacific Time, on [•], 2023. Online check-in will begin at [•] [a.m.][p.m.], Pacific Time. Please allow time for online check-in procedures;

 

   

OSI2 Stockholders may vote and submit questions while attending the OSI2 Special Meeting via the Internet; and

 

   

OSI2 Stockholders will need a control number to enter the OSI2 Special Meeting.

An OSI2 Stockholder may also authorize a proxy by telephone or through the Internet using the toll-free telephone numbers or web address printed on your proxy card. Authorizing a proxy by telephone or through the Internet requires you to input the control number located on your proxy card. After inputting the control number, you will be prompted to direct your proxy to vote on each proposal. You will have an opportunity to review your directions and make any necessary changes before submitting your directions and terminating the telephone call or Internet link.

 

   

By Internet: www.proxyvote.com or scanning the QR Barcode on the enclosed proxy card.

 

   

By telephone: 800-690-6903 to reach a toll-free, automated touchtone voting line, or 844-670-2136 Monday through Friday 9:00 a.m. until 10:00 p.m. Eastern Time to reach a toll-free, live operator line.

 

   

By mail: You may also vote by mail by following the directions and indicating your instructions on the enclosed proxy card, dating and signing the proxy card, and promptly returning the proxy card in the envelope provided, which requires no postage if mailed in the United States. Please allow sufficient time for your proxy card to be received on or prior to 11:59 p.m., Eastern Time, on [•], 2023.

Important notice regarding the availability of proxy materials for the OSI2 Special Meeting. OSI2’s joint proxy statement/prospectus and the proxy card are available at www.proxyvote.com.

 

3


Q:

What if an OCSL Stockholder does not specify a choice for a matter when authorizing a proxy?

 

A:

All properly executed proxies representing shares of OCSL Common Stock received prior to the OCSL Annual Meeting will be voted in accordance with the instructions marked thereon. If a proxy card is signed and returned without any instructions marked, the shares of OCSL Common Stock will be voted “FOR” each of the nominees proposed by the OCSL Board in connection with the Director Proposal, “FOR” the Auditor Proposal, “FOR” the Merger Stock Issuance Proposal and “FOR” the Reverse Stock Split Proposal.

 

Q:

What if an OSI2 Stockholder does not specify a choice for a matter when authorizing a proxy?

 

A:

All properly executed proxies representing shares of OSI2 Common Stock at the OSI2 Special Meeting will be voted in accordance with the instructions marked thereon. If the enclosed proxy card is signed and returned without any instructions marked, the shares of OSI2 Common Stock will be voted “FOR” the Merger Proposal.

 

Q:

If I am an OCSL Stockholder, how can I revoke a proxy?

 

A:

If you are a stockholder of record of OCSL, you can revoke your proxy as to OCSL at any time before it is exercised by: (i) delivering a written revocation notice that is received prior to the OCSL Annual Meeting to Oaktree Specialty Lending Corporation, 333 South Grand Avenue, 28th Floor, Los Angeles, CA 90071, Attention: Secretary; (ii) submitting a later-dated proxy that OCSL receives before the conclusion of voting at the OCSL Annual Meeting; or (iii) participating in the OCSL Annual Meeting and voting online. If you hold shares of OCSL Common Stock through a broker, bank, trustee or nominee, you must follow the instructions you receive from them in order to revoke your voting instructions. Participating in the OCSL Annual Meeting does not revoke your proxy unless you also vote online at the OCSL Annual Meeting.

 

Q:

If I am an OSI2 Stockholder, how can I revoke a proxy?

 

A:

If you are a stockholder of record of OSI2, you can revoke your proxy as to OSI2 at any time before it is exercised by: (i) delivering a written revocation notice that is received prior to the OSI2 Special Meeting to Oaktree Strategic Income II, Inc., 333 South Grand Avenue, 28th Floor, Los Angeles, CA 90071, Attention: Secretary; (ii) submitting a later-dated proxy that OSI2 receives before the conclusion of voting at the OSI2 Special Meeting; or (iii) participating in the OSI2 Special Meeting and voting online. If you hold shares of OSI2 Common Stock through a broker, bank, trustee or nominee, you must follow the instructions you receive from them in order to revoke your voting instructions. Participating in the OSI2 Special Meeting does not revoke your proxy unless you also vote online at the OSI2 Special Meeting.

 

Q:

How do I vote shares of OCSL Common Stock or OSI2 Common Stock held through a broker, bank, trustee or nominee?

 

A:

If you hold shares of OCSL Common Stock or OSI2 Common Stock through a broker, bank, trustee or nominee, you must direct your intermediary regarding how you would like your shares voted by following the voting instructions you receive from your broker, bank, trustee or nominee. Please instruct your broker, bank, trustee or nominee regarding how you would like your shares voted so your vote can be counted.

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 are considered “broker non-votes” with respect to such proposals.

For the OCSL Annual Meeting, broker non-votes, if any, will be treated as shares present for quorum purposes. Such broker non-votes will not be included in determining the number of votes cast and, as a result, will have no effect on the Director Proposal, the Auditor Proposal or the Merger Stock Issuance Proposal. Since the Reverse Stock Split Proposal requires the affirmative vote of a majority of the outstanding shares of OCSL Common Stock and broker non-votes will not be counted as affirmative votes, broker non-votes will have the same effect as votes “against” the Reverse Stock Split Proposal.

 

4


For the OSI2 Special Meeting, because the sole proposal is a matter on which brokers do not have discretionary authority to vote, OSI2 does not expect any broker non-votes. However, if shares representing broker non-votes are presented at the OSI2 Special Meeting, such shares will not be treated as shares present for quorum purposes and will not count as affirmative votes cast and will therefore have the same effect as votes “against” the Merger Proposal.

 

Q:

What constitutes a “quorum” for the OCSL Annual Meeting?

 

A:

For OCSL to conduct business at the OCSL Annual Meeting, a quorum of OCSL Stockholders must be present. The presence at the OCSL Annual Meeting, virtually or by proxy, of the holders of a majority of the shares of OCSL Common Stock outstanding on the OCSL Record Date will constitute a quorum of OCSL. Votes to “withhold authority” and abstentions will be treated as shares present for quorum purposes. Broker non-votes will be treated as shares present for quorum purposes at the OCSL Annual Meeting.

Pursuant to OCSL’s fourth amended and restated bylaws (“OCSL’s bylaws”), the chairman of the OCSL Annual Meeting will have the power to adjourn the OCSL Annual Meeting, whether or not a quorum is present, from time to time for any reason and without notice other than announcement at the OCSL Annual Meeting.

 

Q:

What constitutes a “quorum” for the OSI2 Special Meeting?

 

A:

For OSI2 to conduct business at the OSI2 Special Meeting, a quorum of OSI2 Stockholders must be present. The presence at the OSI2 Special Meeting, virtually or by proxy, of the holders of a majority of the shares of OSI2 Common Stock outstanding on the OSI2 Record Date will constitute a quorum of OSI2. Abstentions will be treated as shares present for quorum purposes. Broker non-votes will not be treated as shares present for quorum purposes at the OSI2 Special Meeting.

Pursuant to OSI2’s amended and restated bylaws (“OSI2’s bylaws”), if less than a quorum is present at the OSI2 Special Meeting or if an insufficient number of votes is present for the adoption of the Merger Proposal at such meeting, the chairman of the OSI2 Special Meeting or OSI2 stockholders holding a majority of the shares of OSI2 Common Stock will have the power to adjourn the OSI2 Special Meeting from time to time without notice other than announcement at the OSI2 Special Meeting.

 

Q:

What vote is required to approve each of the proposals at the OCSL Annual Meeting?

 

A:

The affirmative vote of a plurality of the shares of OCSL Common Stock outstanding and entitled to vote thereon at the OCSL Annual Meeting is required to elect each director nominee of OCSL (i.e., the candidate receiving the most “for” votes will win each election). Stockholders may not cumulate their votes. Votes to “withhold authority” and broker non-votes, if any, will not be included in determining the number of votes cast and, as a result, will have no effect on the Director Proposal.

The affirmative vote of the holders of a majority of the votes cast by the holders of outstanding shares of OCSL Common Stock at the OCSL Annual Meeting in person or by proxy at a meeting at which a quorum is present is required for approval of the Auditor Proposal and the Merger Stock Issuance Proposal (i.e., the number of shares voted “for” the proposal must exceed the number of shares voted “against” such proposal). The approval of the Reverse Stock Split Proposal requires the affirmative vote of a majority of the outstanding shares of OCSL Common Stock. Abstentions and broker non-votes, if any, will not be included in determining the number of votes cast and, as a result, will have no effect on the Auditor Proposal or the Merger Stock Issuance Proposal. Abstentions and broker non-votes, if any, will have the effect of a vote “against” the Reverse Stock Split Proposal.

 

5


Q: What vote is required to approve the proposal being considered at the OSI2 Special Meeting?

 

A:

The affirmative vote of the holders of a majority of the outstanding shares of OSI2 Common Stock is required to approve the OSI2 Merger Proposal. Abstentions and broker non-votes, if any, will have the effect of a vote “against” this proposal.

 

Q:

What will happen if all of the proposals being considered at the OCSL Annual Meeting and the OSI2 Special Meeting are not approved by the required vote?

 

A:

As discussed in more detail in “Description of the Merger Agreement — Conditions to Closing the Merger,” the closing of the Mergers (the “Closing”) is conditioned on (i) OCSL Stockholder approval of the Merger Stock Issuance Proposal, (ii) OSI2 Stockholder approval of the Merger Proposal and (iii) satisfaction or waiver of certain other closing conditions.

If the Mergers do not close because either the OCSL Stockholders or the OSI2 Stockholders do not approve the Merger Stock Issuance Proposal or Merger Proposal, as applicable, or any of the other conditions to the Closing is not satisfied or waived, each of OCSL and OSI2 will continue to operate pursuant to the current agreements in place for each, and each of OCSL’s and OSI2’s respective directors and officers will continue to serve as its directors and officers, respectively, until their successors are duly elected and qualified, or their earlier death, removal or resignation.

 

Q:

When will the final voting results be announced?

 

A:

Preliminary voting results will be announced at each stockholder meeting. Final voting results will be published by OCSL and OSI2 in a current report on Form 8-K within four business days after the date of the OCSL Annual Meeting and the OSI2 Special Meeting, respectively.

 

Q:

Will OCSL and OSI2 incur expenses in soliciting proxies?

 

A:

OCSL and OSI2 will bear the cost of preparing, printing and mailing this joint proxy statement/prospectus and the accompanying Notice of Annual Meeting of Stockholders of OCSL or Notice of Special Meeting of Stockholders of OSI2, as applicable, and proxy cards based on their respective numbers of stockholders. OCSL and OSI2 intend to use the services of Broadridge Investor Communication Services Inc. (“Broadridge”) to aid in the distribution and collection of proxies for an estimated fee of approximately $58,000 plus pass through charges. No additional compensation will be paid to directors, officers or Oaktree employees for such services. For more information regarding expenses related to the Merger, see “Questions and Answers about the Mergers — Who is responsible for paying the expenses relating to completing the Mergers?

 

Q:

What does it mean if I receive more than one proxy card?

 

A:

Some of your shares of OCSL Common Stock or OSI2 Common Stock, as applicable, may be registered differently or held in different accounts. You should authorize a proxy to vote the shares in each of your accounts by mail, by telephone or via the Internet. If you mail proxy cards, please sign, date and return each proxy card to guarantee that all of your shares are voted.

 

Q:

Are the proxy materials available electronically?

 

A:

OCSL and OSI2 have made the registration statement (of which this joint proxy statement/prospectus forms a part), the Notice of Annual Meeting of Stockholders of OCSL, the Notice of Special Meeting of Stockholders of OSI2 and the proxy cards available to OCSL Stockholders and OSI2 Stockholders on the Internet. Stockholders may (i) access and review the proxy materials of OCSL and OSI2, as applicable, (ii) authorize their proxies, as described in “The OCSL Annual Meeting — Voting of Proxies” and “The OSI2 Special Meeting — Voting of Proxies,” and/or (iii) elect to receive certain future proxy materials by electronic delivery via the Internet address provided below.

 

6


The registration statement (of which this joint proxy statement/prospectus forms a part), the Notice of Annual Meeting of Stockholders of OCSL, the Notice of Special Meeting of Stockholders of OSI2 and the proxy cards are available at www.proxyvote.com.

 

Q:

Will my vote make a difference?

 

A:

Yes; your vote is very important. Your vote is needed to ensure the proposals can be acted upon. Please respond immediately to help avoid potential delays and save significant additional expenses associated with soliciting stockholder votes.

 

Q:

Whom can I contact with any additional questions?

 

A:

If you are an OCSL Stockholder, you can contact OCSL at the below contact information with any additional questions:

Investor Relations

Oaktree Specialty Lending Corporation

1301 Avenue of the Americas, 34th Floor

New York, NY 10019

(212) 284-1900

ocsl-ir@oaktreecapital.com

If you are an OSI2 Stockholder, you can contact OSI2 by calling collect at (213) 830-6300, by e-mail to OSI2 at mgallegly@oaktreecapital.com, or by writing to OSI2 at the below contact information with any additional questions:

Oaktree Strategic Income II, Inc.

333 South Grand Avenue, 28th Floor

Attention: Mary Gallegly

Los Angeles, CA 90071

(213) 830-6300

 

Q:

Where can I find more information about OCSL and OSI2?

 

A:

You can find more information about OCSL and OSI2 in the documents described under the caption “Where You Can Find More Information.”

 

Q:

What do I need to do now?

 

A:

We urge you to read carefully this entire document, including its annexes and the documents incorporated by reference. You should also review the documents referenced under “Where You Can Find More Information” and consult with your accounting, legal and tax advisors.

Questions and Answers about the Mergers

 

Q:

What will happen in the Mergers?

 

A:

Pursuant to the terms of the Merger Agreement, at the Effective Time, Merger Sub will be merged with and into OSI2. OSI2 will be the surviving company and will continue its existence as a corporation under the laws of the State of Delaware. As of the Effective Time, the separate corporate existence of Merger Sub will cease. Immediately after the occurrence of the Effective Time, in the Second Merger, OSI2 will merge with and into OCSL with OCSL continuing as the surviving company. As of the Second Effective Time, the separate corporate existence of OSI2 will cease.

 

7


Q:

What will OSI2 Stockholders receive in the Mergers?

 

A:

Under the Merger Agreement, as of the Determination Date, each of OSI2 and OCSL will deliver to the other a calculation of its NAV as of such date (such calculation with respect to OSI2, the “Closing OSI2 Net Asset Value” and such calculation with respect to OCSL, the “Closing OCSL Net Asset Value”), in each case based on the same assumptions and methodologies, and applying the same categories of adjustments to net asset value (except as may be mutually agreed by the parties), historically used in preparing the calculation of the net asset value per share by the applicable party. Based on such calculations, the parties will calculate the “OSI2 Per Share NAV”, which will be equal to (i) the Closing OSI2 Net Asset Value divided by (ii) the number of shares of OSI2 Common Stock issued and outstanding as of the Determination Date (excluding any shares owned by OCSL or any of its consolidated subsidiaries (the “Cancelled Shares”)), and the “OCSL Per Share NAV”, which will be equal to (A) the Closing OCSL Net Asset Value divided by (B) the number of shares of OCSL Common Stock issued and outstanding as of the Determination Date. The “Exchange Ratio” will be equal to the quotient (rounded to four decimal places) of (i) the OSI2 Per Share NAV divided by (ii) the OCSL Per Share NAV.

OSI2 and OCSL will update and redeliver the Closing OSI2 Net Asset Value or the Closing OCSL Net Asset Value, respectively, in the event of a material change to such calculation between the Determination Date and the closing of the Mergers (including for any dividend declared by either OSI2 or OCSL after the Determination Date but prior to the closing of the Mergers) and if needed to ensure that the calculation is determined within 48 hours (excluding Sundays and holidays) prior to the Effective Time.

 

Q:

Is the Exchange Ratio subject to any adjustment?

 

A:

Yes. The Exchange Ratio will be adjusted only if, between the Determination Date and the Effective Time, the respective issued and outstanding shares of OCSL Common Stock or OSI2 Common Stock will have been increased or decreased or changed into or exchanged for a different number or kind of shares or securities, in each case, as a result of any reclassification, recapitalization, stock split, reverse stock split, split-up, merger, issuer tender or exchange offer, combination or exchange of shares or similar transaction, or if a stock dividend or dividend payable in any other securities or similar distribution will be authorized and declared with a record date within such period, as permitted by the Merger Agreement in each case to provide the stockholders of OSI2 and OCSL the same economic effect as contemplated by the Merger Agreement prior to such event. Because the Exchange Ratio will be determined within 48 hours (excluding Sundays and holidays) prior to the Effective Time, the time period during which such an adjustment could occur will be relatively short.

 

Q:

Who is responsible for paying the expenses relating to completing the Mergers?

 

A:

Except with respect to (i) all filing and other fees paid to the SEC in connection with the Mergers and (ii) all filing and other fees in connection with any filing under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), which, in each case, will be borne equally by OCSL and OSI2, all fees and expenses incurred in connection with the Merger Agreement and the transactions contemplated thereby (including the Mergers) will be paid by the party incurring such fees or expenses, provided that all fees and expenses of Merger Sub will be paid by OCSL. It is anticipated that OCSL will bear expenses of approximately $3.4 million in connection with the Mergers ($[•] million of which had been incurred by OCSL as of September 30, 2022) and OSI2 will bear expenses of approximately $2.0 million in connection with the Mergers ($[•] million of which had been incurred by OSI2 as of September 30, 2022).

 

Q:

Will I receive dividends after the Mergers?

 

A:

Subject to applicable legal restrictions and the sole discretion of the OCSL Board, OCSL intends to declare and pay regular cash distributions to OCSL Stockholders on a quarterly basis. For a history of the dividend declarations and distributions paid by OCSL since October 1, 2020, see “Market Price, Dividend and

 

8


  Distribution Information — OCSL.” The amount and timing of past dividends and distributions are not a guarantee of any future dividends or distributions, or the amount thereof, the payment, timing and amount of which will be determined by the OCSL Board and depend on OCSL’s cash requirements, its financial condition and earnings, contractual restrictions, legal and regulatory considerations and other factors. See “Dividend Reinvestment Plan of OCSL” for information regarding OCSL’s dividend reinvestment plan.

Following the Effective Time, the holders of shares of OSI2 Common Stock will be entitled to receive dividends or other distributions declared by the OCSL Board with a record date after the Effective Time theretofore payable with respect to the whole shares of OCSL Common Stock received as part of the Merger Consideration.

 

Q:

Are the Mergers subject to any third party consents?

 

A:

Under the Merger Agreement, OCSL and OSI2 have agreed to cooperate with each other and use reasonable best efforts to take, or cause to be taken, in good faith, all actions, and to do, or cause to be done, all things necessary, including to promptly prepare and file all necessary documentation, to effect all applications, notices, petitions and filings (including any required applications, notices or other filings under the HSR Act), to obtain as promptly as practicable all permits of all governmental entities and all permits, consents, approvals, confirmations and authorizations of all third parties, in each case, that are necessary or advisable, to consummate the transactions contemplated by the Merger Agreement (including the Mergers) in the most expeditious manner practicable, and to comply with the terms and conditions of all such permits, consents, approvals and authorizations of all such third parties and governmental entities. [As of the date of this joint proxy statement/prospectus, OCSL and OSI2 believe that, subject to the satisfaction or waiver of certain conditions, they have obtained all necessary third party consents (including consent under the HSR Act) other than stockholder approval.] There can be no assurance that any permits, consents, approvals, confirmations or authorizations will be obtained or that such permits, consents, approvals, confirmations or authorizations will not impose conditions or requirements that, individually or in the aggregate, would or could reasonably be expected to have a material adverse effect on the financial condition, results of operations, assets or business of the combined company following the Mergers.

 

Q:

How does OCSL’s investment objective, strategy and risks differ from OSI2’s?

 

A:

OCSL’s investment objective is to generate current income and capital appreciation by providing companies with flexible and innovative financing solutions, including first and second lien loans, unsecured and mezzanine loans, bonds, preferred equity and certain equity co-investments. OCSL may also seek to generate capital appreciation and income through secondary investments at discounts to par in either private or syndicated transactions. OCSL expects its portfolio to include a mix of first and second lien loans, including asset backed loans, unitranche loans, mezzanine loans, unsecured loans, bonds, preferred equity and certain equity co-investments. OCSL’s portfolio may also include certain structured finance and other non-traditional structures.

OSI2’s investment objective is to generate current income and long-term capital appreciation. OSI2 seeks to achieve its investment objective without subjecting principal to undue risk of loss by lending to and investing in the debt of public and private companies, primarily in situations where a company or its owners are (a) overleveraged or facing pressures to recapitalize, (b) unable to access broadly syndicated capital markets, (c) undervalued after having recently exited bankruptcy, completed a restructuring or are in a cyclically out-of-favor industry or (d) otherwise affected by mispricings or inefficiencies in the capital markets or at different points throughout the credit cycle.

Oaktree is generally focused on middle-market companies, which OCSL and OSI2 define as companies with enterprise values of between $100 million and $750 million. Each of OCSL and OSI2 generally invests in securities that are rated below investment grade by rating agencies or that would be rated below investment

 

9


grade if they were rated. Below investment grade securities, which are often referred to as “high yield” and “junk,” have predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal.

As of June 30, 2022, 97% of OSI2’s portfolio investments are also in OCSL’s portfolio as OSI2 has been co-investing with OCSL and other Oaktree entities since its inception. As a result, OCSL and OSI2 have substantially similar risks as each focuses on making investments in privately-held middle-market companies.

 

Q:

How will the combined company be managed following the Mergers?

 

A:

The directors of OCSL immediately prior to the Mergers will remain the directors of OCSL and will hold office until their respective successors are duly elected and qualify, or their earlier death, removal or resignation. The officers of OCSL immediately prior to the Mergers will remain the officers of OCSL and will hold office until their respective successors are duly appointed and qualify, or their earlier death, removal or resignation. Following the Mergers, Oaktree will continue to be the investment adviser to OCSL and the OCSL Investment Advisory Agreement will remain in effect. OCSL will exclude any amounts resulting solely from the new cost basis of the acquired OSI2 investments established by ASC 805 (as defined below) as a result of the Mergers from the calculation of the incentive fee on income and the incentive fee on capital gains, with such exclusion to be implemented either through an amendment to the OCSL Investment Advisory Agreement or a waiver of such amounts by Oaktree.

 

Q:

If I am an OCSL Stockholder, will my expenses increase as a result of the Mergers without a waiver or reimbursement?

 

A:

No. Although the calculation of the base management fee and incentive fees payable under the OCSL Investment Advisory Agreement will remain unchanged, legacy OCSL Stockholders would have incurred less expenses as a percentage of net assets primarily due to lower interest expense and no acquired fund fees and expenses at OSI2 that would have been borne by the combined company had the Mergers been completed on June 30, 2022.

 

Q:

If I am an OSI2 Stockholder, will my expenses increase as a result of the Mergers without a waiver or reimbursement?

 

A:

Yes. Under the OSI2 Investment Advisory Agreement, the base management fee is calculated at an annual rate of 1.00% of OSI2’s Gross Asset Value (as defined below); provided that prior to a “Qualified Listing” (as defined below) the base management fee will not exceed 1.75% per annum of the Unleveraged Asset Value (as defined below). From and after the date of a Qualified Listing, if any, the applicable management fee percentage would increase to 1.50% per annum of OSI2’s Gross Asset Value. A “Qualified Listing” means (i) the listing of OSI2 Common Stock on a national securities exchange or (ii) an initial public offering (“IPO”) of the OSI2 Common Stock that results in gross proceeds to OSI2 of at least $50 million and a listing of the OSI2 Common Stock on a national securities exchange. “Gross Asset Value” means the value of OSI2’s gross assets, determined on a consolidated basis in accordance with U.S. generally accepted accounting principles (“GAAP”), including portfolio investments purchased with borrowed funds and other forms of leverage, but excluding cash and cash equivalents. “Unleveraged Asset Value” means the Gross Asset Value less OSI2’s borrowings for investment purposes determined on a consolidated basis in accordance with GAAP (other than borrowings under OSI2’s investor subscription credit facility that are repaid within 180 days following incurrence).

However, under the OCSL Investment Advisory Agreement (which will serve as the investment advisory agreement for the combined company post-Mergers), the base management fee is calculated at a rate of 1.50% of OCSL’s total gross assets at the end of each quarter, including any investment made with borrowings, but excluding cash and cash equivalents; provided, however, the base management fee is

 

10


calculated at an annual rate of 1.00% of the value of OCSL’s total gross assets, including any investments made with borrowings, but excluding cash and cash equivalents, that exceeds the product of (i) 200% (calculated in accordance with the Investment Company Act, and giving effect to exemptive relief OCSL has received with respect to debentures issued by a small business investment company subsidiary) and (ii) OCSL’s net assets. While Oaktree has agreed to waive $9.0 million of base management fees payable to it ($6.0 million at a rate of $1.5 million per quarter (with such amount appropriately prorated for any partial quarter) in the first year following closing of the Mergers and $3.0 million at a rate of $750,000 per quarter (with such amount appropriately prorated for any partial quarter) in the second year following the closing of the Mergers), OCSL’s base management fee rate is higher than that currently paid by OSI2 although it is equivalent to the OSI2 base management fee rate following a Qualified Listing. Such higher base management fee and higher acquired fund fees could result in decreases in net investment income or dividends.

 

Q:

How will the Mergers affect the management fee payable by OCSL post-Closing?

 

A:

OCSL’s contractual management fee will remain unchanged after the Mergers. See “Item 1. Business — Investment Advisory and Management Agreement — Management Fee” in Part I of OCSL’s Annual Report on Form 10-K (File No. 814-00755) for the fiscal year ended September 30, 2021 for additional information on the calculation of the management fee under the OCSL Investment Advisory Agreement. In connection with entry into the Merger Agreement and subject to completion of the transactions contemplated thereby, Oaktree has agreed to waive $9.0 million of base management fees payable to it as follows: $6.0 million at a rate of $1.5 million per quarter (with such amount appropriately prorated for any partial quarter) in the first year following closing of the Mergers and $3.0 million at a rate of $750,000 per quarter (with such amount appropriately prorated for any partial quarter) in the second year following closing of the Mergers.

 

Q:

Will the composition of the OCSL Board change following the Mergers?

 

A:

No. As stated above, following the Mergers, the directors of OCSL immediately prior to the Mergers will remain the directors of OCSL.

 

Q:

Are OCSL Stockholders able to exercise appraisal rights?

 

A:

No. OCSL Stockholders will not be entitled to exercise appraisal rights with respect to any matter to be voted upon at the OCSL Annual Meeting. Any OCSL Stockholder may abstain from voting or vote against any of such matters.

 

Q:

Are OSI2 Stockholders able to exercise appraisal rights?

 

A:

No. OSI2 Stockholders will not be entitled to exercise appraisal rights with respect to any matter to be voted upon at the OSI2 Special Meeting. Any OSI2 Stockholder may abstain from voting or vote against any of such matters.

 

Q:

When do you expect to complete the Mergers?

 

A:

While there can be no assurance as to the exact timing, or that the Mergers will be completed at all, OCSL and OSI2 are working to complete the Mergers by March 31, 2023. It is currently expected that the Mergers will be completed promptly following receipt of the required stockholder approvals at the OCSL Annual Meeting and the OSI2 Special Meeting and satisfaction or waiver of the other closing conditions set forth in the Merger Agreement.

 

Q:

Are the Mergers expected to be taxable to OCSL Stockholders?

 

A:

No. The Mergers are not expected to be a taxable event for OCSL Stockholders.

 

11


Q:

Are the Mergers expected to be taxable to OSI2 Stockholders?

 

A:

No. The Mergers are intended to qualify as a “reorganization,” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and it is a condition to the obligations of OSI2 and of OCSL to consummate the Mergers that OSI2 and OCSL will each use its best efforts to obtain legal opinions to that effect. OSI2 Stockholders are not expected to recognize any gain or loss for U.S. federal income tax purposes on the exchange of shares of OSI2 Common Stock for shares of OCSL Common Stock pursuant to the Mergers, except for any gain or loss that may result from the receipt of cash in lieu of fractional shares of OCSL Common Stock. OSI2 Stockholders should read the section captioned “Certain Material U.S. Federal Income Tax Considerations — Certain Material U.S. Federal Income Tax Consequences of the Mergers” for a more complete discussion of the U.S. federal income tax consequences of the Mergers. Tax matters can be complicated and the tax consequences of the Mergers to an OSI2 Stockholder will depend on the particular tax situation of such stockholder. OSI2 Stockholders should consult with their own tax advisors to determine the tax consequences of the Mergers to them.

 

Q:

What happens if the Mergers are not consummated?

 

A:

If the Mergers are not completed for any reason, the OCSL Common Stock will not be issued pursuant to the Merger Stock Issuance Proposal and OSI2 Stockholders will not receive any consideration for their shares of OSI2 Common Stock in connection with the Merger. Instead, each of OCSL and OSI2 will remain an independent company. See “Description of the Merger Agreement — Termination of the Merger Agreement.”

 

Q:

Did the OCSL Special Committee and OCSL Board receive an opinion from the financial advisor to the OCSL Special Committee regarding the Exchange Ratio?

 

A:

Yes. For more information, see the section entitled “The Mergers — Opinion of the Financial Advisor to the OCSL Special Committee.”

 

Q:

Did the OSI2 Special Committee and OSI2 Board receive an opinion from the financial advisor to the OSI2 Special Committee regarding the Exchange Ratio?

 

A:

Yes. For more information, see the section entitled “The Mergers — Opinion of the Financial Advisor to the OSI2 Special Committee.”

 

12


SUMMARY OF THE MERGERS

This summary highlights selected information contained elsewhere in this joint proxy statement/prospectus and may not contain all of the information that is important to you. You should carefully read this entire joint proxy statement/prospectus, including the other documents to which this joint proxy statement/prospectus refers for a more complete understanding of the Mergers. In particular, you should read the annexes attached to this joint proxy statement/prospectus, including the Merger Agreement, which is attached as Annex A hereto, as it is the legal document that governs the Mergers. See “Where You Can Find More Information.” For a discussion of the risk factors you should carefully consider, see the section entitled “Risk Factors” beginning on page 23.

The Parties to the Mergers

Oaktree Specialty Lending Corporation

333 South Grand Avenue, 28th Floor

Los Angeles, CA 90071

(213) 830-6300

OCSL is a specialty finance company that looks to provide customized, one-stop credit solutions to companies with limited access to public or syndicated capital markets. OCSL was formed in late 2007 and operates as a closed-end, externally managed, non-diversified management investment company that has elected to be regulated as a Business Development Company under the Investment Company Act. OCSL has qualified and elected to be treated as a regulated investment company (“RIC”) under the Code for U.S. federal income tax purposes.

OCSL’s investment objective is to generate current income and capital appreciation by providing companies with flexible and innovative financing solutions, including first and second lien loans, unsecured and mezzanine loans, bonds, preferred equity and certain equity co-investments. OCSL may also seek to generate capital appreciation and income through secondary investments at discounts to par in either private or syndicated transactions. OCSL invests in companies that typically possess resilient business models with strong underlying fundamentals. OCSL intends to deploy capital across credit and economic cycles with a focus on long-term results, which OCSL believes will enable it to build lasting partnerships with financial sponsors and management teams, and OCSL may seek to opportunistically take advantage of dislocations in the financial markets and other situations that may benefit from Oaktree’s credit and structuring expertise, including throughout the COVID-19 pandemic. Sponsors may include financial sponsors, such as an institutional investor or a private equity firm, or a strategic entity seeking to invest in a portfolio company.

Oaktree Strategic Income II, Inc.

333 South Grand Avenue, 28th Floor

Los Angeles, CA 90071

(213) 830-6300

OSI2 is a closed-end investment company focused on lending to small- and medium-sized companies. OSI2 was formed in April 2018 and operates as a closed-end, externally managed, non-diversified management investment company that has elected to be regulated as a Business Development Company under the Investment Company Act. OSI2 has qualified and elected to be treated as a RIC under the Code for U.S. federal income tax purposes.

OSI2’s investment objective is to generate current income and long-term capital appreciation. OSI2 seeks to achieve its investment objective without subjecting principal to undue risk of loss by lending to and investing in the debt of public and private companies, primarily in situations where a company or its owners are

 

13


(a) overleveraged or facing pressures to recapitalize, (b) unable to access broadly syndicated capital markets, (c) undervalued after having recently exited bankruptcy, completed a restructuring or are in a cyclically out-of-favor industry or (d) otherwise affected by mispricings or inefficiencies in the capital markets or at different points throughout the credit cycle.

Project Superior Merger Sub, Inc.

333 South Grand Avenue, 28th Floor

Los Angeles, CA 90071

(213) 830-6300

Merger Sub is a Delaware corporation and a newly formed wholly-owned subsidiary of OCSL. Merger Sub was formed in connection with and for the sole purpose of the Merger.

Oaktree Fund Advisors, LLC

333 South Grand Avenue, 28th Floor

Los Angeles, CA 90071

(213) 830-6300

Each of OCSL and OSI2 is externally managed and advised by Oaktree, a registered investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). Oaktree, subject to the overall supervision of the OCSL Board, manages OCSL’s day-to-day operations, and provides investment advisory services to OCSL pursuant to the OCSL Investment Advisory Agreement. Oaktree, subject to the overall supervision of the OSI2 Board, manages OSI2’s day-to-day operations, and provides investment advisory services to OSI2 pursuant to the OSI2 Investment Advisory Agreement.

Oaktree is an affiliate of OCM, a leading global investment management firm headquartered in Los Angeles, California, focused on less efficient markets and alternative investments. A number of the senior executives and investment professionals of Oaktree and its affiliates have been investing together for over 35 years and have generated impressive investment performance through multiple market cycles. Oaktree and its affiliates emphasize an opportunistic, value-oriented and risk-controlled approach to investments in distressed debt, corporate debt (including high-yield debt and senior loans), control investing, real estate, convertible securities and listed equities.

In 2019, Brookfield Asset Management Inc. (“Brookfield”) acquired a majority economic interest in Oaktree Capital Group, LLC (“OCG”). OCG operates as an independent business within Brookfield, with its own product offerings and investment, marketing and support teams. Brookfield is a leading global alternative asset manager with a 120-year history and approximately $650 billion of assets under management as of September 30, 2021 (inclusive of OCG) across a broad portfolio of real estate, infrastructure, renewable power, credit and private equity assets. OCG’s founders, senior management and current and former employee-unitholders of OCG are able to sell their remaining OCG units to Brookfield over time pursuant to an agreed upon liquidity schedule and approach to valuing such units at the time of liquidation. Pursuant to this liquidity schedule, the earliest year in which Brookfield could own 100% of the OCG business is 2029.

Merger Structure

Pursuant to the terms of the Merger Agreement, at the Effective Time, Merger Sub will be merged with and into OSI2. OSI2 will be the surviving company and will continue its existence as a corporation under the laws of the State of Delaware. As of the Effective Time, the separate corporate existence of Merger Sub will cease. Immediately after the occurrence of the Effective Time, in the Second Merger, OSI2 will merge with and into OCSL with OCSL continuing as the surviving company. As of the Second Effective Time, the separate corporate existence of OSI2 will cease.

 

14


Based on the number of shares of OCSL Common Stock issued and outstanding and the NAVs of OCSL and OSI2 as of June 30, 2022 (and excluding transaction costs and tax-related distributions), OCSL would issue approximately 2.71 shares of OCSL Common Stock for each share of OSI2 Common Stock outstanding, resulting in pro forma ownership of 79.5% for current OCSL Stockholders and 20.5% for current OSI2 Stockholders.

Following the Mergers, Oaktree will continue to be the investment adviser to OCSL and the OCSL Investment Advisory Agreement will remain in effect. OCSL will exclude any amounts resulting solely from the new cost basis of the acquired OSI2 investments established by ASC 805 as a result of the Mergers from the calculation of the incentive fee on income and the incentive fee on capital gains, with such exclusion to be implemented either through an amendment to the OCSL Investment Advisory Agreement or a waiver of such amounts by Oaktree.

The Merger Agreement is attached as Annex A to this joint proxy statement/prospectus. OCSL and OSI2 encourage their respective stockholders to read the Merger Agreement carefully and in its entirety, as it is the legal document governing the Mergers.

Merger Consideration

Subject to the terms and conditions of the Merger Agreement, at the Effective Time, each share of OSI2 Common Stock issued and outstanding immediately prior to the Effective Time (other than Cancelled Shares) will be converted into the right to receive a number of shares of OCSL Common Stock equal to the Exchange Ratio, plus any cash in lieu of fractional shares.

Under the Merger Agreement, as of the Determination Date, OSI2 and OCSL will deliver the Closing OSI2 Net Asset Value and the Closing OCSL Net Asset Value, respectively, in each case based on the same assumptions and methodologies, and applying the same categories of adjustments to NAV (except as may be mutually agreed by the parties), historically used in preparing the calculation of the NAV per share by the applicable party. Based on such calculations, the parties will calculate the OSI2 Per Share NAV, which will be equal to (i) the Closing OSI2 Net Asset Value divided by (ii) the number of shares of OSI2 Common Stock issued and outstanding as of the Determination Date (excluding any Cancelled Shares), and the OCSL Per Share NAV, which will be equal to (A) the Closing OCSL Net Asset Value divided by (B) the number of shares of OCSL Common Stock issued and outstanding as of the Determination Date. The Exchange Ratio will be equal to the quotient (rounded to four decimal places) of (i) the OSI2 Per Share NAV divided by (ii) the OCSL Per Share NAV.

OSI2 and OCSL will update and redeliver the Closing OSI2 Net Asset Value or the Closing OCSL Net Asset Value, respectively, in the event of a material change to such calculation between the Determination Date and the closing of the Mergers (including any dividend declared after the Determination Date but prior to the closing of the Mergers) and if needed to ensure that the calculation is determined within 48 hours (excluding Sundays and holidays) prior to the Effective Time.

The Exchange Ratio will be adjusted only if, between the Determination Date and the Effective Time, the respective issued and outstanding shares of OCSL Common Stock or OSI2 Common Stock will have been increased or decreased or changed into or exchanged for a different number or kind of shares or securities, in each case, as a result of any reclassification, recapitalization, stock split, reverse stock split, split-up, merger, issuer tender or exchange offer, combination or exchange of shares or similar transaction, or if a stock dividend or dividend payable in any other securities (or similar distribution) will be authorized and declared with a record date within such period, as permitted by the Merger Agreement in each case to provide the stockholders of OSI2 and OCSL the same economic effect as contemplated by the Merger Agreement prior to such event. Because the

 

15


Exchange Ratio will be determined within 48 hours (excluding Sundays and holidays) prior to the Effective Time, the time period during which such an adjustment could occur will be relatively short.

Closing of the Mergers is contingent upon (i) OCSL stockholder approval of the Merger Stock Issuance Proposal, (ii) OSI2 stockholder approval of the Merger Proposal and (iii) satisfaction or waiver of certain other closing conditions.

After the Determination Date and until the Mergers are completed, the market value of the shares of OCSL Common Stock to be issued in the Merger will continue to fluctuate but the number of shares to be issued to OSI2 Stockholders will remain fixed.

Market Price of OCSL Common Stock

OCSL Common Stock trades on the Nasdaq Global Select Market (“Nasdaq”) under the ticker symbol “OCSL.” There is no public market for the OSI2 Common Stock currently.

The following table presents the closing sales prices as of the last trading day before the execution of the Merger Agreement and the most recent quarter end, and the most recently determined NAV per share of OCSL Common Stock and the most recently determined NAV per share of OSI2 Common Stock.

 

     OCSL
Common
Stock
     OSI2
Common
Stock
 

NAV per Share as of June 30, 2022

   $ 6.89      $ 18.69  

Closing Sales Price as of June 30, 2022

   $ 6.55      $ —    

Closing Sales Price as of September 14, 2022

   $ 6.55      $ —    

Risks Relating to the Mergers

The Mergers and the other transactions contemplated by the Merger Agreement are subject to, among others, the following risks. OCSL Stockholders and OSI2 Stockholders should carefully consider these risks before deciding how to vote on the proposals to be voted on at their respective annual or special meeting.

 

   

Because the trading price of OCSL Common Stock and the NAV per share of OSI2 Common Stock and OCSL Common Stock will fluctuate, OSI2 Stockholders cannot be sure of the market value of the consideration they will receive in connection with the Mergers until the closing date of the Mergers.

 

   

Sales of shares of OCSL Common Stock after the completion of the Mergers may cause the trading price of OCSL Common Stock to decline.

 

   

OCSL Stockholders and OSI2 Stockholders will experience a reduction in percentage ownership and voting power in the combined company as a result of the Mergers.

 

   

OCSL may be unable to realize the benefits anticipated by the Mergers, including estimated cost savings, or it may take longer than anticipated to achieve such benefits.

 

   

The opinion of the financial advisor to the OCSL Special Committee delivered to the OCSL Special Committee and the OCSL Board prior to the signing of the Merger Agreement and the opinion of the financial advisor to the OSI2 Special Committee delivered to the OSI2 Special Committee and the OSI2 Board prior to the signing of the Merger Agreement will not reflect changes in circumstances since the date of the opinions.

 

   

If the Mergers do not close, OCSL and OSI2 will not benefit from the expenses incurred in pursuit of the Mergers.

 

   

The termination of the Merger Agreement could negatively impact OCSL and OSI2.

 

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The Merger Agreement limits OCSL’s and OSI2’s ability to pursue alternatives to the Mergers.

 

   

The Mergers are subject to closing conditions, including stockholder approvals, that, if not satisfied or (to the extent legally allowed) waived, will result in the Mergers not being completed, which may result in material adverse consequences to the business and operations of OCSL and OSI2.

 

   

OCSL and OSI2 may, to the extent legally allowed, waive one or more conditions to the Mergers without resoliciting stockholder approval.

 

   

OCSL and OSI2 will be subject to operational uncertainties and contractual restrictions while the Mergers are pending.

 

   

The market price of OCSL Common Stock after the Mergers may be affected by factors different from those affecting such common stock currently.

See the section captioned “Risk Factors — Risks Relating to the Mergers” beginning on page 23 for a more detailed discussion of these risks.

Tax Consequences of the Mergers

The Mergers are intended to qualify as a “reorganization,” within the meaning of Section 368(a) of the Code, and it is a condition to the obligations of OSI2 and of OCSL to consummate the Mergers that OSI2 and OCSL will each use its best efforts to obtain a legal opinion to that effect. OSI2 Stockholders are not expected to recognize any gain or loss for U.S. federal income tax purposes on the exchange of shares of OSI2 Common Stock for shares of OCSL Common Stock pursuant to the Mergers, except for any gain or loss that may result from the receipt of cash in lieu of fractional shares of OCSL Common Stock.

OSI2 Stockholders should read the section captioned “Certain Material U.S. Federal Income Tax Considerations — Certain Material U.S. Federal Income Tax Consequences of the Mergers” for a more complete discussion of the U.S. federal income tax consequences of the Mergers. Tax matters can be complicated and the tax consequences of the Mergers to an OSI2 Stockholder will depend on the particular tax situation of such stockholder. OSI2 Stockholders should consult with their own tax advisors to determine the tax consequences of the Mergers to them.

The Mergers are not expected to be a taxable event for OCSL Stockholders.

Annual Meeting of OCSL Stockholders

OCSL plans to hold the OCSL Annual Meeting virtually on [•], 2023, at [•] [a.m.][p.m.], Pacific Time, at the following website: www.virtualshareholdermeeting.com/OCSL2023. At the OCSL Annual Meeting, holders of OCSL Common Stock will be asked to approve (i) the election of each of the nominees proposed by the OCSL Board in connection with the Director Proposal, (ii) the Auditor Proposal, (iii) the Merger Stock Issuance Proposal and (iv) the Reverse Stock Split Proposal.

An OCSL Stockholder can vote at the OCSL Annual Meeting if such stockholder owned shares of OCSL Common Stock at the close of business on the OCSL Record Date. As of that date, there were [•] shares of OCSL Common Stock outstanding and entitled to vote. Approximately [•] of such total outstanding shares, or approximately [•]%, were owned beneficially or of record by directors and executive officers of OCSL.

Special Meeting of OSI2 Stockholders

OSI2 plans to hold the OSI2 Special Meeting virtually on [•], 2023, at [•] [a.m.][p.m.], Pacific Time, at the following website: www.virtualshareholdermeeting.com/OSI22023SM. At the OSI2 Special Meeting, holders of OSI2 Common Stock will be asked to approve the Merger Proposal.

 

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An OSI2 Stockholder can vote at the OSI2 Special Meeting if such stockholder owned shares of OSI2 Common Stock at the close of business on the OSI2 Record Date. As of that date, there were 17,401,121 shares of OSI2 Common Stock outstanding and entitled to vote, and no shares were owned beneficially or of record by directors and executive officers of OSI2.

OCSL Board Recommendation

The OCSL Board, upon recommendation of the OCSL Special Committee, comprised solely of certain independent directors of OCSL, has unanimously approved the Merger Agreement, including the Mergers and the related transactions, the proposed issuance of OCSL Common Stock in connection with the Mergers and directed that such matters be submitted to the OCSL Stockholders for approval at the OCSL Annual Meeting. After careful consideration and, with respect to the Merger Stock Issuance Proposal, on the recommendation of the OCSL Special Committee, the OCSL Board unanimously recommends that OCSL Stockholders vote “FOR” the election of each of the nominees proposed by the OCSL Board in connection with the Director Proposal, “FOR” the Auditor Proposal, “FOR” the Merger Stock Issuance Proposal and “FOR” the Reverse Stock Split Proposal.

OSI2 Board Recommendation

The OSI2 Board, upon recommendation of the OSI2 Special Committee, comprised solely of certain independent directors of OSI2, has unanimously approved the Merger Agreement, including the Mergers and the related transactions, and directed that such matters be submitted to the OSI2 Stockholders for approval. After careful consideration, on the recommendation of the OSI2 Special Committee, the OSI2 Board unanimously approved the Merger Agreement and the transactions contemplated thereby, including the Mergers, and unanimously recommends that OSI2 Stockholders vote “FOR” the Merger Proposal.

Vote Required — OCSL

Each share of OCSL Common Stock held by a holder of record as of the OCSL Record Date has one vote on each matter considered at the OCSL Annual Meeting.

The Director Proposal

The affirmative vote of a plurality of the shares of OCSL Common Stock outstanding and entitled to vote thereon at the OCSL Annual Meeting is required to elect each director nominee of OCSL (i.e., the candidate receiving the most “for” votes will win each election). Stockholders may not cumulate their votes. Votes to “withhold authority” and broker non-votes, if any, will not be included in determining the number of votes cast and, as a result, will have no effect on the Director Proposal.

The Auditor Proposal

The affirmative vote of the holders of a majority of the votes cast by the holders of outstanding shares of OCSL Common Stock at the OCSL Annual Meeting in person or by proxy at a meeting at which a quorum is present is required for approval of the Auditor Proposal (i.e., the number of shares voted “for” the proposal must exceed the number of shares voted “against” such proposal). Abstentions and broker non-votes, if any, will not be included in determining the number of votes cast and, as a result, will have no effect on the Merger Stock Issuance Proposal.

The Merger Stock Issuance Proposal

The affirmative vote of the holders of a majority of the votes cast by the holders of outstanding shares of OCSL Common Stock at the OCSL Annual Meeting in person or by proxy at a meeting at which a quorum is

 

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present is required for approval of the Merger Stock Issuance Proposal (i.e., the number of shares voted “for” the proposal must exceed the number of shares voted “against” such proposal). Abstentions and broker non-votes, if any, will not be included in determining the number of votes cast and, as a result, will have no effect on the Merger Stock Issuance Proposal.

The Reverse Stock Split Proposal

The affirmative vote of a majority of the outstanding shares of OCSL Common Stock is required to approve the Reverse Stock Split Proposal. Abstentions and broker non-votes, if any, will have the effect of a vote “against” the Reverse Stock Split Proposal.

Vote Required — OSI2

Each share of OSI2 Common Stock held by a holder of record as of the OSI2 Record Date has one vote on each matter considered at the OSI2 Special Meeting.

The Merger Proposal

The affirmative vote of the holders of a majority of the outstanding shares of OSI2 Common Stock is required to approve the OSI2 Merger Proposal. Abstentions and broker non-votes, if any, will have the effect of a vote “against” this proposal.

Completion of the Mergers

As more fully described in this joint proxy statement/prospectus and in the Merger Agreement, the completion of the Mergers depends on a number of conditions being satisfied or, where legally permissible, waived. For information on the conditions that must be satisfied or waived for the Mergers to occur, see “Description of the Merger Agreement — Conditions to Closing the Mergers.” While there can be no assurance as to the exact timing, or that the Mergers will be completed at all, OCSL and OSI2 are working to complete the Merger by March 31, 2023. It is currently expected that the Mergers will be completed promptly following receipt of the required stockholder approvals at the OCSL Annual Meeting and the OSI2 Special Meeting and satisfaction or waiver of the other closing conditions set forth in the Merger Agreement.

Termination of the Merger Agreement

The Merger Agreement contains certain termination rights for OCSL and OSI2, each of which is discussed below in “Description of the Merger Agreement — Termination of the Merger Agreement.”

Other Actions Taken in Connection with the Mergers

In connection with entry into the Merger Agreement and subject to completion of the transactions contemplated thereby, Oaktree has agreed to waive $9.0 million of base management fees payable to it as follows: $6.0 million at a rate of $1.5 million per quarter (with such amount appropriately prorated for any partial quarter) in the first year following closing of the Mergers and $3.0 million at a rate of $750,000 per quarter (with such amount appropriately prorated for any partial quarter) in the second year following the closing of the Mergers.

Management of the Combined Company

The directors of OCSL immediately prior to the Mergers will remain the directors of OCSL and will hold office until their respective successors are duly elected and qualify, or their earlier death, removal or resignation.

 

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The officers of OCSL immediately prior to the Mergers will remain the officers of OCSL and will hold office until their respective successors are duly appointed and qualify, or their earlier death, removal or resignation. Following the Mergers, Oaktree will continue to be the investment adviser to OCSL and the OCSL Investment Advisory Agreement will remain in effect. OCSL will exclude any amounts resulting solely from the new cost basis of the acquired OSI2 investments established by ASC 805 (as defined below) as a result of the Mergers from the calculation of the incentive fee on income and the incentive fee on capital gains, with such exclusion to be implemented either through an amendment to the OCSL Investment Advisory Agreement or a waiver of such amounts by Oaktree.

Reasons for the Mergers

OCSL

The OCSL Board consulted with its legal and other advisors, as well as OCSL’s management and Oaktree, and considered numerous factors, including the unanimous recommendation of the OCSL Special Committee, and the OCSL Board and the OCSL Special Committee unanimously determined that the Mergers are in the best interests of OCSL and in the best interests of OCSL Stockholders, and that existing OCSL Stockholders will not suffer any dilution for purposes of Rule 17a-8 of the Investment Company Act as a result of the Mergers.

The OCSL Special Committee and the OCSL Board, with the assistance of their legal and financial advisors, weighed various benefits and risks in considering the Mergers, both with respect to the immediate effects of the Mergers on OCSL and OCSL Stockholders and with respect to the potential benefits that could be experienced by the combined company after the Mergers. Some of the material factors considered by the OCSL Special Committee and the OCSL Board that assisted it in concluding that the Mergers are in the best interests of OCSL and OCSL Stockholders included, among others:

 

   

expected accretion to net investment income;

 

   

increase in first lien investments;

 

   

expected greater access to debt capital;

 

   

increased scale and improved secondary market liquidity;

 

   

acquisition of a known, diversified portfolio;

 

   

no dilution for purposes of Rule 17a-8 of the Investment Company Act;

 

   

potential expense savings;

 

   

the financial analyses reviewed by Houlihan Lokey Capital, Inc. (“Houlihan Lokey”) with the OCSL Special Committee as well as the oral opinion of Houlihan Lokey rendered to the OCSL Special Committee on September 14, 2022 (which was subsequently confirmed in writing by delivery of Houlihan Lokey’s written opinion addressed to the OCSL Special Committee and OCSL Board, dated September 14, 2022), as to, as of such date, the fairness of the Exchange Ratio provided for in the Merger pursuant to the Merger Agreement, from a financial point of view, to OCSL;

 

   

tax consequences of the Mergers; and

 

   

continuation of investment approach.

The foregoing list does not include all the factors that the OCSL Board considered in approving the proposed Mergers and the Merger Agreement and recommending that OCSL Stockholders approve the issuance of shares of OCSL Common Stock necessary to effectuate the Mergers.

For a further discussion of the material factors considered by the OCSL Board, see “The Mergers — Reasons for the Mergers.”

 

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OSI2

The OSI2 Board consulted with its legal and other advisors, as well as OSI2’s management and Oaktree, and considered numerous factors, including the unanimous recommendation of the OSI2 Special Committee, and the OSI2 Board and the OSI2 Special Committee unanimously determined that the Merger Agreement and the terms of the Mergers and the related transactions contemplated by the Merger Agreement are advisable and in the best interests of OSI2, and that existing OSI2 Stockholders will not suffer any dilution for purposes of Rule 17a-8 of the Investment Company Act as a result of the Mergers.

The OSI2 Special Committee and the OSI2 Board, with the assistance of their legal and financial advisors, weighed various benefits and risks in considering the Mergers, both with respect to the immediate effects of the Mergers on OSI2 and OSI2 Stockholders and with respect to the potential benefits that could be experienced by the combined company after the Mergers. Some of the material factors considered by the OSI2 Special Committee and the OSI2 Board that assisted it in concluding that the Mergers are in the best interests of OSI2 and OSI2 Stockholders included, among others:

 

   

expected accretion to net investment income;

 

   

expected greater access to more diverse and lower-cost sources of debt capital;

 

   

immediate access to liquidity for OSI2 Stockholders;

 

   

increased scale, broader equity research coverage and improved secondary market liquidity;

 

   

expected dividend accretion;

 

   

continuity of Oaktree and the management team;

 

   

ease of portfolio integration;

 

   

potential for operational synergies via the elimination of redundant expenses;

 

   

tax consequences of the Mergers;

 

   

no dilution for purposes of Rule 17a-8 of the Investment Company Act; and

 

   

the financial presentation, dated September 14, 2022, of Keefe, Bruyette & Woods, Inc. (“KBW”) provided to and reviewed with the OSI2 Special Committee and the opinion, dated September 14, 2022, of KBW to the OSI2 Special Committee and OSI2 Board as to, as of the date of the opinion, the fairness, from a financial point of view, to the holders of OSI2 Common Stock of the Exchange Ratio in the Merger.

The foregoing list does not include all the factors that the OSI2 Board considered in approving the Merger Agreement and recommending that OSI2 Stockholders approve the Merger Agreement.

For a further discussion of the material factors considered by the OSI2 Board, see “The Mergers — Reasons for the Mergers.”

OCSL Stockholders and OSI2 Stockholders Do Not Have Appraisal Rights

Neither OCSL Stockholders nor OSI2 Stockholders will be entitled to exercise appraisal rights in connection with the Mergers under the laws of the State of Delaware.

Opinion of the Financial Advisor to the OCSL Special Committee

On September 14, 2022, Houlihan Lokey orally rendered its opinion to the OCSL Special Committee (which was subsequently confirmed in writing by delivery of Houlihan Lokey’s written opinion addressed to the OCSL Special Committee and the OCSL Board dated September 14, 2022), as to, as of September 14, 2022, the fairness of the Exchange Ratio provided for in the Merger pursuant to the Merger Agreement, from a financial point of view, to OCSL.

 

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Houlihan Lokey’s opinion was directed to the OCSL Special Committee (in its capacity as such) and, as requested by the OCSL Special Committee, the OCSL Board (in its capacity as such), and only addressed the fairness of the Exchange Ratio provided for in the Merger pursuant to the Merger Agreement, from a financial point of view, to OCSL and did not address any other aspect or implication of the Merger or any other agreement, arrangement or understanding entered into in connection therewith or otherwise. The summary of Houlihan Lokey’s opinion in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of its written opinion, which is attached as Annex B to this joint proxy statement/prospectus and describes the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Houlihan Lokey in connection with the preparation of its opinion. However, neither Houlihan Lokey’s opinion nor the summary of its opinion and the related analyses set forth in this joint proxy statement/prospectus are intended to be, and do not constitute, advice or a recommendation to the OCSL Special Committee, the OCSL Board, any security holder of OCSL or any other person as to how to act or vote with respect to any matter relating to the Merger.

Opinion of the Financial Advisor to the OSI2 Special Committee

In connection with the merger, KBW delivered a written opinion, dated September 14, 2022, to the OSI2 Special Committee and the OSI2 Board as to the fairness, from a financial point of view and as of the date of the opinion, to the holders of OSI2 Common Stock of the Exchange Ratio in the proposed Merger. 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 Annex C to this document. The opinion was for the information of, and was directed to, the OSI2 Special Committee (in its capacity as such) and, as requested by the OSI2 Special Committee, the OSI2 Board (in its capacity as such) in connection with their respective consideration of the financial terms of the Mergers. The opinion did not address the underlying business decision of OSI2 to engage in the Mergers or enter into the Merger Agreement or constitute a recommendation to the OSI2 Special Committee or the OSI2 Board in connection with the Mergers, and it does not constitute a recommendation to any holder of OSI2 Common Stock or any stockholder of any other entity as to how to vote in connection with the Mergers or any other matter.

 

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RISK FACTORS

In addition to the other information included in this document, you should carefully consider the risks described below in determining whether to approve (i) in the case of OCSL Stockholders, the Merger Stock Issuance Proposal and (ii)  in the case of OSI2 Stockholders, the Merger Proposal. The information in “Item 1A. Risk Factors” in Part I of OCSL’s Annual Report on Form 10-K (File No. 814-00755) for the fiscal year ended September  30, 2021 and in Part II, Item 1A of OCSL’s Quarterly Report for the period ended June 30, 2022 is incorporated herein by reference for general risks related to OCSL. The information in “Item 1A. Risk Factors” in Part I of OSI2’s Annual Report on Form  10-K (File No. 814-01281) for the fiscal year ended September  30, 2021 and in Part II, Item 1A of OSI2’s Quarterly Report for the period ended June 30, 2022 is incorporated herein by reference for general risks related to OSI2. The occurrence of any of these risks could materially and adversely affect the business, prospects, financial condition, results of operations and cash flow of OCSL and OSI2 and, following the Mergers, the combined company and might cause you to lose all or part of your investment. The risks, as set out below and incorporated by reference herein, are not the only risks OCSL and OSI2 and, following the Mergers, the combined company face, and there may be additional risks that OCSL and OSI2 do not presently know of or that they currently consider not likely to have a significant impact. New risks may emerge at any time and OCSL and OSI2 cannot predict such risks or estimate the extent to which they may affect the business or financial performance of OCSL and OSI2 and, following the Mergers, the combined company. See also “Incorporation by Reference for OCSL,” “Incorporation by Reference for OSI2” and “Where You Can Find More Information” in this joint proxy statement/prospectus.

Risks Relating to the Mergers

Because the trading price of OCSL Common Stock and the NAV per share of OSI2 Common Stock and OCSL Common Stock will fluctuate, OSI2 Stockholders cannot be sure of the market value of the consideration they will receive in connection with the Mergers until the closing date of the Mergers.

At the Effective Time, each share of OSI2 Common Stock issued and outstanding immediately prior to the Effective Time (other than Cancelled Shares) will be converted into the right to receive a number of shares of OCSL Common Stock, equal to the Exchange Ratio, plus any cash (without interest) in lieu of fractional shares. The market value of such consideration to be received by OSI2 Stockholders upon completion of the Mergers (the “Merger Consideration”) may vary from the closing price of OCSL Common Stock on the date prior to announcement of the Mergers, on the date of the OSI2 Special Meeting and on the date the Mergers are completed. Any change in the market price of OCSL Common Stock prior to completion of the Mergers will affect the market value of the Merger Consideration that OSI2 Stockholders will receive upon completion of the Mergers. Additionally, the Exchange Ratio will fluctuate as OSI2’s and OCSL’s respective NAVs change prior to Closing.

Accordingly, at the time of the OSI2 Special Meeting, OSI2 Stockholders will not know or be able to calculate the market value of the Merger Consideration they would receive upon completion of the Mergers. Neither OSI2 nor OCSL is permitted to terminate the Merger Agreement or resolicit the vote of their respective stockholders solely because of changes in the market price of shares of OCSL Common Stock. There will be no adjustment to the Merger Consideration for changes in the market price of shares of OCSL Common Stock.

Changes in the market price of OCSL Common Stock may result from a variety of factors, including, among other things:

 

   

significant volatility in the market price and trading volume of securities of Business Development Companies or other companies in OCSL’s sector, which are not necessarily related to the operating performance of these companies;

 

   

changes in regulatory policies, accounting pronouncements or tax guidelines, particularly with respect to RICs and Business Development Companies;

 

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loss of OCSL’s Business Development Company or RIC status;

 

   

changes in earnings or variations in operating results or distributions that exceed OCSL’s net investment income;

 

   

increases in expenses associated with defense of litigation and responding to SEC inquiries;

 

   

changes in accounting guidelines governing valuation of OCSL’s investments;

 

   

changes in the value of OCSL’s portfolio of investments and any derivative instruments, including as a result of general economic conditions, interest rate shifts and changes in the performance of OCSL’s portfolio companies;

 

   

any shortfall in investment income or net investment income or any increase in losses from levels expected by investors or securities analysts;

 

   

departure of Oaktree’s key personnel; and

 

   

general economic trends and other external factors.

These factors are generally beyond the control of OCSL. The range of high and low sales prices per share of OCSL Common Stock as reported on Nasdaq for the quarter ended September 30, 2022 was a low of $5.87 and a high of $7.25. However, historical trading prices are not necessarily indicative of future performance. OSI2 Stockholders should obtain current market quotations for shares of OCSL Common Stock prior to the OSI2 Special Meeting.

Sales of shares of OCSL Common Stock after the completion of the Mergers may cause the market price of OCSL Common Stock to decline.

At the Effective Time, each share of the OSI2 Common Stock, issued and outstanding immediately prior to the Effective Time (other than Cancelled Shares), will be converted into the right to receive a number of shares of OCSL Common Stock equal to the Exchange Ratio, plus any cash (without interest) in lieu of fractional shares. For illustrative purposes, based on June 30, 2022 NAVs and excluding transaction costs and other tax-related distributions, OCSL would issue approximately 2.71 shares of OCSL Common Stock for each share of OSI2 Common Stock outstanding, resulting in pro forma ownership of 79.5% for current OCSL Stockholders and 20.5% for current OSI2 Stockholders. Former OSI2 Stockholders may be required to or decide to sell the shares of OCSL Common Stock that they receive pursuant to the Merger Agreement, particularly because they have not previously held liquid securities. In addition, OCSL Stockholders may decide not to hold their shares of OCSL Common Stock after completion of the Mergers. In each case, such sales of OCSL Common Stock could have the effect of depressing the trading price for OCSL Common Stock and may take place promptly following the completion of the Mergers. If this occurs, it could impair OCSL’s ability to raise additional capital through the sale of equity securities should OCSL desire to do so.

OCSL Stockholders and OSI2 Stockholders will experience a reduction in percentage ownership and voting power in the combined company as a result of the Mergers.

OCSL Stockholders will experience a reduction in their percentage ownership interests and effective voting power in respect of the combined company relative to their percentage ownership interests in OCSL prior to the Mergers unless they hold a comparable or greater percentage ownership in OSI2 as they do in OCSL prior to the Mergers. Consequently, OCSL Stockholders should generally expect to exercise less influence over the management and policies of the combined company following the Mergers than they currently exercise over the management and policies of OCSL. OSI2 Stockholders will experience a substantial reduction in their percentage ownership interests and effective voting power in respect of the combined company relative to their percentage ownership interests in OSI2 prior to the Mergers unless they hold a comparable or greater percentage ownership in OCSL as they do in OSI2 prior to the Mergers. Consequently, OSI2 Stockholders should generally expect to

 

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exercise less influence over the management and policies of the combined company following the Mergers than they currently exercise over the management and policies of OSI2. In addition, prior to completion of the Mergers, subject to certain restrictions in the Merger Agreement, OCSL and OSI2 may issue additional shares of OCSL Common Stock and OSI2 Common Stock, respectively, which would further reduce the percentage ownership of the combined company to be held by current OCSL Stockholders and OSI2 Stockholders.

OCSL may be unable to realize the benefits anticipated by the Mergers, including estimated cost savings, or it may take longer than anticipated to achieve such benefits.

The realization of certain benefits anticipated as a result of the Mergers will depend in part on the integration of OSI2’s investment portfolio with OCSL’s investment portfolio and the integration of OSI2’s business with OCSL’s business. There can be no assurance that OSI2’s investment portfolio or business can be operated profitably going forward or integrated successfully into OCSL’s operations in a timely fashion or at all. The dedication of management resources to such integration may detract attention from the day-to-day business of the combined company and there can be no assurance that there will not be substantial costs associated with the transition process or there will not be other material adverse effects as a result of these integration efforts. Such effects, including incurring unexpected costs or delays in connection with such integration and failure of OSI2’s investment portfolio to perform as expected, could have a material adverse effect on the financial results of the combined company.

OCSL also expects to achieve certain synergies and cost savings from the Mergers when the two companies have fully integrated their portfolios. It is possible that the estimates of these synergies and potential cost savings could ultimately be incorrect. The cost savings estimates also assume OCSL will be able to combine its operations and OSI2’s operations in a manner that permits those cost savings to be fully realized. If the estimates turn out to be incorrect or if OCSL is not able to successfully combine OSI2’s investment portfolio or business with its operations, the anticipated synergies and cost savings may not be fully realized or realized at all or may take longer to realize than expected.

The opinion of the financial advisor to the OCSL Special Committee delivered to the OCSL Special Committee and the OCSL Board prior to the signing of the Merger Agreement and the opinion of the financial advisor to the OSI2 Special Committee delivered to the OSI2 Special Committee and the OSI2 Board prior to the signing of the Merger Agreement will not reflect changes in circumstances since the date of such opinions.

The opinion of Houlihan Lokey, the financial advisor to the OCSL Special Committee, was delivered to the OCSL Special Committee and the OCSL Board on, and was dated, September 14, 2022. The opinion of KBW, the financial advisor to the OSI2 Special Committee, was delivered to the OSI2 Special Committee and the OSI2 Board on, and was dated, September 14, 2022. Changes in OCSL’s or OSI2’s operations and prospects, general market and economic conditions and other factors that may be beyond the control of OCSL or OSI2 may significantly alter OSI2’s value or the price of shares of OCSL Common Stock by the time the Mergers are completed. The opinions do not speak as of the time the Mergers will be completed or as of any date other than the date of such opinions.

If the Mergers do not close, OCSL and OSI2 will not benefit from the expenses incurred in pursuit of the Mergers.

If the Mergers do not close, OCSL and OSI2 will have incurred substantial expenses for which no ultimate benefit will have been received. OCSL and OSI2 have incurred out-of-pocket expenses in connection with the Mergers for investment banking, legal and accounting fees and financial printing and other related charges, much of which will be incurred even if the Mergers are not completed.

 

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The termination of the Merger Agreement could negatively impact OCSL and OSI2.

If the Merger Agreement is terminated, there may be various consequences, including:

 

   

the businesses of OCSL and OSI2 may have been adversely impacted by the failure to pursue other beneficial opportunities due to the focus of management on the Mergers, without realizing any of the anticipated benefits of completing the Mergers;

 

   

the market price of OCSL Common Stock might decline to the extent that the market price prior to termination reflects a market assumption that the Mergers will be completed; and

 

   

OSI2 may not be able to find a party willing to pay an equivalent or more attractive price than the price OCSL agreed to pay in the Mergers.

The Merger Agreement limits OCSL’s and OSI2’s ability to pursue alternatives to the Mergers.

The Merger Agreement contains provisions that limit OCSL’s and OSI2’s ability to discuss, facilitate or commit to competing third party proposals to acquire all or a significant part of OCSL or OSI2. These provisions, which are typical for transactions of this type, include a termination fee of $9.8 million payable by third parties to OCSL and $37.9 million payable by third parties to OSI2 under certain circumstances, might discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of OCSL or OSI2 from considering or proposing that acquisition even if it were prepared to pay consideration with a higher per share market price than that proposed in the Mergers or might result in a potential competing acquirer proposing to pay a lower per share price to acquire OCSL or OSI2 than it might otherwise have proposed to pay.

The Mergers are subject to closing conditions, including stockholder approvals, that, if not satisfied or (to the extent legally allowed) waived, will result in the Mergers not being completed, which may result in material adverse consequences to the business and operations of OCSL and OSI2.

The Mergers are subject to closing conditions, including certain approvals of OCSL Stockholders and OSI2 Stockholders that, if not satisfied, will prevent the Mergers from being completed. The closing condition that OSI2 Stockholders adopt the Merger Agreement and approve the Merger Proposal may not be waived under applicable law and must be satisfied for the Mergers to be completed. If OSI2 Stockholders do not adopt the Merger Agreement and approve the Mergers and the Mergers are not completed, the resulting failure of the Mergers could have a material adverse impact on OCSL’s and OSI2’s respective businesses and operations. In addition, the closing condition that OCSL Stockholders approve the issuance of shares of OCSL Common Stock pursuant to the Merger Agreement may not be waived and must be satisfied for the Mergers to be completed. If OCSL Stockholders do not approve the Merger Stock Issuance Proposal and the Mergers are not completed, the resulting failure of the Mergers could have a material adverse impact on OCSL’s and OSI2’s respective businesses and operations. In addition to the required approvals of OCSL Stockholders and OSI2 Stockholders, the Mergers are subject to a number of other conditions beyond the control of OCSL and OSI2 that may prevent, delay or otherwise materially adversely affect completion of the Mergers. OCSL and OSI2 cannot predict whether and when these other conditions will be satisfied.

OCSL and OSI2 may, to the extent legally allowed, waive one or more conditions to the Mergers without resoliciting stockholder approval.

Certain conditions to OCSL’s and OSI2’s respective obligations to complete the Mergers may be waived, in whole or in part, to the extent legally allowed, either unilaterally or by mutual agreement. In the event that any such waiver does not require resolicitation of stockholders, OCSL and OSI2 will each have the discretion to complete the Mergers without seeking further stockholder approval. The conditions requiring the approval of OCSL Stockholders and OSI2 Stockholders, however, cannot be waived.

 

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OCSL and OSI2 will be subject to operational uncertainties and contractual restrictions while the Mergers are pending.

Uncertainty about the effect of the Mergers may have an adverse effect on OCSL or OSI2 and, consequently, on the combined company following completion of the Mergers. These uncertainties may cause those that deal with OCSL or OSI2 to seek to change their existing business relationships with them. In addition, the Merger Agreement restricts OCSL and OSI2 from taking actions that each might otherwise consider to be in its best interests. These restrictions may prevent OCSL or OSI2 from pursuing certain business opportunities that may arise prior to the completion of the Mergers.

The market price of OCSL Common Stock after the Mergers may be affected by factors different from those affecting such common stock currently.

OCSL’s business and OSI2’s business differ in some respects and, accordingly, the results of operations of the combined company and the market price of OCSL Common Stock after the Mergers may be affected by factors different from those currently affecting the independent results of operations of each of OCSL and OSI2, such as a larger stockholder base, a different portfolio composition and a different capital structure, and OCSL’s trading price. Accordingly, OCSL’s historical trading prices and financial results may not be indicative of these matters for the combined company following the Mergers.

 

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COMPARATIVE FEES AND EXPENSES

Comparative Fees and Expenses Relating to the Mergers

The following table is intended to assist OCSL Stockholders and OSI2 Stockholders in understanding the costs and expenses that an investor in shares of OCSL Common Stock or OSI2 Common Stock bears directly or indirectly and, based on the assumptions set forth below, the pro forma costs and expenses estimated to be incurred by the combined company in the first year following completion of the Mergers. OCSL and OSI2 caution you that some of the percentages indicated in the table below are estimates and may vary. Except where the context suggests otherwise, whenever this document contains a reference to fees or expenses paid or to be paid by “you,” “OCSL” or “OSI2,” stockholders will indirectly bear such fees or expenses as investors in OCSL or OSI2, as applicable. The table below is based on information as of June 30, 2022 (except as noted below) and includes expenses of the applicable consolidated subsidiaries.

 

     Actual   Pro Forma
Stockholder transaction expenses:    OCSL   OSI2   OCSL

Sales load (as a percentage of offering price)

   None(1)   None(1)   None(1)

Offering expenses

   None(1)   None(1)   None(1)

Dividend reinvestment plan fees (as a percentage of offering price)

   Up to $15(2)   None(2)   Up to $15(2)

Total stockholder transaction expenses (as a percentage of offering price)

   None   None   None

 

Annual expenses (as a percentage of net assets attributable to
common stock (3)):
   Actual     Pro Forma  
   OCSL     OSI2     OCSL  

Base management fees(4)

     3.10     1.63     3.04

Incentive fees (OCSL: 17.5%; OSI2: 20.0%)(5)

     2.06     2.28     2.05

Interest payments on borrowed funds (including other costs of servicing and offering debt securities)(6)

     4.07     3.82     4.03

Other expenses(7)

     0.67     0.76     0.59

Acquired fund fees and expenses(8)

     0.95     —       0.76

Total annual expenses(9)

     10.85     8.49     10.47

 

(1)

Purchases of shares of OCSL Common Stock or OSI2 Common Stock on the secondary market are not subject to sales load but may be subject to brokerage commissions or other charges. The table does not include any sales load (underwriting discounts or commissions) that stockholders may have paid in connection with their purchase of shares of OCSL Common Stock or OSI2 Common Stock in a prior underwritten offering or otherwise.

(2)

The expenses of administering the OCSL dividend reinvestment plan are included in “Other expenses.” However, if a participant in the plan elects by notice to the plan administrator in advance of termination to have the plan administrator sell part or all of the shares held by the plan administrator in the participant’s account and remit the proceeds to the participant, the plan administrator is authorized to deduct a transaction fee of up to $15 plus a $0.10 per share fee from the proceeds. OSI2 does not have a dividend reinvestment plan.

(3)

For the pro forma column, the combined net assets of OCSL and OSI2 on a pro forma basis as of June 30, 2022 were used.

(4)

For OCSL, the base management fee is calculated at an annual rate of 1.50% of OCSL’s total gross assets at the end of each quarter, including any investment made with borrowings, but excluding cash and cash equivalents; provided, however, the base management fee is calculated at an annual rate of 1.00% of the value of OCSL’s total gross assets, including any investments made with borrowings, but excluding cash and cash equivalents, that exceeds the product of (i) 200% (calculated in accordance with the Investment Company Act, and giving effect to exemptive relief OCSL has received with respect to debentures issued by a small business investment company subsidiary) and (ii) OCSL’s net assets. In connection with the OCSI

 

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  Merger, Oaktree agreed to waive an aggregate of $6.0 million of base management fees otherwise payable to Oaktree in the two years following the closing of the OCSI Merger on March 19, 2021 at a rate of $750,000 per quarter (with such amount appropriately prorated for any partial quarter). See note 10 in the notes to the Consolidated Financial Statements in OCSL’s Quarterly Report on Form 10-Q (File No. 814-00755) for the quarter ended June 30, 2022 for additional information. This table assumes that OCSL’s total gross assets (excluding cash and cash equivalents) are $2.7 billion, which was the actual amount of OCSL’s total gross assets as of June 30, 2022. The base management fee net of such waiver would be 2.93% of net assets attributable to OCSL Common Stock.

For OSI2, the base management fee is calculated at an annual rate of 1.00% of the Gross Asset Value; provided that prior to a Qualified Listing the base management fee will not exceed 1.75% per annum of the Unleveraged Asset Value. From and after the date of a Qualified Listing, if any, the base management fee will increase to 1.50% per annum of OSI2’s Gross Asset Value. See Note 9 in the notes to the Consolidated Financial Statements in OSI2’s Quarterly Report on Form 10-Q (File No. 814-01281) for the quarter ended June 30, 2022 for additional information. This table assumes that OSI2’s Gross Asset Value is $573.2 million, which was the actual amount of OSI2’s total gross assets (excluding cash and cash equivalents) as of June 30, 2022.

Following completion of the Mergers, the combined company will be externally managed by Oaktree. The pro forma base management fee has been calculated in accordance with the OCSL Investment Advisory Agreement. The pro forma base management fee referenced in the table above is based on the combined gross assets (excluding cash and cash equivalents) of OCSL and OSI2 on a pro forma basis on June 30, 2022 and does not reflect the voluntary, irrevocable waiver by Oaktree of $9.0 million of base management fees payable to it as follows: $6.0 million at a rate of $1.5 million per quarter (with such amount appropriately prorated for any partial quarter) in the first year following closing of the Mergers and $3.0 million at a rate of $750,000 per quarter (with such amount appropriately prorated for any partial quarter) in the second year following closing of the Mergers. The pro forma base management fee net of the $1.5 million quarterly base management fee waiver in the year following closing of the Mergers would be 2.66% of net assets attributable to OCSL Common Stock.

 

(5)

For each of OCSL and OSI2, the incentive fee consists of two parts. For each of OCSL and OSI2, the incentive fee on income is calculated and payable quarterly in arrears based upon their respective pre-incentive fee net investment income for the immediately preceding quarter. The payment of the incentive fee on income is subject to payment of a preferred return to investors each quarter (i.e., a “hurdle rate”), expressed as a rate of return on the value of the net assets of OCSL and OSI2, as applicable, at the end of the most recently completed quarter, of 1.50%, subject to a “catch up” feature.

With respect to OCSL, the second part of the incentive fee (the “capital gains incentive fee”) is determined and payable in arrears as of the end of each fiscal year (or upon termination of the OCSL Investment Advisory Agreement, as of the termination date). With respect to OSI2, the second part of the incentive fee (the “capital gains incentive fee”) is determined and payable in arrears as of the end of each calendar year (or upon termination of the OSI2 Investment Advisory Agreement, as of the termination date).

With respect to OCSL, commencing with the fiscal year ended September 30, 2019, the capital gains incentive fee equals 17.5% of OCSL’s realized capital gains, if any, on a cumulative basis from the beginning of the fiscal year ended September 30, 2019 through the end of each fiscal year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gains incentive fees under the OCSL Investment Advisory Agreement. Any realized capital gains or losses and unrealized capital depreciation with respect to OCSL’s portfolio as of the end of the fiscal year ended September 30, 2018 are excluded from the calculation of the second part of the incentive fee. In addition, the calculation of realized capital gains, realized capital losses and unrealized capital depreciation does (1) not include any such amounts resulting solely from merger-related accounting adjustments in connection with the assets acquired in the OCSI Merger, including any premium or discount paid for the acquisition of such assets, solely to the extent that the inclusion of such merger-related accounting adjustments, in the aggregate, would result in an increase in the capital gains incentive fee and (2) include any such amounts associated with the investments acquired in such transaction

 

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for the period from October 1, 2018 to the date of closing of such transaction, solely to the extent that the exclusion of such amounts, in the aggregate, would result in an increase in the capital gains incentive fee. See note 10 in the notes to the Consolidated Financial Statements in OCSL’s Quarterly Report on Form 10-Q (File No. 814-00755) for the quarter ended June 30, 2022 for additional information about the incentive fee payable by OCSL.

With respect to OSI2, the capital gains incentive fee equals 20% of OSI2’s realized capital gains, if any, on a cumulative basis from August 6, 2018, the date of OSI2’s initial closing, through the end of each calendar year, computed net of all realized capital losses on a cumulative basis and unrealized capital depreciation, less the aggregate amount of any previously paid capital gains incentive fee under the OSI2 Investment Advisory Agreement. See Note 9 in the notes to the Consolidated Financial Statements in OSI2’s Quarterly Report on Form 10-Q (File No. 814-01281) for the fiscal quarter ended June 30, 2022 for additional information for additional information about the incentive fee payable by OSI2.

For the “Actual” columns, the incentive fees referenced in the table above are based on actual amounts of the incentive fee on income incurred during the fiscal quarter ended June 30, 2022 and the capital gains incentive fee payable under the applicable investment advisory agreement as of June 30, 2022.

Following completion of the Mergers, the combined company will be externally managed by Oaktree. The pro forma incentive fees have been calculated in a manner consistent with the OCSL Investment Advisory Agreement.

OCSL will exclude any amounts resulting solely from the new cost basis of the acquired OSI2 investments established by ASC 805 as a result of the Mergers from the calculation of the incentive fee on income and the incentive fee on capital gains, with such exclusion to be implemented either through an amendment to the OCSL Investment Advisory Agreement or a waiver of such amounts by Oaktree.

 

(6)

“Interest payments on borrowed funds (including other costs of servicing and offering debt securities)” is calculated as the weighted average interest rate in effect as of June 30, 2022 multiplied by the actual debt outstanding as of June 30, 2022 ($1.4 billion and $269.8 million for OCSL and OSI2, respectively) for the “Actual” columns. The weighted average interest rate (exclusive of deferred financing costs) for borrowings of OCSL and OSI2 as of June 30, 2022 was 3.2% and 4.3%, respectively. The “Pro Forma” column assumes the sum of amounts of debt outstanding as of June 30, 2022 for each of OCSL and OSI2 for the combined company following the Mergers.

(7)

“Other expenses” are based on estimated amounts for the current fiscal year for each of OCSL and OSI2. These expenses include certain expenses allocated to the applicable Company under the OCSL Investment Advisory Agreement and the OSI2 Investment Advisory Agreement, as applicable, including travel expenses incurred by Oaktree’s personnel in connection with investigating and monitoring OCSL’s and OSI2’s respective investments, such as investment due diligence. The “Pro Forma” column assumes the sum of amounts estimated for each of OCSL and OSI2 for the combined company following the Mergers and reflects decreases in duplicative costs such as professional fees for legal, audit and tax fees, directors’ fees, and other redundant administrative and operating expenses directly related to the Mergers.

(8)

OCSL Stockholders indirectly bear the expenses of underlying funds or other investment vehicles that would be an investment company under section 3(a) of the Investment Company Act but for the exceptions to that definition provided for in sections 3(c)(1) and 3(c)(7) of the Investment Company Act (“Acquired Funds”) in which OCSL invests. OSI2 has no such investments.

For OCSL, this amount includes the annual expenses of Senior Loan Fund I LLC (“SLF JV I”) and the annual expenses of OCSI Glick JV LLC (the “Glick JV”). There are no fees paid by SLF JV I or the Glick JV to Oaktree. The annual expenses of SLF JV I and the Glick JV include interest payments on the subordinated notes held by OCSL’s joint venture partners, which represented 12.7% of such expenses for OCSL, and exclude interest payments on the subordinated notes held by OCSL. See note 3 in the notes to the Consolidated Financial Statements in OCSL’s Quarterly Report on Form 10-Q (File No. 814-00755) for the quarter ended June 30, 2022 for more information on SLF JV I and the Glick JV.

 

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The “Pro Forma” column assumes the sum of amounts for each of OCSL and OSI2 for the combined company following the Mergers.

 

(9)

“Total annual expenses” is presented as a percentage of net assets attributable to common stockholders because OCSL Stockholders and OSI2 Stockholders bear all of the fees and expenses of the respective company. “Total annual expenses” does not reflect any potential provision (benefit) for income taxes because of the uncertainties associated with determining such amounts in future periods.

Example

The following example demonstrates the projected dollar amount of total cumulative expenses that would be incurred over various periods with respect to a hypothetical investment in OCSL, OSI2 or the combined company’s common stock following completion of the Mergers on a pro forma basis, in each case assuming that OCSL, OSI2 and the combined company hold no cash or liabilities other than debt. In calculating the following expense amounts, each of OCSL and OSI2 has assumed that it would have no additional leverage and that its annual operating expenses would remain at the levels set forth in the tables above. Calculations for the pro forma combined company following the Mergers assume that the Mergers closed on June 30, 2022 and that the leverage and operating expenses of OCSL and OSI2 remain at the levels set forth in the tables above (and gives effect to the base management fee waivers described above). Transaction expenses related to the Mergers are not included in the following examples.

 

     1 year      3 years      5 years      10 years  

You would pay the following expenses on a $1,000 investment:

           

OCSL, assuming a 5% annual return (assumes no return from net realized capital gains)

   $ 85      $ 251      $ 410      $ 781  

OSI2, assuming a 5% annual return (assumes no return from net realized capital gains)

   $ 61      $ 182      $ 301      $ 591  

OCSL, assuming a 5% annual return (assumes return entirely from realized capital gains)

   $ 93      $ 273      $ 444      $ 833  

OSI2, assuming a 5% annual return (assumes return entirely from realized capital gains)

   $ 71      $ 209      $ 344      $ 663  

 

     1 year      3 years      5 years      10 years  

Pro forma combined company following the Mergers You would pay the following expenses on a $1,000 investment:

           

Assuming a 5% annual return (assumes no return from net realized capital gains)

   $ 83      $ 244      $ 399      $ 762  

Assuming a 5% annual return (assumes return entirely from realized capital gains)

   $ 91      $ 267      $ 434      $ 815  

While the example assumes, as required by the SEC, a 5% annual return, performance of OCSL, OSI2 and the combined company will vary and may result in a return greater or less than 5%. The incentive fee based on pre-incentive fee net investment income under each of the OCSL Investment Advisory Agreement and the OSI2 Investment Advisory Agreement, which, assuming a 5% annual return, would either not be payable or would have an insignificant impact on the expense amounts shown above, is not included in the example. If sufficient returns are achieved on investments, including through the realization of capital gains, to trigger an incentive fee of a material amount, expenses, and returns to investors, would be higher. This example assumes that, as of October 1, 2022, the sum of realized capital losses and unrealized capital depreciation on a cumulative basis since October 1, 2020 for OCSL and since inception for OSI2 is zero. In addition, while the example assumes reinvestment of all distributions at NAV, participants in OCSL’s dividend reinvestment plan will receive a number of shares of

 

31


OCSL Common Stock determined by dividing the total dollar amount of the cash distribution payable to a participant by either (i) the greater of (a) the current NAV per share of OCSL Common Stock and (b) 95% of the market price per share of OCSL Common Stock at the close of trading on the payment date fixed by the OCSL Board of Directors in the event that newly issued shares are used to satisfy the share requirements of the dividend reinvestment plan or (ii) the average purchase price, excluding any brokerage charges or other charges, of all shares of OCSL Common Stock purchased by the administrator of the dividend reinvestment plan in the event that shares are purchased in the open market to satisfy the share requirements of the dividend reinvestment plan, which may be at, above or below NAV.

The example and the expenses in the table above should not be considered a representation of OCSL’s, OSI2’s, or, following completion of the Mergers, the combined company’s, future expenses, and actual expenses may be greater or less than those shown.

 

32


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This joint proxy statement/prospectus, including the documents incorporated by reference herein, contains statements that constitute forward-looking statements, which relate to OCSL, OSI2 or, following the Mergers, the combined company, regarding future events or the future performance or future financial condition of OCSL, OSI2 or, following the Mergers, the combined company. The forward-looking statements may include statements as to: future operating results of OCSL, OSI2 or, following the Mergers, the combined company and distribution projections; business prospects of OCSL, OSI2 or, following the Mergers, the combined company and the prospects of their portfolio companies; and the impact of the investments that OCSL, OSI2 or, following the Mergers, the combined company expect to make. Certain factors could cause actual results and conditions to differ materially from those projected, including the uncertainties associated with:

 

   

the ability of the parties to consummate the Mergers on the expected timeline, or at all;

 

   

the expected synergies and savings associated with the Mergers;

 

   

the ability to realize the anticipated benefits of the Mergers including the expected elimination of certain expenses and costs due to the Mergers;

 

   

the percentage of OCSL Stockholders and OSI2 Stockholders voting in favor of the proposals submitted for their approval;

 

   

the possibility that competing offers or acquisition proposals will be made;

 

   

the possibility that any or all of the various conditions to the consummation of the Mergers may not be satisfied or waived;

 

   

risks related to diverting management’s attention from ongoing business operations;

 

   

the combined company’s plans, expectations, objectives and intentions, as a result of the Mergers;

 

   

any potential termination of the Merger Agreement;

 

   

the actions of OCSL Stockholders or OSI2 Stockholders with respect to any of the proposals submitted for their approval;

 

   

the future operating results and distribution projections of OCSL, OSI2 or, following the Mergers, the combined company;

 

   

the ability of Oaktree to reposition the portfolios of OCSL, OSI2 or, following the Mergers, the combined company, and to implement Oaktree’s future plans with respect to their businesses;

 

   

the ability of Oaktree and its affiliates to attract and retain highly talented professionals;

 

   

the business prospects of OCSL, OSI2 or, following the Mergers, the combined company and the prospects of their portfolio companies;

 

   

the impact of the investments that OCSL, OSI2 or, following the Mergers, the combined company expect to make;

 

   

the ability of the portfolio companies of OCSL, OSI2 or, following the Mergers, the combined company to achieve their objectives;

 

   

the expected financings and investments and additional leverage that OCSL, OSI2 or, following the Mergers, the combined company may seek to incur in the future;

 

   

the adequacy of the cash resources and working capital of OCSL, OSI2 or, following the Mergers, the combined company;

 

   

the timing of cash flows, if any, from the operations of the portfolio companies of OCSL, OSI2 or, following the Mergers, the combined company; and

 

33


   

the risk that stockholder litigation in connection with the Mergers may result in significant costs of defense and liability.

In addition, words such as “anticipate,” “believe,” “expect,” “seek,” “plan,” “should,” “estimate,” “project” and “intend” indicate forward-looking statements, although not all forward-looking statements include these words. The forward-looking statements contained in this joint proxy statement/prospectus involve risks and uncertainties. The actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Item 1A. Risk Factors” in Part I of each of OCSL’s and OSI2’s Annual Reports on Form 10-K (File No. 814-00755 and 814-01281, respectively) for the fiscal year ended September 30, 2021, as such factors may be updated from time to time in their periodic filings with the SEC, and elsewhere contained or incorporated by reference in this joint proxy statement/prospectus.

Other factors that could cause actual results to differ materially include:

 

   

changes or potential disruptions in the operations of OCSL, OSI2 or, following the Mergers, the combined company, the economy, financial markets or political environment;

 

   

risks associated with possible disruption in the operations of OCSL and OSI2 or the economy generally due to terrorism, war or other geopolitical conflict (including the current conflict between Russia and Ukraine), natural disasters or pandemics;

 

   

future changes in laws or regulations (including the interpretation of these laws and regulations by regulatory authorities) and conditions in OCSL’s and OSI2’s operating areas, particularly with respect to Business Development Companies or RICs; and

 

   

other considerations that may be disclosed from time to time in the publicly disseminated documents and filings of OCSL, OSI2 or, following the Mergers, the combined company.

OCSL and OSI2 have based the forward-looking statements included in this joint proxy statement/prospectus and documents incorporated by reference into this joint proxy statement/prospectus on information available to them on the applicable date of the relevant document, and they assume no obligation to update any such forward-looking statements. Although OCSL and OSI2 undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that they may make directly to you or through reports that OCSL and OSI2 in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. This joint proxy statement/prospectus and documents incorporated by reference into this joint proxy statement/prospectus contain or may contain statistics and other data that have been obtained from or compiled from information made available by third-party service providers. Neither OCSL nor OSI2 has independently verified such statistics or data.

 

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CAPITALIZATION

The following table sets forth (1) OCSL’s and OSI2’s actual capitalization as of June 30, 2022 and (2) OCSL’s capitalization as adjusted to reflect the effects of the Mergers. You should read this table together with OCSL’s and OSI2’s consolidated financial statements incorporated by reference herein.

 

     As of June 30, 2022
(dollar amounts and share data in thousands, except per
share data)
 
     Actual
(unaudited)
     Actual
(unaudited)
     Pro forma
Adjustments
(unaudited)
    Pro Forma
(unaudited)
 
     OCSL      OSI2     OCSL  

Cash, cash equivalents and restricted cash

   $ 36,315      $ 30,991      $ (5,365 )(1)    $ 61,941  

Debt less unamortized debt issuance costs

     1,356,606        269,802          1,626,408  

Net assets

     1,263,529        325,280        (5,365 )(2)      1,583,444  

Total capitalization

   $ 2,620,135      $ 595,082      $ (5,365   $ 3,209,852  

Number of shares of common stock outstanding

     183,374        17,401        47,047       230,421  

NAV per common share

   $ 6.89      $ 18.69        $ 6.87 (3) 

 

(1)

Pro forma adjustments reflect the combined impact of $3.4 million and $2.0 million of estimated transaction expenses expected to be incurred by OCSL and OSI2, respectively.

(2)

Pro forma adjustment reflects the shares of OCSL Common Stock issued to OSI2 Stockholders based on an exchange ratio of 2.7037 shares of OCSL Common Stock for each share of OSI2 Common Stock. For purposes of calculating the exchange ratio, the OCSL NAV and OSI2 NAV was adjusted by the transaction expenses previously discussed in Note (1).

(3)

The decrease of $0.02 in pro forma NAV per common share is the result of estimated OCSL transaction costs.

 

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THE OCSL ANNUAL MEETING

Date, Time and Place of the OCSL Annual Meeting

The OCSL Annual Meeting will be held virtually on [•], 2023, at [•] [a.m.][p.m.], Pacific Time, at the following website: www.virtualshareholdermeeting.com/OCSL2023. This joint proxy statement/prospectus and the accompanying materials are being mailed on or about [•], 2022 to stockholders of record of OCSL and are available at www.proxyvote.com.

Purpose of the OCSL Annual Meeting

At the OCSL Annual Meeting, OCSL Stockholders will be asked to approve each of (i) the nominees proposed by the OCSL Board in connection with the Director Proposal; (ii) the Auditor Proposal; (iii) the Merger Stock Issuance Proposal; and (iv) the Reverse Stock Split Proposal.

After careful consideration and, with respect to the Merger Stock Issuance Proposal, on the recommendation of the OCSL Special Committee, comprised solely of certain independent directors of OCSL, the OCSL Board unanimously recommends that OCSL Stockholders vote “FOR” the election of each of the nominees proposed by the OCSL Board in connection with the Director Proposal, “FOR” the Auditor Proposal, “FOR” the Merger Stock Issuance Proposal and “FOR” the Reverse Stock Split Proposal.

Record Date

The OCSL Record Date is [•], 2022. The OCSL Record Date is established by the OCSL Board, and only holders of record of shares of OCSL Common Stock at the close of business on the OCSL Record Date are entitled to receive notice of the OCSL Annual Meeting and vote at the OCSL Annual Meeting. As of the OCSL Record Date, there were [•] shares of OCSL Common Stock outstanding. Each share of OCSL Common Stock held by a holder of record as of the OCSL Record Date has one vote on each matter considered at the OCSL Annual Meeting.

Quorum and Adjournments

For OCSL to conduct business at the OCSL Annual Meeting, a quorum of OCSL Stockholders must be present. The presence at the OCSL Annual Meeting, virtually or by proxy, of the holders of a majority of the shares of OCSL Common Stock outstanding on the OCSL Record Date will constitute a quorum. Votes to “withhold authority” and 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 at the OCSL Annual Meeting.

Pursuant to OCSL’s bylaws, the chairman of the OCSL Annual Meeting shall have the power to adjourn the OCSL Annual Meeting, whether or not a quorum is present, from time to time for any reason and without notice other than announcement at the OCSL Annual Meeting.

Broker Non-Votes

Broker non-votes are described as votes cast by a broker or other nominee on behalf of a beneficial holder who does not provide explicit voting instructions to such broker or nominee and who does not attend the meeting.

The Director Proposal is expected to be a non-routine matter for OCSL. As a result, if an OCSL Stockholder holds shares in “street name” through a broker, bank or other nominee, the broker, bank or nominee will not be

 

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permitted to exercise voting discretion with respect to the Director Proposal. Votes to “withhold authority” and broker non-votes, if any, will not be included in determining the number of votes cast and, as a result, will have no effect on the voting outcome of the Director Proposal.

The Auditor Proposal is expected to be a routine matter for OCSL. As a result, if an OCSL Stockholder holds shares in “street name” through a broker, bank or other nominee, the broker, bank or nominee will be permitted to exercise voting discretion with respect to the Auditor Proposal. Abstentions and broker non-votes, if any, will not be included in determining the number of votes cast and, as a result, will have no effect on the voting outcome of the Auditor Proposal.

The Merger Stock Issuance Proposal is expected to be a non-routine matter for OCSL. As a result, if an OCSL Stockholder holds shares in “street name” through a broker, bank or other nominee, the broker, bank or nominee will not be permitted to exercise voting discretion with respect to the Merger Stock Issuance Proposal. Abstentions and broker non-votes, if any, will not be included in determining the number of votes cast and, as a result, will have no effect on the voting outcome of the Merger Stock Issuance Proposal.

The Reverse Stock Split Proposal is expected to be a routine matter for OCSL. As a result, if an OCSL Stockholder holds shares in “street name” through a broker, bank or other nominee, the broker, bank or nominee will be permitted to exercise voting discretion with respect to the Reverse Stock Split Proposal. Abstentions and broker non-votes, if any, will have the effect of a vote “against” the Reverse Stock Split Proposal.

Vote Required

The affirmative vote of a plurality of the shares of OCSL Common Stock outstanding and entitled to vote thereon at the OCSL Annual Meeting is required to elect each director nominee of OCSL (i.e., the candidate receiving the most “for” votes will win each election). Stockholders may not cumulate their votes.

The affirmative vote of the holders of a majority of the votes cast by the holders of outstanding shares of OCSL Common Stock at the OCSL Annual Meeting in person or by proxy at a meeting at which a quorum is present is required for approval of the Auditor Proposal and the Merger Stock Issuance Proposal (i.e., the number of shares voted “for” the proposal must exceed the number of shares voted “against” such proposal).

The affirmative vote of a majority of the outstanding shares of OCSL Common Stock is required for approval of the Reverse Stock Split Proposal.

Voting of Management and Oaktree

On the OCSL Record Date, OCSL’s executive officers and directors owned and were entitled to vote approximately [•] shares of OCSL Common Stock, representing approximately [•]% of the outstanding shares of OCSL Common Stock on the OCSL Record Date. None of OCSL’s executive officers or directors has entered into any voting agreement relating to the Mergers. OCM and certain affiliates, including Atlas OCM Holdings, LLC, intend to vote their shares of OCSL Common Stock “FOR” the approval of the Merger Stock Issuance Proposal. Pursuant to the voting agreement described under “Control Persons and Principal Stockholders of OCSL”, OCM also intends to direct Leonard Tannenbaum to vote the shares of OCSL Common Stock subject to such voting agreement “FOR” the approval of the Merger Stock Issuance Proposal.

Voting of Proxies

OCSL encourages OCSL Stockholders to vote their shares, either by voting at the OCSL Annual Meeting or by voting by proxy, which means that OCSL Stockholders authorize someone else to vote their shares. Shares represented by duly executed proxies will be voted in accordance with OCSL Stockholders’ instructions. If OCSL Stockholders execute a proxy without specifying their voting instructions, such OCSL Stockholders’

 

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shares will be voted in accordance with the OCSL Board’s recommendation. If any other business is brought before the OCSL Annual Meeting, OCSL Stockholders’ shares will be voted at the OCSL Board’s discretion unless OCSL Stockholders specifically state otherwise on their proxy.

An OCSL Stockholder may also authorize a proxy by telephone or through the Internet using the toll-free telephone numbers or web address printed on your proxy card. Authorizing a proxy by telephone or through the Internet requires you to input the control number located on your proxy card. After inputting the control number, you will be prompted to direct your proxy to vote on each proposal. You will have an opportunity to review your directions and make any necessary changes before submitting your directions and terminating the telephone call or Internet link.

 

   

By Internet: www.proxyvote.com or scanning the QR Barcode on the enclosed proxy card.

 

   

By telephone: 800-690-6903 to reach a toll-free, automated touchtone voting line, or 844-557-9030 Monday through Friday 9:00 a.m. until 10:00 p.m. Eastern Time to reach a toll-free, live operator line.

 

   

By mail: You may also vote by mail by following the directions and indicating your instructions on the enclosed proxy card, dating and signing the proxy card, and promptly returning the proxy card in the envelope provided, which requires no postage if mailed in the United States. Please allow sufficient time for your proxy card to be received on or prior to 11:59 p.m., Eastern Time, on [•], 2023.

Important notice regarding the availability of proxy materials for the OCSL Annual Meeting. OCSL’s joint proxy statement/prospectus, OCSL’s Annual Report on Form 10-K for the year ended September 30, 2022 and the proxy card are available at www.proxyvote.com.

Revocability of Proxies

If you are a stockholder of record of OCSL, you can revoke your proxy as to OCSL at any time before it is exercised by: (i) delivering a written revocation notice that is received prior to the OCSL Annual Meeting to Oaktree Specialty Lending Corporation, 333 South Grand Avenue, 28th Floor, Los Angeles, CA 90071, Attention: Secretary; (ii) submitting a later-dated proxy that OCSL receives before the conclusion of voting at the OCSL Annual Meeting; or (iii) participating in the OCSL Annual Meeting and voting online. If you hold shares of OCSL Common Stock through a broker, bank, trustee or nominee, you must follow the instructions you receive from them in order to revoke your voting instructions. Participating in the OCSL Annual Meeting does not revoke your proxy unless you also vote online at the OCSL Annual Meeting.

Solicitation of Proxies

OCSL and OSI2 will bear the cost of preparing, printing and mailing this joint proxy statement/prospectus and the accompanying Notice of Annual Meeting of Stockholders of OCSL or Notice of Special Meeting of Stockholders of OSI2, as applicable, and proxy cards based on their respective numbers of stockholders. OCSL and OSI2 intend to use the services of Broadridge to aid in the distribution and collection of proxies for an estimated fee of approximately $58,000 plus pass through charges. No additional compensation will be paid to directors, officers or Oaktree employees for such services. For more information regarding expenses related to the Mergers, see “Questions and Answers about the Mergers — Who is responsible for paying the expenses relating to completing the Mergers?

Appraisal Rights

OCSL Stockholders do not have the right to exercise appraisal rights with respect to any matter to be voted upon at the OCSL Annual Meeting. To the extent that an OCSL Stockholder objects to the Merger Stock Issuance Proposal, such OCSL Stockholder will not have the right to have a court judicially determine (and the OCSL Stockholder will not receive) the fair value for its shares of OCSL Common Stock under the provisions of Delaware law governing appraisal rights.

 

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THE OSI2 SPECIAL MEETING

Date, Time and Place of the OSI2 Special Meeting

The OSI2 Special Meeting will be held virtually on [•], 2023, at [•] [a.m.][p.m.], Pacific Time, at the following website: www.virtualshareholdermeeting.com/OSI22023SM. This joint proxy statement/prospectus and the accompanying materials are being mailed on or about [•], 2022 to stockholders of record of OSI2 and are available at www.proxyvote.com.

Purpose of the OSI2 Special Meeting

At the OSI2 Special Meeting, OSI2 Stockholders will be asked to approve the Merger Proposal.

After careful consideration, on the recommendation of the OSI2 Special Committee, comprised solely of certain independent directors of OSI2, the OSI2 Board unanimously approved the Merger Agreement and the transactions contemplated thereby, including the Mergers, and unanimously recommends that OSI2 Stockholders vote “FOR” the Merger Proposal.

Record Date

The OSI2 Record Date is [•], 2022. The OSI2 Record Date is established by the OSI2 Board, and only holders of record of shares of OSI2 Common Stock at the close of business on the OSI2 Record Date are entitled to receive notice of the OSI2 Special Meeting and vote at the OSI2 Special Meeting. As of the OSI2 Record Date, there were 17,401,121 shares of OSI2 Common Stock outstanding. Each share of OSI2 Common Stock held by a holder of record as of the OSI2 Record Date has one vote on each matter considered at the OSI2 Special Meeting.

Quorum and Adjournments

For OSI2 to conduct business at the OSI2 Special Meeting, a quorum of OSI2 Stockholders must be present. The presence at the OSI2 Special Meeting, virtually or by proxy, of the holders of a majority of the shares of OSI2 Common Stock outstanding on the OSI2 Record Date will constitute a quorum of OSI2. Abstentions will be treated as shares present for quorum purposes. Broker non-votes, if any, will not be treated as shares present for quorum purposes at the OSI2 Special Meeting.

Pursuant to OSI2’s bylaws, if less than a quorum is present at the OSI2 Special Meeting or if an insufficient number of votes is present for the adoption of the Merger Proposal at such meeting, the chairman of the OSI2 Special Meeting or OSI2 stockholders holding a majority of the shares of OSI2 Common Stock will have the power to adjourn the OSI2 Special Meeting from time to time without notice other than announcement at the OSI2 Special Meeting until a quorum is present.

Broker Non-Votes

Broker non-votes are described as votes cast by a broker or other nominee on behalf of a beneficial holder who does not provide explicit voting instructions to such broker or nominee and who does not attend the meeting. The Merger Proposal is a non-routine matter for OSI2. As a result, if an OSI2 Stockholder holds shares in “street name” through a broker, bank, or other nominee, the broker, bank or nominee will not be permitted to exercise voting discretion with respect to the Merger Proposal. Because the sole proposal at the OSI2 Special Meeting is the Merger Proposal, OSI2 does not expect any broker non-votes. However, if shares representing broker non-votes are presented at the OSI2 Special Meeting, such shares will not count as affirmative votes cast and will therefore have the same effect as votes “against” the Merger Proposal.

 

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Vote Required

The affirmative vote of the holders of a majority of the outstanding shares of OSI2 Common Stock is required to approve the OSI2 Merger Proposal. Abstentions and broker non-votes, if any, will have the effect of a vote “against” this proposal. Proxies received will be voted “FOR” the Merger Proposal, unless OSI2 Stockholders designate otherwise.

Voting of Management

On the OSI2 Record Date, OSI2’s executive officers and directors did not own any shares of OSI2 Common Stock. None of OSI2’s executive officers or directors has entered into any voting agreement relating to the Mergers.

Voting of Proxies

OSI2 encourages OSI2 Stockholders to vote their shares, either by voting at the OSI2 Special Meeting or by voting by proxy, which means that OSI2 Stockholders authorize someone else to vote their shares. Shares represented by duly executed proxies will be voted in accordance with OSI2 Stockholders’ instructions. If OSI2 Stockholders execute a proxy without specifying their voting instructions, such OSI2 Stockholders’ shares will be voted in accordance with the OSI2 Board’s recommendation. If any other business is brought before the OSI2 Special Meeting, the OSI2 Stockholders’ shares will be voted at the OSI2 Board’s discretion unless the OSI2 Stockholders specifically state otherwise on their proxy.

An OSI2 Stockholder may also authorize a proxy by telephone or through the Internet using the toll-free telephone numbers or web address printed on your proxy card. Authorizing a proxy by telephone or through the Internet requires you to input the control number located on your proxy card. After inputting the control number, you will be prompted to direct your proxy to vote on each proposal. You will have an opportunity to review your directions and make any necessary changes before submitting your directions and terminating the telephone call or Internet link.

 

   

By Internet: www.proxyvote.com or scanning the QR Barcode on the enclosed proxy card.

 

   

By telephone: 800-690-6903 to reach a toll-free, automated touchtone voting line, or 844-670-2136 Monday through Friday 9:00 a.m. until 10:00 p.m. Eastern Time to reach a toll-free, live operator line.

 

   

By mail: You may also vote by mail by following the directions and indicating your instructions on the enclosed proxy card, dating and signing the proxy card, and promptly returning the proxy card in the envelope provided, which requires no postage if mailed in the United States. Please allow sufficient time for your proxy card to be received on or prior to 11:59 p.m., Eastern Time, on [•], 2023.

Important notice regarding the availability of proxy materials for the OSI2 Special Meeting. OSI2’s joint proxy statement/prospectus and the proxy card are available at www.proxyvote.com.

Revocability of Proxies

If you are a stockholder of record of OSI2, you can revoke your proxy as to OSI2 at any time before it is exercised by: (i) delivering a written revocation notice that is received prior to the OSI2 Special Meeting to Oaktree Strategic Income II, Inc., 333 South Grand Avenue, 28th Floor, Los Angeles, CA 90071, Attention: Secretary; (ii) submitting a later-dated proxy that OSI2 receives before the conclusion of voting at the OSI2 Special Meeting; or (iii) participating in the OSI2 Special Meeting and voting online. If you hold shares of OSI2 Common Stock through a broker, bank, trustee or nominee, you must follow the instructions you receive from them in order to revoke your voting instructions. Participating in the OSI2 Special Meeting does not revoke your proxy unless you also vote online at the OSI2 Special Meeting.

 

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Solicitation of Proxies

OCSL and OSI2 will bear the cost of preparing, printing and mailing this joint proxy statement/prospectus and the accompanying Notice of Annual Meeting of Stockholders of OCSL or Notice of Special Meeting of Stockholders of OSI2, as applicable, and proxy cards based on their respective numbers of stockholders. OCSL and OSI2 intend to use the services of Broadridge to aid in the distribution and collection of proxies for an estimated fee of approximately $58,000 plus pass through charges. No additional compensation will be paid to directors, officers or Oaktree employees for such services. For more information regarding expenses related to the Mergers, see “Questions and Answers about the Mergers — Who is responsible for paying the expenses relating to completing the Mergers?

Appraisal Rights

OSI2 Stockholders do not have the right to exercise appraisal rights with respect to any matter to be voted upon at the OSI2 Special Meeting. To the extent that an OSI2 Stockholder objects to the Mergers, such OSI2 Stockholder will not have the right to have a court judicially determine (and the OSI2 Stockholder will not receive) the fair value for its shares of OSI2 Common Stock under the provisions of Delaware law governing appraisal rights.

 

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THE MERGERS

The discussion in this joint proxy statement/prospectus, which includes the material terms of the Mergers and the principal terms of the Merger Agreement, is subject to, and is qualified in its entirety by reference to, the Merger Agreement, a copy of which is attached as Annex A to this joint proxy statement/prospectus.

General Description of the Mergers

Pursuant to the terms of the Merger Agreement, at the Effective Time, Merger Sub will be merged with and into OSI2. OSI2 will be the surviving company and will continue its existence as a corporation under the laws of the State of Delaware and a direct, wholly-owned subsidiary of OCSL. As of the Effective Time, the separate corporate existence of Merger Sub will cease. Immediately after the effectiveness of the Merger, OSI2 will merge with and into OCSL, with OCSL as the surviving entity in the Second Merger. As of the Second Effective Time, the separate corporate existence of OSI2 will cease. Subject to the terms and conditions of the Merger Agreement, at the Effective Time, each share of OSI2 Common Stock issued and outstanding immediately prior to the Effective Time (other than Cancelled Shares) will be converted into the right to receive a number of shares of OCSL Common Stock equal to the Exchange Ratio, plus any cash in lieu of fractional shares.

Based on the number of shares of OCSL Common Stock issued and outstanding and the NAVs of OCSL and OSI2 as of June 30, 2022 (and excluding transaction costs and tax-related distributions), OCSL would issue approximately 2.71 shares of OCSL Common Stock for each share of OSI2 Common Stock outstanding, resulting in pro forma ownership of 79.5% for current OCSL Stockholders and 20.5% for current OSI2 Stockholders.

Background of the Mergers

Since an affiliate of Oaktree became investment adviser to OCSL in October 2017, the OCSL Board has met regularly to provide governance and oversight for the ongoing operation of OCSL’s business, with a focus on generating current income and capital appreciation. Among other items, at these meetings, the OCSL Board periodically reviewed long-term strategic plans for OCSL, as well as potential business opportunities. As part of these ongoing discussions, Oaktree and its affiliates have explored means of improving the trading price of OCSL Common Stock and enhancing the size and scale of OCSL. Oaktree and the OCSL Board have focused their efforts on opportunities to provide additional scale to OCSL because of the general tendency of Business Development Companies with smaller market capitalizations to trade at a larger discount or smaller premium to NAV than larger Business Development Companies. In addition, Oaktree and its affiliates have discussed with the OCSL Board means of attracting additional equity research analyst coverage and institutional investors, as additional interest in the stock by potential investors could yield additional secondary market activity (thereby improving liquidity), improve the trading price of OCSL Common Stock and otherwise make raising equity capital in the future easier.

As part of these reviews of long-term strategic plans for OCSL, Oaktree and its affiliates regularly review with the OCSL Board potential mergers, acquisitions, joint ventures and other similar transaction opportunities that could enhance OCSL Stockholder value, including opportunities related to OCSL’s existing joint ventures. From time to time, Oaktree and its affiliates have presented to the OCSL Board, and the OCSL Board has considered and discussed, possible strategic transactions that were available to OCSL and the potential benefits and risks of such transactions.

As a result of these reviews and discussions, on October 28, 2020, OCSL entered into an Agreement and Plan of Merger (the “OCSI Merger Agreement”) with OCSI, Lion Merger Sub, Inc., OCSL’s wholly-owned subsidiary, and, solely for the limited purposes set forth therein, Oaktree. On March 19, 2021, pursuant to the OCSI Merger Agreement, OCSL acquired OCSI in the OCSI Merger. Since the OCSI Merger, Oaktree has continued to explore opportunities to enhance OCSL Stockholder value and further increase the scale of OCSL.

 

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Oaktree and its affiliates regularly reviewed with the OCSL Board the impacts of the OCSI Merger on OCSL, including realization of expense savings, increased liquidity and increased access to debt capital.

In connection with the initial private offering of OSI2 Common Stock, OSI2 disclosed to investors that if OSI2 had not completed a “Liquidity Event” (as defined below) by the fifth anniversary of its initial closing, or August 6, 2023, the OSI2 Board (subject to any necessary stockholder approvals and applicable requirements of the Investment Company Act) will use its best efforts to wind down and/or liquidate and dissolve OSI2, subject to its right to engage in certain runoff activities. A “Liquidity Event” was defined as, at the discretion of the OSI2 Board: (a) a Qualified Listing (as defined below) or (b) with the consent of a majority of outstanding shares of OSI2 Common Stock not affiliated with Oaktree and in accordance with the applicable requirements of Delaware law, a corporate control transaction, which may include a strategic sale of OSI2 or all or substantially all of OSI2’s assets to, or a merger with, another entity, or another type of corporate control event, which may include, but is not limited to, a transaction with an affiliated entity, including an affiliated Business Development Company, for consideration in cash or publicly listed securities of such entity or a combination of cash and such publicly listed securities. For purposes of the above, a “Qualified Listing” is: (i) the listing of OSI2 Common Stock on a national securities exchange or (ii) an initial public offering of OSI2 Common Stock that results in gross proceeds to OSI2 of at least $50 million and a listing of OSI2 Common Stock on a national securities exchange. OSI2 refers collectively to a Liquidity Event and the wind down and/or liquidation and dissolution of OSI2, subject to its right to engage in certain runoff activities, as the “Liquidity Alternatives.”

On July 29, 2022, at a regular telephonic and video meeting of the OCSL Board, with representatives of Oaktree, Stradley Ronon Stevens & Young, LLP (“Stradley”), counsel to the OCSL Independent Directors, and Kirkland & Ellis LLP (“Kirkland”), counsel to Oaktree and OCSL, also in attendance, representatives of Oaktree proposed the Mergers. Before discussion of the proposed Mergers began and after discussion among the members of the OCSL Board, the OCSL Board determined to form a special committee (the “OCSL Special Committee”) to analyze and evaluate the Mergers and, as appropriate, to negotiate the terms of the Mergers on behalf of OCSL, with the OCSL Special Committee to consist of the OCSL Independent Directors other than Ms. Gero.

The OCSL Board then established the OCSL Special Committee and authorized it to, among other things: (1) review, evaluate, consider and, as appropriate, negotiate the terms and conditions of the Mergers and any agreements or arrangements proposed to be entered into by OCSL in connection with or relating to the Mergers, including to determine whether the Mergers are advisable and in the best interests of all OCSL Stockholders and whether the interests of OCSL Stockholders will be diluted as a result of the Mergers; (2) recommend to the full OCSL Board what action, if any, should be taken by the OCSL Board with respect to the Mergers and any such agreements or arrangements proposed to be entered into in connection with or relating to the Mergers; (3) hire any advisors that they deemed appropriate, including their own legal counsel and financial advisor; and (4) take such other actions as the OCSL Special Committee may deem to be necessary or appropriate for the OCSL Special Committee to discharge its duties. The OCSL Board determined to proceed with the Mergers only if the OCSL Special Committee (a) determined that the Mergers are advisable and in the best interests of all OCSL Stockholders and that the interests of OCSL Stockholders will not be diluted for purposes of Rule 17a-8 of the Investment Company Act as a result of the Mergers and (b) recommended to the full OCSL Board to approve the Mergers. The OCSL Special Committee was not obligated to recommend the Mergers or any agreements or arrangements proposed to be entered into by OCSL in connection with or relating to the Mergers to the OCSL Board and was authorized to determine, if the OCSL Special Committee deemed appropriate, that it was in the best interests of OCSL and OCSL Stockholders not to proceed with the Mergers.

The OCSL Board then temporarily adjourned its regular telephonic and video meeting and the OCSL Special Committee convened a special telephonic and video meeting. Representatives of Oaktree, Stradley and Kirkland also attended at the request of the OCSL Special Committee. The OCSL Special Committee engaged Stradley to represent the OCSL Special Committee in its evaluation and negotiation of the Mergers. It was also noted that Oaktree and OCSL had provided waivers to enable Kirkland to provide joint representation to each of

 

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OCSL (but not the OCSL Special Committee) and Oaktree in the proposed transaction, which was consistent with industry practice in other affiliated investment company mergers. Representatives of Oaktree then outlined an initial proposal for the Mergers, including that the proposed consideration to be paid to OSI2 Stockholders would be determined based on the relative NAVs of OCSL and OSI2 within 48 hours (excluding Sundays and holidays) prior to consummation of the Mergers (a so-called “NAV-for-NAV” transaction). Oaktree noted that the transaction structure for the Mergers would be similar to that of the OCSI Merger. Oaktree provided the OCSL Special Committee with additional background regarding OSI2, noting the extensive overlap between the OCSL and OSI2 portfolios. Oaktree then discussed the potential benefits of the Mergers to OCSL, including the potential for increased scale and secondary market liquidity, the possibility of broader research analyst coverage, acquiring a known portfolio of assets, enhanced access to debt capital markets at potentially more attractive pricing, accretion of net investment income per share and potential expense savings, as well as the potential negative considerations in connection with the Mergers, including any inability to receive the necessary stockholder approvals, potential pressures on the price of OCSL Common Stock if OSI2 Stockholders sell the shares received in the Mergers, the time and ability needed to ramp up to target leverage ratios, the potential for frivolous litigation and transaction costs. Oaktree representatives also reviewed key assumptions and discussed the financial model for the Mergers, which reflected a waiver of a portion of OCSL’s management fees for a period of two years following closing of the Mergers, and the anticipated capital structure for the combined company post-Mergers. The OCSL Special Committee then discussed the proposed Mergers and asked questions of Oaktree, Kirkland and Stradley. After discussion, the OCSL Special Committee decided to continue exploring the proposed Mergers and asked representatives of Oaktree to schedule a meeting of the OCSL Special Committee to discuss the engagement by the OCSL Special Committee of a financial advisor to advise it in connection with the transaction. The OCSL Special Committee also directed Kirkland to begin preparation of the draft Merger Agreement for review by the OCSL Special Committee and Stradley.

On August 5, 2022, at a regular telephonic and video meeting of the OSI2 Board, with representatives of Oaktree and Sullivan & Cromwell LLP (“Sullivan & Cromwell”), counsel to OSI2, also in attendance, representatives of Oaktree proposed potential Liquidity Alternatives for the OSI2 Board’s consideration, and representatives of Oaktree reminded the OSI2 Board that (i) OSI2’s investment period is scheduled to expire on August 6, 2023, (ii) different Liquidity Alternatives have different lead times and (iii) OSI2 Stockholders were informed at the time of their investment that if OSI2 did not complete a “Liquidity Event” on or prior to the fifth anniversary of the date of OSI2’s initial closing of its offering of shares of OSI2 Common Stock, August 6, 2023, the OSI2 Board would be obligated to use its best efforts to wind down and/or liquidate and dissolve OSI2 (subject to its right to engage in certain runoff activities). Before discussion of the proposed Mergers began and after discussion and upon the advice of Sullivan & Cromwell, the OSI2 Board determined to form a special committee (the “OSI2 Special Committee”), with the OSI2 Special Committee to analyze and evaluate any Liquidity Alternatives and, as appropriate, to negotiate the terms of such Liquidity Alternatives on behalf of OSI2, to consist of the OSI2 Independent Directors other than Ms. Gero.

The OSI2 Board then established the OSI2 Special Committee and authorized it to, among other things: (i) review, evaluate, consider and negotiate the terms and conditions of any Liquidity Alternatives and any agreements or arrangements proposed to be entered into by OSI2 in connection with or relating to any Liquidity Alternatives, including to determine whether the interests of OSI2 Stockholders would be diluted for purposes of Rule 17a-8 of the Investment Company Act; (ii) recommend to the OSI2 Board what action, if any, should be taken by the OSI2 Board with respect to any Liquidity Alternative and any such agreements or arrangements proposed to be entered into in connection with or relating to any Liquidity Alternatives; (iii) hire any advisors that the OSI2 Special Committee deems appropriate; (iv) take any such other actions as the OSI2 Special Committee may deem to be necessary or appropriate for the OSI2 Special Committee to discharge its duties; (v) provide reports or recommendations to the OSI2 Board in regard to such matters at such times as the OSI2 Special Committee deemed appropriate and consistent with its activities; and (vi) recommend, or not to recommend, to the OSI2 Board any Liquidity Alternative, and to determine whether or not it is in the best interests of OSI2 and the OSI2 Stockholders that OSI2 proceed with any Liquidity Alternative. Ms. Gero then temporarily dropped from the meeting for the remainder of the discussion regarding Liquidity Alternatives. As

 

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part of this discussion, representatives of Oaktree presented to the OSI2 Board on various Liquidity Alternatives, including the proposed Mergers.

At the end of this discussion, the OSI2 Special Committee discussed with representatives of Oaktree and Sullivan & Cromwell its options with respect to engaging a financial advisor to assist with its evaluation of the Liquidity Alternatives, and the OSI2 Special Committee determined to proceed with engaging a financial advisor. The OSI2 Special Committee selected certain nationally recognized investment banks to interview for the role of financial advisor to the OSI2 Special Committee in connection with its evaluation of the Liquidity Alternatives and directed Oaktree management to coordinate scheduling interviews.

On August 9, 2022, the OCSL Special Committee held a special telephonic and video meeting. Representatives of Oaktree, Stradley and Kirkland also attended at the request of the OCSL Special Committee. The OCSL Special Committee discussed its options with respect to engaging a financial advisor for the proposed Mergers. After discussion, the OCSL Special Committee decided to proceed with engaging a financial advisor to provide financial advisory services and evaluate the potential Mergers and selected certain nationally recognized investment banks to interview for the role of financial advisor to the OCSL Special Committee in connection with the Mergers and directed Oaktree management to coordinate scheduling interviews. The OCSL Special Committee then discussed the benefits and costs of seeking a fairness opinion from a financial advisor, noting the input of each of the investment banks to be interviewed for the role of financial advisor would be sought. Representatives of Oaktree then outlined a proposed timeline for the transaction and responded to questions from the OCSL Special Committee. At the request of the OCSL Special Committee, representatives of Kirkland and Stradley discussed with the OCSL Special Committee the fiduciary duties of the directors under Delaware law and considerations under the Investment Company Act, which were further documented in a written memorandum from Kirkland, and responded to questions from the OCSL Special Committee.

On August 13, 2022 and August 15, 2022, Kirkland and Sullivan & Cromwell exchanged correspondence regarding certain structural considerations in connection with the proposed Mergers, which was intended to assist the OCSL Special Committee in its consideration of the Mergers and to assist the OSI2 Special Committee in its consideration of the proposed Mergers as a Liquidity Alternative.

On August 15, 2022, Kirkland circulated a draft of the Merger Agreement to Stradley and the OCSL Special Committee.

On August 16, 2022, Kirkland exchanged correspondence with the OCSL Special Committee and Stradley regarding the draft Merger Agreement, responding to questions and comments from the OCSL Special Committee.

Later on August 16, 2022, the OCSL Special Committee held a special telephonic and video meeting to interview certain nationally recognized investment banks as financial advisor candidates in connection with its consideration of the Mergers and solicit their views regarding the benefits and costs of seeking a fairness opinion. Representatives of Stradley and Kirkland also attended at the request of the OCSL Special Committee. The OCSL Special Committee evaluated, among other things, the strengths and weaknesses of the presentations made by the financial advisor candidates and each investment bank’s experience with transactions involving Business Development Companies, their ability to provide high-quality financial advice and assistance with respect to the proposed transaction and estimated fees to be charged in connection with a potential engagement. After evaluating the qualifications of the investment banks, including whether such candidates had relationships with OSI2, OCSL or Oaktree and its affiliates, the OCSL Special Committee authorized the engagement of Houlihan Lokey as the financial advisor to the OCSL Special Committee and directed Kirkland and Stradley to proceed with negotiation of the Houlihan Lokey engagement letter, in consultation with the OCSL Special Committee. Representatives of Kirkland and Stradley then discussed the draft Merger Agreement with the OCSL Special Committee, highlighting certain differences from the OCSI Merger Agreement and the reasons for such differences, following which the OCSL Special Committee authorized continued negotiation of the transaction.

 

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Subsequent to the meeting, Houlihan Lokey was engaged to act as the financial advisor to the OCSL Special Committee.

On August 18, 2022, Stradley provided comments on the draft Merger Agreement and directed Kirkland to provide the revised draft to Sullivan & Cromwell.

Also on August 18, 2022, the OSI2 Special Committee interviewed certain nationally recognized investment banks as financial advisor candidates in connection with its consideration of the Liquidity Alternatives. Representatives of Sullivan & Cromwell were in attendance for these interviews. Immediately following the aforementioned interviews, the OSI2 Special Committee held a special telephonic and video meeting with representatives of Sullivan & Cromwell and Oaktree in attendance at the request of the OSI2 Special Committee. Representatives of Oaktree then discussed the potential timeline for the proposed Mergers, in the event the OSI2 Special Committee determined to pursue the Mergers as a Liquidity Alternative. Representatives of Sullivan & Cromwell discussed with the OSI2 Special Committee the fiduciary duties of the directors under Delaware law and considerations under the Investment Company Act, which were further documented in a written presentation from Sullivan & Cromwell, and responded to questions from the OSI2 Special Committee. The OSI2 Special Committee then evaluated, among other things, the strengths and weaknesses of the financial advisor candidates based on their interviews and each investment bank’s qualifications, experience with transactions involving Business Development Companies, their ability to provide high-quality financial advice and assistance with respect to the proposed Liquidity Alternatives and estimated fees proposed for their services in connection with a potential engagement. After evaluating the qualifications of the investment banks, including whether such candidates had relationships with OSI2, OCSL or Oaktree and its affiliates, the OSI2 Special Committee authorized the engagement of KBW as the financial advisor to the OSI2 Special Committee. Subsequent to the meeting, KBW was engaged to act as the financial advisor to the OSI2 Special Committee.

On August 19, 2022, Kirkland circulated a draft of the Merger Agreement to Sullivan & Cromwell, which draft reflected feedback from Stradley and the OCSL Special Committee.

On August 20, 2022, Kirkland circulated a revised draft of the Merger Agreement to the OCSL Special Committee and Stradley.

On August 25, 2022, representatives of Sullivan & Cromwell and Kirkland had a telephone conference to discuss the draft Merger Agreement and certain provisions contained therein.

Also on August 25, 2022, Sullivan & Cromwell circulated comments to the draft Merger Agreement to the OSI2 Special Committee.

On August 26, 2022, the OSI2 Special Committee held a special telephonic and video meeting with representatives of Sullivan & Cromwell also in attendance, at the request of the OSI2 Special Committee, to discuss the key terms of Kirkland’s draft of the Merger Agreement, including, among other terms, deal protections, conditions to closing, and termination rights, and comments to the draft Merger Agreement, to provide the OSI2 Special Committee with further information on the proposed Mergers for purposes of the OSI2 Special Committee’s consideration of the Liquidity Alternatives. Representatives of Sullivan & Cromwell responded to questions from the OSI2 Special Committee. Representatives of Sullivan & Cromwell then provided an update on the proposed timeline for the proposed Mergers, following which the OSI2 Special Committee authorized negotiation of the transaction in the event that the OSI2 Special Committee chose to pursue the proposed Mergers as a Liquidity Alternative. Subsequent to the meeting, Sullivan & Cromwell provided comments on the draft Merger Agreement, which reflected feedback from the OSI2 Special Committee, to Kirkland.

On August 27, 2022, Kirkland circulated the comments received from Sullivan & Cromwell on the Merger Agreement to the OCSL Special Committee and Stradley, along with an outline of proposed responses, to which the OCSL Special Committee expressed their agreement.

 

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On August 29, 2022, the OCSL Special Committee held a special telephonic and video meeting. Representatives of Oaktree, EY, Houlihan Lokey, Stradley and Kirkland also attended at the request of the OCSL Special Committee. Houlihan Lokey provided the OCSL Special Committee with its preliminary analysis of OSI2, OCSL and the proposed Mergers, based on the June 30, 2022 financial statements of each company. Representatives of Houlihan Lokey discussed certain considerations in connection with the proposed Mergers as well as the potential benefits of the Mergers (as identified by Oaktree). Representatives of Houlihan Lokey observed that, based on Oaktree’s assumptions underlying the Mergers, Oaktree expected the Mergers to be accretive to OCSL’s net investment income per share. Following this discussion with Houlihan Lokey, representatives of Oaktree discussed the financial model for the proposed Mergers, highlighting certain immaterial updates and noting the overall financial benefits of the transaction to OCSL remained unchanged. After the representatives of Oaktree and EY exited the meeting, Kirkland and Stradley discussed the updated draft of the Merger Agreement with the OCSL Special Committee, including a summary of the items that were still being negotiated, and the expected timeline for executing the agreement. The OCSL Special Committee discussed the Merger Agreement and the proposed Mergers, and Kirkland and Stradley answered questions from the OCSL Special Committee.

Later on August 29, 2022, Kirkland circulated a revised draft of the Merger Agreement to the OCSL Special Committee and Stradley.

On August 30, 2022, Stradley confirmed they did not have any further comments on the then current draft of the Merger Agreement and directed Kirkland to provide the draft to Sullivan & Cromwell. Later on August 30, 2022, Kirkland circulated a revised draft of the Merger Agreement to Sullivan & Cromwell, and Sullivan & Cromwell circulated the revised draft of the Merger Agreement to the OSI2 Special Committee.

On August 31, 2022, the OSI2 Special Committee held a special telephonic and video meeting, with representatives of Oaktree, KBW and Sullivan & Cromwell also in attendance at the request of the OSI2 Special Committee. KBW reviewed and discussed with the OSI2 Special Committee financial matters regarding OSI2, OCSL and the Liquidity Alternatives (including the proposed Mergers). Representatives of KBW discussed certain considerations in connection with the various Liquidity Alternatives, including the potential benefits of the Mergers (as identified by Oaktree). Following this discussion with KBW, representatives of Oaktree discussed an updated financial model for the proposed Mergers, highlighting material changes since the previously provided financial model. After the representatives of Oaktree exited the meeting, the OSI2 Special Committee discussed the financial matters reviewed by KBW, and representatives from KBW answered questions from the OSI2 Special Committee relating to the OSI2 Special Committee’s consideration of the different Liquidity Alternatives. The OSI2 Special Committee also discussed the latest draft of the Merger Agreement and representatives of Sullivan & Cromwell answered questions from the OSI2 Special Committee.

On September 1, 2022, representatives of Sullivan & Cromwell and Kirkland had a telephone conference to discuss the draft Merger Agreement.

On September 2, 2022, Sullivan & Cromwell circulated a revised draft the Merger Agreement to the OSI2 Special Committee, along with an outline of proposed responses to certain open points remaining in the draft, including the proposed approach for the termination fee, to which the OSI2 Special Committee expressed their agreement and confirmed they did not have any further comments on the then current draft of the Merger Agreement, recognizing that certain open points remained for discussion.

On September 3, 2022, Sullivan & Cromwell provided additional comments to Kirkland on the draft Merger Agreement, including the OSI2 Special Committee’s proposal for the termination fee to be payable by third parties to OCSL or OSI2 under certain circumstances.

On September 4, 2022, Kirkland circulated a revised draft of the Merger Agreement, which included the OSI2 Special Committee’s proposal for the termination fee, to the OCSL Special Committee and Stradley. From

 

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September 4, 2022 through September 6, 2022, the OCSL Special Committee and Stradley corresponded with Kirkland regarding the most recent changes to the Merger Agreement and confirmed agreement with the proposed termination fee and other terms of the Merger Agreement and authorized Kirkland to finalize the Merger Agreement.

On September 6, 2022, representatives of Sullivan & Cromwell and Kirkland had a telephone conference to discuss the Merger Agreement.

On September 8, 2022, Kirkland circulated a revised draft of the Merger Agreement to Sullivan & Cromwell. Also on September 8, 2022, representatives of Sullivan & Cromwell and Kirkland had a telephone conference to discuss the Merger Agreement.

On September 9, 2022, Sullivan & Cromwell provided additional comments on the draft Merger Agreement and representatives of Sullivan & Cromwell and Kirkland had a telephone call to discuss certain provisions of the Merger Agreement. Also on September 9, 2022, Kirkland circulated a revised draft of the Merger Agreement to Sullivan & Cromwell, and Sullivan & Cromwell circulated the revised draft of the Merger Agreement to the OSI2 Special Committee. On September 10, 2022, the OSI2 Special Committee confirmed they did not have any further comments on the then current draft of the Merger Agreement, recognizing that certain open points remained for discussion.

Later on September 10, 2022, the draft Merger Agreement was circulated to the OCSL Special Committee in advance of the OCSL Special Committee’s scheduled special telephonic and video meeting.

On September 13, 2022, Sullivan & Cromwell circulated a revised draft of the Merger Agreement to the OSI2 Special Committee, and Sullivan & Cromwell and the OSI2 Special Committee exchanged correspondence regarding the draft Merger Agreement. Also on September 13, 2022, Sullivan & Cromwell circulated a revised draft of the Merger Agreement to Kirkland.

On September 14, 2022, the OSI2 Special Committee held a special telephonic and video meeting, with representatives of Oaktree, Sullivan & Cromwell and KBW also participating in such meeting at the request of the OSI2 Special Committee. Representatives of Oaktree reviewed with the OSI2 Special Committee the key benefits that Oaktree expected to accrue to OSI2 and the OSI2 Stockholders as a result of the Mergers, including increased scale and access to secondary market liquidity for OSI2 Stockholders, reduced operating expense rates due to a larger asset base, seamless portfolio integration due to overlap in portfolios, an enhanced portfolio size and diversification with limited execution risk with the same investment adviser, advantages relative to other alternatives, the potential for improved access to debt capital markets and reduced financing costs, and the expectation of being accretive to OSI2 Stockholders. Representatives of Oaktree also discussed with the OSI2 Special Committee the potential risks of the Mergers, including the ability to obtain the required vote, potential pressure on OCSL’s Common Stock price and potential stockholder litigation. Oaktree representatives noted that, in order to maintain its RIC status and avoid paying excise taxes, OSI2 would be required to distribute all previously undistributed taxable income immediately prior to closing of the Mergers, which would reduce its NAV for determining the Exchange Ratio. Representatives of Oaktree then described the expected valuation process for determining the NAVs of OCSL and OSI2 within 48 hours of closing in order to calculate the Exchange Ratio. Representatives of Sullivan & Cromwell then discussed with the OSI2 Special Committee the findings required for the Mergers to qualify for an exemption to the joint transaction restrictions applicable to Business Development Companies under Section 57 of the Investment Company Act found in Rule 17a-8 of the Investment Company Act, which permits mergers of Business Development Companies with certain affiliates that would otherwise be prohibited by Section 57 of the Investment Company Act. At the request of the OSI2 Special Committee, KBW then reviewed and discussed the financial aspects of the proposed Mergers, including financial analyses performed by KBW, and rendered an opinion to the OSI2 Special Committee and, at the request of the OSI2 Special Committee, the OSI2 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

 

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undertaken by KBW as set forth in such opinion, the Exchange Ratio in the proposed Merger was fair, from a financial point of view, to the holders of OSI2 Common Stock.

The representatives of Oaktree then exited the meeting and, following a discussion of the foregoing matters and other matters presented, the OSI2 Special Committee (1) unanimously determined, and recommended that the OSI2 Board determine, (a) that the Merger Agreement, the Mergers and the other transactions contemplated by the Merger Agreement are advisable and in the best interests of OSI2 and the OSI2 Stockholders and (b) that the interests of existing OSI2 Stockholders would not be diluted for purposes of Rule 17a-8 of the Investment Company Act as a result of the transactions contemplated by the Merger Agreement, including the Mergers and (2) unanimously recommended that the OSI2 Board approve the Merger Agreement and the transactions contemplated thereby, including the Mergers.

On September 14, 2022, following completion of the meeting of the OSI2 Special Committee, the OSI2 Board (including Ms. Gero) held a special telephonic and video meeting, with representatives of Oaktree, Sullivan & Cromwell and KBW also in attendance at the request of the OSI2 Special Committee. The OSI2 Board reviewed the recommendation of the OSI2 Special Committee with Sullivan & Cromwell. Representatives of Sullivan & Cromwell then discussed with the OSI2 Board the findings required for the Mergers to qualify for an exemption to the joint transaction restrictions applicable to Business Development Companies under Section 57 of the Investment Company Act found in Rule 17a-8 of the Investment Company Act, which permits mergers of Business Development Companies with certain affiliates that would otherwise be prohibited by Section 57 of the Investment Company Act. Representatives from Oaktree and Sullivan & Cromwell then discussed with the OSI2 Board the draft Merger Agreement, the timing of the announcement of the Mergers and the process of soliciting the necessary OSI2 Stockholder and OCSL Stockholder approvals.

Thereafter, on the unanimous recommendation of the OSI2 Special Committee, the OSI2 Board, including a majority of the Independent Directors, unanimously (1) determined that (a) the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Mergers, are advisable and in the best interests of OSI2 and OSI2 Stockholders, and (b) that the interests of existing OSI2 Stockholders would not be diluted for purposes of Rule 17a-8 of the Investment Company Act as a result of the transactions contemplated by the Merger Agreement, including the Mergers, and (2) approved, adopted and declared advisable the Merger Agreement and the transactions contemplated thereby, including the Mergers. The OSI2 Board then directed that the Merger Agreement be submitted to OSI2 Stockholders for approval and resolved to recommend that OSI2 Stockholders vote to adopt the same and approve the Mergers.

Also on September 14, 2022, the OCSL Special Committee held a special telephonic and video meeting. Representatives of Oaktree, EY, Stradley, Kirkland and Houlihan Lokey also participated at the invitation of the OCSL Special Committee. Representatives of Oaktree discussed with the OCSL Special Committee the financial model for the Mergers, highlighting certain immaterial updates and noting the overall financial benefits of the transaction to OCSL remained unchanged. At the request of the OCSL Special Committee, Houlihan Lokey then reviewed and discussed its financial analyses with respect to OCSL, OSI2 and the proposed Mergers. Thereafter, at the request of the OCSL Special Committee, Houlihan Lokey orally rendered its opinion to the OCSL Special Committee (which was subsequently confirmed in writing by delivery of Houlihan Lokey’s written opinion dated September 14, 2022 addressed to the OCSL Special Committee and, as requested by the OCSL Special Committee, the OCSL Board) as to, as of such date, the fairness of the Exchange Ratio provided for in the Merger pursuant to the Merger Agreement, from a financial point of view, to OCSL.

The representatives of Oaktree and EY then exited the meeting. Representatives of Stradley then discussed with the OCSL Special Committee the findings required for the Mergers to qualify for an exemption to the joint transaction restrictions applicable to Business Development Companies under Section 57 of the Investment Company Act found in Rule 17a-8 of the Investment Company Act, which permits mergers of Business Development Companies with certain affiliates that would otherwise be prohibited by Section 57 of the Investment Company Act. Following a discussion of the matters presented at the meeting, the OCSL Special

 

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Committee (1) unanimously determined, and recommended that the OCSL Board determine, (a) that the Merger Agreement, the Mergers and the other transactions contemplated by the Merger Agreement are advisable and in the best interests of OCSL and the OCSL Stockholders and (b) that the interests of existing OCSL Stockholders would not be diluted for purposes of Rule 17a-8 of the Investment Company Act as a result of the transactions contemplated by the Merger Agreement, including the Mergers and (2) unanimously recommended that the OCSL Board approve the Merger Agreement and the transactions contemplated thereby, including the Mergers.

On September 14, 2022, following completion of the meeting of the OCSL Special Committee, the OCSL Board (including Ms. Gero) held a special telephonic and video meeting, with representatives of Oaktree, EY, Stradley, Kirkland and Houlihan Lokey also in attendance. The OCSL Board reviewed the recommendation of the OCSL Special Committee with Kirkland and Stradley. Representatives of Stradley then reviewed with the OCSL Board the findings required for the Mergers to qualify for an exemption to the joint transaction restrictions applicable to Business Development Companies under Section 57 of the Investment Company Act found in Rule 17a-8 of the Investment Company Act. Representatives from Oaktree and Kirkland then discussed with the OCSL Board the draft Merger Agreement, the timing of the announcement of the Mergers and the process of soliciting the necessary OCSL Stockholder and OSI2 Stockholder approvals.

Thereafter, on the unanimous recommendation of the OCSL Special Committee, the OCSL Board unanimously (1) determined that (a) the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Mergers, are advisable and in the best interests of OCSL and OCSL Stockholders, and (b) that the interests of existing OCSL Stockholders would not be diluted for purposes of Rule 17a-8 of the Investment Company Act as a result of the transactions contemplated by the Merger Agreement, including the Mergers and (2) approved, adopted and declared advisable the Merger Agreement and the transactions contemplated thereby, including the Mergers and the issuance of OCSL Common Stock pursuant to the Merger Agreement. The OCSL Board then directed that issuance of OCSL Common Stock pursuant to the Merger Agreement be submitted to OCSL Stockholders for approval and resolved to recommend that OCSL Stockholders vote to approve the same.

Following the September 14, 2022 meetings of the OSI2 Special Committee, the OSI2 Board, the OCSL Special Committee and the OCSL Board, OSI2, OCSL, Merger Sub and Oaktree executed and delivered the Merger Agreement. On September 15, 2022, OCSL and OSI2 issued a joint press release announcing the execution of the Merger Agreement and OCSL held an investor call to discuss the Mergers.

For more information concerning the terms and provisions of the Merger Agreement as negotiated by the parties, see “Description of the Merger Agreement” beginning on page 82 of this joint proxy statement/prospectus.

Reasons for the Mergers

OCSL

At various telephonic and video meetings, the OCSL Special Committee and the OCSL Board considered the approval of the Mergers and the Merger Agreement. In connection with their consideration, Oaktree provided the OCSL Special Committee and the OCSL Board with information regarding the proposed Mergers, OSI2 and the anticipated effects of the Mergers on OCSL and OCSL Stockholders. During the process of reviewing the materials and information provided and considering the Mergers, the OCSL Special Committee and the OCSL Board consulted with Stradley, Kirkland and Houlihan Lokey, as well as management of Oaktree. The OCSL Special Committee and the OCSL Board considered the nature and adequacy of the information provided, the terms of the Merger Agreement, their duties under state and federal law in considering and ultimately approving the Merger Agreement and the Mergers and the conflicts of interest presented by the transactions provided for in the Merger Agreement. The OCSL Special Committee and the OCSL Board considered numerous factors, including the ones described below, in connection with their consideration and approval of the Merger

 

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Agreement and the Mergers. On September 14, 2022, the OCSL Board and the OCSL Special Committee unanimously determined that the Mergers are in the best interests of OCSL and in the best interests of OCSL Stockholders, and that existing OCSL Stockholders will not suffer any dilution for purposes of Rule 17a-8 of the Investment Company Act as a result of the Mergers.

In considering the Mergers, the OCSL Special Committee reviewed comparative information about OCSL and OSI2 including, among other items: (1) their respective investment objectives, strategies, policies and restrictions and what changes, if any, would occur as a result of the Mergers; (2) their individual holdings, including, in particular, the extent of the overlap between the portfolios of OCSL and OSI2; (3) their existing leverage facilities; (4) their investment performance and financial results; (5) the anticipated effect of the Mergers on future OCSL net investment income, distributions and expenses; and (6) the U.S. federal income tax implications of the Mergers. In addition, the OCSL Special Committee reviewed comprehensive information regarding the anticipated benefits and possible risks to OCSL as a result of the Mergers, and the anticipated investment, market and financial synergies to be experienced by the combined company. The OCSL Special Committee considered the potential financial impacts to OCSL as a result of the Mergers in consultation with Houlihan Lokey, the financial advisor to the OCSL Special Committee.

The OCSL Special Committee and the OCSL Board, with the assistance of their legal and financial advisors, weighed various benefits and risks in considering the Mergers, both with respect to the immediate effects of the Mergers on OCSL and OCSL Stockholders and with respect to the potential benefits that could be experienced by the combined company after the Mergers. Some of the material factors considered by the OCSL Special Committee and the OCSL Board that assisted it in concluding that the Mergers are in the best interests of OCSL and OCSL Stockholders included, among others:

Expected Accretion to Net Investment Income. The OCSL Special Committee and the OCSL Board considered that the Mergers are expected to be accretive to net investment income, as a result of expense savings (as described more fully below) and the ability to operate at a slightly higher debt-to-equity ratio. In the short term, accretion to net investment income is also expected to result from the waiver of base management fees by Oaktree.

Increase in First Lien Investments. The OCSL Special Committee and the OCSL Board considered that, as of June 30, 2022, 84% of OSI2’s investment portfolio at fair value was in first lien senior secured loans, compared to 70% of OCSL’s investment portfolio. Based on the June 30, 2022 portfolio of each of OCSL and OSI2, on a pro forma basis, 73% of the portfolio of the combined entity would be in first lien senior secured loans. The OCSL Special Committee and the OCSL Board considered the lower risk profile of the OCSL portfolio post-Mergers due to a larger percentage of first lien loans.

Expected Greater Access to Debt Capital. The OCSL Special Committee and the OCSL Board discussed how the larger scale of the combined company may improve OCSL’s access to more diverse and lower cost sources of debt capital compared to what OCSL would be expected to obtain without the scale provided by the Mergers. The OCSL Special Committee and the OCSL Board noted that the larger size of the combined company could also allow for OCSL to operate at a slightly higher debt-to-equity ratio given the larger size and diversification.

Increased Scale and Improved Secondary Market Liquidity. The OCSL Special Committee and the OCSL Board considered scale and liquidity advantages expected to accrue to the combined company as a result of its larger size. The OCSL Special Committee and the OCSL Board considered that larger Business Development Companies tend to have higher average daily trading volumes, which would give existing OCSL Stockholders more flexibility to manage their investments and would be expected to attract new investors, including institutional investors, seeking a more liquid stock than OCSL provides on a standalone basis. The OCSL Special Committee and the OCSL Board also considered that larger Business Development Companies generally have broader coverage by equity research analysts, which is also expected to expand the potential stockholder base of

 

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the combined company. The OCSL Special Committee and the OCSL Board noted that increased interest in OCSL Common Stock by a larger number of potential stockholders could result in increased trading volumes and higher trading prices, which could provide greater flexibility and opportunity to raise additional equity capital in the future.

Acquisition of a Known, Diversified Portfolio. The OCSL Special Committee and the OCSL Board considered that the significant overlap of OSI2’s investments with those of OCSL (approximately 97% of the investments held by OSI2 on June 30, 2022 were also held by OCSL) and Oaktree’s familiarity with the investments held by OSI2, which would outweigh considerations related to slightly increased portfolio concentration, would result in a more straightforward and faster integration of the portfolio into OCSL’s than a portfolio of a third party. The OCSL Special Committee and the OCSL Board noted that the acquisition of OSI2’s portfolio of investments would lead to a larger portfolio with strong credit quality, as no investments were on non-accrual as of June 30, 2022. The OCSL Special Committee and the OCSL Board also considered the advantages to OCSL of immediately acquiring known, income-producing assets already diligenced and managed by Oaktree as opposed to the process of raising incremental capital in follow-on equity or rights offerings, and suffering lower returns until such capital is invested in income producing assets consistent with Oaktree’s underwriting standards. The OCSL Special Committee and the OCSL Board also considered that execution and integration risk could be lower as compared to a merger with an unaffiliated entity.

No Dilution for Purposes of Rule 17a-8 of the Investment Company Act. The OCSL Special Committee and the OCSL Board considered that the Exchange Ratio (and thus the number of shares of OCSL Common Stock to be issued to OSI2 Stockholders pursuant to the Merger Agreement) will be determined on a NAV-for-NAV basis (determined shortly before the Closing Date on the basis of methodologies that were considered and approved by the OCSL Board) and therefore the interests of the OCSL Stockholders will not be diluted for purposes of Rule 17a-8 under the Investment Company Act as a result of the Mergers.

Potential for Expense Savings. The OCSL Special Committee and the OCSL Board also considered that, as a result of the Mergers, certain redundant professional services and other corporate expenses would be eliminated, which would reduce the potential expenses of the combined company as compared to the aggregate expenses of OCSL and OSI2 on a standalone basis. In addition, the OCSL Special Committee considered that the combined company may have access to lower-cost sources of capital and thus be able to reduce its interest expense. The OCSL Special Committee and the OCSL Board noted that, although certain one-time costs would be borne by OCSL Stockholders in connection with the Mergers, such costs would be offset by the base management fee waiver by Oaktree and operating expense synergies.

Opinion of Houlihan Lokey, Financial Advisor to the OCSL Special Committee. The OCSL Special Committee considered the financial analysis reviewed by Houlihan Lokey with the OCSL Special Committee as well as the oral opinion of Houlihan Lokey rendered to the OCSL Special Committee on September 14, 2022 (which was subsequently confirmed in writing by delivery of Houlihan Lokey’s written opinion dated September 14, 2022 addressed to the OCSL Special Committee and, as requested by the OCSL Special Committee, the OCSL Board), as to, as of September 14, 2022, the fairness of the Exchange Ratio provided for in the Merger pursuant to the Merger Agreement, from a financial point of view, to OCSL, as more fully described below in the section entitled “ — Opinion of the Financial Advisor to the OCSL Special Committee.”

Tax Consequences of the Mergers. The OCSL Special Committee and the OCSL Board considered that the Mergers are expected to qualify as a “reorganization” within the meaning of Section 368(a) of the Code. The Mergers are anticipated to be treated as a tax-free reorganization for U.S. federal income tax purposes and OCSL Stockholders are not expected to recognize any gain or loss for U.S. federal income tax purposes as a result of the Mergers.

Other Considerations. The OCSL Special Committee and the OCSL Board noted that the Mergers are not expected to affect the ability of OCSL to comply with its regulatory obligations, including its ability to continue

 

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to operate in compliance with the asset coverage requirements set forth in the Investment Company Act and to pay dividends required of RICs.

In the course of its deliberations, the OCSL Board and the OCSL Special Committee also considered a variety of risks and other potentially negative factors that could cause the Mergers not to close or the anticipated benefits of the Mergers not to be realized, including the following (which are not in any relative order of importance):

 

   

Failure to Close. The Mergers may not be completed or that completion may be delayed for reasons beyond the control of OCSL or OSI2, including an inability to obtain the required stockholder approvals.

 

   

Management Diversion. It is possible that the attention of management may be diverted during the period prior to completion of the Mergers, which may adversely affect OCSL’s business.

 

   

Pressure on the trading price of OCSL Common Stock. If OSI2 Stockholders sell the shares of OCSL Common Stock received in the Mergers, whether because they do not want to or cannot hold shares of a publicly traded company or for any other reason, it could put negative pressure on the trading price of OCSL Common Stock.

 

   

Time and Ability to Ramp to Target Leverage Ratios. OSI2 currently operates at a lower debt-to-equity ratio than OCSL’s target and any delay in returning the combined company to the target range could impact net investment income.

 

   

Restrictions on Conduct of Business. The restrictions on the conduct of OCSL’s business prior to completion of the Mergers, requiring OCSL to conduct its business only in the ordinary course of business in all material respects, subject to specific limitations, could delay or prevent OCSL from undertaking certain business opportunities that may arise pending completion of the Mergers.

 

   

Restrictions on Superior Proposals; Termination Fee. The Merger Agreement includes restrictions on the ability of OCSL to solicit proposals for alternative transactions or engage in discussions regarding such proposals, subject to exceptions and termination provisions (as more fully described in the section entitled “Description of the Merger Agreement — Additional Agreements”), which could have the effect of discouraging such proposals from being made or pursued. In addition, a third party acquiring OCSL may be required to pay a termination fee of $37.9 million to OSI2, which might discourage a potential acquirer that might have an interest in acquiring all or a significant part of OCSL from considering or proposing that acquisition.

 

   

Fees Associated with the Mergers. Except certain limited expenses that will be split equally with OSI2, OCSL will be responsible for the expenses incurred by OCSL in connection with the Mergers and the completion of the transactions contemplated by the Merger Agreement, whether or not the Mergers are ultimately consummated.

 

   

Litigation Risk. Mergers of publicly traded companies are frequently the subject of litigation. If any litigation arises in connection with the Mergers, even if any plaintiff’s claims are without merit, it could divert management time and resources away from OCSL’s business.

 

   

Other Risks. There are various other risks associated with the Mergers and the business of OCSL and the combined company described in the section entitled “Risk Factors” beginning on page 23 and in the section entitled “Special Note Regarding Forward-Looking Statements” beginning on page 33.

This discussion of the information and factors that the OCSL Special Committee and the OCSL Board considered in making their decisions is not intended to be exhaustive but includes the material benefits, risks and other factors considered by the OCSL Special Committee and the OCSL Board. Because of the wide variety of factors considered in connection with the evaluation of the Mergers and Merger Agreement and the complexity of those matters, the OCSL Board and the OCSL Special Committee did not find it useful to, and did not attempt to, quantify, rank or otherwise assign relative weights to these factors. In addition, the individual members of the OCSL Special Committee and the OCSL Board may have given different weights to different factors.

 

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The OCSL Special Committee consulted with Houlihan Lokey, as its financial advisor, in connection with its evaluation of the financial terms of the Mergers. In addition, the OCSL Special Committee and the OCSL Board relied on their respective legal advisors for legal analysis in connection with the transactions contemplated by the Merger Agreement, including the Mergers.

The OCSL Special Committee and, upon the unanimous recommendation of the OCSL Special Committee, the OCSL Board considered all of these factors and others as a whole and, on balance, determined the Mergers to be in the best interests of OCSL and OCSL Stockholders and unanimously approved the Mergers and the Merger Agreement.

OSI2

At various telephonic and video meetings, the OSI2 Special Committee and the OSI2 Board considered the approval of the Mergers and the Merger Agreement. In connection with their consideration, Oaktree provided the OSI2 Special Committee and the OSI2 Board with information regarding the proposed Mergers, OCSL and the anticipated effects of the Mergers on OSI2 and OSI2 Stockholders. Throughout the process of reviewing the materials and information provided and considering the Liquidity Alternatives, including the Mergers, the OSI2 Special Committee and the OSI2 Board consulted with Sullivan & Cromwell and KBW, as well as management of Oaktree. The OSI2 Special Committee and the OSI2 Board considered the nature and adequacy of the information provided, the terms of the Merger Agreement, their duties under state and federal law in considering and ultimately approving the Merger Agreement and the Mergers and the conflicts of interest presented by the transactions provided for in the Merger Agreement. The OSI2 Special Committee and the OSI2 Board considered numerous factors, including the ones described below, in connection with their consideration and approval of the Merger Agreement and the Mergers. On September 14, 2022, the OSI2 Board and the OSI2 Special Committee unanimously determined that the Mergers are advisable and in the best interests of OSI2, and that existing OSI2 Stockholders will not suffer any dilution for purposes of Rule 17a-8 of the Investment Company Act as a result of the Mergers.

In considering the Mergers, the OSI2 Special Committee and the OSI2 Board reviewed comparative information about OSI2 and OCSL including, among other items: (1) their respective investment objectives, strategies, policies and restrictions and what changes would occur as a result of the Mergers; (2) information about how their holdings substantially overlap and differ; (3) their existing leverage facilities; (4) their short-term and long-term investment performance history and financial results; (5) the level of past distributions and expenses and the anticipated effect of the Mergers on future net investment income, distributions and expenses; (6) their respective investment advisory agreements and expense ratios; and (7) the U.S. federal income tax implications of the Mergers. In addition, the OSI2 Special Committee and the OSI2 Board reviewed comprehensive information regarding the anticipated benefits and possible risks to OSI2 and OSI2 Stockholders as a result of the Mergers, and the anticipated investment, market and financial synergies to be experienced by the combined company. The OSI2 Special Committee also considered financial aspects of the proposed Mergers in consultation with KBW, the financial advisor to the OSI2 Special Committee.

The OSI2 Special Committee and the OSI2 Board weighed various benefits and risks in considering the Mergers, both with respect to the immediate effects of the Mergers on OSI2 and OSI2 Stockholders and with respect to the potential benefits that could be experienced by the combined company after the Mergers. Some of the material factors considered by the OSI2 Special Committee and the OSI2 Board that assisted it in concluding that the Mergers are in the best interests of OSI2 and OSI2 Stockholders included, among others:

Expected Accretion to Net Investment Income. The OSI2 Special Committee and the OSI2 Board considered that the Mergers are expected to be accretive to net investment income in both the short-term and long-term. The OSI2 Special Committee and the OSI2 Board noted that Oaktree expects, in the short term, accretion to net investment income to be delivered primarily by the waiver of base management fees by Oaktree and, over the long term, by expense savings through operational synergies and a streamlined capital structure.

 

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Expected Greater Access to Debt Capital. The OSI2 Special Committee and the OSI2 Board considered how OCSL’s larger scale may improve access to more diverse, lower cost sources of capital. The OSI2 Board also considered that OSI2 Stockholders may benefit from OCSL’s lower cost, more flexible capital structure, including investment grade credit ratings and unsecured debt.

Immediate Access to Liquidity. The OSI2 Special Committee and the OSI2 Board considered that upon completion of the Mergers OSI2 Stockholders will receive OCSL Common Stock that is listed on Nasdaq and is freely saleable, providing immediate access to liquidity. The OSI2 Special Committee and OSI2 Board also considered alternative paths to liquidity for OSI2 Stockholders but determined the potential benefits of the proposed Mergers represent a superior alternative for OSI2 Stockholders.

Similarities in Investment Strategies and Risks. The OSI2 Special Committee and OSI2 Board reviewed the investment objectives and strategies of OCSL and noted the similarities to the objectives and strategies of OSI2 and substantially similar risks and that each focuses on direct lending to middle-market companies. The OSI2 Special Committee and OSI2 Board took into consideration that OSI2 and OCSL are each managed by Oaktree and, after the Mergers, OSI2 Stockholders would be invested in a similarly structured investment vehicle and that their investment experience would likely be comparable in the combined entity.

Broader Equity Coverage and Improved Secondary Market Liquidity. In the Mergers, OSI2 Stockholders will receive OCSL Common Stock and the assets of OSI2 will be incorporated into OCSL, increasing OCSL’s market capitalization and NAV. The OSI2 Special Committee and the OSI2 Board considered that larger Business Development Companies tend to have higher average daily trading volumes, which would give existing OSI2 Stockholders more flexibility to manage their investments and would be expected to attract new investors seeking a more liquid stock than either company provides on a standalone basis. The OSI2 Board and the OSI2 Special Committee noted that OCSL’s increased size as a result of the Mergers could result in additional market coverage of OCSL by analysts and, potentially, an increased focus by institutional investors on the combined company. The OSI2 Special Committee and the OSI2 Board noted that increased interest in the OCSL Common Stock by a larger number of potential stockholders could result in increased trading volumes and higher trading prices, which could provide greater flexibility for the combined company to raise additional equity capital in the future.

Expected Dividend Accretion. The OSI2 Special Committee and the OSI2 Board considered that the Mergers would be accretive to dividends received by OSI2 Stockholders in both the short-term and long-term, as OSI2 Stockholders would benefit from the higher yielding assets currently in the OCSL portfolio.

Continuity of Oaktree and the Management Team. The OSI2 Special Committee and the OSI2 Board, considered that the combined company would have the same investment adviser and management team that have already been considered and approved by the OSI2 Board. The OSI2 Special Committee and the OSI2 Board considered that, because there would be no change in the investment adviser, the combined entity and the OSI2 Stockholders would be expected to receive the same nature, quality and extent of services from Oaktree that they are currently receiving and would continue to benefit from the experience and expertise of its current management team, including familiarity with the investment portfolio.

Ease of Portfolio Integration. The OSI2 Special Committee and the OSI2 Board considered that the significant overlap of OSI2’s investments with those of OCSL (approximately 97% of the investments held by OSI2 on June 30, 2022 were also held by OCSL) and Oaktree’s familiarity with the investments held by OSI2 would result a more straightforward and faster integration of OSI2’s portfolio into that of OCSL than into a portfolio of an unaffiliated acquirer with reduced execution risk. The OSI2 Special Committee and the OSI2 Board also considered the larger portfolio size and increased number of individual borrowers of the combined entity.

Potential for Operational Synergies via the Elimination of Redundant Expenses. The OSI2 Special Committee and the OSI2 Board also considered that, as a result of the Mergers, certain redundant professional

 

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services and other corporate expenses would be eliminated, which would reduce the potential expenses of the combined company as compared to the aggregate expenses of OCSL and OSI2 on a standalone basis. The OSI2 Special Committee and the OSI2 Board noted that, although certain one-time costs would be borne by OSI2 Stockholders in connection with the Mergers, such costs would be offset by the OCSL base management fee waiver and operating expense synergies.

Tax Consequences of the Mergers. The OSI2 Special Committee and the OSI2 Board considered that the Mergers are expected to qualify as a “reorganization” within the meaning of Section 368(a) of the Code. OSI2 Stockholders are not expected to recognize any gain or loss for U.S. federal income tax purposes on the exchange of shares of OSI2 Common Stock for shares of OCSL Common Stock pursuant to the Mergers, except with respect to cash received in lieu of fractional shares of OCSL Common Stock. OSI2 Stockholders will receive a distribution of their proportionate share of OSI2’s undistributed net investment income and net realized gains, if any, prior to or shortly after the completion of the Mergers (the “OSI2 Distribution”) that generally will be taxable to taxable stockholders for U.S. federal, state and local income tax purposes. The OSI2 Distribution may include return of capital which would generally result in a reduction in basis.

No Dilution for Purposes of Rule 17a-8 of the Investment Company Act. The OSI2 Special Committee and the OSI2 Board considered that the Exchange Ratio (and thus the number of shares of OCSL Common Stock to be issued to OSI2 Stockholders pursuant to the Merger Agreement) will be determined on a NAV-for-NAV basis (determined shortly before the Closing Date on the basis of methodologies that were considered and approved by the OSI2 Board), supporting a determination that the interests of the OSI2 Stockholders will not be diluted for purposes of Rule 17a-8 under the Investment Company Act as a result of the Mergers.

Opinion of KBW, Financial Advisor to the OSI2 Special Committee. The OSI2 Special Committee considered the financial presentation, dated September 14, 2022, of KBW provided to and reviewed with the OSI2 Special Committee and the opinion, dated September 14, 2022, of KBW to the OSI2 Special Committee and OSI2 Board as to, as of the date of the opinion, the fairness, from a financial point of view, to the holders of OSI2 Common Stock of the Exchange Ratio in the Merger, as more fully described below in the section entitled “ Opinion of the Financial Advisor to the OSI2 Special Committee.” At the request of the OSI2 Special Committee, KBW also attended the special telephonic and video meeting of the OSI2 Board following the delivery of its opinion to provide the OSI2 Board with the opportunity to discuss KBW’s opinion.

Other Considerations. The OSI2 Special Committee and the OSI2 Board also considered that the OSI2 Board will declare the OSI2 Distribution.

In the course of its deliberations, the OSI2 Board and the OSI2 Special Committee also considered a variety of risks and other potentially negative factors, including the following (which are not in any relative order of importance):

 

   

Failure to Close. It is possible that the Mergers may not be completed or that completion may be delayed for reasons beyond the control of OCSL or OSI2.

 

   

Management Diversion. It is possible that the attention of management may be diverted during the period prior to completion of the Mergers, which may adversely affect OSI2’s business.

 

   

Restrictions on Conduct of Business. The restrictions on the conduct of OSI2’s business prior to completion of the Mergers, requiring OSI2 to conduct its business only in the ordinary course of business in all material respects, subject to specific limitations, could delay or prevent OSI2 from undertaking business opportunities that may arise pending completion of the Mergers.

 

   

Restrictions on Superior Proposals. The Merger Agreement includes restrictions on the ability of OSI2 to solicit proposals for alternative transactions or engage in discussions regarding such proposals, subject to exceptions and termination provisions (as more fully described in the section entitled “Description of the Merger Agreement — Additional Agreements”), which could have the effect of discouraging such proposals from being made or pursued.

 

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Fees Associated with the Mergers. Except certain limited expenses that will be split equally with OCSL, OSI2 will be responsible for the expenses incurred by OSI2 in connection with the Mergers and the completion of the transactions contemplated by the Merger Agreement, whether or not the Mergers are ultimately consummated.

 

   

Litigation Risk. Mergers of publicly traded companies are frequently the subject of litigation. If any litigation arises in connection with the Mergers, even if any plaintiff’s claims are without merit, it could divert management time and resources away from the combined company’s business.

 

   

Higher Base Management Fee. While Oaktree has agreed to waive $9.0 million of base management fees ($6.0 million at a rate of $1.5 million per quarter, with such amount prorated for any partial quarter, in the first year following closing of the Mergers and $3.0 million at a rate of $750,000 per quarter, with such amount prorated for any partial quarter, in the second year following the closing of the Mergers), OCSL’s base management fee rate is higher than that of OSI2, which could result in decreases in net investment income or dividends for OSI2 Stockholders if Oaktree is unable to successfully rotate out of lower-yielding OSI2 investments.

 

   

Other Risks. There are various other risks associated with the Mergers and the business of OSI2 and the combined company described in the section entitled “Risk Factors” beginning on page 23 and in the section entitled “Special Note Regarding Forward-Looking Statements” beginning on page 33.

This discussion of the information and factors that the OSI2 Special Committee and the OSI2 Board considered in making their decisions is not intended to be exhaustive, but includes the material benefits, risks and other factors considered by the OSI2 Special Committee and the OSI2 Board. Because of the wide variety of factors considered in connection with the evaluation of the Mergers and Merger Agreement and the complexity of those matters, the OSI2 Board and the OSI2 Special Committee did not find it useful to, and did not attempt to, quantify, rank or otherwise assign relative weights to these factors. In addition, the individual members of the OSI2 Special Committee and the OSI2 Board may have given different weights to different factors.

The OSI2 Special Committee consulted with KBW, as its financial advisor regarding financial matters, in connection with the OSI2 Special Committee’s evaluation of the Liquidity Alternatives, including the financial terms of the Mergers. In addition, the OSI2 Special Committee and the OSI2 Board relied on their legal advisors for legal analysis in connection with the transactions contemplated by the Merger Agreement, including the Mergers.

The OSI2 Special Committee and, upon the unanimous recommendation of the OSI2 Special Committee, the OSI2 Board considered all of these factors and others as a whole and, on balance, determined the Mergers to be in the best interests of OSI2 and OSI2 Stockholders and unanimously approved the Mergers and the Merger Agreement.

OCSL Board Recommendation

The OCSL Board, upon recommendation of the OCSL Special Committee, has unanimously approved the Merger Agreement, including the Mergers and the related transactions, and the proposed issuance of OCSL Common Stock in connection with the Mergers, and directed that the proposed issuance of OCSL Common Stock in connection with the Mergers be submitted to the OCSL Stockholders for approval at the OCSL Annual Meeting. The OCSL Board unanimously recommends that OCSL Stockholders vote “FOR” the Merger Stock Issuance Proposal.

OSI2 Board Recommendation

The OSI2 Board, upon recommendation of the OSI2 Special Committee, has unanimously approved the Merger Agreement, including the Mergers and the related transactions, and directed that the Merger Agreement be submitted to the OSI2 Stockholders for approval at the OSI2 Special Meeting. The OSI2 Board unanimously recommends that OSI2 Stockholders vote “FOR” the Merger Proposal.

 

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Certain Prospective Financial Information Provided by Oaktree

Neither OCSL nor OSI2 (or Oaktree on their behalf), as a matter of course, makes public long-term projections as to their respective future investment income, net investment income or other results due to, among other reasons, the inherent uncertainty of the underlying assumptions and estimates. However, Oaktree prepared certain unaudited forecasted financial information, which was made available to the OCSL Special Committee and the OCSL Board in connection with their evaluation of the proposed Mergers and to Houlihan Lokey who was authorized and directed to use and rely upon such information for purposes of providing financial advice to the OCSL Special Committee. In addition, Oaktree prepared certain unaudited forecasted financial information, which was made available to the OSI2 Special Committee and the OSI2 Board in connection with their evaluation of the Liquidity Alternatives, including the proposed Mergers, and to KBW who was authorized and directed to use and rely upon such information for purposes of providing financial advice to the OSI2 Special Committee. The prospective financial information contained in this joint proxy statement/prospectus was prepared for internal use and not with a view to public disclosure and is being included in this joint proxy statement/prospectus only because the prospective financial information was provided to the OCSL Special Committee and OSI2 Special Committee in connection with their evaluation of the proposed Mergers or to Houlihan Lokey and KBW who were authorized and directed to use and rely upon such information for purposes of providing financial advice to the OCSL Special Committee and the OSI2 Special Committee, respectively. The summary of the projections and prospective financial information included in this joint proxy statement/prospectus are not being provided to influence the decision of OCSL Stockholders to vote for the Merger Stock Issuance Proposal or OSI2 Stockholders to vote for the Merger Proposal.

The prospective financial information was not prepared with a view to compliance with the published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. The prospective financial information does not purport to present operations in accordance with U.S. generally accepted accounting principles, and OCSL’s and OSI2’s registered public accounting firms have not examined, compiled or otherwise applied procedures to the prospective financial information and accordingly assume no responsibility for such information.

The prospective financial information provided by Oaktree on behalf of OCSL and OSI2, as applicable, was based solely on the information available to Oaktree management at that time. The inclusion of the prospective financial information in this joint proxy statement/prospectus should not be regarded as an indication that the prospective financial information will be necessarily predictive of actual future results, and the forecasts should not be relied upon as such. None of OCSL, OSI2, Oaktree or any other person makes any representation to any security holders regarding the ultimate performance of OCSL or OSI2, as applicable, compared to the prospective financial information set forth in this joint proxy statement/prospectus.

The prospective financial information is not fact and reflects numerous assumptions and estimates as to future events made by Oaktree management of OCSL or OSI2, as applicable, that were believed to be reasonable at the time the prospective financial information was prepared and other factors such as industry performance and general business, economic, regulatory, market and financial conditions, as well as factors specific to the businesses of OCSL and OSI2, all of which are difficult to predict and many of which are beyond the control of OCSL and OSI2. Other persons attempting to project the future results of OCSL and OSI2 will make their own assumptions that could result in projections materially different than those presented in this joint proxy statement/prospectus. In addition, the prospective financial information does not take into account any circumstances or events occurring after the date that they were prepared. Further, the prospective financial information does not take into account the effect of any failure to occur of the Mergers. Accordingly, there can be no assurance that the prospective financial information will be realized, and actual results could vary significantly from those reflected in the prospective financial information.

Neither OCSL nor OSI2 intends to update or otherwise revise the prospective financial information to reflect circumstances existing after the date when made or to reflect the occurrence of future events even in the

 

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event that any or all of the assumptions underlying the prospective financial information are shown to be in error. The projections and prospective financial information in this joint proxy statement/prospectus are forward-looking statements. These statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. See “Special Note Regarding Forward-Looking Statements.”

Oaktree made available to OCSL and Houlihan Lokey (who was authorized and directed to use and rely upon such information for purposes of providing financial advice to the OCSL Special Committee) the following information with respect to:

 

   

OCSL on a standalone basis:

 

   

Estimated total increases in adjusted annual net investment income per share of 4.4% by March 31, 2026 as compared to adjusted net investment income for the twelve months ended June 30, 2022; and

 

   

Estimated total increases in annual distributions per share of 9.2% by March 31, 2026 as compared to distributions for the twelve months ended June 30, 2022;

 

   

OSI2 on a standalone basis (based on scenarios involving an orderly liquidation of OSI2 following the end of the investment period in August 2023, an extension to the investment period and a listing of OSI2 on a national securities exchange):

 

   

Estimated total changes in annual net investment income per share of between (25.8)% and (3.2)% by March 31, 2026 as compared to net investment income for the twelve months ended June 30, 2022; and

 

   

Estimated total changes in annual distributions per share of between (34.0)% and (13.9)% by March 31, 2026 as compared to distributions for the twelve months ended June 30, 2022; and

 

   

the combined company on a pro forma basis giving effect to the Mergers and the base management fee waiver by Oaktree assuming the Mergers close on March 31, 2023:

 

   

Estimated total increases in adjusted net investment income per share of 10.3% by March 31, 2026 as compared to OCSL’s adjusted net investment income for the twelve months ended June 30, 2022; and

 

   

Estimated total increases in annual distributions per share of 15.4% by March 31, 2026 as compared to OCSL’s distributions for the twelve months ended June 30, 2022.

In addition, Oaktree made available to OSI2 and KBW (which was authorized and directed to use and rely upon the following information for purposes of providing financial advice to the OSI2 Special Committee) the following information:

 

   

With respect to OCSL on a standalone basis:

 

   

Estimated annual net investment income and annual distributions per share of between $0.71 per share and $0.72 per share during the twelve month periods ending March 31, 2024, March 31, 2025 and March 31, 2026; and

 

   

Additionally for KBW’s use in performing analyses in connection with KBW’s opinion, estimated annual net investment income and annual distributions of between $130.7 million and $132.6 million during the twelve month periods ending December 31, 2024, December 31, 2025 and December 31, 2026.

 

   

With respect to OSI2 on a standalone basis:

 

   

Estimated annual net investment income and annual distributions per share (based on scenarios involving an orderly liquidation of OSI2 following the end of the investment period in August 2023, an extension of the investment period of OSI2 and a listing of OSI2 on a national securities exchange) of between $1.38 per share and $1.80 per share during the twelve month periods ending March 31, 2024, March 31, 2025 and March 31, 2026, depending on the liquidity alternative under consideration; and

 

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Additionally for KBW’s use in performing analyses in connection with KBW’s opinion, estimated annual net investment income and annual distributions (based on the scenario involving an extension of the investment period) of between $30.9 million and $31.5 million during the twelve month periods ending December 31, 2024, December 31, 2025 and December 31, 2026.

 

   

With respect to the combined company on a pro forma basis giving effect to the Mergers (including an implied exchange ratio of 2.7037 (with pro forma adjustments reflecting the combined impact of $3.4 million and $2.0 million of estimated transaction expenses expected to be incurred by OCSL and OSI2, respectively) shares of OCSL Common Stock for each share of OSI2 Common Stock) and the base management fee waiver by Oaktree assuming the Mergers close on March 31, 2023, estimated annual net investment income and annual distributions per share of between $0.75 per share and $0.77 per share during the twelve month periods ending March 31, 2024, March 31, 2025 and March 31, 2026.

Opinion of the Financial Advisor to the OCSL Special Committee

On September 14, 2022, Houlihan Lokey orally rendered its opinion to the OCSL Special Committee (which was subsequently confirmed in writing by delivery of Houlihan Lokey’s written opinion addressed to the OCSL Special Committee and the OCSL Board dated September 14, 2022), as to, as of September 14, 2022, the fairness of the Exchange Ratio provided for in the Merger pursuant to the Merger Agreement, from a financial point of view, to OCSL.

Houlihan Lokey’s opinion was directed to the OCSL Special Committee (in its capacity as such) and, as requested by the OCSL Special Committee, the OCSL Board (in its capacity as such), and only addressed the fairness of the Exchange Ratio provided for in the Merger pursuant to the Merger Agreement, from a financial point of view, to OCSL and did not address any other aspect or implication of the Merger or any other agreement, arrangement or understanding entered into in connection therewith or otherwise. The summary of Houlihan Lokey’s opinion in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of its written opinion, which is attached as Annex B to this joint proxy statement/prospectus and describes the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Houlihan Lokey in connection with the preparation of its opinion. However, neither Houlihan Lokey’s opinion nor the summary of its opinion and the related analyses set forth in this joint proxy statement/prospectus are intended to be, and do not constitute, advice or a recommendation to the OCSL Special Committee, the OCSL Board, any security holder of OCSL or any other person as to how to act or vote with respect to any matter relating to the Merger.

In arriving at its opinion, Houlihan Lokey made such reviews, analyses and inquiries as it deemed necessary and appropriate under the circumstances. Among other things, Houlihan Lokey:

 

   

reviewed a draft, dated September 13, 2022, of the Merger Agreement;

 

   

reviewed certain publicly available business and financial information relating to OCSL and OSI2 that Houlihan Lokey deemed to be relevant;

 

   

reviewed certain information relating to the historical, current and future operations, financial condition and prospects of OSI2 and OCSL made available to Houlihan Lokey by Oaktree, including (a) financial projections prepared by the management of Oaktree relating to OSI2 contemplating continued operation as a going concern (the “OSI2 Projections”), (b) solely for illustrative purposes, financial projections prepared by the management of Oaktree relating to OSI2 contemplating a wind-down and liquidation of OSI2 (the “OSI2 Liquidation Projections”), (c) solely for illustrative purposes, financial projections prepared by the management of Oaktree relating to OSI2 contemplating an IPO by OSI2 (the “OSI2 IPO Projections”), (d) financial projections prepared by the management of Oaktree relating to OCSL (the “OCSL Projections”), and (e) solely for illustrative purposes, financial projections prepared by the management of Oaktree relating to OCSL after giving effect to the Merger (the “Pro Forma OCSL Projections”);

 

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spoke with certain members of the management of Oaktree and certain of its representatives and advisors regarding the respective businesses, operations, financial condition and prospects of OSI2 and OCSL, the Merger and related matters;

 

   

compared the financial and operating performance of OSI2 and OCSL with that of companies with publicly traded equity securities that Houlihan Lokey deemed to be relevant;

 

   

considered the publicly available financial terms of certain transactions that Houlihan Lokey deemed to be relevant;

 

   

reviewed the NAV per share of OSI2 Common Stock and the NAV per share of OCSL Common Stock as of June 30, 2022, prepared and provided to Houlihan Lokey by Oaktree, as adjusted for estimated transaction expenses provided by Oaktree (the “Adjusted June 30 NAVs”);

 

   

compared the Exchange Ratio, determined on the basis of the Adjusted June 30 NAVs, to the relative value reference ranges that Houlihan Lokey believed were indicated by its financial analyses of OSI2 and OCSL;

 

   

reviewed the current and historical market prices for OCSL’s publicly traded equity securities; and

 

   

conducted such other financial studies, analyses and inquiries and considered such other information and factors as Houlihan Lokey deemed appropriate.

Houlihan Lokey relied upon and assumed, without independent verification, the accuracy and completeness of all data, material and other information furnished, or otherwise made available, to it, discussed with or reviewed by it, or publicly available, and did not assume any responsibility with respect to such data, material and other information. In addition, management of Oaktree advised Houlihan Lokey, and Houlihan Lokey assumed, that (a) the OSI2 Projections, the OSI2 Liquidation Projections, and the OSI2 IPO Projections were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of such management as to the future financial results and condition of OSI2 on a going concern basis, under a wind-down and liquidation, and following an IPO, respectively, and (b) the OCSL Projections and the Pro Forma OCSL Projections were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of such management as to the future financial results and condition of OCSL on a standalone basis and after giving effect to the Merger, respectively. At the OCSL Special Committee’s direction, Houlihan Lokey assumed that the OSI2 Projections and the OCSL Projections provided a reasonable basis on which to evaluate OSI2, OCSL and the Merger and Houlihan Lokey, at the OCSL Special Committee’s direction, used and relied upon the OSI2 Projections and the OCSL Projections for purposes of its analyses and opinion. Houlihan Lokey expressed no view or opinion with respect to the OSI2 Projections, the OSI2 Liquidation Projections, the OSI2 IPO Projections, the OCSL Projections, the Pro Forma OCSL Projections or the respective assumptions on which they were based. Houlihan Lokey relied upon and assumed, without independent verification, that there had been no change in the business, assets, liabilities, financial condition, results of operations, cash flows or prospects of OSI2 or OCSL since the respective dates of the most recent financial statements and other information, financial or otherwise, provided to it that would be material to its analyses or opinion, and that there was no information or any facts that would make any of the information reviewed by it incomplete or misleading.

Houlihan Lokey relied upon and assumed, without independent verification, that (a) the representations and warranties of all parties to the Merger Agreement and all other related documents and instruments referred to therein were true and correct, (b) each party to the Merger Agreement and such other related documents and instruments would fully and timely perform all of the covenants and agreements required to be performed by such party, (c) all conditions to the consummation of the Merger would be satisfied without waiver thereof, and (d) the Merger would be consummated in a timely manner in accordance with the terms described in the Merger Agreement and such other related documents and instruments, without any amendments or modifications thereto that would be material to its analyses or opinion. Houlihan Lokey also assumed that the Merger, together with the Second Merger, would qualify, for federal income tax purposes, as a “reorganization” within the meaning of Section 368(a) of the Code. Houlihan Lokey relied upon and assumed, without independent verification, that

 

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(i) the Merger would be consummated in a manner that complies in all respects with all applicable federal and state statutes, rules and regulations, and (ii) all governmental, regulatory, and other consents and approvals necessary for the consummation of the Merger would be obtained and that no delay, limitations, restrictions or conditions would be imposed or amendments, modifications or waivers made that would result in the disposition of any assets of OSI2 or OCSL, or otherwise have an effect on the Merger, OSI2 or OCSL or any expected benefits of the Merger that would be material to its analyses or opinion. In addition, Houlihan Lokey relied upon and assumed, without independent verification, that the final form of the Merger Agreement would not differ from the draft of the Merger Agreement identified above in any respect material to its analyses or opinion.

Furthermore, in connection with its opinion, Houlihan Lokey was not requested to, and did not, make any physical inspection or independent appraisal or evaluation of any of the assets, properties or liabilities (fixed, contingent, derivative, off-balance-sheet or otherwise) of OSI2, OCSL or any other party. Houlihan Lokey did not estimate, and expressed no opinion regarding, the liquidation value of any entity or business. Houlihan Lokey did not undertake any independent analysis of any potential or actual litigation, regulatory action, possible unasserted claims or other contingent liabilities, to which OSI2 or OCSL was or may have been a party or was or may have been subject, or of any governmental investigation of any possible unasserted claims or other contingent liabilities to which OSI2 or OCSL was or may have been a party or was or may have been subject.

Houlihan Lokey was not requested to, and did not, (a) solicit any indications of interest from third parties with respect to the Merger, the securities, assets, businesses or operations of OSI2, OCSL or any other party, or any alternatives to the Merger, or (b) advise the OCSL Special Committee, the OCSL Board or any other party with respect to alternatives to the Merger. Houlihan Lokey’s opinion was necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to Houlihan Lokey as of, the date of its opinion. As the OCSL Special Committee was aware the credit, financial and stock markets had been experiencing unusual volatility and Houlihan Lokey expressed no opinion or view as to any potential effects of such volatility on the Merger, and Houlihan Lokey’s opinion did not purport to address potential developments in any such markets. Houlihan Lokey did not undertake, and is under no obligation, to update, revise, reaffirm or withdraw its opinion, or otherwise comment on or consider events occurring or coming to its attention after the date of its opinion. Houlihan Lokey did not express any opinion as to what the value of OCSL Common Stock actually would be when issued pursuant to the Merger or the price or range of prices at which OSI2 Common Stock or OCSL Common Stock may be purchased or sold, or otherwise be transferable, at any time. Houlihan Lokey assumed that the shares of OCSL Common Stock to be issued in the Merger to holders of OSI2 Common Stock would be listed on Nasdaq immediately following the consummation of the Merger.

Houlihan Lokey’s opinion was furnished for the use of the OCSL Special Committee and the OCSL Board (each in its capacity as such) in connection with its evaluation of the Merger and may not be used for any other purpose without Houlihan Lokey’s prior written consent. Houlihan Lokey’s opinion was not intended to be, and does not constitute, a recommendation to the OCSL Special Committee, the OCSL Board, any security holder or any other party as to how to act or vote with respect to any matter relating to the Merger or otherwise.

Houlihan Lokey’s opinion only addressed the fairness of the Exchange Ratio provided for in the Merger pursuant to the Merger Agreement, from a financial point of view, to OCSL and did not address any other aspect or implication of the Merger, any related transaction or any agreement, arrangement or understanding entered into in connection therewith or otherwise, including, without limitation, the termination of the OSI2 Advisory Agreement and the OSI2 Administration Agreement immediately after the Effective Time and immediately prior to the Second Merger, or the Second Merger. Houlihan Lokey was not requested to opine as to, and its opinion did not express an opinion as to or otherwise address, among other things: (i) the underlying business decision of the OCSL Special Committee, the OCSL Board, OCSL, its security holders or any other party to proceed with or effect the Merger, (ii) the terms of any arrangements, understandings, agreements or documents related to, or the form, structure or any other portion or aspect of, the Merger or otherwise (other than the Exchange Ratio to the extent expressly specified in its opinion), (iii) the fairness of any portion or aspect of the Merger to the holders of any class of securities, creditors or other constituencies of OCSL, or to any other party, except if and only to the

 

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extent expressly set forth in the last sentence of Houlihan Lokey’s opinion, (iv) the relative merits of the Merger as compared to any alternative business strategies or transactions that might have been available for OCSL, OSI2 or any other party, (v) the fairness of any portion or aspect of the Merger to any one class or group of OCSL’s or any other party’s security holders or other constituents vis-à-vis any other class or group of OCSL’s or such other party’s security holders or other constituents (including, without limitation, the allocation of any consideration amongst or within such classes or groups of security holders or other constituents), (vi) the appropriate capital structure of OCSL, whether OCSL should be issuing debt or equity securities or a combination of both in the Merger, or the form, structure or any aspect or terms of any debt or equity financing for the Merger or the likelihood of obtaining such financing, (vii) whether or not OCSL, OSI2, their respective security holders or any other party is receiving or paying reasonably equivalent value in the Merger, (viii) the solvency, creditworthiness or fair value of OCSL, OSI2 or any other participant in the Merger, or any of their respective assets, under any applicable laws relating to bankruptcy, insolvency, fraudulent conveyance or similar matters, or (ix) the fairness, financial or otherwise, of the amount, nature or any other aspect of any compensation to or consideration payable to or received by any officers, directors or employees of any party to the Merger, any class of such persons or any other party, relative to the Exchange Ratio or otherwise. Furthermore, Houlihan Lokey did not express any opinion, counsel or interpretation regarding matters that require legal, regulatory, accounting, insurance, tax or other similar professional advice. Houlihan Lokey assumed that such opinions, counsel or interpretations had been or would be obtained from the appropriate professional sources. Furthermore, Houlihan Lokey relied, with the consent of the OCSL Special Committee, on the assessments by the OCSL Special Committee, the OCSL Board, OCSL and their respective advisors, as to all legal, regulatory, accounting, insurance and tax matters with respect to OSI2, OCSL and the Merger or otherwise.

In preparing its opinion to the OCSL Special Committee, Houlihan Lokey performed a variety of analyses, including those described below. The summary of Houlihan Lokey’s analyses is not a complete description of the analyses underlying Houlihan Lokey’s opinion. The preparation of such an opinion is a complex process involving various quantitative and qualitative judgments and determinations with respect to the financial, comparative and other analytical methods employed and the adaptation and application of these methods to the unique facts and circumstances presented. As a consequence, neither Houlihan Lokey’s opinion nor its underlying analyses is readily susceptible to summary description. Houlihan Lokey arrived at its opinion based on the results of all analyses undertaken by it and assessed as a whole and did not draw, in isolation, conclusions from or with regard to any individual analysis, methodology or factor. While the results of each analysis were taken into account in reaching Houlihan Lokey’s overall conclusion with respect to fairness, Houlihan Lokey did not make separate or quantifiable judgments regarding individual analyses. Accordingly, Houlihan Lokey believes that its analyses and the following summary must be considered as a whole and that selecting portions of its analyses, methodologies and factors, without considering all analyses, methodologies and factors, could create a misleading or incomplete view of the processes underlying Houlihan Lokey’s analyses and opinion.

In performing its analyses, Houlihan Lokey considered general business, economic, industry and market conditions, financial and otherwise, and other matters as they existed on, and could be evaluated as of, the date of its opinion. No company, transaction or business used in Houlihan Lokey’s analyses for comparative purposes is identical to OCSL, OSI2 or the proposed Merger and an evaluation of the results of those analyses is not entirely mathematical. The estimates contained in the OCSL Projections and the OSI2 Projections and the implied exchange ratio reference ranges indicated by Houlihan Lokey’s analyses are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by the analyses. In addition, any analyses relating to the value of assets, businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold, which may depend on a variety of factors, many of which are beyond the control of OCSL and OSI2. Much of the information used in, and accordingly the results of, Houlihan Lokey’s analyses are inherently subject to substantial uncertainty.

Houlihan Lokey’s opinion was only one of many factors considered by the OCSL Special Committee and the OCSL Board in evaluating the proposed Merger. Neither Houlihan Lokey’s opinion nor its analyses were

 

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determinative of the Merger Consideration or of the views of the OCSL Special Committee or the OCSL Board with respect to the Merger or the Merger Consideration. The type and amount of consideration payable in the Merger were determined through negotiation between OCSL and OSI2, and the decision to enter into the Merger Agreement was solely that of the OCSL Special Committee and the OCSL Board.

Material Financial Analyses

The following is a summary of the material financial analyses performed by Houlihan Lokey in connection with the preparation of its opinion and reviewed with the OCSL Special Committee on September 14, 2022. The order of the analyses does not represent relative importance or weight given to those analyses by Houlihan Lokey. The analyses summarized below include information presented in tabular format. The tables alone do not constitute a complete description of the analyses. Considering the data in the tables below without considering the full narrative description of the analyses, as well as the methodologies underlying, and the assumptions, qualifications and limitations affecting, each analysis, could create a misleading or incomplete view of Houlihan Lokey’s analyses.

For purposes of its analyses, Houlihan Lokey reviewed the Adjusted June 30, 2022 NAVs of OCSL and OSI2, prepared and provided to Houlihan Lokey by Oaktree, and compared the implied exchange ratio, determined on the basis of the Adjusted June 30 NAVs, of 2.7037 shares of OCSL Common Stock for each share of OSI2 Common Stock to the relative value reference ranges that Houlihan Lokey believed were indicated by its financial analyses of OCSL and OSI2.

For purposes of its analyses, Houlihan Lokey reviewed a number of financial metrics, including:

 

   

Net Investment Income Per Share — generally, the amount of the relevant company’s income received from investment assets minus associated investment expenses for a specified period, divided by the number of shares outstanding of such company.

 

   

Last Quarter Annualized Dividends Per Share — generally, the annualized amount of the relevant company’s recurring cash distributions (excluding one-time or special dividends) for the most recent calendar quarter, divided by the number of shares outstanding of such company.

 

   

NAV Per Share — generally, the total value of all assets, less any liabilities, of the relevant company, divided by the number of shares outstanding of such company as of a specified date.

Unless the context indicates otherwise, share prices used in the selected companies analysis described below were based on the closing price of the common stock of the selected companies listed below as of September 8, 2022, and transaction values for the selected transactions analysis described below were calculated on an equity value basis based on the announced transaction equity price and other public information available at the time of the announcement. The estimates of future financial performance of OCSL relied upon for the financial analyses described below were based on the OCSL Projections, and the estimates of future financial performance of OSI2 relied upon for the financial analyses described below were based on the OSI2 Projections. The estimates of the future financial performance of the selected companies listed below were based on publicly available research analyst estimates for those companies.

Selected Companies Analysis. Houlihan Lokey reviewed certain financial data for selected companies with publicly traded equity securities that Houlihan Lokey deemed relevant. The financial data reviewed included:

 

   

Stock price as a multiple of estimated Net Investment Income Per Share for the calendar year ending December 31, 2022, or “Price-to-CY 2022E Net Investment Income”;

 

   

Stock price as a multiple of estimated Net Investment Income Per Share for the calendar year ending December 31, 2023, or “Price-to-CY 2023E Net Investment Income”;

 

   

Last Quarter Annualized Dividend Per Share divided by stock price, or “LQA Dividend Yield”; and

 

   

Stock price as a multiple of NAV Per Share as of June 30, 2022, or “Price-to-NAV.”

 

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With respect to OCSL, the selected companies and resulting high, mean, median and low financial data were:

 

   

Barings BDC, Inc.

 

   

BlackRock TCP Capital Corp.

 

   

Carlyle Secured Lending, Inc.

 

   

CION Investment Corporation

 

   

Crescent Capital BDC, Inc.

 

   

MidCap Financial Investment Corporation

 

   

PennantPark Floating Rate Capital Ltd.

 

   

Sixth Street Specialty Lending, Inc.

 

     Price /      Price /
6/30/2022
NAV Per Share
     LQA Dividend
Yield
 
     Net Investment Income Per Share  
     2022E      2023E  

High

     10.5x        10.3x        1.15x        12.6

Mean

     9.2x        8.9x        0.89x        10.2

Median

     9.3x        9.1x        0.85x        9.6

Low

     7.5x        7.3x        0.62x        8.8

With respect to OSI2, the selected companies and resulting high, mean, median and low financial data were:

 

   

BlackRock Capital Investment Corporation

 

   

Monroe Capital Corporation

 

   

Portman Ridge Finance Corporation

 

   

Stellus Capital Investment Corporation

 

   

WhiteHorse Finance, Inc.

 

     Price /
Net Investment Income Per Share
     Price /
6/30/2022
NAV Per Share
     LQA Dividend
Yield
 
     2022E      2023E  

High

     10.5x        10.3x        1.15x        12.6

Mean

     9.2x        8.9x        0.89x        10.2

Median

     9.3x        9.1x        0.85x        9.6

Low

     7.5x        7.3x        0.62x        8.8

OCSL. Taking into account the results of the selected companies analysis, Houlihan Lokey applied selected ranges of 8.50x to 10.50x to OCSL’s estimated Price-to-CY 2022E Net Investment Income Per Share, 8.00x to 10.00x to OCSL’s estimated Price-to-CY 2023E Net Investment Income Per Share, 10.50% to 8.50% to OCSL’s Last Quarter Annualized Dividend Per Share and 0.90x to 1.05x to OCSL’s NAV Per Share.

OSI2. Taking into account the results of the selected companies analysis, Houlihan Lokey applied selected ranges of 8.50x to 10.50x to OSI2’s estimated Price-to-CY 2022E Net Investment Income Per Share, 8.00x to 10.00x to OSI2’s estimated Price-to-CY 2023E Net Investment Income Per Share, 11.00% to 9.00% to OSI2’s Last Quarter Annualized Dividend Per Share and 0.90x to 1.00x to OSI2’s NAV Per Share.

The selected companies analysis indicated implied exchange ratio reference ranges of 1.8882 to 2.8813 shares of OCSL Common Stock for each share of OSI2 Common Stock based on estimated Price-to-CY 2022E

 

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Net Investment Income Per Share, 1.8824 to 2.9412 shares of OCSL Common Stock for each share of OSI2 Common Stock based on estimated Price-to-CY 2023E Net Investment Income Per Share, 2.0000 to 3.0196 shares of OCSL Common Stock for each share of OSI2 Common Stock based on Last Quarter Annualized Dividend Per Share and 2.3250 to 3.0138 shares of OCSL Common Stock for each share of OSI2 Common Stock based on NAV Per Share, in each case as compared to the implied exchange ratio of 2.7037 shares of OCSL Common Stock for each share of OSI2 Common Stock based on the Adjusted June 30, 2022 NAVs of OCSL and OSI2.

 

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Selected Transactions Analysis. Houlihan Lokey considered certain financial terms of certain transactions involving target companies that Houlihan Lokey deemed relevant. The financial data reviewed included transaction value as a multiple of NAV Per Share, and the selected transactions and resulting high, mean, median and low financial data were:

 

Date

Announced

  

Date

Effective

  

Target

  

Acquirer

December 2021    April 2022    SLR Senior Investment Corp.    SLR Investment Corp.
September 2021    February 2022    Sierra Income Corporation    Barings BDC, Inc.
December 2020    June 2021    Harvest Capital Credit Corporation    Portman Ridge Finance Corporation
November 2020    June 2021    FS KKR Capital Corp. II    FS KKR Capital Corp.
October 2020    March 2021    Oaktree Strategic Income Corporation    Oaktree Strategic Lending Corporation
August 2020    December 2020    MVC Capital, Inc.    Barings BDC, Inc.
June 2020    October 2020    Garrison Capital Inc.    Portman Ridge Finance Corporation
December 2019, Amended June 2020    October 2020    Goldman Sachs Middle Market Lending Corp.    Goldman Sachs BDC, Inc.
August 2019    January 2020    Alcentra Capital Corporation    Crescent Capital BDC, Inc.
July 2019    December 2019    OHA Investment Corporation    Portman Ridge Finance Corp.
June 2019    December 2019    FS Investment Corporation III, FS Investment Corporation IV, Corporate Capital Trust II    FS Investment Corporation II
November 2018    September 2019    Golub Capital Investment Corporation    Golub Capital BDC, Inc.
August 2018    Terminated    Medley Capital Corporation    Sierra Income Corporation
July 2018    December 2018    Corporate Capital Trust, Inc.    FS Investment Corporation
April 2018    August 2018    Triangle Capital Corporation    BSP Asset Acquisition I, LLC (Barings)
May 2017    June 2017    NF Investment Corp.    TCG BDC, Inc.
September 2016    October 2016    Credit Suisse Park View BDC, Inc.    CION Investment Corporation
June 2016    November 2016    Full Circle Capital Corporation    Great Elm Capital Corp.
May 2016    January 2017    American Capital, Ltd.    Ares Capital Corporation
April 2015    August 2015    MCG Capital Corporation    Pennant Park Floating Rate Capital Ltd.
October 2009    April 2010    Allied Capital Corporation    Ares Capital Corp.
August 2009    December 2009    Patriot Capital Corporation    Prospect Capital Corporation

 

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     Transaction Value /
NAV1
 

High

     1.12x  

Mean

     0.96x  

Median

     1.00x  

Low

     0.49x  

 

1.

“Transaction Value” includes consideration paid by OCSL and, as applicable, Oaktree.

Taking into account the results of the selected transactions analysis, Houlihan Lokey applied a selected multiple range of 0.90x to 1.00x to OCSL’s NAV Per Share and 0.90x to 1.00x to OSI2’s NAV Per Share. The selected transactions analysis indicated an implied exchange ratio reference range of 2.4412 to 3.0138 shares of OCSL Common Stock for each share of OSI2 Common Stock, as compared to the implied exchange ratio of 2.7037 shares of OCSL Common Stock for each share of OSI2 Common Stock based on the Adjusted June 30, 2022 NAVs of OCSL and OSI2.

Discounted Dividend Analysis. Houlihan Lokey performed a discounted dividend analysis of OCSL and OSI2 based on the OCSL Projections and the OSI2 Projections, respectively. With respect to OCSL, Houlihan Lokey applied a range of terminal value multiples of 0.90x to 1.00x to OCSL’s estimated 2026E NAV and discount rates ranging from 8.5% to 10.5%. With respect to OSI2, Houlihan Lokey applied a range of terminal value multiples of 0.90x to 1.00x to OSI2’s estimated 2026E NAV and discount rates ranging from 9.0% to 11.0%. The discounted dividend analysis indicated an implied exchange ratio reference range of 2.2543 to 2.9458 shares of OCSL Common Stock for each share of OSI2 Common Stock, as compared to the implied exchange ratio of 2.7037 shares of OCSL Common Stock for each share of OSI2 Common Stock based on the Adjusted June 30, 2022 NAVs of OCSL and OSI2.

Other Matters

Houlihan Lokey was engaged by the OCSL Special Committee to act as its financial advisor in connection with a possible merger, consolidation, business combination, sale or other similar transaction involving OCSL and OSI2. The OCSL Special Committee engaged Houlihan Lokey based on Houlihan Lokey’s experience and reputation. Houlihan Lokey is regularly engaged to provide financial advisory services in connection with mergers and acquisitions, financings, and financial restructurings. Pursuant to its engagement by the OCSL Special Committee, Houlihan Lokey is entitled to a transaction fee of $1,000,000, of which $50,000 became payable to Houlihan Lokey upon its engagement as the OCSL Special Committee’s financial advisor, $300,000 became payable to Houlihan Lokey upon the rendering of its opinion to the OCSL Special Committee and the remainder is contingent upon the consummation of the Merger. OCSL also agreed to reimburse Houlihan Lokey for certain expenses and to indemnify Houlihan Lokey, its affiliates and certain related parties against certain liabilities and expenses arising out of or relating to Houlihan Lokey’s engagement.

In the ordinary course of business, certain of Houlihan Lokey’s employees and affiliates, as well as investment funds in which they may have financial interests or with which they may co-invest, may acquire, hold or sell, long or short positions, or trade, in debt, equity, and other securities and financial instruments (including loans and other obligations) of, or investments in, OSI2, OCSL, or any other party that may be involved in the Merger and their respective affiliates or security holders or any currency or commodity that may be involved in the Merger.

Houlihan Lokey and/or certain of its affiliates have in the past provided and are currently providing financial advisory and/or other services to OCSL and have in the past provided and are currently providing investment banking, financial advisory and/or other financial or consulting services to OCM, or one or more security holders or affiliates of, and/or portfolio companies of investment funds affiliated or associated with, OCM (collectively, with OCM, the “OCM Group”), for which Houlihan Lokey and its affiliates have received, and may receive, compensation, including, among other things, during the prior two years (i) having provided

 

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and currently providing valuation advisory services for financial reporting purposes to OCSL, (ii) having acted as financial advisor to the special committee of the board of directors of OCSI, then managed by Oaktree, in connection with the OCSI Merger, which closed in March 2021, (iii) having acted as financial advisor to a noteholder group, of which one or more members of the Oaktree Group were members, in relation to their interests as noteholders of Frontier Communications Corporation in connection with its chapter 11 bankruptcy proceedings, which concluded in April 2021, (iv) having acted as financial advisor to a consortium of shareholders, in which OCM was a leading member along with Centerbridge Partners, LP, in connection with the restructuring and reorganization of Garrett Motion, Inc., which was completed in April 2021, and (v) having acted as financial advisor to a lender group, of which one or more members of the Oaktree Group were members, in relation to their interests as lenders to Array Canada, Inc. in connection with its refinancing transaction, which closed in September 2021, for which Houlihan Lokey received aggregate compensation of approximately $35 million. Houlihan Lokey and certain of its affiliates may provide investment banking, financial advisory and/or other financial or consulting services to OSI2, OCSL, members of the Oaktree Group, other participants in the Merger or certain of their respective affiliates or security holders in the future, for which Houlihan Lokey and its affiliates may receive compensation. In addition, Houlihan Lokey and certain of its affiliates and certain of Houlihan Lokey’s and their respective employees may have committed to invest in private equity or other investment funds managed or advised by OCM, other participants in the Merger or certain of their respective affiliates or security holders, and in portfolio companies of such funds, and may have co-invested with the members of the Oaktree Group, other participants in the Merger or certain of their respective affiliates or security holders, and may do so in the future. Furthermore, in connection with bankruptcies, restructurings, distressed situations and similar matters, Houlihan Lokey and certain of its affiliates may have in the past acted, may currently be acting and may in the future act as financial advisor to debtors, creditors, equity holders, trustees, agents and other interested parties (including, without limitation, formal and informal committees or groups of creditors) that may have included or represented and may include or represent, directly or indirectly, or may be or have been adverse to, OSI2, OCSL, members of the Oaktree Group, other participants in the Merger or certain of their respective affiliates or security holders, for which advice and services Houlihan Lokey and its affiliates have received and may receive compensation.

Opinion of the Financial Advisor to the OSI2 Special Committee

OSI2 engaged KBW to render financial advisory and investment banking services to the OSI2 Special Committee, including an opinion to the OSI2 Special Committee and, as requested by the OSI2 Special Committee, the OSI2 Board, as to the fairness, from a financial point of view, to the holders of OSI2 Common Stock of the Exchange Ratio in the proposed Merger. OSI2 selected KBW because KBW is a nationally recognized investment banking firm with substantial experience in transactions similar to the Mergers. As part of its investment banking business, KBW is regularly engaged in the valuation of business development company securities in connection with mergers and acquisitions.

As part of its engagement, representatives of KBW attended the meetings of the OSI2 Special Committee and the OSI2 Board held on September 14, 2022 at which the OSI2 Special Committee and the OSI2 Board evaluated the proposed Mergers. At the meeting of the OSI2 Special Committee, KBW reviewed the financial aspects of the proposed Mergers and rendered an opinion to the OSI2 Special Committee and the OSI2 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 Exchange Ratio in the proposed Merger was fair, from a financial point of view, to the holders of OSI2 Common Stock. The OSI2 Board, upon recommendation of the OSI2 Special Committee, approved the Merger Agreement at its meeting.

The description of the opinion set forth herein is qualified in its entirety by reference to the full text of the opinion, which is attached as Annex C to this document 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.

 

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KBW’s opinion speaks only as of the date of the opinion. The opinion was for the information of, and was directed to, the OSI2 Special Committee (in its capacity as such) and, as requested by the OSI2 Special Committee, the OSI2 Board (in its capacity as such) in connection with their respective consideration of the financial terms of the Mergers. The opinion addressed only the fairness, from a financial point of view, of the Exchange Ratio in the Merger to the holders of OSI2 Common Stock. It did not address the underlying business decision of OSI2 to engage in the Mergers or enter into the Merger Agreement or constitute a recommendation to the OSI2 Special Committee or the OSI2 Board in connection with the Mergers, and it does not constitute a recommendation to any holder of OSI2 Common Stock or any stockholder of any other entity as to how to vote or act in connection with the Mergers or any other matter, nor does it constitute a recommendation as to whether or not any such stockholder should enter into a voting, stockholders’, affiliates’ or other agreement with respect to the Mergers or exercise any dissenters’ or appraisal rights that may be available to such stockholder.

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.

At the direction of OSI2 and without independent verification, KBW relied upon and assumed for purposes of its analyses and opinion, that the OSI2 Per Share NAV and the OCSL Per Share NAV would be $18.58 and $6.87, respectively, and that, as a result thereof, the Exchange Ratio would be 2.7037x.

In connection with the opinion, KBW reviewed, analyzed and relied upon material bearing upon the financial and operating condition of OSI2 and OCSL and bearing upon the Mergers, including, among other things:

 

   

a draft of the Merger Agreement, dated September 9, 2022 (the most recent draft then made available to KBW);

 

   

the audited financial statements and Annual Reports on Form 10-K for the three fiscal years ended September 30, 2021 of OSI2;

 

   

the unaudited quarterly financial statements and Quarterly Reports on Form 10-Q for the quarters ended December 31, 2021, March 31, 2022 and June 30, 2022 of OSI2;

 

   

the audited financial statements and Annual Reports on Form 10-K for the three fiscal years ended September 30, 2021 of OCSL;

 

   

the unaudited quarterly financial statements and Quarterly Reports on Form 10-Q for the quarters ended December 31, 2021, March 31, 2022 and June 30, 2022 of OCSL;

 

   

certain other interim reports and other communications of OSI2 and OCSL to their respective stockholders; and

 

   

other financial information concerning the respective businesses and operations of OSI2 and OCSL furnished to KBW by OSI2 and OCSL or which KBW was otherwise directed to use for purposes of its analysis.

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:

 

   

the historical and current financial position and results of operations of OSI2 and OCSL;

 

   

the assets and liabilities of OSI2 and OCSL;

 

   

the nature and terms of certain other merger transactions and business combinations in the business development company industry;

 

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a comparison of certain financial information of OSI2 and certain financial and stock market information of OCSL with similar information for certain other companies the securities of which are publicly traded;

 

   

financial and operating forecasts and projections of OSI2 and OCSL that were prepared by Oaktree management (which acts as management of both OSI2 and OCSL), provided to and discussed with KBW by Oaktree management, and used and relied upon by KBW based on such discussions, at the direction of OSI2 and with the consent of the OSI2 Special Committee; and

 

   

estimates regarding certain pro forma financial effects of the Mergers on OCSL (including, without limitation, the cost savings, related expenses and operating synergies expected to result or be derived from the Mergers) that were prepared by Oaktree management, provided to and discussed with KBW by such management, and used and relied upon by KBW based on such discussions, at the direction of OSI2 and with the consent of the OSI2 Special Committee.

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 business development company industry generally. KBW also participated in discussions with Oaktree management regarding the past and current business operations, regulatory relations, financial condition and future prospects of OSI2 and OCSL and such other matters as KBW deemed relevant to its inquiry. KBW was not requested to assist, and did not assist, OSI2 with soliciting indications of interest from third parties regarding a potential transaction with OSI2.

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 provided to or discussed with KBW 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. KBW relied, with the consent of OSI2 and the OSI2 Special Committee, upon Oaktree management, as to the reasonableness and achievability of the financial and operating forecasts and projections of OSI2 and OCSL and the estimates regarding certain pro forma financial effects of the Mergers on OCSL (including, without limitation, the cost savings, related expenses and operating synergies expected to result or be derived from the Mergers), all as referred to above (and the assumptions and bases for all such information), and KBW assumed that all such information was reasonably prepared and represented the best currently available estimates and judgments of Oaktree management and that the forecasts, projections and estimates reflected in such information would be realized in the amounts and in the time periods estimated by such management.

It is understood that the foregoing financial information of OSI2 and OCSL that was provided to KBW was not prepared with the expectation of public disclosure and that all of the foregoing financial information was based on numerous variables and assumptions that are inherently uncertain (including, without limitation, factors related to general economic and competitive conditions and, in particular, the widespread disruption, extraordinary uncertainty and unusual volatility arising from global tensions and political unrest, economic uncertainty, inflation, and the COVID-19 pandemic, including the effect of evolving governmental interventions and non-interventions) and, accordingly, actual results could vary significantly from those set forth in such information. KBW assumed, based on discussions with Oaktree management, and with the consent of OSI2 and the OSI2 Special Committee, that all such information provided a reasonable basis upon which KBW could form its opinion, and KBW expressed no view as to any such information or the assumptions or bases therefor. Among other things, such information assumed that the ongoing COVID-19 pandemic could have an adverse impact, which was assumed to be limited, on OSI2 and OCSL. KBW relied on all such information without independent verification or analysis and did not in any respect assume any responsibility or liability for the accuracy or completeness thereof.

KBW also assumed that there were no material changes in the assets, liabilities, financial condition, results of operations, business or prospects of either OSI2 or OCSL since the date of the last financial statements of each

 

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such entity that were made available to KBW. 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 OSI2 or OCSL, 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 OSI2 or OCSL 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. Such estimates are inherently subject to uncertainty and should not be taken as KBW’s view of the actual value of any companies or assets.

KBW assumed, in all respects material to its analyses, the following:

 

   

the Mergers and any related transactions would be completed substantially in accordance with the terms set forth in the Merger Agreement (the final terms of which KBW assumed would not differ in any respect material to its analyses from the draft reviewed by KBW and referred to above), with no adjustments to the Exchange Ratio and with no other consideration or payments in respect of OSI2 Common Stock;

 

   

the representations and warranties of each party in the Merger Agreement and in all related documents and instruments referred to in the Merger Agreement were true and correct;

 

   

each party to the Merger Agreement and all related documents would perform all of the covenants and agreements required to be performed by such party under such documents;

 

   

there were no factors that would delay or subject to any adverse conditions, any necessary regulatory or governmental approval for the Mergers or any related transactions and all conditions to the completion of the Mergers and any related transactions would be satisfied without any waivers or modifications to the Merger Agreement or any of the related documents; and

 

   

in the course of obtaining the necessary regulatory, contractual, or other consents or approvals for the Mergers and any related transactions, no restrictions, including any divestiture requirements, termination or other payments or amendments or modifications, would be imposed that would have a material adverse effect on the future results of operations or financial condition of OSI2, OCSL or the pro forma entity, or the contemplated benefits of the Mergers, including without limitation the cost savings, related expenses and operating synergies expected to result or be derived from the Mergers.

KBW assumed that the Mergers would be consummated in a manner that complies with the applicable provisions of the Securities Act, the Exchange Act, and all other applicable federal and state statutes, rules and regulations. KBW was further advised by representatives of OSI2 that OSI2 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 OSI2, OCSL, Merger Sub, the Mergers and any related transaction, and the Merger 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, of the Exchange Ratio in the Merger to the holders of OSI2 Common Stock. KBW expressed no view or opinion as to any other terms or aspects of the Mergers or any term or aspect of any related transaction (including the termination of the OSI2 Investment Advisory Agreement and the OSI2 Administration Agreement and the fee waiver to be entered into by and between OCSL and Oaktree), including without limitation, the form or structure of the Mergers or any such related transaction, any consequences of the Mergers or any related transaction to OSI2, its stockholders, creditors or otherwise, or any terms, aspects, merits or implications of any employment, consulting, voting, support, stockholder or other agreements, arrangements or understandings contemplated or entered into in connection with the Mergers, 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 the opinion and the information made available to KBW through the date of the opinion. There has been significant volatility in the stock and other financial markets arising from global tensions, economic uncertainty and the effects of the

 

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COVID-19 pandemic, including the effect of evolving governmental interventions and non-interventions. 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 expressed no view or opinion as to any changes to the OSI2 Per Share NAV or the OCSL Per Share NAV after the date of its opinion from the respective amounts thereof that KBW was directed to assume for purposes of its analyses and opinion. KBW’s opinion did not address, and KBW expressed no view or opinion with respect to:

 

   

the underlying business decision of OSI2 to engage in the Mergers or enter into the Merger Agreement;

 

   

the relative merits of the Mergers as compared to any strategic alternatives that are, have been or may be available to or contemplated by OSI2, the OSI2 Special Committee or the OSI2 Board;

 

   

the fairness of the amount or nature of any compensation to any of OSI2’s officers, directors or employees, or any class of such persons, relative to any compensation to the holders of OSI2 Common Stock;

 

   

the effect of the Mergers or any related transaction on, or the fairness of the consideration to be received by, holders of any class of securities of OSI2 (other than the holders of OSI2 Common Stock, solely with respect to the Exchange Ratio (as described in KBW’s opinion) and not relative to the consideration to be received by holders of any other class of securities) or holders of any class of securities of OCSL or any other party to any transaction contemplated by the Merger Agreement;

 

   

any fees payable by OCSL to Oaktree for investment advisory and management services or the reduction of the base management fee resulting from the fee waiver between OCSL and Oaktree;

 

   

any adjustment (as provided in the Merger Agreement) to the Exchange Ratio assumed for purposes of KBW’s opinion (whether relating to a reverse stock split of OCSL Common Stock or otherwise);

 

   

the actual value of OCSL Common Stock to be issued in connection with the Merger;

 

   

the prices, trading range or volume at which OCSL Common Stock would trade following the public announcement or consummation of the Mergers;

 

   

any advice or opinions provided by any other advisor to any of the parties to the Mergers or any other transaction contemplated by the Merger Agreement; or

 

   

any legal, regulatory, accounting, tax or similar matters relating to OSI2, OCSL, Merger Sub, any of their respective stockholders, or relating to or arising out of or as a consequence of the Mergers or any other related transaction, including whether or not the Mergers would qualify as a tax-free reorganization for United States federal income tax purposes.

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, OSI2 and OCSL. 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 OSI2 Special Committee in making its determination to recommend the approval by the OSI2 Board of the Merger Agreement and the Mergers and by the OSI2 Board in making its determination to approve the Merger Agreement and the Mergers. Consequently, the analyses described below should not be viewed as determinative of the decision of OSI2 Special Committee or the OSI2 Board with respect to the fairness of the Exchange Ratio. The type and amount of consideration payable in the Merger were determined through negotiation between OSI2 and OCSL and the decision of OSI2 to enter into the Merger Agreement was solely that of the OSI2 Special Committee and the OSI2 Board.

 

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The following is a summary of the material financial analyses included in the presentation made by KBW and reviewed with the OSI2 Special Committee in connection with its opinion to the OSI2 Special Committee and the OSI2 Board. The summary is not a complete description of the financial analyses underlying the opinion or the presentation reviewed by KBW with the OSI2 Special Committee, 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.

Implied Transaction Value for the Mergers. KBW calculated an implied transaction value for the proposed Mergers of $18.25 per outstanding share of OSI2 common stock based on an assumed 2.7037x exchange ratio and the closing price of OCSL Common Stock on September 13, 2022. This implied transaction value for the proposed Mergers was used to calculate implied transaction multiples and those multiples were compared to the ranges of multiples found in the financial analyses described below. This implied transaction value for the proposed Mergers was also compared to the ranges of implied value per share of OSI2 Common Stock in the financial analyses described below.

Selected Companies Analysis of OSI2. Using publicly available information, KBW reviewed, among other things, the market performance of 23 selected publicly traded, externally managed business development companies with market capitalizations between $100 million and $1 billion. Growth/total return business development companies were excluded from the selected companies.

The selected companies were as follows (shown by column in descending order of market capitalization):

 

Bain Capital Specialty Finance, Inc.    PennantPark Investment Corporation
MidCap Financial Investment Corporation    Gladstone Capital Corporation
SLR Investment Corp.    WhiteHorse Finance, Inc.
BlackRock TCP Capital Corp.    Horizon Technology Finance Corporation
Carlyle Secured Lending, Inc.    Saratoga Investment Corp.
CION Investment Corporation    BlackRock Capital Investment Corporation
Crescent Capital BDC, Inc.    Stellus Capital Investment Corporation
PennantPark Floating Rate Capital Ltd.    Portman Ridge Finance Corporation
Runway Growth Finance Corp.    Monroe Capital Corporation
Gladstone Investment Corporation    Oxford Square Capital Corp.
Fidus Investment Corporation    OFS Capital Corporation
TriplePoint Venture Growth BDC Corp.   

To perform this analysis, KBW used market price information as of September 13, 2022, reported NAV per share data as of the end of the most recent completed quarterly period available (which in the case of OSI2 was June 30, 2022) and most recent completed quarterly period available annualized (“MRQ annualized”) reported net investment income per share (“NII”). KBW also used calendar years 2022 and 2023 earnings per share estimates (“EPS”) taken from consensus “street estimates” of the selected companies.

KBW’s analysis showed the following concerning the market performance of the selected companies, as well as certain corresponding implied transaction multiples for the proposed Mergers based on the implied

 

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transaction value for the proposed Mergers of $18.25 per outstanding share of OSI2 Common Stock and using historical financial information for OSI2 as of and for the three-month period (annualized) ended June 30, 2022:

 

       Selected Companies  
     Proposed
Mergers
     Low      25th
Percentile
     Average      Median      75th
Percentile
     High  

Price / NAV per share

     0.98x        0.63x        0.81x        0.88x        0.87x        0.97x        1.08x  

Price / MRQ annualized NII

     9.1x        5.6x        8.7x        9.7x        9.5x        10.4x        15.8x  

Price / CY2022 EPS

        7.5x        8.9x        9.8x        9.3x        10.6x        15.3x  

Price / CY2023 EPS

        7.3x        8.2x        9.3x        9.0x        10.0x        15.1x  

KBW then applied a range of price-to-NAV per share multiples of 0.81x to 0.97x derived from the 25th percentile and 75th percentile multiples of the selected companies to the June 30, 2022 NAV per share of OSI2, a range of price-to-MRQ annualized NII multiples of 8.69x to 10.40x derived from the 25th percentile and 75th percentile multiples of the selected companies to the MRQ annualized NII per share of OSI2 for the three-month period ended June 30, 2022, and a range of price-to-estimated calendar year 2023 EPS multiples of 8.16x to 10.00x derived from the 25th percentile and 75th percentile multiples of the selected companies to the calendar year 2023 EPS of OSI2, which was based on financial and operating forecasts and projections of OSI2 provided by Oaktree management. This analysis indicated the following ranges of the implied value per share of OSI2 Common Stock, as compared to the implied transaction value for the proposed Mergers of $18.25 per outstanding share of OSI2 Common Stock:

 

     Implied Value Per Share Ranges
of OSI2 Common Stock
 

Based on NAV per share of OSI2 as of June 30, 2022

   $ 15.18 to $18.16  

Based on MRQ annualized NII per share of OSI2 for the 3-month period ended June 30, 2022

   $ 17.36 to $20.78  

Based on CY2023 EPS estimate of OSI2 provided by Oaktree management

   $ 13.92 to $17.07  

No company used as a comparison in the above selected companies analysis is identical to OSI2. 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 Companies Analysis of OCSL. Using publicly available information, KBW compared, among other things, the market performance of OCSL to 14 selected publicly traded, externally managed business development companies with market capitalizations above $750 million.

The selected companies were as follows (shown by column in descending order of market capitalization):

 

Ares Capital Corporation    Sixth Street Specialty Lending, Inc.
FS KKR Capital Corp.    New Mountain Finance Corporation
Owl Rock Capital Corporation    Barings BDC, Inc.
Blackstone Secured Lending Fund    Bain Capital Specialty Finance, Inc.
Prospect Capital Corporation    MidCap Financial Investment Corporation
Golub Capital BDC, Inc.    SLR Investment Corp.
Goldman Sachs BDC, Inc.    BlackRock TCP Capital Corp.

To perform this analysis, KBW used market price information as of September 13, 2022 and reported NAV per share data as of the end of the most recent completed quarterly period available (which in the case of OCSL was June 30, 2022) and reported MRQ annualized NII. KBW also used calendar years 2022 and 2023 EPS estimates taken from consensus “street estimates” of OCSL and the selected companies.

 

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KBW’s analysis showed the following concerning the market performance of OCSL and the selected companies:

 

            Selected Companies  
     OCSL      Low      25th
Percentile
     Average      Median      75th
Percentile
     High  

Price / NAV per share

     0.98x        0.71x        0.82x        0.91x        0.89x        0.96x        1.14x  

Price / MRQ annualized NII

     7.7x        7.2x        8.7x        9.4x        9.5x        10.1x        11.7x  

Price / CY2022 EPS

     9.4x        7.1x        9.1x        9.5x        9.6x        10.0x        11.3x  

Price / CY2023 EPS

     9.1x        7.4x        8.6x        9.0x        9.0x        9.4x        10.7x  

No company used as a comparison in the above selected companies analysis is identical to OCSL. 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 20 selected acquisitions of U.S. business development companies announced since the beginning of 2009. Reverse mergers and distressed deals were excluded from the selected transactions.

The selected transactions were as follows:

 

Acquirer

  

Acquired Company

SLR Investment Corp.    SLR Senior Investment Corp.
Barings BDC Inc.    Sierra Income Corporation
Portman Ridge Finance Corporation    Harvest Capital Credit Corporation
FS KKR Capital Corp.    FS KKR Capital Corp. II
Oaktree Specialty Lending Corporation    Oaktree Strategic Income Corporation
Barings BDC, Inc.    MVC Capital, Inc.
Portman Ridge Finance Corporation    Garrison Capital Inc.
Goldman Sachs BDC, Inc.    Goldman Sachs Middle Market Lending Corporation
Crescent Capital BDC, Inc.    Alcentra Capital Corporation
Portman Ridge Finance Corporation    OHA Investment Corporation
Golub Capital BDC, Inc.    Golub Capital Investment Corporation
FS Investment Corporation    Corporate Capital Trust, Inc.
Benefit Street Partners LLC; Barings LLC    Triangle Capital Corporation
TCG BDC, Inc.    NF Investment Corporation
CĪON Investment Corporation    Credit Suisse Park View BDC, Inc.
MAST Capital Management LLC; Great Elm Capital Group Inc.    Full Circle Capital Corporation
Ares Capital Corporation    American Capital, Ltd.
PennantPark Floating Rate Capital Ltd.    MCG Capital Corporation
Ares Capital Corporation    Allied Capital Corporation
Prospect Capital Corporation    Patriot Capital Funding, Inc.

For each selected 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):

 

   

Price to NAV per share of the acquired company; and

 

   

Price to latest 12 months (“LTM”) NII per share of the acquired company.

 

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KBW also reviewed the price per common share paid for the acquired company for the 14 selected transactions involving publicly traded acquired companies as a premium/(discount) to the closing price of the acquired company one day and 30 days prior to the announcement of the respective transaction (expressed as percentages and referred to as the one day market premium and the 30 day market premium). The resulting transaction multiples for the selected transactions were compared with the corresponding transaction multiples for the proposed Mergers based on the implied transaction value for the proposed Mergers of $18.25 per outstanding share of OSI2 Common Stock and using historical financial information for OSI2 as of and for the LTM period ended June 30, 2022.

All Selected Transactions. KBW’s analysis showed the following concerning the proposed Mergers and the selected transactions (excluding the impact of the price-to-LTM net investment income per share of one of the selected transactions, which multiple was considered to be not meaningful because it was negative):

 

            Selected Transactions  
     Proposed
Mergers
     25th
Percentile
    Average     Median     75th
Percentile
 

Price / NAV Per Share

     0.98x        0.77x       0.87x       0.90x       1.00x  

Price / LTM NII Per Share

     9.84x        8.96x       12.73x       10.46x       12.91x  

One Day Market Premium

        4.2     26.0     24.4     38.5

30 Day Market Premium

        4.2     39.0     22.5     34.7

KBW applied a range of price-to-NAV per share multiples of 0.77x to 1.00x derived from the 25th percentile and 75th percentile multiples of the selected transactions to the June 30, 2022 NAV per share of OSI2 and a range of price-to-LTM NII multiples of 8.96x to 12.91x derived from the 25th percentile and 75th percentile multiples of the selected transactions to the LTM NII per share of OSI2 for the 12-month period ended June 30, 2022. This analysis indicated the following ranges of the implied value per share of OSI2 Common Stock, as compared to the implied transaction value for the proposed Mergers of $18.25 per outstanding share of OSI2 Common Stock:

 

     Implied Value Per Share Ranges
of OSI2 Common Stock
 

Based on June 30, 2022 NAV per share of OSI2

   $ 14.45 to $18.69  

Based on LTM NII per share of OSI2 for the 12-month- period ended June 30, 2022

   $ 16.61 to $23.95  

Selected Transactions Involving Affiliates. KBW’s analysis also showed the following concerning the proposed Mergers and the seven selected transactions involving affiliates (SLR Investment Corporation/SLR Senior Investment Corporation, FS KKR Capital Corp./FS KKR Capital Corp. II, Oaktree Specialty Lending Corporation/Oaktree Strategic Income Corporation, Goldman Sachs BDC, Inc./Goldman Sachs Middle Market Lending Corporation, Golub Capital BDC, Inc./Golub Capital Investment Corporation, FS Investment Corporation/Corporate Capital Trust, Inc. and TCG BDC, Inc./NF Investment Corp.), of which four involved publicly traded acquired companies:

 

            Selected Transactions Involving Affiliates  
     Proposed
Mergers
     25th
Percentile
    Average     Median     75th
Percentile
 

Price / NAV Per Share

     0.98x        0.80x       0.93x       0.95x       1.04x  

Price / LTM NII Per Share

     9.84x        10.44x       11.47x       10.59x       12.06x  

One Day Market Premium

        (2.0 )%      2.1     0.1     4.2

30 Day Market Premium

        (5.1 )%      1.5     (0.7 )%      5.9

KBW applied a range of price-to-NAV per share multiples of 0.80x to 1.04x derived from the 25th percentile and 75th percentile multiples of the selected transactions involving affiliates to the June 30, 2022 NAV per share of OSI2 and a range of price-to-LTM NII multiples of 10.44x to 12.06x derived from the 25th percentile and 75th

 

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percentile multiples of the selected transactions involving affiliates to the LTM NII per share of OSI2 for the 12-month period ended June 30, 2022. This analysis indicated the following ranges of the implied value per share of OSI2 Common Stock, as compared to the implied transaction value for the proposed Mergers of $18.25 per outstanding share of OSI2 Common Stock:

 

     Implied Value Per Share Ranges
of OSI2 Common Stock
 

Based on June 30, 2022 NAV per share of OSI2

   $ 15.04 to $19.36  

Based on LTM NII per share of OSI2 for the 12-month period ended June 30, 2022

   $ 19.37 to $22.36  

No company or transaction used as a comparison in the above selected transaction analysis is identical to OSI2 or the proposed Mergers. 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.

Dividend Discount Analysis of OSI2. KBW performed a dividend discount analysis of OSI2 on a standalone basis to estimate ranges for the implied equity value of OSI2. In this analysis, KBW used financial and operating forecasts and projections relating to net investment income, dividends and net assets of OSI2 that were provided by Oaktree management. KBW assumed discount rates ranging from 8.5% to 10.5%. Ranges of values were derived by adding (i) the present value of the estimated future dividends of OSI2 over the period from the assumed closing date of the proposed Mergers through December 31, 2026 and (ii) the present value of OSI2’s implied terminal value at the end of such period. KBW derived implied terminal values using two methodologies, one based on December 31, 2026 estimated NAV per share multiples and the other based on calendar year 2026 estimated dividend yields. Using implied terminal values for OSI2 calculated by applying a terminal multiple range of 0.85x to 1.05x to OSI2’s estimated NAV per share as of December 31, 2026, this analysis resulted in a range of implied values per share of OSI2 Common Stock of approximately $16.37 to $20.04 per share, as compared to the implied transaction value for the proposed Mergers of $18.25 per outstanding share of OSI2 Common Stock. Using implied terminal values for OSI2 calculated by applying a terminal dividend yield range of 9.0% to 11.0% to OSI2 calendar year 2026 estimated dividends, this analysis resulted in a range of implied values per share of OSI2 Common Stock of approximately $16.91 to $20.59, as compared to the implied transaction value for the proposed Mergers of $18.25 per outstanding share of OSI2 Common Stock.

The dividend discount analysis is a widely used valuation methodology, but the results of such methodology are highly dependent on the assumptions that must be made, including NAV per share and dividend assumptions, terminal values and discount rates. The analysis did not purport to be indicative of the actual values or expected values of OSI2.

Dividend Discount Analysis of OCSL. KBW performed a dividend discount analysis of OCSL on a standalone basis to estimate ranges for the implied equity value of OCSL. In this analysis, KBW used financial and operating forecasts and projections relating to net investment income, dividends and net assets of OCSL that were provided by Oaktree management. KBW assumed discount rates ranging from 7.5% to 9.5%. Ranges of values were derived by adding (i) the present value of the estimated future dividends of OCSL over the period from the assumed closing date of the proposed Mergers through December 31, 2026 and (ii) the present value of OCSL’s implied terminal value at the end of such period. KBW derived implied terminal values using two methodologies, one based on December 31, 2026 estimated NAV per share multiples and the other based on calendar year 2026 estimated dividend yields. Using implied terminal values for OCSL calculated by applying a terminal multiple range of 0.85x to 1.05x to OCSL’s estimated NAV per share as of December 31, 2026, this analysis resulted in a range of implied values per share of OCSL Common Stock of approximately $6.45 to $7.88 per share, as compared to the closing price of OCSL Common Stock on September 13, 2022 of $6.75. Using implied terminal values for OCSL calculated by applying a terminal dividend yield range of 8.5% to 10.5% to

 

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OCSL calendar year 2026 estimated dividends, this analysis resulted in a range of implied values per share of OCSL Common Stock of approximately $7.15 to $8.80, as compared to the closing price of OCSL Common Stock on September 13, 2022 of $6.75.

The dividend discount analysis is a widely used valuation methodology, but the results of such methodology are highly dependent on the assumptions that must be made, including NAV per share and dividend assumptions, terminal values and discount rates. The analysis did not purport to be indicative of the actual values or expected values of OCSL or the pro forma combined company.

Relative Contribution Analysis. KBW analyzed the relative standalone contribution of OCSL and OSI2 to various pro forma balance sheet and income statement items of the combined entity. This analysis did not include purchase accounting adjustments. To perform this analysis, KBW used (a) historical balance sheet and income statement information for OCSL and OSI2 as of and for the 12-month period ended June 30, 2022, and (b) the closing prices of OCSL Common Stock on September 13, 2022. The results of KBW’s analysis are set forth in the following table, which also compares the results of KBW’s analysis with the implied pro forma ownership percentages of OCSL and OSI2 Stockholders in the combined company based on the assumed exchange ratio of 2.7037x:

 

     OCSL
as a % of
Total
    OSI2
as a % of
Total
 

Pro Forma Ownership

    

Based on Assumed Exchange Ratio of 2.7037x

     79.6     20.4

Balance Sheet

    

Total Assets

     81.7     18.3

Investments

     81.9     18.1

Total Debt

     83.8     16.2

Net Asset Value

     79.5     20.5

Illustrative Closing Net Asset Value(1)

     79.6     20.4

Income Statement

    

LTM Net Investment Income

     81.9     18.1

 

(1)

Adjusted for transaction-related costs

Potential Net Investment Income Per Share Accretion. Using (i) financial and operating forecasts and projections of OCSL and OSI2 provided by Oaktree management, and (ii) pro forma assumptions (including, without limitation, the cost savings, related expenses and operating synergies expected to result from the Mergers) provided by Oaktree management, KBW analyzed the potential financial impact of the Mergers on certain projected financial results of OCSL. This analysis indicated that, based on OCSL’s projected pro forma financial results attributable to a share of OSI2 Common Stock using an assumed 2.7037x exchange ratio, the proposed Mergers could be accretive relative to OSI2’s estimated net investment income per share in each of the twelve month periods ending March 31, 2024, March 31, 2025 and March 31, 2026. For all of the above analysis, the actual results achieved by OCSL following the proposed Mergers may vary from the projected results, and the variations may be material.

Miscellaneous. KBW acted as financial advisor to the OSI2 Special Committee in connection with the proposed Mergers 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 business development company 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, OSI2 and OCSL. In addition, as market makers 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 OCSL for its and their own respective

 

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accounts and for the accounts of its and their respective customers and clients. KBW employees may also from time to time maintain individual positions in OCSL Common Stock. As the OSI2 Special Committee was previously informed by KBW, such positions currently include an individual position in shares of OCSL Common Stock held by a senior member of the KBW advisory team providing services to the OSI2 Special Committee in connection with the proposed Mergers. A commercial bank affiliate of KBW was also, as of the date of KBW’s opinion, a lender to OCSL under a revolving credit facility.

Pursuant to the KBW engagement agreement, OSI2 agreed to pay KBW cash fees of $1,000,000 in the aggregate, $250,000 of which became payable with the rendering of KBW’s opinion and $750,000 of which is contingent upon the consummation of the Mergers. OSI2 also agreed to reimburse KBW for reasonable 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 the present engagement, during the two years preceding the date of KBW’s opinion, KBW did not provide investment banking or financial advisory services to OSI2. During the two years preceding the date of KBW’s opinion, KBW provided investment banking and financial advisory services to OCSL and received compensation for such services. KBW acted as (i) a sales agent for the ATM program of OCSL, (ii) financial advisor to the special committee of the OCSL Board in connection with the OCSI Merger, and (iii) co-manager for OCSL’s May 2021 notes offering. During the two years preceding the date of KBW’s opinion, KBW did not provide investment banking or financial advisory services to Oaktree. KBW may in the future provide investment banking and financial advisory services to OSI2, OCSL or Oaktree and receive compensation for such services.

Regulatory Approvals Required for the Mergers

The obligations of OCSL and OSI2 to complete the Mergers are subject to the satisfaction or waiver of certain conditions, including the condition that all regulatory approvals required by law to consummate the transactions contemplated by the Merger Agreement, including the Mergers, have been obtained and remain in full force and effect, and all statutory waiting periods required by applicable law in respect thereof have expired (including expiration of the applicable waiting period under the HSR Act). OCSL and OSI2 have agreed to cooperate with each other and use their reasonable best efforts to obtain all licenses, permits, variances, exemptions, approvals, qualifications or orders from any governmental or regulatory authority necessary to consummate the Mergers.

There can be no assurance that such regulatory approvals will be obtained, that such approvals will be received on a timely basis or that such approvals will not impose conditions or requirements that, individually or in the aggregate, would or could reasonably be expected to have a material adverse effect on the financial condition, results of operations, assets or business of the combined company following completion of the Mergers.

Third Party Consents Required for the Mergers

Under the Merger Agreement, OCSL and OSI2 have agreed to cooperate with each other and use reasonable best efforts to take, or cause to be taken, in good faith, all actions, and to do, or cause to be done, all things necessary, including to promptly prepare and file all necessary documentation, to effect all applications, notices, petitions and filings (including any required applications, notices or other filings under the HSR Act), to obtain as promptly as practicable all permits of all governmental entities and all permits, consents, approvals, confirmations and authorizations of all third parties, in each case, that are necessary or advisable, to consummate the transactions contemplated by the Merger Agreement (including the Mergers) in the most expeditious manner practicable, and to comply with the terms and conditions of all such permits, consents, approvals and authorizations of all such third parties and governmental entities. [As of the date of this joint proxy statement/prospectus, OCSL and OSI2 believe that, subject to the satisfaction or waiver of certain conditions, they have

 

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obtained all necessary third party consents (including consent under the HSR Act) other than stockholder approval.] There can be no assurance that any permits, consents, approvals, confirmations or authorizations will be obtained or that such permits, consents, approvals, confirmations or authorizations will not impose conditions or requirements that, individually or in the aggregate, would or could reasonably be expected to have a material adverse effect on the financial condition, results of operations, assets or business of the combined company following the Mergers.

 

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DESCRIPTION OF THE MERGER AGREEMENT

The following summary, which includes the material terms of the Merger Agreement, is qualified by reference to the complete text of the Merger Agreement, which is attached as Annex A to this joint proxy statement/prospectus. This summary does not purport to be complete and may not contain all of the information about the Merger Agreement that is important to you. OCSL and OSI2 encourage you to read the Merger Agreement carefully and in its entirety.

Structure of the Mergers

Pursuant to the terms of the Merger Agreement, at the Effective Time, Merger Sub will be merged with and into OSI2. OSI2 will be the surviving company and will continue its existence as a corporation under the laws of the State of Delaware. As of the Effective Time, the separate corporate existence of Merger Sub will cease. Immediately after the occurrence of the Effective Time, in the Second Merger, the surviving company will merge with and into OCSL in accordance with the Delaware General Corporation Law (the “DGCL”) with OCSL continuing as the surviving company. As of the Second Effective Time, the separate corporate existence of OSI2 will cease.

Closing; Completion of the Proposed Mergers

It is currently expected that the Merger will be completed promptly following receipt of the required stockholder approvals at the OCSL Annual Meeting and the OSI2 Special Meeting and satisfaction or waiver of the other closing conditions set forth in the Merger Agreement. The Second Merger will occur immediately after the Merger is completed.

The Mergers will occur on the date that is one (1) business day after the satisfaction or waiver of the latest to occur of the conditions to closing set forth in the Merger Agreement or at another time as may be agreed to in writing by the parties to the Merger Agreement. Assuming approval of the proposals presented at the OCSL Annual Meeting and the OSI2 Special Meeting and the other conditions to closing the Mergers are satisfied or waived, OCSL and OSI2 expect to complete the Mergers by March 31, 2023.

Merger Consideration

At the Effective Time, each share of OSI2 Common Stock issued and outstanding immediately prior to the Effective Time (other than Cancelled Shares) will be converted into the right to receive a number of shares of OCSL Common Stock equal to the Exchange Ratio (as defined below), plus any cash (without interest) in lieu of fractional shares.

As of the Determination Date, each of OSI2 and OCSL will deliver to the other a calculation of its NAV as of such date, in each case based on the same assumptions and methodologies, and applying the same categories of adjustments to net asset value (except as may be mutually agreed by the parties), historically used in preparing the calculation of the net asset value per share by the applicable party. Based on such calculations, the parties will calculate the OSI2 Per Share NAV and the OCSL Per Share NAV. The “Exchange Ratio” will be equal to the quotient (rounded to four decimal places) of (i) the OSI2 Per Share NAV divided by (ii) the OCSL Per Share NAV. Oaktree will certify in writing to each of OCSL and OSI2 the calculation of the Closing OCSL Net Asset Value or Closing OSI2 Net Asset Value, as the case may be.

OSI2 and OCSL will update and redeliver the Closing OSI2 Net Asset Value or the Closing OCSL Net Asset Value, respectively, in the event of a material change to such calculation between the Determination Date and the closing of the Mergers (including any dividend declared after the Determination Date but prior to the closing of the Mergers) and if needed to ensure that the calculation is determined within 48 hours (excluding Sundays and holidays) prior to the Effective Time.

 

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Each of OSI2 and OCSL will use the portfolio valuation methods approved by the OSI2 Board or the OCSL Board, as applicable, for valuing the securities and other assets of OSI2 or OCSL, as applicable, as of September 8, 2022, unless otherwise agreed by each of the OCSL Board and the OSI2 Board.

The Exchange Ratio will be appropriately adjusted (to the extent not already taken into account in determining the Closing OSI2 Net Asset Value and/or the Closing OCSL Net Asset Value, as applicable) if, between the Determination Date and the Effective Time, the respective issued and outstanding shares of OCSL Common Stock or OSI2 Common Stock have been increased or decreased or changed into or exchanged for a different number or kind of shares or securities, in each case, as a result of any reclassification, recapitalization, stock split, reverse stock split, split-up, merger, issuer tender or exchange offer, combination or exchange of shares or similar transaction, or if a stock dividend or dividend payable in any other securities or similar distribution is declared with a record date within such period (as permitted by the Merger Agreement), in each case to provide OCSL Stockholders and OSI2 Stockholders the same economic effect as contemplated by the Merger Agreement prior to such event, and such items, so adjusted will, from and after the date of such event, be the Exchange Ratio.

No fractional shares of OCSL Common Stock will be issued upon the conversion of OSI2 Common Stock into the right to receive shares of OCSL Common Stock. Each holder of shares of OSI2 Common Stock converted pursuant to the Merger who would otherwise have been entitled to receive a fraction of a share of OCSL Common Stock will receive, in lieu thereof, cash (without interest) in an amount equal to the product of (i) such fractional part of a share of OCSL Common Stock multiplied by (ii) the volume-weighted average trading price of a share of OCSL Common Stock on Nasdaq for the five (5) consecutive trading days ending on the third (3rd) trading day preceding the Closing Date.

Subject to the effect of applicable abandoned property, escheat or similar laws, following the Effective Time, the record holder of shares (other than Cancelled Shares) of OSI2 Common Stock at the Effective Time will be entitled to receive, without interest, the amount of dividends or other distributions which theretofore had become payable with respect to the whole shares of OCSL Common Stock which the shares of OSI2 Common Stock have been converted into the right to receive.

Conversion of Shares; Exchange of Shares

At the Effective Time, each share of OSI2 Common Stock issued and outstanding immediately prior to the Effective Time (other than Cancelled Shares) will be converted into the right to receive the Merger Consideration. Each such share of OSI2 Common Stock will no longer be outstanding and will be automatically cancelled and cease to exist as of the Effective Time, with the holders of such shares ceasing to have any rights with respect to any OSI2 Common Stock other than the right to receive the Merger Consideration and any dividends or other distributions payable in accordance with the terms of the Merger Agreement.

After the Effective Time, the stock transfer books of OSI2 will be closed, and there will be no further transfers on the stock transfer books of OSI2 of the shares of OSI2 Common Stock that were issued and outstanding immediately prior to the Effective Time.

Withholding

OCSL or the exchange agent, as applicable, will be entitled to deduct and withhold from any amounts payable to any OSI2 Stockholder such amounts as it determines in good faith are required to be deducted and withheld with respect to the making of such payment under applicable tax laws. If any amounts are withheld and paid over to the appropriate governmental entity, such withheld amounts will be treated as having been paid to the OSI2 Stockholders from whom they were withheld.

 

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Representations and Warranties

The Merger Agreement contains representations and warranties of OCSL, Merger Sub, OSI2 and Oaktree relating to their respective businesses. With the exception of certain representations that must be true and correct in all or virtually all respects, or in all material respects, no representation or warranty will be deemed untrue, and neither party will be deemed to have breached a representation or warranty as a consequence of the existence of any fact, circumstance or event unless such fact, circumstance or event, individually or when taken together with all other facts, circumstances and events inconsistent with any representation made by such party (without considering “materiality” or “material adverse effect” qualifications), has had or is reasonably expected to have a material adverse effect (as defined below) with respect to the party giving the representation or warranty. The representations and warranties in the Merger Agreement will not survive after the Effective Time.

The Merger Agreement contains representations and warranties by each of OCSL and Merger Sub, on the one hand, and OSI2, on the other hand, subject to specified exceptions and qualifications, relating to, among other things:

 

   

corporate organization and qualification, including with respect to consolidated subsidiaries;

 

   

capitalization;

 

   

power and authority to execute, deliver and perform obligations under the Merger Agreement and the absence of violations of (1) organizational documents, (2) laws or orders or (3) permits, contracts or other obligations;

 

   

required government filings and consents;

 

   

SEC reports;

 

   

financial statements, including the status of internal controls and disclosure controls and procedures;

 

   

broker’s fees;

 

   

absence of certain changes and actions since September 30, 2021;

 

   

compliance with applicable laws, maintenance of appropriate permits and no disqualifications of affiliated persons;

 

   

the accuracy and completeness of information supplied for inclusion in this joint proxy statement/prospectus and the registration statement of which this joint proxy statement/prospectus forms a part;

 

   

tax matters;

 

   

absence of certain litigation, orders or investigations;

 

   

employment and labor matters, including with respect to any employee benefit plans;

 

   

material contracts and certain other types of contracts;

 

   

insurance coverage;

 

   

intellectual property matters;

 

   

no real property ownership or leases;

 

   

investment assets;

 

   

state takeover laws;

 

   

solely in the case of OSI2, absence of appraisal rights;

 

   

valuation of certain investment assets; and

 

   

opinion of its financial advisor.

 

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The Merger Agreement contains representations and warranties by Oaktree, subject to specified exceptions and qualifications, relating to:

 

   

organization and qualification;

 

   

power and authority to execute, deliver and perform obligations under the Merger Agreement and the absence of violations of (1) organizational documents, (2) laws or orders or (3) permits, contracts or other obligations;

 

   

compliance with applicable laws and maintenance of appropriate permits;

 

   

absence of certain litigation, orders or investigations;

 

   

the valuation of investment assets owned by OCSL and OSI2;

 

   

the accuracy of information supplied or to be supplied by Oaktree for inclusion in this joint proxy statement/prospectus and the registration statement of which this joint proxy statement/prospectus forms a part;

 

   

the participation in the Mergers by OCSL and OSI2 and the impact of the Mergers on the existing OCSL Stockholders and OSI2 Stockholders;

 

   

the financial resources of Oaktree;

 

   

the representations and warranties made by OCSL and OSI2 in the Merger Agreement; and

 

   

the forbearances applicable to OCSL and OSI2 set forth in the Merger Agreement.

These representations and warranties were made as of specific dates, may be subject to important qualifications and limitations agreed to by the parties in connection with negotiating the terms of the Merger Agreement and may have been included in the Merger Agreement for the purpose of allocating risk between the parties rather than to establish matters as facts. The Merger Agreement is described in, and included as Annex A to, this document only to provide you with information regarding its terms and conditions and not to provide any other factual information regarding the parties or their respective businesses. Accordingly, the representations and warranties and other provisions of the Merger Agreement should not be read alone, but instead should be read only in conjunction with the information provided elsewhere in this document.

For purposes of the Merger Agreement, “material adverse effect” with respect to OCSL, OSI2 or Oaktree, as applicable, means any event, development, change, effect or occurrence that is, or would reasonably be expected to be, individually or in the aggregate, materially adverse to (1) the business, operations, condition (financial or otherwise) or results of operations of such party and its consolidated subsidiaries, taken as a whole, or (2) the ability of such party to timely perform its material obligations under the Merger Agreement or consummate the Merger and the other transactions contemplated thereby. None of the following events, developments, changes, effects or occurrences will constitute or be taken into account in determining whether a material adverse effect has occurred or is reasonably expected to occur with respect to clause (1) in the immediately preceding sentence:

 

   

changes in general economic, social or political conditions or financial markets in general, including the commencement or escalation of a war, armed hostilities or other material international or national calamity or acts of terrorism or earthquakes, hurricanes, other natural disasters or acts of God or pandemics, including COVID-19 (including the impact on economies generally and the results of any actions taken by governmental entities in response thereto);

 

   

general changes or developments in the industries in which such party and its consolidated subsidiaries operate, including general changes in law across such industries;

 

   

the announcement of the Merger Agreement or the transactions contemplated thereby or the identities of the parties to the Merger Agreement; and

 

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any failure to meet internal or published projections or forecasts for any period, or, with respect to OCSL, any decline in the price of shares of OCSL Common Stock on Nasdaq (provided that the underlying cause of such failure or decline will be considered in determining whether there is a material adverse effect).

The events, developments, changes, effects and occurrences set forth in the first two bullets in the immediately preceding paragraph will otherwise be taken into account in determining whether a material adverse effect has occurred to the extent such events, developments, changes, effects or occurrences have a materially disproportionate adverse impact on such party and its consolidated subsidiaries, taken as whole, relative to other participants of similar sizes engaged in the same industries in which such party conducts its businesses.

Conduct of Business Pending Completion of the Mergers

Each of OCSL and OSI2 has undertaken covenants that place restrictions on it and certain of its subsidiaries until the completion of the Mergers. In general, each of OCSL and OSI2 has agreed that before the completion of the Mergers, except as may be required by law or a governmental entity, as required or expressly permitted by the Merger Agreement or with the prior written consent of the other parties to the Merger Agreement (including the consent of the OCSL Special Committee, in the case of OCSL, and the consent of the OSI2 Special Committee, in the case of OSI2), which prior written consent will not be unreasonably delayed, conditioned or withheld, it will, and will cause each of its consolidated subsidiaries to, conduct its business in the ordinary course of business and consistent with past practice and each of OSI2’s and OCSL’s investment objectives and policies as publicly disclosed, respectively, and use reasonable best efforts to maintain and preserve intact its business organization and existing business relationships.

In addition, before the completion of the Mergers, each of OCSL and OSI2 has agreed that, except as may be required by law or as expressly contemplated by the Merger Agreement or as set forth in its disclosure schedules, it will not, and will not permit any of its consolidated subsidiaries to, directly or indirectly, without the prior written consent of the OSI2 Special Committee or the OCSL Special Committee, as applicable (which prior written consent will not be unreasonably delayed, conditioned or withheld):

 

   

other than, in the case of OCSL, pursuant to its dividend reinvestment plan, issue, deliver, sell or grant, or encumber or pledge, or authorize the creation of (i) any shares of its capital stock, (ii) any voting securities or (iii) any securities convertible into or exercisable or exchangeable for, or any other rights to acquire, any such shares or other securities;

 

   

make, authorize, declare, pay or set aside any dividend in respect of, or declare or make any distribution on, any shares of its capital stock, except for (A) the authorization, announcement and payment of regular cash distributions payable on a quarterly basis, (B) the authorization and payment of any dividend or distribution necessary for it to maintain its qualification as a RIC or avoid the imposition of any income or excise tax, (C) dividends payable by any of its direct or indirect wholly-owned consolidated subsidiaries to OCSL or OSI2, as applicable, or another direct or indirect wholly-owned consolidated subsidiary or (D), in the case of OSI2, the authorization and payment of any dividend or distribution necessary for such party to maintain its qualification as a RIC or to avoid the imposition of any income or excise tax, as reasonably determined by such party; (ii) adjust, split, combine, reclassify or take similar action with respect to any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock; or (iii) purchase, redeem or otherwise acquire, any shares of its capital stock or any rights, warrants or options to acquire, or securities convertible into, such capital stock;

 

   

sell, transfer, lease, mortgage, encumber or otherwise dispose of any of its assets or properties, except for (i) sales, transfers, leases, mortgages, encumbrances or other dispositions in the ordinary course of business, or (ii) encumbrances required to secure permitted indebtedness of it or any of its consolidated subsidiaries;

 

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acquire or agree to acquire all or any portion of the assets, business or properties of any other person or entity, whether by merger, consolidation, purchase or otherwise or make any other investments, except in a transaction conducted in the ordinary course of business;

 

   

amend any of its governing documents or similar governing documents of any of its consolidated subsidiaries;

 

   

implement or adopt any material change in its tax or financial accounting principles, practices or methods, other than as required by applicable law, GAAP, the SEC or applicable regulatory requirements;

 

   

take any action or knowingly fail to take any action that would, or would reasonably be expected to (i) materially delay or materially impede the ability of the parties to consummate the transactions contemplated by the Merger Agreement or (ii) prevent the Mergers from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code, provided, however, that the foregoing will not preclude OSI2 from declaring or paying any tax dividend on or before the Closing Date;

 

   

incur any indebtedness for borrowed money or guarantee any indebtedness of another person or entity, except for draw-downs with respect to any previously disclosed financing arrangements and obligations to fund commitments to portfolio companies entered into in the ordinary course of business and other permitted indebtedness;

 

   

make or agree to make any new capital expenditure, except for obligations to fund commitments to portfolio companies entered into in the ordinary course of business;

 

   

file or amend any material tax return other than in the ordinary course of business and consistent with past practice; make, change or revoke any tax election; or settle or compromise any material tax liability or refund;

 

   

take any action, or knowingly fail to take any action, which action or failure to act is reasonably likely to cause it to fail to qualify or not be subject to tax as a RIC;

 

   

enter into any new line of business (except for any portfolio companies in which it or any of its subsidiaries has made a debt or equity investment that is, would or should be reflected in the schedule of investments included in its quarterly or annual periodic reports that are filed with the SEC);

 

   

other than in the ordinary course of business consistent with past practice, enter into any material contract;

 

   

other than in the ordinary course of business, terminate, cancel, renew or agree to any material amendment of, change in or waiver under any material contract (other than material contracts related to permitted indebtedness);

 

   

settle any proceeding against it, except for proceedings that (i) are settled in the ordinary course of business consistent with past practice and its investment objectives and policies as publicly disclosed, in an amount not in excess of $250,000 in the aggregate (after reduction by any insurance proceeds actually received), (ii) would not impose any material restriction on the conduct of business of it or any of its consolidated subsidiaries or, after the Effective Time, OCSL, in the case of OSI2, the surviving company or any of their consolidated subsidiaries, and (iii) would not admit liability, guilt or fault;

 

   

except as expressly contemplated by the Merger Agreement, merge or consolidate OCSL or OSI2, as applicable, or any of its consolidated subsidiaries with any person or entity or enter into any other similar extraordinary corporate transaction with any person or entity, or adopt, recommend, propose or announce an intention to adopt a plan of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization of it or any of its consolidated subsidiaries; or

 

   

agree to take, make any commitment to take, or adopt any resolutions of its board of directors authorizing, any of the foregoing actions.

 

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Additional Agreements

Further Assurances; Regulatory Matters

The Merger Agreement contains covenants relating to the preparation of this document, the holding of the OCSL Annual Meeting and the OSI2 Special Meeting and obtaining certain regulatory and third party consents. The Merger Agreement obligates the parties to cooperate with each other and use reasonable best efforts to take, or cause to be taken, in good faith, all actions, and to do, or cause to be done, all things necessary, including to promptly prepare and file all necessary documentation, to effect all applications, notices, petitions and filings, to obtain as promptly as practicable all permits of all governmental entities and all permits, consents, approvals, confirmations and authorizations of all third parties that are necessary or advisable to consummate the transactions contemplated by the Merger Agreement in the most expeditious manner practicable, and to comply with the terms and conditions of all such permits, consents, approvals and authorizations of all such third parties and governmental entities.

The parties are required to file any required applications, notices or other filings under the HSR Act as promptly as practicable. In connection with such filings, the parties are required to use reasonable best efforts to cooperate with one another, to keep the other party informed of any communications received from governmental entities and permit the other party to review such communications. The parties must consult with each other with respect to the obtaining of all permits, consents, approvals and authorizations of all third parties and permits of all governmental entities necessary or advisable to consummate the transactions contemplated by the Merger Agreement, and each party must keep the other reasonably apprised of the status of matters relating to completion of the transactions contemplated by the Merger Agreement. The parties are not required to make payments or provide other consideration for the repayment, restructuring or amendment of terms of indebtedness in connection with the transactions contemplated by the Merger Agreement, other than the consent fees set forth in the disclosure schedules to the Merger Agreement.

Stockholder Approval

OSI2 has agreed to hold the OSI2 Special Meeting as promptly as practicable following the effectiveness of the registration statement of which this joint proxy statement/prospectus forms a part for the purpose of obtaining the approval of OSI2 Stockholders of the Merger Proposal. OSI2 will be required to use its reasonable best efforts to obtain from OSI2 Stockholders the vote required to approve the Merger Proposal, unless the OSI2 Board withdraws its recommendation related to the Merger Proposal.

Similarly, OCSL has agreed to hold the OCSL Annual Meeting as promptly as practicable following the effectiveness of the registration statement of which this joint proxy statement/prospectus forms a part for the purpose of obtaining the approval of the Merger Stock Issuance Proposal. OCSL will be required to use its reasonable best efforts to obtain from OCSL Stockholders the vote required to approve the Merger Stock Issuance Proposal, unless the OCSL Board withdraws its recommendation related to the Merger Stock Issuance Proposal.

Nasdaq Listing

OCSL is required to use reasonable best efforts to cause the shares comprising the Merger Consideration to be approved for listing on the Nasdaq Global Select Market, subject to official notice of issuance, at or prior to the Effective Time.

Indemnification; Directors’ and Officers’ Insurance

OCSL has agreed to indemnify, defend and hold harmless, and advance expenses, to the present and former directors and officers of OSI2 or any of its consolidated subsidiaries (collectively, the “D&O Indemnified Parties”) against all costs or expenses (including, reasonable attorneys’ fees actually incurred, reasonable

 

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experts’ fees, reasonable travel expenses, court costs, transcript fees and telecommunications, postage and courier charges), judgments, fines, losses, claims, damages penalties, amounts paid in settlement or other liabilities in connection with any proceeding arising with respect to all acts or omissions in such capacities at any time at or prior to the Effective Time (including any matters arising in connection with the Merger Agreement or the transactions contemplated thereby), to the fullest extent permitted by applicable law. If an indemnified liability arises, (i) OCSL has agreed to advance to the applicable D&O Indemnified Party, upon request, reimbursement of documented expenses reasonably and actually incurred so long as such D&O Indemnified Party, or someone on his or her behalf, undertakes to repay such advanced expenses if he or she is ultimately determined to be not entitled to indemnification and such D&O Indemnified Party complies with other applicable provisions imposed under the Investment Company Act and interpretations thereof by the SEC or its staff and (ii) OCSL and the applicable D&O Indemnified Party will cooperate in the defense of such matter.

Unless (1) OCSL has amended its existing directors’ and officers’ insurance policies to include coverage for claims arising from acts of OSI2’s directors and officers with respect to matters existing or occurring at or prior to the Effective Time, provided that OCSL will maintain its directors’ and officers’ insurance policies as amended pursuant to this subpart (1) for a period of at least six years from and after the Effective Time with coverage and amounts not less than, and terms and conditions that are not materially less advantageous to the insureds as, OSI2’s existing policies with respect to matters existing or occurring at or prior to the Effective Time or (2) OCSL and OSI2 otherwise agree, unless OSI2 or the surviving company or its successor has purchased a “tail” insurance policy prior to the Effective Time as provided below, for at least six years from and after the Effective Time, OCSL will cause the surviving company or its successor to pay for and maintain in full force and effect, a “tail” insurance policy for the extension of the directors’ and officers’ liability coverage of OSI2’s existing directors’ and officers’ insurance policies, with coverage and amounts not less than, and terms and conditions that are not materially less advantageous to the insureds as, OSI2’s existing policies with respect to matters existing or occurring at or prior to the Effective Time (provided that the annual cost for such insurance will in no event exceed 300% of the aggregate annual premiums currently paid by OSI2 on an annualized basis, but in such case, the surviving company or its successor will purchase as much of such coverage as possible for a cost not exceeding such amount). If OCSL or any of its successors or assigns consolidates with or merges into another entity and is not the surviving entity, or transfers all or substantially all of its assets to another entity, then OCSL will cause the successors and assigns of OCSL to assume the foregoing obligations.

No Solicitation

Each of OSI2 and OCSL has agreed to, and to cause its affiliates, consolidated subsidiaries, and its and each of their respective officers, directors, trustees, managers, employees, consultants, financial advisors, attorneys, accountants and other advisors, representatives and agents to, immediately cease and cause to be terminated all discussions or negotiations with respect to, or that are intended to or could reasonably be expected to lead to, a “Takeover Proposal” (as described below) from a third party and not to: (i) directly or indirectly solicit or take any other action (including by providing information) designed to, or which could reasonably be expected to, facilitate any inquiries or the making or submission or implementation of any proposal or offer (including any proposal or offer to its stockholders) with respect to any Takeover Proposal; (ii) approve, publicly endorse or recommend or enter into any agreement, arrangement, discussions or understandings with respect to any Takeover Proposal or enter into any contract or understanding requiring it to abandon, terminate or fail to consummate, or that is intended to or that could reasonably be expected to result in the abandonment of, termination of or failure to consummate, the Merger or any other transaction contemplated by the Merger Agreement; (iii) initiate or participate in any way in any negotiations or discussions regarding, or furnish or disclose to any person or entity (other than OCSL, OSI2 and their respective affiliates or representatives) any information with respect to, or take any other action to facilitate or in furtherance of any inquiries or the making of any proposal that constitutes, or could reasonably be expected to lead to, any Takeover Proposal; (iv) publicly propose or publicly announce an intention to take any of the foregoing actions; or (v) grant any (x) approval pursuant to any takeover statute to any person or entity (other than OCSL, OSI2 and or its respective affiliates) or with respect to any transaction (other than the transactions contemplated by the Merger Agreement) or (y), unless

 

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required by applicable fiduciary duties, waiver or release under any standstill or any similar agreement with respect to equity securities of OSI2 or OCSL. If OSI2 or OCSL receives a Takeover Proposal or similar request for information, it must notify OCSL or OSI2, as applicable, as promptly as reasonably practicable (and in any event within twenty-four (24) hours), provide the other party with copies of any written materials received by it or its representatives in connection therewith and the identity of the potential acquirer, and keep the other party informed on a reasonably current basis of the status (including the status of negotiations) of such Takeover Proposal or similar request for information.

Takeover Proposals

OSI2 Takeover Proposals

If, prior to the OSI2 Special Meeting, (i) OSI2 receives a bona fide unsolicited Takeover Proposal from a third party, (ii) the OSI2 Special Committee determines in good faith, after consultation with its outside legal counsel and, in the case of financial matters, its financial advisor, that (x) failure to consider such Takeover Proposal would be reasonably likely to be inconsistent with the OSI2 directors’ exercise of their fiduciary duties under applicable law and (y) such Takeover Proposal constitutes or is reasonably likely to result in an “OSI2 Superior Proposal” (as described below); and (iii) OSI2 gives OCSL written notice of its intention to engage in negotiations or discussions with the person making such Takeover Proposal at least two (2) business days’ before engaging in such negotiations or discussions (with such written notice specifying the identity of the third party making such Takeover Proposal, the terms and conditions of such Takeover Proposal and OSI2’s intention to furnish information to, or participate in discussions or negotiations with, such third party), then OSI2 may engage in discussions and negotiations with such third party and may adopt, approve or recommend, or publicly propose to adopt, approve or recommend such Takeover Proposal, including entering into an agreement with respect thereto (collectively, a “Takeover Approval”), so long as certain notice and other procedural requirements are satisfied, including providing notice to OCSL within twenty-four (24) hours after determining that a Takeover Proposal constitutes an OSI2 Superior Proposal.

In addition, OSI2 may take other actions if the OSI2 Special Committee determines, after consultation with its outside counsel, that the continued recommendation of the Merger Proposal to OSI2 Stockholders would be reasonably likely to be inconsistent with the OSI2 directors’ exercise of their fiduciary duties under applicable law as a result of an OSI2 Superior Proposal, including withdrawing, qualifying, or modifying (in a manner adverse to OCSL), or publicly proposing to withdraw, qualify or modify (in a manner adverse to OCSL), the recommendation of the OSI2 Board that OSI2 Stockholders adopt the Merger Agreement and approve the transactions contemplated thereby or taking any other action inconsistent with such recommendation (collectively with any Takeover Approval, an “OSI2 Adverse Recommendation Change”). OSI2 may terminate the Merger Agreement and enter into an agreement with a third party who has made an OSI2 Superior Proposal, subject to negotiating in good faith to amend the Merger Agreement so that the OSI2 Superior Proposal is no longer deemed an OSI2 Superior Proposal and satisfying certain other procedural requirements. Other than in connection with a Takeover Proposal, nothing in the Merger Agreement will prohibit or restrict the OSI2 Board from withdrawing or qualifying or publicly proposing to withdraw or qualify the approval, adoption, recommendation or declaration of the advisability of the Merger Proposal in response to an Intervening Event, subject to the procedures set forth in the Merger Agreement.

Other than as described above, neither OSI2 nor the OSI2 Board may make any OSI2 Adverse Recommendation Change, and no OSI2 Adverse Recommendation Change will change the approval of the Merger Proposal or any other approval of the OSI2 Board, including in any respect that would have the effect of causing any takeover statue or similar statute to be applicable to the transactions contemplated by the Merger Agreement.

 

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OCSL Takeover Proposals

If, prior to the OCSL Annual Meeting, (i) OCSL receives a bona fide unsolicited Takeover Proposal from a third party, (ii) the OCSL Special Committee determines in good faith, after consultation with its outside legal counsel and, in the case of financial matters, its financial advisor, that (x) failure to consider such Takeover Proposal would be reasonably likely to be inconsistent with the OCSL directors’ exercise of their fiduciary duties under applicable law and (y) such Takeover Proposal constitutes or is reasonably likely to result in an “OCSL Superior Proposal” (as described below); and (iii) OCSL gives OSI2 written notice of its intention to engage in negotiations or discussions with the person making such Takeover Proposal at least two (2) business days’ before engaging in such negotiations or discussions (with such written notice specifying the identity of the third party making such Takeover Proposal, the terms and conditions of such Takeover Proposal and OCSL’s intention to furnish information to, or participate in discussions or negotiations with, such third party) then OCSL may engage in discussions and negotiations with such third party and effect a Takeover Approval so long as certain notice and other procedural requirements are satisfied, including providing notice to OSI2 within twenty-four (24) hours after determining that a Takeover Proposal constitutes an OCSL Superior Proposal.

In addition, OCSL may take other actions if the OCSL Special Committee determines, after consultation with its outside counsel, that the continued recommendation of the Merger Stock Issuance Proposal to OCSL Stockholders would be reasonably likely to be inconsistent with the OCSL directors’ exercise of their fiduciary duties under applicable law as a result of an OCSL Superior Proposal, including withdrawing, qualifying, or modifying (in a manner adverse to OSI2), or publicly proposing to withdraw, qualify or modify (in a manner adverse to OSI2), the recommendation of the OCSL Board that OCSL Stockholders approve the Merger Stock Issuance Proposal or taking any other action inconsistent with such recommendation (collectively with any Takeover Approval, an “OCSL Adverse Recommendation Change”). OCSL may terminate the Merger Agreement and enter into an agreement with a third party who has made an OCSL Superior Proposal, subject to negotiating in good faith to amend the Merger Agreement so that the OCSL Superior Proposal is no longer deemed an OCSL Superior Proposal and satisfying certain other procedural requirements. Other than in connection with a Takeover Proposal, nothing in the Merger Agreement will prohibit or restrict the OCSL Board from withdrawing or qualifying or publicly proposing to withdraw or qualify the approval, adoption, recommendation or declaration of the advisability of the Merger Stock Issuance Proposal in response to an Intervening Event, subject to the procedures set forth in the Merger Agreement.

Other than as described above, neither OCSL nor the OCSL Board may make any OCSL Adverse Recommendation Change, and no OCSL Adverse Recommendation Change will change the approval of the Merger Stock Issuance Proposal or any other approval of the OCSL Board, including in any respect that would have the effect of causing any takeover statue or similar statute to be applicable to the transactions contemplated by the Merger Agreement.

Related Definitions

For purposes of the Merger Agreement:

 

   

“Takeover Proposal” means any inquiry, proposal, discussions, negotiations or offer from any person or group of persons (other than OCSL or OSI2 or any of their respective affiliates) (a) with respect to a merger, consolidation, tender offer, exchange offer, stock acquisition, asset acquisition, share exchange, business combination, recapitalization, liquidation, dissolution, joint venture or similar transaction involving OSI2 or OCSL, as applicable, or any of such party’s consolidated subsidiaries or (b) relating to any direct or indirect acquisition, in one transaction or a series of transactions, of (i) assets or businesses (including any mortgage, pledge or similar disposition thereof but excluding any bona fide financing transaction) that constitute or represent, or would constitute or represent if such transaction is consummated, 25% or more of the total assets, net revenue or net income of OSI2 or OCSL, as applicable, and its respective consolidated subsidiaries, taken as a whole, or (ii) 25% or more

 

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of the outstanding shares of capital stock of, or other equity or voting interests in, OSI2 or OCSL, as applicable, or in any of its consolidated subsidiaries, in each case other than the Merger and the other transactions contemplated by the Merger Agreement.

 

   

“OSI2 Superior Proposal” means a bona fide written Takeover Proposal that was not knowingly solicited by, or the result of any knowing solicitation by, OSI2 or any of its consolidated subsidiaries or by any of their respective affiliates or representatives in violation of the Merger Agreement, made by a third party that would result in such third party becoming the beneficial owner, directly or indirectly, of more than 75% of the total voting power of OSI2 or more than 75% of the assets of OSI2 on a consolidated basis (a) on terms which the OSI2 Board determines in good faith to be superior for OSI2 Stockholders (in their capacity as stockholders), taken as a group, from a financial point of view as compared to the Merger (after giving effect to the payment of the OSI2 termination fee contemplated by the Merger Agreement and any alternative proposed by OCSL), (b) that is reasonably likely to be consummated (taking into account, among other things, all legal, financial, regulatory and other aspects of the proposal, including any conditions, and the identity of the offeror) in a timely manner and in accordance with its terms and (c) in respect of which any required financing has been determined in good faith by the OSI2 Board (upon the recommendation of the OSI2 Special Committee) to be reasonably likely to be obtained, as evidenced by a written commitment of a reputable financing source.

 

   

“OCSL Superior Proposal” means a bona fide written Takeover Proposal that was not knowingly solicited by, or the result of any knowing solicitation by, OCSL or any of its consolidated subsidiaries or by any of their respective affiliates or representatives in violation of the Merger Agreement, made by a third party that would result in such third party becoming the beneficial owner, directly or indirectly, of more than 75% of the total voting power of OCSL or more than 75% of the assets of OCSL on a consolidated basis (a) on terms which the OCSL Board determines in good faith to be superior for OCSL Stockholders (in their capacity as stockholders), taken as a group, from a financial point of view as compared to the Merger (after giving effect to the payment of the OCSL termination fee contemplated by the Merger Agreement and any alternative proposed by OSI2), (b) that is reasonably likely to be consummated (taking into account, among other things, all legal, financial, regulatory and other aspects of the proposal, including any conditions, and the identity of the offeror) in a timely manner and in accordance with its terms and (c) in respect of which any required financing has been determined in good faith by the OCSL Board (upon the recommendation of the OCSL Special Committee) to be reasonably likely to be obtained, as evidenced by a written commitment of a reputable financing source.

 

   

“Intervening Event” means with respect to any party any event, change or development first occurring or arising after the date of the Merger Agreement that is material to, as applicable, OCSL and its consolidated subsidiaries, taken as a whole, or OSI2 and its consolidated subsidiaries, taken as whole, that was not known to, or reasonably foreseeable by, the party’s board of directors, as of or prior to the date of the Merger Agreement (or if known or reasonably foreseeable, the material consequences of which were not known or reasonably foreseeable as of the date of the Merger Agreement) and did not result from or arise out of the announcement or pendency of, or any actions required to be taken by such party (or to be refrained from being taken by such party) pursuant to, the Merger Agreement; provided, however, that in no event will the following events, circumstances, or changes in circumstances constitute an Intervening Event: (a) the receipt, existence, or terms of a Takeover Proposal or any matter relating thereto or consequence thereof or any inquiry, proposal, offer, or transaction from any third party relating to or in connection with a transaction of the nature described in the definition of “Takeover Proposal” (which, for the purposes of the Intervening Event definition, will be read without reference to the percentage thresholds set forth in the definition thereof); (b) any change in the price, or change in trading volume, of the OCSL Common Stock (provided, however, that the exception to this clause (b) will not apply to the underlying causes giving rise to or contributing to such change or prevent any of such underlying causes from being taken into account in determining

 

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whether an Intervening Event has occurred unless such underlying causes are otherwise excluded from the definition of Intervening Event); and (c) any changes in general economic or political conditions.

Access to Information

Upon reasonable notice, except as may otherwise be restricted by applicable law, each of OCSL and OSI2 will, and will cause its consolidated subsidiaries to, afford to the directors, officers, accountants, counsel, advisors and other representatives of the other party, reasonable access, during normal business hours during the period prior to the Effective Time, to its properties, books, contracts, and records and, during such period, such party will, and will cause its consolidated subsidiaries to, make available (including via EDGAR) to the other party all other information concerning its business and properties as the other party may reasonably request, subject to certain exceptions relating to confidentiality and attorney-client privilege.

Publicity

OSI2 and OCSL each will consult with the other before issuing or causing the publication of any press release or other public announcement with respect to the Merger Agreement, the Mergers or the transactions contemplated by the Merger Agreement, except as may be required by applicable law or the rules and regulations of Nasdaq and, to the extent practicable, before such press release or disclosure is issued or made, OCSL or OSI2, as applicable, will use commercially reasonable efforts to advise the other party of, and consult with the other party regarding, the text of such disclosure, subject to certain exceptions.

Takeover Statutes and Provisions

Neither OCSL nor OSI2 will take any action that would cause the transactions contemplated by the Merger Agreement to be subject to the requirements imposed by any takeover statute, and each of OCSL and OSI2 will take all necessary steps within its control to exempt such transactions from, or if necessary challenge the validity or applicability of, any applicable takeover statute.

Tax Matters

OCSL will obtain the opinion of Kirkland, counsel to OCSL (or, if Kirkland is unable or unwilling to render such an opinion, the written opinion of Sullivan & Cromwell or another nationally recognized counsel as may be reasonably acceptable to OCSL), addressed to OCSL, substantially to the effect that, on the basis of facts, representations and assumptions set forth in such opinion that are consistent with the state of facts existing at the Closing Date, the Mergers will be treated as a reorganization, within the meaning of Section 368(a) of the Code. In rendering such opinion, tax counsel may rely upon the tax representation letters provided by OCSL and OSI2. OSI2 will obtain the opinion of Sullivan & Cromwell, counsel to OSI2 (or, if Sullivan & Cromwell is unable or unwilling to render such an opinion, the written opinion of Kirkland or another nationally recognized counsel as may be reasonably acceptable to OSI2), addressed to OSI2, substantially to the effect that, on the basis of facts, representations and assumptions set forth in such opinion that are consistent with the state of facts existing at the Closing Date, the Mergers will be treated as a reorganization within the meaning of Section 368(a) of the Code. In rendering such opinion, tax counsel may rely upon the tax representation letters provided by OCSL and OSI2.

During the period through the Effective Time, except as expressly contemplated or permitted by the Merger Agreement, (i) OSI2 will not, and will not permit any of its consolidated subsidiaries to, directly or indirectly, without the prior written consent of OCSL take any action, or knowingly fail to take any action, which action or failure to act is reasonably likely to cause OSI2 to fail to qualify as a RIC, and (ii) OCSL will not, and will not permit any of its consolidated subsidiaries to, directly or indirectly, without the prior written consent of OSI2, take any action, or knowingly fail to take any action, which action or failure to act is reasonably likely to cause OCSL to fail to qualify as a RIC.

 

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Unless otherwise required by applicable law or administrative action, (i) each of OSI2, OCSL and Merger Sub will use its reasonable best efforts to cause the Mergers to qualify as a “reorganization” within the meaning of Section 368(a) of the Code, including by not taking any action that such party knows is reasonably likely to prevent such qualification; and (ii) each of OSI2, OCSL and Merger Sub will report the Mergers for U.S. federal income tax purposes in a manner consistent with a “reorganization” within the meaning of Section 368(a) of the Code.

Stockholder Litigation

The parties to the Merger Agreement will reasonably cooperate and consult with one another in connection with defense and settlement of any proceeding by OSI2 Stockholders or OCSL Stockholders against any of them or any of their respective directors, officers or affiliates with respect to the Merger Agreement or the transactions contemplated thereby, and each of OSI2 and OCSL will keep the other party reasonably informed of any material developments in connection with any such proceeding brought by its stockholders and will not settle any such proceeding without the prior written consent of the other party (such consent not to be unreasonably delayed, conditioned or withheld).

No Other Representations or Warranties

The parties have acknowledged and agreed that except for the representations contained in the Merger Agreement, none of Oaktree, OSI2, OCSL or any of OSI2’s or OCSL’s respective consolidated subsidiaries or any other person or entity acting on behalf of the foregoing makes any representation or warranty, express or implied.

Termination of OSI2 Agreements

Immediately after the occurrence of the Effective Time and prior to the Second Merger, the OSI2 Investment Advisory Agreement and the OSI2 Administration Agreement will be automatically terminated and of no further force and effect.

Coordination of Dividends

OCSL and OSI2 will coordinate with each other in designating the record and payment dates for any quarterly dividends or distributions to its stockholders declared in accordance with the Merger Agreement in any calendar quarter in which the Closing Date might reasonably be expected to occur, and neither OCSL nor OSI2 will authorize or declare any dividend or distributions to its stockholders after the Determination Date at any time on or before the Closing Date. In the event that a dividend or distribution with respect to shares of OSI2 Common Stock permitted under the terms of the Merger Agreement (i) has a record date prior to the Effective Time and (ii) has not been paid as of the Effective Time, the holders of shares of OSI2 Common Stock will be entitled to receive such dividend or distribution at the time such shares are exchange pursuant to the Merger Agreement.

Conditions to Closing the Mergers

Conditions to Each Party’s Obligations to Effect the Merger

The obligations of OCSL and OSI2 to complete the Merger are subject to the satisfaction or, other than with respect to the first bullet point below, waiver at or prior to the Effective Time of the following conditions:

 

   

the required approvals of OCSL Stockholders and OSI2 Stockholders, including, with respect to OCSL, the Merger Stock Issuance Proposal and, with respect to OSI2, the Merger Proposal, are obtained at their respective stockholder meetings;

 

   

the shares of OCSL Common Stock to be issued in connection with the Merger have been authorized for listing on Nasdaq, subject to official notice of issuance;

 

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the registration statement, of which this joint proxy statement/prospectus forms a part, has become effective and no stop order suspending its effectiveness has been issued and no proceedings for that purpose have been initiated by the SEC, and any necessary state securities or “blue sky” authorizations have been received;

 

   

no order issued by any court or agency of competent jurisdiction or other law preventing, enjoining, restraining or making illegal the consummation of the Mergers or any of the other transactions contemplated by the Merger Agreement is in effect;

 

   

all regulatory approvals required by applicable law to consummate the transactions contemplated by the Merger Agreement have been obtained and remain in full force and effect and all statutory waiting periods required by applicable law in respect thereof have expired (including expiration of the applicable waiting period under the HSR Act), and each of the approvals set forth on the disclosure schedules to the Merger Agreement, if any, have been obtained and remain in full force and effect;

 

   

no proceeding by any governmental entity of competent jurisdiction is pending that challenges the Mergers or any of the other transactions contemplated by the Merger Agreement or that otherwise seeks to prevent, enjoin, restrain or make illegal the consummation of the Mergers or any of the other transactions contemplated by the Merger Agreement;

 

   

the determination of both the Closing OCSL Net Asset Value and the Closing OSI2 Net Asset Value has been completed in accordance with the Merger Agreement; and

 

   

the representations and warranties of Oaktree are true and correct, without giving effect to any materiality or material adverse effect qualifications stated therein, as of the date of the Merger Agreement and as of the Closing Date (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty is true and correct as of such earlier date); provided that this condition will be deemed satisfied even if any such representations and warranties of Oaktree are not so true and correct, without regard to any material adverse effect or other materiality qualification to such representations and warranties, unless the failure of such representations and warranties of Oaktree to be so true and correct, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect with respect to OCSL; and OCSL has received a certificate signed on behalf of Oaktree by an authorized officer of Oaktree to the effect that such conditions have been satisfied, and, for the avoidance of doubt, any waiver of any such conditions will require prior written consent of each of OCSL and OSI2.

Conditions to Obligations of OCSL and Merger Sub to Effect the Mergers

The obligations of OCSL and Merger Sub to effect the Mergers are also subject to the satisfaction, or waiver by OCSL, at or prior to the Effective Time, of the following conditions:

 

   

the representations and warranties of OSI2 pertaining to:

 

  (1)

the capitalization of OSI2 are true and correct in all respects (other than de minimis inaccuracies) as of the date of the Merger Agreement and as of the Closing Date (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty is true and correct as of such earlier date);

 

  (2)

absence of events that would, individually or in the aggregate, reasonably be expected to have a material adverse effect with respect to OSI2 are true and correct in all respects as of the date of the Merger Agreement and as of the Closing Date (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty is true and correct as of such earlier date);

 

  (3)

authority, no violation, brokers, appraisal rights and valuation of investments are true and correct in all material respects as of the date of the Merger Agreement and as of the Closing Date (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty is true and correct as of such earlier date); and

 

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  (4)

all other representations contained in the Merger Agreement are true and correct, without giving effect to any materiality or material adverse effect qualifications stated therein, as of the date of the Merger Agreement and as of the Closing Date (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty is true and correct as of such earlier date); provided that this condition will be deemed satisfied even if any such representations and warranties of OSI2 are not so true and correct, unless the failure of such representations and warranties to be so true and correct, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect with respect to OSI2; and OCSL has received a certificate signed on behalf of OSI2 by the Chief Executive Officer or Chief Financial Officer of OSI2 to such effect;

 

   

OSI2 has performed in all material respects all obligations required to be performed by it under the Merger Agreement at or prior to the Effective Time, and OCSL has received a certificate signed on behalf of OSI2 by the Chief Executive Officer or Chief Financial Officer of OSI2 to such effect;

 

   

since the date of the Merger Agreement, there has not occurred any condition, change or event that, individually or in the aggregate, has had or would reasonably be expected to have, a material adverse effect in respect of OSI2; and

 

   

OCSL has received the opinion of Kirkland (or, if Kirkland is unable or unwilling to render such an opinion, the written opinion of Sullivan & Cromwell or another nationally recognized counsel as may be reasonably acceptable to OCSL) substantially to the effect that, on the basis of facts, representations and assumptions set forth in such opinion that are consistent with the state of facts existing at the Closing Date, the Mergers will be treated as a reorganization within the meaning of Section 368(a) of the Code. In rendering such opinion, tax counsel may rely upon the tax representation letters provided by OCSL and OSI2.

Conditions to Obligations of OSI2 to Effect the Mergers

The obligation of OSI2 to effect the Mergers is also subject to the satisfaction, or waiver by OSI2, at or prior to the Effective Time, of the following conditions:

 

   

the representations and warranties of OCSL and Merger Sub pertaining to:

 

  (1)

the capitalization of OCSL are true and correct in all respects (other than de minimis inaccuracies) as of the date of the Merger Agreement and as of the Closing Date (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty is true and correct as of such earlier date);

 

  (2)

absence of events that would, individually or in the aggregate, reasonably be expected to have a material adverse effect with respect to OCSL are true and correct in all respects as of the date of the Merger Agreement and as of the Closing Date (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty is true and correct as of such earlier date);

 

  (3)

authority, no violation and brokers are true and correct in all material respects as of the date of the Merger Agreement and as of the Closing Date (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty is true and correct as of such earlier date); and

 

  (4)

all other representations contained in the Merger Agreement are true and correct, without giving effect to any materiality or material adverse effect qualifications stated therein, as of the date of the Merger Agreement and as of the Closing Date (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty is true and correct as of such earlier date); provided that this condition will be deemed satisfied even if any such representations and warranties of OCSL and Merger Sub

 

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  are not so true and correct, unless the failure of such representations and warranties to be so true and correct, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect with respect to OCSL; and OSI2 has received a certificate signed on behalf of OCSL by the Chief Executive Officer or Chief Financial Officer of OCSL and Merger Sub to such effect;

 

   

each of OCSL and Merger Sub has performed in all material respects all obligations required to be performed by it under the Merger Agreement at or prior to the Effective Time, and OSI2 has received a certificate signed on behalf of OCSL and Merger Sub by the Chief Executive Officer or Chief Financial Officer of OCSL to such effect;

 

   

since the date of the Merger Agreement, there has not occurred any condition, change or event that, individually or in the aggregate, has had or would reasonably be expected to have, a material adverse effect in respect of OCSL; and

 

   

OSI2 has received the opinion of Sullivan & Cromwell (or if Sullivan & Cromwell is unable or unwilling to render such an opinion, the written opinion of Kirkland or another nationally recognized counsel as may be reasonably acceptable to OSI2) substantially to the effect that, on the basis of facts, representations and assumptions set forth in such opinion that are consistent with the state of facts existing at the Closing Date, the Mergers will be treated as a reorganization within the meaning of Section 368(a) of the Code. In rendering such opinion, tax counsel may rely upon the tax representation letters provided by OCSL and OSI2.

Frustration of Closing Conditions

None of OCSL, Merger Sub or OSI2 may rely on the failure of any condition applicable to the other party to be satisfied to excuse performance by such party of its obligations under the Merger Agreement if such failure was caused by such party’s failure to act in good faith or use its commercially reasonable efforts to consummate the Merger and the transactions contemplated by the Merger Agreement.

Termination of the Merger Agreement

Right to Terminate

The Merger Agreement may be terminated at any time prior to the Effective Time, whether before or after approval of the Merger Proposal by OSI2 Stockholders or the Merger Stock Issuance Proposal by OCSL Stockholders:

 

   

by mutual consent of OSI2 and OCSL by each of the OSI2 Board (upon the recommendation of the OSI2 Special Committee) and OCSL Board (upon the recommendation of the OCSL Special Committee);

 

   

by either OSI2 (acting upon the recommendation of the OSI2 Special Committee) or OCSL (acting upon the recommendation of the OCSL Special Committee), if:

 

  o

any governmental entity takes any final and non-appealable action that permanently restrains, enjoins or prohibits the transactions contemplated by the Merger Agreement;

 

  o

the Merger has not been completed on or before June 30, 2023 (the “Termination Date”), provided that the right to terminate the Merger Agreement on this basis will not be available to any party whose failure to fulfill in any material respect any of its obligations under the Merger Agreement has been the cause of, or resulted in, the event giving rise to the failure to close prior to the Termination Date;

 

  o

the requisite OSI2 Stockholder approval, including approval of the Merger Proposal, is not obtained; or

 

  o

the requisite OCSL Stockholder approval, including approval of the Merger Stock Issuance Proposal, is not obtained,

 

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provided, however, that the right to terminate the Merger Agreement pursuant to any of the foregoing will not be available to any party that has breached in any material respect its obligations in any manner that has been the principal cause of or resulted in the failure to consummate the transactions contemplated by the Merger Agreement;

 

   

by OSI2, if:

 

  o

OCSL or Merger Sub breaches any of their respective representations, warranties and covenants under the Merger Agreement, which breach, either individually or in the aggregate, would result in, if occurring or continuing on the Closing Date, the failure of certain OSI2 closing conditions, and such breach is not curable prior to the Termination Date or if curable prior to the Termination Date, has not been cured within thirty (30) days after the giving of notice thereof by OSI2 to OCSL (provided that OSI2 is not then in material breach so as to result in the failure of certain OCSL closing conditions);

 

  o

prior to obtaining approval of the Merger Stock Issuance Proposal by OCSL Stockholders (A) an OCSL Adverse Recommendation Change and/or a Takeover Approval occurs, (B) OCSL fails to include in this joint proxy statement/prospectus the OCSL Board’s recommendation that OCSL Stockholders vote in favor of the Merger Stock Issuance Proposal, (C) a Takeover Proposal is publicly announced and OCSL fails to issue, within ten (10) business days after such Takeover Proposal is announced, a press release that reaffirms the recommendation of the OCSL Board that OCSL Stockholders vote in favor of the Merger Stock Issuance Proposal or (D) a tender or exchange offer relating to any shares of OCSL Common Stock has been commenced by a third party and OCSL does not send to OCSL Stockholders, within ten (10) business days after the commencement of such tender or exchange offer, a statement disclosing that the OCSL Board recommends rejection of such tender or exchange offer;

 

  o

OCSL breaches, in any material respect, its obligations relating to the solicitation and administration of Takeover Proposals from third parties; or

 

  o

prior to obtaining approval of the Merger Proposal by OSI2 Stockholders, (A) OSI2 is not in material breach of any of the terms of the Merger Agreement, (B) the OSI2 Board, upon the recommendation of the OSI2 Special Committee, properly authorizes OSI2 to enter into, and OSI2 enters into, a definitive contract with respect to an OSI2 Superior Proposal and (C) the third party that made such OSI2 Superior Proposal, prior to such termination, pays to OCSL in immediately available funds any fees required to be paid pursuant to the Merger Agreement (described below); and

 

   

by OCSL, if:

 

  o

OSI2 breaches or any of its representations, warranties and covenants under the Merger Agreement, which breach, either individually or in the aggregate, would result in, if occurring or continuing on the Closing Date, the failure of certain OCSL closing conditions, and such breach is not curable prior to the Termination Date or if curable prior to the Termination Date, has not been cured within thirty (30) days after the giving of notice thereof by OCSL to OSI2 (provided that OCSL is not then in material breach so as to result in the failure of certain OSI2 closing conditions);

 

  o

prior to obtaining approval of the Merger Proposal by OSI2 Stockholders (A) an OSI2 Adverse Recommendation Change and/or a Takeover Approval occurs, (B) OSI2 fails to include in this joint proxy statement/prospectus the OSI2 Board’s recommendation that OSI2 Stockholders vote in favor of the Merger Proposal, including the Merger and the other transactions contemplated by the Merger Agreement, (C) a Takeover Proposal is publicly announced and OSI2 fails to issue, within ten (10) business days after such Takeover Proposal is announced, a press release that reaffirms the recommendation of the OSI2 Board

 

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  that OSI2 Stockholders vote in favor of the Merger Proposal, including the Merger and the other transactions contemplated by the Merger Agreement, or (D) a tender or exchange offer relating to any shares of OSI2 Common Stock has been commenced by a third party and OSI2 does not send to OSI2 Stockholders, within ten (10) business days after the commencement of such tender or exchange offer, a statement disclosing that the OSI2 Board recommends rejection of such tender or exchange offer;

 

  o

OSI2 breaches, in any material respect, its obligations relating to the solicitation and administration of Takeover Proposals from third parties; or

 

  o

prior to obtaining approval of the Merger Stock Issuance Proposal by OCSL Stockholders, (A) OCSL is not in material breach of any of the terms of the Merger Agreement, (B) the OCSL Board, upon the recommendation of the OCSL Special Committee, properly authorizes OCSL to enter into, and OCSL enters into, a definitive contract with respect to an OCSL Superior Proposal and (C) the third party that made such OCSL Superior Proposal, prior to such termination, pays to OSI2 in immediately available funds any fees required to be paid pursuant to the Merger Agreement (described below).

Termination Fees

Set forth below are summaries of the termination fees that may be payable if the Merger Agreement is terminated prior to consummation of the Mergers. OCSL or OSI2, as applicable, will be the entities entitled to receive any termination fees under the Merger Agreement.

OSI2 Termination Fee

The Merger Agreement provides for the payment by a third party that makes an OSI2 Superior Proposal (or its designee) to OCSL of a termination fee of $9.8 million if the Merger Agreement is terminated by OSI2 at any time prior to obtaining approval of the Merger Proposal by OSI2 Stockholders and (A) OSI2 is not in material breach of any of the terms of the Merger Agreement, and (B) the OSI2 Board, including a majority of the OSI2 Independent Directors, authorizes OSI2 to enter into, and OSI2 enters into, a definitive contract with respect to such OSI2 Superior Proposal.

The Merger Agreement provides for the payment by a third party that makes the Takeover Proposal described in this paragraph (or its designee) to OCSL of a termination fee of $9.8 million if (A) the Merger Agreement is terminated (i) by OCSL or OSI2 if the Merger is not completed by the Termination Date, or the OSI2 Stockholders do not approve the Merger Proposal at the OSI2 Special Meeting, or (ii) by OCSL if OSI2 willfully or intentionally breaches its representations, warranties, covenants or agreements in the Merger Agreement, which breach, either individually or in the aggregate, would result in, if occurring or continuing on the Closing Date, the failure of certain OCSL closing conditions, and such breach is not curable prior to the Termination Date or, if curable prior to the Termination Date, has not been cured within thirty (30) days after the giving of notice thereof by OCSL to OSI2 (provided that OCSL is not then in material breach so as to result in the failure of certain OSI2 closing conditions), (B) a Takeover Proposal (except that references to 25% in such definition will be deemed to be references to 50%) by the relevant third party is publicly disclosed after the date of the Merger Agreement and has not been withdrawn prior to the OSI2 Special Meeting (in the case of a termination due to the failure of the OSI2 Stockholders to approve the Merger Proposal) or termination of the Merger Agreement (in the case of (A)(ii) above or the failure to complete the Merger by the Termination Date) and (C) OSI2 enters into a definitive agreement with respect to such Takeover Proposal within twelve (12) months after the Merger Agreement is terminated and such Takeover Proposal is subsequently completed (regardless of whether such consummation happens prior to or following such 12-month period).

 

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OCSL Termination Fee

The Merger Agreement provides for the payment by a third party that makes an OCSL Superior Proposal (or its designee) to OSI2 of a termination fee of $37.9 million if the Merger Agreement is terminated by OCSL at any time prior to obtaining approval of the Merger Stock Issuance Proposal by OCSL Stockholders and (A) OCSL is not in material breach of any of the terms of the Merger Agreement, and (B) the OCSL Board, including a majority of the OCSL Independent Directors, authorizes OCSL to enter into, and OCSL enters into, a definitive contract with respect to such OCSL Superior Proposal.

The Merger Agreement provides for the payment by a third party that makes the Takeover Proposal described in this paragraph (or its designee) to OSI2 of a termination fee of $37.9 million if (A) the Merger Agreement is terminated (i) by OCSL or OSI2 if the Merger is not completed by the Termination Date, or the OCSL Stockholders do not approve the Merger Stock Issuance Proposal at the OCSL Annual Meeting, or (ii) by OSI2 if OCSL willfully or intentionally breaches its representations, warranties, covenants or agreements in the Merger Agreement, which breach, either individually or in the aggregate, would result in, if occurring or continuing on the Closing Date, the failure of certain OCSL closing conditions, and such breach is not curable prior to the Termination Date or, if curable prior to the Termination Date, has not been cured within thirty (30) days after the giving of notice thereof by OSI2 to OCSL (provided that OSI2 is not then in material breach so as to result in the failure of certain OCSL closing conditions), (B) a Takeover Proposal (except that references to 25% in such definition will be deemed to be references to 50%) by the relevant third party is publicly disclosed after the date of the Merger Agreement and has not been withdrawn prior to the OCSL Annual Meeting (in the case of a termination due to the failure of the OCSL Stockholders to approve the Merger Stock Issuance Proposal) or termination of the Merger Agreement (in the case of (A)(ii) above or the failure to complete the Merger by the Termination Date) and (C) OCSL enters into a definitive agreement with respect to such Takeover Proposal within twelve (12) months after the Merger Agreement is terminated and such Takeover Proposal is subsequently completed (regardless of whether such consummation happens prior to or following such 12-month period).

Effect of Termination

If the Merger Agreement is terminated, it will become void and have no effect, and there will be no liability on the part of OCSL, Merger Sub, OSI2, or their respective affiliates or consolidated subsidiaries or any of their respective directors or officers, except that (1) OCSL and OSI2 will remain liable to each other for any damages incurred or suffered by another party arising out of any willful or intentional breach of the Merger Agreement or a failure or refusal by a party to consummate the Merger Agreement and the transactions contemplated thereby when such party was obligated to do so in accordance with the terms of the Merger Agreement and (2) certain designated provisions of the Merger Agreement will survive the termination, including the confidentiality and termination fee provisions.

Amendment of the Merger Agreement

The Merger Agreement may be amended by the parties, by action taken or authorized by their respective boards of directors, at any time before or after approval of the Merger Stock Issuance Proposal by OCSL Stockholders or the Merger Proposal by OSI2 Stockholders; provided that after any approval of the Merger Stock Issuance Proposal by OCSL Stockholders or the Merger Proposal by OSI2 Stockholders, there may not be, without further approval of such stockholders, any amendment of the Merger Agreement that requires such further approval under applicable law. The Merger Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties (acting upon the recommendation of the OSI2 Special Committee, in the case of OSI2, or the OCSL Special Committee, in the case of OCSL).

 

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Expenses and Fees

Except with respect to (i) all filing and other fees paid to the SEC in connection with the Mergers and (ii) all filing and other fees in connection with any filing under the HSR Act, which, in each case, will be borne equally by OCSL and OSI2, all fees and expenses incurred in connection with the Merger Agreement and the transactions contemplated thereby (including the Mergers) will be paid by the party incurring such fees or expenses, whether or not the transactions contemplated by the Merger Agreement (including the Mergers) are consummated, provided that all fees and expenses of Merger Sub will be paid by OCSL.

 

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ACCOUNTING TREATMENT OF THE MERGERS

Management of OCSL has performed an analysis and determined that the Mergers are asset acquisitions and that OCSL is the accounting survivor. Therefore, the Mergers will be accounted for under the asset acquisition method of accounting by OCSL in accordance with Accounting Standards Codification Topic 805-50, Business Combinations — Related Issues (“ASC 805-50”). Under asset acquisition accounting, acquiring assets in groups not only requires ascertaining the cost of the asset (or net assets), but also allocating that cost to the individual assets (or individual assets and liabilities) that make up the group. Per ASC 805-50-30-1, assets are recognized based on their cost to the acquiring entity, which generally includes transaction costs of the asset acquisition, and no gain or loss is recognized unless the fair value of noncash assets given as consideration differs from the assets’ carrying amounts on the acquiring entity’s records. ASC 805-50-30-2 provides that asset acquisitions in which the consideration given is cash are measured by the amount of cash paid. However, if the consideration given is not in the form of cash (that is, in the form of noncash assets, liabilities incurred, or equity interests issued), measurement is based on the cost to the acquiring entity or the fair value of the assets (or net assets) acquired, whichever is more clearly evident and, thus, more reliably measured.

In connection with the Mergers, the outstanding shares of OSI2 Common Stock will be exchanged for newly issued shares of OCSL Common Stock. The aggregate NAV of the OCSL Common Stock received by OSI2 Stockholders in connection with the Mergers will equal the aggregate NAV of shares of OSI2 Common Stock held by OSI2 Stockholders immediately prior to the Mergers, less transaction costs and tax-related distributions, if any. Management of OCSL has determined the fair value of the shares of OCSL Common Stock to be issued pursuant to the Merger Agreement plus transaction costs (“purchase price”) to be most evident of fair value for measuring the consideration given in connection with the Mergers. The consideration paid by OCSL will be allocated to the individual assets acquired or liabilities assumed based on their relative fair values of net identifiable assets acquired other than “non-qualifying” assets (for example, cash) and does not give rise to goodwill. To the extent that the purchase price does not closely approximate the NAV of OCSL Common Stock at such time, the difference between the purchase price and the fair value of OSI2’s net assets acquired would result in a purchase discount or premium (henceforth referred to as the (“purchase discount (or premium)”). The purchase discount (or premium) will be allocated to the acquired assets and assumed liabilities of OSI2 based on their relative fair values as of the Closing Date. Immediately following the Mergers, OCSL will record its investments, including the acquired OSI2 investments, at their respective fair values and, as a result, the purchase discount (or premium) allocated to the cost basis of the investments acquired from OSI2 will be recognized as unrealized appreciation (or depreciation). The purchase discount (or premium) allocated to the acquired OSI2 investments in loans would accrete (or amortize) over the life of the loans through interest income with a corresponding reversal of the initial unrealized appreciation (or depreciation) on the acquired OSI2 loans through their ultimate disposition. The purchase discount (or premium) allocated to the acquired OSI2 investments in equity securities would not accrete (or amortize) over the life of the equity securities through interest income and, assuming no subsequent change to the fair value of the acquired OSI2 equity securities and disposition of such equity securities at fair value, would be recognized as realized gain (or loss) with a corresponding reversal of the unrealized appreciation (or depreciation) upon disposition of such equity securities.

The final allocation of the purchase price will be determined after the Mergers are completed and after completion of a final analysis to determine the estimated relative fair values of OSI2’s assets and liabilities. Increases or decreases in the estimated fair values of the net assets, commitments, and other items of OSI2 as compared to the information shown in this joint proxy statement/prospectus may occur. OCSL will exclude any amounts resulting solely from the new cost basis of the acquired OSI2 investments established by ASC 805 as a result of the Mergers from the calculation of the incentive fee on income and the incentive fee on capital gains, with such exclusion to be implemented either through an amendment to the OCSL Investment Advisory Agreement or a waiver of such amounts by Oaktree.

 

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CERTAIN MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS

The following discussion is a general summary of certain material U.S. federal income tax consequences of the Mergers, including an investment in shares of OCSL Common Stock by an OSI2 Stockholder. This summary does not purport to be a complete description of the income tax consequences of the Mergers applicable to an investment in shares of OCSL Common Stock.

Neither OCSL nor OSI2 has sought or will seek any ruling from the Internal Revenue Service (“IRS”) as to the U.S. federal income tax consequences of the Mergers or any related transactions. The following discussion does not discuss the special treatment under U.S. federal income tax laws that could result if OCSL invested in tax-exempt securities or certain other investment assets. You are urged to consult with your own tax advisors and financial planners as to the particular tax consequences of the Mergers to you, as applicable, including the applicability and effect of any state, local or foreign laws and the effect of possible changes in applicable tax laws.

This discussion addresses only those OSI2 Stockholders that hold their OSI2 Common Stock (and will hold their OCSL Common Stock) as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment), and does not address all the U.S. federal income tax consequences that may be relevant to particular OSI2 Stockholders in light of their individual circumstances or to OSI2 Stockholders that are subject to special rules, including, without limitation:

 

   

tax-exempt organizations or governmental organizations;

 

   

insurance companies;

 

   

partnerships or other entities or arrangements treated as partnerships for U.S. federal income tax purposes (and investors therein);

 

   

stockholders who hold their shares as part of a straddle or a hedging or conversion transaction;

 

   

stockholders who purchase or sell shares as part of a wash sale;

 

   

brokers, dealers or traders in securities;

 

   

traders in securities that elect to use a mark-to-market method of accounting for securities holdings;

 

   

pension plans and trusts;

 

   

tax-qualified retirement plans;

 

   

real estate investment trusts;

 

   

other RICs;

 

   

banks, insurance companies and other financial institutions;

 

   

U.S. stockholders whose functional currency is not the U.S. dollar;

 

   

non-U.S. stockholders engaged in a trade or business in the United States;

 

   

nonresident alien individuals who are present in the United States for 183 days or more in a taxable year;

 

   

persons who have ceased to be U.S. citizens or to be taxed as residents of the United States; or

 

   

“controlled foreign corporations,” “passive foreign investment companies,” and corporations that accumulate earnings to avoid U.S. federal income tax.

In addition, the discussion does not address any alternative minimum tax, gift or estate tax, or any state, local or foreign tax consequences of the Mergers, nor does it address any tax consequences arising under Medicare tax on net investment income.

 

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For purposes of this discussion, a “U.S. stockholder” or “U.S. holder” is a beneficial owner of OSI2 Common Stock or OCSL Common Stock (as applicable) who for U.S. federal income tax purposes is:

(i) an individual who is a citizen or resident of the United States;

(2) a corporation, or an entity treated as a corporation, created or organized in or under the laws of the United States, any state thereof, or the District of Columbia;

(3) a trust if (a) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more “United States persons” (within the meaning of Section 7701(a)(30) of the Code) have the authority to control all substantial decisions of the trust or (b) such trust has a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person; or

(4) an estate, the income of which is subject to U.S. federal income tax on its income regardless of its source.

For purposes of this discussion, a “non-U.S. stockholder” is a beneficial owner of OSI2 Common Stock or OCSL Common Stock (as applicable) that is not a U.S. stockholder or an entity that is treated as a partnership for U.S. federal income tax purposes.

The tax treatment of a partner in a partnership (or an entity treated as a partnership) generally will depend on the status of the partner, the activities of the partnership and certain determinations made at the partner level. An OSI2 Stockholder that is a partner of a partnership is urged to consult its own tax advisor.

The following discussion is based on the Code, its legislative history, existing and proposed U.S. Treasury regulations thereunder, published rulings, administrative pronouncements of the IRS and court decisions, all as currently in effect as of the date hereof, and all of which are subject to change or different interpretations, possibly with retroactive effect. Any such change could affect the continuing validity of this discussion. Each OSI2 Stockholder is urged to consult its tax advisor with respect to the particular tax consequence of the Mergers to such holder.

Certain Material U.S. Federal Income Tax Consequences of the Mergers

OCSL and OSI2 intend for the Mergers, taken together, to qualify as a reorganization within the meaning of Section 368(a) of the Code. It is a condition to the obligation of OSI2 to consummate the Mergers that OSI2 will obtain an opinion from Sullivan & Cromwell LLP, as counsel to OSI2, (or, if Sullivan & Cromwell LLP is unable or unwilling to render such an opinion, the written opinion of Kirkland & Ellis LLP or another nationally recognized counsel as may be reasonably acceptable to OSI2) generally to the effect that the Mergers, taken together will qualify as a “reorganization,” within the meaning of Section 368(a) of the Code. It is a condition to the obligation of OCSL to consummate the Mergers that OCSL will obtain an opinion from Kirkland & Ellis LLP, as counsel to OCSL (or, if Kirkland & Ellis LLP is unable or unwilling to render such an opinion, the written opinion of Sullivan & Cromwell LLP or another nationally recognized counsel as may be reasonably acceptable to OCSL), generally to the effect that the Mergers, taken together, will qualify as a “reorganization,” within the meaning of Section 368(a) of the Code. The opinions will be based on then-existing law, will be subject to certain assumptions, qualifications and exclusions and will be based in part on the truth and accuracy of certain facts and representations contained in representation letters provided by each of OSI2 and OCSL and on customary factual assumptions.

The remainder of this disclosure assumes that the Mergers qualify as a “reorganization” under Section 368(a) of the Code.

U.S. Stockholders

OSI2 Stockholders that are U.S. holders who receive shares of OCSL Common Stock in exchange for shares of OSI2 Common Stock pursuant to the Mergers generally will not recognize gain or loss for U.S. federal income

 

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tax purposes, other than for cash received in lieu of fractional shares of OCSL Common Stock. The aggregate basis of the shares of OCSL Common Stock received in the Mergers will be the same as the aggregate basis of the OSI2 Common Stock for which it is exchanged, decreased by any basis attributable to fractional interests in shares of OCSL Common Stock for which cash is received. The holding period of shares of OCSL Common Stock received in exchange for shares of OSI2 Common Stock will include the holding period of the OSI2 Common Stock for which it is exchanged.

If the OSI2 Stockholder acquired different blocks of OSI2 Common Stock at different times or at different prices, then the OSI2 Stockholder’s basis and holding period in their shares of OCSL Common Stock will be determined by reference to each block of OSI2 Common Stock exchanged.

A holder of OSI2 Common Stock who receives cash instead of a fractional share of OCSL Common Stock will generally be treated as having received the fractional share pursuant to the Mergers and then as having sold that fractional share of OCSL Common Stock for cash. As a result, a U.S. holder of OSI2 Common Stock generally will recognize gain or loss equal to the difference between the amount of cash received and the basis in his or her fractional share interest. Except as described above, this gain or loss generally will be capital gain or loss, and will be long-term capital gain or loss if, as of the effective date of the Mergers, the holding period for such shares is greater than one year. The deductibility of capital losses is subject to limitations.

Payments of cash in lieu of fractional shares to a holder of OSI2 Common Stock may, under certain circumstances, be subject to information reporting and backup withholding. Payments will not be subject to backup withholding if the U.S. stockholder (i) is a corporation or comes within certain other exempt categories and, when required, demonstrates this fact or (ii) provides OCSL or the transfer agent, as appropriate, with a properly completed IRS Form W-9 (or its successor form) certifying that such U.S. stockholder is a U.S. person, the taxpayer identification number provided is correct and such U.S. stockholder is not subject to backup withholding. The taxpayer identification number of an individual is his or her Social Security number. Any amounts withheld from payments to a holder under the backup withholding rules are not additional tax and will be allowed as a refund or credit against the holder’s U.S. federal income tax liability, provided the required information is furnished to the Internal Revenue Service.

Each holder of OSI2 Common Stock who is required to file a U.S. federal income tax return and who is a “significant holder” that receives OCSL Common Stock in the Mergers will be required to file a statement with such U.S. federal income tax return in accordance with U.S. Treasury Regulations Section 1.368-3 setting forth such holder’s basis in, and the fair market value of, the OSI2 Common Stock that is exchanged for OCSL Common Stock by such significant holder (in each case determined immediately prior to the exchange). A “significant holder” is a holder of OSI2 Common Stock who, immediately before the Mergers, owned at least 1% of the outstanding stock of OSI2 or securities of OSI2 with a basis for U.S. federal income tax purposes of at least $1,000,000.

Non-U.S. Stockholders

OSI2 Stockholders that are non-U.S. stockholders who receive shares of OCSL Common Stock in exchange for shares of OSI2 Common Stock pursuant to the Mergers generally will not recognize gain or loss for U.S. federal income tax purposes. The holding period and basis of the OCSL Common Stock received by a non-U.S. stockholder generally will be calculated in the same manner as for as U.S. stockholder as described above under “— U.S. Stockholders”. Gain recognized by a non-U.S. stockholder upon the exchange of OSI2 Common Stock for cash in lieu of fractional shares of OCSL Common Stock pursuant to the Mergers generally should not be subject to U.S. federal income tax.

A non-U.S. stockholder will be subject to information reporting and, in certain circumstances, backup withholding with respect to any cash received in lieu of fractional shares received by such holder pursuant to the Mergers, unless such non-U.S. stockholder certifies under penalties of perjury that it is a non-U.S. stockholder

 

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(and the payor does not have actual knowledge or reason to know that the holder is a United States person as defined under the Code) or such non-U.S. stockholder otherwise establishes an exemption from backup withholding. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a non-U.S. stockholder’s U.S. federal income tax liability, provided the required information is timely furnished to the IRS.

Limitations on Utilization of Loss Carryforwards and Unrealized Losses

In general, it is expected that limitations under the Code will apply to loss carryforwards and unrealized losses of OSI2, as OSI2 Stockholders before the Mergers are expected to hold less than 50% of the outstanding shares of OCSL immediately following the Mergers.

In this regard, the Mergers are expected to result in potential limitations on the ability of OCSL to use OSI2’s loss carryforwards and unrealized capital losses inherent in the tax basis of the assets acquired, once realized, and on the ability of OSI2’s taxable subsidiaries to use their net operating loss carryforwards. These potential limitations generally would be imposed on an annual basis. Losses in excess of the limitation may be carried forward indefinitely for capital loss carryforwards and post-2017 net operating loss carryforwards while pre-2018 net operating loss carryforwards are subject to a 20-year expiration from the year incurred. The limitations generally would equal the product of the fair market value of OSI2’s (or OSI2’s taxable subsidiaries, as the case may be) equity immediately prior to the Mergers and the “long-term tax-exempt rate,” as published quarterly by the IRS, in effect at such time. No assurance can be given as to what long-term tax-exempt rate will be in effect at the time of the Mergers.

OCSL will be prohibited from using its capital loss carryforwards, if any, and unrealized losses (once realized) against the unrealized gains in OSI2’s portfolio at the time of the Mergers, if any, to the extent such gains are realized within five years following the Mergers, if OSI2 has a net unrealized built in gain at the time of the Mergers. The ability of OCSL to absorb its losses in the future depends upon a variety of factors that cannot be known in advance. Even if OCSL is able to utilize its capital loss carryforwards or unrealized losses, the tax benefit resulting from those losses will be shared by both OCSL Stockholders and OSI2 Stockholders following the Mergers. Therefore, an OCSL Stockholder or OSI2 Stockholder may pay more taxes, or pay taxes sooner, than such stockholder otherwise would have paid if the Mergers did not occur.

OCSL will also be prohibited from using OSI2’s capital loss carryforwards, if any, and unrealized losses (once realized) against the unrealized gains in OCSL’s portfolio at the time of the Mergers, if any, to the extent such gains are realized within five years following the Mergers, if OCSL has a net unrealized built in gain at the time of the Mergers. The ability of OCSL to use OSI2’s losses in the future depends upon a variety of factors that cannot be known in advance. Even if OCSL is able to utilize capital loss carryforwards or unrealized losses of OSI2, the tax benefit resulting from those losses will be shared by both OSI2 and OCSL stockholders following the Mergers. Therefore, an OSI2 stockholder may pay more taxes, or pay taxes sooner, than such stockholder otherwise would have paid if the Mergers did not occur.

Further, in addition to the other limitations on the use of losses, under Section 381 of the Code, for the taxable year of the Mergers, only that percentage of OCSL’s capital gain net income for such taxable year (excluding capital loss carryforwards), if any, equal to the percentage of its taxable year that remains following the Mergers can be reduced by OSI2’s capital loss carryforwards (as otherwise limited under Sections 382, 383 and 384 of the Code, as described above).

Distribution of Income and Gains

OSI2’s taxable year is expected to end as a result of the Mergers. Under applicable U.S. tax rules, OSI2 generally will be required to declare to OSI2 Stockholders of record one or more distributions of all of its

 

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previously undistributed net investment income and net realized capital gain (if any), in order to maintain OSI2’s treatment as a RIC with respect to its taxable year ending with the date of the Mergers and to avoid being subject to any corporate-level U.S. federal income tax on its taxable income in respect of such taxable year (a “Tax Dividend”). It is expected that the Tax Dividend will equal or exceed all of OSI2’s previously undistributed net investment income and net realized capital gains and that as a result OSI2 will not be subject to corporate-level U.S. federal income tax with respect to its final taxable year ending on the date on which the Mergers are effective.

Moreover, if OCSL has net investment income or net realized capital gain, but has not distributed such income or gain prior to the Mergers and an OSI2 Stockholder acquires shares of OCSL Common Stock in the Mergers, a portion of any subsequent distributions from OCSL may, in effect, be a taxable return of part of the stockholder’s investment. Similarly, if an OSI2 Stockholder acquires OCSL Common Stock in the Mergers when OCSL holds appreciated securities, the stockholder may receive a taxable return of part of its investment if and when OCSL sells the appreciated securities and distributes the realized gain.

The Tax Dividend should be treated as a distribution with respect to OSI2 Common Stock. Accordingly, if you are a U.S. stockholder, the Tax Dividend generally will (subject to the last sentence in this paragraph) be taxable to you as ordinary income or capital gains depending on the type and amount of OSI2’s income to which the Tax Dividend is attributable. Distributions of OSI2’s investment company taxable income (which is, generally, OSI2’s net ordinary income plus realized net short-term capital gains in excess of realized net long-term capital losses) will be taxable as ordinary income to the extent of OSI2’s current or accumulated earnings and profits. To the extent any portion of the Tax Dividend is attributable to dividends from U.S. corporations and certain qualified foreign corporations, that portion may be eligible for taxation at a preferential rate if you are taxed at individual rates. In this regard, it is anticipated that the Tax Dividend will generally not be attributable to dividends and, therefore, generally will not qualify for the preferential rate. Distributions of OSI2’s net capital gains (which are generally OSI2’s realized net long-term capital gains in excess of realized net short-term capital losses) and properly reported by OSI2 as “capital gain dividends” will be taxable to you as long-term capital gains. Distributions in excess of OSI2’s earnings and profits first will reduce your adjusted tax basis in your OSI2 common stock and, after the adjusted basis is reduced to zero, will constitute capital gains to you.

If you are a non-U.S. stockholder, the Tax Dividend generally will be subject to withholding of U.S. federal tax at a 30% rate (or lower rate if you are eligible for a reduced rate under an applicable income tax treaty) to the extent attributable to a distribution of OSI2’s “investment company taxable income” out of current and accumulated earnings and profits, unless the distributions are properly designated as (1) paid by OSI2 in respect of OSI2’s “qualified net interest income” (generally, OSI2’s U.S. source interest income, other than certain contingent interest and interest from obligations of a corporation or partnership in which OSI2 is at least a 10% stockholder, reduced by expenses that are allocable to such income) or (2) paid by OSI2 in connection with OSI2’s “qualified short-term capital gains” (generally, the excess of OSI2’s net short-term capital gains over OSI2’s net long-term capital losses for such taxable year). If any portion of the Tax Dividend is attributable to OSI2’s net capital gains or is in excess of OSI2’s current and accumulated earnings and profits, that portion of the Tax Dividend generally will not be subject to U.S. federal income tax. If the Tax Dividend is effectively connected with your conduct of a U.S. trade or business, you will not be subject to U.S. federal withholding tax, but you generally will be subject to tax on the Tax Dividend in the same manner as a U.S. stockholder, as described in the preceding paragraph.

Withholding taxes may be imposed under Sections 1471 to 1474 of the Code (such Sections commonly referred to as the Foreign Account Tax Compliance Act, or “FATCA”) on certain types of payments made to non-U.S. financial institutions and certain other non-U.S. entities. Specifically, a 30% withholding tax may be imposed on certain types of income from sources within the United States, which may include the Tax Dividend, that are paid to a “foreign financial institution” or a “non-financial foreign entity” (each as defined in the Code), unless (1) the foreign financial institution undertakes certain diligence and reporting obligations, (2) the non-financial foreign entity either certifies it does not have any “substantial United States owners” (as defined in

 

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the Code) or furnishes identifying information regarding each substantial United States owner, or (3) the foreign financial institution or non-financial foreign entity otherwise qualifies for an exemption from these rules. If the payee is a foreign financial institution and is subject to the diligence and reporting requirements in (1) above, it must enter into an agreement with the U.S. Department of the Treasury requiring, among other things, that it undertake to identify accounts held by certain “specified United States persons” or “United States-owned foreign entities” (each as defined in the Code), annually report certain information about such accounts, and withhold 30% on certain payments to non-compliant foreign financial institutions and certain other account holders. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules.

OSI2 stockholders are urged to consult their tax advisors regarding the potential application of withholding under FATCA to the Tax Dividend.

The preceding discussion is intended only as a summary of material U.S. federal income tax consequences of the Mergers and does not address tax consequences that may vary with, or are contingent on, individual circumstances. Moreover, it does not address any non-income tax or any foreign, state or local tax consequences of the Mergers. OSI2 Stockholders are strongly urged to consult their own tax advisors as to the specific tax consequences resulting from the Mergers, including tax return reporting requirements, the applicability and effect of United States federal, state, local and other tax laws and the effect of any proposed changes in the tax laws.

U.S. Federal Income Taxation of an Investment in OCSL Common Stock

The following discussion is a general summary of the material U.S. federal income tax considerations applicable to OCSL, to OCSL’s qualification and taxation as a RIC for U.S. federal income tax purposes under Subchapter M of the Code and to an investment in OCSL Common Stock.

Election to be Taxed as a RIC

OCSL has elected to be treated, and intends to operate in a manner so as to continuously qualify annually thereafter, as a RIC for U.S. federal income tax purposes. As a RIC, OCSL generally does not pay corporate-level U.S. federal income taxes on any net ordinary income or capital gains that OCSL timely distributes (or are deemed to timely distribute) to OCSL Stockholders as dividends. Instead, dividends OCSL distributes (or are deemed to timely distribute) generally are taxable to the holders of OCSL Common Stock, and any net operating losses, foreign tax credits and most other tax attributes generally will not pass through to the holders of OCSL Common Stock. OCSL will be subject to U.S. federal corporate-level income tax on any undistributed income and gains. To qualify as a RIC, OCSL must, among other things, meet certain source-of-income and asset diversification requirements (as described below). In addition, OCSL must distribute to OCSL Stockholders, for each taxable year, at least 90% of OCSL’s investment company taxable income (which generally is OCSL’s net ordinary taxable income and realized net short-term capital gains in excess of realized net long-term capital losses, determined without regard to the dividends-paid deduction) (the “Annual Distribution Requirement”) for any taxable year. The following discussion assumes that OCSL continues to qualify as a RIC.

Taxation as a Regulated Investment Company

If OCSL qualifies as a RIC and meets the Annual Distribution Requirement, OCSL will not be subject to U.S. federal income tax on the portion of OCSL’s investment company taxable income and net capital gain (realized net long-term capital gain in excess of realized net short-term capital loss) that OCSL timely distributes (or are deemed to distribute) to OCSL Stockholders. OCSL would, however, be subject to a 4% nondeductible federal excise tax if OCSL does not distribute, actually or on a deemed basis, an amount at least equal to the sum of (i) 98% of OCSL’s ordinary income for the calendar year, (ii) 98.2% of OCSL’s net capital gains for the one-year period ending on October 31 of the calendar year and (iii) any income realized, but not distributed, in the preceding period (to the extent that income tax was not imposed on such amounts), less certain reductions, as applicable (together, the “Excise Tax Distribution Requirements”).

 

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In order to qualify as a RIC for U.S. federal income tax purposes under Subchapter M of the Code, OCSL must, among other things:

 

   

continue to qualify and have in effect an election to be treated as a Business Development Company under the Investment Company Act at all times during each taxable year;

 

   

derive in each taxable year at least 90% of OCSL’s gross income from dividends, interest, payments with respect to loans of certain securities, gains from the sale of stock or other securities or foreign currencies, net income from certain “qualified publicly traded partnerships,” or other income (including certain deemed inclusions) derived with respect to OCSL’s business of investing in such stock or securities or foreign currencies or net income derived from an interest in a “qualified publicly traded partnership” (the “90% Gross Income Test”);

 

   

diversify OCSL’s holdings so that at the end of each quarter of the taxable year:

 

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OCSL ensures that at least 50% of the value of OCSL’s assets consists of cash, cash equivalents, U.S. government securities, securities of other RICs and other securities, if such other securities of any one issuer do not represent more than 5% of the value of OCSL’s assets or more than 10% of the outstanding voting securities of the issuer; and

 

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OCSL ensures that no more than 25% of the value of OCSL’s assets is invested in the securities, other than U.S. government securities or securities of other RICs, of one issuer, or of two or more issuers that are controlled, as determined under applicable Code rules, by OCSL and that are engaged in the same or similar or related trades or businesses, or the securities of one or more “qualified publicly traded partnerships” (the “Diversification Tests”).

Under certain applicable provisions of the Code and the U.S. Treasury regulations, distributions payable in cash or in shares of stock at the election of stockholders are treated as taxable dividends. The IRS has issued private rulings indicating that this rule will apply even if the issuer limits the total amount of cash that may be distributed, provided that the limitation does not cause the cash to be less than 20% of the total distribution. OCSL generally intends to pay distributions in cash. However, OCSL reserves the right, in OCSL’s sole discretion from time to time, to limit the total amount of cash distributed to as little as 20% of the total distribution depending on, among other factors, OCSL’s cash balances. In such a case, each stockholder receiving cash would receive a pro rata share of the total cash to be distributed and would receive the remainder of their distribution in shares of stock, even if the stockholder had “opted out” of OCSL’s dividend reinvestment plan. In no event will any stockholder that has “opted out” of the dividend reinvestment plan receive less than 20% of his or her entire distribution in cash. For U.S. federal income tax purposes, the amount of a dividend paid in stock will be equal to the amount of cash that could have been received instead of stock.

Stockholders who participate in OCSL’s dividend reinvestment plan will be required to include the full amount of the dividend (including the portion payable in stock) as ordinary income (or, in certain circumstances, long-term capital gain) to the extent of OCSL’s current and accumulated earnings and profits for U.S. federal income tax purposes. As a result, stockholders may be required to pay income taxes with respect to such dividends in excess of the cash dividends received. Furthermore, with respect to non-U.S. stockholders, OCSL may be required to withhold U.S. tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in OCSL Common Stock. It is unclear whether and to what extent OCSL will be able to pay taxable dividends of the type described in this paragraph.

OCSL may have investments that require income to be included in investment company taxable income in a year prior to the year in which OCSL actually receives a corresponding amount of cash in respect of such income. For example, if OCSL holds corporate stock with respect to which Section 305 of the Code requires inclusion in income of amounts of deemed dividends even if no cash distribution is made, OCSL must include in OCSL’s taxable income in each year the full amount of OCSL’s allocable share of these deemed dividends. Additionally, if OCSL holds debt obligations that are treated under applicable U.S. federal income tax rules as

 

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having OID (such as debt instruments with PIK interest or, in certain cases, that have increasing interest rates or are issued with warrants), OCSL must include in OCSL’s taxable income in each year a portion of the OID that accrues over the life of the obligation, regardless of whether OCSL receives cash representing such income in the same taxable year. OCSL may also have to include in OCSL’s taxable income other amounts that OCSL has not yet received in cash, such as accruals on a contingent payment debt instrument or deferred loan origination fees that are paid after origination of the loan or are paid in non-cash compensation such as warrants or stock.

A RIC is limited in its ability to deduct expenses in excess of its investment company taxable income. If OCSL’s deductible expenses in a given year exceed OCSL’s investment company taxable income, OCSL will have a net operating loss for that year. However, a RIC is not permitted to carry forward net operating losses to subsequent years, and these net operating losses generally will not pass through to stockholders. In addition, expenses can be used only to offset investment company taxable income, and may not be used to offset net capital gain. A RIC may not use any net capital losses (that is, realized capital losses in excess of realized capital gains) to offset the RIC’s investment company taxable income, but may carry forward those losses, and use them to offset future capital gains, indefinitely. Further, a RIC’s deduction of net business interest expense is limited to 30% of its “adjusted taxable income” plus “floor plan financing interest expense.” It is not expected that any portion of any underwriting or similar fee will be deductible for U.S. federal income tax purposes to OCSL or the holders of OCSL Common Stock. Due to these limits on the deductibility of expenses, net capital losses and business interest expenses, OCSL may, for U.S. federal income tax purposes, have aggregate taxable income for several years that OCSL is required to distribute and that is taxable to stockholders even if this income is greater than the aggregate net income OCSL actually earned during those years.

In order to enable OCSL to make distributions to the holders of OCSL Common Stock that will be sufficient to enable OCSL to satisfy the Annual Distribution Requirement or the Excise Tax Distribution Requirements in the event that the circumstances described in the preceding two paragraphs apply, OCSL may need to liquidate or sell some of OCSL’s assets at times or at prices that OCSL would not consider advantageous, OCSL may need to raise additional equity or debt capital, OCSL may need to take out loans, or OCSL may need to forego new investment opportunities or otherwise take actions that are disadvantageous to OCSL’s business (or be unable to take actions that are advantageous to OCSL’s business). Even if OCSL is authorized to borrow and to sell assets in order to satisfy the Annual Distribution Requirement or the Excise Tax Distribution Requirements, under the Investment Company Act, OCSL generally is not permitted to make distributions to OCSL Stockholders while OCSL’s debt obligations and senior securities are outstanding unless certain “asset coverage” tests or other financial covenants are met. If OCSL is unable to obtain cash from other sources to enable OCSL to satisfy the Annual Distribution Requirement, OCSL may fail to qualify for the U.S. federal income tax benefits allowable to RICs and, thus, become subject to a corporate-level U.S. federal income tax (and any applicable state and local taxes). If OCSL is unable to obtain cash from other sources to enable OCSL to satisfy the Excise Tax Distribution Requirements, OCSL may be subject to an additional tax, as described above.

For the purpose of determining whether OCSL satisfies the 90% Gross Income Test and the Diversification Tests, the character of OCSL’s distributive share of items of income, gain, losses, deductions and credits derived through any investments in companies that are treated as partnerships for U.S. federal income tax purposes (other than certain publicly traded partnerships), or are otherwise treated as disregarded from OCSL for U.S. federal income tax purposes, generally will be determined as if OCSL realized these tax items directly. Further, for purposes of calculating the value of OCSL’s investment in the securities of an issuer for purposes of determining the 25% requirement of the Diversification Tests, OCSL’s proper proportion of any investment in the securities of that issuer that are held by a member of OCSL’s “controlled group” must be aggregated with OCSL’s investment in that issuer. A controlled group is one or more chains of corporations connected through stock ownership with OCSL if (a) at least 20% of the total combined voting power of all classes of voting stock of each of the corporations is owned directly by one or more of the other corporations, and (b) OCSL directly owns at least 20% or more of the combined voting stock of at least one of the other corporations.

 

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Failure to Qualify as a RIC

If OCSL fails to satisfy the 90% Gross Income Test for any taxable year or the Diversification Tests for any quarter of a taxable year, OCSL might nevertheless continue to qualify as a RIC for such year if certain relief provisions of the Code apply (which might, among other things, require OCSL to pay certain corporate-level U.S. federal taxes or to dispose of certain assets). Subject to a limited exception applicable to RICs that qualified for RIC status under Subchapter M of the Code for at least one year prior to disqualification and that requalify as a RIC no later than the second year following the non-qualifying year, OCSL could be subject to U.S. federal income tax on any unrealized net built-in gains in the assets held by OCSL during the period in which OCSL failed to qualify as a RIC that are recognized during the 5-year period after OCSL’s requalification as a RIC, unless OCSL made a special election to pay corporate-level U.S. federal income tax on these net built-in gains at the time of OCSL’s requalification as a RIC.

If OCSL fails to qualify for treatment as a RIC and such relief provisions do not apply to OCSL, OCSL would be subject to U.S. federal income tax on all of OCSL’s taxable income at regular corporate U.S. federal income tax rates (and OCSL also would be subject to any applicable state and local taxes), regardless of whether OCSL makes any distributions to the holders of OCSL Common Stock. OCSL would not be able to deduct distributions to OCSL Stockholders, nor would distributions to the holders of OCSL Common Stock be required to be made for U.S. federal income tax purposes. Any distributions OCSL makes generally would be taxable to the holders of OCSL Common Stock as ordinary dividend income and, subject to certain limitations under the Code, would be eligible for the current maximum rate applicable to qualifying dividend income of individuals and other non-corporate U.S. stockholders, to the extent of OCSL’s current or accumulated earnings and profits. Subject to certain limitations under the Code, U.S. OCSL Stockholders that are corporations for U.S. federal income tax purposes would be eligible for the dividends-received deduction. Distributions in excess of OCSL’s current and accumulated earnings and profits would be treated first as a return of capital to the extent of the holder’s adjusted tax basis in its shares of OCSL Common Stock, and any remaining distributions would be treated as capital gain.

If, before the end of any quarter of OCSL’s taxable year, OCSL believes that OCSL may fail the Diversification Tests, OCSL may seek to take certain actions to avert a failure. However, the action frequently taken by RICs to avert a failure, the disposition of non-diversified assets, may be difficult for OCSL to pursue because of the limited liquidity of OCSL’s investments.

Although OCSL expects to operate in a manner so as to qualify continuously as a RIC, OCSL may decide in the future to be taxed as a “C” corporation, even if OCSL would otherwise qualify as a RIC, if OCSL determines that treatment as a C corporation for a particular year would be in OCSL’s best interests. The remainder of this discussion assumes that OCSL will continuously qualify as a RIC for each taxable year.

OCSL’s Investments — General

Certain of OCSL’s investment practices may be subject to special and complex U.S. federal income tax provisions that may, among other things, (1) treat dividends that would otherwise constitute qualified dividend income as non-qualified dividend income, (2) disallow, suspend or otherwise limit the allowance of certain losses or deductions, (3) convert lower-taxed long-term capital gain into higher-taxed short-term capital gain or ordinary income, (4) convert an ordinary loss or a deduction into a capital loss (the deductibility of which is more limited), (5) cause OCSL to recognize income or gain without receipt of a corresponding cash payment, (6) adversely affect the time as to when a purchase or sale of stock or securities is deemed to occur, (7) adversely alter the characterization of certain complex financial transactions and (8) produce income that will not be qualifying income for purposes of the 90% Gross Income Test. OCSL intends to monitor OCSL’s transactions and may make certain tax elections to mitigate the potential adverse effect of these provisions, but there can be no assurance that OCSL will be eligible for any such tax elections or that any adverse effects of these provisions will be mitigated.

 

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Gain or loss recognized by OCSL from warrants or other securities acquired by OCSL, as well as any loss attributable to the lapse of such warrants, generally will be treated as capital gain or loss. Such gain or loss generally will be long-term or short-term depending on how long OCSL held a particular warrant or security.

A portfolio company in which OCSL invests may face financial difficulties that require OCSL to work-out, modify or otherwise restructure OCSL’s investment in the portfolio company. Any such transaction could, depending upon the specific terms of the transaction, cause OCSL to recognize taxable income without a corresponding receipt of cash, which could affect OCSL’s ability to satisfy the Annual Distribution Requirement or the Excise Tax Distribution Requirements or result in unusable capital losses and future non-cash income. Any such transaction could also result in OCSL receiving assets that give rise to non-qualifying income for purposes of the 90% Gross Income Test.

OCSL’s investment in non-U.S. securities may be subject to non-U.S. income, withholding and other taxes. In that case, OCSL’s yield on those securities would be decreased. Stockholders generally will not be entitled to claim a U.S. foreign tax credit or deduction with respect to non-U.S. taxes paid by OCSL.

If OCSL purchases shares in a “passive foreign investment company” (“PFIC”), OCSL may be subject to U.S. federal income tax on a portion of any “excess distribution” received on, or any gain from the disposition of, such shares even if OCSL distributes such income as a taxable dividend to the holders of OCSL Common Stock. Additional charges in the nature of interest generally will be imposed on OCSL in respect of deferred taxes arising from any such excess distribution or gain. If OCSL invests in a PFIC and elects to treat the PFIC as a “qualified electing fund” under the Code (“QEF”), in lieu of the foregoing requirements, OCSL will be required to include in income each year OCSL’s proportionate share of the ordinary earnings and net capital gain of the QEF, even if such income is not distributed by the QEF. Any required inclusions from the QEF election will be considered “good income” for purposes of the 90% Gross Income Test. Alternatively, OCSL may be able to elect to mark-to-market at the end of each taxable year OCSL’s shares in a PFIC; in this case, OCSL will recognize as ordinary income any increase in the value of such shares, and as ordinary loss any decrease in such value to the extent that any such decrease does not exceed prior increases included in OCSL’s income. OCSL’s ability to make either election will depend on factors beyond OCSL’s control, and is subject to restrictions which may limit the availability of the benefit of these elections. Under either election, OCSL may be required to recognize in a year income in excess of any distributions OCSL receives from PFICs and any proceeds from dispositions of PFIC stock during that year, and such income will nevertheless be subject to the Annual Distribution Requirement and will be taken into account for purposes of determining whether OCSL satisfies the Excise Tax Distribution Requirements. See “— Taxation as a Regulated Investment Company” above.

Under Section 988 of the Code, gains or losses attributable to fluctuations in exchange rates between the time OCSL accrues income, expenses or other liabilities denominated in a foreign currency and the time OCSL actually collects such income or pays such expenses or liabilities are generally treated as ordinary income or loss. Similarly, gains or losses on foreign currency forward contracts, the disposition of debt obligations denominated in a foreign currency, and other financial transactions denominated in a foreign currency, to the extent attributable to fluctuations in exchange rates between the acquisition and disposition dates, are also treated as ordinary income or loss.

Taxation of U.S. Stockholders

The following discussion applies only to U.S. stockholders. If you are not a U.S. stockholder, this section does not apply to you.

Distributions by OCSL generally are taxable to U.S. stockholders as ordinary income or capital gains. Distributions of OCSL’s investment company taxable income, determined without regard to the deduction for dividends paid, will be taxable as ordinary income to U.S. stockholders to the extent of OCSL’s current or accumulated earnings and profits, whether paid in cash or reinvested in additional OCSL Common Stock. To the

 

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extent such distributions OCSL pays to non-corporate U.S. stockholders (including individuals) are attributable to dividends from U.S. corporations and certain qualified foreign corporations, such distributions (“Qualifying Dividends”) generally are taxable to U.S. stockholders at the preferential rates applicable to long-term capital gains. However, it is anticipated that distributions paid by OCSL will generally not be attributable to dividends and, therefore, generally will not qualify for the preferential rates applicable to Qualifying Dividends or the dividends-received deduction available to corporations under the Code. Distributions of OCSL’s net capital gains (which generally are OCSL’s realized net long-term capital gains in excess of realized net short-term capital losses) that are properly reported by OCSL as “capital gain dividends” will be taxable to a U.S. stockholder as long-term capital gains that are currently taxable at reduced rates in the case of non-corporate taxpayers, regardless of the U.S. stockholder’s holding period for his, her or its OCSL Common Stock and regardless of whether paid in cash or reinvested in additional OCSL Common Stock. Distributions in excess of OCSL’s earnings and profits first will reduce a U.S. stockholder’s adjusted tax basis in such U.S. stockholder’s OCSL Common Stock and, after the adjusted tax basis is reduced to zero, will constitute capital gains to such U.S. stockholder.

A portion of OCSL’s ordinary income dividends, but not capital gain dividends, paid to corporate U.S. stockholders may, if certain conditions are met, qualify for up to a 50% dividends-received deduction to the extent OCSL has received dividends from certain corporations during the taxable year, but only to the extent these ordinary income dividends are treated as paid out of OCSL’s earnings and profits. OCSL expects only a small portion of OCSL’s dividends to qualify for this deduction. A corporate U.S. stockholder may be required to reduce its basis in its common stock with respect to certain “extraordinary dividends,” as defined in Section 1059 of the Code. Corporate U.S. stockholders should consult their own tax advisors in determining the application of these rules in their particular circumstances.

U.S. stockholders who have not opted out of OCSL’s dividend reinvestment plan will have their cash dividends and distributions automatically reinvested in additional shares of OCSL Common Stock, rather than receiving cash dividends and distributions. Any dividends or distributions reinvested under the plan will nevertheless remain taxable to U.S. stockholders. A U.S. stockholder will have an adjusted basis in the additional OCSL Common Stock purchased through the plan equal to the dollar amount that would have been received if the U.S. stockholder had received the dividend or distribution in cash, unless OCSL were to issue new shares that are trading at or above NAV, in which case, the U.S. stockholder’s basis in the new shares would generally be equal to their fair market value. The additional shares will have a new holding period commencing on the day following the day on which the shares are credited to the U.S. stockholder’s account.

OCSL may distribute OCSL’s net long-term capital gains, if any, in cash or elect to retain some or all of such gains, pay taxes at the U.S. federal corporate-level income tax rate on the amount retained, and designate the retained amount as a “deemed distribution.” If OCSL elects to retain net long-term capital gains and deem them distributed, each U.S. common stockholder will be treated as if they received a distribution of their pro rata share of the retained net long-term capital gain and the U.S. federal income tax paid. As a result, each U.S. common stockholder will (i) be required to report their pro rata share of the retained gain on their tax return as long-term capital gain, (ii) receive a refundable tax credit for their pro rata share of federal tax paid by OCSL on the retained gain, and (iii) increase the tax basis of their shares of OCSL Common Stock by an amount equal to the deemed distribution less the tax credit. In order to utilize the deemed distribution approach, OCSL must provide written notice to OCSL Stockholders prior to the expiration of 60 days after the close of the relevant taxable year.

For purposes of determining (1) whether the Annual Distribution Requirement is satisfied for any year and (2) the amount of capital gain dividends paid for that year, OCSL may, under certain circumstances, elect to treat a dividend that is paid during the following taxable year as if it had been paid during the taxable year in question. If OCSL makes such an election, the U.S. stockholder will still be treated as receiving the dividend in the taxable year in which the distribution is made. However, any dividend declared by OCSL in October, November or December of any calendar year, payable to stockholders of record on a specified date in such a month and

 

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actually paid during January of the following year, will be treated as if it had been received by OCSL Stockholders on December 31 of the year in which the dividend was declared.

If a U.S. stockholder purchases shares of OCSL Common Stock shortly before the record date of a distribution, the price of the shares will include the value of the distribution and the U.S. stockholder investor will be subject to tax on the distribution even though economically it may represent a return of his, her or its investment.

A U.S. stockholder generally will recognize taxable gain or loss if the U.S. stockholder redeems, sells or otherwise disposes of his, her or its shares of OCSL Common Stock. The amount of gain or loss will be measured by the difference between such U.S. stockholder’s adjusted tax basis in the OCSL Common Stock sold, redeemed or otherwise disposed of and the amount of the proceeds received in exchange. Any gain or loss arising from such sale, redemption or other disposition generally will be treated as long-term capital gain or loss if the U.S. stockholder has held his, her or its shares for more than one year. Otherwise, such gain or loss will be classified as short