SLR Investment
Annual Report 2018

Plain-text annual report

Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549 FORM 10-K ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE FISCAL YEAR ENDED DECEMBER 31, 2018OR ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER: 814-00754 SOLAR CAPITAL LTD.(Exact name of registrant as specified in its charter) Maryland 26-1381340(State of Incorporation) (I.R.S. EmployerIdentification Number)500 Park AvenueNew York, N.Y. 10022(Address of principal executive offices) (Zip Code)Registrant’s telephone number, including area code: (212) 993-1670Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which RegisteredCommon Stock, par value $0.01 per share The NASDAQ Global Select MarketSecurities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained,to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or anyamendment to this Form 10-K. ☒Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting companyor an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerginggrowth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☒ Accelerated filer ☐Non-accelerated filer ☐ Smaller Reporting Company ☐Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying withany new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes ☐ No ☒The aggregate market value of common stock held by non-affiliates of the Registrant on June 29, 2018 based on the closing price on that date of$20.44 on the NASDAQ Global Select Market was approximately $812.6 million. For the purposes of calculating this amount only, all directors andexecutive officers of the Registrant have been treated as affiliates. There were 42,260,826 shares of the Registrant’s common stock outstanding as ofFebruary 15, 2019. Table of ContentsSOLAR CAPITAL LTD.FORM 10-KFOR THE FISCAL YEAR ENDED DECEMBER 31, 2018TABLE OF CONTENTS Page PART I Item 1. Business 1 Item 1A. Risk Factors 24 Item 1B. Unresolved Staff Comments 57 Item 2. Properties 57 Item 3. Legal Proceedings 57 Item 4. Mine Safety Disclosures 57 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 58 Item 6. Selected Financial Data 59 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 60 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 80 Item 8. Financial Statements and Supplementary Data 82 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 127 Item 9A. Controls and Procedures 127 Item 9B. Other Information 127 PART III Item 10. Directors, Executive Officers and Corporate Governance 128 Item 11. Executive Compensation 134 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 136 Item 13. Certain Relationships and Related Transactions, and Director Independence 137 Item 14. Principal Accounting Fees and Services 140 PART IV Item 15. Exhibits, Financial Statement Schedules 142 Item 16. Form 10-K Summary 144 Signatures 145 Table of ContentsPART IItem 1. BusinessSolar Capital Ltd. (“Solar”, “Solar Capital”, the “Company”, “we” or “our”), a Maryland corporation formed in November 2007, is a closed-end,externally managed, non-diversified management investment company that has elected to be regulated as a business development company (“BDC”)under the Investment Company Act of 1940, as amended (the “1940 Act”). Furthermore, as the Company is an investment company, it continues toapply the guidance in FASB Accounting Standards Codification (“ASC”) Topic 946. In addition, for tax purposes, we have elected to be treated, andintend to qualify annually, as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the“Code”).In February 2010, we completed our initial public offering and a concurrent private offering of shares to our senior management team.We invest primarily in privately held U.S. middle-market companies, where we believe the supply of primary capital is limited and theinvestment opportunities are most attractive. Our investment objective is to generate both current income and capital appreciation through debt andequity investments. We invest primarily in leveraged middle-market companies in the form of senior secured loans, stretch-senior loans, unitrancheloans, leases and to a lesser extent, mezzanine loans and equity securities. We define “middle market” to refer to companies with annual revenuestypically between $50 million and $1 billion. Our investments in stretch-senior loans represent loans where the amount of senior debt of the portfoliocompany is larger than a traditional senior secured loan but is less than a unitranche loan. From time to time, we may also invest directly in the debtand equity of public companies that are thinly traded and such investments will not be limited to any minimum or maximum market capitalization. Inaddition, we may invest in foreign markets, including emerging markets. Our business is focused primarily on the direct origination of investmentsthrough portfolio companies or their financial sponsors. Our investments generally range between $5 million and $100 million each, although weexpect that this investment size will vary proportionately with the size of our capital base and/or with strategic initiatives.In addition, we may invest a portion of our portfolio in other types of investments, which we refer to as opportunistic investments, which are notour primary focus but are intended to enhance our overall returns. These investments may include, but are not limited to, direct investments in publiccompanies that are not thinly traded and securities of leveraged companies located in select countries outside of the United States. The securities thatwe invest in are typically rated below investment grade. Securities rated below investment grade are often referred to as “leveraged loans,” “high yield”or “junk” securities, and may be considered “high risk” compared to debt instruments that are rated investment grade. In addition, some of our debtinvestments will not fully amortize during their lifetime, which could result in a loss or a substantial amount of unpaid principal and interest due uponmaturity. Our investment activities are managed by Solar Capital Partners, LLC (“Solar Capital Partners” or the “Investment Adviser”) and supervisedby our board of directors, a majority of whom are non-interested, as such term is defined in the 1940 Act. Solar Capital Management, LLC (“SolarCapital Management”) provides the administrative services necessary for us to operate.As of December 31, 2018, our investment portfolio totaled $1.5 billion and our net asset value was $919.2 million. Our portfolio was comprisedof debt and equity investments in 117 portfolio companies.During the fiscal year ended December 31, 2018, we invested approximately $586 million in over 65 portfolio companies. Investments sold orprepaid during the fiscal year ended December 31, 2018 totaled approximately $624 million.Solar Capital PartnersSolar Capital Partners, our investment adviser, is controlled and led by Michael S. Gross, our Chairman and Chief Executive Officer, and BruceSpohler, our Chief Operating Officer. They are supported by a team of 1Table of Contentsdedicated investment professionals. Solar Capital Partners’ investment team has extensive experience in leveraged lending and private equity, as wellas significant contacts with financial sponsors.In addition, at December 31, 2018, Solar Capital Partners serves as investment adviser to private funds and managed accounts as well as to SolarSenior Capital Ltd. (or “Solar Senior”), another publicly traded BDC that invests in the senior debt securities of leveraged middle-market companiessimilar to those we target for investment. Through December 31, 2018, the investment team led by Messrs. Gross and Spohler has investedapproximately $8 billion in more than 360 different portfolio companies approximately 200 different financial sponsors. Since Solar Capital’sinception, these investment professionals have used their relationships in the middle-market financial sponsor and financial intermediary communityto generate deal flow. As of February 15, 2019, Mr. Gross and Mr. Spohler beneficially owned, either directly or indirectly, approximately 5.7% of ouroutstanding common stock.Solar Capital ManagementPursuant to an administration agreement (the “Administration Agreement”), Solar Capital Management furnishes us with office facilities,equipment and clerical, bookkeeping and record keeping services at such facilities. Under the Administration Agreement, Solar Capital Managementalso performs, or oversees the performance of, our required administrative services, which include, among other things, being responsible for thefinancial records which we are required to maintain and preparing reports to our stockholders. In addition, Solar Capital Management assists us indetermining and publishing our net asset value, oversees the preparation and filing of our tax returns and the printing and dissemination of reports toour stockholders, and generally oversees the payment of our expenses and the performance of administrative and professional services rendered to usby others. Solar Capital Management also provides managerial assistance, if any, on our behalf to those portfolio companies that request suchassistance.InvestmentsSolar Capital seeks to create a diverse portfolio that includes senior secured loans, stretch-senior secured loans, unitranche loans and to a lesserextent mezzanine loans and equity securities by investing approximately $5 million to $100 million of capital, on average, in the securities ofleveraged companies, including middle-market companies. We expect that this investment size will vary with the size of our capital base and/or forstrategic initiatives. Structurally, mezzanine loans usually rank subordinate in priority of payment to senior debt, such as senior bank debt, and areoften unsecured. As such, other creditors may rank senior to us in the event of insolvency. However, mezzanine loans rank senior to common andpreferred equity in a borrowers’ capital structure. Mezzanine loans may have both elements of debt and equity instruments, offering fixed returns in theform of interest payments associated with senior debt, while providing lenders an opportunity to participate in the capital appreciation of a borrower, ifany, through an equity interest. This equity interest may take the form of warrants. Due to its higher risk profile and often less restrictive covenants ascompared to senior loans, mezzanine loans generally earn a higher return than senior secured loans. The warrants associated with mezzanine loans, ifany, are typically detachable, which allows lenders to receive repayment of their principal on an agreed amortization schedule while retaining theirequity interest in the borrower. Mezzanine loans also may include a “put” feature, which permits the holder to sell its equity interest back to theborrower at a price determined through an agreed formula. We believe that in an appropriate market environment mezzanine loans can offer anattractive investment opportunity based upon their historic returns and resilience during economic downturns.In addition to senior secured loans, stretch-senior loans, unitranche loans and mezzanine loans, we may invest a portion of our portfolio inopportunistic investments, which are not our primary focus, but are intended to enhance our returns to our investors. These investments may includedirect investments in public companies that are not thinly traded and securities of leveraged companies located in select countries outside of theUnited States. The securities that we invest in are typically rated below investment grade. Securities rated below 2Table of Contentsinvestment grade are often referred to as “leveraged loans,” “high yield” or “junk” securities, and may be considered “high risk” compared to debtinstruments that are rated investment grade. In addition, some of our debt investments will not fully amortize during their lifetime, which could resultin a loss or a substantial amount of unpaid principal and interest due upon maturity. We may invest up to 30% of our total assets in such opportunisticinvestments, including loans issued by non-U.S. issuers, subject to compliance with our regulatory obligations as a BDC under the 1940 Act.We have and will continue to borrow funds to make investments. As a result, we will be exposed to the risks of leverage, which may beconsidered a speculative investment technique. The use of leverage magnifies the potential for loss on amounts invested and therefore increases therisks associated with investing in our securities. In addition, the costs associated with our borrowings, including any increase in management feespayable to our investment adviser, Solar Capital Partners, will be borne by our common stockholders.Additionally, we may in the future seek to securitize our loans to generate cash for funding new investments. To securitize loans, we may create awholly-owned subsidiary and contribute a pool of loans to the subsidiary. This could include the sale of interests in the subsidiary on a non-recoursebasis to purchasers who we would expect to be willing to accept a lower interest rate to invest in investment grade loan pools, and we would retain aportion of the equity in the securitized pool of loans.Moreover, we may acquire investments in the secondary market and, in analyzing such investments, we will employ the same analytical processas we use for our primary investments.We may utilize instruments such as forward contracts, currency options and interest rate swaps, caps, collars and floors to seek to hedge againstfluctuations in the relative values of our portfolio positions from changes in currency exchange rates and market interest rates. Hedging against adecline in the values of our portfolio positions does not eliminate the possibility of fluctuations in the values of such positions or prevent losses if thevalues of such positions decline. However, such hedging can establish other positions designed to gain from those same developments, therebyoffsetting the decline in the value of such portfolio positions. Such hedging transactions may also limit the opportunity for gain if the values of theunderlying portfolio positions should increase. It may not be possible to hedge against an exchange rate or interest rate fluctuation that is so generallyanticipated that we are not able to enter into a hedging transaction at an acceptable price. Moreover, for a variety of reasons, we may not seek toestablish a perfect correlation between such hedging instruments and the portfolio holdings being hedged. Any such imperfect correlation may preventus from achieving the intended hedge and expose us to risk of loss. In addition, it may not be possible to hedge fully or perfectly against currencyfluctuations affecting the value of securities denominated in non-U.S. currencies because the value of those securities is likely to fluctuate as a result offactors not related to currency fluctuations.Our principal focus is to provide senior secured loans, stretch-senior loans and unitranche loans to leveraged companies in a variety of industries.We generally seek to target companies that generate positive cash flows and/or have substantial assets that secure our loans. We generally seek toinvest in companies from the broad variety of industries in which our investment adviser has direct expertise. 3Table of ContentsThe following is a representative list of the industries in which we may invest: •  Aerospace & Defense•  Air Freight & Logistics•  Airlines•  Asset Management•  Automobiles•  Building Products•  Chemicals•  Commercial Services & Supplies•  Communications Equipment•  Construction & Engineering•  Consumer Finance•  Containers & Packaging•  Distributors•  Diversified Consumer Services•  Diversified Financial Services•  Diversified Real Estate Activities•  Diversified Telecommunications Services•  Education Services•  Energy Equipment & Services•  Food Products•  Footwear•  Health Care Equipment & Supplies•  Health Care Facilities•  Health Care Providers & Services•  Health Care Technology •  Hotels, Restaurants & Leisure•  Industrial Conglomerates•  Insurance•  Internet Services & Infrastructure•  IT Services•  Leisure Equipment & Products•  Life Sciences Tools & Services•  Machinery•  Media•  Multiline Retail•  Multi-Sector Holdings•  Oil, Gas & Consumer Fuels•  Paper & Forest Products•  Personal Products•  Pharmaceuticals•  Professional Services•  Research & Consulting Services•  Road & Rail•  Software•  Specialty Retail•  Textiles, Apparel & Luxury Goods•  Thrifts & Mortgage Finance•  Trading Companies & Distributors•  Utilities•  Wireless Telecommunications ServicesWe may also invest in other industries if we are presented with attractive opportunities.We may invest, to the extent permitted by law, in the securities and instruments of other investment companies, including private funds. We mayalso participate in negotiated co-investment transactions with certain affiliates, each of whose investment adviser is Solar Capital Partners, or aninvestment adviser controlling, controlled by or under common control with Solar Capital Partners and is registered as an investment adviser under theInvestment Advisers Act of 1940, as amended (the “Advisers Act”), in a manner consistent with our investment objective, positions, policies, strategiesand restrictions as well as regulatory requirements and other pertinent factors, and pursuant to the conditions of the exemptive order obtained from theSecurities and Exchange Commission (“SEC”) on June 13, 2017, which supersedes the exemptive order we originally obtained on July 28, 2014.Pursuant to the exemptive order, we are permitted to co-invest with our affiliates if a “required majority” (as defined in Section 57(o) of the 1940 Act)of our independent directors make certain conclusions in connection with a co-investment transaction, including, but not limited to, that (1) the termsof the potential co-investment transaction, including the consideration to be paid, are reasonable and fair to us and our stockholders and do notinvolve overreaching in respect of us or our stockholders on the part of any person concerned, and (2) the potential co-investment transaction isconsistent with the interests of our stockholders and is consistent with our then-current investment objective and strategies.At December 31, 2018, our portfolio consisted of 117 portfolio companies and was invested 33.1% in cash flow senior secured loans, 27.8% inasset-based senior secured loans / Crystal Financial LLC (“Crystal”), 21.6% in equipment senior secured financings / NEF Holdings, LLC (“NEF”), and17.5% in life science senior secured loans, in each case, measured at fair value. We expect that our portfolio will continue to include primarily seniorsecured, stretch-senior, unitranche loans, leases and to a lesser extent, mezzanine loans as well as equity-related securities. In addition, we also expectto invest a portion of our portfolio in opportunistic investments, which are not our primary focus, but are intended to enhance our risk-adjusted returnsto stockholders. These investments may include, but are not limited to, securities of public companies and debt and equity securities of companieslocated outside of the United States. 4Table of ContentsWhile our primary investment objective is to maximize current income and capital appreciation through investments in U.S. senior andsubordinated loans, other debt securities and equity, we may also invest a portion of the portfolio in opportunistic investments, including foreignsecurities.Listed below are our top ten portfolio companies and industries based on their fair value and represented as a percentage of total assets as ofDecember 31, 2018 and December 31, 2017:TOP TEN PORTFOLIO COMPANIES AND INDUSTRIES AS OF DECEMBER 31, 2018 Portfolio Company % ofTotal Assets Crystal Financial LLC* 17.4% NEF Holdings, LLC* 8.6% Falmouth Group Holdings Corp. (AMPAC) 2.4% KORE Wireless Group, Inc. 2.2% Varilease Finance, Inc. 2.0% Equipment Operating Leases LLC* 2.0% PhyMed Management LLC 1.9% American Teleconferencing Services, Ltd. (PGI) 1.8% Pet Holdings ULC & Pet Supermarket, Inc. 1.7% PSKW, LLC & PDR, LLC 1.7% *Denotes investments in which we are deemed to exercise a controlling influence over the management or policies of a company, as defined in the 1940 Act, due to beneficially owning, eitherdirectly or through one or more controlled companies, more than 25% of the outstanding voting securities of the investment. Industry % ofTotal Assets Diversified Financial Services 18.5% Multi-Sector Holdings 14.2% Health Care Providers & Services 10.0% Pharmaceuticals 9.0% Health Care Equipment & Supplies 4.8% Road & Rail 2.7% Chemicals 2.4% Media 2.3% Wireless Telecommunication Services 2.3% Communications Equipment 2.2% TOP TEN PORTFOLIO COMPANIES AND INDUSTRIES AS OF DECEMBER 31, 2017 Portfolio Company % ofTotal Assets Crystal Financial LLC 18.5% NEF Holdings, LLC 8.9% Senior Secured Unitranche Loan Program LLC 5.4% On Location Events, LLC & PrimeSport Holdings Inc. 3.6% KORE Wireless Group, Inc. 3.3% Senior Secured Unitranche Loan Program II LLC 3.2% DISA Holdings Acquisition Subsidiary Corp. 3.1% Varilease Finance, Inc. 2.9% PhyMed Management LLC 1.9% Aegis Toxicology Sciences Corporation 1.8% 5Table of ContentsIndustry % ofTotal Assets Diversified Financial Services 18.5% Multi-Sector Holdings 11.8% Asset Management 9.4% Health Care Providers & Services 7.1% Health Care Equipment & Supplies 5.5% Pharmaceuticals 4.9% Media 4.5% Wireless Telecommunication Services 3.3% Professional Services 3.1% Communications Equipment 2.9% Investment Selection ProcessSolar Capital Partners is committed to and utilizes a value-oriented investment philosophy with a focus on the preservation of capital and acommitment to managing downside exposure.Portfolio Company CharacteristicsWe have identified several criteria that we believe are important in identifying and investing in prospective portfolio companies. These criteriaprovide general guidelines for our investment decisions; however, not all of these criteria will be met by each prospective portfolio company in whichwe choose to invest.Stable Earnings and Strong Free Cash Flow. We seek to invest in companies who have demonstrated stable earnings through economic cycles.We target companies that can de-lever through consistent generation of cash flows rather than relying solely on growth to service and repay our loans.Value Orientation. Our investment philosophy places a premium on fundamental analysis from an investor’s perspective and has a distinct valueorientation. We focus on companies in which we can invest at relatively low multiples of operating cash flow and that are profitable at the time ofinvestment on an operating cash flow basis.Value of Assets. The prospective value of the assets, if any, that collateralizes the loans in which we invest, is an important factor in our creditanalysis. Our analysis emphasizes both tangible assets, such as accounts receivable, inventory, equipment and real estate, and intangible assets, such asintellectual property, customer lists, networks and databases. In some of our transactions the company’s fundings may be derived from a borrowingbase determined by the value of the company’s assets.Strong Competitive Position in Industry. We seek to invest in target companies that have developed leading market positions within theirrespective markets and are well positioned to capitalize on growth opportunities. We seek companies that demonstrate significant competitiveadvantages versus their competitors, which we believe should help to protect their market position and profitability.Diversified Customer and Supplier Base. We seek to invest in businesses that have a diversified customer and supplier base. We believe thatcompanies with a diversified customer and supplier base are generally better able to endure economic downturns, industry consolidation, changingbusiness preferences and other factors that may negatively impact their customers, suppliers and competitors.Exit Strategy. We predominantly invest in companies which provide multiple alternatives for an eventual exit. We look for opportunities thatprovide an exit typically within three years of the initial capital commitment. 6Table of ContentsWe generally seek companies that we believe will have or provide a steady stream of cash flow to repay our loans and reinvest in their respectivebusinesses. We believe that such internally generated cash flow, leading to the payment of our interest, and the repayment of our principal, represent akey means by which we will be able to exit from our investments over time.In addition, we also seek to invest in companies whose business models and expected future cash flows or cash positions offer attractive exitpossibilities. These companies include candidates for strategic acquisition by other industry participants and companies that may repay ourinvestments through an initial public offering of common stock or another capital market transaction. We underwrite our investments on aheld-to-maturity basis, but expensive capital is often repaid prior to stated maturity.Experienced and Committed Management. We generally require that portfolio companies have an experienced management team. We alsorequire portfolio companies have in place proper incentives to induce management to succeed and to act in concert with our interests as investors,including having significant equity interests.Strong Sponsorship. We generally aim to invest alongside other sophisticated investors. We typically seek to partner with successful financialsponsors who have historically generated high returns. We believe that investing in these sponsors’ portfolio companies enables us to benefit fromtheir direct involvement and due diligence.Solar Capital’s investment team works in concert with sponsors to proactively manage investment opportunities by acting as a partnerthroughout the investment process. We actively focus on the middle-market financial sponsor community, with a particular focus on the upper-end ofthe middle-market (sponsors with equity funds of $800 million to $3 billion). We favor such sponsors because they typically: • buy larger companies with strong business franchises; • invest significant amounts of equity in their portfolio companies; • value flexibility and creativity in structuring their transactions; • possess longer track records over multiple investment funds; • have a deeper management bench; • have better ability to withstand downturns; and • possess the ability to support portfolio companies with additional capital.We divide our coverage of these sponsors among our more senior investment professionals, who are responsible for day-to-day interaction withfinancial sponsors. Our coverage approach aims to act proactively, consider all investments in the capital structure, provide quick feedback, deliver oncommitments, and are constructive throughout the life cycle of an investment.Due DiligenceOur “private equity” approach to credit investing typically incorporates extensive in-depth due diligence often alongside the private equitysponsor. In conducting due diligence, we will use publicly available information as well as information from relationships with former and currentmanagement teams, consultants, competitors and investment bankers. We believe that our due diligence methodology allows us to screen a highvolume of potential investment opportunities on a consistent and thorough basis.Our due diligence typically includes: • review of historical and prospective financial information; 7Table of Contents • review and valuation of assets; • research relating to the company’s management, industry, markets, products and services and competitors; • on-site visits; • discussions with management, employees, customers or vendors of the potential portfolio company; • review of senior loan documents; and • background investigations.We also expect to evaluate the private equity sponsor making the investment. Further, due to Solar Capital Partners’ considerable repeat businesswith sponsors, we have direct experience with the management teams of many sponsors. A private equity sponsor is typically the controllingstockholder upon completion of an investment and as such is considered critical to the success of the investment. The equity sponsor is evaluatedalong several key criteria, including: • investment track record; • industry experience; • capacity and willingness to provide additional financial support to the company through additional capital contributions, if necessary; and • reference checks.Throughout the due diligence process, a deal team is in constant dialogue with the management team of the company in which we areconsidering to invest to ensure that any concerns are addressed as early as possible through the process and that unsuitable investments are filtered outbefore considerable time has been invested.Upon the completion of due diligence and a decision to proceed with an investment in a company, the investment professionals leading theinvestment present the investment opportunity to Solar Capital Partners’ investment committee, which then determines whether to pursue the potentialinvestment. Additional due diligence with respect to any investment may be conducted on our behalf by attorneys and independent accountants priorto the closing of the investment, as well as other outside advisers, as appropriate.The Investment CommitteeAll new investments are required to be approved by a consensus of the investment committee of Solar Capital Partners, which is led by Messrs.Gross and Spohler. The members of Solar Capital Partners’ investment committee receive no compensation from us. Such members may be employeesor partners of Solar Capital Partners and may receive compensation or profit distributions from Solar Capital Partners.Investment StructureOnce we determine that a prospective portfolio company is suitable for investment, we work with the management of that company and its othercapital providers, including senior, junior and equity capital providers, to structure an investment. We negotiate among these parties to agree on howour investment is expected to perform relative to the other capital in the portfolio company’s capital structure.We invest in portfolio companies primarily in the form of senior secured loans, stretch-senior loans, unitranche loans and to a lesser extentmezzanine investments. With respect to our senior secured loans, we seek to obtain security interests in the assets of our portfolio companies that serveas collateral in support of the repayment of these loans. This collateral may take the form of first or second priority liens on the assets of a portfoliocompany. 8Table of ContentsWe structure our mezzanine investments primarily as unsecured, subordinated loans that provide for relatively high, fixed or floating interestrates that provide us with significant current interest income. These loans typically have interest-only payments in the early years, with amortization ofprincipal, if any, deferred to the later years of the mezzanine loans. In some cases, we may enter into loans that, by their terms, convert into equity oradditional debt securities or defer payments of interest for the first few years after our investment. Also, in some cases our mezzanine loans may becollateralized by a subordinated lien on some or all of the assets of the borrower.Typically, our senior secured, stretch-senior, unitranche and mezzanine loans have final maturities of five to ten years. However, we expect thatour portfolio companies often may repay these loans early, generally within three to four years from the date of initial investment. In some cases andwhen available, we seek to structure these loans with prepayment premiums to capture foregone interest.In the case of our senior secured, stretch-senior, unitranche and mezzanine loan investments, we tailor the terms of the investment to the facts andcircumstances of the transaction and the prospective portfolio company, negotiating a structure that protects our rights and manages our risk whilecreating incentives for the portfolio company to achieve its business plan and improve its profitability. For example, in addition to seeking a senior orfulcrum position in the capital structure of our portfolio companies, we will seek to limit the downside potential of our investments by: • requiring a total return on our investments (including both interest and potential capital appreciation) that compensates us for credit risk; • incorporating “put” rights and call protection into the investment structure; and • negotiating covenants in connection with our investments that afford our portfolio companies as much flexibility in managing theirbusinesses as possible, consistent with preservation of our capital. Such restrictions may include affirmative and negative covenants,default penalties, lien protection, change of control provisions and board rights, including either observation or participation rights.Our investments may include equity features, such as warrants or options to buy a minority interest in the portfolio company. Any warrants wereceive with our debt securities generally require only a nominal cost to exercise, and thus, as a portfolio company appreciates in value, we mayachieve additional investment return from this equity interest. We may structure the warrants to provide provisions protecting our rights as a minorityinterest holder, as well as puts, or rights to sell such securities back to the company, upon the occurrence of specified events. In many cases, we alsoobtain registration rights in connection with these equity securities, which may include demand and “piggyback” registration rights. In addition, wemay from time to time make direct equity investments in portfolio companies.We generally seek to hold most of our investments to maturity or repayment, but will sell our investments earlier, including if a liquidity eventtakes place such as the sale or recapitalization of a portfolio company.Ongoing Relationships with Portfolio CompaniesSolar Capital Partners monitors our portfolio companies on an ongoing basis. Solar Capital Partners monitors the financial trends of eachportfolio company to determine if it is meeting its business plan and to assess the appropriate course of action for each company.Solar Capital Partners has several methods of evaluating and monitoring the performance and fair value of our investments, which include thefollowing: • Assessment of success in adhering to each portfolio company’s business plan and compliance with covenants; 9Table of Contents • Periodic and regular contact with portfolio company management and, if appropriate, the financial or strategic sponsor, to discuss financialposition, requirements and accomplishments; • Comparisons to other Solar Capital portfolio companies in the industry, if any; • Attendance at and participation in board meetings; and • Review of monthly and quarterly financial statements and financial projections for portfolio companies.In addition to various risk management and monitoring tools, Solar Capital Partners also uses an investment rating system to characterize andmonitor our expected level of returns on each investment in our portfolio.We use an investment rating scale of 1 to 4. The following is a description of the conditions associated with each investment rating: InvestmentRating Summary Description1 Involves the least amount of risk in our portfolio, the portfolio company is performing above expectations, and the trends and riskfactors are generally favorable (including a potential exit)2 Risk that is similar to the risk at the time of origination, the portfolio company is performing as expected, and the risk factors are neutralto favorable; all new investments are initially assessed a grade of 23 The portfolio company is performing below expectations, may be out of compliance with debt covenants, and requires procedures forcloser monitoring4 The investment is performing well below expectations and is not anticipated to be repaid in fullSolar Capital Partners monitors and, when appropriate, changes the investment ratings assigned to each investment in our portfolio. As ofDecember 31, 2018 and December 31, 2017, the weighted average investment rating on the fair market value of our portfolio was a 2. In connectionwith our valuation process, Solar Capital Partners reviews these investment ratings on a quarterly basis.Valuation ProceduresWe conduct the valuation of our assets, pursuant to which our net asset value shall be determined, at all times consistent with U.S. generallyaccepted accounting principles (“GAAP”) and the 1940 Act and generally value our assets on a quarterly basis, or more frequently if required. Ourvaluation procedures are set forth in more detail below:Under procedures established by our board of directors (the “Board”), we value investments, including certain senior secured debt, subordinateddebt and other debt securities with maturities greater than 60 days, for which market quotations are readily available, at such market quotations (unlessthey are deemed not to represent fair value). We attempt to obtain market quotations from at least two brokers or dealers (if available, otherwise from aprincipal market maker or a primary market dealer or other independent pricing service). We utilize mid-market pricing as a practical expedient for fairvalue unless a different point within the range is more representative. If and when market quotations are deemed not to represent fair value, we mayutilize independent third-party valuation firms to assist us in determining the fair value of material assets. Accordingly, such investments go throughour multi-step valuation process as described below. In each case, independent valuation firms consider observable market inputs together withsignificant unobservable inputs in arriving at their valuation recommendations. Debt investments with maturities of 60 days or less shall each bevalued at cost plus accreted discount, or minus amortized premium, which is expected to approximate fair value, unless such valuation, in thejudgment of Solar Capital Partners, does not represent fair value, in which case such investments shall be valued at fair value as determined in goodfaith by or under the direction of our Board. Investments that 10Table of Contentsare not publicly traded or whose market quotations are not readily available are valued at fair value as determined in good faith by or under thedirection of our Board. Such determination of fair values involves subjective judgments and estimates.With respect to investments for which market quotations are not readily available or when such market quotations are deemed not to representfair value, our Board has approved a multi-step valuation process each quarter, as described below: (1)our quarterly valuation process begins with each portfolio company or investment being initially valued by the investment professionals ofSolar Capital Partners responsible for the portfolio investment; (2)preliminary valuation conclusions are then documented and discussed with senior management of Solar Capital Partners; (3)independent valuation firms engaged by our Board conduct independent appraisals and review Solar Capital Partners’ preliminaryvaluations and make their own independent assessment for all material assets; (4)the audit committee of the Board reviews the preliminary valuation of Solar Capital Partners and that of the independent valuation firm, ifany, and responds to the valuation recommendation of the independent valuation firm to reflect any comments; and (5)the Board discusses valuations and determines the fair value of each investment in our portfolio in good faith based on the input of SolarCapital Partners, the respective independent valuation firm, if any, and the audit committee.Investments in all asset classes are valued utilizing a market approach, an income approach, or both approaches, as appropriate. However, inaccordance with ASC 820-10, certain investments that qualify as investment companies in accordance with ASC 946, may be valued using net assetvalue as a practical expedient for fair value. The market approach uses prices and other relevant information generated by market transactionsinvolving identical or comparable assets or liabilities (including a business). The income approach uses valuation approaches to convert futureamounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by currentmarket expectations about those future amounts. In following these approaches, the types of factors that we may take into account in fair value pricingour investments include, as relevant: available current market data, including relevant and applicable market trading and transaction comparables,applicable market yields and multiples, security covenants, call protection provisions, the nature and realizable value of any collateral, the portfoliocompany’s ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisonsof financial ratios of peer companies that are public, M&A comparables, our principal market (as the reporting entity) and enterprise values, amongother factors. When available, broker quotations and/or quotations provided by pricing services are considered as an input in the valuation process. Forthe fiscal year ended December 31, 2018, there has been no change to the Company’s valuation techniques and the nature of the related inputsconsidered in the valuation process.Accounting Standards Codification (“ASC”) Topic 820 classifies the inputs used to measure these fair values into the following hierarchy:Level 1: Quoted prices in active markets for identical assets or liabilities, accessible by the Company at the measurement date.Level 2: Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities inmarkets that are not active, or other observable inputs other than quoted prices.Level 3: Unobservable inputs for the asset or liability. 11Table of ContentsIn all cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowestlevel of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement inits entirety requires judgment and considers factors specific to each investment. The exercise of judgment is based in part on our knowledge of the assetclass and our prior experience.Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our consolidated financial statements expressthe uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our consolidated financial statements.CompetitionOur primary competitors provide financing to middle-market companies and include other business development companies, commercial andinvestment banks, commercial financing companies and, to the extent they provide an alternative form of financing, private equity funds.Additionally, alternative investment vehicles, such as hedge funds, frequently invest in middle-market companies. As a result, competition forinvestment opportunities at middle-market companies can be intense. While many middle-market companies were previously able to raise senior debtfinancing through traditional large financial institutions, we believe this approach to financing will become more difficult as implementation of U.S.and international financial reforms limits the capacity of large financial institutions to hold non-investment grade leveraged loans on their balancesheets. We believe that many of these financial institutions have de-emphasized their service and product offerings to middle-market companies inparticular.Many of our competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. Forexample, some competitors may have a lower cost of funds and access to funding sources that are not available to us. In addition, some of ourcompetitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments andestablish more relationships than us. Furthermore, many of our competitors are not subject to the regulatory restrictions that the 1940 Act imposes onus as a BDC. We use the industry information available to Messrs. Gross and Spohler and the other investment professionals of Solar Capital Partners toassess investment risks and determine appropriate pricing for our investments in portfolio companies. In addition, we believe that the relationships ofMessrs. Gross and Spohler and the other investment professionals of our investment adviser enable us to learn about, and compete effectively for,financing opportunities with attractive leveraged companies in the industries in which we seek to invest.StaffingWe do not currently have any employees. Mr. Gross, our Chairman and Chief Executive Officer, and Mr. Spohler, our Chief Operating Officer andboard member, are managing members and senior investment professionals of, and have financial and controlling interests in, Solar Capital Partners. Inaddition, Mr. Peteka, our Chief Financial Officer, Treasurer and Corporate Secretary serves as the Chief Financial Officer for Solar Capital Partners. GuyTalarico, our Chief Compliance Officer, is the Chief Executive Officer of Alaric Compliance Services, LLC, and performs his functions as our ChiefCompliance Officer under the terms of an agreement between Solar Capital Management and Alaric Compliance Services, LLC. Solar CapitalManagement has retained Mr. Talarico and Alaric Compliance Services, LLC pursuant to its obligations under our Administration Agreement.Our day-to-day investment operations are managed by Solar Capital Partners. Based upon its needs, Solar Capital Partners may hire additionalinvestment professionals. In addition, we will reimburse Solar Capital Management for the allocable portion of overhead and other expenses incurredby it in performing its obligations under the Administration Agreement, including rent, and the allocable portion of the cost of the company’s chiefcompliance officer and chief financial officer and their respective staffs. 12Table of ContentsSarbanes-Oxley Act of 2002The Sarbanes-Oxley Act of 2002 imposes a wide variety of regulatory requirements on publicly-held companies and their insiders. Many of theserequirements affect us. For example: • Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934 (the “1934 Act”), our Chief Executive Officer and Chief Financial Officermust certify the accuracy of the consolidated financial statements contained in our periodic reports; • Pursuant to Item 307 of Regulation S-K, our periodic reports must disclose our conclusions about the effectiveness of our disclosurecontrols and procedures; • Pursuant to Rule 13a-15 of the 1934 Act, our management must prepare a report regarding its assessment of the effectiveness of internalcontrols over financial reporting and obtain an audit of the effectiveness of internal controls over financial reporting performed by ourindependent registered public accounting firm; and • Pursuant to Item 308 of Regulation S-K and Rule 13a-15 of the 1934 Act, our periodic reports must disclose whether there were significantchanges in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation,including any corrective actions with regard to significant deficiencies and material weaknesses.The Sarbanes-Oxley Act of 2002 requires us to review our current policies and procedures to determine whether we comply with the Sarbanes-Oxley Act of 2002 and the regulations promulgated thereunder. We will continue to monitor our compliance with all regulations that are adoptedunder the Sarbanes-Oxley Act of 2002 and will take actions necessary to ensure that we are in compliance therewith.Business Development Company RegulationsA BDC is regulated by the 1940 Act. A BDC must be organized in the United States for the purpose of investing in or lending to primarily privatecompanies and making significant managerial assistance available to them. A BDC may use capital provided by public stockholders and from othersources to make long-term, private investments in businesses. A BDC provides stockholders the ability to retain the liquidity of a publicly-traded stockwhile sharing in the possible benefits, if any, of investing in primarily privately owned companies.We may not change the nature of our business so as to cease to be, or withdraw our election as, a BDC unless authorized by vote of a majority ofour outstanding voting securities, as required by the 1940 Act. A majority of the outstanding voting securities of a company is defined under the 1940Act as the lesser of: (a) 67% or more of such company’s voting securities present at a meeting if more than 50% of the outstanding voting securities ofsuch company are present or represented by proxy, or (b) more than 50% of the outstanding voting securities of such company. We do not anticipateany substantial change in the nature of our business.As with other companies regulated by the 1940 Act, a BDC must adhere to certain substantive regulatory requirements. A majority of ourdirectors must be persons who are not interested persons, as that term is defined in the 1940 Act. Additionally, we are required to provide and maintaina bond issued by a reputable fidelity insurance company to protect the BDC. Furthermore, as a BDC, we are prohibited from protecting any director orofficer against any liability to us or our stockholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard of the dutiesinvolved in the conduct of such person’s office.As a BDC, we had been required to meet an asset coverage ratio, reflecting the value of our total assets to our total senior securities, whichinclude all of our borrowings and any preferred stock we may issue in the future, of at least 200%. However, our stockholders have approved aresolution permitting us to be subject to a 150% asset coverage ratio effective as of October 12, 2018. We may also be prohibited under the 1940 Actfrom knowingly participating in certain transactions with our affiliates without the prior approval of our directors who are not interested persons and, insome cases, prior approval by the SEC. 13Table of ContentsThe Small Business Credit Availability Act (“SBCA”) instructs the SEC to issue rules or amendments to rules allowing BDCs to use the samesecurities offering and proxy rules that are available to operating companies, including, among other things, allowing BDCs to incorporate byreference in registration statements filed with the SEC and allow certain BDCs to file shelf registration statements that are automatically effective andtake advantage of other benefits available to Well-Known Seasoned Issuers; however, as of the date of this filing, we do not know when the rulesrelating to this legislation will become effective.We are generally not able to issue and sell our common stock at a price below net asset value per share without annual stockholder approval. Wemay, however, sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the then-current net asset value ofour common stock if our board of directors determines that such sale is in our best interests and the best interests of our stockholders, and ourstockholders approve such sale. At our Annual Meeting of Stockholders on October 11, 2018, our stockholders approved a proposal authorizing us tosell up to 25% of our common stock at a price below our then-current asset value per share, subject to the approval by our board of directors for theoffering. This authorization expires on the earlier of October 11, 2019 and the date of our 2019 Annual Meeting of Stockholders. In addition, we maygenerally issue new shares of our common stock at a price below net asset value in rights offerings to existing stockholders, in payment of dividendsand in certain other limited circumstances.As a BDC, we were substantially limited in our ability to co-invest in privately negotiated transactions with affiliated funds until we obtained anexemptive order from the SEC on July 28, 2014 (the “Prior Exemptive Order”). The Prior Exemptive Order permitted us to participate in negotiatedco-investment transactions with certain affiliates, each of whose investment adviser was Solar Capital Partners, in a manner consistent with ourinvestment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors, and pursuant to theconditions to the Prior Exemptive Order. On June 13, 2017, the Company, Solar Senior Capital Ltd., and Solar Capital Partners, et al., received anexemptive order that supersedes the Prior Exemptive Order (the “New Exemptive Order”) and extends the relief granted in the Prior Exemptive Ordersuch that it no longer applies to certain affiliates only if their respective investment adviser is Solar Capital Partners, but also applies to certainaffiliates whose investment adviser is an investment adviser that controls, is controlled by or is under common control with Solar Capital Partners andis registered as an investment adviser under the Advisers Act. The terms and conditions of the New Exemptive Order are otherwise substantially similarto the Prior Exemptive Order. If we are unable to rely on the New Exemptive Order for a particular opportunity, such opportunity will be allocated firstto the entity whose investment strategy is the most consistent with the opportunity being allocated, and second, if the terms of the opportunity areconsistent with more than one entity’s investment strategy, on an alternating basis. Although our investment professionals will endeavor to allocateinvestment opportunities in a fair and equitable manner, we and our common stockholders could be adversely affected to the extent investmentopportunities are allocated among us and other investment vehicles managed or sponsored by, or affiliated with, our executive officers, directors andmembers of our investment adviser.We will be periodically examined by the SEC for compliance with the federal securities laws, including the 1940 Act.Qualifying AssetsUnder the 1940 Act, a BDC may not acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act, which are referred to asqualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the BDC’s total assets. The principal categoriesof qualifying assets relevant to our business are the following: (1)Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer (subject to certainlimited exceptions) is an eligible portfolio company, or from any person who is, or has been during the preceding 13 months, an affiliatedperson of an eligible 14Table of Contents portfolio company, or from any other person, subject to such rules as may be prescribed by the SEC. An eligible portfolio company isdefined in the 1940 Act as any issuer which:(a) is organized under the laws of, and has its principal place of business in, the United States;(b) is not an investment company (other than a small business investment company wholly owned by the BDC) or a company thatwould be an investment company but for certain exclusions under the 1940 Act; and(c) satisfies any of the following:i.) does not have any class of securities that is traded on a national securities exchange;ii.) has a class of securities listed on a national securities exchange, but has an aggregate market value of outstanding votingand non-voting common equity of less than $250 million;iii.) is controlled by a BDC or a group of companies including a BDC and the BDC has an affiliated person who is a directorof the eligible portfolio company; oriv.) is a small and solvent company having total assets of not more than $4.0 million and capital and surplus of not less than$2.0 million. (2)Securities of any eligible portfolio company which we control, which, as defined by the 1940 Act, is presumed to exist where a BDCbeneficially owns more than 25% of the outstanding voting securities of the portfolio company. (3)Securities purchased in a private transaction from a U.S. issuer that is not an investment company or from an affiliated person of the issuer,or in transactions incident thereto, if the issuer is in bankruptcy and subject to reorganization or if the issuer, immediately prior to thepurchase of its securities, was unable to meet its obligations as they came due without material assistance other than conventional lendingor financing arrangements. (4)Securities of an eligible portfolio company purchased from any person in a private transaction if there is no ready market for such securitiesand we already own 60% of the outstanding equity of the eligible portfolio company. (5)Securities received in exchange for or distributed on or with respect to securities described in (1) through (4) above, or pursuant to theexercise of warrants or rights relating to such securities. (6)Cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment. (7)Office furniture and equipment, interests in real estate and leasehold improvements and facilities maintained to conduct the businessoperations of the BDC, deferred organization and operating expenses, and other noninvestment assets necessary and appropriate to itsoperations as a BDC, including notes of indebtedness of directors, officers, employees, and general partners held by a BDC as payment forsecurities of such company issued in connection with an executive compensation plan described in Section 57(j) of the 1940 Act.Under Section 55(b) of the 1940 Act, the value of a BDC’s assets shall be determined as of the date of the most recent financial statements filedby such company with the SEC pursuant to Section 13 of the 1934 Act, and shall be determined no less frequently than annually.Significant Managerial Assistance to Portfolio CompaniesAs a BDC, we offer, and must provide upon request, significant managerial assistance to our portfolio companies. This assistance could involve,among other things, monitoring the operations of our portfolio companies, participating in board and management meetings, consulting with andadvising officers of 15Table of Contentsportfolio companies and providing other organizational and financial guidance. We may also receive fees for these services. Solar Capital Managementprovides such managerial assistance, if any, on our behalf to portfolio companies that request this assistance.Temporary InvestmentsPending investment in other types of “qualifying assets,” as described above, our investments may consist of cash, cash equivalents, U.S.government securities or high-quality investment grade debt securities maturing in one year or less from the time of investment, which we refer to,collectively, as temporary investments, so that 70% of our assets are qualifying assets. Typically, we will invest in U.S. Treasury bills or in repurchaseagreements, provided that such repurchase agreements are fully collateralized by cash or securities issued by the U.S. government or its agencies. Arepurchase agreement involves the purchase by an investor, such as us, of a specified security and the simultaneous agreement by the seller torepurchase it at an agreed-upon future date and at a price which is greater than the purchase price by an amount that reflects an agreed-upon interestrate. There is no percentage restriction on the proportion of our assets that may be invested in such repurchase agreements. However, if more than 25%of our total assets constitute repurchase agreements from a single counterparty, we would not meet the diversification tests in order to qualify as a RICfor U.S. federal income tax purposes. Thus, we do not intend to enter into repurchase agreements with a single counterparty in excess of this limit. Ourinvestment adviser will monitor the creditworthiness of the counterparties with which we enter into repurchase agreement transactions.Senior SecuritiesWe are permitted, under specified conditions, to issue multiple classes of indebtedness and one class of stock senior to our common stock if ourasset coverage, as defined in the 1940 Act, is at least equal to 150% immediately after each such issuance. In addition, while certain senior securitiesremain outstanding, we may be required to make provisions to prohibit any distribution to our stockholders or the repurchase of such securities orshares unless we meet the applicable asset coverage ratios at the time of the distribution or repurchase. We may also borrow amounts up to 5% of thevalue of our total assets for temporary or emergency purposes without regard to asset coverage. We may borrow money, which would magnify thepotential for gain or loss on amounts invested and may increase the risk of investing in us.Code of EthicsWe and Solar Capital Partners have each adopted a code of ethics pursuant to Rule 17j-1 under the 1940 Act and Rule 204A-1 under the AdvisersAct, respectively, that establishes procedures for personal investments and restricts certain transactions by our personnel. Our codes of ethics generallydo not permit investments by our employees in securities that may be purchased or held by us. Each code of ethics is available on the EDGARDatabase on the SEC’s Internet site at http://www.sec.gov. You may also obtain copies of the codes of ethics, after paying a duplicating fee, byelectronic request at the following Email address: publicinfo@sec.gov.Compliance Policies and ProceduresWe and our investment adviser have adopted and implemented written policies and procedures reasonably designed to detect and preventviolation of the federal securities laws. We are required to review these compliance policies and procedures annually for their adequacy and theeffectiveness of their implementation and to designate a chief compliance officer to be responsible for their administration. Guy Talarico currentlyserves as our Chief Compliance Officer.Proxy Voting Policies and ProceduresWe have delegated our proxy voting responsibility to our investment adviser. A summary of the Proxy Voting Policies and Procedures of ouradviser are set forth below. The guidelines are reviewed periodically by the adviser and our non-interested directors, and, accordingly, are subject tochange. 16Table of ContentsAs an investment adviser registered under the Advisers Act, Solar Capital Partners has a fiduciary duty to act solely in the best interests of itsclients. As part of this duty, it recognizes that it must vote securities held by its clients in a timely manner free of conflicts of interest. These policiesand procedures for voting proxies for investment advisory clients are intended to comply with Section 206 of, and Rule 206(4)-6 under, the AdvisersAct.Our investment adviser votes proxies relating to our portfolio securities in the best interest of our stockholders. Solar Capital Partners reviews ona case-by-case basis each proposal submitted for a proxy vote to determine its impact on our investments. Although it generally votes against proposalsthat may have a negative impact on our investments, it may vote for such a proposal if there exists compelling long-term reasons to do so. The proxyvoting decisions of our investment adviser are made by the senior investment professionals who are responsible for monitoring each of ourinvestments. To ensure that our vote is not the product of a conflict of interest, it requires that: (i) anyone involved in the decision making processdisclose to a managing member of Solar Capital Partners any potential conflict that he or she is aware of and any contact that he or she has had withany interested party regarding a proxy vote; and (ii) employees involved in the decision making process or vote administration are prohibited fromrevealing how we intend to vote on a proposal in order to reduce any attempted influence from interested parties.You may obtain information about how we voted proxies by making a written request for proxy voting information to: Solar Capital Partners,LLC, 500 Park Avenue, New York, NY 10022.Privacy PrinciplesWe are committed to maintaining the privacy of our stockholders and to safeguarding their non-public personal information. The followinginformation is provided to help you understand what personal information we collect, how we protect that information and why, in certain cases, wemay share information with select other parties.Generally, we do not receive any non-public personal information relating to our stockholders, although certain non-public personal informationof our stockholders may become available to us. We do not disclose any non-public personal information about our stockholders or formerstockholders to anyone, except as permitted by law or as is necessary in order to service stockholder accounts (for example, to a transfer agent or thirdparty administrator).We restrict access to non-public personal information about our stockholders to employees of our investment adviser and its affiliates with alegitimate business need for the information. We maintain physical, electronic and procedural safeguards designed to protect the non-public personalinformation of our stockholders.Taxation as a Regulated Investment CompanyAs a BDC, we elected to be treated, and intend to qualify annually, as a RIC under Subchapter M of the Code. As a RIC, we generally will nothave to pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that we distribute to our stockholders as dividends. Tocontinue to qualify as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements (as described below).In addition, to qualify for RIC tax treatment we must distribute to our stockholders, for each taxable year, at least 90% of our “investment companytaxable income,” which generally is our ordinary income plus the excess of our realized net short-term capital gains over our realized net long-termcapital losses (the “Annual Distribution Requirement”). If we qualify as a RIC and satisfy the Annual Distribution Requirement, then we will not besubject to U.S. federal income tax on the portion of our investment company taxable income and net capital gain (i.e., realized net long-term capitalgains in excess of realized net short-term capital losses) we distribute (or are deemed to distribute) to stockholders. We will be subject to U.S. federalincome tax at the regular corporate rates on any income or capital gain not distributed (or deemed not distributed) to our stockholders. 17Table of ContentsWe will be subject to a 4% nondeductible U.S. federal excise tax on certain undistributed income unless we distribute in a timely manner anamount at least equal to the sum of (1) 98% of our ordinary income for each calendar year, (2) 98.2% of our capital gain net income for the one-yearperiod ending October 31 in that calendar year and (3) any income realized, but not distributed, and on which we paid no U.S. federal income tax, inpreceding years (the “Excise Tax Avoidance Requirement”).In order to qualify as a RIC for U.S. federal income tax purposes, we must, among other things: • at all times during each taxable year, have in effect an election to be treated as a BDC under the 1940 Act; • derive in each taxable year at least 90% of our gross income from (a) dividends, interest, payments with respect to certain securities loans,gains from the sale of stock or other securities or currencies, or other income derived with respect to our business of investing in such stock,securities or currencies and (b) net income derived from an interest in a “qualified publicly traded partnership;” and • diversify our holdings so that at the end of each quarter of the taxable year: • at least 50% of the value of our assets consists of cash, cash equivalents, U.S. government securities, securities of other RICs, andother securities if such other securities of any one issuer do not represent more than 5% of the value of our assets or more than 10%of the outstanding voting securities of the issuer; and • no more than 25% of the value of our assets is invested in (i) the securities, other than U.S. government securities or securities ofother RICs, of one issuer, (ii) the securities of two or more issuers that are controlled, as determined under applicable tax rules, by usand that are engaged in the same or similar or related trades or businesses or (iii) the securities of one or more “qualified publiclytraded partnerships.”The Regulated Investment Company Modernization Act of 2010, which was generally effective for 2011 and subsequent tax years, providessome relief from RIC disqualification due to failures of the income and asset diversification requirements, although there may be additional taxes duein such cases.We may be required to recognize taxable income in circumstances in which we do not receive cash. For example, if we hold debt obligations thatare treated under applicable tax rules as having original issue discount (such as debt instruments with payment-in-kind (“PIK”) interest or, in certaincases, increasing interest rates or debt instruments issued with warrants), we must include in income each year a portion of the original issue discountthat accrues over the life of the obligation, regardless of whether cash representing such income is received by us in the same taxable year. Because anyoriginal issue discount accrued will be included in our investment company taxable income for the year of accrual, we may be required to make adistribution to our stockholders in order to satisfy the Annual Distribution Requirement, even though we will not have received any correspondingcash amount.Because we may use debt financing, we will be subject to certain asset coverage ratio requirements under the 1940 Act and financial covenantsunder loan and credit agreements that could, under certain circumstances, restrict us from making distributions necessary to satisfy the AnnualDistribution Requirement. If we are unable to obtain cash from other sources or are otherwise limited in our ability to make distributions, we could failto qualify for RIC tax treatment and thus become subject to corporate-level U.S. federal income tax.Certain of our investment practices may be subject to special and complex U.S. federal income tax provisions that may, among other things:(i) disallow, suspend or otherwise limit the allowance of certain losses or deductions; (ii) convert lower taxed long-term capital gain into higher taxedshort-term capital gain or ordinary income; (iii) convert an ordinary loss or a deduction into a capital loss (the deductibility of which is more limited);(iv) cause us to recognize income or gain without a corresponding receipt of cash; (v) adversely affect 18Table of Contentsthe time as to when a purchase or sale of securities is deemed to occur; (vi) adversely alter the characterization of certain complex financialtransactions; and (vii) produce income that will not be qualifying income for purposes of the 90% gross income test described above. We will monitorour transactions and may make certain tax elections in order to mitigate the potential adverse effect of these provisions.Gain or loss realized by us from the sale or exchange of warrants acquired by us as well as any loss attributable to the lapse of such warrantsgenerally will be treated as capital gain or loss. The treatment of such gain or loss as long-term or short-term will depend on how long we held aparticular warrant. Upon the exercise of a warrant acquired by us, our tax basis in the stock purchased under the warrant will equal the sum of theamount paid for the warrant plus the strike price paid on the exercise of the warrant.Failure to Qualify as a Regulated Investment CompanyIf we were unable to qualify for treatment as a RIC, we would be subject to U.S. federal income tax on all of our taxable income at regularcorporate rates. We would not be able to deduct distributions to stockholders, nor would they be required to be made. Such distributions would betaxable to our stockholders as dividends and, provided certain holding period and other requirements were met, could qualify for treatment as“qualified dividend income” in the hands of non-corporate stockholders (and thus eligible for the current 20% maximum rate) to the extent of ourcurrent and accumulated earnings and profits. Subject to certain limitations under the Code, corporate distributees would be eligible for the dividendsreceived deduction. Distributions in excess of our current and accumulated earnings and profits would be treated first as a return of capital to the extentof the stockholder’s tax basis, and any remaining distributions would be treated as a capital gain. To requalify as a RIC in a subsequent taxable year,we would be required to satisfy the RIC qualification requirements for that year and dispose of any earnings and profits from any year in which wefailed to qualify as a RIC. Subject to a limited exception applicable to RICs that qualified as such under Subchapter M of the Code for at least one yearprior to disqualification and that requalify as a RIC no later than the second year following the non-qualifying year, we could be subject to tax on anyunrealized net built-in gains in the assets held by us during the period in which we failed to qualify as a RIC that are recognized within the subsequent5 years, unless we made a special election to pay corporate-level U.S. federal income tax on such built-in gain at the time of our requalification as aRIC.Investment Advisory FeesPursuant to an investment advisory and management agreement (the “Advisory Agreement”), we have agreed to pay Solar Capital Partners a feefor investment advisory and management services consisting of two components — a base management fee and an incentive fee.The base management fee is calculated at an annual rate of 1.75% of our gross assets. Effective January 1, 2018, the annual rate for the basemanagement fee changed from 2.00% to 1.75%. Effective August 2, 2018, the annual rate is 1.00% on gross assets that exceed 200% of the Company’stotal net assets as of the immediately preceding quarter end. For services rendered under the Investment Advisory and Management Agreement, thebase management fee is payable quarterly in arrears. The base management fee is calculated based on the average value of our gross assets at the end ofthe two most recently completed calendar quarters. For purposes of computing the base management fee, gross assets exclude temporary assets acquiredat the end of each fiscal quarter for purposes of preserving investment flexibility in the next fiscal quarter. Temporary assets include, but are not limitedto, U.S. treasury bills, other short-term U.S. government or government agency securities, repurchase agreements or cash borrowings.The performance-based incentive fee has two parts, as follows: one is calculated and payable quarterly in arrears based on our pre-incentive feenet investment income for the immediately preceding calendar quarter. For this purpose, pre-incentive fee net investment income means interestincome, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment,origination, structuring, diligence and consulting fees or other fees that we receive from portfolio companies) 19Table of Contentsaccrued during the calendar quarter, minus our operating expenses for the quarter (including the base management fee, expenses payable under theAdministration Agreement to Solar Capital Management, and any interest expense and dividend paid on any issued and outstanding preferred stock,but excluding the performance-based incentive fee). Pre-incentive fee net investment income includes, in the case of investments with a deferredinterest feature (such as original issue discount, debt instruments with pay in kind interest and zero coupon securities), accrued income that we havenot yet received in cash. Pre-incentive fee net investment income does not include any realized capital gains, computed net of all realized capitallosses or unrealized capital appreciation or depreciation. Pre-incentive fee net investment income, expressed as a rate of return on the value of our netassets at the end of the immediately preceding calendar quarter, is compared to a hurdle of 1.75% per quarter (7.00% annualized). Our net investmentincome used to calculate this part of the incentive fee is also included in the amount of our gross assets used to calculate the 1.75% base managementfee. We pay Solar Capital Partners an incentive fee with respect to our pre-incentive fee net investment income in each calendar quarter as follows: • no performance-based incentive fee in any calendar quarter in which our pre-incentive fee net investment income does not exceed thehurdle of 1.75%; • 100% of our pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any,that exceeds the hurdle but is less than 2.1875% in any calendar quarter (8.75% annualized). We refer to this portion of our pre-incentivefee net investment income (which exceeds the hurdle but is less than 2.1875%) as the “catch-up.” The “catch-up” is meant to provide ourinvestment adviser with 20% of our pre-incentive fee net investment income as if a hurdle did not apply if this net investment incomeexceeds 2.1875% in any calendar quarter; and • 20% of the amount of our pre-incentive fee net investment income, if any, that exceeds 2.1875% in any calendar quarter (8.75%annualized) is payable to Solar Capital Partners (once the hurdle is reached and the catch-up is achieved, 20% of all pre-incentive feeinvestment income thereafter is allocated to Solar Capital Partners).The following is a graphical representation of the calculation of the income-related portion of the performance-based incentive fee:Quarterly Incentive Fee Based on Net Investment IncomePre-incentive fee net investment income(expressed as a percentage of the value of net assets) Percentage of pre-incentive fee net investment incomeallocated to Solar Capital PartnersThese calculations are appropriately pro-rated for any period of less than three months. You should be aware that a rise in the general level ofinterest rates can be expected to lead to higher interest rates applicable to our debt investments. Accordingly, an increase in interest rates would make iteasier for us to meet or exceed the incentive fee hurdle rate and may result in a substantial increase of the amount of incentive fees payable to ourinvestment adviser with respect to pre-incentive fee net investment income.The second part of the incentive fee is determined and payable in arrears as of the end of each calendar year (or upon termination of theInvestment Advisory and Management Agreement, as of the termination date), and equals 20% of our realized capital gains, if any, on a cumulativebasis from inception through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on acumulative basis, less the aggregate amount of any previously paid capital gain incentive fees with respect to each of the investments in our portfolio. 20Table of ContentsExamples of Quarterly Incentive Fee CalculationExample 1: Income Related Portion of Incentive Fee (*):Alternative 1:AssumptionsInvestment income (including interest, dividends, fees, etc.) = 1.25%Hurdle rate (1) = 1.75%Management fee (2) = 0.4375%Other expenses (legal, accounting, custodian, transfer agent, etc.) (3) = 0.20%Pre-incentive fee net investment income(investment income – (management fee + other expenses)) = 0.6125%Pre-incentive net investment income does not exceed hurdle rate, therefore there is no incentive fee.Alternative 2:AssumptionsInvestment income (including interest, dividends, fees, etc.) = 2.70%Hurdle rate (1) = 1.75%Management fee (2) = 0.4375%Other expenses (legal, accounting, custodian, transfer agent, etc.) (3) = 0.20%Pre-incentive fee net investment income(investment income – (management fee + other expenses)) = 2.0625%Incentive fee = 100% × pre-incentive fee net investment income, subject to the “catch-up” (4)= 100% × (2.0625% – 1.75%)= 0.3125%Alternative 3:AssumptionsInvestment income (including interest, dividends, fees, etc.) = 3.00%Hurdle rate (1) = 1.75%Management fee (2) = 0.4375%Other expenses (legal, accounting, custodian, transfer agent, etc.) (3) = 0.20% 21Table of ContentsPre-incentive fee net investment income(investment income – (management fee + other expenses)) = 2.3625%Incentive fee = 20% × pre-incentive fee net investment income, subject to “catch-up” (4)Incentive fee = 100% × “catch-up” + (20% × (pre-incentive fee net investment income – 2.1875%))Catch-up = 2.1875% – 1.75%= 0.4375%Incentive fee = (100% × 0.4375%) + (20% × (2.3625% – 2.1875%))= 0.4375% + (20% × 0.175%)= 0.4375% + 0.035%= 0.4725% (*)The hypothetical amount of pre-incentive fee net investment income shown is based on a percentage of total net assets.(1)Represents 7% annualized hurdle rate.(2)Represents 1.75% annualized management fee.(3)Excludes organizational and offering expenses.(4)The “catch-up” provision is intended to provide our investment adviser with an incentive fee of 20% on all of our pre-incentive fee netinvestment income as if a hurdle rate did not apply when our net investment income exceeds 2.1875% in any calendar quarter.Example 2: Capital Gains Portion of Incentive Fee:Alternative 1:Assumptions • Year 1: $20 million investment made in Company A (“Investment A”), and $30 million investment made in Company B (“Investment B”) • Year 2: Investment A sold for $50 million and fair market value (“FMV”) of Investment B determined to be $32 million • Year 3: FMV of Investment B determined to be $25 million • Year 4: Investment B sold for $31 millionThe capital gains portion of the incentive fee would be: • Year 1: None • Year 2: Capital gains incentive fee of $6 million ($30 million realized capital gains on sale of Investment A multiplied by 20%) • Year 3: None$5 million (20% multiplied by ($30 million cumulative capital gains less $5 million cumulative capital depreciation)) less $6 million (previouscapital gains fee paid in Year 2) • Year 4: Capital gains incentive fee of $200,000 22Table of Contents$6.2 million ($31 million cumulative realized capital gains multiplied by 20%) less $6 million (capital gains fee taken in Year 2)Alternative 2:Assumptions • Year 1: $20 million investment made in Company A (“Investment A”), $30 million investment made in Company B (“Investment B”) and$25 million investment made in Company C (“Investment C”) • Year 2: Investment A sold for $50 million, FMV of Investment B determined to be $25 million and FMV of Investment C determined to be$25 million • Year 3: FMV of Investment B determined to be $27 million and Investment C sold for $30 million • Year 4: FMV of Investment B determined to be $24 million • Year 5: Investment B sold for $20 millionThe capital gains incentive fee, if any, would be: • Year 1: None • Year 2: $5 million capital gains incentive fee20% multiplied by $25 million ($30 million realized capital gains on Investment A less unrealized capital depreciation on Investment B) • Year 3: $1.4 million capital gains incentive fee(1)$6.4 million (20% multiplied by $32 million ($35 million cumulative realized capital gains less $3 million unrealized capital depreciation)) less$5 million capital gains fee received in Year 2 • Year 4: None • Year 5: None$5 million (20% multiplied by $25 million (cumulative realized capital gains of $35 million less realized capital losses of $10 million)) less$6.4 million cumulative capital gains fee paid in Year 2 and Year 3 (1)As illustrated in Year 3 of Alternative 2 above, if Solar Capital were to be wound up on a date other than December 31 of any year, SolarCapital may have paid aggregate capital gain incentive fees that are more than the amount of such fees that would be payable if SolarCapital had been wound up on December 31 of such year.Payment of Our ExpensesAll investment professionals of the investment adviser and their respective staffs, when and to the extent engaged in providing investmentadvisory and management services, and the compensation and routine overhead expenses of such personnel allocable to such services, are providedand paid for by Solar Capital Partners. We bear all other costs and expenses of our operations and transactions, including (without limitation): • the cost of our organization and public offerings; • the cost of calculating our net asset value, including the cost of any third-party valuation services; • the cost of effecting sales and repurchases of our shares and other securities; • interest payable on debt, if any, to finance our investments; 23Table of Contents • fees payable to third parties relating to, or associated with, making investments, including fees and expenses associated with performingdue diligence reviews of prospective investments and advisory fees; • transfer agent and custodial fees; • fees and expenses associated with marketing efforts; • federal and state registration fees, any stock exchange listing fees; • federal, state and local taxes; • independent directors’ fees and expenses; • brokerage commissions; • fidelity bond, directors and officers errors and omissions liability insurance and other insurance premiums; • direct costs and expenses of administration, including printing, mailing, long distance telephone and staff; • fees and expenses associated with independent audits and outside legal costs; • costs associated with our reporting and compliance obligations under the 1940 Act and applicable federal and state securities laws; and • all other expenses incurred by either Solar Capital Management or us in connection with administering our business, including paymentsunder the Administration Agreement based upon our allocable portion of overhead and other expenses incurred by Solar CapitalManagement in performing its obligations under the Administration Agreement, including rent and the allocable portion of the cost of ourchief compliance officer and our chief financial officer and their respective staffs.Available InformationThe SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that fileelectronically with the SEC. The address of that site is (http://www.sec.gov).Our internet address is www.solarcapltd.com. We make available free of charge on our website our annual report on Form 10-K, quarterly reportson Form 10-Q, current reports on Form 8-K and amendments to those reports as soon as reasonably practicable after we electronically file such materialwith, or furnish it to, the SEC. Information contained on our website is not incorporated by reference into this annual report on Form 10-K, and youshould not consider information contained on our website to be part of this annual report on Form 10-K. Item 1A.Risk FactorsBefore you invest in our securities, you should be aware of various risks, including those described below. You should carefully consider theserisk factors, together with all of the other information included in this annual report on Form 10-K, before you decide whether to make an investmentin our securities. The risks set out below are not the only risks we face. If any of the following events occur, our business, financial condition andresults of operations could be materially adversely affected. In such case, our net asset value and the trading price of our common stock could declineor the value of our preferred stock, debt securities, subscription rights or warrants may decline, and you may lose all or part of your investment.Risks Related to Our InvestmentsWe operate in a highly competitive market for investment opportunities.A number of entities compete with us to make the types of investments that we target in leveraged companies. We compete with other BDCs,public and private funds, commercial and investment banks, 24Table of Contentscommercial financing companies and, to the extent they provide an alternative form of financing, private equity funds. Many of our competitors aresubstantially larger and have considerably greater financial, technical and marketing resources than we do. For example, some competitors may have alower cost of funds and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances ordifferent risk assessments than we have, which could allow them to consider a wider variety of investments and establish more relationships and offerbetter pricing and a more flexible structure than we are able to do. Furthermore, many of our potential competitors are not subject to the regulatoryrestrictions that the 1940 Act imposes on us as a BDC. If we are unable to source attractive investments, we may hold a greater percentage of our assetsin cash and cash equivalents than anticipated, which could impact potential returns on our portfolio. We cannot assure you that the competitivepressures we face will not have a material adverse effect on our business, financial condition and results of operations. Also, as a result of thiscompetition, we may not be able to take advantage of attractive investment opportunities from time to time, and we can offer no assurance that we willbe able to identify and make investments that are consistent with our investment objective.Participants in our industry compete on several factors, including price, flexibility in transaction structure, customer service, reputation, marketknowledge and speed in decision-making. We do not seek to compete primarily based on the interest rates we will offer, and we believe that some ofour competitors may make loans with interest rates that will be comparable to or lower than the rates we offer. We may lose investment opportunities ifwe do not match our competitors’ pricing, terms and structure. However, if we match our competitors’ pricing, terms and structure, we may experiencedecreased net interest income and increased risk of credit loss.Our investments are very risky and highly speculative.We invest primarily in senior secured term loans, stretch-senior loans unitranche loans, mezzanine loans and preferred securities, and selectequity investments issued by leveraged companies.Senior Secured Loans. When we make a senior secured term loan investment, including stretch-senior and unitranche loan investments, in aportfolio company, we generally take a security interest in the available assets of the portfolio company, including the equity interests of itssubsidiaries, which we expect to help mitigate the risk that we will not be repaid. However, there is a risk that the collateral securing our loans maydecrease in value over time, may be difficult to sell in a timely manner, may be difficult to appraise and may fluctuate in value based upon the successof the business and market conditions, including as a result of the inability of the portfolio company to raise additional capital, and, in somecircumstances, our lien could be subordinated to claims of other creditors. In addition, deterioration in a portfolio company’s financial condition andprospects, including its inability to raise additional capital, may be accompanied by deterioration in the value of the collateral for the loan.Consequently, the fact that a loan is secured does not guarantee that we will receive principal and interest payments according to the loan’s terms, or atall, or that we will be able to collect on the loan should we be forced to enforce our remedies.Mezzanine Loans and Preferred Securities. Our mezzanine and preferred investments are generally subordinated to senior loans and aregenerally unsecured. As such, other creditors may rank senior to us in the event of an insolvency. This may result in an above average amount of riskand loss of principal.Equity Investments. When we invest in senior secured loans, stretch-senior loans, unitranche loans, mezzanine loans or preferred securities, wemay acquire common equity securities as well. In certain other unique circumstances we may also make equity investments in businesses that makesenior loans and/or leases, such as our investments in Crystal Financial LLC and NEF Holdings LLC. In addition, we may invest directly in the equitysecurities of portfolio companies without limitation as to market capitalization. For instance, we may invest in thinly traded companies, the prices ofwhich may be subject to erratic market movement. Our goal is ultimately to exit such equity interests and realize gains upon our disposition of suchinterests. However, the equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may 25Table of Contentsnot be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient tooffset any other losses we experience.In addition, investing in middle-market companies involves a number of significant risks, including: • these companies may have limited financial resources and may be unable to meet their obligations under their debt securities that we hold,which may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of us realizing any guaranteeswe may have obtained in connection with our investment; • they typically have shorter operating histories, narrower product lines and smaller market shares than larger businesses, which tend torender them more vulnerable to competitors’ actions and market conditions, as well as general economic downturns; • they are more likely to depend on the management talents and efforts of a small group of persons; therefore, the death, disability,resignation or termination of one or more of these persons could have a material adverse impact on our portfolio company and, in turn, onus; • they generally have less predictable operating results, may from time to time be parties to litigation, may be engaged in rapidly changingbusinesses with products subject to a substantial risk of obsolescence, and may require substantial additional capital to support theiroperations, finance expansion or maintain their competitive position. In addition, our executive officers, directors and our investmentadviser may, in the ordinary course of business, be named as defendants in litigation arising from our investments in the portfoliocompanies; and • they may have difficulty accessing the capital markets to meet future capital needs, which may limit their ability to grow or to repay theiroutstanding indebtedness upon maturity.The lack of liquidity in our investments may make it difficult for us to dispose of our investments at a favorable price, which may adversely affectour ability to meet our investment objectives.We generally make investments in private companies. We invest and expect to continue investing in companies whose securities have noestablished trading market and whose securities are and will be subject to legal and other restrictions on resale or whose securities are and will be lessliquid than are publicly-traded securities. Investments purchased by us that are liquid at the time of purchase may subsequently become illiquid due toevents relating to the issuer of the investments, market events, economic conditions or investor perceptions. The illiquidity of our investments maymake it difficult for us to sell such investments if the need arises. In addition, if we are required to liquidate all or a portion of our portfolio quickly, wemay realize significantly less than the value at which we have previously recorded our investments. As a result, we do not expect to achieve liquidityin our investments in the near-term. However, to maintain our qualification as a BDC and as a RIC, we may have to dispose of investments if we do notsatisfy one or more of the applicable criteria under the respective regulatory frameworks. Domestic and foreign markets are complex and interrelated, sothat events in one sector of the world markets or economy, or in one geographical region, can reverberate and have materially negative consequencesfor other markets, economic or regional sectors in a manner that may not be foreseen and which may negatively impact the liquidity of our investmentsand materially harm our business. In addition, we may face other restrictions on our ability to liquidate an investment in a portfolio company to theextent that we have material non-public information regarding such portfolio company.Our portfolio may be concentrated in a limited number of portfolio companies and industries, which will subject us to a risk of significant loss ifany of these companies performs poorly or defaults on its obligations under any of its debt instruments or if there is a downturn in a particularindustry.Our portfolio may be concentrated in a limited number of portfolio companies and industries. For example, as of December 31, 2018, ourinvestments in Crystal Financial LLC and NEF Holdings LLC comprised 17.4% 26Table of Contentsand 8.6%, respectively, of our total assets and our investments in diversified financial services and multi-sector holdings industries comprised 18.5%and 14.2%, respectively, of our total assets. Beyond the asset diversification requirements associated with our qualification as a RIC under SubchapterM of the Code, we do not have fixed guidelines for diversification, and while we are not targeting any specific industries, our investments may beconcentrated in relatively few industries or portfolio companies. As a result, the aggregate returns we realize may be significantly adversely affected if asmall number of investments perform poorly or if we need to write down the value of any one investment. Additionally, a downturn in any particularindustry in which we are invested could also significantly impact the aggregate returns we realize.Our investments in securities rated below investment grade are speculative in nature and are subject to additional risk factors such as increasedpossibility of default, illiquidity of the security, and changes in value based on changes in interest rates.The securities that we invest in are typically rated below investment grade. Securities rated below investment grade are often referred to as“leveraged loans,” “high yield” or “junk” securities, and may be considered “high risk” compared to debt instruments that are rated investment grade.High yield securities are regarded as having predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repayprincipal in accordance with the terms of the obligations and involve major risk exposure to adverse conditions. In addition, high yield securitiesgenerally offer a higher current yield than that available from higher grade issues, but typically involve greater risk. These securities are especiallysensitive to adverse changes in general economic conditions, to changes in the financial condition of their issuers and to price fluctuation in responseto changes in interest rates. During periods of economic downturn or rising interest rates, issuers of below investment grade instruments may experiencefinancial stress that could adversely affect their ability to make payments of principal and interest and increase the possibility of default. Thesecondary market for high yield securities may not be as liquid as the secondary market for more highly rated securities. In addition, many of our debtinvestments will not fully amortize during their lifetime, which could result in a loss or a substantial amount of unpaid principal and interest due uponmaturity.Price declines and illiquidity in the corporate debt markets have adversely affected, and may continue to adversely affect, the fair value of ourportfolio investments, reducing our net asset value through increased net unrealized depreciation. Any unrealized depreciation that weexperience on our loan portfolio may be an indication of future realized losses, which could reduce our income available for distribution andcould adversely affect our ability to service our outstanding borrowings.As a BDC, we are required to carry our investments at market value or, if no market value is ascertainable, at fair value as determined in goodfaith by or under the direction of our board of directors. Decreases in the market values or fair values of our investments are recorded as unrealizeddepreciation. Any unrealized depreciation in our loan portfolio could be an indication of a portfolio company’s inability to meet its repaymentobligations to us with respect to the affected loans. This could result in realized losses in the future and ultimately in reductions of our incomeavailable for distribution in future periods and could materially adversely affect our ability to service our outstanding borrowings. Depending onmarket conditions, we could incur substantial losses in future periods, which could further reduce our net asset value and have a material adverseimpact on our business, financial condition and results of operations.Global economic, political and market conditions may adversely affect our business, results of operations and financial condition, including ourrevenue growth and profitability.The current worldwide financial market situation, as well as various social and political tensions in the United States and around the world, maycontribute to increased market volatility, may have long-term effects on the U.S. and worldwide financial markets, and may cause economicuncertainties or deterioration in the United States and worldwide. The U.S. and global capital markets experienced extreme volatility and disruptionduring the economic downturn that began in mid-2007, and the U.S. economy was in a recession for several 27Table of Contentsconsecutive calendar quarters during the same period. In 2010, a financial crisis emerged in Europe, triggered by high budget deficits and rising directand contingent sovereign debt, which created concerns about the ability of certain nations to continue to service their sovereign debt obligations.Risks resulting from such debt crisis, including any austerity measures taken in exchange for bailout of certain nations, and any future debt crisis inEurope or any similar crisis elsewhere could have a detrimental impact on the global economic recovery, sovereign and non-sovereign debt in certaincountries and the financial condition of financial institutions generally. In June 2016, the United Kingdom held a referendum in which votersapproved an exit from the European Union (“Brexit”) and, subsequently, on March 29, 2017, the U.K. government began the formal process of leavingthe European Union, which is set to occur on March 29, 2019. Brexit created political and economic uncertainty and instability in the global markets(including currency and credit markets), and especially in the United Kingdom and the European Union, and this uncertainty and instability may lastindefinitely. Because the U.K. Parliament rejected Prime Minister Theresa May’s proposed Brexit deal with the European Union in January 2019, thereis increased uncertainty on the timing of Brexit. There is continued concern about national-level support for the Euro and the accompanyingcoordination of fiscal and wage policy among European Economic and Monetary Union member countries. In addition, the fiscal and monetarypolicies of foreign nations, such as Russia and China, may have a severe impact on the worldwide and U.S. financial markets.The Republican Party currently controls the executive branch and the senate portion of the legislative branch of government, which increases thelikelihood that legislation may be adopted that could significantly affect the regulation of U.S. financial markets. Areas subject to potential change,amendment or repeal include the Dodd-Frank Wall Street Reform and Consumer Protection Act and the authority of the Federal Reserve and theFinancial Stability Oversight Council. For example, in March 2018, the U.S. Senate passed a bill that eased financial regulations and reduced oversightfor certain entities. The United States may also potentially withdraw from or renegotiate various trade agreements and take other actions that wouldchange current trade policies of the United States. We cannot predict which, if any, of these actions will be taken or, if taken, their effect on thefinancial stability of the United States. Such actions could have a significant adverse effect on our business, financial condition and results ofoperations. We cannot predict the effects of these or similar events in the future on the U.S. economy and securities markets or on our investments. Wemonitor developments and seek to manage our investments in a manner consistent with achieving our investment objective, but there can be noassurance that we will be successful in doing so.On May 24, 2018, President Trump signed into law the Economic Growth, Regulatory Relief, and Consumer Protection Act, which increasedfrom $50 billion to $250 billion the asset threshold for designation of “systemically important financial institutions” or “SIFIs” subject to enhancedprudential standards set by the Federal Reserve Board, staggering application of this change based on the size and risk of the covered bank holdingcompany. On May 30, 2018, the Federal Reserve Board voted to consider changes to the Volcker Rule that would loosen compliance requirements forall banks. The effect of this change and any further rules or regulations are and could be complex and far-reaching, and the change and any future lawsor regulations or changes thereto could negatively impact our operations, cash flows or financial condition, impose additional costs on us, intensify theregulatory supervision of us or otherwise adversely affect our business, financial condition and results of operations.Volatility or a prolonged disruption in the credit markets could materially damage our business.We are required to record our assets at fair value, as determined in good faith by our board of directors, in accordance with our valuation policy.As a result, volatility in the capital markets may have a material adverse effect on our valuations and our net asset value, even if we hold investments tomaturity. Volatility or dislocation in the capital markets may depress our stock price below our net asset value per share and create a challengingenvironment in which to raise equity and debt capital. These conditions could continue for a prolonged period of time or worsen in the future. Whilethese conditions persist, we and other companies in the financial services sector may have to access, if available, alternative markets for debt andequity capital. Equity capital may be 28Table of Contentsdifficult to raise because, subject to some limited exceptions which apply to us, as a BDC we are generally not able to issue additional shares of ourcommon stock at a price less than net asset value without first obtaining approval for such issuance from our stockholders and our independentdirectors. At our 2018 Annual Stockholders Meeting, our stockholders approved our ability to sell or otherwise issue shares of our common stock, notexceeding 25% of our then outstanding common stock immediately prior to each such offering, at a price or prices below the then current net assetvalue per share, in each case subject to the approval of our board of directors and compliance with the conditions set forth in the proxy statementpertaining thereto, during a period beginning on October 11, 2018 and expiring on the earlier of the one-year anniversary of the date of the 2018Annual Stockholders Meeting and the date of our 2019 Annual Stockholders Meeting. However, notwithstanding such stockholder approval, since ourinitial public offering on February 9, 2010, we have not sold any shares of our common stock in an offering that resulted in proceeds to us of less thanour then current net asset value per share. Any offering of our common stock that requires stockholder approval must occur, if at all, within one yearafter receiving such stockholder approval. In addition, our ability to incur indebtedness (including by issuing preferred stock) is limited by applicableregulations such that our asset coverage, as defined in the 1940 Act, must equal at least 150% immediately after each time we incur indebtedness. Thedebt capital that will be available, if at all, may be at a higher cost and on less favorable terms and conditions in the future. Any inability to raisecapital could have a negative effect on our business, financial condition and results of operations.Additionally, our ability to incur indebtedness is limited by the asset coverage ratio for a BDC, as defined under the 1940 Act. Decliningportfolio values negatively impact our ability to borrow additional funds because our net asset value is reduced for purposes of the asset coverage ratio.If the fair value of our assets declines substantially, we may fail to maintain the asset coverage ratio stipulated by the 1940 Act, which could, in turn,cause us to lose our status as a BDC and materially impair our business operations. A lengthy disruption in the credit markets could also materiallydecrease demand for our investments.The significant disruption in the capital markets experienced in the past has had, and may in the future have, a negative effect on the valuationsof our investments and on the potential for liquidity events involving our investments. The debt capital that may be available to us in the future maybe at a higher cost and have less favorable terms and conditions than those currently in effect. If our financing costs increase and we have no increase ininterest income, then our net investment income will decrease. A prolonged inability to raise capital may require us to reduce the volume ofinvestments we originate and could have a material adverse impact on our business, financial condition and results of operations. This may alsoincrease the probability that other structural risks negatively impact us. These situations may arise due to circumstances that we may be unable tocontrol, such as a lengthy disruption in the credit markets, a severe decline in the value of the U.S. dollar, a sharp economic downturn or recession or anoperational problem that affects third parties or us, and could materially damage our business, financial condition and results of operations.If we cannot obtain additional capital because of either regulatory or market price constraints, we could be forced to curtail or cease our newlending and investment activities, our net asset value could decrease and our level of distributions and liquidity could be affected adversely.Our ability to secure additional financing and satisfy our financial obligations under indebtedness outstanding from time to time will dependupon our future operating performance, which is subject to the prevailing general economic and credit market conditions, including interest rate levelsand the availability of credit generally, and financial, business and other factors, many of which are beyond our control. The worsening of currenteconomic and capital market conditions could have a material adverse effect on our ability to secure financing on favorable terms, if at all.If we are unable to obtain debt capital, then our equity investors will not benefit from the potential for increased returns on equity resulting fromleverage to the extent that our investment strategy is successful and we may be limited in our ability to make new commitments or fundings to ourportfolio companies. 29Table of ContentsUncertainty relating to the LIBOR calculation process may adversely affect the value of our portfolio of the LIBOR-indexed, floating-rate debtsecurities.In the recent past, concerns have been publicized that some of the member banks surveyed by the British Bankers’ Association (“BBA”) inconnection with the calculation of LIBOR across a range of maturities and currencies may have been under-reporting or otherwise manipulating theinter-bank lending rate applicable to them in order to profit on their derivatives positions or to avoid an appearance of capital insufficiency or adversereputational or other consequences that may have resulted from reporting inter-bank lending rates higher than those they actually submitted. A numberof BBA member banks have entered into settlements with their regulators and law enforcement agencies with respect to alleged manipulation ofLIBOR, and investigations by regulators and governmental authorities in various jurisdictions are ongoing.Actions by the BBA, regulators or law enforcement agencies may result in changes to the manner in which LIBOR is determined. Uncertainty asto the nature of such potential changes may adversely affect the market for LIBOR-based securities, including our portfolio of LIBOR-indexed,floating-rate debt securities. In addition, any further changes or reforms to the determination or supervision of LIBOR may result in a sudden orprolonged increase or decrease in reported LIBOR, which could have an adverse impact on the market for LIBOR-based securities or the value of ourportfolio of LIBOR-indexed, floating-rate debt securities. For example, On July 27, 2017, the United Kingdom’s Financial Conduct Authority, whichregulates LIBOR, announced that it intends to phase out LIBOR by the end of 2021. It is unclear if at that time whether or not LIBOR will cease toexist or if new methods of calculating LIBOR will be established such that it continues to exist after 2021. The U.S. Federal Reserve, in conjunctionwith the Alternative Reference Rates Committee, a steering committee comprised of large US financial institutions, is considering replacing U.S. dollarLIBOR with a new index calculated by short-term repurchase agreements, backed by Treasury securities. The future of LIBOR at this time is uncertain.If LIBOR ceases to exist, we may need to renegotiate the credit agreements extending beyond 2021 with our portfolio companies that utilize LIBOR asa factor in determining the interest rate to replace LIBOR with the new standard that is established.Economic recessions or downturns could impair the ability of our portfolio companies to repay loans and harm our operating results.Many of our portfolio companies may be susceptible to economic slowdowns or recessions and may be unable to repay our loans during theseperiods. Therefore, our non-performing assets may increase and the value of our portfolio may decrease during these periods as we are required torecord the values of our investments. Adverse economic conditions also may decrease the value of collateral securing some of our loans and the valueof our equity investments at fair value. Economic slowdowns or recessions could lead to financial losses in our portfolio and a decrease in revenues, netincome and assets. Unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets or result in adecision by lenders not to extend credit to us. These events could prevent us from increasing investments and result in our receipt of a reduced level ofinterest income from our portfolio companies and/or losses or charge offs related to our investments, and, in turn, may adversely affect distributableincome and have a material adverse effect on our results of operations.A portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and, potentially,acceleration of the time when the loans are due and foreclosure on its secured assets, which could trigger cross-defaults under other agreements andjeopardize the portfolio company’s ability to meet its obligations under the debt that we hold. We may incur additional expenses to the extentnecessary to seek recovery upon default or to negotiate new terms with a defaulting portfolio company. In addition, if one of our portfolio companieswere to go bankrupt, depending on the facts and circumstances, including the extent to which we actually provided significant managerial assistanceto that portfolio company, a bankruptcy court might re-characterize our debt holdings and subordinate all or a portion of our claim to that of othercreditors. 30Table of ContentsThese portfolio companies may face intense competition, including competition from companies with greater financial resources, more extensiveresearch and development, manufacturing, marketing and service capabilities and greater number of qualified and experienced managerial andtechnical personnel. They may need additional financing that they are unable to secure and that we are unable or unwilling to provide, or they may besubject to adverse developments unrelated to the technologies they acquire.We may suffer a loss if a portfolio company defaults on a loan and the underlying collateral is not sufficient.In the event of a default by a portfolio company on a secured loan, we will only have recourse to the assets collateralizing the loan. If theunderlying collateral value is less than the loan amount, we will suffer a loss. In addition, we sometimes make loans that are unsecured, which aresubject to the risk that other lenders may be directly secured by the assets of the portfolio company. In the event of a default, those collateralizedlenders would have priority over us with respect to the proceeds of a sale of the underlying assets. In cases described above, we may lack control overthe underlying asset collateralizing our loan or the underlying assets of the portfolio company prior to a default, and as a result the value of thecollateral may be reduced by acts or omissions by owners or managers of the assets.In the event of bankruptcy of a portfolio company, we may not have full recourse to its assets in order to satisfy our loan, or our loan may besubject to equitable subordination. In addition, certain of our loans are subordinate to other debt of the portfolio company. If a portfolio companydefaults on our loan or on debt senior to our loan, or in the event of a portfolio company bankruptcy, our loan will be satisfied only after the seniordebt receives payment. Where debt senior to our loan exists, the presence of inter-creditor arrangements may limit our ability to amend our loandocuments, assign our loans, accept prepayments, exercise our remedies (through “standstill” periods) and control decisions made in bankruptcyproceedings relating to the portfolio company. Bankruptcy and portfolio company litigation can significantly increase collection losses and the timeneeded for us to acquire the underlying collateral in the event of a default, during which time the collateral may decline in value, causing us to sufferfurther losses.If the value of collateral underlying our loan declines or interest rates increase during the term of our loan, a portfolio company may not be ableto obtain the necessary funds to repay our loan at maturity through refinancing. Decreasing collateral value and/or increasing interest rates may hindera portfolio company’s ability to refinance our loan because the underlying collateral cannot satisfy the debt service coverage requirements necessary toobtain new financing. If a borrower is unable to repay our loan at maturity, we could suffer a loss which may adversely impact our financialperformance.The business, financial condition and results of operations of our portfolio companies could be adversely affected by worldwide economicconditions, as well as political and economic conditions in the countries in which they conduct business.The business and operating results of our portfolio companies may be impacted by worldwide economic conditions. Although the U.S. economyhas in recent years shown signs of recovery from the 2008–2009 global recession, the strength and duration of any economic recovery will be impactedby worldwide economic growth. For instance, concerns of economic slowdown in China and other emerging markets and signs of deterioratingsovereign debt conditions in Europe could lead to disruption and instability in the global financial markets. The significant debt in the United Statesand European countries is expected to hinder growth in those countries for the foreseeable future. In the future, the U.S. government may not be able tomeet its debt payments unless the federal debt ceiling is raised. If legislation increasing the debt ceiling is not enacted, as needed, and the debt ceilingis reached, the U.S. federal government may stop or delay making payments on its obligations. Any default by the U.S. government on its obligationsor any prolonged U.S. government shutdown could negatively impact the U.S. economy and our portfolio companies. Multiple factors relating to theinternational operations of some of our portfolio companies and to particular countries in which they operate could negatively impact their business,financial condition and results of operations. 31Table of ContentsSome of the products of our portfolio companies are developed, manufactured, assembled, tested or marketed outside the United States. Anyconflict or uncertainty in these countries, including due to natural disasters, public health concerns, political unrest or safety concerns, could harmtheir business, financial condition and results of operations. In addition, if the government of any country in which their products are developed,manufactured or sold sets technical or regulatory standards for products developed or manufactured in or imported into their country that are notwidely shared, it may lead some of their customers to suspend imports of their products into that country, require manufacturers or developers in thatcountry to manufacture or develop products with different technical or regulatory standards and disrupt cross-border manufacturing, marketing orbusiness relationships which, in each case, could harm their businesses.Our failure to make follow-on investments in our portfolio companies could impair the value of our portfolio.Following an initial investment in a portfolio company, we may make additional investments in that portfolio company as “follow-on”investments, in order to: (i) increase or maintain in whole or in part our ownership percentage; (ii) exercise warrants, options or convertible securitiesthat were acquired in the original or subsequent financing; or (iii) attempt to preserve or enhance the value of our investment. We may elect not tomake follow-on investments or otherwise lack sufficient funds to make those investments. We will have the discretion to make any follow-oninvestments, subject to the availability of capital resources. The failure to make follow-on investments may, in some circumstances, jeopardize thecontinued viability of a portfolio company and our initial investment, or may result in a missed opportunity for us to increase our participation in asuccessful operation. Even if we have sufficient capital to make a desired follow-on investment, we may elect not to make a follow-on investmentbecause we may not want to increase our concentration of risk, either because we prefer other opportunities or because we are subject to BDCrequirements that would prevent such follow-on investments or the desire to maintain our RIC tax treatment.Where we do not hold controlling equity interests in our portfolio companies, we may not be in a position to exercise control over our portfoliocompanies or to prevent decisions by management of our portfolio companies that could decrease the value of our investments.Although we hold controlling equity positions in some of our portfolio companies, we do not currently hold controlling equity positions in themajority of our portfolio companies. As a result, we are subject to the risk that a portfolio company in which we do not have a controlling interest maymake business decisions with which we disagree, and that the management and/or stockholders of such portfolio company may take risks or otherwiseact in ways that are adverse to our interests. Due to the lack of liquidity of the debt and equity investments that we typically hold in our portfoliocompanies, we may not be able to dispose of our investments in the event we disagree with the actions of a portfolio company and may therefore suffera decrease in the value of our investments.Prepayments of our debt investments by our portfolio companies could adversely impact our results of operations and reduce our return on equity.We are subject to the risk that the investments we make in our portfolio companies may be prepaid prior to maturity. When this occurs, we mayreduce our borrowings outstanding or reinvest these proceeds in temporary investments, pending their future investment in new portfolio companies.These temporary investments, if any, will typically have substantially lower yields than the debt investment being prepaid and we could experiencesignificant delays in reinvesting these amounts. Any future investment in a new portfolio company may also be at lower yields than the debtinvestment that was prepaid. As a result, our results of operations could be materially adversely affected if one or more of our portfolio companies electto prepay amounts owed to us. Additionally, prepayments could negatively impact our return on equity, which could result in a decline in the marketprice of our common stock. 32Table of ContentsWe may choose to waive or defer enforcement of covenants in the debt securities held in our portfolio, which may cause us to lose all or part ofour investment in these companies.We structure the debt investments in our portfolio companies to include business and financial covenants placing affirmative and negativeobligations on the operation of the company’s business and its financial condition. However, from time to time we may elect to waive breaches of thesecovenants, including our right to payment, or waive or defer enforcement of remedies, such as acceleration of obligations or foreclosure on collateral,depending upon the financial condition and prospects of the particular portfolio company. These actions may reduce the likelihood of our receivingthe full amount of future payments of interest or principal and be accompanied by a deterioration in the value of the underlying collateral as many ofthese companies may have limited financial resources, may be unable to meet future obligations and may go bankrupt. This could negatively impactour ability to pay distributions, could adversely affect our results of operation and financial condition and cause the loss of all or part of yourinvestment.Our loans could be subject to equitable subordination by a court which would increase our risk of loss with respect to such loans.Courts may apply the doctrine of equitable subordination to subordinate the claim or lien of a lender against a borrower to claims or liens ofother creditors of the borrower, when the lender or its affiliates is found to have engaged in unfair, inequitable or fraudulent conduct. The courts havealso applied the doctrine of equitable subordination when a lender or its affiliates is found to have exerted inappropriate control over a client,including control resulting from the ownership of equity interests in a client. We have made direct equity investments or received warrants inconnection with loans. Payments on one or more of our loans, particularly a loan to a client in which we may also hold an equity interest, may besubject to claims of equitable subordination. If we were deemed to have the ability to control or otherwise exercise influence over the business andaffairs of one or more of our portfolio companies resulting in economic hardship to other creditors of that company, this control or influence mayconstitute grounds for equitable subordination and a court may treat one or more of our loans as if it were unsecured or common equity in the portfoliocompany. In that case, if the portfolio company were to liquidate, we would be entitled to repayment of our loan on a pro-rata basis with otherunsecured debt or, if the effect of subordination was to place us at the level of common equity, then on an equal basis with other holders of theportfolio company’s common equity only after all of its obligations relating to its debt and preferred securities had been satisfied.An investment strategy focused primarily on privately held companies presents certain challenges, including the lack of available informationabout these companies, a dependence on the talents and efforts of only a few key portfolio company personnel and a greater vulnerability toeconomic downturns.We invest primarily in privately held companies. Generally, little public information exists about these companies, and we are required to rely onthe ability of Solar Capital Partners’ investment professionals to obtain adequate information to evaluate the potential returns from investing in thesecompanies. If we are unable to uncover all material information about these companies, we may not make a fully informed investment decision, and wemay lose money on our investments. Also, smaller privately held companies frequently have less diverse product lines and smaller market presencethan larger competitors. These factors could adversely affect our investment returns as compared to companies investing primarily in the securities ofpublic companies.Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies.We invest primarily in senior secured loans, stretch-senior loans, unitranche loans, mezzanine loans, preferred securities, and equity securitiesissued by our portfolio companies. Our portfolio companies typically have, or may be permitted to incur, other debt that ranks equally with, or seniorto, the debt securities in which we invest. By their terms, such debt instruments may provide that the holders are entitled to receive payment of 33Table of Contentsinterest or principal on or before the dates on which we are entitled to receive payments in respect of the debt securities in which we invest. Also, in theevent of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of debt instruments ranking senior to ourinvestment in that portfolio company would typically be entitled to receive payment in full before we receive any distribution in respect of ourinvestment. After repaying such senior creditors, such portfolio company may not have any remaining assets to use for repaying its obligation to us. Inthe case of debt ranking equally with debt securities in which we invest, we would have to share on an equal basis any distributions with other creditorsholding such debt in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company. Any suchlimitations on the ability of our portfolio companies to make principal or interest payments to us, if at all, may reduce our net asset value and have anegative material adverse impact to our business, financial condition and results of operation.Our investments in foreign securities may involve significant risks in addition to the risks inherent in U.S. investments.Our investment strategy contemplates potential investments in debt securities of foreign companies, including emerging market companies.Investing in foreign companies may expose us to additional risks not typically associated with investing in U.S. companies. These risks includechanges in exchange control regulations, political and social instability, expropriation, imposition of foreign taxes, less liquid markets and lessavailable information than is generally the case in the United States, higher transaction costs, less government supervision of exchanges, brokers andissuers, less developed bankruptcy laws, difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards and greaterprice volatility. These risks may be more pronounced for portfolio companies located or operating primarily in emerging markets, whose economies,markets and legal systems may be less developed.Although most of our investments will be U.S. dollar-denominated, any investments denominated in a foreign currency will be subject to the riskthat the value of a particular currency will change in relation to one or more other currencies. Among the factors that may affect currency values aretrade balances, the level of short-term interest rates, differences in relative values of similar assets in different currencies, long-term opportunities forinvestment and capital appreciation, and political developments. We may employ hedging techniques to minimize these risks, but we can offer noassurance that we will, in fact, hedge currency risk, or that if we do, such strategies will be effective.We may expose ourselves to risks if we engage in hedging transactions.If we engage in hedging transactions, we may expose ourselves to risks associated with such transactions. We may utilize instruments such asforward contracts, currency options and interest rate swaps, caps, collars and floors to seek to hedge against fluctuations in the relative values of ourportfolio positions from changes in currency exchange rates and market interest rates. Hedging against a decline in the values of our portfolio positionsdoes not eliminate the possibility of fluctuations in the values of such positions or prevent losses if the values of such positions decline. However, suchhedging can establish other positions designed to gain from those same developments, thereby offsetting the decline in the value of such portfoliopositions. Such hedging transactions may also limit the opportunity for gain if the values of the underlying portfolio positions should increase. It maynot be possible to hedge against an exchange rate or interest rate fluctuation that is so generally anticipated that we are not able to enter into a hedgingtransaction at an acceptable price.The success of our hedging transactions will depend on our ability to correctly predict movements in currencies and interest rates. Therefore,while we may enter into such transactions to seek to reduce currency exchange rate and interest rate risks, unanticipated changes in currency exchangerates or interest rates may result in poorer overall investment performance than if we had not engaged in any such hedging transactions. In addition, thedegree of correlation between price movements of the instruments used in a hedging strategy and price movements in the portfolio positions beinghedged may vary. Moreover, for a variety of reasons, we may 34Table of Contentsnot seek to establish a perfect correlation between such hedging instruments and the portfolio holdings being hedged. Any such imperfect correlationmay prevent us from achieving the intended hedge and expose us to risk of loss. In addition, it may not be possible to hedge fully or perfectly againstcurrency fluctuations affecting the value of securities denominated in non-U.S. currencies because the value of those securities is likely to fluctuate asa result of factors not related to currency fluctuations. To the extent we engage in hedging transactions, we also face the risk that counterparties to thederivative instruments we hold may default, which may expose us to unexpected losses from positions where we believed that our risk had beenappropriately hedged.Our investment adviser may not be able to achieve the same or similar returns as those achieved for other funds it currently manages or by oursenior investment professionals while they were employed at prior positions.Our investment adviser manages other funds, including other BDCs, and may manage other entities in the future. The track record andachievements of these other entities are not necessarily indicative of future results that will be achieved by our investment adviser because these otherentities may have investment objectives and strategies that differ from ours. Additionally, although in the past our senior investment professionals heldsenior positions at a number of investment firms, their track record and achievements are not necessarily indicative of future results that will beachieved by our investment adviser. In their roles at such other firms, our senior investment professionals were part of investment teams, and they werenot solely responsible for generating investment ideas. In addition, such investment teams arrived at investment decisions by consensus.Risks Relating to an Investment in Our SecuritiesOur shares may trade at a substantial discount from net asset value and may continue to do so over the long term.Shares of BDCs may trade at a market price that is less than the net asset value that is attributable to those shares. The possibility that our sharesof common stock will trade at a substantial discount from net asset value over the long term is separate and distinct from the risk that our net assetvalue will decrease. We cannot predict whether shares of our common stock will trade above, at or below our net asset value in the future. If ourcommon stock trades below its net asset value, we will generally not be able to issue additional shares or sell our common stock at its market pricewithout first obtaining the approval for such issuance from our stockholders and our independent directors. At our 2018 Annual Stockholders Meeting,our stockholders approved our ability to sell or otherwise issue shares of our common stock, not exceeding 25% of our then outstanding common stockimmediately prior to each such offering, at a price or prices below the then current net asset value per share, in each case subject to the approval of ourboard of directors and compliance with the conditions set forth in the proxy statement pertaining thereto, during a period beginning on October 11,2018 and expiring on the earlier of the one-year anniversary of the date of the 2018 Annual Stockholders Meeting and the date of our 2019 AnnualStockholders Meeting. However, notwithstanding such stockholder approval, since our initial public offering on February 9, 2010, we have not soldany shares of our common stock in an offering that resulted in proceeds to us of less than our then current net asset value per share. Any offering of ourcommon stock that requires stockholder approval must occur, if at all, within one year after receiving such stockholder approval. If additional funds arenot available to us, we could be forced to curtail or cease our new lending and investment activities, and our net asset value could decrease and ourlevel of distributions could be impacted.Our common stock price may be volatile and may decrease substantially.The trading price of our common stock may fluctuate substantially. The price of our common stock that will prevail in the market may be higheror lower than the price you pay, depending on many factors, some of which are beyond our control and may not be directly related to our operatingperformance. These factors include, but are not limited to, the following: • price and volume fluctuations in the overall stock market from time to time; 35Table of Contents • investor demand for our shares; • significant volatility in the market price and trading volume of securities of BDCs or other companies in our sector, which are notnecessarily related to the operating performance of these companies; • exclusion of our common stock from certain market indices, such as the Russell 2000 Financial Services Index, which could reduce theability of certain investment funds to own our common stock and put short-term selling pressure on our common stock; • changes in regulatory policies or tax guidelines with respect to RICs or BDCs; • failure to qualify as a RIC, or the loss of RIC tax treatment; • any shortfall in revenue or net income or any increase in losses from levels expected by investors or securities analysts; • changes, or perceived changes, in the value of our portfolio investments; • departures of Solar Capital Partners’ key personnel; • operating performance of companies comparable to us; • changes in the prevailing interest rates; • loss of a major funding source; or • general economic conditions and trends and other external factors.Our business and operation could be negatively affected if we become subject to any securities litigation or shareholder activism, which couldcause us to incur significant expense, hinder execution of investment strategy and impact our stock price.In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been broughtagainst that company. Shareholder activism, which could take many forms or arise in a variety of situations, has been increasing in the BDC spacerecently. While we are currently not subject to any securities litigation or shareholder activism, due to the potential volatility of our stock price and fora variety of other reasons, we may in the future become the target of securities litigation or shareholder activism. Securities litigation and shareholderactivism, including potential proxy contests, could result in substantial costs and divert management’s and our board of directors’ attention andresources from our business. Additionally, such securities litigation and shareholder activism could give rise to perceived uncertainties as to our future,adversely affect our relationships with service providers and make it more difficult to attract and retain qualified personnel. Also, we may be required toincur significant legal fees and other expenses related to any securities litigation and activist shareholder matters. Further, our stock price could besubject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any securities litigation and shareholderactivism.There is a risk that our stockholders may not receive distributions or that our distributions may not grow over time.We intend to make distributions on a quarterly basis to our stockholders out of assets legally available for distribution. We cannot assure youthat we will achieve investment results that will allow us to make a specified level of cash distributions or year-to-year increases in cash distributions.In addition, due to the asset coverage test applicable to us as a BDC, we may be limited in our ability to make distributions. To the extent we makedistributions to stockholders which include a return of capital, that portion of the distribution essentially constitutes a return of the stockholders’investment. Although such return of capital may not be taxable, such distributions may increase an investor’s tax liability for capital gains upon thefuture sale of our common stock. 36Table of ContentsAs a RIC, if we do not distribute a certain percentage of our income annually, we may suffer adverse tax consequences, including possibly losingthe U.S. federal income tax benefits allowable to RICs. We cannot assure you that you will receive distributions at a particular level or at all.We may choose to pay distributions in our own common stock, in which case our stockholders may be required to pay U.S. federal income taxes inexcess of the cash distributions they receive.We may distribute taxable distributions that are payable in cash or shares of our common stock at the election of each stockholder. Under certainapplicable provisions of the Code and the Treasury regulations, distributions payable of a publicly offered RIC that are in cash or in shares of stock atthe election of stockholders may be treated as taxable distributions. The Internal Revenue Service has issued a revenue procedure indicating that thisrule will apply if the total amount of cash to be distributed is not less than 20% of the total distribution. Under this revenue procedure, if too manystockholders elect to receive their distributions in cash, the cash available for distribution must be allocated among the stockholders electing to receivecash (with the balance of distributions paid in stock). If we decide to make any distributions consistent with this revenue procedure that are payable inpart in our stock, taxable stockholders receiving such distributions will be required to include the full amount of the distribution (whether received incash, our stock, or a combination thereof) as ordinary income (or as long-term capital gain to the extent such distribution is properly reported as acapital gain distribution) to the extent of our current and accumulated earnings and profits for U.S. federal income tax purposes. As a result, a U.S.stockholder may be required to pay tax with respect to such distributions in excess of any cash received. If a U.S. stockholder sells the stock it receivesas a distribution in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the distribution, dependingon the market price of our stock at the time of the sale. Furthermore, with respect to non-U.S. stockholders, we may be required to withhold U.S. taxwith respect to such distributions, including in respect of all or a portion of such distribution that is payable in stock. If a significant number of ourstockholders determine to sell shares of our stock in order to pay taxes owed on distributions, it may put downward pressure on the trading price of ourstock.Sales of substantial amounts of our common stock in the public market may have an adverse effect on the market price of our common stock.The shares of our common stock beneficially owned by each of Messrs. Gross and Spohler immediately prior to completion of our initial publicoffering, including any shares that are attributable to such shares issued pursuant to our dividend reinvestment plan, are no longer subject to lock-uprestrictions that each of Messrs. Gross and Spohler agreed to in connection with our initial public offering, and are generally available for resalewithout restriction, subject to the provisions of Rule 144 promulgated under the Securities Act. In addition, on November 30, 2010, Messrs. Gross andSpohler jointly acquired 115,000 shares of our common stock in a private placement transaction conducted in accordance with Regulation D under theSecurities Act. Such shares have been registered with the SEC and are generally available for resale. Sales of substantial amounts of our common stock,or the availability of such common stock for sale, could adversely affect the prevailing market prices for our common stock. If this occurs andcontinues, it could impair our ability to raise additional capital through the sale of securities should we desire to do so.Delays in the government budget process or a government shutdown may adversely affect our operations and may prevent us from conducting asecurities offering.Each year, the U.S. Congress must pass all spending bills in the federal budget. If any such spending bill is not timely passed, a governmentshutdown will close many federally run operations, which may include those of the SEC, and halt work for federal employees unless they areconsidered essential or such work is separately funded by industry. If a government shutdown were to occur, and the SEC were to remain closed for aprolonged period of time, we may not be able to conduct a securities offering. Our ability to raise additional capital through the sale of securities couldbe materially affected by any prolonged government shutdown. 37Table of ContentsWe may be unable to invest the net proceeds raised from any offerings on acceptable terms or allocate net proceeds from any offering of oursecurities in ways with which you may not agree.We cannot assure you that we will be able to find enough appropriate investments that meet our investment criteria or that any investment wecomplete using the proceeds from any securities offering will produce a sufficient return. Until we identify new investment opportunities, we intend toeither invest the net proceeds of future offerings in cash equivalents, U.S. government securities and other high-quality debt investments that mature inone year or less or use the net proceeds from such offerings to reduce then-outstanding obligations.We have significant flexibility in investing the net proceeds of any offering of our securities and may use the net proceeds from an offering inways with which you may not agree or for purposes other than those contemplated at the time of the offering.The net asset value per share of our common stock may be diluted if we issue or sell shares of our common stock at prices below the then currentnet asset value per share of our common stock or securities to subscribe for or convertible into shares of our common stock.At our 2018 Annual Stockholders Meeting, our stockholders approved our ability to sell or otherwise issue shares of our common stock, notexceeding 25% of our then outstanding common stock immediately prior to each such offering, at a price or prices below the then current net assetvalue per share, in each case subject to the approval of our board of directors and compliance with the conditions set forth in the proxy statementpertaining thereto, during a period beginning on October 11, 2018 and expiring on the earlier of the one-year anniversary of the date of the 2018Annual Stockholders Meeting and the date of our 2019 Annual Stockholders Meeting. However, notwithstanding such stockholder approval, since ourinitial public offering on February 9, 2010, we have not sold any shares of our common stock in an offering that resulted in proceeds to us of less thanour then current net asset value per share. Any offering of our common stock that requires stockholder approval must occur, if at all, within one yearafter receiving such stockholder approval.In addition, at our 2011 Annual Stockholders Meeting, our stockholders authorized us to sell or otherwise issue warrants or securities tosubscribe for or convertible into shares of our common stock subject to certain limitations (including, without limitation, that the number of sharesissuable does not exceed 25% of our then outstanding common stock and that the exercise or conversion price thereof is not, at the date of issuance,less than the market value per share of our common stock). Such authorization has no expiration.We may also use newly issued shares to implement our dividend reinvestment plan, whether our shares are trading at a premium or at a discountto our then current net asset value per share. Any decision to issue or sell shares of our common stock below our then current net asset value per share orsecurities to subscribe for or convertible into shares of our common stock would be subject to the determination by our board of directors that suchissuance or sale is in our and our stockholders’ best interests.If we were to issue or sell shares of our common stock below our then current net asset value per share, such issuances or sales would result in animmediate dilution to the net asset value per share of our common stock. This dilution would occur as a result of the issuance or sale of shares at a pricebelow the then current net asset value per share of our common stock and a proportionately greater decrease in the stockholders’ interest in ourearnings and assets and their voting interest in us than the increase in our assets resulting from such issuance or sale. Because the number of shares ofcommon stock that could be so issued and the timing of any issuance is not currently known, the actual dilutive effect cannot be predicted.In addition, if we issue warrants or securities to subscribe for or convertible into shares of our common stock, subject to certain limitations, theexercise or conversion price per share could be less than net asset value per share at the time of exercise or conversion (including through the operationof anti-dilution protections). Because we would incur expenses in connection with any issuance of such securities, such issuance could result 38Table of Contentsin a dilution of the net asset value per share at the time of exercise or conversion. This dilution would include reduction in net asset value per share as aresult of the proportionately greater decrease in the stockholders’ interest in our earnings and assets and their voting interest than the increase in ourassets resulting from such issuance.Further, if our current stockholders do not purchase any shares to maintain their percentage interest, regardless of whether such offering is aboveor below the then current net asset value per share, their voting power will be diluted. For example, if we sell an additional 10% of our common stock ata 5% discount from net asset value, a stockholder who does not participate in that offering for its proportionate interest will suffer net asset valuedilution of up to 0.5% or $5 per $1,000 of net asset value.Similarly, all distributions declared in cash payable to stockholders that are participants in our dividend reinvestment plan are generallyautomatically reinvested in shares of our common stock. As a result, stockholders that do not participate in the dividend reinvestment plan mayexperience dilution over time. Stockholders who do not elect to receive distributions in shares of common stock may experience accretion to the netasset value of their shares if our shares are trading at a premium and dilution if our shares are trading at a discount. The level of accretion or discountwould depend on various factors, including the proportion of our stockholders who participate in the plan, the level of premium or discount at whichour shares are trading and the amount of the distribution payable to a stockholder.If we issue preferred stock, the net asset value and market value of our common stock may become more volatile.We cannot assure you that the issuance of preferred stock would result in a higher yield or return to the holders of the common stock. Theissuance of preferred stock would likely cause the net asset value and market value of the common stock to become more volatile. If the distributionrate on the preferred stock were to approach the net rate of return on our investment portfolio, the benefit of leverage to the holders of the commonstock would be reduced. If the distribution rate on the preferred stock were to exceed the net rate of return on our portfolio, the leverage would result ina lower rate of return to the holders of common stock than if we had not issued preferred stock. Any decline in the net asset value of our investmentswould be borne entirely by the holders of common stock. Therefore, if the market value of our portfolio were to decline, the leverage would result in agreater decrease in net asset value to the holders of common stock than if we were not leveraged through the issuance of preferred stock. This greaternet asset value decrease would also tend to cause a greater decline in the market price for the common stock. We might be in danger of failing tomaintain the required asset coverage of the preferred stock or of losing our ratings on the preferred stock or, in an extreme case, our current investmentincome might not be sufficient to meet the distribution requirements on the preferred stock. In order to counteract such an event, we might need toliquidate investments in order to fund a redemption of some or all of the preferred stock. In addition, we would pay (and the holders of common stockwould bear) all costs and expenses relating to the issuance and ongoing maintenance of the preferred stock, including higher advisory fees if our totalreturn exceeds the distribution rate on the preferred stock. Holders of preferred stock may have different interests than holders of common stock andmay at times have disproportionate influence over our affairs.Our board of directors is authorized to reclassify any unissued shares of common stock into one or more classes of preferred stock, which couldconvey special rights and privileges to its owners.Under Maryland General Corporation Law and our charter, our board of directors is authorized to classify and reclassify any authorized butunissued shares of stock into one or more classes of stock, including preferred stock. Prior to issuance of shares of each class or series, the board ofdirectors is required by Maryland law and our charter to set the preferences, conversion or other rights, voting powers, restrictions, limitations as toother distributions, qualifications and terms or conditions of redemption for each class or series. Thus, the board of directors could authorize theissuance of shares of preferred stock with terms and conditions which could have 39Table of Contentsthe effect of delaying, deferring or preventing a transaction or a change in control that might involve a premium price for holders of our common stockor otherwise be in their best interest. The cost of any such reclassification would be borne by our existing common stockholders. The issuance of sharesof preferred stock convertible into shares of common stock might also reduce the net income and net asset value per share of our common stock uponconversion, provided, that we will only be permitted to issue such convertible preferred stock to the extent we comply with the requirements ofSection 61 of the 1940 Act, including obtaining common stockholder approval. These effects, among others, could have an adverse effect on yourinvestment in our common stock.Certain matters under the 1940 Act require the separate vote of the holders of any issued and outstanding preferred stock. For example, holders ofpreferred stock would vote separately from the holders of common stock on a proposal to cease operations as a BDC. In addition, the 1940 Act providesthat holders of preferred stock are entitled to vote separately from holders of common stock to elect two preferred stock directors. In the eventdistributions become two full years in arrears, holders of any preferred stock would have the right to elect a majority of the directors until sucharrearage is completely eliminated. Preferred stockholders also have class voting rights on certain matters, including changes in fundamentalinvestment restrictions and conversion to open-end status, and accordingly can veto any such changes. Restrictions imposed on the declarations andpayment of distributions to the holders of our common stock and preferred stock, both by the 1940 Act and by requirements imposed by ratingagencies or the terms of our credit facilities, might impair our ability to maintain our qualification for tax treatment as a RIC for U.S. federal income taxpurposes. While we would intend to redeem our preferred stock to the extent necessary to enable us to distribute our income as required to maintain ourqualification as a RIC, there can be no assurance that such actions could be effected in time to meet the tax requirements.To the extent we use debt or preferred stock to finance our investments, changes in interest rates will affect our cost of capital and net investmentincome.To the extent we borrow money, or issue preferred stock, to make investments, our net investment income will depend, in part, upon thedifference between the rate at which we borrow funds or pay distributions on preferred stock and the rate at which we invest those funds. As a result, wecan offer no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income in theevent we use debt to finance our investments. In periods of rising interest rates, our cost of funds would increase, except to the extent we issue fixed ratedebt or preferred stock, which could reduce our net investment income. We expect that our long-term fixed-rate investments will be financed primarilywith equity and long-term debt. We may use interest rate risk management techniques in an effort to limit our exposure to interest rate fluctuations.Such techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act.You should also be aware that a rise in the general level of interest rates can be expected to lead to higher interest rates applicable to our debtinvestments. Accordingly, an increase in interest rates would make it easier for us to meet or exceed the incentive fee hurdle rate and may result in asubstantial increase of the amount of incentive fees payable to our investment adviser with respect to our pre-incentive fee net investment income.We may in the future determine to fund a portion of our investments with preferred stock, which would magnify the potential for loss and the risksof investing in us in a similar way as our borrowings.Preferred stock, which is another form of leverage, has the same risks to our common stockholders as borrowings because the distributions on anypreferred stock we issue must be cumulative. Payment of such distributions and repayment of the liquidation preference of such preferred stock musttake preference over any distributions or other payments to our common stockholders, and preferred stockholders are not subject to any of our expensesor losses and are not entitled to participate in any income or appreciation in excess of their stated preference. 40Table of ContentsRisks Relating to Our Business and StructureWe are dependent upon Solar Capital Partners’ key personnel for our future success.We depend on the diligence, skill and network of business contacts of Messrs. Gross and Spohler, who serve as the managing partners of SolarCapital Partners and who lead Solar Capital Partners’ investment team. Messrs. Gross and Spohler, together with the other dedicated investmentprofessionals available to Solar Capital Partners, evaluate, negotiate, structure, close and monitor our investments. Our future success will depend onthe diligence, skill, network of business contacts and continued service of Messrs. Gross and Spohler and the other investment professionals availableto Solar Capital Partners. We cannot assure you that unforeseen business, medical, personal or other circumstances would not lead any such individualto terminate his relationship with us. The loss of Mr. Gross or Mr. Spohler, or any of the other senior investment professionals who serve on SolarCapital Partners’ investment team, could have a material adverse effect on our ability to achieve our investment objective as well as on our financialcondition and results of operations. In addition, we can offer no assurance that Solar Capital Partners will remain our investment adviser.The senior investment professionals of Solar Capital Partners are and may in the future become affiliated with entities engaged in businessactivities similar to those intended to be conducted by us, and may have conflicts of interest in allocating their time. We expect that Messrs. Gross andSpohler will dedicate a significant portion of their time to the activities of Solar Capital; however, they may be engaged in other business activitieswhich could divert their time and attention in the future. Specifically each of Messrs. Gross and Spohler serve as Chief Executive Officer and ChiefOperating Officer, respectively, of Solar Senior Capital Ltd. and SCP Private Credit Income BDC LLC.Our business model depends to a significant extent upon strong referral relationships with financial sponsors, and the inability of the seniorinvestment professionals of our investment adviser to maintain or develop these relationships, or the failure of these relationships to generateinvestment opportunities, could adversely affect our business.We expect that the principals of our investment adviser will maintain and develop their relationships with financial sponsors, and we will rely toa significant extent upon these relationships to provide us with potential investment opportunities. If the senior investment professionals of ourinvestment adviser fail to maintain their existing relationships or develop new relationships with other sponsors or sources of investment opportunities,we will not be able to grow our investment portfolio. In addition, individuals with whom the senior investment professionals of our investment adviserhave relationships are not obligated to provide us with investment opportunities, and, therefore, there is no assurance that such relationships willgenerate investment opportunities for us. If our investment adviser is unable to source investment opportunities, we may hold a greater percentage ofour assets in cash and cash equivalents than anticipated, which could impact potential returns on our portfolio.A disruption in the capital markets and the credit markets could negatively affect our business.As a BDC, we must maintain our ability to raise additional capital for investment purposes. Without sufficient access to the capital markets orcredit markets, we may be forced to curtail our business operations or we may not be able to pursue new business opportunities. Disruptive conditionsin the financial industry and the impact of new legislation in response to those conditions could restrict our business operations and could adverselyimpact our results of operations and financial condition.If the fair value of our assets declines substantially, we may fail to maintain the asset coverage ratios imposed upon us by the 1940 Act and ourexisting credit facilities. Any such failure could result in an event of default and all of our debt being declared immediately due and payable and wouldaffect our ability to issue senior securities, including borrowings, and pay distributions, which could materially impair our business operations. Ourliquidity could be impaired further by an inability to access the capital markets or to draw on our credit facilities. For example, we cannot be certainthat we will be able to renew our existing credit facilities as 41Table of Contentsthey mature or to consummate new borrowing facilities to provide capital for normal operations, including new originations. Reflecting concern aboutthe stability of the financial markets, many lenders and institutional investors have reduced or ceased providing funding to borrowers. This marketturmoil and tightening of credit have led to increased market volatility and widespread reduction of business activity generally.If we are unable to renew or replace our existing credit facilities and consummate new facilities on commercially reasonable terms, our liquiditywill be reduced significantly. If we consummate new facilities but are then unable to repay amounts outstanding under such facilities and are declaredin default or are unable to renew or refinance these facilities, we would not be able to initiate significant originations or to operate our business in thenormal course. These situations may arise due to circumstances that we may be unable to control, such as inaccessibility to the credit markets, a severedecline in the value of the U.S. dollar, a further economic downturn or an operational problem that affects third parties or us, and could materiallydamage our business. Moreover, we are unable to predict when economic and market conditions may become more favorable. Even if such conditionsimprove broadly and significantly over the long term, adverse conditions in particular sectors of the financial markets could adversely impact ourbusiness.Our financial condition and results of operations will depend on Solar Capital Partners’ ability to manage our future growth effectively byidentifying, investing in and monitoring companies that meet our investment criteria.Our ability to achieve our investment objective and to grow depends on Solar Capital Partners’ ability to identify, invest in and monitorcompanies that meet our investment criteria. Accomplishing this result on a cost-effective basis is largely a function of Solar Capital Partners’structuring of the investment process, its ability to provide competent, attentive and efficient services to us and its ability to access financing for us onacceptable terms. The investment team of Solar Capital Partners has substantial responsibilities under the Investment Advisory and ManagementAgreement, and they may also be called upon to provide managerial assistance to our portfolio companies as the principals of our administrator. Inaddition, the members of Solar Capital Partners’ investment team have similar responsibilities with respect to the management of other investmentportfolios, including Solar Senior Capital Ltd.’s investment portfolio and SCP Private Credit Income BDC LLC’s investment portfolio. Such demandson their time may distract them or slow our rate of investment. In order to grow, we and Solar Capital Partners will need to retain, train, supervise andmanage new investment professionals. However, we can offer no assurance that any such investment professionals will contribute effectively to thework of the investment adviser. Any failure to manage our future growth effectively could have a material adverse effect on our business, financialcondition and results of operations.We may need to raise additional capital to grow because we must distribute most of our income.We may need additional capital to fund growth in our investments. We expect to issue equity securities and expect to borrow from financialinstitutions in the future. A reduction in the availability of new capital could limit our ability to grow. We must distribute at least 90% of ourinvestment company taxable income to our stockholders to maintain our tax treatment as a RIC. As a result, any such cash earnings may not beavailable to fund investment originations. We expect to borrow from financial institutions and issue additional debt and equity securities. If we fail toobtain funds from such sources or from other sources to fund our investments, it could limit our ability to grow, which may have an adverse effect onthe value of our securities. In addition, as a BDC, our ability to borrow or issue additional preferred stock may be restricted if our total assets are lessthan 150% of our total borrowings and preferred stock.Any failure on our part to maintain our status as a BDC would reduce our operating flexibility and we may be limited in our investment choicesas a BDC.The 1940 Act imposes numerous constraints on the operations of BDCs. For example, BDCs are required to invest at least 70% of their totalassets in specified types of securities, primarily in private companies or thinly- 42Table of Contentstraded U.S. public companies, cash, cash equivalents, U.S. government securities and other high quality debt investments that mature in one year orless. Furthermore, any failure to comply with the requirements imposed on BDCs by the 1940 Act could cause the SEC to bring an enforcement actionagainst us and/or expose us to claims of private litigants. In addition, upon approval of a majority of our stockholders, we may elect to withdraw ourstatus as a BDC. If we decide to withdraw our election, or if we otherwise fail to qualify, or maintain our qualification, as a BDC, we may be subject tothe substantially greater regulation under the 1940 Act as a closed-end investment company. Compliance with such regulations would significantlydecrease our operating flexibility, and could have a material adverse effect on our business, financial condition and results of operations.Regulations governing our operation as a BDC affect our ability to, and the way in which we will, raise additional capital. As a BDC, thenecessity of raising additional capital may expose us to risks, including the typical risks associated with leverage.In order to satisfy the tax requirements applicable to a RIC, to avoid payment of excise taxes and to minimize or avoid payment of income taxes,we intend to distribute to our stockholders substantially all of our ordinary income and realized net capital gains except for certain realized net long-term capital gains, which we may retain, pay applicable income taxes with respect thereto and elect to treat as deemed distributions to our stockholders.We may issue debt securities or preferred stock and/or borrow money from banks or other financial institutions, which we refer to collectively as“senior securities,” up to the maximum amount permitted by the 1940 Act. Under the provisions of the 1940 Act, we had been permitted, as a BDC, toissue senior securities in amounts such that our asset coverage ratio, as defined in the 1940 Act, equals at least 200% of gross assets less all liabilitiesand indebtedness not represented by senior securities, after each issuance of senior securities. However, our stockholders have approved a resolutionpermitting us to be subject to a 150% asset coverage ratio effective as of October 12, 2018. If the value of our assets declines, we may be unable tosatisfy the asset coverage test. If that happens, we may be required to sell a portion of our investments and, depending on the nature of our leverage,repay a portion of our indebtedness at a time when such sales may be disadvantageous. Also, any amounts that we use to service our indebtednesswould not be available for distributions to our common stockholders. Furthermore, as a result of issuing senior securities, we would also be exposed totypical risks associated with leverage, including an increased risk of loss. In addition, because our management fee is calculated as a percentage of ourgross assets, which includes any borrowings for investment purposes, the management fee expenses will increase if we incur additional indebtedness.As of December 31, 2018, we had $146.4 million outstanding under our credit facility (the “Credit Facility”), composed of $96.4 million ofrevolving credit and $50 million outstanding of term loans, $53.8 million outstanding under our SSLP credit facility (the “SSLP Facility”) and$30 million outstanding under our NEFPASS SPV credit facility (the “NEFPASS Facility”). We also had $75 million outstanding of the 2023Unsecured Notes, $150 million outstanding of the 2022 Unsecured Notes, and $21 million outstanding of the 2022 Tranche C Notes. If we issuepreferred stock, the preferred stock would rank “senior” to common stock in our capital structure, preferred stockholders would generally vote togetherwith common stockholders but would have separate voting rights on certain matters and might have other rights, preferences, or privileges morefavorable than those of our common stockholders, and the issuance of preferred stock could have the effect of delaying, deferring or preventing atransaction or a change of control that might involve a premium price for holders of our common stock or otherwise be in your best interest.We are not generally able to issue and sell our common stock at a price below net asset value per share. We may, however, sell our common stock,or warrants, options or rights to acquire our common stock, at a price below the then-current net asset value per share of our common stock if our boardof directors determines that such sale is in the best interests of Solar Capital and its stockholders, and our stockholders approve such sale. In any suchcase, the price at which our securities are to be issued and sold may not be less than a price that, in the determination of our board of directors, closelyapproximates the market value of such securities (less any distributing commission or discount). If we raise additional funds by issuing more commonstock or senior 43Table of Contentssecurities convertible into, or exchangeable for, our common stock, then the percentage ownership of our stockholders at that time will decrease, andyou might experience dilution. This dilution would occur as a result of a proportionately greater decrease in a stockholder’s interest in our earningsand assets and voting interest in us than the increase in our assets resulting from such issuance. Because the number of future shares of common stockthat may be issued below our net asset value per share and the price and timing of such issuances are not currently known, we cannot predict the actualdilutive effect of any such issuance. We cannot determine the resulting reduction in our net asset value per share of any such issuance. We also cannotpredict whether shares of our common stock will trade above, at or below our net asset value.At our 2018 Annual Stockholders Meeting, our stockholders approved our ability to sell or otherwise issue shares of our common stock, notexceeding 25% of our then outstanding common stock immediately prior to each such offering, at a price or prices below the then current net assetvalue per share, in each case subject to the approval of our board of directors and compliance with the conditions set forth in the proxy statementpertaining thereto, during a period beginning on October 11, 2018 and expiring on the earlier of the one-year anniversary of the date of the 2018Annual Stockholders Meeting and the date of our 2019 Annual Stockholders Meeting. However, notwithstanding such stockholder approval, since ourinitial public offering on February 9, 2010, we have not sold any shares of our common stock in an offering that resulted in proceeds to us of less thanour then current net asset value per share. Any offering of our common stock that requires stockholder approval must occur, if at all, within one yearafter receiving such stockholder approval.Our credit ratings may not reflect all risks of an investment in our debt securities.Our credit ratings are an assessment by third parties of our ability to pay our obligations. Consequently, real or anticipated changes in our creditratings will generally affect the market value of our debt securities. Our credit ratings, however, may not reflect the potential impact of risks related tomarket conditions generally or other factors discussed above on the market value of or trading market for the publicly issued debt securities.Our stockholders may experience dilution in their ownership percentage if they opt out of our dividend reinvestment plan.All distributions declared in cash payable to stockholders that are participants in our dividend reinvestment plan are automatically reinvested inshares of our common stock. In the event we issue new shares in connection with our dividend reinvestment plan, our stockholders that do not elect toreceive distributions in shares of common stock may experience dilution in their ownership percentage over time as a result of such issuance.We have and will continue to borrow money, which would magnify the potential for loss on amounts invested and may increase the risk ofinvesting in us.We borrow money as part of our business plan. Borrowings, also known as leverage magnify the potential for loss on amounts invested and,therefore, increase the risks associated with investing in our securities. As of December 31, 2018, we had $146.4 million outstanding on the CreditFacility, composed of $96.4 million of revolving credit and $50.0 million of term loans, $53.8 million outstanding under the SSLP Facility and$30 million outstanding under the NEFPASS Facility. We also had $75 million outstanding of the 2023 Unsecured Notes, $150 million outstanding ofthe 2022 Unsecured Notes and $21 million outstanding of the 2022 Tranche C Notes. We may borrow from and issue senior debt securities to banks,insurance companies and other lenders in the future. Lenders of these senior securities, including the Credit Facility, the SSLP Facility, the 2022Unsecured Notes, the 2023 Unsecured Notes, and the 2022 Tranche C Notes, will have fixed dollar claims on our assets that are superior to the claimsof our common stockholders, and we would expect such lenders to seek recovery against our assets in the event of a default. If the value of our assetsdecreases, leveraging would cause net asset value to decline more sharply than it otherwise would have had we not leveraged. Similarly, any decreasein our income would cause net income to decline more sharply than it would have had we not borrowed. Such a decline could also negatively affectour ability to make distribution payments on our common stock. 44Table of ContentsLeverage is generally considered a speculative investment technique. Our ability to service any debt that we incur will depend largely on our financialperformance and will be subject to prevailing economic conditions and competitive pressures. Moreover, as the management fee payable to ourinvestment adviser, Solar Capital Partners, will be payable based on our gross assets, including those assets acquired through the use of leverage, SolarCapital Partners will have a financial incentive to incur leverage which may not be consistent with our stockholders’ interests. In addition, our commonstockholders will bear the burden of any increase in our expenses as a result of leverage, including any increase in the management fee payable to SolarCapital Partners.As a BDC, we had generally been required to meet a coverage ratio of total assets to total borrowings and other senior securities, which includeall of our borrowings and any preferred stock that we may issue in the future, of at least 200%. However, our stockholders have approved a resolutionpermitting us to be subject to a 150% asset coverage ratio effective as of October 12, 2018. Even though we are subject to a 150% asset coverage ratioeffective as of October 12, 2018, contractual leverage limitations under our existing credit facilities or future borrowings may limit our ability to incuradditional indebtedness. On November 21, 2018, we entered into Amendment No. 3 to the Credit Facility which, among other things, reduced the assetcoverage covenant in the Credit Facility from 200% to 150% and made certain related changes to the borrowing base calculations. Some of our whollyand substantially owned portfolio companies, including Crystal Financial LLC and NEF Holdings LLC, may incur significantly more leverage than wecan but we do not consolidate Crystal Financial LLC and NEF Holdings LLC and their leverage is non-recourse to us. Additionally, the Credit Facilityrequires us to comply with certain financial and other restrictive covenants including maintaining an asset coverage ratio of not less than 150% at anytime. Failure to maintain compliance with these covenants could result in an event of default and all of our debt being declared immediately due andpayable. If this ratio declines below 150%, we may not be able to incur additional debt and could be required by law to sell a portion of ourinvestments to repay some debt when it is disadvantageous to do so, which could have a material adverse effect on our operations, and we may not beable to make distributions. The amount of leverage that we employ will depend on our investment adviser’s and our board of directors’ assessment ofmarket and other factors at the time of any proposed borrowing. We cannot assure you that we will be able to obtain credit at all or on terms acceptableto us.In addition, our credit facilities impose, and any other debt facility into which we may enter would likely impose, financial and operatingcovenants that restrict our business activities, including limitations that could hinder our ability to finance additional loans and investments or tomake the distributions required to maintain RIC tax treatment under Subchapter M of the Code.Illustration. The following table illustrates the effect of leverage on returns from an investment in our common stock assuming various annualreturns on our portfolio, net of interest expense. The calculations in the table below are hypothetical and actual returns may be higher or lower thanthose appearing in the table below. Assumed total return(net of interest expense) (10)% (5)% 0% 5% 10% Corresponding return to stockholder(1) (20.6)% (11.4)% (2.2)% 6.9% 16.1% (1)Assumes $1.68 billion in total assets and $476.2 million in total debt outstanding, which reflects our total assets and total debt outstanding as ofDecember 31, 2018, and a cost of funds of 4.33%. Excludes non-leverage related expenses.In order for us to cover our annual interest payments on our outstanding indebtedness at December 31, 2018, we must achieve annual returns onour December 31, 2018 total assets of at least 1.2%.It is likely that the terms of any current or future long-term or revolving credit or warehouse facility we may enter into in the future couldconstrain our ability to grow our business.Our current lenders have, and any future lender or lenders may have, fixed dollar claims on our assets that are senior to the claims of ourstockholders and, thus, will have a preference over our stockholders with respect 45Table of Contentsto our assets in the collateral pool. Our current credit facilities and borrowings also subject us to various financial and operating covenants, including,but not limited to, maintaining certain financial ratios and minimum tangible net worth amounts. Future credit facilities and borrowings will likelysubject us to similar or additional covenants. In addition, we may grant a security interest in our assets in connection with any such credit facilities andborrowings.Our credit facilities generally contain customary default provisions such as a minimum net worth amount, a profitability test, and a restriction onchanging our business and loan quality standards. In addition, our credit facilities require or are expected to require the repayment of all outstandingdebt on the maturity which may disrupt our business and potentially the business of our portfolio companies that are financed through our creditfacilities. An event of default under our credit facilities would likely result, among other things, in termination of the availability of further funds underour credit facilities and accelerated maturity dates for all amounts outstanding under our credit facilities, which would likely disrupt our business and,potentially, the business of the portfolio companies whose loans we finance through our credit facilities. This could reduce our revenues and, bydelaying any cash payment allowed to us under our credit facilities until the lender has been paid in full, reduce our liquidity and cash flow and impairour ability to grow our business and maintain RIC tax treatment.The terms of future available financing may place limits on our financial and operation flexibility. If we are unable to obtain sufficient capital inthe future, we may be forced to reduce or discontinue our operations, not be able to make new investments, or otherwise respond to changing businessconditions or competitive pressures.Recent legislation allows us to incur additional leverage, which could increase the risk of investing in the Company.The 1940 Act had generally been prohibiting us from incurring indebtedness unless immediately after such borrowing we had an asset coveragefor total borrowings of at least 200% (i.e., the amount of debt may not exceed 50% of the value of our total assets). However, on March 23, 2018, theSmall Business Credit Availability Act (the “SBCA”) was signed into law, which included various changes to regulations under the federal securitieslaws that impact BDCs. The SBCA included changes to the 1940 Act to allow BDCs to decrease their asset coverage requirement from 200% to 150%(i.e. the amount of debt may not exceed 66.7% of the value of our total assets), if certain requirements are met. On August 2, 2018, our board ofdirectors, including a ‘‘required majority’’ (as such term is defined in Section 57(o) of the 1940 Act) approved the application of the modified assetcoverage requirements set forth in Section 61(a)(2) of the 1940 Act, as amended by the SBCA and recommended the submission of a proposal forstockholders to approve the application of the 150% minimum asset coverage ratio to the Company at our annual meeting of stockholders, which washeld on October 11, 2018. The stockholder proposal was approved by the required votes of the Company’s stockholders at such annual meeting ofstockholders, and thus the Company became subject to the 150% minimum asset coverage ratio on October 12, 2018. Changing the asset coverageratio permits the Company to double its leverage, which results in increased leverage risk and increased expenses.As a result of the SBCA, and of us obtaining the necessary stockholder approval, we are able to increase our leverage up to an amount thatreduces our asset coverage ratio from 200% to 150%. Leverage magnifies the potential for loss on investments in our indebtedness and on investedequity capital. As we use leverage to partially finance our investments, you will experience increased risks of investing in our securities. If the value ofour assets increases, then leveraging would cause the net asset value attributable to our common stock to increase more sharply than it would have hadwe not leveraged. Conversely, if the value of our assets decreases, leveraging would cause net asset value to decline more sharply than it otherwisewould have had we not leveraged our business. Similarly, any increase in our income in excess of interest payable on the borrowed funds would causeour net investment income to increase more than it would without the leverage, while any decrease in our income would cause net investment incometo decline more sharply than it would have had we not borrowed. Such a decline could negatively affect our ability to pay common stock dividends,scheduled debt payments or other payments related to our securities. Leverage is generally considered a speculative investment technique. 46Table of ContentsOur quarterly and annual operating results are subject to fluctuation as a result of the nature of our business, and if we fail to achieve ourinvestment objective, the net asset value of our common stock may decline.We could experience fluctuations in our quarterly and annual operating results due to a number of factors, some of which are beyond our control,including, but not limited to, the interest rate payable on the debt securities that we acquire, the default rate on such securities, the level of ourexpenses, variations in and the timing of the recognition of realized and unrealized gains or losses, changes in our portfolio composition, the degree towhich we encounter competition in our markets, market volatility in our publicly traded securities and the securities of our portfolio companies, andgeneral economic conditions. As a result of these factors, results for any period should not be relied upon as being indicative of performance in futureperiods. In addition, any of these factors could negatively impact our ability to achieve our investment objectives, which may cause our net asset valueof our common stock to decline.Our investments may be in portfolio companies that may have limited operating histories and financial resources.We expect that our portfolio will continue to consist of investments that may have relatively limited operating histories. These companies maybe particularly vulnerable to U.S. and foreign economic downturns such as the U.S. recession that began in mid-2007 and the European financial crisis,may have more limited access to capital and higher funding costs, may have a weaker financial position and may need more capital to expand orcompete. These businesses also may experience substantial variations in operating results. They may face intense competition, including fromcompanies with greater financial, technical and marketing resources. Furthermore, some of these companies do business in regulated industries andcould be affected by changes in government regulation. Accordingly, these factors could impair their cash flow or result in other events, such asbankruptcy, which could limit their ability to repay their obligations to us, and may adversely affect the return on, or the recovery of, our investment inthese companies. We cannot assure you that any of our investments in our portfolio companies will be successful. Our portfolio companies competewith larger, more established companies with greater access to, and resources for, further development in these new technologies. Therefore, we maylose our entire investment in any or all of our portfolio companies.There will be uncertainty as to the value of our portfolio investments, which may impact our net asset value.A large percentage of our portfolio investments are in the form of securities that are not publicly traded. The fair value of securities and otherinvestments that are not publicly traded may not be readily determinable. We value these securities, the Credit Facility, the SSLP Facility and the 2022Unsecured Notes on a quarterly basis in accordance with our valuation policy, which is at all times consistent with U.S. generally accepted accountingprinciples (“GAAP”). Our board of directors utilizes the services of third-party valuation firms to aid it in determining the fair value of material assets.The board of directors discusses valuations and determines the fair value in good faith based on the input of our investment adviser and, when utilized,the respective third-party valuation firms. The factors that may be considered in fair value pricing our investments include the nature and realizablevalue of any collateral, the portfolio company’s ability to make payments and its earnings, the markets in which the portfolio company does business,comparisons to publicly traded companies, discounted cash flow and other relevant factors. Because such valuations, and particularly valuations ofprivate securities and private companies, are inherently uncertain, may fluctuate over short periods of time and may be based on estimates, ourdeterminations of fair value may differ materially from the values that would have been used if a ready market for these securities existed. Our net assetvalue could be adversely affected if our determinations regarding the fair value of our investments were materially higher than the values that weultimately realize upon the disposal of such securities. 47Table of ContentsOur equity ownership in a portfolio company may represent a control investment. Our ability to exit an investment in a timely manner because weare in a control position or have access to inside information in the portfolio company could result in a realized loss on the investment.If we obtain a control investment in a portfolio company our ability to divest ourselves from a debt or equity investment could be restricted dueto illiquidity in a private stock, limited trading volume on a public company’s stock, inside information on a company’s performance, insider blackoutperiods, or other factors that could prohibit us from disposing of the investment as we would if it were not a control investment. Additionally, we maychoose not to take certain actions to protect a debt investment in a control investment portfolio company. As a result, we could experience a decreasein the value of our portfolio company holdings and potentially incur a realized loss on the investment.There are significant potential conflicts of interest, including Solar Capital Partners’ management of other investment funds such as Solar SeniorCapital Ltd. and SCP Private Credit Income BDC LLC, which could impact our investment returns, and an investment in Solar Capital is not aninvestment in Solar Senior Capital Ltd. or SCP Private Credit Income BDC LLC.Our executive officers and directors, as well as the current and future partners of our investment adviser, Solar Capital Partners, may serve asofficers, directors or principals of entities that operate in the same or a related line of business as we do. For example, Solar Capital Partners presentlyserves as the investment adviser to Solar Senior Capital Ltd., a publicly-traded BDC that focuses on investing primarily in senior secured loans,including first lien, unitranche and second lien debt instruments, and SCP Private Credit Income BDC LLC, a private BDC that focuses on investingprimarily in senior secured loans, including non-traditional asset-based loans and first lien loans. In addition, Michael S. Gross, our Chairman, ChiefExecutive Officer and President, Bruce Spohler, our Chief Operating Officer and board member, and Richard L. Peteka, our Chief Financial Officer,serve in similar capacities for Solar Senior Capital Ltd and SCP Private Credit Income BDC LLC. Accordingly, they may have obligations to investorsin those entities, the fulfillment of which obligations might not be in the best interests of us or our stockholders. In addition, we note that any affiliatedinvestment vehicle formed in the future and managed by our investment adviser or its affiliates may, notwithstanding different stated investmentobjectives, have overlapping investment objectives with our own and, accordingly, may invest in asset classes similar to those targeted by us. As aresult, Solar Capital Partners may face conflicts in allocating investment opportunities between us and such other entities. Although Solar CapitalPartners will endeavor to allocate investment opportunities in a fair and equitable manner, it is possible that, in the future, we may not be given theopportunity to participate in investments made by investment funds managed by our investment adviser or an investment manager affiliated with ourinvestment adviser. In any such case, when Solar Capital Partners identifies an investment, it will be forced to choose which investment fund shouldmake the investment.As a BDC, we were substantially limited in our ability to co-invest in privately negotiated transactions with affiliated funds until we obtained anexemptive order from the SEC on July 28, 2014 (the “Prior Exemptive Order”). The Prior Exemptive Order permitted us to participate in negotiatedco-investment transactions with certain affiliates, each of whose investment adviser is Solar Capital Partners, in a manner consistent with ourinvestment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors, and pursuant to theconditions to the Prior Exemptive Order. On June 13, 2017, the Company, Solar Senior Capital Ltd., and Solar Capital Partners received an exemptiveorder (the “Exemptive Order”) that would supersedes the Prior Exemptive Order and extends the relief granted in the Prior Exemptive Order such that itno longer applies to certain affiliates only if their respective investment adviser is Solar Capital Partners, but also applies to certain affiliates whoseinvestment adviser is an investment adviser that controls, is controlled by or is under common control with Solar Capital Partners and is registered asan investment adviser under the Investment Advisers Act of 1940, as amended. The terms and conditions of the Exemptive Order are otherwisesubstantially similar to the Prior Exemptive Order. If we are unable to rely on the Exemptive Order for a particular opportunity, such opportunity willbe allocated first to the entity whose investment strategy is the most consistent with the opportunity being allocated, and second, if the terms of theopportunity are consistent with 48Table of Contentsmore than one entity’s investment strategy, on an alternating basis. Although our investment professionals will endeavor to allocate investmentopportunities in a fair and equitable manner, we and our common stockholders could be adversely affected to the extent investment opportunities areallocated among us and other investment vehicles managed or sponsored by, or affiliated with, our executive officers, directors and members of ourinvestment adviser.Solar Capital Partners and certain investment advisory affiliates may determine that an investment is appropriate for us and for one or more ofthose other funds. In such event, depending on the availability of such investment and other appropriate factors, Solar Capital Partners or its affiliatesmay determine that we should invest side-by-side with one or more other funds. Any such investments will be made only to the extent permitted byapplicable law and interpretive positions of the SEC and its staff, and consistent with Solar Capital Partners’ allocation procedures. Related partytransactions may occur among Solar Capital Ltd., Crystal Financial LLC, Equipment Operating Leases LLC and NEF Holdings LLC. Thesetransactions may occur in the normal course of business. No administrative fees are paid to Solar Capital Partners by Crystal Financial LLC, EquipmentOperating Leases LLC or NEF Holdings LLC.In the ordinary course of our investing activities, we pay management and incentive fees to Solar Capital Partners and reimburse Solar CapitalPartners for certain expenses it incurs. As a result, investors in our common stock will invest on a “gross” basis and receive distributions on a “net”basis after expenses, resulting in a lower rate of return than an investor might achieve through direct investments. Accordingly, there may be timeswhen the management team of Solar Capital Partners has interests that differ from those of our stockholders, giving rise to a conflict.We have entered into a royalty-free license agreement with our investment adviser, pursuant to which our investment adviser has granted us anon-exclusive license to use the name “Solar Capital.” Under the license agreement, we have the right to use the “Solar Capital” name for so long asSolar Capital Partners or one of its affiliates remains our investment adviser. In addition, we pay Solar Capital Management, an affiliate of Solar CapitalPartners, our allocable portion of overhead and other expenses incurred by Solar Capital Management in performing its obligations under theAdministration Agreement, including rent, the fees and expenses associated with performing compliance functions, and our allocable portion of thecompensation of our chief compliance officer and our chief financial officer and their respective staffs. These arrangements create conflicts of interestthat our board of directors must monitor.Our ability to enter into transactions involving derivatives and financial commitment transactions may be limited.The SEC has proposed a new rule under the 1940 Act that would govern the use of derivatives (defined to include any swap, security-based swap,futures contract, forward contract, option or any similar instrument) as well as financial commitment transactions (defined to include reverse repurchaseagreements, short sale borrowings and any firm or standby commitment agreement or similar agreement) by BDCs. Under the proposed rule, a BDCwould be required to comply with one of two alternative portfolio limitations and manage the risks associated with derivatives transactions andfinancial commitment transactions by segregating certain assets. Furthermore, a BDC that engages in more than a limited amount of derivativestransactions or that uses complex derivatives would be required to establish a formalized derivatives risk management program. If the SEC adopts thisrule in the form proposed, our ability to enter into transactions involving such instruments may be hindered, which could have an adverse effect on ourbusiness, financial condition and results of operations.We may be obligated to pay our investment adviser incentive compensation even if we incur a loss.Our investment adviser will be entitled to incentive compensation for each fiscal quarter in an amount equal to a percentage of the excess of ourpre-incentive fee net investment income for that quarter (before deducting incentive compensation) above a performance threshold for that quarter.Accordingly, since the performance 49Table of Contentsthreshold is based on a percentage of our net asset value, decreases in our net asset value make it easier to achieve the performance threshold. Ourpre-incentive fee net investment income for incentive compensation purposes excludes realized and unrealized capital losses or depreciation that wemay incur in the fiscal quarter, even if such capital losses or depreciation result in a net loss on our statement of operations for that quarter. Thus, wemay be required to pay Solar Capital Partners incentive compensation for a fiscal quarter even if there is a decline in the value of our portfolio or weincur a net loss for that quarter.Our incentive fee may induce Solar Capital Partners to pursue speculative investments.The incentive fee payable by us to Solar Capital Partners may create an incentive for Solar Capital Partners to pursue investments on our behalfthat are riskier or more speculative than would be the case in the absence of such compensation arrangement. The incentive fee payable to ourinvestment adviser is calculated based on a percentage of our return on invested capital. This may encourage our investment adviser to use leverage toincrease the return on our investments. Under certain circumstances, the use of leverage may increase the likelihood of default, which would impair thevalue of our common stock. In addition, our investment adviser receives the incentive fee based, in part, upon net capital gains realized on ourinvestments. Unlike that portion of the incentive fee based on income, there is no hurdle rate applicable to the portion of the incentive fee based on netcapital gains. As a result, our investment adviser may have a tendency to invest more capital in investments that are likely to result in capital gains ascompared to income producing securities. Such a practice could result in our investing in more speculative securities than would otherwise be the case,which could result in higher investment losses, particularly during economic downturns.The incentive fee payable by us to our investment adviser also may induce Solar Capital Partners to invest on our behalf in instruments that havea deferred interest feature, even if such deferred payments would not provide cash necessary to enable us to pay current distributions to ourstockholders. Under these investments, we would accrue interest over the life of the investment but would not receive the cash income from theinvestment until the end of the term. Our net investment income used to calculate the income portion of our investment fee, however, includes accruedinterest. Thus, a portion of this incentive fee would be based on income that we have not received in cash. In addition, the “catch-up” portion of theincentive fee may encourage Solar Capital Partners to accelerate or defer interest payable by portfolio companies from one calendar quarter to another,potentially resulting in fluctuations in timing and distribution amounts.We may invest, to the extent permitted by law, in the securities and instruments of other investment companies, including private funds, and, tothe extent we so invest, will bear our ratable share of any such investment company’s expenses, including management and performance fees. We willalso remain obligated to pay management and incentive fees to Solar Capital Partners with respect to the assets invested in the securities andinstruments of other investment companies. With respect to each of these investments, each of our stockholders will bear his or her share of themanagement and incentive fee of Solar Capital Partners as well as indirectly bearing the management and performance fees and other expenses of anyinvestment companies in which we invest.We may become subject to corporate-level U.S. federal income tax if we are unable to qualify and maintain our qualification for tax treatment asa regulated investment company under Subchapter M of the Code.Although we have elected to be treated as a RIC under Subchapter M of the Code, no assurance can be given that we will continue to be able toqualify for and maintain RIC tax treatment. To maintain RIC tax treatment under the Code, we must meet the following annual distribution, incomesource and asset diversification requirements. • The Annual Distribution Requirement for a RIC will be satisfied if we distribute to our stockholders on an annual basis at least 90% of ournet ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any. Because we may usedebt financing, we are 50Table of Contents subject to certain asset coverage ratio requirements under the 1940 Act and financial covenants under loan and credit agreements thatcould, under certain circumstances, restrict us from making distributions necessary to satisfy the Annual Distribution Requirement. If weare unable to obtain cash from other sources, we could fail to qualify for RIC tax treatment and thus become subject to corporate-level U.Sfederal income tax. • The income source requirement will be satisfied if we obtain at least 90% of our income for each year from certain passive investments,including interest, dividends, gains from the sale of stock or securities or similar sources. • The asset diversification requirement will be satisfied if we meet certain asset diversification requirements at the end of each quarter of ourtaxable year. Failure to meet those requirements may result in our having to dispose of certain investments quickly in order to prevent theloss of RIC tax treatment. Because most of our investments will be in private companies, and therefore will be relatively illiquid, any suchdispositions could be made at disadvantageous prices and could result in substantial losses.If we fail to qualify for RIC tax treatment for any reason and become subject to corporate income tax, the resulting corporate taxes couldsubstantially reduce our net assets, the amount of income available for distribution and the amount of our distributions. Such a failure could have amaterial adverse effect on us, the net asset value of our common stock and the total return, if any, obtainable from your investment in our commonstock. Any net operating losses that we incur in periods during which we qualify as a RIC will not offset net capital gains (i.e., net realized long-termcapital gains in excess of net realized short-term capital losses) that we are otherwise required to distribute, and we cannot pass such net operatinglosses through to our stockholders. In addition, net operating losses that we carry over to a taxable year in which we qualify as a RIC normally cannotoffset ordinary income or capital gains.We may have difficulty satisfying the Annual Distribution Requirement in order to qualify and maintain RIC tax treatment if we recognizeincome before or without receiving cash representing such income.In accordance with GAAP and tax requirements, we include in income certain amounts that we have not yet received in cash, such as contractualPIK interest, which represents contractual interest added to a loan balance and due at the end of such loan’s term. In addition to the cash yields receivedon our loans, in some instances, certain loans may also include any of the following: end-of-term payments, exit fees, balloon payment fees orprepayment fees. The increases in loan balances as a result of contractual PIK arrangements are included in income for the period in which such PIKinterest was accrued, which is often in advance of receiving cash payment, and are separately identified on our statements of cash flows. We also maybe required to include in income certain other amounts prior to receiving the related cash.Any warrants that we receive in connection with our debt investments will generally be valued as part of the negotiation process with theparticular portfolio company. As a result, a portion of the aggregate purchase price for the debt investments and warrants will be allocated to thewarrants that we receive. This will generally result in “original issue discount” for U.S. federal income tax purposes, which we must recognize asordinary income, increasing the amount that we are required to distribute to qualify for the U.S. federal income tax benefits applicable to RICs. Becausethese warrants generally will not produce distributable cash for us at the same time as we are required to make distributions in respect of the relatedoriginal issue discount, we would need to obtain cash from other sources or to pay a portion of our distributions using shares of newly issued commonstock, consistent with Internal Revenue Service requirements, to satisfy the Annual Distribution and Excise Tax Avoidance requirements.Other features of the debt instruments that we hold may also cause such instruments to generate an original issue discount, resulting in adistribution requirement in excess of current cash interest received. Since in certain cases we may recognize income before or without receiving cashrepresenting such income, we may have 51Table of Contentsdifficulty meeting the RIC tax requirement to distribute at least 90% of our net ordinary income and realized net short-term capital gains in excess ofrealized net long-term capital losses, if any. Under such circumstances, we may have to sell some of our investments at times we would not consideradvantageous, raise additional debt or equity capital or reduce new investment originations to meet these distribution requirements. If we are unable toobtain cash from other sources and are otherwise unable to satisfy such distribution requirements, we may fail to qualify for the U.S. federal income taxbenefits allowable to RICs and, thus, become subject to a corporate-level U.S. federal income tax on all our income.The higher yields and interest rates on PIK securities reflects the payment deferral and increased credit risk associated with such instruments andthat such investments may represent a significantly higher credit risk than coupon loans. PIK securities may have unreliable valuations because theircontinuing accruals require continuing judgments about the collectability of the deferred payments and the value of any associated collateral. PIKinterest has the effect of generating investment income and increasing the incentive fees payable at a compounding rate. In addition, the deferral of PIKinterest also increases the loan-to-value ratio at a compounding rate. PIK securities create the risk that incentive fees will be paid to our investmentadviser based on non-cash accruals that ultimately may not be realized, but our investment adviser will be under no obligation to reimburse theCompany for these fees.Provisions of the Maryland General Corporation Law and of our charter and bylaws could deter takeover attempts and have an adverse impacton the price of our common stock.The Maryland General Corporation Law and our charter and bylaws contain provisions that may discourage, delay or make more difficult achange in control of Solar Capital or the removal of our directors. We are subject to the Maryland Business Combination Act, subject to any applicablerequirements of the 1940 Act. Our board of directors has adopted a resolution exempting from the Maryland Business Combination Act any businesscombination between us and any other person, subject to prior approval of such business combination by our board of directors, including approval bya majority of our disinterested directors. If the resolution exempting business combinations is repealed or our board of directors does not approve abusiness combination, the Maryland Business Combination Act may discourage third parties from trying to acquire control of us and increase thedifficulty of consummating such an offer. Our bylaws exempt from the Maryland Control Share Acquisition Act (the “Control Share Act”) acquisitionsof our stock by any person. If we amend our bylaws to repeal the exemption from the Control Share Act, the Control Share Act also may make it moredifficult for a third party to obtain control of us and increase the difficulty of consummating such a transaction. However, we will amend our bylaws tobe subject to the Control Share Act only if our board of directors determines that it would be in our best interests and if the SEC staff does not object toour determination that our being subject to the Control Share Act does not conflict with the 1940 Act. The SEC staff has issued informal guidancesetting forth its position that certain provisions of the Control Share Act would, if implemented, violate Section 18(i) of the 1940 Act.We have also adopted measures that may make it difficult for a third party to obtain control of us, including provisions of our charter classifyingour board of directors in three classes serving staggered three-year terms, and authorizing our board of directors to classify or reclassify shares of ourstock in one or more classes or series, to cause the issuance of additional shares of our stock and to amend our charter without stockholder approval toincrease or decrease the number of shares of stock that we have authority to issue. These provisions, as well as other provisions of our charter andbylaws, may delay, defer or prevent a transaction or a change in control that might otherwise be in the best interests of our stockholders.The foregoing provisions are expected to discourage certain coercive takeover practices and inadequate takeover bids and to encourage personsseeking to acquire control of us to negotiate first with our board of directors. However, these provisions may deprive a stockholder of the opportunityto sell such stockholder’s shares at a premium to a potential acquirer. We believe that the benefits of these provisions outweigh the potentialdisadvantages of discouraging any such acquisition proposals because, among other things, the 52Table of Contentsnegotiation of such proposals may improve their terms. Our board of directors has considered both the positive and negative effects of the foregoingprovisions and determined that they are in the best interest of our stockholders.The failure in cyber security systems, as well as the occurrence of events unanticipated in our disaster recovery systems and managementcontinuity planning could impair our ability to conduct business effectively.The occurrence of a disaster, such as a cyber-attack against us or against a third-party that has access to our data or networks, a naturalcatastrophe, an industrial accident, failure of our disaster recovery systems, or consequential employee error, could have an adverse effect on our abilityto communicate or conduct business, negatively impacting our operations and financial condition. This adverse effect can become particularly acute ifthose events affect our electronic data processing, transmission, storage, and retrieval systems, or impact the availability, integrity, or confidentiality ofour data.We depend heavily upon computer systems to perform necessary business functions. Despite our implementation of a variety of securitymeasures, our computer systems, networks, and data, like those of other companies, could be subject to cyber-attacks and unauthorized access, use,alteration, or destruction, such as from physical and electronic break-ins or unauthorized tampering. If one or more of these events occurs, it couldpotentially jeopardize the confidential, proprietary, and other information processed, stored in, and transmitted through our computer systems andnetworks. Such an attack could cause interruptions or malfunctions in our operations, which could result in financial losses, litigation, regulatorypenalties, client dissatisfaction or loss, reputational damage, and increased costs associated with mitigation of damages and remediation. Ifunauthorized parties gain access to such information and technology systems, they may be able to steal, publish, delete or modify private and sensitiveinformation, including nonpublic personal information related to stockholders (and their beneficial owners) and material nonpublic information. Thesystems we have implemented to manage risks relating to these types of events could prove to be inadequate and, if compromised, could becomeinoperable for extended periods of time, cease to function properly or fail to adequately secure private information. Breaches such as those involvingcovertly introduced malware, impersonation of authorized users and industrial or other espionage may not be identified even with sophisticatedprevention and detection systems, potentially resulting in further harm and preventing them from being addressed appropriately. The failure of thesesystems or of disaster recovery plans for any reason could cause significant interruptions in our and our Adviser’s operations and result in a failure tomaintain the security, confidentiality or privacy of sensitive data, including personal information relating to stockholders, material nonpublicinformation and other sensitive information in our possession.A disaster or a disruption in the infrastructure that supports our business, including a disruption involving electronic communications or otherservices used by us or third parties with whom we conduct business, or directly affecting our headquarters, could have a material adverse impact on ourability to continue to operate our business without interruption. Our disaster recovery programs may not be sufficient to mitigate the harm that mayresult from such a disaster or disruption. In addition, insurance and other safeguards might only partially reimburse us for our losses, if at all.Third parties with which we do business may also be sources of cybersecurity or other technological risk. We outsource certain functions andthese relationships allow for the storage and processing of our information, as well as client, counterparty, employee, and borrower information. Whilewe engage in actions to reduce our exposure resulting from outsourcing, ongoing threats may result in unauthorized access, loss, exposure, destruction,or other cybersecurity incident that affects our data, resulting in increased costs and other consequences as described above. 53Table of ContentsWe can be highly dependent on information systems and systems failures could significantly disrupt our business, which may, in turn, negativelyaffect the market price of our common stock and our ability to pay distributions.Our business is highly dependent on our and third parties’ communications and information systems. Any failure or interruption of those systems,including as a result of the termination of an agreement with any third-party service providers, could cause delays or other problems in our activities.Our financial, accounting, data processing, backup or other operating systems and facilities may fail to operate properly or become disabled ordamaged as a result of a number of factors including events that are wholly or partially beyond our control and adversely affect our business. Therecould be: • sudden electrical or telecommunications outages; • natural disasters such as earthquakes, tornadoes and hurricanes; • events arising from local or larger scale political or social matters, including terrorist acts; and • cyber-attacks.These events, in turn, could have a material adverse effect on our operating results and negatively affect the market price of our common stockand our ability to pay distributions to our stockholders.Our board of directors may change our investment objective, operating policies and strategies without prior notice or stockholder approval.Our board of directors has the authority to modify or waive certain of our operating policies and strategies without prior notice (except asrequired by the 1940 Act) and without stockholder approval. However, absent stockholder approval, we may not change the nature of our business soas to cease to be, or withdraw our election as a BDC. We cannot predict the effect any changes to our current operating policies and strategies wouldhave on our business, operating results and value of our stock. Nevertheless, the effects may adversely affect our business and impact our ability tomake distributions.Our business is subject to increasingly complex corporate governance, public disclosure and accounting requirements that could adversely affectour business and financial results.We are subject to changing rules and regulations of federal and state government as well as the stock exchange on which our common stock islisted. These entities, including the Public Company Accounting Oversight Board, the SEC and the NASDAQ Stock Market, have issued a significantnumber of new and increasingly complex requirements and regulations over the course of the last several years and continue to develop additionalregulations and requirements in response to laws enacted by Congress. Our efforts to comply with these existing requirements, or any revised oramended requirements, have resulted in, and are likely to continue to result in, an increase in expenses and a diversion of management’s time fromother business activities.Changes in laws or regulations governing our operations may adversely affect our business.Changes in the laws or regulations, or the interpretations of the laws and regulations, which govern BDCs, RICs or non-depository commerciallenders could significantly affect our operations and our cost of doing business. We are subject to federal, state and local laws and regulations and aresubject to judicial and administrative decisions that affect our operations, including our loan originations, maximum interest rates, fees and othercharges, disclosures to portfolio companies, the terms of secured transactions, collection and foreclosure procedures, and other trade practices. If theselaws, regulations or decisions change, or if we expand our business into jurisdictions that have adopted more stringent requirements than those inwhich we currently conduct business, then we may have to incur significant expenses in order to comply or we may have to restrict 54Table of Contentsour operations. In addition, if we do not comply with applicable laws, regulations and decisions, then we may lose licenses needed for the conduct ofour business and be subject to civil fines and criminal penalties, any of which could have a material adverse effect upon our business results ofoperations or financial condition.Uncertainty about presidential administration initiatives could negatively impact our business, financial condition and results of operations.The current administration has called for significant changes to U.S. trade, healthcare, immigration, foreign and government regulatory policy. Inthis regard, there is significant uncertainty with respect to legislation, regulation and government policy at the federal level, as well as the state andlocal levels. Recent events have created a climate of heightened uncertainty and introduced new and difficult-to-quantify macroeconomic and politicalrisks with potentially far-reaching implications. There has been a corresponding meaningful increase in the uncertainty surrounding interest rates,inflation, foreign exchange rates, trade volumes and fiscal and monetary policy. To the extent the U.S. Congress or the current administrationimplements changes to U.S. policy, those changes may impact, among other things, the U.S. and global economy, international trade and relations,unemployment, immigration, corporate taxes, healthcare, the U.S. regulatory environment, inflation and other areas. Although we cannot predict theimpact, if any, of these changes to our business, they could adversely affect our business, financial condition, operating results and cash flows. Until weknow what policy changes are made and how those changes impact our business and the business of our competitors over the long term, we will notknow if, overall, we will benefit from them or be negatively affected by them.We cannot predict how tax reform legislation will affect us, our investments, or our stockholders, and any such legislation could adversely affectour business.Legislative or other actions relating to taxes could have a negative effect on us. The rules dealing with U.S. federal income taxation areconstantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Treasury Department. InDecember 2017, the U.S. House of Representatives and U.S. Senate passed tax reform legislation, which the President signed into law. Such legislationhas made many changes to the Code, including significant changes to the taxation of business entities, the deductibility of interest expense, and thetax treatment of capital investment. We cannot predict with certainty how any changes in the tax laws might affect us, our stockholders, or our portfolioinvestments. New legislation and any U.S. Treasury regulations, administrative interpretations or court decisions interpreting such legislation couldsignificantly and negatively affect our ability to qualify for tax treatment as a RIC or the U.S. federal income tax consequences to us and ourstockholders of such qualification, or could have other adverse consequences. Stockholders are urged to consult with their tax advisor regarding taxlegislative, regulatory, or administrative developments and proposals and their potential effect on an investment in our securities.Changes to United States tariff and import/export regulations may have a negative effect on our portfolio companies and, in turn, harm us.There has been ongoing discussion and commentary regarding potential significant changes to United States trade policies, treaties and tariffs.The current administration, along with Congress, has created significant uncertainty about the future relationship between the United States and othercountries with respect to the trade policies, treaties and tariffs. These developments, or the perception that any of them could occur, may have amaterial adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global trade and, inparticular, trade between the impacted nations and the United States. Any of these factors could depress economic activity and restrict our portfoliocompanies’ access to suppliers or customers and have a material adverse effect on their business, financial condition and results of operations, which inturn would negatively impact us. 55Table of ContentsOur investment adviser can resign on 60 days’ notice, and we may not be able to find a suitable replacement within that time, resulting in adisruption in our operations that could adversely affect our financial condition, business and results of operations.Our investment adviser has the right, under the Investment Advisory and Management Agreement, to resign at any time upon 60 days’ writtennotice, whether we have found a replacement or not. If our investment adviser resigns, we may not be able to find a new investment adviser or hireinternal management with similar expertise and ability to provide the same or equivalent services on acceptable terms within 60 days, or at all. If we areunable to do so quickly, our operations are likely to experience a disruption, our financial condition, business and results of operations as well as ourability to pay distributions are likely to be adversely affected and the market price of our shares may decline. In addition, the coordination of ourinternal management and investment activities is likely to suffer if we are unable to identify and reach an agreement with a single institution or groupof executives having the expertise possessed by our investment adviser and its affiliates. Even if we are able to retain comparable management, whetherinternal or external, the integration of such management and their lack of familiarity with our investment objective may result in additional costs andtime delays that may adversely affect our financial condition, business and results of operations. 56Table of ContentsItem 1B. Unresolved Staff CommentsNone Item 2.PropertiesOur executive offices are located at 500 Park Avenue, New York, New York 10022, and are provided by Solar Capital Management in accordancewith the terms of the Administration Agreement. We believe that our office facilities are suitable and adequate for our business as it is presentlyconducted. Item 3.Legal ProceedingsWe and our consolidated subsidiaries are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legalproceeding threatened against us or our consolidated subsidiaries. From time to time, we and our consolidated subsidiaries may be a party to certainlegal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfoliocompanies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have amaterial effect upon our financial condition or results of operations. Item 4.Mine Safety DisclosuresNot applicable. 57Table of ContentsPART II Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesCommon StockOur common stock is traded on the NASDAQ Global Select Market under the symbol “SLRC”. Shares of BDCs may trade at a market price that isless than the value of the net assets attributable to those shares. The possibility that our shares of common stock will trade at a discount from net assetvalue or at premiums that are unsustainable over the long term are separate and distinct from the risk that our net asset value will decrease. Since ourinitial public offering on February 9, 2010, our shares of common stock have traded at both a discount and a premium to the net assets attributable tothose shares. As of February 15, 2019, we had 19 stockholders of record.DISTRIBUTIONSTax characteristics of all distributions will be reported to stockholders on Form 1099 after the end of the calendar year. Future quarterlydistributions, if any, will be determined by our Board. We expect that our distributions to stockholders will generally be from accumulated netinvestment income, from net realized capital gains or non-taxable return of capital, if any, as applicable.We have elected to be taxed as a RIC under Subchapter M of the Code. To maintain our RIC tax treatment, we must distribute at least 90% of ourordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, out of the assets legally available fordistribution. In addition, although we currently intend to distribute realized net capital gains (i.e., net long-term capital gains in excess of short-termcapital losses), if any, at least annually, out of the assets legally available for such distributions, we may in the future decide to retain such capital gainsfor investment.We maintain an “opt out” dividend reinvestment plan for our common stockholders. As a result, if we declare a distribution, then stockholders’cash distributions will be automatically reinvested in additional shares of our common stock, unless they specifically “opt out” of the dividendreinvestment plan so as to receive cash distributions.We may not be able to achieve operating results that will allow us to make distributions at a specific level or to increase the amount of thesedistributions from time to time. In addition, due to the asset coverage test applicable to us as a business development company, we may in the future belimited in our ability to make distributions. Also, our revolving credit facilities may limit our ability to declare distributions if we default under certainprovisions. If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including possible loss of thetax benefits available to us as a regulated investment company. In addition, in accordance with U.S. generally accepted accounting principles and taxregulations, we include in income certain amounts that we have not yet received in cash, such as contractual payment-in-kind interest, which representscontractual interest added to the loan balance that becomes due at the end of the loan term, or the accrual of original issue or market discount. Since wemay recognize income before or without receiving cash representing such income, we may have difficulty meeting the requirement to distribute at least90% of our investment company taxable income to obtain tax benefits as a regulated investment company.With respect to the distributions to stockholders, income from origination, structuring, closing and certain other upfront fees associated withinvestments in portfolio companies are treated as taxable income and accordingly, distributed to stockholders.We cannot assure stockholders that they will receive any distributions at a particular level.All distributions declared in cash payable to stockholders that are participants in our dividend reinvestment plan are generally automaticallyreinvested in shares of our common stock. As a result, stockholders that do not 58Table of Contentsparticipate in the dividend reinvestment plan may experience dilution over time. Stockholders who do not elect to receive distributions in shares ofcommon stock may experience accretion to the net asset value of their shares if our shares are trading at a premium and dilution if our shares are tradingat a discount. The level of accretion or discount would depend on various factors, including the proportion of our stockholders who participate in theplan, the level of premium or discount at which our shares are trading and the amount of the distribution payable to a stockholder.Recent Sales of Unregistered SecuritiesNone.Issuer Purchases of Equity SecuritiesNone.STOCK PERFORMANCE GRAPHThis graph compares the cumulative total return on our common stock with that of the Standard & Poor’s BDC Index, Standard & Poor’s 500Stock Index and the Russell 2000 Financial Services Index, for the period from December 31, 2013 through December 31, 2018. The graph assumesthat a person invested $10,000 in each of the following: our common stock (SLRC), the S&P BDC Index, the S&P 500 Index, and the Russell 2000Financial Services Index. The graph measures total stockholder return, which takes into account both changes in stock price and dividends. It assumesthat dividends paid are invested in additional shares of the same class of equity securities at the frequency with which dividends are paid of suchsecurities during the applicable fiscal year. The graph and other information furnished under this Part II Item 5 of this Form 10-K shall not be deemed to be “soliciting material” or to be“filed” with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the 1934 Act. The stock price performance included inthe above graph is not necessarily indicative of future stock price performance. Item 6.Selected Financial DataThe selected financial and other data below should be read in conjunction with our “Management’s Discussion and Analysis of FinancialCondition and Results of Operations” and the consolidated financial 59Table of Contentsstatements and notes thereto. Financial information is presented for the fiscal years ended December 31, 2018, 2017, 2016, 2015 and 2014. Financialinformation for the periods ending December 31, 2018, 2017, 2016, 2015 and 2014 has been derived from our consolidated financial statements thatwere audited by KPMG LLP (“KPMG”), an independent registered public accounting firm. ($ in thousands, exceptper share data) Year endedDecember 31,2018 Year endedDecember 31,2017 Year endedDecember 31,2016 Year endedDecember 31,2015 Year endedDecember 31,2014 Income statement data: Total investment income $153,526 $143,338 $151,839 $115,560 $121,937 Net expenses $78,637 $74,975 $80,738 $51,204 $55,230 Net investment income $74,889 $68,363 $71,101 $64,356 $66,707 Net realized gain (loss) $2,078 $(12,015) $776 $(4,874) $(36,840) Net change in unrealized gain (loss). $(10,093) $14,082 $34,938 $(45,402) $18,585 Net increase in net assets resulting from operations $66,874 $70,430 $106,815 $14,080 $48,452 Per share data: Net investment income(1) $1.77 $1.62 $1.68 $1.52 $1.56 Net realized and unrealized gain (loss)(1) $(0.19) $0.05 $0.84 $(1.18) $(0.43) Dividends and distributions declared $1.64 $1.60 $1.60 $1.60 $1.60 As ofDecember 31,2018 As ofDecember 31,2017 As ofDecember 31,2016 As ofDecember 31,2015 As ofDecember 31,2014 Balance sheet data: Total investment portfolio $1,456,080 $1,461,170 $1,304,778 $1,312,591 $1,020,738 Cash and cash equivalents $207,216 $150,789 $312,046 $277,570 $635,340 Total assets $1,683,429 $1,641,565 $1,650,547 $1,620,300 $1,686,334 Debt $476,185 $541,600 $390,200 $432,900 $225,000 Net assets $919,171 $921,605 $918,507 $882,698 $936,568 Per share data: Net asset value per share $21.75 $21.81 $21.74 $20.79 $22.05 Other data (unaudited): Total return(2) 2.8% 4.5% 37.5% (0.3%) (13.6%) Number of portfolio companies at period end 117 93 63 54 43 (1)The per-share calculations are based on weighted average shares of 42,260,826, 42,257,692, 42,258,143, 42,465,158 and 42,888,232 for the years ended December 31, 2018, 2017, 2016, 2015 and2014, respectively.(2)Total return is based on the change in market price per share during the year and takes into account dividends, if any, reinvested in accordance with the dividend reinvestment plan. Total return doesnot include a sales load. Item 7.Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe information contained in this section should be read in conjunction with the Selected Financial and Other Data and our ConsolidatedFinancial Statements and notes thereto appearing elsewhere in this report.Some of the statements in this report constitute forward-looking statements, which relate to future events or our future performance or financialcondition. The forward-looking statements contained herein involve risks and uncertainties, including statements as to: • our future operating results; • our business prospects and the prospects of our portfolio companies; 60Table of Contents • the impact of investments that we expect to make; • our contractual arrangements and relationships with third parties; • the dependence of our future success on the general economy and its impact on the industries in which we invest; • the ability of our portfolio companies to achieve their objectives; • our expected financings and investments; • the adequacy of our cash resources and working capital; and • the timing of cash flows, if any, from the operations of our portfolio companies.We generally use words such as “anticipates,” “believes,” “expects,” “intends” and similar expressions to identify forward-looking statements.Our actual results could differ materially from those projected in the forward-looking statements for any reason, including any factors set forth in “RiskFactors” and elsewhere in this report.We have based the forward-looking statements included in this report on information available to us on the date of this report, and we assume noobligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements,whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly toyou or through reports that we in the future may file with the SEC, including any annual reports on Form 10-K, quarterly reports on Form 10-Q andcurrent reports on Form 8-K.OverviewSolar Capital LLC, a Maryland limited liability company, was formed in February 2007 and commenced operations on March 13, 2007 withinitial capital of $1.2 billion of which 47.04% was funded by affiliated parties.Solar Capital Ltd. (“Solar Capital”, the “Company”, “we” or “our”), a Maryland corporation formed in November 2007, is a closed-end,externally managed, non-diversified management investment company that has elected to be regulated as a business development company (“BDC”)under the Investment Company Act of 1940, as amended (the “1940 Act”). Furthermore, as the Company is an investment company, it continues toapply the guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946. In addition, for taxpurposes, the Company has elected to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of1986, as amended (the “Code”).On February 9, 2010, we priced our initial public offering, selling 5.68 million shares of our common stock. Concurrent with our initial publicoffering, Michael S. Gross, our Chairman and Chief Executive Officer, and Bruce Spohler, our Chief Operating Officer, collectively purchased anadditional 0.6 million shares of our common stock through a private placement transaction exempt from registration under the Securities Act (the“Concurrent Private Placement”).We invest primarily in privately held U.S. middle-market companies, where we believe the supply of primary capital is limited and theinvestment opportunities are most attractive. Our investment objective is to generate both current income and capital appreciation through debt andequity investments. We invest primarily in leveraged middle-market companies in the form of senior secured loans, stretch-senior loans, unitrancheloans, leases and to a lesser extent, mezzanine loans and equity securities. From time to time, we may also invest in public companies that are thinlytraded. Our business is focused primarily on the direct origination of investments through portfolio companies or their financial sponsors. Ourinvestments generally range between 61Table of Contents$5 million and $100 million each, although we expect that this investment size will vary proportionately with the size of our capital base and/or withstrategic initiatives. Our investment activities are managed by Solar Capital Partners, LLC (the “Investment Adviser”) and supervised by our board ofdirectors, a majority of whom are non-interested, as such term is defined in the 1940 Act. Solar Capital Management, LLC (the “Administrator”)provides the administrative services necessary for us to operate.In addition, we may invest a portion of our portfolio in other types of investments, which we refer to as opportunistic investments, which are notour primary focus but are intended to enhance our overall returns. These investments may include, but are not limited to, direct investments in publiccompanies that are not thinly traded and securities of leveraged companies located in select countries outside of the United States.As of December 31, 2018, the Investment Adviser has directly invested approximately $8 billion in more than 360 different portfolio companiessince 2006. Over the same period, the Investment Adviser completed transactions with approximately 200 different financial sponsors.Recent DevelopmentsOn February 21, 2019, our Board declared a quarterly distribution of $0.41 per share payable on April 3, 2019 to holders of record as ofMarch 21, 2019.InvestmentsOur level of investment activity can and does vary substantially from period to period depending on many factors, including the amount of debtand equity capital available to middle market companies, the level of merger and acquisition activity for such companies, the general economicenvironment and the competitive environment for the types of investments we make. As a BDC, we must not acquire any assets other than “qualifyingassets” specified in the 1940 Act unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets (with certain limitedexceptions). Qualifying assets include investments in “eligible portfolio companies.” The definition of “eligible portfolio company” includes certainpublic companies that do not have any securities listed on a national securities exchange and companies whose securities are listed on a nationalsecurities exchange but whose market capitalization is less than $250 million.RevenueWe generate revenue primarily in the form of interest and dividend income from the securities we hold and capital gains, if any, on investmentsecurities that we may sell. Our debt investments generally have a stated term of three to seven years and typically bear interest at a floating rateusually determined on the basis of a benchmark London interbank offered rate (“LIBOR”), commercial paper rate, or the prime rate. Interest on our debtinvestments is generally payable monthly or quarterly but may be bi-monthly or semi-annually. In addition, our investments may providepayment-in-kind (“PIK”) interest. Such amounts of accrued PIK interest are added to the cost of the investment on the respective capitalization datesand generally become due at maturity of the investment or upon the investment being called by the issuer. We may also generate revenue in the form ofcommitment, origination, structuring fees, fees for providing managerial assistance and, if applicable, consulting fees, etc.ExpensesAll investment professionals of the investment adviser and their respective staffs, when and to the extent engaged in providing investmentadvisory and management services, and the compensation and routine overhead expenses of such personnel allocable to such services, are providedand paid for by Solar Capital Partners. We bear all other costs and expenses of our operations and transactions, including (without limitation): • the cost of our organization and public offerings; 62Table of Contents • the cost of calculating our net asset value, including the cost of any third-party valuation services; • the cost of effecting sales and repurchases of our shares and other securities; • interest payable on debt, if any, to finance our investments; • fees payable to third parties relating to, or associated with, making investments, including fees and expenses associated with performingdue diligence reviews of prospective investments and advisory fees; • transfer agent and custodial fees; • fees and expenses associated with marketing efforts; • federal and state registration fees, any stock exchange listing fees; • federal, state and local taxes; • independent directors’ fees and expenses; • brokerage commissions; • fidelity bond, directors and officers errors and omissions liability insurance and other insurance premiums; • direct costs and expenses of administration, including printing, mailing, long distance telephone and staff; • fees and expenses associated with independent audits and outside legal costs; • costs associated with our reporting and compliance obligations under the 1940 Act and applicable federal and state securities laws; and • all other expenses incurred by either Solar Capital Management or us in connection with administering our business, including paymentsunder the Administration Agreement that will be based upon our allocable portion of overhead and other expenses incurred by SolarCapital Management in performing its obligations under the Administration Agreement, including rent, the fees and expenses associatedwith performing compliance functions, and our allocable portion of the costs of compensation and related expenses of our chiefcompliance officer and our chief financial officer and their respective staffs.We expect our general and administrative operating expenses related to our ongoing operations to increase moderately in dollar terms. Duringperiods of asset growth, we generally expect our general and administrative operating expenses to decline as a percentage of our total assets andincrease during periods of asset declines. Incentive fees, interest expense and costs relating to future offerings of securities, among others, may alsoincrease or reduce overall operating expenses based on portfolio performance, interest rate benchmarks, and offerings of our securities relative tocomparative periods, among other factors.Portfolio and Investment ActivityDuring the year ended December 31, 2018, we invested approximately $586 million across over 65 portfolio companies. This compares toinvesting approximately $472 million in 60 portfolio companies for the year ended December 31, 2017. Investments sold, prepaid or repaid during theyear ended December 31, 2018 totaled approximately $624 million versus approximately $333 million for the year ended December 31, 2017.At December 31, 2018, our portfolio consisted of 117 portfolio companies and was invested 33.1% in cash flow senior secured loans, 27.8% inasset-based senior secured loans / Crystal, 21.6% in equipment senior secured financings / NEF, and 17.5% in life science senior secured loans, in eachcase, measured at fair value, versus 93 portfolio companies invested 42.4% in cash flow senior secured loans, 28.0% in asset-based senior secured loans/ Crystal, 15.0% in equipment senior secure financings / NEF, and 14.6% in life science senior secured loans, in each case, measured at fair value, atDecember 31, 2017. 63Table of ContentsAt December 31, 2018, 74.6% or $1.08 billion of our income producing investment portfolio is floating rate and 25.4% or $366.1 million isfixed rate, measured at fair value. At December 31, 2017, 82.0% or $1.18 billion of our income producing investment portfolio is floating rate and18.0% or $259.8 million is fixed rate, measured at fair value. As of December 31, 2018 and 2017, we had zero issuers on non-accrual status.Since inception through December 31, 2018, Solar Capital and its predecessor companies have invested approximately $5.8 billion in more than250 portfolio companies. Over the same period, Solar Capital has completed transactions with more than 150 different financial sponsors.Crystal Financial LLCOn December 28, 2012, we completed the acquisition of Crystal Capital Financial Holdings LLC (“Crystal Financial”), a commercial financecompany focused on providing asset-based and other secured financing solutions (the “Crystal Acquisition”). We invested $275 million in cash toeffect the Crystal Acquisition. Crystal Financial owned approximately 98% of the outstanding ownership interest in Crystal Financial LLC. Theremaining financial interest was held by various employees of Crystal Financial LLC, through their investment in Crystal Management LP. CrystalFinancial LLC had a diversified portfolio of 23 loans having a total par value of approximately $400 million at November 30, 2012 and a $275 millioncommitted revolving credit facility. On July 28, 2016, the Company purchased Crystal Management LP’s approximately 2% equity interest in CrystalFinancial LLC for approximately $5.7 million. Upon the closing of this transaction, the Company holds 100% of the equity interest in CrystalFinancial LLC. On September 30, 2016, Crystal Capital Financial Holdings LLC was dissolved. On December 20, 2018, the revolving credit facilitywas expanded to $330 million.As of December 31, 2018, Crystal Financial LLC had 31 funded commitments to 26 different issuers with a total par value of approximately$418.7 million on total assets of $486.4 million. As of December 31, 2017, Crystal Financial LLC had 27 funded commitments to 23 different issuerswith a total par value of approximately $300.9 million on total assets of $448.5 million. As of December 31, 2018 and December 31, 2017, the largestloan outstanding totaled $37.5 million and $36.0 million, respectively. For the same periods, the average exposure per issuer was $16.1 million and$13.1 million, respectively. Crystal Financial LLC’s credit facility, which is non-recourse to Solar Capital, had approximately $206.0 million and$176.5 million of borrowings outstanding at December 31, 2018 and December 31, 2017, respectively. For the years ended December 31, 2018, 2017and 2016, Crystal Financial LLC had net income of $33.0 million, $20.4 million and $34.1 million, respectively, on gross income of $58.8 million,$52.7 million and $69.4 million, respectively. Due to timing and non-cash items, there may be material differences between GAAP net income and cashavailable for distributions. As such, and subject to fluctuations in Crystal Financial LLC’s funded commitments, the timing of originations, and therepayments of financings, the Company cannot guarantee that Crystal Financial LLC will be able to maintain consistent dividend payments to us.Crystal Financial LLC’s consolidated financial statements for the fiscal years ended December 31, 2018 and December 31, 2017 are attached as anexhibit to this annual report on Form 10-K.NEF Holdings, LLCOn July 31, 2017, we completed the acquisition of NEF Holdings, LLC (“NEF”), which conducts its business through its wholly-ownedsubsidiary Nations Equipment Finance, LLC. NEF is an independent equipment finance company that provides senior secured loans and leasesprimarily to U.S. based companies. We invested $209.9 million in cash to effect the transaction, of which $145.0 million was invested in the equity ofNEF through our wholly-owned consolidated taxable subsidiary NEFCORP LLC and our wholly-owned consolidated subsidiary NEFPASS LLC and$64.9 million was used to purchase certain leases and loans held by NEF through NEFPASS LLC. Concurrent with the transaction, NEF refinanced itsexisting senior secured credit facility into a $150.0 million non-recourse facility with an accordion feature to expand up to $250.0 million. The We have included Crystal Financial LLC and NEF Holdings LLC within our income producing investment portfolio. 64***Table of Contentsmaturity date of the facility is July 31, 2021. At July 31, 2017, NEF also had two securitizations outstanding, with an issued note balance of$94.6 million.As of December 31, 2018, NEF had 207 funded equipment-backed leases and loans to 82 different customers with a total net investment in leasesand loans of approximately $237.2 million on total assets of $293.2 million. As of December 31, 2017, NEF had 223 funded equipment-backed leasesand loans to 90 different customers with a total net investment in leases and loans of approximately $223.0 million on total assets of $289.5 million.As of December 31, 2018 and December 31, 2017, the largest position outstanding totaled $28.5 million and $16.0 million, respectively. For the sameperiods, the average exposure per customer was $2.9 million and $2.5 million, respectively. NEF’s credit facility, which is non-recourse to SolarCapital, had approximately $119.3 million and $71.0 million of borrowings outstanding at December 31, 2018 and December 31, 2017, respectively.During 2018, NEF exercised its option to redeem the remaining securitization notes. The securitization notes balance on December 31, 2017 was$71.7 million. For the year ended December 31, 2018 and for the period July 31, 2017 through December 31, 2017, NEF had net income of$3.4 million and $4.7 million, respectively, on gross income of $30.1 million and $15.6 million, respectively. Due to timing and non-cash items, theremay be material differences between GAAP net income and cash available for distributions. As such, and subject to fluctuations in NEF’s fundedcommitments, the timing of originations, and the repayments of financings, the Company cannot guarantee that NEF will be able to maintainconsistent dividend payments to us. NEF’s consolidated financial statements for the fiscal years ended December 31, 2018 and December 31, 2017 areattached as an exhibit to this annual report on Form 10-K.Solar Life Science Program LLCOn February 22, 2017, the Company, through its commitment to Senior Secured Unitranche Loan Program III (“SSLP III”), and Solar SeniorCapital Ltd. formed Solar Life Science Program (“LSJV”) with an affiliate of Deerfield Management. SSLP III committed approximately $50.0 millionto LSJV. On March 10, 2017, SSLP III was dissolved. On August 16, 2018, the LSJV was dissolved, without commencing operations.Senior Secured Unitranche Loan Program LLCOn September 2, 2014, the Company entered into a limited liability company agreement with an affiliate (the “Investor”) of a fund managed byPacific Investment Management Company LLC (“PIMCO”) to co-invest in middle market senior secured unitranche loans sourced by the sameorigination platform used by the Company. Initial funding commitments to the unitranche strategy totaled $600 million, consisting of direct equityinvestments and co-investment commitments as described below. The joint venture vehicle known as the Senior Secured Unitranche Loan ProgramLLC (“SSLP”) was structured as an unconsolidated Delaware limited liability company. The Company and the Investor initially made equitycommitments to the SSLP of $300.0 million and $43.25 million, respectively. All portfolio decisions and generally all other decisions in respect of theSSLP had to be approved by an investment committee of the SSLP consisting of representatives of the Company and PIMCO (with approval from arepresentative of each required).On October 15, 2015, the Company entered into an amended and restated limited liability company agreement for its SSLP to add VoyaInvestment Management LLC (“Voya”), part of Voya Financial, Inc. (NYSE: VOYA), as a partner in SSLP in place of the investor that was previouslythe Company’s partner in SSLP, though this investor could still co-invest up to $300 million of equity in unitranche loans alongside SSLP. This jointventure was expected to invest primarily in senior secured loans, including unitranche loans, primarily to middle market companies predominantlyowned by private equity sponsors or entrepreneurs, consistent with the Company’s core origination and underwriting mandate. In addition to theCompany’s prior equity commitment of $300.0 million to SSLP, Voya had made an initial equity commitment of $25.0 million to SSLP, with theability to upsize.On November 2, 2015, the Company assigned $125.0 million of its $300.0 million commitment to SSLP to Senior Secured Unitranche LoanProgram II LLC (“SSLP II”), a Delaware limited liability company. 65Table of ContentsOn November 25, 2015, SSLP commenced operations. On June 30, 2016, SSLP as transferor and SSLP 2016-1, LLC, a newly formed wholly-owned subsidiary of SSLP, as borrower entered into a $200 million senior secured revolving credit facility (the “SSLP Facility”) with Wells FargoBank, NA acting as administrative agent. The Company acts as servicer under the SSLP Facility. The SSLP Facility is scheduled to mature on June 30,2021. The SSLP Facility generally bears interest at a rate of LIBOR plus 2.50%. SSLP and SSLP 2016-1, LLC, as applicable, have made certaincustomary representations and warranties, and are required to comply with various covenants, including leverage restrictions, reporting requirementsand other customary requirements for similar credit facilities. The SSLP Facility also includes usual and customary events of default for credit facilitiesof this nature. On September 18, 2018, the Company acquired Voya’s share of the equity in SSLP to hold 100% of the equity in SSLP. As such, theCompany consolidated SSLP as of this date. For financial reporting purposes, assets consolidated were recorded at fair value and the cost basis of theassets consolidated were carried forward to align with the ongoing reporting of the Company’s realized and unrealized gains and losses. Also due to theconsolidation, the then $0.35 million in unrealized depreciation on the Company’s equity investment in SSLP was reflected as unrealized depreciationin our consolidated assets and liabilities as well as an adjustment to net increase in net assets resulting from operations on the Company’s consolidatedstatement of cash flows. The effect of consolidation did not affect the Company’s net assets at September 30, 2018. On December 19, 2018, SSLP andthe Company merged, with the Company the surviving entity. Also on December 19, 2018, SSLP 2016-1 LLC merged with SSLP II 2016-1 LLC, withSSLP 2016-1 LLC the surviving entity. SSLP 2016-1 LLC is now a wholly-owned subsidiary of the Company and borrowings under the SSLP Facilityare consolidated.Senior Secured Unitranche Loan Program II LLCOn November 2, 2015, the Company assigned $125.0 million of its $300.0 million commitment to SSLP to SSLP II, a Delaware limited liabilitycompany. On August 5, 2016, the Company entered into an amended and restated limited liability company agreement with WFI Loanco, LLC (“WFI”)and SSLP II commenced operations. SSLP II invested primarily in senior secured loans, including unitranche loans, primarily to middle marketcompanies predominantly owned by private equity sponsors or entrepreneurs, consistent with the Company’s core origination and underwritingmandate. Also, on August 5, 2016, the Company assigned approximately $50.0 million of its $125.0 million commitment to SSLP II to SSLP III, anewly formed Delaware limited liability company. SSLP III, which had not commenced operations, was wholly owned by Solar Capital Ltd. but couldhave brought in unaffiliated investors at a later date. The Company and WFI’s equity commitments to SSLP II then totaled $75.0 million and$18.0 million, respectively.On November 15, 2016, SSLP II as transferor and SSLP II 2016-1, LLC, a newly formed wholly-owned subsidiary of SSLP II, as borrower enteredinto a $100 million senior secured revolving credit facility (the “SSLP II Facility”) with Wells Fargo Bank, NA acting as administrative agent. SolarCapital Ltd. was servicer under the SSLP II Facility. The SSLP II Facility was scheduled to mature on November 15, 2021. The SSLP II Facilitygenerally bore interest at a rate of LIBOR plus 2.50%. SSLP II and SSLP II 2016-1, LLC, as applicable, had made certain customary representations andwarranties, and were required to comply with various covenants, including leverage restrictions, reporting requirements and other customaryrequirements for similar credit facilities. The SSLP II Facility also included usual and customary events of default for credit facilities of this nature. OnSeptember 14, 2018, the Company acquired WFI’s share of the equity in SSLP II to hold 100% of the equity in SSLP II. As such, the Companyconsolidated SSLP II as of this date. For financial reporting purposes, assets consolidated were recorded at fair value and the cost basis of the assetsconsolidated were carried forward to align with the ongoing reporting of the Company’s realized and unrealized gains and losses. Also due to theconsolidation, the then $0.09 million in unrealized depreciation on the Company’s equity investment in SSLP II was reflected as unrealizeddepreciation in our consolidated assets and liabilities as well as an adjustment to net increase in net assets resulting from operations on the Company’sconsolidated statement of cash flows. The effect of consolidation did not affect the Company’s net assets at September 30, 2018. On December 19,2018, SSLP II and Solar Capital Ltd. merged, with Solar Capital Ltd. the surviving entity. Additionally, on December 19, 2018, the SSLP II Facility wasterminated after merging into the SSLP Facility. 66Table of ContentsStock Repurchase ProgramsOn July 31, 2013, the Board authorized a program for the purpose of repurchasing up to $100 million of the Company’s common stock. Underthe repurchase program, the Company could have, but was not obligated to, repurchase its outstanding common stock in the open market from time totime provided that the Company complied with the prohibitions under its Insider Trading Policies and Procedures and the guidelines specified inRules 10b-18 and 10b-5 under the Securities Exchange Act of 1934, as amended, including certain price, market volume and timing constraints. OnDecember 5, 2013, the Board extended the repurchase program to be in place until the earlier of July 31, 2014 or until $100 million of the Company’soutstanding shares of common stock had been repurchased. On July 31, 2014, the Company’s stock repurchase program expired. During the fiscal yearended December 31, 2014, the Company repurchased 1,779,033 shares at an average price of approximately $21.97 per share, inclusive ofcommissions. The total dollar amount of shares repurchased in that period was $39.1 million. During the year ended December 31, 2013, the Companyrepurchased 796,418 shares at an average price of approximately $21.98 per share, inclusive of commissions, for a total dollar amount of $17.5 million.On October 7, 2015, the Board authorized a new share repurchase program to purchase common stock in the open market in an amount up to$30 million. Under the repurchase program, the Company may, but is not obligated to, repurchase its outstanding common stock in the open marketfrom time to time provided that the Company complies with the prohibitions under its Insider Trading Policies and Procedures and the guidelinesspecified in Rules 10b-18 and 10b-5 under the Securities Exchange Act of 1934, as amended, including certain price, market volume and timingconstraints. During the year ended December 31, 2016, the Company repurchased 216,237 shares at an average price of $15.76 per share, inclusive ofcommissions. The total dollar amount of shares repurchased during the year ended December 31, 2016 was $3.4 million. On October 7, 2016, theCompany’s stock repurchase program expired.Critical Accounting PoliciesThe preparation of consolidated financial statements and related disclosures in conformity with GAAP requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidatedfinancial statements, and revenues and expenses during the periods reported. Actual results could materially differ from those estimates. We haveidentified the following items as critical accounting policies. Within the context of these critical accounting policies and disclosed subsequent eventsherein, we are not currently aware of any other reasonably likely events or circumstances that would result in materially different amounts beingreported.Valuation of Portfolio InvestmentsWe conduct the valuation of our assets, pursuant to which our net asset value is determined, at all times consistent with GAAP, and the 1940 Act.Our valuation procedures are set forth in more detail below:Under procedures established by our board of directors (the “Board”), we value investments, including certain senior secured debt, subordinateddebt and other debt securities with maturities greater than 60 days, for which market quotations are readily available, at such market quotations (unlessthey are deemed not to represent fair value). We attempt to obtain market quotations from at least two brokers or dealers (if available, otherwise from aprincipal market maker or a primary market dealer or other independent pricing service). We utilize mid-market pricing as a practical expedient for fairvalue unless a different point within the range is more representative. If and when market quotations are deemed not to represent fair value, we mayutilize independent third-party valuation firms to assist us in determining the fair value of material assets. Accordingly, such investments go throughour multi-step valuation process as described below. In each case, independent valuation firms consider observable market inputs together withsignificant unobservable inputs in arriving at their valuation recommendations. Debt investments with maturities of 60 days or less shall each bevalued at cost plus 67Table of Contentsaccreted discount, or minus amortized premium, which is expected to approximate fair value, unless such valuation, in the judgment of the InvestmentAdviser, does not represent fair value, in which case such investments shall be valued at fair value as determined in good faith by or under the directionof our Board. Investments that are not publicly traded or whose market quotations are not readily available are valued at fair value as determined ingood faith by or under the direction of our Board. Such determination of fair values involves subjective judgments and estimates.With respect to investments for which market quotations are not readily available or when such market quotations are deemed not to representfair value, our Board has approved a multi-step valuation process each quarter, as described below: (1)our quarterly valuation process begins with each portfolio company or investment being initially valued by the investment professionals ofthe Investment Adviser responsible for the portfolio investment; (2)preliminary valuation conclusions are then documented and discussed with senior management of the Investment Adviser; (3)independent valuation firms engaged by our Board conduct independent appraisals and review the Investment Adviser’s preliminaryvaluations and make their own independent assessment for all material assets; (4)the audit committee of the Board reviews the preliminary valuation of the Investment Adviser and that of the independent valuation firm, ifany, and responds to the valuation recommendation of the independent valuation firm to reflect any comments; and (5)the Board discusses valuations and determines the fair value of each investment in our portfolio in good faith based on the input of theInvestment Adviser, the respective independent valuation firm, if any, and the audit committee.Investments in all asset classes are valued utilizing a market approach, an income approach, or both approaches, as appropriate. However, inaccordance with ASC 820-10, certain investments that qualify as investment companies in accordance with ASC 946, may be valued using net assetvalue as a practical expedient for fair value. The market approach uses prices and other relevant information generated by market transactionsinvolving identical or comparable assets or liabilities (including a business). The income approach uses valuation approaches to convert futureamounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by currentmarket expectations about those future amounts. In following these approaches, the types of factors that we may take into account in fair value pricingour investments include, as relevant: available current market data, including relevant and applicable market trading and transaction comparables,applicable market yields and multiples, security covenants, call protection provisions, the nature and realizable value of any collateral, the portfoliocompany’s ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisonsof financial ratios of peer companies that are public, M&A comparables, our principal market (as the reporting entity) and enterprise values, amongother factors. When available, broker quotations and/or quotations provided by pricing services are considered as an input in the valuation process. Forthe fiscal year ended December 31, 2018, there has been no change to the Company’s valuation approaches or techniques and the nature of the relatedinputs considered in the valuation process.Accounting Standards Codification (“ASC”) Topic 820 classifies the inputs used to measure these fair values into the following hierarchy:Level 1: Quoted prices in active markets for identical assets or liabilities, accessible by the Company at the measurement date.Level 2: Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities inmarkets that are not active, or other observable inputs other than quoted prices.Level 3: Unobservable inputs for the asset or liability. 68Table of ContentsIn all cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowestlevel of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement inits entirety requires judgment and considers factors specific to each investment. The exercise of judgment is based in part on our knowledge of the assetclass and our prior experience.Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our consolidated financial statements expressthe uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our consolidated financial statements.Valuation of Credit Facility, 2022 Unsecured Notes and SSLP FacilityThe Company has made irrevocable elections to apply the fair value option of accounting to the Credit Facility, the 2022 Unsecured Notes andeffectively, through the merger, the SSLP Facility, in accordance with ASC 825-10. We believe accounting for the Credit Facility, 2022 UnsecuredNotes and the SSLP Facility at fair value better aligns the measurement methodologies of assets and liabilities, which may mitigate certain earningsvolatility.Revenue RecognitionThe Company records dividend income and interest, adjusted for amortization of premium and accretion of discount, on an accrual basis.Investments that are expected to pay regularly scheduled interest and/or dividends in cash are generally placed on non-accrual status when principal orinterest/dividend cash payments are past due 30 days or more (90 days or more for equipment financing) and/or when it is no longer probable thatprincipal or interest/dividend cash payments will be collected. Such non-accrual investments are restored to accrual status if past due principal andinterest or dividends are paid in cash, and in management’s judgment, are likely to continue timely payment of their remaining interest or dividendobligations. Interest or dividend cash payments received on investments may be recognized as income or applied to principal depending uponmanagement’s judgment. Some of our investments may have contractual PIK interest or dividends. PIK interest and dividends computed at thecontractual rate are accrued into income and reflected as receivable up to the capitalization date. PIK investments offer issuers the option at eachpayment date of making payments in cash or in additional securities. When additional securities are received, they typically have the same terms,including maturity dates and interest rates as the original securities issued. On these payment dates, the Company capitalizes the accrued interest ordividends receivable (reflecting such amounts as the basis in the additional securities received). PIK generally becomes due at the maturity of theinvestment or upon the investment being called by the issuer. At the point the Company believes PIK is not expected to be realized, the PIKinvestment will be placed on non-accrual status. When a PIK investment is placed on non-accrual status, the accrued, uncapitalized interest ordividends is reversed from the related receivable through interest or dividend income, respectively. The Company does not reverse previouslycapitalized PIK interest or dividends. Upon capitalization, PIK is subject to the fair value estimates associated with their related investments. PIKinvestments on non-accrual status are restored to accrual status if the Company again believes that PIK is expected to be realized. Loan originationfees, original issue discount, and market discounts are capitalized and amortized into income using the interest method or straight-line, as applicable.Upon the prepayment of a loan, any unamortized loan origination fees are recorded as interest income. We record prepayment premiums on loans andother investments as interest income when we receive such amounts. Capital structuring fees are recorded as other income when earned.The typically higher yields and interest rates on PIK securities, to the extent we invested, reflects the payment deferral and increased credit riskassociated with such instruments and that such investments may represent a significantly higher credit risk than coupon loans. PIK securities may haveunreliable valuations because their continuing accruals require continuing judgments about the collectability of the deferred payments and the valueof any associated collateral. PIK interest has the effect of generating investment income and increasing the incentive fees payable at a compoundingrate. In addition, the deferral of PIK interest also 69Table of Contentsincreases the loan-to-value ratio at a compounding rate. PIK securities create the risk that incentive fees will be paid to the Investment Adviser basedon non-cash accruals that ultimately may not be realized, but the Investment Adviser will be under no obligation to reimburse the Company for thesefees. For the fiscal years ended December 31, 2018, 2017 and 2016, capitalized PIK income totaled $0.9 million, $0.2 million and $0.0 million,respectively.Net Realized Gain or Loss and Net Change in Unrealized Gain or LossWe generally measure realized gain or loss by the difference between the net proceeds from the repayment or sale and the amortized cost basis ofthe investment, without regard to unrealized appreciation or depreciation previously recognized, but considering unamortized origination orcommitment fees and prepayment penalties. The net change in unrealized gain or loss reflects the change in portfolio investment values during thereporting period, including the reversal of previously recorded unrealized gain or loss, when gains or losses are realized. Gains or losses on investmentsare calculated by using the specific identification method.Income TaxesSolar Capital, a U.S. corporation, has elected to be treated, and intends to qualify annually, as a RIC under Subchapter M of the Code. In order toqualify for taxation as a RIC, the Company is required, among other things, to timely distribute to its stockholders at least 90% of investment companytaxable income, as defined by the Code, for each year. Depending on the level of taxable income earned in a given tax year, we may choose to carryforward taxable income in excess of current year distributions into the next tax year and pay a 4% excise tax on such income, as required. To the extentthat the Company determines that its estimated current year annual taxable income will be in excess of estimated current year distributions, theCompany accrues an estimated excise tax, if any, on estimated excess taxable income.Recent Accounting PronouncementsIn August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework — Changes to the DisclosureRequirements for Fair Value Measurement. The amendments in this Update modify the disclosure requirements on fair value measurements in Topic820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits. ASU 2018-13 iseffective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted.The Company is evaluating the impact of ASU 2018-13 on its consolidated financial statements and disclosures.In August 2018, the US Securities and Exchange Commission adopted final rules to eliminate redundant, duplicative, overlapping, outdated orsuperseded disclosure requirements in light of other disclosure requirements, GAAP or changes in the information environment. These rules amendcertain provisions of Regulation S-X and Regulation S-K, certain rules promulgated under the Securities Act of 1933 and the Securities Exchange Actof 1934 and certain related forms. These changes became effective on November 5, 2018.In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows, which amends FASB ASC 230. The amendments in this Updaterequire that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described asrestricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should beincluded with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cashflows. The amendments in this Update apply to all entities that have restricted cash or restricted cash equivalents and are required to present astatement of cash flows under Topic 230. For public business entities, the amendments were effective for fiscal years beginning after December 15,2017, and interim periods within those fiscal years. The Company has adopted ASU 2016-18 and determined that the adoption has not had a materialimpact on its consolidated financial statements and disclosures. 70Table of ContentsIn March 2017, the FASB issued ASU 2017-08, Premium Amortization on Purchased Callable Debt Securities, which will amend FASB ASC310-20. The amendments in this Update shorten the amortization period for certain callable debt securities held at a premium, generally requiring thepremium to be amortized to the earliest call date. For public business entities, the amendments are effective for fiscal years, and interim periods withinthose fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. The Company isevaluating the impact of ASU 2017-08 on its consolidated financial statements and disclosures.In May 2014, the FASB issued ASC 606, Revenue From Contracts With Customers, originally effective for public business entities with annualreporting periods beginning after December 15, 2016. On August 12, 2015, the FASB issued an ASU, Revenue From Contracts With Customers (Topic606): Deferral of the Effective Date, which deferred the effective date of ASC 606 for one year. ASC 606 provides accounting guidance related torevenue from contracts with customers. For public business entities, ASC 606 was effective for fiscal years, and interim periods within those fiscalyears, beginning after December 15, 2017. The Company has adopted ASC 606 and determined that the adoption has not had a material impact on itsconsolidated financial statements and disclosures.RESULTS OF OPERATIONSResults comparisons are for the fiscal years ended December 31, 2018, December 31, 2017 and December 31, 2016.Investment IncomeFor the fiscal years ended December 31, 2018, 2017 and 2016, gross investment income totaled $153.5 million, $143.3 million and$151.8 million, respectively. The increase in gross investment income from 2017 to 2018 was primarily due to growth of the average incomeproducing investment portfolio. The decrease in gross investment income from 2016 to 2017 was primarily due to an increase in the volume ofprepayments and other exits, which reduced the average size of the income-producing portfolio.ExpensesExpenses totaled $78.6 million, $75.0 million and $80.7 million, respectively, for the fiscal years ended December 31, 2018, 2017 and 2016, ofwhich $44.5 million, $44.5 million and $45.9 million, respectively, were base management fees and performance-based incentive fees and$24.7 million, $21.7 million and $24.6 million, respectively, were interest and other credit facility expenses (inclusive of $0.6 million of costs in 2017related to the issuance of the 2022 Unsecured Notes and $3.1 million of costs in 2016 related to an amendment of the Credit Facility and the issuanceof the 2022 Unsecured Notes). Administrative services and other general and administrative expenses totaled $9.4 million, $8.8 million and$10.3 million, respectively, for the fiscal years ended December 31, 2018, 2017 and 2016. Expenses generally consist of management andperformance-based incentive fees, interest and other credit facility expenses, administrative services fees, insurance expenses, legal fees, directors’ fees,transfer agency fees, printing and proxy expenses, audit and tax services expenses, and other general and administrative expenses. Interest and othercredit facility expenses generally consist of interest, unused fees, agency fees and loan origination fees, if any, among others. The increase in expensesfrom 2017 to 2018 was primarily due to higher interest expense resulting from generally higher LIBOR and an increase in average borrowings tosupport a larger average income producing investment portfolio. The decrease in expenses from 2016 to 2017 is primarily due to fewer one-time creditfacility costs associated with amendments and new debt issuances, as well as lower general and administrative expenses.Net Investment IncomeThe Company’s net investment income totaled $74.9 million, $68.4 million and $71.1 million, or $1.77, $1.62 and $1.68, per average share,respectively, for the fiscal years ended December 31, 2018, 2017 and 2016. 71Table of ContentsNet Realized Gain (Loss)The Company had investment sales and prepayments totaling approximately $624 million, $333 million and $488 million, respectively, for thefiscal years ended December 31, 2018, 2017 and 2016. Net realized gains (losses) over the same periods were $2.1 million, ($12.0) million and$0.8 million, respectively. Net realized gains for fiscal year 2018 were related to the sale of select assets and the redemption of warrants. Net realizedlosses for fiscal year 2017 were primarily due to the exit of our investment in Direct Buy Inc., along with losses incurred related to the extinguishmentof debt. Modest net realized gains for fiscal year 2016 were related to the sale of select assets.Net Change in Unrealized Gain (Loss)For the fiscal years ended December 31, 2018, 2017 and 2016, net change in unrealized gain (loss) on the Company’s assets and liabilitiestotaled ($10.1) million, $14.1 million and $34.9 million, respectively. Net unrealized loss for the fiscal year ended December 31, 2018 is primarily dueto unrealized depreciation in the value of our investments in Crystal Financial LLC, Rug Doctor, LLC and IHS Intermediate, Inc. among others,partially offset by unrealized appreciation in the value of our investments in SOAGG LLC and Phymed Management LLC, among others. Netunrealized gain for the fiscal year ended December 31, 2017 was primarily related to the reversal of unrealized depreciation on our investment in DirectBuy Inc. due to its exit from our portfolio, as well as appreciation in the value of our investments in Bishop Lifting Products, Inc., BreatheTechnologies, Inc. and Aegis Toxicology Corporation, among others. Partially offsetting the net change in unrealized gain was depreciation on ourinvestments in Rug Doctor, LLC and Crystal Financial LLC, among others. Net unrealized gain for the fiscal year ended December 31, 2016 wasprimarily related to appreciation in the value of our investments in Crystal Financial LLC, WireCo Worldgroup Inc., Global Tel*Link Corporation,Asurion LLC and DISA Holdings Acquisition Subsidiary Corp., among others. Partially offsetting the net appreciation was depreciation in the value ofour investments in Breathe Technologies, Inc., Senior Secured Unitranche Loan Program LLC and Rug Doctor, LLC, among others.Net Increase in Net Assets From OperationsFor the fiscal years ended December 31, 2018, 2017 and 2016, the Company had a net increase in net assets resulting from operations of$66.9 million, $70.4 million and $106.8 million, respectively. For the fiscal years ended December 31, 2018, 2017 and 2016, earnings per averageshare were $1.58, $1.67 and $2.53, respectively.LIQUIDITY AND CAPITAL RESOURCESThe Company’s liquidity and capital resources are generated and generally available through its Credit Facility, the 2022 Unsecured Notes, the2022 Tranche C Notes, the NEFPASS Facility, the SSLP Facility and the 2023 Unsecured Notes (collectively the “Credit Facilities”), through cashflows from operations, investment sales, prepayments of senior and subordinated loans, income earned on investments and cash equivalents, andperiodic follow-on equity and/or debt offerings. As of December 31, 2018, we had a total of $549.8 million of unused borrowing capacity under theCredit Facilities, subject to borrowing base limits.We may from time to time issue equity and/or debt securities in either public or private offerings. The issuance of such securities will depend onfuture market conditions, funding needs and other factors and there can be no assurance that any such issuance will occur or be successful. The primaryuses of existing funds and any funds raised in the future is expected to be for investments in portfolio companies, repayment of indebtedness, cashdistributions to our stockholders, or for other general corporate purposes.On December 28, 2017, the Company closed a private offering of $21 million of the 2022 Tranche C Notes with a fixed interest rate of 4.50% anda maturity date of December 28, 2022. Interest on the 2022 Tranche C Notes is due semi-annually on June 28 and December 28. The 2022 Tranche CNotes were issued in a private placement only to qualified institutional buyers. 72Table of ContentsOn November 22, 2017, we issued $75 million in aggregate principal amount of publicly registered 2023 Unsecured Notes for net proceeds of$73.8 million. Interest on the 2023 Unsecured Notes is paid semi-annually on January 20 and July 20, at a rate of 4.50% per year, commencing onJanuary 20, 2018. The 2023 Unsecured Notes mature on January 20, 2023.On February 15, 2017, the Company closed a private offering of $100 million of the 2022 Unsecured Notes with a fixed interest rate of 4.60%and a maturity date of May 8, 2022. Interest on the 2022 Unsecured Notes is due semi-annually on May 8 and November 8. The 2022 Unsecured Noteswere issued in a private placement only to qualified institutional buyers.On November 8, 2016, the Company closed a private offering of $50 million of the 2022 Unsecured Notes with a fixed interest rate of 4.40% anda maturity date of May 8, 2022. Interest on the 2022 Unsecured Notes is due semi-annually on May 8 and November 8. The 2022 Unsecured Noteswere issued in a private placement only to qualified institutional buyers.On January 11, 2013, the Company closed its most recent follow-on public equity offering of 6.3 million shares of common stock raisingapproximately $146.9 million in net proceeds. The primary uses of the funds raised were for investments in portfolio companies, reductions inrevolving debt outstanding and for other general corporate purposes.The primary uses of existing funds and any funds raised in the future is expected to be for repayment of indebtedness, investments in portfoliocompanies, cash distributions to our stockholders or for other general corporate purposes.Cash EquivalentsWe deem certain U.S. Treasury bills, repurchase agreements and other high-quality, short-term debt securities as cash equivalents. The Companymakes purchases that are consistent with its purpose of making investments in securities described in paragraphs 1 through 3 of Section 55(a) of the1940 Act. From time to time, including at or near the end of each fiscal quarter, we consider using various temporary investment strategies for ourbusiness. One strategy includes taking proactive steps by utilizing cash equivalents as temporary assets with the objective of enhancing our investmentflexibility pursuant to Section 55 of the 1940 Act. More specifically, from time-to-time we may purchase U.S. Treasury bills or other high-quality,short-term debt securities at or near the end of the quarter and typically close out the position on a net cash basis subsequent to quarter end. We mayalso utilize repurchase agreements or other balance sheet transactions, including drawing down on our credit facilities, as deemed appropriate. Theamount of these transactions or such drawn cash for this purpose is excluded from total assets for purposes of computing the asset base upon which themanagement fee is determined. We held approximately $200 million in cash equivalents as of December 31, 2018.DebtUnsecured NotesOn December 28, 2017, the Company closed a private offering of $21 million of the 2022 Tranche C Notes with a fixed interest rate of 4.50% anda maturity date of December 28, 2022. Interest on the 2022 Tranche C Notes is due semi-annually on June 28 and December 28. The 2022 Tranche CNotes were issued in a private placement only to qualified institutional buyers.On November 22, 2017, we issued $75 million in aggregate principal amount of publicly registered 2023 Unsecured Notes for net proceeds of$73.8 million. Interest on the 2023 Unsecured Notes is paid semi-annually on January 20 and July 20, at a rate of 4.50% per year, commencing onJanuary 20, 2018. The 2023 Unsecured Notes mature on January 20, 2023. 73Table of ContentsOn February 15, 2017, the Company closed a private offering of $100 million of the 2022 Unsecured Notes with a fixed interest rate of 4.60%and a maturity date of May 8, 2022. Interest on the 2022 Unsecured Notes is due semi-annually on May 8 and November 8. The 2022 Unsecured Noteswere issued in a private placement only to qualified institutional buyers.On November 8, 2016, the Company closed a private offering of $50 million of the 2022 Unsecured Notes with a fixed interest rate of 4.40% anda maturity date of May 8, 2022. Interest on the 2022 Unsecured Notes is due semi-annually on May 8 and November 8. The 2022 Unsecured Noteswere issued in a private placement only to qualified institutional buyers.Revolving & Term Loan FacilitiesOn September 30, 2016, the Company entered into a second Credit Facility amendment. Post amendment, the Credit Facility was composed of$505 million of revolving credit and $50 million of term loans. Borrowings generally bear interest at a rate per annum equal to the base rate plus arange of 2.00-2.25% or the alternate base rate plus 1.00%-1.25%. The Credit Facility has no LIBOR floor requirement. The Credit Facility matures inSeptember 2021 and includes ratable amortization in the final year. The Credit Facility may be increased up to $800 million with additional newlenders or an increase in commitments from current lenders. The Credit Facility contains certain customary affirmative and negative covenants andevents of default. In addition, the Credit Facility contains certain financial covenants that among other things, requires the Company to maintain aminimum shareholder’s equity and a minimum asset coverage ratio. The Company also pays issuers of funded term loans quarterly in arrears acommitment fee at the rate of 0.25% per annum on the average daily outstanding balance. On February 23, 2017, the Company prepaid its twonon-extending lenders and terminated their commitments, reducing total outstanding revolving credit commitments by $110 million to $395 million.On April 30, 2018, the revolving credit commitments under the Company’s Credit Facility were expanded by $50 million from $395 million to$445 million and on July 13, 2018, revolving credit commitments were further expanded by $35 million to $480 million. On November 21, 2018, weentered into Amendment No. 3 to the Credit Facility which, among other things, reduced the asset coverage covenant in the Credit Facility from 200%to 150% and made certain related changes to the borrowing base calculations. At December 31, 2018, outstanding USD equivalent borrowings underthe Credit Facility totaled $146.4 million, composed of $96.4 million of revolving credit and $50.0 million of term loans.On June 30, 2016, SSLP as transferor and SSLP 2016-1, LLC, a newly formed wholly-owned subsidiary of SSLP, as borrower entered into theSSLP Facility with Wells Fargo Bank, NA acting as administrative agent. Solar Capital Ltd. acts as servicer under the SSLP Facility. The SSLP Facilityis scheduled to mature on June 30, 2021. The SSLP Facility generally bears interest at a rate of LIBOR plus 2.50%. SSLP and SSLP 2016-1, LLC, asapplicable, have made certain customary representations and warranties, and are required to comply with various covenants, including leveragerestrictions, reporting requirements and other customary requirements for similar credit facilities. The SSLP Facility also includes usual and customaryevents of default for credit facilities of this nature. There were $53.8 million of borrowings outstanding as of December 31, 2018.On November 15, 2016, SSLP II as transferor and SSLP II 2016-1, LLC, a newly formed wholly-owned subsidiary of SSLP II, as borrower enteredinto a $100 million senior secured revolving credit facility (the “SSLP II Facility”) with Wells Fargo Bank, NA acting as administrative agent. SolarCapital Ltd. acts as servicer under the SSLP II Facility. The SSLP II Facility is scheduled to mature on November 15, 2021. The SSLP II Facilitygenerally bears interest at a rate of LIBOR plus 2.50%. SSLP II and SSLP II 2016-1, LLC, as applicable, have made certain customary representationsand warranties, and are required to comply with various covenants, including leverage restrictions, reporting requirements and other customaryrequirements for similar credit facilities. The SSLP II Facility also includes usual and customary events of default for credit facilities of this nature. OnDecember 19, 2018, the SSLP II Facility was merged into the SSLP Facility.On September 26, 2018, NEFPASS SPV LLC, a newly formed wholly-owned subsidiary of NEFPASS LLC, as borrower entered into the NEFPASSFacility with Keybank acting as administrative agent. The 74Table of ContentsCompany acts as servicer under the NEFPASS Facility. The NEFPASS Facility is scheduled to mature on September 26, 2023. The NEFPASS Facilitygenerally bears interest at a rate of LIBOR plus 2.15%. NEFPASS and NEFPASS SPV LLC, as applicable, have made certain customary representationsand warranties, and are required to comply with various covenants, including leverage restrictions, reporting requirements and other customaryrequirements for similar credit facilities. The NEFPASS Facility also includes usual and customary events of default for credit facilities of this nature.There were $30.0 million of borrowings outstanding as of December 31, 2018.Certain covenants on our issued debt may restrict our business activities, including limitations that could hinder our ability to finance additionalloans and investments or to make the distributions required to maintain our status as a RIC under Subchapter M of the Code. At December 31, 2018,the Company was in compliance with all financial and operational covenants required by our Credit Facilities.Contractual ObligationsA summary of our significant contractual payment obligations is as follows as of December 31, 2018:Payments Due by Period (in millions) Total Less than1 Year 1-3 Years 3-5 Years More Than5 Years Revolving credit facilities(1) $180.2 $— $150.2 $30.0 $— Unsecured senior notes 246.0 — — 246.0 — Term Loans 50.0 — 50.0 — — (1)As of December 31, 2018, we had a total of $549.8 million of unused borrowing capacity under our revolving credit facilities, subject toborrowing base limits.Information about our senior securities is shown in the following table (in thousands) as of each year ended December 31 for the past ten years,unless otherwise noted. The “—” indicates information which the SEC expressly does not require to be disclosed for certain types of senior securities. Class and Year Total AmountOutstanding(1) AssetCoveragePer Unit(2) InvoluntaryLiquidatingPreferencePer Unit(3) AverageMarket ValuePer Unit(4) Revolving Credit Facility Fiscal 2018 $96,400 $593 — N/A Fiscal 2017 245,600 1,225 — N/A Fiscal 2016 115,200 990 — N/A Fiscal 2015 207,900 1,459 — N/A Fiscal 2014 — — — N/A Fiscal 2013 — — — N/A Fiscal 2012 264,452 1,510 — N/A Fiscal 2011 201,355 3,757 — N/A Fiscal 2010 400,000 2,668 — N/A Fiscal 2009 88,114 8,920 — N/A 2022 Unsecured Notes Fiscal 2018 150,000 923 — N/A Fiscal 2017 150,000 748 — N/A Fiscal 2016 50,000 430 — N/A 2022 Tranche C Notes Fiscal 2018 21,000 129 — N/A Fiscal 2017 21,000 105 — N/A 75Table of ContentsClass and Year Total AmountOutstanding(1) AssetCoveragePer Unit(2) InvoluntaryLiquidatingPreferencePer Unit(3) AverageMarket ValuePer Unit(4) 2023 Unsecured Notes Fiscal 2018 75,000 461 — N/A Fiscal 2017 75,000 374 — N/A 2042 Unsecured Notes Fiscal 2017 — — — N/A Fiscal 2016 100,000 859 — $1,002 Fiscal 2015 100,000 702 — 982 Fiscal 2014 100,000 2,294 — 943 Fiscal 2013 100,000 2,411 — 934 Fiscal 2012 100,000 571 — 923 Senior Secured Notes Fiscal 2017 — — — N/A Fiscal 2016 75,000 645 — N/A Fiscal 2015 75,000 527 — N/A Fiscal 2014 75,000 1,721 — N/A Fiscal 2013 75,000 1,808 — N/A Fiscal 2012 75,000 428 — N/A Term Loans Fiscal 2018 50,000 308 — N/A Fiscal 2017 50,000 250 — N/A Fiscal 2016 50,000 430 — N/A Fiscal 2015 50,000 351 — N/A Fiscal 2014 50,000 1,147 — N/A Fiscal 2013 50,000 1,206 — N/A Fiscal 2012 50,000 285 — N/A Fiscal 2011 35,000 653 — N/A Fiscal 2010 35,000 233 — N/A NEFPASS Facility Fiscal 2018 30,000 185 — N/A SSLP Facility Fiscal 2018 53,785 331 — N/A Total Senior Securities Fiscal 2018 $476,185 $2,930 — N/A Fiscal 2017 541,600 2,702 — N/A Fiscal 2016 390,200 3,354 — N/A Fiscal 2015 432,900 3,039 — N/A Fiscal 2014 225,000 5,162 — N/A Fiscal 2013 225,000 5,425 — N/A Fiscal 2012 489,452 2,794 — N/A Fiscal 2011 236,355 4,410 — N/A Fiscal 2010 435,000 2,901 — N/A Fiscal 2009 88,114 8,920 — N/A (1)Total amount of each class of senior securities outstanding at the end of the period presented.(2)The asset coverage ratio for a class of senior securities representing indebtedness is calculated as our consolidated total assets, less all liabilitiesand indebtedness not represented by senior securities, divided by all senior securities representing indebtedness. This asset coverage ratio ismultiplied by one thousand to determine the Asset Coverage Per Unit. In order to determine the specific Asset Coverage Per Unit for each 76Table of Contents class of debt, the total Asset Coverage Per Unit is allocated based on the amount outstanding in each class of debt at the end of the period. As ofDecember 31, 2018, asset coverage was 293.0%.(3)The amount to which such class of senior security would be entitled upon the involuntary liquidation of the issuer in preference to any securityjunior to it.(4)Not applicable except for the 2042 Unsecured Notes which were publicly traded. The Average Market Value Per Unit is calculated by taking thedaily average closing price during the period and dividing it by twenty-five dollars per share and multiplying the result by one thousand todetermine a unit price per thousand consistent with Asset Coverage Per Unit. The average market value for the fiscal 2018, 2017, 2016, 2015,2014, 2013 and 2012 periods was N/A, N/A, $100,175, $98,196, $94,301, $93,392, and $92,302, respectively.We have also entered into two contracts under which we have future commitments: the Advisory Agreement, pursuant to which Solar CapitalPartners, LLC has agreed to serve as our investment adviser, and the Administration Agreement, pursuant to which the Administrator has agreed tofurnish us with the facilities and administrative services necessary to conduct our day-to-day operations and provide on our behalf managerialassistance to those portfolio companies to which we are required to provide such assistance. Payments under the Advisory Agreement are equal to (1) apercentage of the value of our average gross assets and (2) a two-part incentive fee. Payments under the Administration Agreement are equal to anamount based upon our allocable portion of the Administrator’s overhead in performing its obligations under the Administration Agreement, includingrent, technology systems, insurance and our allocable portion of the costs of our chief financial officer and chief compliance officer and their respectivestaffs. Either party may terminate each of the Advisory Agreement and administration agreement without penalty upon 60 days’ written notice to theother. See note 3 to our Consolidated Financial Statements.On July 31, 2017, the Company, NEFPASS LLC and NEFCORP LLC entered into a servicing agreement. NEFCORP LLC was engaged to provideNEFPASS LLC with administrative services related to the loans and capital leases held by NEFPASS LLC. NEFPASS LLC may terminate thisagreement upon 30 days’ written notice to NEFCORP LLC. 77Table of ContentsOff-Balance Sheet ArrangementsFrom time-to-time and in the normal course of business, the Company may make unfunded capital commitments to current or prospectiveportfolio companies. Typically, the Company may agree to provide delayed-draw term loans or, to a lesser extent, revolving loan or equitycommitments. These unfunded capital commitments always take into account the Company’s liquidity and cash available for investment, portfolio andissuer diversification, and other considerations. Accordingly, the Company had the following unfunded capital commitments at December 31, 2018and December 31, 2017, respectively: December 31,2018 December 31,2017 (in millions) Crystal Financial LLC* $44.3 $44.3 Rubius Therapeutics, Inc.** 26.8 — BioElectron Technology Corporation** 17.5 — BAM Capital, LLC 15.0 — Tetraphase Pharmaceuticals, Inc.** 13.8 — Phynet Dermatology LLC 12.4 — Cardiva Medical, Inc.** 9.0 — Corindus Vascular Robotics, Inc.** 6.2 — PQ Bypass, Inc.** 4.8 — Kingsbridge Holdings, LLC 4.1 — Breathe Technologies, Inc.** 4.0 — Genmark Diagnostics, Inc 3.0 — Delphinus Medical Technologies, Inc.** 1.9 3.7 RS Energy Group U.S., Inc 1.7 — Datto, Inc 1.7 1.7 Atria Wealth Solutions, Inc 1.5 — Solara Medical Supplies, Inc 1.2 — iCIMS, Inc 0.8 — MRI Software LLC — 2.3 Radiology Partners, Inc — 0.9 Alera Group Intermediate Holdings, Inc — 3.9 Accentcare, Inc — 3.4 CardioFocus, Inc — 1.0 WJV658, LLC — 0.8 Total Commitments $169.7 $62.0 *The Company controls the funding of the Crystal Financial LLC commitment and may cancel it at its discretion.**Commitments are subject to the portfolio company achieving certain milestones. As of December 31, 2018, these milestones have not yet beenachieved, and as such the portfolio company would not have been able to draw on any of the stated commitment at that time.As of December 31, 2018 and December 31, 2017, the Company had sufficient cash available and/or liquid securities available to fund itscommitments.In the normal course of its business, we invest or trade in various financial instruments and may enter into various investment activities withoff-balance sheet risk, which may include forward foreign currency contracts. Generally, these financial instruments represent future commitments topurchase or sell other financial instruments at specific terms at future dates. These financial instruments contain varying degrees of off-balance sheetrisk whereby changes in the market value or our satisfaction of the obligations may exceed the amount recognized in our Consolidated Statements ofAssets and Liabilities. 78Table of ContentsDistributionsThe following table reflects the cash distributions per share on our common stock for the two most recent fiscal years and the current fiscal year todate: Date Declared Record Date Payment Date Amount Fiscal 2019 February 21, 2019 March 21, 2019 April 3, 2019 $0.41 Fiscal 2018 November 5, 2018 December 20, 2018 January 4, 2019 $0.41 August 2, 2018 September 20, 2018 October 2, 2018 0.41 May 7, 2018 June 21, 2018 July 3, 2018 0.41 February 22, 2018 March 22, 2018 April 3, 2018 0.41 Total 2018 $1.64 Fiscal 2017 November 2, 2017 December 21, 2017 January 4, 2018 $0.40 August 1, 2017 September 21, 2017 October 3, 2017 0.40 May 2, 2017 June 22, 2017 July 5, 2017 0.40 February 22, 2017 March 23, 2017 April 4, 2017 0.40 Total 2017 $1.60 Tax characteristics of all distributions will be reported to stockholders on Form 1099 after the end of the calendar year. Future quarterlydistributions, if any, will be determined by our Board. We expect that our distributions to stockholders will generally be from accumulated netinvestment income, from net realized capital gains or non-taxable return of capital, if any, as applicable.We have elected to be taxed as a RIC under Subchapter M of the Code. To maintain our RIC tax treatment, we must distribute at least 90% of ourordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, out of the assets legally available fordistribution. In addition, although we currently intend to distribute realized net capital gains (i.e., net long-term capital gains in excess of short-termcapital losses), if any, at least annually, out of the assets legally available for such distributions, we may in the future decide to retain such capital gainsfor investment.We maintain an “opt out” dividend reinvestment plan for our common stockholders. As a result, if we declare a distribution, then stockholders’cash distributions will be automatically reinvested in additional shares of our common stock, unless they specifically “opt out” of the dividendreinvestment plan so as to receive cash distributions.We may not be able to achieve operating results that will allow us to make distributions at a specific level or to increase the amount of thesedistributions from time to time. In addition, due to the asset coverage test applicable to us as a business development company, we may in the future belimited in our ability to make distributions. Also, our revolving credit facility may limit our ability to declare distributions if we default under certainprovisions. If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including possible loss of thetax benefits available to us as a regulated investment company. In addition, in accordance with GAAP and tax regulations, we include in incomecertain amounts that we have not yet received in cash, such as contractual payment-in-kind interest, which represents contractual interest added to theloan balance that becomes due at the end of the loan term, or the accrual of original issue or market discount. Since we may recognize income before orwithout receiving cash representing such income, we may have difficulty meeting the requirement to distribute at least 90% of our investmentcompany taxable income to obtain tax benefits as a regulated investment company. 79Table of ContentsWith respect to the distributions to stockholders, income from origination, structuring, closing and certain other upfront fees associated withinvestments in portfolio companies are treated as taxable income and accordingly, distributed to stockholders.Related PartiesWe have entered into a number of business relationships with affiliated or related parties, including the following: • We have entered into the Advisory Agreement with Solar Capital Partners. Mr. Gross, our Chairman and Chief Executive Officer andMr. Spohler, our Chief Operating Officer and board member, are managing members and senior investment professionals of, and havefinancial and controlling interests in, the Investment Adviser. In addition, Mr. Peteka, our Chief Financial Officer, Treasurer and CorporateSecretary serves as the Chief Financial Officer for Solar Capital Partners. • The Administrator provides us with the office facilities and administrative services necessary to conduct day-to-day operations pursuant toour Administration Agreement. We reimburse the Administrator for the allocable portion of overhead and other expenses incurred by it inperforming its obligations under the Administration Agreement, including rent, the fees and expenses associated with performingcompliance functions, and the compensation of our chief compliance officer, our chief financial officer and their respective staffs. • We have entered into a license agreement with the Investment Adviser, pursuant to which the Investment Adviser has granted us anon-exclusive, royalty-free license to use the name “Solar Capital.”The Investment Adviser may also manage other funds in the future that may have investment mandates that are similar, in whole and in part, withours. For example, the Investment Adviser presently serves as investment adviser to Solar Senior Capital Ltd., a publicly traded BDC, which focuses oninvesting in senior secured loans, including first lien and second lien debt instruments. In addition, Michael S. Gross, our Chairman and ChiefExecutive Officer, Bruce Spohler, our Chief Operating Officer, and Richard L. Peteka, our Chief Financial Officer, serve in similar capacities for SolarSenior Capital Ltd. The Investment Adviser and certain investment advisory affiliates may determine that an investment is appropriate for us and forone or more of those other funds. In such event, depending on the availability of such investment and other appropriate factors, the Investment Adviseror its affiliates may determine that we should invest side-by-side with one or more other funds. Any such investments will be made only to the extentpermitted by applicable law and interpretive positions of the SEC and its staff, and consistent with the Investment Adviser’s allocation procedures.Related party transactions may occur among Solar Capital Ltd., Crystal Financial LLC, Equipment Operating Leases LLC and NEF HoldingsLLC. These transactions may occur in the normal course of business. No administrative fees are paid to Solar Capital Partners by Crystal FinancialLLC, Equipment Operating Leases LLC or NEF Holdings LLC.In addition, we have adopted a formal code of ethics that governs the conduct of our officers and directors. Our officers and directors also remainsubject to the duties imposed by both the 1940 Act and the Maryland General Corporation Law. Item 7A.Quantitative and Qualitative Disclosure About Market RiskWe are subject to financial market risks, including changes in interest rates. During the fiscal year ended December 31, 2018, certain of theinvestments in our comprehensive investment portfolio had floating interest rates. These floating rate investments were primarily based on floatingLIBOR and typically have durations of one to three months after which they reset to current market interest rates. Additionally, some of these 80Table of Contentsinvestments have LIBOR floors. The Company also has revolving credit facilities that are generally based on floating LIBOR. Assuming no changes toour balance sheet as of December 31, 2018 and no new defaults by portfolio companies, a hypothetical one-quarter of one percent decrease in LIBORon our comprehensive floating rate assets and liabilities would reduce our net investment income by three cents per average share over the next twelvemonths. Assuming no changes to our balance sheet as of December 31, 2018 and no new defaults by portfolio companies, a hypothetical one percentincrease in LIBOR on our comprehensive floating rate assets and liabilities would increase our net investment income by approximately fourteen centsper average share over the next twelve months. However, we may hedge against interest rate fluctuations from time-to-time by using standard hedginginstruments such as futures, options, swaps and forward contracts subject to the requirements of the 1940 Act. While hedging activities may insulate usagainst adverse changes in interest rates, they may also limit our ability to participate in any benefits of certain changes in interest rates with respect toour portfolio of investments. At December 31, 2018, we have no interest rate hedging instruments outstanding on our balance sheet. Increase (Decrease) in LIBOR (0.25%) 1.00% Increase (Decrease) in Net Investment Income Per Share Per Year ($0.03) $0.14 We may also have exposure to foreign currencies through various investments. These investments are converted into U.S. dollars at the balancesheet date, exposing us to movements in foreign exchange rates. In order to reduce our exposure to fluctuations in foreign exchange rates, we mayborrow from time-to-time in such currencies under our multi-currency revolving credit facility or enter into forward currency or similar contracts. 81Table of ContentsItem 8.Financial Statements and Supplementary DataINDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Management’s Report on Internal Control Over Financial Reporting 83 Report of Independent Registered Public Accounting Firm 84 Consolidated Statements of Assets and Liabilities as of December 31, 2018 and 2017 86 Consolidated Statements of Operations for the years ended December 31, 2018, 2017 and 2016 87 Consolidated Statements of Changes in Net Assets for the years ended December 31, 2018, 2017 and 2016 88 Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017 and 2016 89 Consolidated Schedule of Investments as of December 31, 2018 and 2017 90 Notes to Consolidated Financial Statements 103 82Table of ContentsMANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTINGManagement is responsible for establishing and maintaining adequate internal control over financial reporting, and for performing an assessmentof the effectiveness of internal control over financial reporting as of December 31, 2018. Internal control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies andprocedures that (i) pertain to assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparationof consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Companyare being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on theconsolidated financial statements.Management performed an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2018based upon criteria in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the TreadwayCommission (“COSO”). Based on our assessment, management determined that the Company’s internal control over financial reporting was effectiveas of December 31, 2018 based on the criteria on Internal Control – Integrated Framework (2013) issued by COSO.The effectiveness of the Company’s internal control over financial reporting as of December 31, 2018 has been audited by KPMG LLP, anindependent registered public accounting firm, as stated in their report which appears herein. 83Table of ContentsReport of Independent Registered Public Accounting FirmTo the Stockholders and Board of DirectorsSolar Capital Ltd.:Opinions on the Consolidated Financial Statements and Internal Control Over Financial ReportingWe have audited the accompanying consolidated statements of assets and liabilities, including the consolidated schedule of investments, ofSolar Capital Ltd. (and consolidated subsidiaries) (the Company) as of December 31, 2018 and 2017, the related consolidated statements of operations,changes in net assets, and cash flows for each of the years in the three-year period ended December 31, 2018, and the related notes (collectively, theconsolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2018, based oncriteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the TreadwayCommission.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of theCompany as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the three-year period endedDecember 31, 2018, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all materialrespects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control – IntegratedFramework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.Basis for OpinionsThe Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financialreporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying management’s report oninternal control over financial reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and anopinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the PublicCompany Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance withthe U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtainreasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whethereffective internal control over financial reporting was maintained in all material respects.Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of theconsolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures includedexamining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our procedures includedconfirmation of securities owned as of December 31, 2018 and 2017, by correspondence with the custodian, portfolio companies or agents. Our auditsalso included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentationof the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal controlover financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internalcontrol based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. Webelieve that our audits provide a reasonable basis for our opinions. 84Table of ContentsDefinition and Limitations of Internal Control Over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’sinternal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions arerecorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts andexpenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) providereasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could havea material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that thedegree of compliance with the policies or procedures may deteriorate./s/ KPMG LLPWe have served as the auditor of one or more Solar Capital Partners, LLC (the Investment Advisor) investment companies since 2007.New York, New YorkFebruary 21, 2019 85Table of ContentsSOLAR CAPITAL LTD.CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES(in thousands, except share amounts) December 31,2018 December 31,2017 Assets Investments at fair value: Companies less than 5% owned (cost: $948,478 and $835,041, respectively) $944,597 $834,410 Companies more than 25% owned (cost: $500,792 and $609,226, respectively) 511,483 626,760 Cash 7,570 5,963 Cash equivalents (cost: $199,646 and $144,826, respectively) 199,646 144,826 Dividends receivable 9,065 15,013 Interest receivable 7,619 7,336 Receivable for investments sold 2,073 6,160 Other receivable 593 58 Prepaid expenses and other assets 783 1,039 Total assets $1,683,429 $1,641,565 Liabilities Revolving credit facility (see notes 6 and 7) $96,400 $245,600 Unsecured senior notes due 2022 (see notes 6 and 7) 150,000 150,000 Unsecured tranche c senior notes due 2022 ($21,000 and $21,000 face amounts, respectively, reported net ofunamortized debt issuance costs of $123 and $316, respectively. See note 7) 20,877 20,684 Unsecured senior notes due 2023 ($75,000 and $75,000 face amounts, respectively, reported net of unamortized debtissuance costs of $1,457 and $1,813, respectively. See note 7) 73,543 73,187 Term loans (see notes 6 and 7) 50,000 50,000 SSLP 2016-1, LLC revolving credit facility (the “SSLP Facility”) (see notes 6 and 7) 53,785 — NEFPASS SPV LLC credit facility ($30,000 and $0 face amounts, respectively, reported net of unamortized debtissuance costs of $1,067 and $0, respectively. See note 7) 28,933 — Payable for investments and cash equivalents purchased 251,391 145,118 Distributions payable 17,542 16,904 Management fee payable (see note 3) 6,504 7,373 Performance-based incentive fee payable (see note 3) 4,613 4,660 Interest payable (see note 7) 4,714 2,485 Administrative services expense payable (see note 3) 2,716 2,756 Other liabilities and accrued expenses 3,240 1,193 Total liabilities $764,258 $719,960 Commitments and contingencies (see notes 13, 14, 15 and 16) Net Assets Common stock, par value $0.01 per share, 200,000,000 and 200,000,000 common shares authorized, respectively, and42,260,826 and 42,260,826 shares issued and outstanding, respectively $423 $423 Paid-in capital in excess of par (see note 2f) 992,438 991,340 Accumulated distributable net loss (see note 2f) (73,690) (70,158) Total net assets $919,171 $921,605 Net Asset Value Per Share $21.75 $21.81 See notes to consolidated financial statements. 86Table of ContentsSOLAR CAPITAL LTD.CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except share amounts) Year ended December 31, 2018 2017 2016 INVESTMENT INCOME: Interest: Companies less than 5% owned $98,172 $88,014 $108,386 Companies more than 25% owned 2,827 1,222 1,835 Dividends: Companies less than 5% owned 28 26 11 Companies more than 25% owned 50,953 52,496 40,649 Other income: Companies less than 5% owned 1,367 1,334 828 Companies more than 25% owned 179 246 130 Total investment income 153,526 143,338 151,839 EXPENSES: Management fees (see note 3) 25,789 27,409 28,115 Performance-based incentive fees (see note 3) 18,722 17,055 17,775 Interest and other credit facility expenses (see note 7) 24,728 21,666 24,571 Administrative services expense (see note 3) 5,247 5,215 5,990 Other general and administrative expenses 4,151 3,630 4,287 Total expenses 78,637 74,975 80,738 Net investment income $74,889 $68,363 $71,101 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, CASH EQUIVALENTS ANDFOREIGN CURRENCIES: Net realized gain (loss) on investments and cash equivalents: Companies less than 5% owned $1,857 $310 $609 Companies 5% to 25% owned 246 (8,104) 197 Companies more than 25% owned (25) (6) (30) Net realized gain (loss) on investments and cash equivalents 2,078 (7,800) 776 Net realized loss on extinguishment of debt: — (2,782) — Net realized gain (loss) on foreign currencies: — (1,433) — Net realized gain (loss) 2,078 (12,015) 776 Net change in unrealized gain (loss) on investments and cash equivalents: Companies less than 5% owned (2,805) 10,541 28,093 Companies 5% to 25% owned — 7,734 (456) Companies more than 25% owned (7,288) (4,193) 7,301 Net change in unrealized gain (loss) (10,093) 14,082 34,938 Net realized and unrealized gain (loss) on investments, cash equivalents and foreigncurrencies (8,015) 2,067 35,714 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $66,874 $70,430 $106,815 EARNINGS PER SHARE (see note 5) $1.58 $1.67 $2.53 See notes to consolidated financial statements. 87Table of ContentsSOLAR CAPITAL LTD.CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS(in thousands, except share amounts) Year ended December 31, 2018 2017 2016 Increase in net assets resulting from operations: Net investment income $74,889 $68,363 $71,101 Net realized gain (loss) 2,078 (12,015) 776 Net change in unrealized gain (loss) (10,093) 14,082 34,938 Net increase in net assets resulting from operations 66,874 70,430 106,815 Distributions to stockholders (see note 8a): From net investment income (69,308) (67,612) (67,598) Capital transactions (see note 18): Reinvestment of distributions — 280 — Repurchases of common stock — — (3,408) Net increase (decrease) in net assets resulting from capital transactions — 280 (3,408) Total increase (decrease) in net assets (2,434) 3,098 35,809 Net assets at beginning of year 921,605 918,507 882,698 Net assets at end of year $919,171 $921,605 $918,507 Capital share activity: Common stock issued from reinvestment of distributions — 12,301 — Common stock repurchased — — (216,237) Net increase (decrease) from capital share activity — 12,301 (216,237) See notes to consolidated financial statements. 88Table of ContentsSOLAR CAPITAL LTD.CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands) Year ended December 31, 2018 2017 2016 Cash Flows from Operating Activities: Net increase in net assets resulting from operations $66,874 $70,430 $106,815 Adjustments to reconcile net increase in net assets resulting from operations to net cash providedby (used in) operating activities: Net realized (gain) loss on investments and cash equivalents (2,078) 7,800 (776) Net realized loss on extinguishment of debt — 2,782 — Net realized loss on foreign currencies — 1,433 — Net change in unrealized (gain) loss on investments and cash equivalents 10,093 (14,082) (34,938) (Increase) decrease in operating assets: Purchase of investments (776,809) (480,734) (438,030) Proceeds from disposition of investments 774,045 326,486 480,975 Capitalization of payment-in-kind interest (946) (250) — Collections of payment-in-kind interest 785 173 582 Receivable for investments sold 4,087 7,442 (2,228) Interest receivable (283) 743 (1,671) Dividends receivable 5,948 (4,061) (2,465) Other receivable (535) (4) (50) Prepaid expenses and other assets 256 (3) (166) Increase (decrease) in operating liabilities: Payable for investments and cash equivalents purchased 106,273 (164,776) 34,911 Management fee payable (869) 503 347 Performance-based incentive fee payable (47) 248 3,004 Administrative services expense payable (40) (533) 965 Interest payable 2,229 260 560 Other liabilities and accrued expenses 2,047 56 324 Net Cash Provided by (Used in) Operating Activities 191,030 (246,087) 148,159 Cash Flows from Financing Activities: Cash distributions paid (68,670) (67,327) (67,685) Proceeds from issuance of unsecured debt — 193,836 50,000 Deferred financing costs 607 139 110 Consolidation of SSLP Facility and SSLP II Facility 61,066 — — Repurchase of common stock — — (3,408) Proceeds from secured borrowings 558,374 761,400 678,500 Repayments of secured borrowings (685,980) (706,000) (771,200) Repayments of unsecured borrowings — (97,218) — Net Cash Provided by (Used in) Financing Activities (134,603) 84,830 (113,683) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 56,427 (161,257) 34,476 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 150,789 312,046 277,570 CASH AND CASH EQUIVALENTS AT END OF YEAR $207,216 $150,789 $312,046 Supplemental disclosure of cash flow information: Cash paid for interest $22,499 $21,406 $24,011 Non-cash financing activities consist of the reinvestment of distributions of $0, $280 and $0, for the fiscal years ended December 31, 2018, 2017 and2016, respectively as well as $43,498 of investments transferred from the Company to Senior Secured Unitranche Loan Program II LLC during thefiscal year ended December 31, 2016 (see note 15).See notes to consolidated financial statements. 89Table of ContentsSOLAR CAPITAL LTD.CONSOLIDATED SCHEDULE OF INVESTMENTSDecember 31, 2018(in thousands, except share/unit amounts) Description Industry SpreadAboveIndex(9) LIBORFloor InterestRate(1) AcquisitionDate MaturityDate ParAmount Cost FairValue Senior Secured Loans — 89.1% Bank Debt/Senior Secured Loans Aegis Toxicology Sciences Corporation(10) Health Care Providers & Services L+550 1.00% 8.10% 5/7/2018 5/9/2025 $17,215 $16,935 $17,215 Alteon Health, LLC(10)(16) Health Care Providers & Services L+650 1.00% 9.02% 9/14/2018 9/1/2022 15,271 15,159 14,507 American Teleconferencing Services, Ltd. (PGI)(10)(16) Communications Equipment L+650 1.00% 9.09% 5/5/2016 12/8/2021 30,965 30,001 30,578 Amerilife Group, LLC(10) Insurance L+875 1.00% 11.27% 7/9/2015 1/10/2023 15,000 14,811 14,963 Associated Pathologists, LLC(10)(16) Health Care Providers & Services L+500 1.00% 7.38% 9/14/2018 8/1/2021 3,718 3,699 3,718 Atria Wealth Solutions, Inc.(10)(16) Diversified Financial Services L+600 1.00% 8.61% 9/14/2018 11/30/2022 3,358 3,326 3,324 AviatorCap SII, LLC(3)(10) Aerospace & Defense L+700 — 9.80% 12/27/2018 10/30/2020 2,975 2,975 2,975 BAM Capital, LLC(10) Diversified Financial Services L+800 — 11.52% 12/26/2018 1/23/2023 15,500 15,268 15,268 Bishop Lifting Products, Inc.(7)(10) Trading Companies & Distributors L+800 1.00% 10.52% 3/24/2014 3/27/2022 24,985 24,873 24,235 Datto, Inc.(10) IT Services L+800 1.00% 10.46% 12/6/2017 12/7/2022 25,000 24,587 25,000 Falmouth Group Holdings Corp. (AMPAC)(10)(16) Chemicals L+675 1.00% 9.27% 12/7/2015 12/14/2021 40,887 40,658 40,887 Global Holdings LLC & Payment ConceptsLLC(10)(16). Consumer Finance L+750 1.00% 10.24% 9/14/2018 5/5/2022 7,066 6,964 7,066 Greystone Select Holdings LLC & Greystone &Co., Inc.(10) Thrifts & Mortgage Finance L+800 1.00% 10.51% 3/29/2017 4/17/2024 19,900 19,739 19,850 iCIMS, Inc.(10) Software L+650 1.00% 8.94% 9/7/2018 9/12/2024 12,670 12,426 12,480 IHS Intermediate, Inc.(10) Health Care Providers & Services L+825 1.00% 10.74% 6/19/2015 7/20/2022 25,000 24,705 24,000 Kingsbridge Holdings, LLC(10) Multi-Sector Holdings L+700 1.00% 9.82% 12/21/2018 12/21/2024 28,973 28,540 28,538 KORE Wireless Group, Inc.(10) Wireless Telecommunication Services L+550 1.00% 8.29% 12/21/2018 12/21/2024 37,222 36,478 36,850 Logix Holding Company, LLC(10)(16) Communications Equipment L+575 1.00% 8.27% 9/14/2018 12/22/2024 7,178 7,115 7,178 On Location Events, LLC & PrimeSportHoldings Inc.(10)(16) Media L+550 1.00% 7.90% 12/7/2017 9/29/2021 24,506 24,284 24,322 Pet Holdings ULC & Pet Supermarket, Inc.(5)(10)(16) Specialty Retail L+550 1.00% 7.90% 9/14/2018 7/5/2022 29,344 29,054 29,197 PhyMed Management LLC(10) Health Care Providers & Services L+875 1.00% 11.46% 12/18/2015 5/18/2021 32,321 31,662 32,160 PhyNet Dermatology LLC(10) Health Care Providers & Services L+550 1.00% 8.02% 9/5/2018 8/16/2024 9,644 9,551 9,547 PPT Management Holdings, LLC(10) Health Care Providers & Services L+750 PIK 1.00% 9.85% 9/14/2018 12/16/2022 19,969 19,841 16,973 PSKW, LLC & PDR, LLC(10)(16) Health Care Providers & Services L+425 1.00% 7.05% 9/14/2018 11/25/2021 2,024 2,016 2,024 PSKW, LLC & PDR, LLC(10)(16) Health Care Providers & Services L+825 1.00% 11.05% 10/24/2017 11/25/2021 26,647 26,348 26,647 RS Energy Group U.S., Inc.(10) Software L+475 1.00% 7.55% 10/26/2018 10/6/2023 15,249 14,951 14,944 Rug Doctor LLC(3)(10) Diversified Consumer Services L+975 1.50% 12.33% 12/23/2013 10/31/2019 9,111 9,050 9,111 Solara Medical Supplies, Inc.(10)(16) Health Care Providers & Services L+600 1.00% 8.52% 5/31/2018 5/31/2023 3,418 3,371 3,418 Southern Auto Finance Company(5)(10) Consumer Finance — — 11.15% 10/19/2011 12/4/2019 25,000 24,920 25,000 The Octave Music Group, Inc. (fka TouchTunes)(10) Media L+825 1.00% 10.63% 5/28/2015 5/27/2022 14,000 13,880 13,930 Varilease Finance, Inc.(10) Multi-Sector Holdings L+825 1.00% 10.65% 8/22/2014 8/24/2020 33,000 32,793 33,000 Total Bank Debt/Senior Secured Loans $569,980 $568,905 90See notes to consolidated financial statements.Table of ContentsSOLAR CAPITAL LTD.CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)December 31, 2018(in thousands, except share/unit amounts) Description Industry SpreadAboveIndex(9) LIBORFloor InterestRate(1) AcquisitionDate MaturityDate ParAmount Cost FairValue Life Science Senior Secured Loans Alimera Sciences, Inc.(10) Pharmaceuticals L+765 — 10.03% 1/5/2018 7/1/2022 $25,000 $25,044 $25,125 Ardelyx, Inc.(5)(10) Pharmaceuticals L+745 — 9.83% 5/10/2018 11/1/2022 24,500 24,400 24,377 aTyr Pharma, Inc.(10) Pharmaceuticals P+410 — 9.35% 11/18/2016 11/18/2020 7,667 7,985 7,782 Axcella Health Inc.(10) Pharmaceuticals L+850 — 10.84% 1/9/2018 7/1/2022 26,000 26,247 26,000 BioElectron Technology Corporation(10) Pharmaceuticals L+750 — 9.88% 8/9/2018 8/10/2022 10,500 10,458 10,447 Breathe Technologies, Inc.(10) Health Care Equipment & Supplies L+850 — 10.84% 1/5/2018 1/5/2022 22,000 22,298 22,000 Cardiva Medical, Inc.(10) Health Care Equipment & Supplies L+795 0.63% 10.33% 9/24/2018 9/1/2022 12,000 12,067 12,030 Corindus Vascular Robotics, Inc.(5)(10) Health Care Equipment & Supplies L+725 — 9.60% 3/9/2018 3/1/2022 6,783 6,787 6,817 Delphinus Medical Technologies, Inc.(10) Health Care Equipment & Supplies L+850 — 10.88% 8/18/2017 9/1/2021 5,625 5,594 5,513 GenMark Diagnostics, Inc.(5)(10) Health Care Providers & Services — — 6.90% 11/8/2018 1/1/2021 17,473 17,531 17,531 OmniGuide Holdings, Inc.(10)(15) Health Care Equipment & Supplies L+805 — 10.43% 7/30/2018 7/29/2023 10,500 10,504 10,474 PQ Bypass, Inc.(10) Health Care Equipment & Supplies L+795 1.00% 10.42% 12/20/2018 12/20/2022 5,200 5,119 5,117 Restoration Robotics, Inc.(10) Health Care Equipment & Supplies L+795 — 10.33% 5/10/2018 5/1/2022 9,000 8,887 8,977 Rubius Therapeutics, Inc.(5)(10) Pharmaceuticals L+550 — 7.97% 12/21/2018 12/21/2023 13,430 13,400 13,397 scPharmaceuticals, Inc.(10) Pharmaceuticals L+845 — 10.83% 5/23/2017 5/1/2021 5,000 5,019 5,025 Scynexis, Inc.(10) Pharmaceuticals L+849 — 10.87% 9/30/2016 9/30/2020 15,000 15,379 15,300 SentreHeart, Inc.(10) Health Care Equipment & Supplies L+885 — 11.19% 11/15/2016 11/15/2020 10,000 10,193 10,150 Sunesis Pharmaceuticals, Inc.(10) Pharmaceuticals L+854 — 10.92% 3/31/2016 4/1/2020 3,750 3,833 3,769 Tetraphase Pharmaceuticals, Inc.(10) Pharmaceuticals L+725 — 9.63% 10/30/2018 5/2/2023 20,600 20,169 20,125 Total Life Science Senior Secured Loans $250,914 $249,956 Total Senior Secured Loans $820,894 $818,861 Description Industry InterestRate(1) AcquisitionDate MaturityDate ParAmount Cost FairValue Equipment Financing — 34.2% Althoff Crane Service, Inc.(10)(17) Commercial Services & Supplies 10.55% 7/31/2017 6/8/2022 $1,362 $1,362 $1,357 B&W Resources, Inc.(10)(12) Oil, Gas & Consumable Fuels 21.57% 8/17/2018 3/27/2020 297 291 305 BB578, LLC(10)(12) Media 10.00% 7/31/2017 11/1/2021 669 669 667 Beverly Hills Limo and Corporate Coach,Inc.(10)(17) Road & Rail 10.57% 3/19/2018 9/9/2019 366 379 363 Blackhawk Mining, LLC(10)(17) Oil, Gas & Consumable Fuels 10.99-11.17% 2/16/2018 3/1/2022-11/1/2022 6,270 5,890 6,270 Brightwater R&B Acquisition, LLC(10)(17) Machinery 12.24% 8/17/2018 4/20/2019 76 76 76 C&H Paving, Inc.(10)(12) Construction & Engineering 9.94% 12/26/2018 1/1/2024 3,393 3,444 3,393 Capital City Jet Center, Inc.(10)(12) Airlines 10.00% 4/4/2018 10/4/2023 2,174 2,174 2,184 Central Freight Lines, Inc.(10)(12) Road & Rail 7.16% 7/31/2017 1/14/2024 1,710 1,710 1,710 Cfactor Leasing Corp. & CZM USA, Corp.(10)(17) Machinery 12.00-14.11% 7/31/2017 5/27/2020-8/3/2022 3,162 3,143 3,173 91See notes to consolidated financial statements.Table of ContentsSOLAR CAPITAL LTD.CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)December 31, 2018(in thousands, except share/unit amounts) Description Industry InterestRate(1) AcquisitionDate MaturityDate ParAmount Cost FairValue Champion Air, LLC(10)(12) Airlines 10.00% 3/19/2018 1/1/2023 3,200 3,181 3,200 Delicate Productions, Inc.(10)(12) Commercial Services & Supplies 13.30% 5/3/2018 5/15/2022 2,023 2,010 2,023 Easton Sales and Rentals, LLC(10)(12) Commercial Services & Supplies 10.00% 9/18/2018 10/1/2021 2,034 1,981 2,034 Equipment Operating Leases, LLC(3)(10)(14) Multi-Sector Holdings 7.53-8.37% 4/27/2018 8/1/22-4/27/2025 32,882 32,882 32,882 Falcon Transport Company(10)(12) Road & Rail 10.96% 10/24/2018 7/1/2024 12,443 12,271 12,443 Family First Freight, LLC(10)(12) Road & Rail 9.29-11.52% 7/31/2017 7/2/2019-1/22/2022 881 879 870 Garda CL Technical Services, Inc.(10)(17) Commercial Services & Supplies 8.31-8.77% 3/22/2018 7/13/2023-10/5/2023 2,847 2,847 2,847 Georgia Jet, Inc.(10)(12) Airlines 8.00% 12/4/2017 12/4/2021 2,373 2,373 2,373 Globecomm Systems Inc.(10)(17) Wireless Telecommunication Services 13.18% 5/10/2018 7/1/2021 1,610 1,610 1,610 GMT Corporation(10)(12) Machinery 12.46% 10/23/2018 10/23/2023 7,582 7,506 7,582 Great Plains Gas Compression Holdings, LLC(10)(12) Oil, Gas & Consumable Fuels 9.37-9.93% 3/19/2018 8/1/2019-9/7/19 8,775 8,754 8,792 Haljoe Coaches USA, LLC(10)(17) Road & Rail 8.15-9.90% 7/31/2017 7/1/2022-11/17/2022 5,180 5,180 5,137 Hawkeye Contracting Company, LLC(10)(12)(13) Oil, Gas & Consumable Fuels 10.00% 11/15/2017 11/15/2020 3,648 3,648 3,620 HTI Logistics Corporation(10)(12) Commercial Services & Supplies 9.80% 11/15/2018 12/1/2023 274 274 274 Interstate NDT, Inc.(10)(17) Road & Rail 11.32-13.94% 6/11/2018 7/1/2023-10/1/2023 2,429 2,429 2,429 JP Motorsports, Inc.(10)(17) Road & Rail 13.96% 8/17/2018 1/25/2022 397 394 405 Knight Transfer Services, Inc. & Dumpstr Xpress,Inc.(10)(17) Commercial Services & Supplies 12.05-12.76% 7/31/2017 4/11/2020-4/30/2020 518 518 519 Kool Pak, LLC(10)(17) Road & Rail 8.58% 2/5/2018 3/1/2024 729 729 722 Lineal Industries, Inc.(10)(12) Construction & Engineering 8.00% 12/21/2018 12/21/2021 107 107 107 Marcal Manufacturing,LLC dba Soundview Paper Company,LLC(10)(17) Paper & Forest Products 12.91-12.98% 7/31/2017 7/30/2022-10/25/2022 1,365 1,365 1,386 Meridian Consulting I Corp, Inc.(10)(12) Hotels, Restaurants & Leisure 10.72% 7/31/2017 12/4/2021 2,145 2,145 2,156 Mountain Air Helicopters, Inc.(10)(12) Commercial Services & Supplies 10.00% 7/31/2017 4/30/2022 1,668 1,668 1,651 Mulholland Energy Services Equipment Leasing,LLC(10)(17) Commercial Services & Supplies 8.89% 8/17/2018 10/30/2019 809 807 804 OKK Equipment, LLC(10)(12) Commercial Services & Supplies 10.15% 7/31/2017 8/27/2023 612 612 601 Reston Limousine & Travel Service, Inc.(10)(17) Road & Rail 11.82% 9/13/2017 10/1/2021 1,454 1,471 1,460 Rossco Crane & Rigging, Inc.(10)(17) Commercial Services & Supplies 11.13-11.53% 8/25/2017 4/1/2021-9/1/2022 797 797 798 RVR Air Charter, LLC & RVR Aviation,LLC(10)(12) Airlines 12.00% 7/31/2017 8/1/2020-1/1/2022 2,692 2,692 2,727 92See notes to consolidated financial statements.Table of ContentsSOLAR CAPITAL LTD.CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)December 31, 2018(in thousands, except share/unit amounts) Description Industry InterestRate(1) AcquisitionDate MaturityDate ParAmount Cost FairValue Santek Environmental, LLC(10)(17) Commercial Services & Supplies 10.00% 7/31/2017 3/1/2021 98 98 99 Santek Environmental of Alabama, LLC(10)(17) Commercial Services & Supplies 8.95-10.00% 7/31/2017 12/18/2020-11/29/2021 179 179 176 Sidelines Tree Service LLC(10)(17) Diversified Consumer Services 10.31-10.52% 7/31/2017 8/1/2022-10/1/2022 431 432 427 South Texas Oilfield Solutions, LLC(10)(17) Energy Equipment & Services 12.52-13.76% 3/29/2018 9/1/2022-7/1/2023 3,413 3,413 3,413 Southern Nevada Oral & Maxillofacial Surgery,LLC(10)(12) Health Care Providers & Services 12.00% 7/31/2017 3/1/2024 1,404 1,404 1,425 Southwest Traders, Inc.(10)(17) Road & Rail 9.13% 11/21/2017 11/1/2020 139 139 138 ST Coaches, LLC(10)(17) Road & Rail 8.21-8.59% 7/31/2017 10/1/2022-10/1/2023 4,396 4,396 4,396 Star Coaches Inc.(10)(17) Road & Rail 8.42% 3/9/2018 4/1/2025 3,785 3,785 3,785 Sturgeon Services International Inc.(10)(12) Energy Equipment & Services 17.88% 7/31/2017 2/28/2022 1,763 1,763 1,789 Sun-Tech Leasing of Texas, L.P.(10)(17) Road & Rail 8.68-8.83% 7/31/2017 6/25/2020-7/25/2021 424 424 416 Superior Transportation, Inc.(10)(17) Road & Rail 9.77-10.26% 7/31/2017 4/23/2022-12/1/2023 4,500 4,499 4,460 The Smedley Company & Smedley Services, Inc.(10)(12) Commercial Services & Supplies 9.92-14.68% 7/31/2017 10/29/2023-2/10/2024 6,273 6,315 6,361 Tornado Bus Company(10)(17) Road & Rail 10.78% 7/31/2017 9/1/2021 2,151 2,151 2,141 Trinity Equipment Rentals, Inc.(10)(12) Commercial Services & Supplies 11.02% 9/13/2018 10/1/2022 935 935 935 Trolleys, Inc.(10)(17) Road & Rail 9.81% 7/18/2018 8/1/2022 3,039 3,039 3,039 Up Trucking Services, LLC(10)(17) Road & Rail 11.91% 3/23/2018 4/1/2022 2,226 2,261 2,263 Waste Services of Alabama, LLC(10)(17) Commercial Services & Supplies 10.24% 8/17/2018 11/27/2020 1,692 1,696 1,687 Waste Services of Tennessee, LLC(10)(17) Commercial Services & Supplies 8.95-10.15% 7/31/2017 2/7/2021-11/29/2021 742 742 727 Waste Services of Texas, LLC(10)(17) Commercial Services & Supplies 8.95% 7/31/2017 12/6/2021 147 147 145 WJV658, LLC (10)(12) Airlines 8.50% 7/31/2017 7/1/2022 7,884 7,884 7,879 W.P.M., Inc., WPM-Southern, LLC, WPMConstruction Services, Inc.(10)(12). Construction & Engineering 7.50% 7/31/2017 10/1/2022 2,601 2,601 2,575 Shares/Units NEF Holdings, LLC Equity Interests(3)(10)(11) Multi-Sector Holdings 7/31/2017 200 145,000 145,000 Total Equipment Financing $313,571 $314,226 Preferred Equity – 1.7% SOAGG LLC(3)(5)(6)(10) Aerospace & Defense 8.00% 12/14/2010 6/30/2020 2,493 $2,493 $9,113 SOINT, LLC(3)(5)(6)(10) Aerospace & Defense 15.00% 6/8/2012 6/30/2020 58,361 5,836 6,414 Total Preferred Equity $8,329 $15,527 Description Industry AcquisitionDate Shares/Units Cost FairValue Common Equity/EquityInterests/Warrants — 33.4% Ark Real Estate Partners LP(2)(3)(10)* Diversified Real Estate Activities 3/12/2007 — $527 $39 Ark Real Estate Partners II LP(2)(3)(10)* Diversified Real Estate Activities 10/23/2012 — 12 1 aTyr Pharma, Inc. Warrants(10)* Pharmaceuticals 11/18/2016 88,792 106 — 93See notes to consolidated financial statements.Table of ContentsSOLAR CAPITAL LTD.CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)December 31, 2018(in thousands, except share/unit amounts) Description Industry AcquisitionDate Shares/Units Cost FairValue B Riley Financial Inc.(5) Research & Consulting Services 3/16/2007 38,015 2,684 540 CardioFocus, Inc. Warrants(10)* Health Care Equipment & Supplies 3/31/2017 440,816 51 69 CAS Medical Systems, Inc. Warrants(10)* Health Care Equipment & Supplies 6/30/2016 48,491 38 28 Conventus Orthopaedics, Inc. Warrants(10)* Health Care Equipment & Supplies 6/15/2016 157,500 65 68 Corindus Vascular Robotics, Inc. Warrants(5)(10)* Health Care Equipment & Supplies 3/9/2018 79,855 40 22 Crystal Financial LLC(3)(5)(10) Diversified Financial Services 12/28/2012 280,303 280,737 293,000 Delphinus Medical Technologies, Inc. Warrants(10)* Health Care Equipment & Supplies 8/18/2017 380,904 74 99 Essence Group Holdings Corporation (Lumeris) Warrants(10)* Health Care Technology 3/22/2017 208,000 63 358 PQ Bypass, Inc. Warrants(10)* Health Care Equipment & Supplies 12/20/2018 156,000 70 75 RD Holdco Inc. (Rug Doctor)(3)(10)* Diversified Consumer Services 12/23/2013 231,177 15,683 7,732 RD Holdco Inc. (Rug Doctor) Class B(3)(10)* Diversified Consumer Services 12/23/2013 522 5,216 5,216 RD Holdco Inc. (Rug Doctor) Warrants(3)(10)* Diversified Consumer Services 12/23/2013 30,370 381 — Restoration Robotics, Inc. Warrants(10)* Health Care Equipment & Supplies 5/10/2018 72,776 111 3 Scynexis, Inc. Warrants(10)* Pharmaceuticals 9/30/2016 122,435 105 — SentreHeart, Inc. Warrants(10)* Health Care Equipment & Supplies 11/15/2016 261,825 126 127 Sunesis Pharmaceuticals, Inc. Warrants(10)* Pharmaceuticals 3/31/2016 104,001 118 — Tetraphase Pharmaceuticals, Inc. Warrants(10)* Pharmaceuticals 10/30/2018 284,530 269 89 Total Common Equity/Equity Interests/Warrants $306,476 $307,466 Total Investments (8) — 158.4% $1,449,270 $1,456,080 Description Industry AcquisitionDate MaturityDate ParAmount Cash Equivalents — 21.7% U.S. Treasury Bill Government 12/31/2018 1/29/2019 $200,000 $199,646 $199,646 Total Investments & Cash Equivalents — 180.1% $1,648,916 $1,655,726 Liabilities in Excess of Other Assets — (80.1%) (736,555) Net Assets — 100.0% $919,171 (1)Floating rate debt investments typically bear interest at a rate determined by reference to the London Interbank Offered Rate (“LIBOR”), and which typically reset monthly, quarterly or semi-annually. For each debt investment we have provided the current rate of interest, or in the case of leases the current implied yield, in effect as of December 31, 2018.(2)Ark Real Estate Partners is held through SLRC ADI Corp., a wholly-owned taxable subsidiary. 94See notes to consolidated financial statements.Table of ContentsSOLAR CAPITAL LTD.CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)December 31, 2018(in thousands, except share/unit amounts) (3)Denotes investments in which we are deemed to exercise a controlling influence over the management or policies of a company, as defined in the Investment Company Act of 1940 (“1940 Act”),due to beneficially owning, either directly or through one or more controlled companies, more than 25% of the outstanding voting securities of the investment. Transactions during the year endedDecember 31, 2018 in these controlled investments are as follows: Name of Issuer Fair Value atDecember 31,2017 GrossAdditions GrossReductions RealizedGain(Loss) Change inUnrealizedGain(Loss) Interest/Dividend/OtherIncome Fair Value atDecember 31,2018 Ark Real Estate Partners LP $263 $— $— $376† $(224) $— $39 Ark Real Estate Partners II LP 6 — — — (5) — 1 AviatorCap SII, LLC I 10 — 10 — — — — AviatorCap SII, LLC — 2,975 — — — 4 2,975 Crystal Financial LLC 303,200 — — — (10,200) 30,220 293,000 Equipment Operating Leases, LLC — 34,511 1,629 — — 1,677 32,882 NEF Holdings, LLC 145,500 — — — (500) 8,332 145,000 RD Holdco Inc. (Rug Doctor, common equity)... 10,102 — — — (2,369) — 7,732 RD Holdco Inc. (Rug Doctor, class B) 5,216 — — — — — 5,216 RD Holdco Inc. (Rug Doctor, warrants) 35 — — — (35) — — Rug Doctor LLC 9,111 — — — (32) 1,164 9,111 SSLP(18) 88,736 25,322 115,038 (354) 626 6,289 — SSLP II(18) 51,744 21,781 72,858 (47) (758) 4,628 — SOAGG LLC 4,537 — 1,654 — 6,230 663 9,113 SOINT, LLC (preferred equity) 8,300 — 1,865 — (21) 982 6,414 $626,760 $84,589 $193,054 $(25) $(7,288) $53,959 $511,483 (4)Denotes investments in which we are an “Affiliated Person” but not exercising a controlling influence, as defined in the 1940 Act, due to beneficially owning, either directly or through one or morecontrolled companies, more than 5% but less than 25% of the outstanding voting securities of the investment. Transactions during the year ended December 31, 2018 in these affiliated investmentsare as follows: Name of Issuer Fair Value atDecember 31,2017 GrossAdditions GrossReductions RealizedGain(Loss) Change inUnrealizedGain(Loss) Interest/DividendIncome Fair Value atDecember 31,2018 DSW Group Holdings LLC $— $— $— $246† $— $— $— (5)Indicates assets that the Company believes may not represent “qualifying assets” under Section 55(a) of the Investment Company Act of 1940 (“1940 Act”), as amended. If we fail to invest asufficient portion of our assets in qualifying assets, we could be prevented from making follow-on investments in existing portfolio companies or could be required to dispose of investments atinappropriate times in order to comply with the 1940 Act. As of December 31, 2018, on a fair value basis, non-qualifying assets in the portfolio represented 23.3% of the total assets of theCompany.(6)Solar Capital Ltd.’s investments in SOAGG, LLC and SOINT, LLC include a two and one dollar investment in common shares, respectively.(7)Bishop Lifting Products, Inc., SEI Holding I Corporation, Singer Equities, Inc. & Hampton Rubber Company are co-borrowers.(8)Aggregate net unrealized appreciation for U.S. federal income tax purposes is $853; aggregate gross unrealized appreciation and depreciation for federal tax purposes is $21,655 and $20,802,respectively, based on a tax cost of $1,455,227. All of the Company’s investments are pledged as collateral against the borrowings outstanding on the revolving credit facility. The Companygenerally acquires its investments in private transactions exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”). These investments are generally subject tocertain limitations on resale, and may be deemed to be “restricted securities” under the Securities Act.(9)Floating rate instruments accrue interest at a predetermined spread relative to an index, typically the LIBOR or PRIME rate. These instruments are typically subject to a LIBOR or PRIME ratefloor.(10)Level 3 investment valued using significant unobservable inputs.(11)NEF Holdings, LLC is held through NEFCORP LLC, a wholly-owned consolidated taxable subsidiary and NEFPASS LLC, a wholly-owned consolidated subsidiary.(12)Indicates an investment that is wholly held by Solar Capital Ltd. through NEFPASS LLC.(13)Hawkeye Contracting Company, LLC, Eagle Creek Mining, LLC & Falcon Ridge Leasing, LLC are co-borrowers.(14)Equipment Operating Leases, LLC is a subsidiary of NEF Holdings, LLC. 95See notes to consolidated financial statements.Table of ContentsSOLAR CAPITAL LTD.CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)December 31, 2018(in thousands) (15)OmniGuide Holdings, Inc., Domain Surgical, Inc. and OmniGuide, Inc. are co-borrowers.(16)Indicates an investment that is wholly or partially held by the Company through its wholly-owned consolidated financing subsidiary SSLP 2016-1, LLC (the “SSLP SPV”). Such investments arepledged as collateral under the SSLP 2016-1, LLC Revolving Credit Facility (see Note 7 to the consolidated financial statements) and are not generally available to creditors, if any, of theCompany.(17)Indicates an investment that is held by the Company through its wholly-owned consolidated financing subsidiary NEFPASS SPV, LLC (the “NEFPASS SPV”). Such investments are pledged ascollateral under the NEFPASS SPV, LLC Revolving Credit Facility (see Note 7 to the consolidated financial statements) and are not generally available to creditors, if any, of the Company.(18)On September 14, 2018 and September 18, 2018, the Company acquired 100% of the equity of SSLP II and SSLP, respectively, and as such consolidated these investments as of this date. OnDecember 19, 2018, SSLP and SSLP II were merged into the Company.*Non-income producing security.†Represents estimated change in receivable balance. Industry Classification Percentage of TotalInvestments (at fair value) asof December 31, 2018 Diversified Financial Services (Crystal Financial LLC) 21.4% Multi-Sector Holdings (includes NEF Holdings, LLC and Equipment Operating Leases, LLC) 16.4% Health Care Providers & Services 11.6% Pharmaceuticals 10.4% Health Care Equipment & Supplies 5.6% Road & Rail 3.2% Chemicals 2.8% Media 2.7% Wireless Telecommunication Services 2.6% Communications Equipment 2.6% Consumer Finance 2.2% Specialty Retail 2.0% Software 1.9% IT Services 1.7% Trading Companies & Distributors 1.7% Diversified Consumer Services 1.6% Commercial Services & Supplies 1.5% Thrifts & Mortgage Finance 1.4% Oil, Gas & Consumable Fuels 1.3% Aerospace & Defense 1.3% Airlines 1.3% Insurance 1.0% Machinery 0.7% Energy Equipment & Services 0.4% Construction & Engineering 0.4% Hotels, Restaurants & Leisure 0.2% Paper & Forest Products 0.1% Research & Consulting Services 0.0% Health Care Technology 0.0% Diversified Real Estate Activities 0.0% Total Investments 100.0% See notes to consolidated financial statements. 96Table of ContentsSOLAR CAPITAL LTD.CONSOLIDATED SCHEDULE OF INVESTMENTSDecember 31, 2017(in thousands, except share/unit amounts) Description Industry SpreadAboveIndex(9) LIBORFloor InterestRate(1) AcquisitionDate MaturityDate ParAmount Cost FairValue Senior Secured Loans — 83.5% Bank Debt/Senior Secured Loans AccentCare, Inc.(11) Health Care Providers & Services L+525 1.00% 6.94% 12/29/2017 3/3/2022 $2,580 $2,567 $2,567 AccentCare, Inc.(11) Health Care Providers & Services L+950 1.00% 11.01% 9/3/2015 9/3/2022 10,000 9,869 9,900 Aegis Toxicology Sciences Corporation(11) Health Care Providers & Services L+850 1.00% 10.17% 2/20/2014 8/24/2021 31,000 30,606 30,070 American Teleconferencing Services, Ltd. (PGI)(11) Communications Equipment L+650 1.00% 7.90% 5/5/2016 12/8/2021 21,627 21,127 21,303 Amerilife Group, LLC(11) Insurance L+875 1.00% 10.25% 7/9/2015 1/10/2023 15,000 14,775 14,887 Argo Turboserve Corporation & Argo Tech, LLC††(11) Air Freight & Logistics L+1425(10) — 15.73% 5/2/2014 5/2/2018 6,660 6,235 6,660 AviatorCap SII, LLC I(3)(11) Aerospace & Defense — — 12.00% 5/31/2011 1/31/2019 10 10 10 Bishop Lifting Products, Inc.(7)(11) Trading Companies & Distributors L+800 1.00% 9.57% 3/24/2014 3/27/2022 25,000 24,857 23,500 Datto, Inc.(11) IT Services L+800 1.00% 9.41% 12/6/2017 12/7/2022 25,000 24,505 24,500 DISA Holdings Acquisition Subsidiary Corp.(11) Professional Services L+850 1.00% 9.84% 12/9/2014 6/9/2021 51,476 51,008 51,476 Falmouth Group Holdings Corp. (AMPAC)(11) Chemicals L+675 1.00% 8.44% 12/7/2015 12/14/2021 9,298 9,265 9,298 Global Tel*Link Corporation Communications Equipment L+400 1.25% 5.69% 11/6/2015 5/23/2020 7,194 6,205 7,230 Global Tel*Link Corporation Communications Equipment L+825 1.25% 9.94% 5/21/2013 11/23/2020 18,500 18,317 18,540 Greystone Select Holdings LLC & Greystone &Co., Inc.(11) Thrifts & Mortgage Finance L+800 1.00% 9.40% 3/29/2017 4/17/2024 20,000 19,815 20,000 IHS Intermediate, Inc.(11) Health Care Providers & Services L+825 1.00% 9.62% 6/19/2015 7/20/2022 25,000 24,639 24,562 K2 Pure Solutions NoCal, L.P.(11) Chemicals L+900 1.00% 10.57% 8/19/2013 2/19/2021 7,475 7,398 7,400 KORE Wireless Group, Inc.(11) Wireless Telecommunication Services L+825 1.00% 9.94% 9/12/2014 3/12/2021 55,500 54,866 54,945 MRI Software LLC(11) Software L+625 1.00% 7.83% 6/7/2017 6/30/2023 16,352 16,197 16,271 On Location Events, LLC & PrimeSport HoldingsInc.(11) Media L+550 1.00% 7.04% 12/7/2017 9/29/2021 60,000 59,260 59,250 PhyMed Management LLC(11) Health Care Providers & Services L+875 1.00% 10.21% 12/18/2015 5/18/2021 32,321 31,430 31,271 PSKW, LLC & PDR, LLC(11) Health Care Providers & Services L+826 1.00% 9.95% 10/24/2017 11/25/2021 3,461 3,394 3,392 Radiology Partners, Inc.(11) Health Care Providers & Services L+575 1.00% 7.44% 11/28/2017 12/4/2023 9,122 9,032 9,031 Rug Doctor LLC(3)(11) Diversified Consumer Services L+975 1.50% 11.42% 12/23/2013 12/31/2018 9,111 9,019 9,111 Salient Partners, L.P.(11) Asset Management L+850 1.00% 9.85% 6/10/2015 6/9/2021 13,980 13,803 13,980 Southern Auto Finance Company(5)(11) Consumer Finance — — 11.15% 10/19/2011 12/4/2018 25,000 24,905 25,000 The Octave Music Group, Inc. (fka TouchTunes)(11) Media L+825 1.00% 9.62% 5/28/2015 5/27/2022 14,000 13,852 14,000 Varilease Finance, Inc.(11) Multi-Sector Holdings L+825 1.00% 9.58% 8/22/2014 8/24/2020 48,000 47,548 48,000 Total Bank Debt/Senior Secured Loans $554,504 $556,154 Life Science Senior Secured Loans Achaogen, Inc.(5)(11) Pharmaceuticals L+699 1.00% 8.34% 8/5/2015 8/5/2019 $20,833 $21,783 $22,500 aTyr Pharma, Inc.(11) Pharmaceuticals P+410 — 8.35% 11/18/2016 11/18/2020 10,000 9,986 10,100 Axcella Health Inc.(11) Pharmaceuticals L+880 — 10.15% 8/7/2015 8/31/2019 20,000 20,600 20,900 Breathe Technologies, Inc.(11) Health Care Equipment & Supplies L+830 — 9.65% 11/5/2015 11/5/2019 15,000 16,774 16,800 CardioDx, Inc.(11) Health Care Providers & Services P+670 — 11.20% 6/18/2015 4/1/2019 4,000 4,507 4,480 CardioFocus, Inc.(11) Health Care Equipment & Supplies L+750 — 8.88% 3/31/2017 7/1/2020 5,300 5,307 5,300 Cardiva Medical, Inc.(11) Health Care Equipment & Supplies L+865 0.63% 10.00% 2/2/2017 2/2/2021 9,000 9,125 9,045 CAS Medical Systems, Inc.(11) Health Care Equipment & Supplies L+875 — 10.10% 6/30/2016 7/1/2020 6,000 6,083 6,045 Cianna Medical, Inc.(11) Health Care Equipment & Supplies L+900 — 10.35% 9/28/2016 9/28/2020 7,500 7,613 7,556 Claret Medical, Inc.(11) Health Care Equipment & Supplies P+450 — 9.00% 11/22/2017 10/1/2020 5,000 4,947 4,933 Clinical Ink, Inc.(11) Health Care Technology L+850 0.70% 9.86% 3/8/2016 3/8/2020 5,056 5,153 5,056 Delphinus Medical Technologies, Inc.(11) Health Care Equipment & Supplies L+850 — 9.88% 8/18/2017 9/1/2021 3,750 3,664 3,722 97See notes to consolidated financial statements.Table of ContentsSOLAR CAPITAL LTD.CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)December 31, 2017(in thousands, except share/unit amounts) Description Industry SpreadAboveIndex(9) LIBORFloor InterestRate(1) AcquisitionDate MaturityDate ParAmount Cost FairValue Lumeris Solutions Company, LLC(11) Health Care Technology L+860 0.25% 9.98% 3/22/2017 2/1/2020 16,000 16,147 16,160 Mitralign, Inc.(11) Health Care Equipment & Supplies — — 9.48% 4/22/2016 12/1/2018 833 843 829 Nabsys 2.0 LLC(11) Life Sciences Tools & Services — — 8.90% 4/22/2016 10/13/2018 2,302 2,695 2,532 PQ Bypass, Inc.(11) Health Care Equipment & Supplies L+885 1.00% 10.20% 4/21/2016 4/21/2020 5,000 5,012 4,975 Rapid Micro Biosystems, Inc.(11) Life Sciences Tools & Services L+880 — 10.16% 6/30/2015 6/30/2019 15,360 16,126 15,322 scPharmaceuticals, Inc.(11) Pharmaceuticals L+845 — 9.83% 5/23/2017 5/1/2021 5,000 4,952 5,000 Scynexis, Inc. (11) Pharmaceuticals L+849 — 9.87% 9/30/2016 9/30/2020 15,000 15,049 14,850 SentreHeart, Inc.(11) Health Care Equipment & Supplies L+885 — 10.20% 11/15/2016 11/15/2020 10,000 9,958 10,000 Sunesis Pharmaceuticals, Inc.(11) Pharmaceuticals L+854 — 9.92% 3/31/2016 4/1/2020 3,750 3,765 3,769 Trevi Therapeutics, Inc.(11) Pharmaceuticals L+775 — 9.11% 12/29/2014 6/29/2018 2,406 2,786 2,623 Vapotherm, Inc.(11) Health Care Equipment & Supplies L+899 — 10.34% 11/16/2016 5/16/2021 20,000 20,040 20,450 Total Life Science Senior Secured Loans $212,915 $212,947 Total Senior Secured Loans $767,419 $769,101 Description Industry InterestRate(1) AcquisitionDate MaturityDate ParAmount Cost FairValue Equipment Financing — 23.7% Althoff Crane Service, Inc.(11)(13) Commercial Services & Supplies 10.55% 7/31/2017 6/8/2022 $1,526 $1,526 $1,526 BB578, LLC(11)(13) Media 10.00% 7/31/2017 11/1/2021 801 801 821 Beverly Hills Limo and Corporate Coach,Inc.(11)(13) Road & Rail 10.67% 7/31/2017 2/28/2018 38 38 37 Blue Star Materials II, LLC(11)(13) Construction Materials 39.06% 7/31/2017 5/1/2018 102 102 102 Carl R. Bieber, Inc.(11)(13) Hotels, Restaurants & Leisure 9.92% 7/31/2017 1/13/2024 1,363 1,363 1,347 Central Freight Lines, Inc.(11)(13) Road & Rail 7.16% 7/31/2017 1/14/2024 1,979 1,979 1,940 Cfactor Leasing Corp. & CZM USA, Corp.(11)(13) Machinery 12.00-12.05% 7/31/2017 5/31/2019-1/15/2021 2,090 2,090 2,135 Family First Freight, LLC(11)(13) Road & Rail 10.11% 7/31/2017 1/22/2022 505 505 513 Georgia Jet, Inc.(11)(13) Airlines 8.00% 12/4/2017 12/4/2021 2,918 2,918 2,918 Haljoe Coaches USA, LLC(11)(13) Road & Rail 8.12-9.90% 7/31/2017 7/1/2022-11/17/2022 6,172 6,172 6,172 Hawkeye Contracting Company, LLC(11)(13)(14) Oil, Gas & Consumable Fuels 10.00% 11/15/2017 11/15/2020 5,292 5,292 5,292 Knight Transfer Services, Inc. & DumpstrXpress, Inc.(11)(13) Commercial Services & Supplies 12.05-12.76% 7/31/2017 4/11/2020-4/30/2020 852 852 854 Logicorp Enterprises, LLC(11)(13) Road & Rail 12.18% 7/31/2017 2/3/2021 4,016 4,016 4,096 Marcal Manufacturing, LLC dba SoundviewPaper Company, LLC(11)(13) Paper & Forest Products 12.91-12.98% 7/31/2017 7/30/2022-10/25/2022 1,637 1,637 1,637 Meridian Consulting I Corp, Inc.(11)(13) Hotels, Restaurants & Leisure 10.72% 7/31/2017 12/4/2021 3,784 3,784 3,873 Mountain Air Helicopters, Inc.(11)(13) Commercial Services & Supplies 10.00% 7/31/2017 4/30/2022 1,882 1,882 1,882 98See notes to consolidated financial statements.Table of ContentsSOLAR CAPITAL LTD.CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)December 31, 2017(in thousands, except share/unit amounts) Description Industry InterestRate(1) AcquisitionDate MaturityDate ParAmount Cost FairValue OKK Equipment, LLC(11)(13) Commercial Services & Supplies 10.15% 7/31/2017 8/27/2023 709 709 696 Reston Limousine & Travel Service, Inc.(11)(13) Road & Rail 11.81% 9/13/2017 10/1/2021 1,868 1,895 1,868 Rossco Crane & Rigging, Inc.(11)(13) Commercial Services & Supplies 11.53% 8/25/2017 9/1/2022 711 711 711 Royal Coach Lines, Inc.(11)(13) Road & Rail 10.03% 7/31/2017 8/28/2018 364 364 361 RVR Air Charter, LLC & RVR Aviation,LLC(11)(13) Airlines 12.00% 7/31/2017 1/1/2022 1,550 1,550 1,581 Santek Environmental, LLC(11)(13) Commercial Services & Supplies 10.00% 7/31/2017 3/1/2021 154 154 153 Santek Environmental of Alabama, LLC(11)(13) Commercial Services & Supplies 8.95-10.00% 7/31/2017 12/18/2020-11/29/2021 252 252 250 Sidelines Tree Service LLC(11)(13) Diversified Consumer Services 10.31%-10.52% 7/31/2017 8/1/2022-10/1/2022 523 525 523 Southern Nevada Oral & Maxillofacial Surgery,LLC(11)(13) Health Care Providers & Services 12.00% 7/31/2017 3/1/2024 1,521 1,521 1,544 Southwest Traders, Inc.(11)(13) Road & Rail 9.13% 11/21/2017 11/1/2020 202 202 202 ST Coaches, LLC(11)(13) Road & Rail 8.23-8.72% 7/31/2017 10/1/2022-11/18/2022 3,703 3,703 3,703 Sturgeon Services International Inc.(11)(13) Energy Equipment & Services 17.21% 7/31/2017 2/28/2022 2,212 2,212 2,225 Sun-Tech Leasing of Texas, L.P.(11)(13) Road & Rail 8.68-10.60% 7/31/2017 5/4/2019-7/25/2021 1,253 1,253 1,252 Superior Transportation, Inc.(11)(13) Road & Rail 9.77-10.26% 7/31/2017 4/23/2022-11/25/2022 3,451 3,451 3,423 The Smedley Company & Smedley Services, Inc.(11)(13) Commercial Services & Supplies 11.63% 7/31/2017 2/10/2024 3,119 3,119 3,181 Tornado Bus Company(11)(13) Road & Rail 10.78% 7/31/2017 9/1/2021 2,727 2,727 2,749 Waste Services of Tennessee, LLC(11)(13) Commercial Services & Supplies 8.95-10.15% 7/31/2017 2/7/2021-11/29/2021 983 983 968 Waste Services of Texas, LLC(11)(13) Commercial Services & Supplies 8.95% 7/31/2017 12/6/2021 190 190 185 WJV658, LLC(11)(13) Airlines 8.50% 7/31/2017 7/1/2022 8,452 8,452 8,452 W.P.M., Inc., WPM-Southern, LLC, WPMConstruction Services, Inc.(11)(13) Construction & Engineering 7.50% 7/31/2017 10/1/2022 4,004 4,004 3,911 Shares/Units NEF Holdings, LLC Equity Interests(3)(11)(12) Multi-Sector Holdings 7/31/2017 200 145,000 145,500 Total Equipment Financing $217,934 $218,583 Preferred Equity – 1.4% SOAGG LLC(3)(5)(6) Aerospace & Defense 8.00% 12/14/2010 6/30/2020 4,147 $4,147 $4,537 SOINT, LLC(3)(5)(6) Aerospace & Defense 15.00% 6/8/2012 6/30/2020 77,014 7,701 8,300 Total Preferred Equity $11,848 $12,837 Description Industry AcquisitionDate Shares/Units Cost FairValue Common Equity/Equity Interests/Warrants — 50.0% Ark Real Estate Partners LP(2)(3)(11)* Diversified Real Estate Activities 3/12/2007 — $527 $263 Ark Real Estate Partners II LP(2)(3)(11)* Diversified Real Estate Activities 10/23/2012 — 12 6 aTyr Pharma, Inc. Warrants(11)* Pharmaceuticals 11/18/2016 88,792 106 73 B Riley Financial Inc.(5) Research & Consulting Services 3/16/2007 38,015 2,684 688 CardioDx, Inc. Warrants(11)* Health Care Providers & Services 6/18/2015 3,986 129 — CardioFocus, Inc. Warrants(11)* Health Care Equipment & Supplies 3/31/2017 440,816 51 43 CAS Medical Systems, Inc. Warrants(11)* Health Care Equipment & Supplies 6/30/2016 48,491 38 — 99See notes to consolidated financial statements.Table of ContentsSOLAR CAPITAL LTD.CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)December 31, 2017(in thousands, except share/unit amounts) Description Industry AcquisitionDate Shares/Units Cost FairValue Cianna Medical, Inc. Warrants(11)* Health Care Equipment & Supplies 9/28/2016 112,158 47 39 Claret Medical, Inc. Warrants(11)* Health Care Equipment & Supplies 11/22/2017 367,737 42 42 Conventus Orthopaedics, Inc. Warrants(11)* Health Care Equipment & Supplies 6/15/2016 157,500 65 43 Crystal Financial LLC(3)(5)(11) Diversified Financial Services 12/28/2012 280,303 280,737 303,200 Delphinus Medical Technologies, Inc. Warrants(11)* Health Care Equipment & Supplies 8/18/2017 380,904 74 66 Essence Group Holdings Corporation (Lumeris) Warrants(11)* Health Care Technology 3/22/2017 208,000 63 155 PQ Bypass, Inc. Warrants(11)* Health Care Equipment & Supplies 4/21/2016 176,471 70 38 RD Holdco Inc. (Rug Doctor)(3)(11)* Diversified Consumer Services 12/23/2013 231,177 15,683 10,102 RD Holdco Inc. (Rug Doctor) Class B(3)(11)* Diversified Consumer Services 12/23/2013 522 5,216 5,216 RD Holdco Inc. (Rug Doctor) Warrants(3)(11)* Diversified Consumer Services 12/23/2013 30,370 381 35 Scynexis, Inc. Warrants(11)* Pharmaceuticals 9/30/2016 122,435 105 3 Senior Secured Unitranche Loan Program LLC(3)(5)(11) Asset Management 11/25/2015 — 89,716 88,736 Senior Secured Unitranche Loan Program II LLC(3)(5)(11) Asset Management 8/5/2016 — 51,076 51,744 SentreHeart, Inc. Warrants(11)* Health Care Equipment & Supplies 11/15/2016 261,825 126 79 Sunesis Pharmaceuticals, Inc. Warrants(11)* Pharmaceuticals 3/31/2016 104,001 118 78 Total Common Equity/Equity Interests/Warrants $447,066 $460,649 Total Investments (8) — 158.6% $1,444,267 $1,461,170 MaturityDate ParAmount Cash Equivalents — 15.7% U.S. Treasury Bill Government 12/28/2017 2/8/2018 $145,000 $144,826 $144,826 Cost FairValue Total Investments & Cash Equivalents — 174.3% $1,589,093 $1,605,996 Liabilities in Excess of Other Assets — (74.3%) (684,391) Net Assets — 100.0% $921,605 (1)Floating rate debt investments typically bear interest at a rate determined by reference to the London Interbank Offered Rate (“LIBOR”), and which typically reset monthly, quarterly or semi-annually. For each debt investment we have provided the current rate of interest in effect as of December 31, 2017.(2)Ark Real Estate Partners is held through SLRC ADI Corp., a wholly-owned taxable subsidiary. See notes to consolidated financial statements. 100Table of ContentsSOLAR CAPITAL LTD.CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)December 31, 2017(in thousands, except share/unit amounts) (3)Denotes investments in which we are deemed to exercise a controlling influence over the management or policies of a company, as defined in the Investment Company Act of 1940 (“1940 Act”),due to beneficially owning, either directly or through one or more controlled companies, more than 25% of the outstanding voting securities of the investment. Transactions during the year endedDecember 31, 2017 in these controlled investments are as follows: Name of Issuer Fair Value atDecember 31,2016 GrossAdditions GrossReductions RealizedGain(Loss) Change inUnrealizedGain(Loss) Interest/Dividend/OtherIncome Fair Value atDecember 31,2017 Ark Real Estate Partners LP $336 $— $— $(6)† $(73) $— $263 Ark Real Estate Partners II LP 8 — — — (2) — 6 AviatorCap SII, LLC I 497 — 487 — — 31 10 Crystal Financial LLC 305,000 — — — (1,800) 31,600 303,200 NEF Holdings, LLC — 145,000 — — 500 5,898 145,500 RD Holdco Inc. (Rug Doctor, common equity) 13,574 — — — (3,472) — 10,102 RD Holdco Inc. (Rug Doctor, class B) 5,216 — — — — — 5,216 RD Holdco Inc. (Rug Doctor, warrants).. 168 — — — (133) — 35 Rug Doctor LLC 9,111 — — — (92) 1,149 9,111 SSLP 100,653 525 12,687 — 245 8,393 88,736 SSLP II 47,363 8,872 4,758 — 267 5,180 51,744 SOAGG LLC 5,806 — 1,476 — 207 394 4,537 SOINT, LLC 2,386 — 2,386 — (6) 60 — SOINT, LLC (preferred equity) 9,100 — 966 — 166 1,259 8,300 $499,218 $154,397 $22,760 $(6) $(4,193) $53,964 $626,760 (4)Denotes investments in which we are an “Affiliated Person” but not exercising a controlling influence, as defined in the 1940 Act, due to beneficially owning, either directly or through one or morecontrolled companies, more than 5% but less than 25% of the outstanding voting securities of the investment. Transactions during the year ended December 31, 2017 in these affiliated investmentsare as follows: Name of Issuer Fair Value atDecember 31,2016 GrossAdditions GrossReductions RealizedGain(Loss) Change inUnrealizedGain(Loss) Interest/DividendIncome Fair Value atDecember 31,2017 Direct Buy Inc. (common equity) $— $— $— $— $— $— $ — Direct Buy Inc. (senior secured loan) 777 333 11,439 (8,387) 7,734 — — DSW Group Holdings LLC — — — 283† — — — $777 $333 $11,439 $(8,104) $7,734 $— $— (5)Indicates assets that the Company believes may not represent “qualifying assets” under Section 55(a) of the Investment Company Act of 1940 (“1940 Act”), as amended. If we fail to invest asufficient portion of our assets in qualifying assets, we could be prevented from making follow-on investments in existing portfolio companies or could be required to dispose of investments atinappropriate times in order to comply with the 1940 Act. As of December 31, 2017, on a fair value basis, non-qualifying assets in the portfolio represented 30.5% of the total assets of theCompany.(6)Solar Capital Ltd.’s investments in SOAGG, LLC and SOINT, LLC include a two and one dollar investment in common shares, respectively.(7)Bishop Lifting Products, Inc., SEI Holding I Corporation, Singer Equities, Inc. & Hampton Rubber Company are co-borrowers.(8)Aggregate net unrealized appreciation for U.S. federal income tax purposes is $10,234; aggregate gross unrealized appreciation and depreciation for federal tax purposes is $27,742 and $17,508,respectively, based on a tax cost of $1,450,936. All of the Company’s investments are pledged as collateral against the borrowings outstanding on the revolving credit facility.(9)Floating rate instruments accrue interest at a predetermined spread relative to an index, typically the LIBOR or PRIME rate. These instruments are typically subject to a LIBOR or PRIME ratefloor.(10)Spread is 12.25% Cash / 2.00% PIK.(11)Investment valued using significant unobservable inputs.(12)NEF Holdings, LLC is held through NEFCORP LLC, a wholly-owned consolidated taxable subsidiary and NEFPASS LLC, a wholly-owned consolidated subsidiary.(13)Indicates an investment that is wholly held by Solar Capital Ltd. through NEFPASS LLC.(14)Hawkeye Contracting Company, LLC, Eagle Creek Mining, LLC & Falcon Ridge Leasing, LLC are co-borrowers.*Non-income producing security. See notes to consolidated financial statements. 101Table of ContentsSOLAR CAPITAL LTD.CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)December 31, 2017(in thousands) †Represents estimated change in receivable balance.††Investment contains a payment-in-kind (“PIK”) feature. Industry Classification Percentage of TotalInvestments (at fair value) asof December 31, 2017 Diversified Financial Services (Crystal Financial LLC) 20.7% Multi-Sector Holdings (includes NEF Holdings, LLC) 13.2% Asset Management (includes SSLP and SSLP II) 10.6% Health Care Providers & Services 8.0% Health Care Equipment & Supplies 6.2% Pharmaceuticals 5.5% Media 5.1% Wireless Telecommunication Services 3.8% Professional Services 3.5% Communications Equipment 3.2% Road & Rail 1.8% Consumer Finance 1.7% Diversified Consumer Services 1.7% IT Services 1.7% Trading Companies & Distributors 1.6% Health Care Technology 1.5% Thrifts & Mortgage Finance 1.4% Life Sciences Tools & Services 1.2% Chemicals 1.1% Software 1.1% Insurance 1.0% Airlines 0.9% Aerospace & Defense 0.9% Commercial Services & Supplies 0.7% Air Freight & Logistics 0.5% Oil, Gas & Consumable Fuels 0.4% Hotels, Restaurants & Leisure 0.4% Construction & Engineering 0.3% Energy Equipment & Services 0.1% Machinery 0.1% Paper & Forest Products 0.1% Research & Consulting Services 0.0% Diversified Real Estate Activities 0.0% Construction Materials 0.0% Total Investments 100.0% See notes to consolidated financial statements. 102Table of ContentsSOLAR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2018(in thousands, except share amounts)Note 1. OrganizationSolar Capital LLC, a Maryland limited liability company, was formed in February 2007 and commenced operations on March 13, 2007 withinitial capital of $1,200,000 of which 47.04% was funded by affiliated parties.Immediately prior to our initial public offering, through a series of transactions, Solar Capital Ltd. merged with Solar Capital LLC, leaving SolarCapital Ltd. as the surviving entity (the “Merger”). Solar Capital Ltd. issued an aggregate of approximately 26.65 million shares of common stock and$125,000 in senior unsecured notes to the existing Solar Capital LLC unit holders in connection with the Merger. Solar Capital Ltd. had no assets oroperations prior to completion of the Merger and as a result, the historical books and records of Solar Capital LLC have become the books and recordsof the surviving entity. The number of shares used to calculate weighted average shares for use in computations on a per share basis have beendecreased retroactively by a factor of approximately 0.4022 for all periods prior to February 9, 2010. This factor represents the effective impact of thereduction in shares resulting from the Merger.Solar Capital Ltd. (“Solar Capital”, the “Company”, “we”, “us” or “our”), a Maryland corporation formed in November 2007, is a closed-end,externally managed, non-diversified management investment company that has elected to be regulated as a business development company (“BDC”)under the Investment Company Act of 1940, as amended (the “1940 Act”). Furthermore, as the Company is an investment company, it continues toapply the guidance in FASB Accounting Standards Codification (“ASC”) Topic 946. In addition, for tax purposes, the Company has elected to betreated, and intend to qualify annually, as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, asamended (the “Code”).On February 9, 2010, Solar Capital priced its initial public offering, selling 5.68 million shares, including the underwriters’ over-allotment, at aprice of $18.50 per share. Concurrent with this offering, the Company’s senior management purchased an additional 600,000 shares through a privateplacement, also at $18.50 per share.The Company’s investment objective is to maximize both current income and capital appreciation through debt and equity investments. TheCompany invests primarily in leveraged middle market companies in the form of senior secured loans, stretch-senior loans, unitranche loans, leases andto a lesser extent, mezzanine loans and equity securities. From time to time, we may also invest in public companies that are thinly traded.Note 2. Significant Accounting PoliciesThe accompanying consolidated financial statements have been prepared on the accrual basis of accounting in conformity with U.S. generallyaccepted accounting principles (“GAAP”), and include the accounts of the Company and certain wholly-owned subsidiaries. The consolidatedfinancial statements reflect all adjustments and reclassifications which, in the opinion of management, are necessary for the fair presentation of theresults of the operations and financial condition for the periods presented. All significant intercompany balances and transactions have beeneliminated. Certain prior period amounts may have been reclassified to conform to the current period presentation.The preparation of consolidated financial statements in conformity with GAAP and pursuant to the requirements for reporting on Form 10-K andRegulation S-X, as appropriate, also requires management to make estimates and assumptions that affect the reported amount of assets and liabilities atthe date of the financial statements and the reported amounts of income and expenses during the reported periods. Changes in the economicenvironment, financial markets and any other parameters used in determining these estimates could cause actual results to differ materially. 103Table of ContentsSOLAR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share amounts) In the opinion of management, all adjustments, which are of a normal recurring nature, considered necessary for the fair presentation of financialstatements have been included.The significant accounting policies consistently followed by the Company are: (a)Investment transactions are accounted for on the trade date; (b)Under procedures established by our board of directors (the “Board”), we value investments, including certain senior secured debt,subordinated debt and other debt securities with maturities greater than 60 days, for which market quotations are readily available, at suchmarket quotations (unless they are deemed not to represent fair value). We attempt to obtain market quotations from at least two brokers ordealers (if available, otherwise from a principal market maker or a primary market dealer or other independent pricing service). We utilizemid-market pricing as a practical expedient for fair value unless a different point within the range is more representative. If and whenmarket quotations are deemed not to represent fair value, we may utilize independent third-party valuation firms to assist us in determiningthe fair value of material assets. Accordingly, such investments go through our multi-step valuation process as described below. In eachsuch case, independent valuation firms consider observable market inputs together with significant unobservable inputs in arriving at theirvaluation recommendations. Debt investments with maturities of 60 days or less shall each be valued at cost plus accreted discount, orminus amortized premium, which is expected to approximate fair value, unless such valuation, in the judgment of Solar Capital Partners,LLC (the “Investment Adviser”), does not represent fair value, in which case such investments shall be valued at fair value as determined ingood faith by or under the direction of our Board. Investments that are not publicly traded or whose market quotations are not readilyavailable are valued at fair value as determined in good faith by or under the direction of our Board. Such determination of fair valuesinvolves subjective judgments and estimates.With respect to investments for which market quotations are not readily available or when such market quotations are deemed not torepresent fair value, our Board has approved a multi-step valuation process each quarter, as described below: (1)our quarterly valuation process begins with each portfolio company or investment being initially valued by the investmentprofessionals of the Investment Adviser responsible for the portfolio investment; (2)preliminary valuation conclusions are then documented and discussed with senior management of the Investment Adviser; (3)independent valuation firms engaged by our Board conduct independent appraisals and review the Investment Adviser’spreliminary valuations and make their own independent assessment for all material assets; (4)the audit committee of the Board reviews the preliminary valuation of the Investment Adviser and that of the independentvaluation firm and responds to the valuation recommendation of the independent valuation firm, if any, to reflect anycomments; and (5)the Board discusses valuations and determines the fair value of each investment in our portfolio in good faith based on theinput of the Investment Adviser, the respective independent valuation firm, if any, and the audit committee.Investments in all asset classes are valued utilizing a market approach, an income approach, or both approaches, as appropriate. However,in accordance with ASC 820-10, certain investments that qualify 104Table of ContentsSOLAR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share amounts) as investment companies in accordance with ASC 946, may be valued using net asset value as a practical expedient for fair value. Themarket approach uses prices and other relevant information generated by market transactions involving identical or comparable assets orliabilities (including a business). The income approach uses valuation approaches to convert future amounts (for example, cash flows orearnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations aboutthose future amounts. In following these approaches, the types of factors that we may take into account in fair value pricing ourinvestments include, as relevant: available current market data, including relevant and applicable market trading and transactioncomparables, applicable market yields and multiples, security covenants, call protection provisions, the nature and realizable value of anycollateral, the portfolio company’s ability to make payments, its earnings and discounted cash flows, the markets in which the portfoliocompany does business, comparisons of financial ratios of peer companies that are public, M&A comparables, our principal market (as thereporting entity) and enterprise values, among other factors. When available, broker quotations and/or quotations provided by pricingservices are considered as an input in the valuation process. For the fiscal year ended December 31, 2018, there has been no change to theCompany’s valuation approaches or techniques and the nature of the related inputs considered in the valuation process.ASC Topic 820 classifies the inputs used to measure these fair values into the following hierarchy:Level 1: Quoted prices in active markets for identical assets or liabilities, accessible by the Company at the measurement date.Level 2: Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities inmarkets that are not active, or other observable inputs other than quoted prices.Level 3: Unobservable inputs for the asset or liability.In all cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on thelowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fairvalue measurement in its entirety requires judgment and considers factors specific to each investment. The exercise of judgment is based inpart on our knowledge of the asset class and our prior experience. (c)Gains or losses on investments are calculated by using the specific identification method. (d)The Company records dividend income and interest, adjusted for amortization of premium and accretion of discount, on an accrual basis.Loan origination fees, original issue discount, and market discounts are capitalized and we amortize such amounts into income using theeffective interest method or on a straight-line basis, as applicable. Upon the prepayment of a loan, any unamortized loan origination feesare recorded as interest income. We record call premiums received on loans repaid as interest income when we receive such amounts.Capital structuring fees, amendment fees, consent fees, and any other non-recurring fee income as well as management fee and other feeincome for services rendered, if any, are recorded as other income when earned. (e)The Company intends to comply with the applicable provisions of the Code pertaining to regulated investment companies to makedistributions of taxable income sufficient to relieve it of substantially all U.S. federal income taxes. The Company, at its discretion, maycarry forward taxable income in excess of calendar year distributions and pay a 4% excise tax on this income. The Company will accrueexcise tax on such estimated excess taxable income as appropriate. 105Table of ContentsSOLAR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share amounts) (f)Book and tax basis differences relating to stockholder distributions and other permanent book and tax differences are typically reclassifiedamong the Company’s capital accounts. In addition, the character of income and gains to be distributed is determined in accordance withincome tax regulations that may differ from GAAP; accordingly at December 31, 2018, $1,098 was reclassified on our balance sheetbetween accumulated distributable net loss and paid-in capital in excess of par. Total earnings and net asset value are not affected. (g)Distributions to common stockholders are recorded as of the record date. The amount to be paid out as a distribution is determined by theBoard. Net realized capital gains, if any, are generally distributed or deemed distributed at least annually. (h)In accordance with Regulation S-X and ASC Topic 810—Consolidation, the Company consolidates its interest in controlled investmentcompany subsidiaries, financing subsidiaries and certain wholly-owned holding companies that serve to facilitate investment in portfoliocompanies. In addition, the Company may also consolidate any controlled operating companies substantially all of whose businessconsists of providing services to the Company. (i)The accounting records of the Company are maintained in U.S. dollars. Any assets and liabilities denominated in foreign currencies aretranslated into U.S. dollars based on the rate of exchange of such currencies against U.S. dollars on the date of valuation. The Company willnot isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuationsarising from changes in market prices of securities held. Such fluctuations would be included with the net unrealized gain or loss frominvestments. The Company’s investments in foreign securities, if any, may involve certain risks, including without limitation: foreignexchange restrictions, expropriation, taxation or other political, social or economic risks, all of which could affect the market and/or creditrisk of the investment. In addition, changes in the relationship of foreign currencies to the U.S. dollar can significantly affect the value ofthese investments in terms of U.S. dollars and therefore the earnings of the Company. (j)The Company has made irrevocable elections to apply the fair value option of accounting to the senior secured credit facility (the “CreditFacility”), the unsecured senior notes due 2022 (the “2022 Unsecured Notes”), and the SSLP Facility (see note 6 and 7), in accordance withASC 825-10. (k)In accordance with ASC 835-30, the Company records origination and other expenses related to certain debt issuances as a directdeduction from the carrying amount of the debt liability. These expenses are deferred and amortized using either the effective interestmethod or the straight-line method over the stated life. The straight-line method may be used on revolving facilities and/or when itapproximates the effective yield method. (l)The Company may enter into forward exchange contracts in order to hedge against foreign currency risk. These contracts aremarked-to-market by recognizing the difference between the contract exchange rate and the current market rate as unrealized appreciationor depreciation. Realized gains or losses are recognized when contracts are settled. (m)The Company records expenses related to shelf registration statements and applicable equity offering costs as prepaid assets. Theseexpenses are typically charged as a reduction of capital upon utilization, in accordance with ASC 946-20-25. Certain subsequent costs areexpensed per the AICPA Audit & Accounting Guide for Investment Companies. (n)Investments that are expected to pay regularly scheduled interest in cash are generally placed on non-accrual status when principal orinterest cash payments are past due 30 days or more (90 days or 106Table of ContentsSOLAR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share amounts) more for equipment financing) and/or when it is no longer probable that principal or interest cash payments will be collected. Suchnon-accrual investments are restored to accrual status if past due principal and interest are paid in cash, and in management’s judgment, arelikely to continue timely payment of their remaining principal and interest obligations. Cash interest payments received on suchinvestments may be recognized as income or applied to principal depending on management’s judgment. (o)The Company defines cash equivalents as securities that are readily convertible into known amounts of cash and so near their maturity thatthey present insignificant risk of changes in value because of changes in interest rates. Generally, only securities with a maturity of threemonths or less would qualify, with limited exceptions. The Company believes that certain U.S. Treasury bills, repurchase agreements andother high-quality, short-term debt securities would qualify as cash equivalents.Recent Accounting PronouncementsIn August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework—Changes to the DisclosureRequirements for Fair Value Measurement. The amendments in this Update modify the disclosure requirements on fair value measurementsin Topic 820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits.ASU 2018-13 is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.Early adoption is permitted. The Company is evaluating the impact of ASU 2018-13 on its consolidated financial statements anddisclosures.In August 2018, the US Securities and Exchange Commission adopted final rules to eliminate redundant, duplicative, overlapping,outdated or superseded disclosure requirements in light of other disclosure requirements, GAAP or changes in the informationenvironment. These rules amend certain provisions of Regulation S-X and Regulation S-K, certain rules promulgated under the SecuritiesAct of 1933 and the Securities Exchange Act of 1934 and certain related forms. These changes became effective on November 5, 2018.In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows, which amends FASB ASC 230. The amendments in thisUpdate require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amountsgenerally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restrictedcash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period totalamounts shown on the statement of cash flows. The amendments in this Update apply to all entities that have restricted cash or restrictedcash equivalents and are required to present a statement of cash flows under Topic 230. For public business entities, the amendments wereeffective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company has adopted ASU2016-18 and determined that the adoption has not had a material impact on its consolidated financial statements and disclosures.In March 2017, the FASB issued ASU 2017-08, Premium Amortization on Purchased Callable Debt Securities, which will amend FASBASC 310-20. The amendments in this Update shorten the amortization period for certain callable debt securities held at a premium,generally requiring the premium to be amortized to the earliest call date. For public business entities, the amendments are effective forfiscal years, and interim periods within those fiscal years, beginning after December 15, 107Table of ContentsSOLAR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share amounts) 2018. Early adoption is permitted, including adoption in an interim period. The Company is evaluating the impact of ASU 2017-08 on itsconsolidated financial statements and disclosures.In May 2014, the FASB issued ASC 606, Revenue From Contracts With Customers, originally effective for public business entities withannual reporting periods beginning after December 15, 2016. On August 12, 2015, the FASB issued an ASU, Revenue From Contracts WithCustomers (Topic 606): Deferral of the Effective Date, which deferred the effective date of ASC 606 for one year. ASC 606 providesaccounting guidance related to revenue from contracts with customers. For public business entities, ASC 606 was effective for fiscalyears, and interim periods within those fiscal years, beginning after December 15, 2017. The Company has adopted ASC 606 anddetermined that the adoption has not had a material impact on its consolidated financial statements and disclosures.Note 3. AgreementsSolar Capital has an Advisory Agreement with the Investment Adviser, under which the Investment Adviser will manage the day-to-dayoperations of, and provide investment advisory services to, Solar Capital. For providing these services, the Investment Adviser receives a fee from SolarCapital, consisting of two components—a base management fee and a performance-based incentive fee. The base management fee is determined bytaking the average value of Solar Capital’s gross assets at the end of the two most recently completed calendar quarters calculated at an annual rate of1.75%. Prior to January 1, 2018, the annual rate was 2.00%. Effective August 2, 2018, the annual rate is 1.00% on gross assets that exceed 200% of theCompany’s total net assets as of the immediately preceding quarter end. For purposes of computing the base management fee, gross assets excludetemporary assets acquired at the end of each fiscal quarter for purposes of preserving investment flexibility in the next fiscal quarter. Temporary assetsinclude, but are not limited to, U.S. treasury bills, other short-term U.S. government or government agency securities, repurchase agreements or cashborrowings.The performance-based incentive fee has two parts, as follows: one part is calculated and payable quarterly in arrears based on Solar Capital’spre-incentive fee net investment income for the immediately preceding calendar quarter. For this purpose, pre-incentive fee net investment incomemeans interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such ascommitment, origination, structuring, diligence and consulting fees or other fees that we receive from portfolio companies) accrued during the calendarquarter, minus Solar Capital’s operating expenses for the quarter (including the base management fee, any expenses payable under the AdministrationAgreement, and any interest expense and distributions paid on any issued and outstanding preferred stock, but excluding the performance-basedincentive fee). Pre-incentive fee net investment income does not include any realized capital gains or losses, or unrealized capital appreciation ordepreciation. Pre-incentive fee net investment income, expressed as a rate of return on the value of Solar Capital’s net assets at the end of theimmediately preceding calendar quarter, is compared to the hurdle rate of 1.75% per quarter (7% annualized). Solar Capital pays the InvestmentAdviser a performance-based incentive fee with respect to Solar Capital’s pre-incentive fee net investment income in each calendar quarter as follows:(1) no performance-based incentive fee in any calendar quarter in which Solar Capital’s pre-incentive fee net investment income does not exceed thehurdle rate; (2) 100% of Solar Capital’s pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investmentincome, if any, that exceeds the hurdle rate but is less than 2.1875% in any calendar quarter; and (3) 20% of the amount of Solar Capital’s pre-incentivefee net investment income, if any, that exceeds 2.1875% in any calendar quarter. These calculations are appropriately pro-rated for any period of lessthan three months. 108Table of ContentsSOLAR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share amounts) The second part of the performance-based incentive fee is determined and payable in arrears as of the end of each calendar year (or upontermination of the Advisory Agreement, as of the termination date), and will equal 20% of Solar Capital’s cumulative realized capital gains lesscumulative realized capital losses, unrealized capital depreciation (unrealized depreciation on a gross investment-by-investment basis at the end ofeach calendar year) and all net capital gains upon which prior performance-based capital gains incentive fee payments were previously made to theInvestment Adviser. For financial statement purposes, the second part of the performance-based incentive fee is accrued based upon 20% of cumulativenet realized gains and net unrealized capital appreciation. No accrual was required for the fiscal years ended December 31, 2018, 2017 and 2016.For the fiscal years ended December 31, 2018, 2017 and 2016, the Company recognized $25,789, $27,409 and $28,115, respectively, in basemanagement fees and $18,722, $17,055 and $17,775, respectively, in performance-based incentive fees.Solar Capital has also entered into an Administration Agreement with Solar Capital Management, LLC (the “Administrator”) under which theAdministrator provides administrative services to Solar Capital. For providing these services, facilities and personnel, Solar Capital reimburses theAdministrator for Solar Capital’s allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations underthe Administration Agreement, including rent. The Administrator will also provide, on Solar Capital’s behalf, managerial assistance to those portfoliocompanies to which Solar Capital is required to provide such assistance. The Company typically reimburses the Administrator on a quarterly basis.For the fiscal years ended December 31, 2018, 2017 and 2016, the Company recognized expenses under the Administration Agreement of$5,247, $5,215 and $5,990, respectively. No managerial assistance fees were accrued or collected for the fiscal years ended December 31, 2018, 2017and 2016.Note 4. Net Asset Value Per ShareAt December 31, 2018, the Company’s total net assets and net asset value per share were $919,171 and $21.75, respectively. This compares tototal net assets and net asset value per share at December 31, 2017 of $921,605 and $21.81, respectively.Note 5. Earnings Per ShareThe following table sets forth the computation of basic and diluted net increase in net assets per share resulting from operations, pursuant to ASC260-10, for the years ended December 31, 2018, 2017 and 2016: Year endedDecember 31, 2018 Year endedDecember 31, 2017 Year endedDecember 31, 2016 Earnings per share (basic & diluted)Numerator - net increase in net assets resulting from operations: $66,874 $70,430 $106,815 Denominator - weighted average shares: 42,260,826 42,257,692 42,258,143 Earnings per share: $1.58 $1.67 $2.53 Note 6. Fair ValueFair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between marketparticipants at the measurement date. GAAP establishes a framework for 109Table of ContentsSOLAR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share amounts) measuring fair value that includes a hierarchy used to classify the inputs used in measuring fair value. The hierarchy prioritizes the inputs to valuationsused to measure fair value into three levels. The level in the fair value hierarchy within which the fair value measurement falls is determined based onthe lowest level input that is significant to the fair value measurement. The levels of the fair value hierarchy are as follows:Level 1. Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active marketthat the Company has the ability to access.Level 2. Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observableeither directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following: a)Quoted prices for similar assets or liabilities in active markets; b)Quoted prices for identical or similar assets or liabilities in non-active markets; c)Pricing models whose inputs are observable for substantially the full term of the asset or liability; and d)Pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means forsubstantially the full term of the asset or liability.Level 3. Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservableand significant to the overall fair value measurement. These inputs reflect management’s and, if applicable, an independent third-party valuation firm’sown assumptions about the assumptions a market participant would use in pricing the asset or liability.When the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement iscategorized is based on the lowest level input that is significant to the fair value measurement in its entirety. For example, a Level 3 fair valuemeasurement may include inputs that are observable (Levels 1 and 2) and unobservable (Level 3).Gains and losses for assets and liabilities categorized within the Level 3 table below may include changes in fair value that are attributable toboth observable inputs (Levels 1 and 2) and unobservable inputs (Level 3).A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in areclassification for certain financial assets or liabilities. Such reclassifications are reported as transfers in/out of the appropriate category as of the end ofthe quarter in which the reclassifications occur. 110Table of ContentsSOLAR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share amounts) The following tables present the balances of assets and liabilities measured at fair value on a recurring basis, as of December 31, 2018 and 2017:Fair Value MeasurementsAs of December 31, 2018 Level 1 Level 2 Level 3 Total Assets: Senior Secured Loans $— $— $818,861 $818,861 Equipment Financing — — 314,226 314,226 Preferred Equity — — 15,527 15,527 Common Equity/Equity Interests/Warrants 540 — 306,926 307,466 Total Investments $540 $— $1,455,540 $1,456,080 Liabilities: Credit Facility, 2022 Unsecured Notes and SSLP Facility $— $— $350,185 $350,185 Fair Value MeasurementsAs of December 31, 2017 Level 1 Level 2 Level 3 Measured at NetAsset Value* Total Assets: Senior Secured Loans $— $25,770 $743,331 $— $769,101 Equipment Financing — — 218,583 — 218,583 Preferred Equity — — 12,837 — 12,837 Common Equity/Equity Interests/Warrants 688 — 319,481 140,480 460,649 Total Investments $688 $25,770 $1,294,232 $140,480 $1,461,170 Liabilities: Credit Facility and 2022 Unsecured Notes $— $— $445,600 $— $445,600 *In accordance with ASC 820-10, certain investments that are measured using the net asset value per share (or its equivalent) as a practicalexpedient for fair value have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permitreconciliation of the fair value hierarchy to the amounts presented in the Consolidated Statements of Assets and Liabilities. The two portfolioinvestments in this category are SSLP and SSLP II. See Note 14 & 15, respectively, for more information on these investments, including theirinvestment strategies and the Company’s unfunded equity commitments to SSLP and SSLP II. Neither of these investments are redeemable by theCompany absent an election by the members of the entities to liquidate all investments and distribute the proceeds to the members.The following tables provide a summary of the changes in fair value of Level 3 assets and liabilities for the year ended December 31, 2018 andthe year ended December 31, 2017 as well as the portion of gains or losses 111Table of ContentsSOLAR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share amounts) included in income attributable to unrealized gains or losses related to those assets and liabilities still held at December 31, 2018 and December 31,2017:Fair Value Measurements Using Level 3 Inputs Senior SecuredLoans EquipmentFinancing Preferred Equity Common Equity/EquityInterests/Warrants Total Fair value, December 31, 2017 $743,331 $218,583 $12,837 $319,481 $1,294,232 Total gains or losses included in earnings: Net realized gain (loss) 470 17 — 367 854 Net change in unrealized gain (loss) (1,263) 5 6,209 (12,756) (7,805) Purchase of investment securities 413,106 132,879 — 548 546,533 Proceeds from dispositions of investment securities (563,251) (37,258) (3,519) (714) (604,742) Transfers in/out of Level 3 226,468 — — — 226,468Fair value, December 31, 2018 $818,861 $314,226 $15,527 $306,926 $1,455,540 Unrealized gains (losses) for the period relating tothose Level 3 assets that were still held by theCompany at the end of the period: Net change in unrealized gain (loss) $657 $68 $6,209 $(12,925) $(5,991) During the year ended December 31, 2018, the Company’s investments in SSLP and SSLP II were consolidated, and as such the Level 3 assetsheld by SSLP and SSLP II are reflected as transfers into Level 3.The following table shows a reconciliation of the beginning and ending balances for fair valued liabilities measured using significantunobservable inputs (Level 3) for the year ended December 31, 2018: Credit Facility, 2022 Unsecured Notes, SSLP Facility and SSLP II Facility For the year endedDecember 31, 2018 Beginning fair value $445,600 Net realized (gain) loss — Net change in unrealized (gain) loss — Borrowings 529,499 Repayments (685,980) Transfers in/out of Level 3 61,066 Ending fair value $350,185 The Company made irrevocable elections to apply the fair value option of accounting to the Credit Facility, the 2022 Unsecured Notes, the SSLPFacility and the SSLP II Facility, in accordance with ASC 825-10. On December 31, 2018, there were borrowings of $146,400, $150,000, $53,785 and$0, respectively, on the Credit 112Table of ContentsSOLAR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share amounts) Facility, the 2022 Unsecured Notes, the SSLP Facility and the SSLP II Facility. As a result of the consolidation of SSLP and SSLP II, the SSLP Facilityand the SSLP II Facility are shown as transfers into Level 3.Fair Value Measurements Using Level 3 Inputs Senior SecuredLoans EquipmentFinancing Subordinated Debt/Corporate Notes Preferred Equity Common Equity/EquityInterests/Warrants Fair value, December 31, 2016 $759,510 $— $28,059 $14,906 $324,842 Total gains or losses included in earnings: Net realized gain (loss) (9,547) — — — — Net change in unrealized gain (loss) 18,455 649 (122) 372 (5,661) Purchase of investment securities 246,367 224,468 36 — 300 Proceeds from dispositions of investmentsecurities (271,454) (6,534) (27,973) (2,441) — Transfers in/out of Level 3 — — — — — Fair value, December 31, 2017 $743,331 $218,583 $— $12,837 $319,481 Unrealized gains (losses) for the periodrelating to those Level 3 assets that werestill held by the Company at the end of theperiod: Net change in unrealized gain (loss) $9,046 $649 $— $372 $(5,661) During the year ended December 31, 2017, there were no transfers in and out of Levels 1 and 2.The following table shows a reconciliation of the beginning and ending balances for fair valued liabilities measured using significantunobservable inputs (Level 3) for the year ended December 31, 2017: Credit Facility, Senior Secured Notes and 2022 Unsecured Notes For the year endedDecember 31, 2017 Beginning fair value $290,200 Net realized (gain) loss — Net change in unrealized (gain) loss — Borrowings 861,400 Repayments (706,000) Transfers in/out of Level 3 — Ending fair value $445,600 The Company has made an irrevocable election to apply the fair value option of accounting to the Credit Facility and the 2022 Unsecured Notes,in accordance with ASC 825-10. On December 31, 2017, there were borrowings of $295,600 and $150,000, respectively, on the Credit Facility and the2022 Unsecured Notes. The 113Table of ContentsSOLAR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share amounts) Company used an independent third-party valuation firm to assist in measuring the fair value of the Credit Facility and the 2022 Unsecured Notes.Quantitative Information about Level 3 Fair Value MeasurementsThe Company typically determines the fair value of its performing debt investments utilizing a yield analysis. In a yield analysis, a price isascribed for each investment based upon an assessment of current and expected market yields for similar investments and risk profiles. Additionalconsideration is given to current contractual interest rates, relative maturities and other key terms and risks associated with an investment. Among otherfactors, a significant determinant of risk is the amount of leverage used by the portfolio company relative to the total enterprise value of the company,and the rights and remedies of our investment within each portfolio company.Significant unobservable quantitative inputs typically used in the fair value measurement of the Company’s Level 3 assets and liabilitiesprimarily reflect current market yields, including indices, and readily available quotes from brokers, dealers, and pricing services as indicated bycomparable assets and liabilities, as well as enterprise values, returns on equity and earnings before income taxes, depreciation and amortization(“EBITDA”) multiples of similar companies, and comparable market transactions for equity securities.Quantitative information about the Company’s Level 3 asset and liability fair value measurements as of December 31, 2018 is summarized in thetable below: Asset orLiability Fair Value atDecember 31, 2018 Principal ValuationTechnique/Methodology Unobservable Input Range (WeightedAverage)Senior Secured Loans Asset $818,861 Income Approach Market Yield 7.1% – 13.6% (10.7%)Equipment Financing Asset $$169,226145,000 Income ApproachMarket Approach Market YieldReturn on Equity 7.2% – 19.8% (10.1%)9.1% – 9.1% (9.1%)Preferred Equity Asset $15,527 Income Approach Market Yield 8.0% – 13.0% (10.1%)Common Equity/Equity Interests/Warrants Asset $$13,926293,000 Market ApproachMarket Approach EBITDA MultipleReturn on Equity 6.0x – 7.0x (6.3x)7.9% – 17.5% (17.4%)Credit Facility and SSLP Facility Liability $200,185 Income Approach Market Yield L+1.4% – L+4.8%(L+2.1%)2022 Unsecured Notes Liability $150,000 Income Approach Market Yield 4.5% – 4.9% (4.5%) 114Table of ContentsSOLAR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share amounts) Quantitative information about the Company’s Level 3 asset and liability fair value measurements as of December 31, 2017 is summarized in thetable below: Asset orLiability Fair Value atDecember 31, 2017 Principal ValuationTechnique/Methodology Unobservable Input Range (WeightedAverage)Senior Secured Loans Asset $743,331 Yield Analysis Market Yield 7.6% – 22.8% (11.2%)Equipment Financing Asset $$73,083145,500 Yield AnalysisEnterprise Value Market YieldReturn on Equity 7.6% – 39.1% (10.0%)11.8% – 11.8% (11.8%)Preferred Equity Asset $12,837 Yield Analysis Market Yield 6.2% – 13.4% (10.9%)Common Equity/Equity Interests/Warrants Asset $$16,281303,200 Enterprise ValueEnterprise Value EBITDA MultipleReturn on Equity 5.5x – 6.5x (6.3x)7.3% – 14.0% (14.0%)Credit Facility Liability $295,600 Yield Analysis Market Yield L+1.4% – L+4.8%(L+2.0%)2022 Unsecured Notes Liability $150,000 Yield Analysis Market Yield 4.5% – 4.9% (4.5%)Significant increases or decreases in any of the above unobservable inputs in isolation, including unobservable inputs used in deriving bid-askspreads, if applicable, could result in significantly lower or higher fair value measurements for such assets and liabilities.Note 7. DebtUnsecured NotesOn December 28, 2017, the Company closed a private offering of $21,000 of unsecured tranche c notes due 2022 (the “2022 Tranche C Notes”)with a fixed interest rate of 4.50% and a maturity date of December 28, 2022. Interest on the 2022 Tranche C Notes is due semi-annually on June 28and December 28. The 2022 Tranche C Notes were issued in a private placement only to qualified institutional buyers.On November 22, 2017, we issued $75,000 in aggregate principal amount of publicly registered unsecured senior notes due 2023 (the “2023Unsecured Notes”) for net proceeds of $73,846. Interest on the 2023 Unsecured Notes is paid semi-annually on January 20 and July 20, at a rate of4.50% per year, commencing on January 20, 2018. The 2023 Unsecured Notes mature on January 20, 2023.On February 15, 2017, the Company closed a private offering of $100,000 of additional 2022 Unsecured Notes with a fixed interest rate of 4.60%and a maturity date of May 8, 2022. Interest on the 2022 Unsecured Notes is due semi-annually on May 8 and November 8. The 2022 Unsecured Noteswere issued in a private placement only to qualified institutional buyers.On November 8, 2016, the Company closed a private offering of $50,000 of the 2022 Unsecured Notes with a fixed interest rate of 4.40% and amaturity date of May 8, 2022. Interest on the 2022 Unsecured Notes is due semi-annually on May 8 and November 8. The 2022 Unsecured Notes wereissued in a private placement only to qualified institutional buyers.Revolving and Term Loan FacilitiesOn September 30, 2016, the Company entered into a second Credit Facility amendment. Post amendment, the Credit Facility was composed of$505,000 of revolving credit and $50,000 of term loans. Borrowings generally bear interest at a rate per annum equal to the base rate plus a range of2.00-2.25% or the alternate base 115Table of ContentsSOLAR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share amounts) rate plus 1.00%-1.25%. The Credit Facility has no LIBOR floor requirement. The Credit Facility matures in September 2021 and includes ratableamortization in the final year. The Credit Facility may be increased up to $800,000 with additional new lenders or an increase in commitments fromcurrent lenders. The Credit Facility contains certain customary affirmative and negative covenants and events of default. In addition, the CreditFacility contains certain financial covenants that among other things, requires the Company to maintain a minimum shareholder’s equity and aminimum asset coverage ratio. The Company also pays issuers of funded term loans quarterly in arrears a commitment fee at the rate of 0.25% perannum on the average daily outstanding balance. On February 23, 2017, the Company prepaid its two non-extending lenders and terminated theircommitments, reducing total outstanding revolving credit commitments by $110,000 to $395,000. On April 30, 2018, the revolving creditcommitments under the Company’s Credit Facility were expanded by $50,000 from $395,000 to $445,000 and on July 13, 2018, revolving creditcommitments were further expanded by $35,000 to $480,000. On November 21, 2018, we entered into Amendment No. 3 to the Credit Facility which,among other things, reduced the asset coverage covenant in the Credit Facility from 200% to 150% and made certain related changes to the borrowingbase calculations. At December 31, 2018, outstanding USD equivalent borrowings under the Credit Facility totaled $146,400, composed of $96,400 ofrevolving credit and $50,000 of term loans.On June 30, 2016, SSLP as transferor and SSLP 2016-1, LLC, a newly formed wholly-owned subsidiary of SSLP, as borrower entered into the$200,000 SSLP Facility with Wells Fargo Bank, NA acting as administrative agent. Solar Capital Ltd. acts as servicer under the SSLP Facility. OnDecember 19, 2018, the SSLP Facility was amended and Solar Capital Ltd. now serves as transferor in addition to its role as servicer. The SSLP Facilityis scheduled to mature on June 30, 2021. The SSLP Facility generally bears interest at a rate of LIBOR plus 2.50%. The Company and SSLP 2016-1,LLC, as applicable, have made certain customary representations and warranties, and are required to comply with various covenants, includingleverage restrictions, reporting requirements and other customary requirements for similar credit facilities. The SSLP Facility also includes usual andcustomary events of default for credit facilities of this nature. There were $53,785 of borrowings outstanding as of December 31, 2018.On November 15, 2016, SSLP II as transferor and SSLP II 2016-1, LLC, a newly formed wholly-owned subsidiary of SSLP II, as borrower enteredinto a $100,000 senior secured revolving credit facility (the “SSLP II Facility”) with Wells Fargo Bank, NA acting as administrative agent. SolarCapital Ltd. acted as servicer under the SSLP II Facility. The SSLP II Facility was scheduled to mature on November 15, 2021. The SSLP II Facilitygenerally bore interest at a rate of LIBOR plus 2.50%. SSLP II and SSLP II 2016-1, LLC, as applicable, had made certain customary representations andwarranties, and are required to comply with various covenants, including leverage restrictions, reporting requirements and other customaryrequirements for similar credit facilities. The SSLP II Facility included usual and customary events of default for credit facilities of this nature. OnDecember 19, 2018, SSLP II 2016-1, LLC was merged into SSLP 2016-1, LLC and the SSLP II Facility was terminated.On September 26, 2018, NEFPASS SPV LLC, a newly formed wholly-owned subsidiary of NEFPASS LLC, as borrower entered into a $50,000senior secured revolving credit facility (the “NEFPASS Facility”) with Keybank acting as administrative agent. The Company acts as servicer under theNEFPASS Facility. The NEFPASS Facility is scheduled to mature on September 26, 2023. The NEFPASS Facility generally bears interest at a rate ofLIBOR plus 2.15%. NEFPASS and NEFPASS SPV LLC, as applicable, have made certain customary representations and warranties, and are required tocomply with various covenants, including leverage restrictions, reporting requirements and other customary requirements for similar credit facilities.The NEFPASS Facility also includes usual and customary events of default for credit facilities of this nature. There were $30,000 of borrowingsoutstanding as of December 31, 2018. 116Table of ContentsSOLAR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share amounts) Certain covenants on our issued debt may restrict our business activities, including limitations that could hinder our ability to finance additionalloans and investments or to make the distributions required to maintain our status as a RIC under Subchapter M of the Code.The Company has made irrevocable elections to apply the fair value option of accounting to the Credit Facility, the 2022 Unsecured Notes andthe SSLP Facility, in accordance with ASC 825-10. We believe accounting for these facilities at fair value better aligns the measurementmethodologies of assets and liabilities, which may mitigate certain earnings volatility. ASC 825-10 requires entities to display the fair value of theselected assets and liabilities on the face of the Consolidated Statement of Assets and Liabilities and changes in fair value of the above facilities arereported in the Consolidated Statement of Operations.The average annualized interest cost for all borrowings for the year ended December 31, 2018 and the year ended December 31, 2017 was 4.33%and 4.73%, respectively. These costs are exclusive of other credit facility expenses such as unused fees, agency fees and other prepaid expenses relatedto establishing and/or amending the Credit Facility, the 2022 Unsecured Notes, the 2022 Tranche C Notes, the NEFPASS Facility, the SSLP Facilityand the 2023 Unsecured Notes (collectively the “Credit Facilities”), if any. During the year ended December 31, 2017, the Company expensed $591 inconjunction with the February 2017 issue of 2022 Unsecured Notes. The maximum amounts borrowed on the Credit Facilities during the year endedDecember 31, 2018 and the year ended December 31, 2017 were $592,600 and $606,600, respectively.Note 8(a). Income Tax Information and Distributions to StockholdersThe tax character of distributions for the fiscal years ended December 31, 2018, 2017 and 2016 were as follows: 2018 2017 2016 Ordinary income $69,308 100.0% $67,612 100.0% $67,598 100.0% Capital gains — 0.0% — 0.0% — 0.0% Return of capital — 0.0% — 0.0% — 0.0% Total distributions $69,308 100.0% $67,612 100.0% $67,598 100.0% As of December 31, 2018, 2017 and 2016 the total accumulated earnings (loss) on a tax basis were as follows (1): 2018 2017 2016 Undistributed ordinary income $13,259 $8,750 $7,329Undistributed long-term net capital gains — — — Total undistributed net earnings 13,259 8,750 7,329 Post-October capital losses — — — Capital loss carryforward (37,319) (41,814) (31,311) Other book/tax temporary differences (1,098) 2,800 2,915Net unrealized appreciation (depreciation) 853 10,234 (7,928) Total tax accumulated earnings (loss) $(24,305) $(20,030) $(28,995) (1)Tax information for the fiscal years ended December 31, 2018, 2017 and 2016 are/were estimates and are not final until the Company files its taxreturns, typically in October each year. 117Table of ContentsSOLAR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share amounts) The Company recognizes in its consolidated financial statements the tax effect of a tax position when it is more likely than not, based on thetechnical merits, that the position will be sustained upon examination. To the best of our knowledge, we did not have any uncertain tax positions thatmet the recognition or measurement criteria of ASC 740-10-25 nor did we have any unrecognized tax benefits as of the periods presented herein.Although we file federal and state tax returns, our major tax jurisdiction is federal. Our tax returns for each of our federal tax years since 2015 remainsubject to examination by the Internal Revenue Service and the state department of revenue. The capital loss carryforwards shown above do not expire.Note 8(b). Other Tax Information (unaudited)For the fiscal years ended December 31, 2018, 2017 and 2016, none of the distributions paid during the year were eligible for qualified dividendincome treatment or the dividends received deduction for corporate stockholders. For the fiscal years ended December 31, 2018, 2017, and 2016,89.69%, 89.25% and 95.23%, respectively, of each of the distributions paid during the year represent interest-related dividends. For the fiscal yearsended December 31, 2018, 2017 and 2016, none of the distributions represent short-term capital gains dividends.Note 9. Financial Highlights and Senior Securities TableThe following is a schedule of financial highlights for the respective years: Year endedDecember 31,2018 Year endedDecember 31,2017 Year endedDecember 31,2016 Year endedDecember 31,2015 Year endedDecember 31,2014 Per Share Data: (a) Net asset value, beginning of year $21.81 $21.74 $20.79 $22.05 $22.50 Net investment income 1.77 1.62 1.68 1.52 1.56 Net realized and unrealized gain (loss) (0.19) 0.05 0.84 (1.18) (0.43) Net increase in net assets resulting from operations 1.58 1.67 2.52 0.34 1.13 Distributions to stockholders (see note 8a): From net investment income (1.64) (1.60) (1.60) (1.60) (1.55) From other sources — — — — (0.05)(c) Anti-dilution — — 0.03 — 0.02Net asset value, end of year $21.75 $21.81 $21.74 $20.79 $22.05 Per share market value, end of year $19.19 $20.21 $20.82 $16.43 $18.01 Total Return(b) 2.77% 4.47% 37.49% (0.29)% (13.58)% Net assets, end of year $919,171 $921,605 $918,507 $882,698 $936,568 Shares outstanding, end of year 42,260,826 42,260,826 42,248,525 42,464,762 42,465,162 Ratios to average net assets: Net investment income 8.10% 7.43% 7.91% 6.94% 6.93% Operating expenses 5.83% 5.80% 6.25% 3.84%* 4.24% Interest and other credit facility expenses** 2.67% 2.35% 2.73% 1.68% 1.50% Total expenses 8.50% 8.15% 8.98% 5.52%* 5.74% Average debt outstanding $508,445 $414,264 $495,795 $262,341 $225,000 Portfolio turnover ratio 39.3% 24.9% 31.0% 13.0% 53.7% (a)Calculated using the average shares outstanding method. 118Table of ContentsSOLAR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share amounts) (b)Total return is based on the change in market price per share during the year and takes into account distributions, if any, reinvested in accordancewith the dividend reinvestment plan. Total return does not include a sales load.(c)Represents tax return of capital.*The ratio of operating expenses to average net assets and the ratio of total expenses to average net assets is shown net of a voluntary incentive feewaiver (see note 3). For the year ended December 31, 2015, the ratios of operating expenses to average net assets and total expenses to averagenet assets would be 4.02% and 5.70%, respectively, without the voluntary incentive fee waiver.**Ratios shown without the non-recurring costs associated with the amendments and establishment of the Credit Facility and 2022 UnsecuredNotes would be 2.67%, 2.29%, 2.39%, 1.68% and 1.50%, respectively for the years shown.Information about our senior securities is shown in the following table as of each year ended December 31 for the past ten years, unless otherwisenoted. The “—” indicates information which the SEC expressly does not require to be disclosed for certain types of senior securities. Class and Year Total AmountOutstanding(1) AssetCoveragePer Unit(2) InvoluntaryLiquidatingPreferencePer Unit(3) AverageMarket ValuePer Unit(4) Revolving Credit Facility Fiscal 2018 $96,400 $593 — N/A Fiscal 2017 245,600 1,225 — N/A Fiscal 2016 115,200 990 — N/A Fiscal 2015 207,900 1,459 — N/A Fiscal 2014 — — — N/A Fiscal 2013 — — — N/A Fiscal 2012 264,452 1,510 — N/A Fiscal 2011 201,355 3,757 — N/A Fiscal 2010 400,000 2,668 — N/A Fiscal 2009 88,114 8,920 — N/A 2022 Unsecured Notes Fiscal 2018 150,000 923 — N/A Fiscal 2017 150,000 748 — N/A Fiscal 2016 50,000 430 — N/A 2022 Tranche C Notes Fiscal 2018 21,000 129 — N/A Fiscal 2017 21,000 105 — N/A 2023 Unsecured Notes Fiscal 2018 75,000 461 — N/A Fiscal 2017 75,000 374 — N/A 2042 Unsecured Notes Fiscal 2017 — — — N/A Fiscal 2016 100,000 859 — $1,002 Fiscal 2015 100,000 702 — 982 Fiscal 2014 100,000 2,294 — 943 Fiscal 2013 100,000 2,411 — 934 Fiscal 2012 100,000 571 — 923 119Table of ContentsSOLAR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share amounts) Class and Year Total AmountOutstanding(1) AssetCoveragePer Unit(2) InvoluntaryLiquidatingPreferencePer Unit(3) AverageMarket ValuePer Unit(4) Senior Secured Notes Fiscal 2017 — — — N/A Fiscal 2016 75,000 645 — N/A Fiscal 2015 75,000 527 — N/A Fiscal 2014 75,000 1,721 — N/A Fiscal 2013 75,000 1,808 — N/A Fiscal 2012 75,000 428 — N/A Term Loans Fiscal 2018 50,000 308 — N/A Fiscal 2017 50,000 250 — N/A Fiscal 2016 50,000 430 — N/A Fiscal 2015 50,000 351 — N/A Fiscal 2014 50,000 1,147 — N/A Fiscal 2013 50,000 1,206 — N/A Fiscal 2012 50,000 285 — N/A Fiscal 2011 35,000 653 — N/A Fiscal 2010 35,000 233 — N/A NEFPASS Facility Fiscal 2018 30,000 185 — N/A SSLP Facility Fiscal 2018 53,785 331 — N/A Total Senior Securities Fiscal 2018 $476,185 $2,930 — N/A Fiscal 2017 541,600 2,702 — N/A Fiscal 2016 390,200 3,354 — N/A Fiscal 2015 432,900 3,039 — N/A Fiscal 2014 225,000 5,162 — N/A Fiscal 2013 225,000 5,425 — N/A Fiscal 2012 489,452 2,794 — N/A Fiscal 2011 236,355 4,410 — N/A Fiscal 2010 435,000 2,901 — N/A Fiscal 2009 88,114 8,920 — N/A (1)Total amount of each class of senior securities outstanding at the end of the period presented.(2)The asset coverage ratio for a class of senior securities representing indebtedness is calculated as our consolidated total assets, less all liabilitiesand indebtedness not represented by senior securities, divided by all senior securities representing indebtedness. This asset coverage ratio ismultiplied by one thousand to determine the Asset Coverage Per Unit. In order to determine the specific Asset Coverage Per Unit for each class ofdebt, the total Asset Coverage Per Unit is allocated based on the amount outstanding in each class of debt at the end of the period. As ofDecember 31, 2018, asset coverage was 293.0%.(3)The amount to which such class of senior security would be entitled upon the involuntary liquidation of the issuer in preference to any securityjunior to it.(4)Not applicable except for the 2042 Unsecured Notes which were publicly traded. The Average Market Value Per Unit is calculated by taking thedaily average closing price during the period and dividing it by 120Table of ContentsSOLAR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share amounts) twenty-five dollars per share and multiplying the result by one thousand to determine a unit price per thousand consistent with Asset CoveragePer Unit. The average market value for the fiscal 2018, 2017, 2016, 2015, 2014, 2013 and 2012 periods was N/A, N/A, $100,175, $98,196,$94,301, $93,392, and $92,302, respectively.Note 10. Crystal Financial LLCOn December 28, 2012, we completed the acquisition of Crystal Capital Financial Holdings LLC (“Crystal Financial”), a commercial financecompany focused on providing asset-based and other secured financing solutions (the “Crystal Acquisition”). We invested $275,000 in cash to effectthe Crystal Acquisition. Crystal Financial owned approximately 98% of the outstanding ownership interest in Crystal Financial LLC. The remainingfinancial interest was held by various employees of Crystal Financial LLC, through their investment in Crystal Management LP. Crystal Financial LLChad a diversified portfolio of 23 loans having a total par value of approximately $400,000 at November 30, 2012 and a $275,000 committed revolvingcredit facility. On July 28, 2016, the Company purchased Crystal Management LP’s approximately 2% equity interest in Crystal Financial LLC forapproximately $5,737. Upon the closing of this transaction, the Company holds 100% of the equity interest in Crystal Financial LLC. OnSeptember 30, 2016, Crystal Capital Financial Holdings LLC was dissolved. On December 20, 2018, the revolving credit facility was expanded to$330,000.As of December 31, 2018 Crystal Financial LLC had 31 funded commitments to 26 different issuers with a total par value of approximately$418,680 on total assets of $486,420. As of December 31, 2017 Crystal Financial LLC had 27 funded commitments to 23 different issuers with a totalpar value of approximately $300,876 on total assets of $448,465. As of December 31, 2018 and December 31, 2017, the largest loan outstandingtotaled $37,500 and $35,954, respectively. For the same periods, the average exposure per issuer was $16,103 and $13,082, respectively. CrystalFinancial LLC’s credit facility, which is non-recourse to Solar Capital, had approximately $205,990 and $176,454 of borrowings outstanding atDecember 31, 2018 and December 31, 2017, respectively. For the years ended December 31, 2018, 2017 and 2016, Crystal Financial LLC had netincome of $33,026, $20,391 and $34,099, respectively, on gross income of $58,758, $52,746 and $69,442, respectively. Due to timing and non-cashitems, there may be material differences between GAAP net income and cash available for distributions. Crystal Financial LLC’s consolidated financialstatements for the fiscal years ended December 31, 2018 and December 31, 2017 are attached as an exhibit to this annual report on Form 10-K.Note 11. Stock Repurchase ProgramsOn July 31, 2013, the Board authorized a program for the purpose of repurchasing up to $100,000 of the Company’s common stock. Under therepurchase program, the Company could have, but was not obligated to, repurchase its outstanding common stock in the open market from time to timeprovided that the Company complied with the prohibitions under its Insider Trading Policies and Procedures and the guidelines specified in Rules10b-18 and 10b-5 under the Securities Exchange Act of 1934, as amended, including certain price, market volume and timing constraints. OnDecember 5, 2013, the Board extended the repurchase program to be in place until the earlier of July 31, 2014 or until $100,000 of the Company’soutstanding shares of common stock had been repurchased. On July 31, 2014, the Company’s stock repurchase program expired. During the fiscal yearended December 31, 2014, the Company repurchased 1,779,033 shares at an average price of approximately $21.97 per share, inclusive ofcommissions. The total dollar amount of shares repurchased in that period was $39,078. During the year ended December 31, 2013, the Companyrepurchased 796,418 shares at an average price of approximately $21.98 per share, inclusive of commissions, for a total dollar amount of $17,508. 121Table of ContentsSOLAR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share amounts) On October 7, 2015, the Board authorized a new share repurchase program to purchase common stock in the open market in an amount up to$30,000. Under the repurchase program, the Company may, but is not obligated to, repurchase its outstanding common stock in the open market fromtime to time provided that the Company complies with the prohibitions under its Insider Trading Policies and Procedures and the guidelines specifiedin Rules 10b-18 and 10b-5 under the Securities Exchange Act of 1934, as amended, including certain price, market volume and timing constraints. OnOctober 7, 2016, the Company’s stock repurchase program expired. During the year ended December 31, 2016, the Company repurchased 216,237shares at an average price of $15.76 per share, inclusive of commissions. The total dollar amount of shares repurchased in that period was $3,408.During the year ended December 31, 2015, the Company repurchased 400 shares at an average price of $15.98 per share, inclusive of commissions, fora total dollar amount of $6.Note 12. Selected Quarterly Financial Data (unaudited) Quarter Ended InvestmentIncome Net InvestmentIncome Net Realized AndUnrealized Gain(Loss) on Assets Net Increase(Decrease) InNet Assets FromOperations Total PerShare Total PerShare Total PerShare Total PerShare December 31, 2018 $38,236 0.90 $18,451 0.44 $(9,545) (0.23) $8,906 0.21 September 30, 2018 37,142 0.88 18,416 0.44 (286) (0.01) 18,130 0.43 June 30, 2018 39,188 0.93 19,165 0.45 625 0.02 19,790 0.47 March 31, 2018 38,960 0.92 18,857 0.45 1,191 0.02 20,048 0.47 December 31, 2017 $38,911 0.92 $18,640 0.44 $(1,314) (0.03) $17,326 0.41 September 30, 2017 36,147 0.86 17,315 0.41 (152) (0.00) 17,163 0.41 June 30, 2017 33,888 0.80 16,079 0.38 2,704 0.06 18,783 0.44 March 31, 2017 34,392 0.81 16,330 0.39 828 0.02 17,158 0.41 122Table of ContentsSOLAR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share amounts) Note 13. Commitments and ContingenciesThe Company had unfunded debt and equity commitments to various revolving and delayed draw loans as well as to Crystal Financial LLC. Thetotal amount of these unfunded commitments as of December 31, 2018 and December 31, 2017 is $169,667 and $62,044, respectively, comprised ofthe following: December 31,2018 December 31,2017 Crystal Financial LLC* $44,263 $44,263 Rubius Therapeutics, Inc.** 26,861 — BioElectron Technology Corporation** 17,500 — BAM Capital, LLC 15,000 — Tetraphase Pharmaceuticals, Inc.** 13,800 — Phynet Dermatology LLC 12,385 — Cardiva Medical, Inc.** 9,000 — Corindus Vascular Robotics, Inc.** 6,217 — PQ Bypass, Inc.** 4,800 — Kingsbridge Holdings, LLC 4,139 — Breathe Technologies, Inc.** 4,000 — GenMark Diagnostics, Inc. 3,010 — Delphinus Medical Technologies, Inc.** 1,875 3,750 RS Energy Group U.S., Inc. 1,685 — Datto, Inc. 1,683 1,683 Atria Wealth Solutions, Inc. 1,473 — Solara Medical Supplies, Inc. 1,184 — iCIMS, Inc. 792 — MRI Software LLC — 2,361 Radiology Partners, Inc. — 878 Alera Group Intermediate Holdings, Inc. — 3,885 Accentcare, Inc. — 3,397 CardioFocus, Inc. — 1,000 WJV658, LLC — 827 Total Commitments $169,667 $62,044 *The Company controls the funding of the Crystal Financial LLC commitment and may cancel it at its discretion.**Commitments are subject to the portfolio company achieving certain milestones. As of December 31, 2018, these milestones have not yet beenachieved, and as such the portfolio company would not have been able to draw on any of the stated commitment at that time.As of December 31, 2018 and December 31, 2017, the Company had sufficient cash available and/or liquid securities available to fund itscommitments.Note 14. Senior Secured Unitranche Loan Program LLCOn September 2, 2014, the Company entered into a limited liability company agreement with an affiliate (the “Investor”) of a fund managed byPacific Investment Management Company LLC (“PIMCO”) to co-invest 123Table of ContentsSOLAR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share amounts) in middle market senior secured unitranche loans sourced by the same origination platform used by the Company. Initial funding commitments to theunitranche strategy totaled $600 million, consisting of direct equity investments and co-investment commitments as described below. The jointventure vehicle known as the SSLP was structured as an unconsolidated Delaware limited liability company. The Company and the Investor initiallymade equity commitments to the SSLP of $300,000 and $43,250, respectively. All portfolio decisions and generally all other decisions in respect ofthe SSLP had to be approved by an investment committee of the SSLP consisting of representatives of the Company and PIMCO (with approval from arepresentative of each required).On October 15, 2015, the Company entered into an amended and restated limited liability company agreement for its SSLP to add VoyaInvestment Management LLC (“Voya”), part of Voya Financial, Inc. (NYSE: VOYA), as a partner in SSLP in place of the investor that was previouslythe Company’s partner in SSLP, though this investor could still co-invest up to $300,000 of equity in unitranche loans alongside SSLP. This jointventure was expected to invest primarily in senior secured loans, including unitranche loans, primarily to middle market companies predominantlyowned by private equity sponsors or entrepreneurs, consistent with the Company’s core origination and underwriting mandate. In addition to theCompany’s prior equity commitment of $300,000 to SSLP, Voya had made an initial equity commitment of $25,000 to SSLP, with the ability toupsize.On November 2, 2015, the Company assigned $125,000 of its $300,000 commitment to SSLP to SSLP II, a Delaware limited liability company.On November 25, 2015, SSLP commenced operations. On June 30, 2016, SSLP as transferor and SSLP 2016-1, LLC, a newly formed wholly-owned subsidiary of SSLP, as borrower entered into the SSLP Facility with Wells Fargo Bank, NA acting as administrative agent. The Company acts asservicer under the SSLP Facility. The SSLP Facility is scheduled to mature on June 30, 2021. The SSLP Facility generally bears interest at a rate ofLIBOR plus 2.50%. SSLP and SSLP 2016-1, LLC, as applicable, have made certain customary representations and warranties, and are required tocomply with various covenants, including leverage restrictions, reporting requirements and other customary requirements for similar credit facilities.The SSLP Facility also includes usual and customary events of default for credit facilities of this nature. On September 18, 2018, the Companyacquired Voya’s share of the equity in SSLP to hold 100% of the equity in SSLP. As such, the Company consolidated SSLP as of this date. For financialreporting purposes, assets consolidated were recorded at fair value and the cost basis of the assets consolidated were carried forward to align with theongoing reporting of the Company’s realized and unrealized gains and losses. Also due to the consolidation, the then $354 in unrealized depreciationon the Company’s equity investment in SSLP was reflected as unrealized depreciation in our consolidated assets and liabilities as well as anadjustment to net increase in net assets resulting from operations on the Company’s consolidated statement of cash flows. The effect of consolidationdid not affect the Company’s net assets at September 30, 2018. On December 19, 2018, SSLP and the Company merged, with the Company thesurviving entity. Also on December 19, 2018, SSLP 2016-1 LLC merged with SSLP II 2016-1 LLC, with SSLP 2016-1 LLC the surviving entity. SSLP2016-1 LLC is now a wholly-owned subsidiary of the Company and the borrowings under the SSLP Facility are consolidated.Note 15. Senior Secured Unitranche Loan Program II LLCOn November 2, 2015, the Company assigned $125,000 of its $300,000 commitment to SSLP to SSLP II, a Delaware limited liabilitycompany. On August 5, 2016, the Company entered into an amended and restated limited liability company agreement with WFI Loanco, LLC (“WFI”)and SSLP II commenced operations. SSLP II invested primarily in senior secured loans, including unitranche loans, primarily to middle marketcompanies 124Table of ContentsSOLAR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share amounts) predominantly owned by private equity sponsors or entrepreneurs, consistent with the Company’s core origination and underwriting mandate. Also, onAugust 5, 2016, the Company assigned approximately $50,000 of its $125,000 commitment to SSLP II to SSLP III, a newly formed Delaware limitedliability company. SSLP III, which had not commenced operations, was wholly owned by Solar Capital Ltd. but could have brought in unaffiliatedinvestors at a later date. The Company and WFI’s equity commitments to SSLP II then totaled $75,000 and $18,000, respectively.On November 15, 2016, SSLP II as transferor and SSLP II 2016-1, LLC, a newly formed wholly-owned subsidiary of SSLP II, as borrower enteredinto a $100,000 senior secured revolving credit facility (the “SSLP II Facility”) with Wells Fargo Bank, NA acting as administrative agent. SolarCapital Ltd. was servicer under the SSLP II Facility. The SSLP II Facility was scheduled to mature on November 15, 2021. The SSLP II Facilitygenerally bore interest at a rate of LIBOR plus 2.50%. SSLP II and SSLP II 2016-1, LLC, as applicable, had made certain customary representations andwarranties, and were required to comply with various covenants, including leverage restrictions, reporting requirements and other customaryrequirements for similar credit facilities. The SSLP II Facility also included usual and customary events of default for credit facilities of this nature. OnSeptember 14, 2018, the Company acquired WFI’s share of the equity in SSLP II to hold 100% of the equity in SSLP II. As such, the Companyconsolidated SSLP II as of this date. For financial reporting purposes, assets consolidated were recorded at fair value and the cost basis of the assetsconsolidated were carried forward to align with the ongoing reporting of the Company’s realized and unrealized gains and losses. Also due to theconsolidation, the then $91 in unrealized depreciation on the Company’s equity investment in SSLP II was reflected as unrealized depreciation in ourconsolidated assets and liabilities as well as an adjustment to net increase in net assets resulting from operations on the Company’s consolidatedstatement of cash flows. The effect of consolidation did not affect the Company’s net assets at September 30, 2018. On December 19, 2018, SSLP II andSolar Capital Ltd. merged, with Solar Capital Ltd. the surviving entity. Additionally, on December 19, 2018, the SSLP II Facility was terminated aftermerging with the SSLP Facility.Note 16. Solar Life Science Program LLCOn February 22, 2017, the Company, through its commitment to SSLP III, and Solar Senior Capital Ltd. formed LSJV with an affiliate ofDeerfield Management. SSLP III committed approximately $49,977 to LSJV. On March 10, 2017, SSLP III was dissolved. On August 16, 2018, theLSJV was dissolved, without commencing operations.Note 17. NEF Holdings, LLCOn July 31, 2017, we completed the acquisition of NEF Holdings, LLC (“NEF”), which conducts its business through its wholly-ownedsubsidiary Nations Equipment Finance, LLC. NEF is an independent equipment finance company that provides senior secured loans and leasesprimarily to U.S. based companies. We invested $209,866 in cash to effect the transaction, of which $145,000 was invested in the equity of NEFthrough our wholly-owned consolidated taxable subsidiary NEFCORP LLC and our wholly-owned consolidated subsidiary NEFPASS LLC and$64,866 was used to purchase certain leases and loans held by NEF through NEFPASS LLC. Concurrent with the transaction, NEF refinanced itsexisting senior secured credit facility into a $150,000 non-recourse facility with an accordion feature to expand up to $250,000. The maturity date ofthe facility is July 31, 2021. At July 31, 2017, NEF also had two securitizations outstanding, with an issued note balance of $94,587.As of December 31, 2018, NEF had 207 funded equipment-backed leases and loans to 82 different customers with a total net investment in leasesand loans of approximately $237,221 on total assets of $293,185. 125Table of ContentsSOLAR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share amounts) As of December 31, 2017, NEF had 223 funded equipment-backed leases and loans to 90 different customers with a total net investment in leases andloans of approximately $222,972 on total assets of $289,483. As of December 31, 2018 and December 31, 2017, the largest position outstandingtotaled $28,474 and $15,959, respectively. For the same periods, the average exposure per customer was $2,893 and $2,477, respectively. NEF’s creditfacility, which is non-recourse to Solar Capital, had approximately $119,316 and $71,010 of borrowings outstanding at December 31, 2018 andDecember 31, 2017, respectively. During 2018, NEF exercised its option to redeem the remaining securitization notes. The securitization notes balanceon December 31, 2017 was $71,656. For the year ended December 31, 2018, NEF had net income of $3,426 on gross income of $30,068. Since theacquisition on July 31, 2017 and through December 31, 2017, NEF had net income of $4,703 on gross income of $15,568. Due to timing and non-cashitems, there may be material differences between GAAP net income and cash available for distributions. NEF’s consolidated financial statements for thefiscal years ended December 31, 2018 and December 31, 2017 are attached as an exhibit to this annual report on Form 10-K.Note 18. Capital Share TransactionsAs of December 31, 2018 and December 31, 2017, 200,000,000 shares of $0.01 par value capital stock were authorized.Transactions in capital stock were as follows: Shares Amount Year endedDecember 31,2018 Year endedDecember 31,2017 Year endedDecember 31,2018 Year endedDecember 31,2017 Shares issued in reinvestment of distributions — 12,301 $— $280 Net increase (decrease) — 12,301 $— $280 Note 19. Subsequent EventsThe Company has evaluated the need for disclosures and/or adjustments resulting from subsequent events through the date the consolidatedfinancial statements were issued.On February 21, 2019, our Board declared a quarterly distribution of $0.41 per share payable on April 3, 2019 to holders of record as ofMarch 21, 2019. 126Table of ContentsItem 9.Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNone. Item 9A.Controls and Procedures(a) Evaluation of Disclosure Controls and ProceduresAs of December 31, 2018 (the end of the period covered by this report), we, including our Chief Executive Officer and Chief Financial Officer,evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the 1934 Act). Basedon that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls andprocedures were effective and provided reasonable assurance that information required to be disclosed in our periodic SEC filings is recorded,processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated andcommunicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisionsregarding required disclosure. However, in evaluating the disclosure controls and procedures, management recognized that any controls andprocedures, no matter how well designed and operated can provide only reasonable assurance of achieving the desired control objectives, andmanagement necessarily was required to apply its judgment in evaluating the cost-benefit relationship of such possible controls and procedures.(b) Management’s Report on Internal Control Over Financial ReportingManagement’s Report on Internal Control Over Financial Reporting, which appears in Item 8 of this Form 10-K, is incorporated by referenceherein.(c) Attestation Report of the Independent Registered Public Accounting FirmOur independent registered public accounting firm, KPMG LLP, has issued an attestation report on the Company’s internal control over financialreporting, which is set forth above under the heading “Report of Independent Registered Public Accounting Firm” in Item 8.(d) Changes in Internal Controls Over Financial ReportingManagement has not identified any change in the Company’s internal control over financial reporting that occurred during the fourth fiscalquarter of 2018 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. Item 9B.Other InformationNone. 127Table of ContentsPART III Item 10.Directors, Executive Officers and Corporate GovernanceInformation about DirectorsCertain information with respect to each of the current directors is set forth below, including their names, ages, a brief description of their recentbusiness experience, including present occupations and employment, certain directorships that each person holds, the year in which each personbecame a director of the Company, and a discussion of their particular experience, qualifications, attributes or skills that lead us to conclude that suchindividual should serve as a director of the Company, in light of the Company’s business and structure. There were no legal proceedings of the typedescribed in Item 401(f) of Regulation S-K in the past 10 years against any of the directors or officers of the Company and none are currently pending.There is no arrangement or understanding between any of the Company’s directors or officers pursuant to which they were selected as directors orofficers and the Company or any other person or entity.Mr. Gross is an “interested person” of Solar Capital as defined in the Investment Company Act of 1940 (the “1940 Act”) due to his position asthe Chief Executive Officer and President of the Company and a managing member of Solar Capital Partners, LLC (“Solar Capital Partners”) theCompany’s investment adviser. Mr. Spohler is an “interested person” of the Company as defined in the 1940 Act due to his position as the ChiefOperating Officer of the Company and a managing member of Solar Capital Partners, the Company’s investment adviser. Each of Mr. Wachter,Mr. Hochberg and Mr. Potter is not an “interested person” of the Company as defined in the 1940 Act. Name, Address and Age(1) Position(s) Heldwith Company Terms of Office andLength of TimeServed PrincipalOccupation(s) DuringPast 5 Years Other DirectorshipsHeld by Director orNominee for DirectorDuring Past5 Years(2)Independent Director David S. Wachter, 55 Director Class I Director since2007; Term expires 2019. Founding Partner,Managing Director andPresident of W CapitalPartners, a private equityfund manager, since 2001. Director of Solar SeniorCapital Ltd. since 2011,SCP Private Credit IncomeBDC LLC since 2018 andof several privatecompanies.Mr. Wachter’s extensive knowledge of private equity and investment banking provides the board of directors with the valuable insight of anexperienced financial manager. 128Table of ContentsName, Address and Age(1) Position(s) Heldwith Company Terms of Office andLength of TimeServed PrincipalOccupation(s) DuringPast 5 Years Other DirectorshipsHeld by Director orNominee for DirectorDuring Past5 YearsInterested Director Bruce Spohler, 58 Director Class II Director since2009; Term expires 2020. Chief Operating Officer ofSolar Capital Ltd. since2007, Solar Senior CapitalLtd. since 2010 and SCPPrivate Credit IncomeBDC LLC since 2018;previously, ManagingDirector and a former Co-Head of U.S. LeveragedFinance for CIBC WorldMarkets. Director of Solar SeniorCapital Ltd. since 2010and SCP Private CreditIncome BDC LLC since2018.Mr. Spohler’s depth of experience in managerial positions in investment management, leveraged finance and financial services, as well as his intimateknowledge of Solar Capital’s business and operations, gives the board of directors valuable industry-specific knowledge and expertise on these andother matters. 129 (2)Table of ContentsName, Address and Age(1) Position(s) Heldwith Company Terms of Office andLength of TimeServed PrincipalOccupation(s) DuringPast 5 Years Other DirectorshipsHeld by Director orNominee for DirectorDuring Past5 Years(2)Independent Director Steven Hochberg, 57 Director Class II Director since2007; Term expires 2020. Partner at DeerfieldManagement, a healthcareinvestment firm, since2013. Co-founder andmanager of AscentBiomedical Ventures, aventure capital firmfocused on early stageinvestment anddevelopment ofbiomedical companies,since 2004. Partner at DeerfieldManagement, a healthcareinvestment firm, since2013. Co-founder andmanager of AscentBiomedical Ventures, aventure capital firmfocused on early stageinvestment anddevelopment ofbiomedical companies,since 2004. Director ofSolar Senior Capital Ltd.since 2011 and SCPPrivate Credit IncomeBDC LLC since2018. Since 2011,Mr. Hochberg had beenthe Chairman of the Boardof Continuum HealthPartners until its mergerwith Mount Sinai in 2013,where he is the Senior ViceChairman of the MountSinai Health System, anon-profit healthcareintegrated delivery systemin New York City. Directorof DFB HealthcareAcquisitions Corp., anewly organized specialpurchase acquisitioncompany. Director of theCardiovascular ResearchFoundation, anorganization focused onadvancing newtechnologies andeducation in the field ofcardiovascular medicine. 130Table of ContentsMr. Hochberg’s varied experience in investing in medical technology companies provides the board of directors with particular knowledge of thisfield, and his role as chairman of other companies’ board of directors brings the perspective of a knowledgeable corporate leader. Name, Address and Age(1) Position(s) Heldwith Company Terms of Office andLength of TimeServed PrincipalOccupation(s) DuringPast 5 Years Other DirectorshipsHeld by Director orNominee for DirectorDuring Past5 Years(2)Interested Director Michael S. Gross, 57 Chairman of theBoard of Directors, ChiefExecutive Officer andPresident. Class III Director since2007; Term expires 2021. Chairman of the Board ofDirectors, Chief ExecutiveOfficer and President ofSolar Capital Ltd. since2007 ,Solar Senior CapitalLtd. since 2010 and SCPPrivate Credit IncomeBDC since 2018; Presidentand Chief ExecutiveOfficer of ApolloInvestment Corporationfrom 2004 to 2006. Chairman of the Board ofDirectors, Chief ExecutiveOfficer and President ofSolar Senior Capital Ltd.since 2010 and SCPPrivate Credit IncomeBDC LLC since 2018;Chairman of the Board ofDirectors of Global ShipLease Inc.; Director ofSaks, Inc. (1992-2013) andJarden Corporation (2007-2016); Chairman of theBoard of Mt. SinaiChildren’s CenterFoundation; Director ofNew York Road Runners;Member of the KelloggGlobal Advisory Board;and Member of the RossSchool Advisory Board atthe University ofMichigan.Mr. Gross’ intimate knowledge of the business and operations of Solar Capital Partners, extensive familiarity with the financial industry and theinvestment management process in particular, and experience as a director of other public and private companies not only gives the board of directorsvaluable insight but also positions him well to continue to serve as the Chairman of our board of directors. 131Table of ContentsName, Address and Age(1) Position(s) Heldwith Company Terms of Office andLength of TimeServed PrincipalOccupation(s) DuringPast 5 Years Other DirectorshipsHeld by Director orNominee for DirectorDuring Past5 Years(2)Independent Director Leonard A. Potter, 57 Director Class III Director since2009; Term expires 2021. President and ChiefInvestment Officer ofWildcat CapitalManagement, LLC since2011; Chief ExecutiveOfficer of Infinity QCapital Management, LLCsince 2014; ChiefInvestment Officer of SaltCreek Hospitality from2009 to 2011; ManagingDirector of Soros PrivateEquity at Soros FundManagement LLC from2002 to 2009. Director of Solar SeniorCapital Ltd. since 2011,SCP Private Credit IncomeBDC LLC since 2018,Hilton Grand VacationsInc. since 2017, GSVCapital Corp. since 2011,Crumbs Bake Shop, Inc.from 2009 to 2014, andseveral private companies.Mr. Potter’s experience practicing as a corporate lawyer provides valuable insight to the board of directors on regulatory and risk management issues.In addition, his tenure in private equity and other investments and service as a director of both public and private companies provide industry-specificknowledge and expertise to the board of directors. (1)The business address of the director nominees and other directors is c/o Solar Capital Ltd., 500 Park Avenue, New York, New York 10022.(2)All of the Company’s directors also serve as directors of Solar Senior Capital Ltd. and SCP Private Credit Income BDC LLC, which areinvestment companies that have each elected to be regulated as a business development company (“BDC”) and for which Solar Capital Partnersserves as investment adviser. Mr. Potter also serves as a director of GSV Capital Corp., which is a closed-end management investment companythat has elected to be regulated as a BDC.Information about Executive Officers Who Are Not DirectorsThe following information, as of December 31, 2018, pertains to our executive officers who are not directors of the Company. Name, Address, and Age(1) Position(s) Held withCompany Principal Occupation(s) DuringPast 5 YearsRichard L. Peteka, 57 Chief Financial Officer, Treasurer and Secretary Chief Financial Officer, Treasurer and Secretaryof the Company and of Solar Senior Capital Ltd.since May 2012 and of SCP Private CreditIncome BDC LLC since June 2018. Mr. Petekajoined the Company from Apollo InvestmentCorporation, a publicly-traded businessdevelopment company, where he served from2004 to 2012 as the Chief Financial Officer andTreasurer. 132Table of ContentsName, Address, and Age(1) Position(s) Held withCompany Principal Occupation(s) DuringPast 5 YearsGuy Talarico, 63 Chief Compliance Officer Chief Compliance Officer of Solar Capital Ltd.since 2009, Solar Senior Capital Ltd. since2011, Solar Capital Partners, LLC sinceFebruary 2016 and SCP Private Credit IncomeBDC LLC since June 2018 – all affiliatedentities; and Chief Executive Officer of AlaricCompliance Services, LLC (successor to EOSCompliance Services LLC) since December2005. In conjunction with this primaryoccupation, Mr. Talarico has served andcontinues to serve as Chief Compliance Officerfor other business development companies,funds, and/or investment advisers who are notaffiliated with the Solar Capital entities. (1)The business address of the executive officers is c/o Solar Capital Ltd., 500 Park Avenue, New York, New York 10022.Audit CommitteeThe Audit Committee operates pursuant to a charter approved by our board of directors, a copy of which is available on our website athttp://www.solarcapltd.com. The charter sets forth the responsibilities of the Audit Committee. The Audit Committee’s responsibilities includeselecting the independent registered public accounting firm for the Company, reviewing with such independent registered public accounting firm theplanning, scope and results of their audit of the Company’s financial statements, pre-approving the fees for services performed, reviewing with theindependent registered public accounting firm the adequacy of internal control systems, reviewing the Company’s annual financial statements andperiodic filings and receiving the Company’s audit reports and financial statements. The Audit Committee also establishes guidelines and makesrecommendations to our board of directors regarding the valuation of our investments. The Audit Committee is responsible for aiding our board ofdirectors in determining the fair value of debt and equity securities that are not publicly traded or for which current market values are not readilyavailable. The board of directors and Audit Committee utilize the services of nationally recognized third-party valuation firms to help determine thefair value of these securities. The Audit Committee is currently composed of Messrs. Hochberg, Wachter and Potter, all of whom are consideredindependent under the rules of the NASDAQ Stock Market and are not “interested persons” of the Company as that term is defined in Section 2(a)(19)of the 1940 Act. Mr. Hochberg serves as Chairman of the Audit Committee. Our board of directors has determined that Mr. Hochberg is an “auditcommittee financial expert” as that term is defined under Item 407 of Regulation S-K, as promulgated under the Securities Exchange Act of 1934, asamended (the “Exchange Act”). Mr. Hochberg meets the current independence and experience requirements of Rule 10A-3 of the Exchange Act.Communication with the Board of DirectorsStockholders with questions about the Company are encouraged to contact the Company’s investor relations department. However, ifstockholders believe that their questions have not been addressed, they may communicate with the Company’s board of directors by sending theircommunications to Solar Capital Ltd., c/o 133Table of ContentsRichard L. Peteka, Corporate Secretary, 500 Park Avenue, New York, New York 10022. All stockholder communications received in this manner willbe delivered to one or more members of the board of directors.Section 16(a) Beneficial Ownership Reporting CompliancePursuant to Section 16(a) of the Exchange Act, the Company’s directors and executive officers, and any persons holding more than 10% of itscommon stock, are required to report their beneficial ownership and any changes therein to the SEC and the Company. Specific due dates for thosereports have been established, and the Company is required to report herein any failure to file such reports by those due dates. Based solely on a reviewof copies of such reports and written representations delivered to the Company by such persons, the Company believes that there were no violations ofSection 16(a) by such persons during the fiscal year ended December 31, 2018.Code of EthicsThe Company has adopted a code of ethics that applies to, among others, its senior officers, including its Chief Executive Officer and its ChiefFinancial Officer, as well as every officer, director and employee of the Company. The Company’s code of ethics can be accessed via its website athttp://www.solarcapltd.com . The Company intends to disclose amendments to or waivers from a required provision of the code of ethics on Form 8-K.Nomination of DirectorsThere have been no material changes to the procedures by which stockholders may recommend nominees to our Board of Directors implementedsince the filing of our Proxy Statement for our 2018 Annual Meeting of Stockholders. Item 11.Executive CompensationCompensation of Executive OfficersNone of our officers receives direct compensation from the Company. As a result, we do not engage any compensation consultants. Mr. Gross, ourChief Executive Officer and President, and Mr. Spohler, our Chief Operating Officer, through their ownership interest in Solar Capital Partners, ourinvestment adviser, are entitled to a portion of any profits earned by Solar Capital Partners, which includes any fees payable by us to Solar CapitalPartners under the terms of the Advisory Agreement, less expenses incurred by Solar Capital Partners in performing its services under the AdvisoryAgreement. Messrs. Gross and Spohler do not receive any additional compensation from Solar Capital Partners in connection with the management ofour portfolio.Mr. Peteka, our Chief Financial Officer, Treasurer and Secretary and, through Alaric Compliance Services, LLC, Guy Talarico, our ChiefCompliance Officer, are paid by Solar Capital Management, our administrator, subject to reimbursement by us of an allocable portion of suchcompensation for services rendered by such persons to the Company. To the extent that Solar Capital Management outsources any of its functions, wewill pay the fees associated with such functions on a direct basis without profit to Solar Capital Management. 134Table of ContentsCompensation of DirectorsThe following table sets forth compensation of the Company’s directors, for the year ended December 31, 2018. Name Fees Earned orPaid in Cash(1) StockAwards(2) All OtherCompensation Total Interested Directors Michael S. Gross — — — — Bruce Spohler — — — — Independent Directors Steven Hochberg $130,500 — — $130,500 David S. Wachter $125,500 — — $125,500 Leonard A. Potter $124,500 — — $124,500 (1)For a discussion of the independent directors’ compensation, see below.(2)We do not maintain a stock or option plan, non-equity incentive plan or pension plan for our directors. However, our independent directors havethe option to receive all or a portion of the directors’ fees to which they would otherwise be entitled in the form of shares of our common stockissued at a price per share equal to the greater of our then current net asset value per share or the market price at the time of payment. No shareswere issued to any of our independent directors in lieu of cash during 2018.Our independent directors’ annual fee is $100,000. The independent directors also receive $2,500 ($1,500 if participating telephonically) plusreimbursement of reasonable out-of-pocket expenses incurred in connection with attending each board meeting and $1,000 plus reimbursement ofreasonable out-of-pocket expenses incurred in connection with each committee meeting attended. In addition, the Chairman of the Audit Committeereceives an annual fee of $7,500, the Chairman of the Nominating and Corporate Governance Committee receives an annual fee of $2,500 and theChairman of the Compensation Committee receives an annual fee of $2,500. Further, we purchase directors’ and officers’ liability insurance on behalfof our directors and officers. In addition, no compensation was paid to directors who are interested persons of the Company as defined in the 1940 Act.Compensation CommitteeThe Compensation Committee operates pursuant to a charter approved by our board of directors, a copy of which is available on our website athttp://www.solarcapltd.com. The charter sets forth the responsibilities of the Compensation Committee. The Compensation Committee is responsiblefor reviewing and recommending for approval to our board of directors the Advisory Agreement and the Administration Agreement. In addition,although we do not directly compensate our executive officers currently, to the extent that we do so in the future, the Compensation Committee wouldalso be responsible for reviewing and evaluating their compensation and making recommendations to the board of directors regarding theircompensation. Lastly, the Compensation Committee would produce a report on our executive compensation practices and policies for inclusion in ourproxy statement if required by applicable proxy rules and regulations and, if applicable, make recommendations to the board of directors with mattersrelated to compensation generally. The Compensation Committee has the authority to engage compensation consultants and to delegate their dutiesand responsibilities to a member or to a subcommittee of the Compensation Committee. The members of the Compensation Committee are Messrs.Hochberg, Wachter and Potter, all of whom are considered independent under the rules of the NASDAQ Stock Market and are not “interested persons”of the Company as that term is defined in Section 2(a)(19) of the 1940 Act. Mr. Potter serves as Chairman of the Compensation Committee.Compensation Committee Interlocks and Insider ParticipationDuring fiscal year 2018 none of the Company’s executive officers served on the board of directors (or a compensation committee thereof or otherboard committee performing equivalent functions) of any entities that 135Table of Contentshad one or more executive officers serve on the Compensation Committee of the Company or on the Board of Directors of the Company.Compensation Committee ReportCurrently, none of our executive officers are compensated by the Company, and as such the Company is not required to produce a report onexecutive officer compensation for inclusion in our annual report on Form 10-K. Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersThe following table sets forth, as of February 15, 2019, the beneficial ownership of each current director, the nominees for directors, theCompany’s executive officers, each person known to us to beneficially own 5% or more of the outstanding shares of our common stock, and theexecutive officers and directors as a group.Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission (“SEC”) and includes voting orinvestment power with respect to the securities. Ownership information for those persons who beneficially own 5% or more of our shares of commonstock is based upon reports filed by such persons with the SEC and other information obtained from such persons, if available.Unless otherwise indicated, the Company believes that each beneficial owner set forth in the table has sole voting and investment power and hasthe same address as the Company. Our address is 500 Park Avenue, New York, New York 10022. Name and Address of Beneficial Owner Number of SharesOwned Beneficially(1) Percentageof Class(2) Interested Directors Michael S. Gross(3)(4) 2,425,878 5.7% Bruce Spohler(3) 2,214,484 5.2% Independent Directors Steven Hochberg 25,000 * Leonard A. Potter 10,000 * David S. Wachter 25,895 * Executive Officers Richard L. Peteka 11,000 * Guy Talarico — — All executive officers and directors as a group (7 persons) 2,511,773 5.9% Wellington Management Group LLP(5) 5,860,416 13.9% Thornburg Investment Management Inc.(6) 4,613,589 10.9% *Represents less than one percent.(1)Beneficial ownership has been determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the“Exchange Act”). Assumes no other purchases or sales of our common stock since the most recently available SEC filings. This assumption hasbeen made under the rules and regulations of the SEC and does not reflect any knowledge that we have with respect to the present intent of thebeneficial owners of our common stock listed in this table.(2)Based on a total of 42,260,826 shares of the Company’s common stock issued and outstanding as of February 15, 2019.(3)Includes 1,285,013 shares held by Solar Capital Investors, LLC and 715,000 shares held by Solar Capital Investors II, LLC, a portion of both ofwhich may be deemed to be indirectly beneficially owned by Michael S. Gross, by Bruce Spohler and a grantor retained annuity trust (“GRAT”)setup by and for Mr. Gross by virtue of their collective ownership interest therein. Also includes 200,471 shares held by 136Table of Contents Solar Capital Partners Employee Stock Plan LLC, which is controlled by Solar Capital Partners, LLC. Mr. Gross and Mr. Spohler may bedeemed to beneficially own a portion of the shares held by Solar Capital Partners Employee Stock Plan LLC by virtue of their collectiveownership interest in Solar Capital Partners, LLC. Each of Mr. Gross and Mr. Spohler disclaim beneficial ownership of any shares of ourcommon stock directly held by Solar Capital Partners Employee Stock Plan LLC, Solar Capital Investors, LLC or Solar Capital Investors II,LLC, except to the extent of their respective pecuniary interest therein.(4)Includes 39,500 shares directly held by Michael S. Gross’ profit sharing plan (the “Profit Sharing Plan”). Mr. Gross may be deemed to directlybeneficially own these shares as the sole participant in the Profit Sharing Plan. Also includes 20,000 shares directly held by the GRAT setup byand for Michael S. Gross, which Mr. Gross may be deemed to directly beneficially own as the sole trustee of the GRAT.(5)Based upon information contained in the Schedule 13G/A filed February 12, 2019 by Wellington Management Group LLP. Such securities areheld by certain investment vehicles controlled and/or managed by Wellington Management Company, LLP or its affiliates. The address forWellington Management Company, LLP is 280 Congress Street, Boston, MA 02210.(6)Based upon information contained in the Schedule 13G/A filed February 12, 2019 by Thornburg Investment Management Inc. Such securitiesare held by certain investment vehicles controlled and/or managed by Thornburg Investment Management Inc. or its affiliates. The address forThornburg Investment Management Inc. is 2300 North Ridgetop Road, Santa Fe, New Mexico 87506.Set forth below is the dollar range of equity securities beneficially owned by each of our directors as of February 15, 2019. We are not partof a “family of investment companies,” as that term is defined in the 1940 Act. Name of Director Dollar Rangeof EquitySecuritiesBeneficiallyOwned(1)(2) Interested Directors Michael S. Gross Over $100,000 Bruce Spohler Over $100,000 Independent Directors Steven Hochberg Over $100,000 Leonard A. Potter Over $100,000 David S. Wachter Over $100,000 (1)The dollar ranges are: None, $1-$10,000, $10,001-$50,000, $50,001-$100,000, or Over $100,000.(2)The dollar range of equity securities beneficially owned in us is based on the closing price for our common stock of $20.80 on February 15,2019 on the NASDAQ Global Select Market. Beneficial ownership has been determined in accordance with Rule 16a-1(a)(2) of the ExchangeAct. Item 13.Certain Relationships and Related Transactions, and Director IndependenceWe have entered into the Advisory Agreement with Solar Capital Partners. Mr. Gross, our Chairman, Chief Executive Officer and President, andMr. Spohler, our Chief Operating Officer and board member, are managing members and senior investment professionals of, and have financial andcontrolling interests in, Solar Capital Partners. In addition, Mr. Peteka, our Chief Financial Officer, Treasurer and Secretary, serves as the ChiefFinancial Officer for Solar Capital Partners.Solar Capital Partners and its affiliates may also manage other funds in the future that may have investment mandates that are similar, in wholeand in part, with ours. For example, Solar Capital Partners presently serves as investment adviser to private funds and managed accounts as well as toSolar Senior Capital Ltd., a publicly traded BDC, which focuses on investing primarily in senior secured loans, including first lien and second lien debtinstruments. In addition, Michael S. Gross, our Chairman and Chief Executive Officer, Bruce Spohler, our 137Table of ContentsChief Operating Officer, and Richard L. Peteka, our Chief Financial Officer, serve in similar capacities for Solar Senior Capital Ltd.Solar Capital Partners and certain investment advisory affiliates may determine that an investment is appropriate for us and for one or more ofthose other funds. In such event, depending on the availability of such investment and other appropriate factors, Solar Capital Partners or its affiliatesmay determine that we should invest side-by-side with one or more other funds. Any such investments will be made only to the extent permitted byapplicable law and interpretive positions of the SEC and its staff, and consistent with Solar Capital Partners’ allocation procedures.Related party transactions may occur among Solar Capital Ltd., Crystal Financial LLC, Equipment Operating Leases LLC and NEF HoldingsLLC. These transactions may occur in the normal course of business. No administrative fees are paid to Solar Capital Partners by Crystal FinancialLLC, Equipment Operating Leases LLC or NEF Holdings LLC.In addition, we have adopted a formal code of ethics that governs the conduct of our officers and directors. Our officers and directors also remainsubject to the duties imposed by both the 1940 Act and the Maryland General Corporation Law.Regulatory restrictions limit our ability to invest in any portfolio company in which any affiliate currently has an investment. The Companyobtained an exemptive order from the SEC on July 28, 2014 (the “Prior Exemptive Order”). The Prior Exemptive Order permitted us to participate innegotiated co-investment transactions with certain affiliates, each of whose investment adviser is Solar Capital Partners, in a manner consistent withour investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors, and pursuant tothe conditions to the Prior Exemptive Order. On June 13, 2017, the Company, Solar Senior Capital Ltd., and Solar Capital Partners received anexemptive order that supersedes the Prior Exemptive Order (the “New Exemptive Order”) and extends the relief granted in the Prior Exemptive Ordersuch that it no longer applies to certain affiliates only if their respective investment adviser is Solar Capital Partners, but also applies to certainaffiliates whose investment adviser is an investment adviser that controls, is controlled by or is under common control with Solar Capital Partners andis registered as an investment adviser under the Investment Advisers Act of 1940, as amended. The terms and conditions of the New Exemptive Orderare otherwise substantially similar to the Prior Exemptive Order. We believe that it will be advantageous for us to co-invest with funds managed bySolar Capital Partners where such investment is consistent with the investment objectives, investment positions, investment policies, investmentstrategy, investment restrictions, regulatory requirements and other pertinent factors applicable to us.We have entered into a license agreement with Solar Capital Partners, pursuant to which Solar Capital Partners has agreed to grant us anon-exclusive, royalty-free license to use the name “Solar Capital.” In addition, pursuant to the terms of the Administration Agreement, Solar CapitalManagement provides us with the office facilities and administrative services necessary to conduct our day-to-day operations.Board Consideration of the Investment Advisory and Management AgreementOur board of directors determined at a meeting held on November 5, 2018, to approve the Advisory Agreement between the Company and SolarCapital Partners. In its consideration of the approval of the Advisory Agreement, the board of directors focused on information it had received relatingto, among other things: • the nature, extent and quality of advisory and other services provided by Solar Capital Partners, including information about theinvestment performance of the Company relative to its stated objectives and in comparison to the performance of the Company’s peergroup and relevant market indices, and concluded that such advisory and other services are satisfactory and the Company’s investmentperformance is reasonable; 138Table of Contents • the experience and qualifications of the personnel providing such advisory and other services, including information about thebackgrounds of the investment personnel, the allocation of responsibilities among such personnel and the process by which investmentdecisions are made, and concluded that the investment personnel of Solar Capital Partners have extensive experience and are well qualifiedto provide advisory and other services to the Company; • the current fee structure, the existence of any fee waivers, and the Company’s anticipated expense ratios in relation to those of otherinvestment companies having comparable investment policies and limitations, and concluded that the current fee structure is reasonable; • the advisory fees charged by Solar Capital Partners to the Company, to Solar Senior Capital Ltd. and to SCP Private Credit Income BDCLLC, and comparative data regarding the advisory fees charged by other investment advisers to business development companies withsimilar investment objectives, and concluded that the advisory fees charged by Solar Capital Partners to the Company are reasonable; • the direct and indirect costs, including for personnel and office facilities, that are incurred by Solar Capital Partners and its affiliates inperforming services for the Company and the basis of determining and allocating these costs, and concluded that the direct and indirectcosts, including the allocation of such costs, are reasonable; • possible economies of scale arising from the Company’s size and/or anticipated growth, and the extent to which such economies of scaleare reflected in the advisory fees charged by Solar Capital Partners to the Company, and concluded that some economies of scale may bepossible in the future; • other possible benefits to Solar Capital Partners and its affiliates arising from their relationships with the Company, and concluded that allsuch other benefits were not material to Solar Capital Partners and its affiliates; and • possible alternative fee structures or bases for determining fees, and concluded that the Company’s current fee structure and bases fordetermining fees are satisfactory.Based on the information reviewed and the discussions detailed above, the board of directors, including a majority of the directors who are not“interested persons” as defined in the 1940 Act, concluded that the fees payable to Solar Capital Partners pursuant to the Advisory Agreement werereasonable, and comparable to the fees paid by other management investment companies with similar investment objectives, in relation to the servicesto be provided. The board of directors did not assign relative weights to the above factors or the other factors considered by it. Individual members ofthe board of directors may have given different weights to different factors.Director IndependenceIn accordance with rules of the NASDAQ Stock Market, our board of directors annually determines each director’s independence. We do notconsider a director independent unless the board of directors has determined that he has no material relationship with us. We monitor the relationshipsof our directors and officers through a questionnaire each director completes no less frequently than annually and updates periodically as informationprovided in the most recent questionnaire changes.Our governance guidelines require any director who has previously been determined to be independent to inform the Chairman of the board ofdirectors, the Chairman of the Nominating and Corporate Governance Committee and our Corporate Secretary of any change in circumstance that maycause his status as an independent director to change. The board of directors limits membership on the Audit Committee, the Nominating andCorporate Governance Committee and the Compensation Committee to independent directors.In order to evaluate the materiality of any such relationship, the board of directors uses the definition of director independence set forth in therules promulgated by the NASDAQ Stock Market. Rule 5605(a)(2) 139Table of Contentsprovides that a director of a BDC, shall be considered to be independent if he or she is not an “interested person” of the Company, as defined inSection 2(a)(19) of the 1940 Act.The board of directors has determined that each of the directors is independent and has no relationship with us, except as a director andstockholder, with the exception of Michael S. Gross, as a result of his positions as the Chief Executive Officer and President of the Company and amanaging member of Solar Capital Partners, and Bruce Spohler, as a result of his position as Chief Operating Officer of the Company and a managingmember of Solar Capital Partners.Indemnification AgreementsWe have entered into indemnification agreements with our directors. The indemnification agreements are intended to provide our directors themaximum indemnification permitted under Maryland law and the 1940 Act. Each indemnification agreement provides that Solar Capital shallindemnify the director who is a party to the agreement (an “Indemnitee”), including the advancement of legal expenses, if, by reason of his or hercorporate status, the Indemnitee is, or is threatened to be, made a party to or a witness in any threatened, pending, or completed proceeding, to themaximum extent permitted by Maryland law and the 1940 Act. Item 14.Principal Accounting Fees and ServicesKPMG LLP has advised us that neither the firm nor any present member or associate of it has any material financial interest, direct or indirect, inthe Company or its affiliates.Table below in thousands Fiscal YearEndedDecember 31,2018 Fiscal YearEndedDecember 31,2017 Audit Fees $581.9 $612.5 Audit-Related Fees 122.0 84.5 Tax Fees 181.9 154.9 All Other Fees — — Total Fees: $885.8 $851.9 Audit Fees: Audit fees consist of fees billed for professional services rendered for the audit of our year-end financial statements and quarterlyreviews and services that are normally provided by KPMG LLP in connection with statutory and regulatory filings.Audit-Related Fees: Audit-related services consist of fees billed for assurance and related services that are reasonably related to the performanceof the audit or review of our financial statements and are not reported under “Audit Fees.” These services include attest services that are not required bystatute or regulation and consultations concerning financial accounting and reporting standards.Tax Services Fees: Tax services fees consist of fees billed for professional tax services. These services also include assistance regarding federal,state, and local tax compliance.All Other Fees: Other fees would include fees for products and services other than the services reported above.Pre-Approval PolicyThe Audit Committee has established a pre-approval policy that describes the permitted audit, audit-related, tax and other services to beprovided by KPMG LLP, the Company’s independent registered public accounting 140Table of Contentsfirm (“KPMG”). The policy requires that the Audit Committee pre-approve the audit and non-audit services performed by the independent auditor inorder to assure that the provision of such service does not impair the auditor’s independence.Any requests for audit, audit-related, tax and other services that have not received general pre-approval must be submitted to the AuditCommittee for specific pre-approval, irrespective of the amount, and cannot commence until such approval has been granted. Normally, pre-approval isprovided at regularly scheduled meetings of the Audit Committee. However, the Audit Committee may delegate pre-approval authority to one or moreof its members. The member or members to whom such authority is delegated shall report any pre-approval decisions to the Audit Committee at its nextscheduled meeting. The Audit Committee does not delegate its responsibilities to pre-approve services performed by the independent registered publicaccounting firm to management. The Audit Committee pre-approved 100% of services described in this policy. 141Table of ContentsPART IV Item 15.Exhibits, Financial Statement Schedulesa. Documents Filed as Part of this ReportThe following reports and consolidated financial statements are set forth in Item 8: Page Management’s Report on Internal Control Over Financial Reporting 83 Report of Independent Registered Public Accounting Firm 84 Consolidated Statements of Assets and Liabilities as of December 31, 2018 and 2017 86 Consolidated Statements of Operations for the years ended December 31, 2018, 2017 and 2016 87 Consolidated Statements of Changes in Net Assets for the years ended December 31, 2018, 2017 and 2016 88 Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017 and 2016 89 Consolidated Schedules of Investments as of December 31, 2018 and 2017 90 Notes to Consolidated Financial Statements 103 b. ExhibitsThe following exhibits are filed as part of this report or hereby incorporated by reference to exhibits previously filed with the SEC: ExhibitNumber Description 3.1 Articles of Amendment and Restatement(1) 3.2 Amended and Restated Bylaws(1) 4.1 Form of Common Stock Certificate(2) 4.2 Indenture, dated as of November 16, 2012, between the Registrant and U.S. Bank National Association as trustee(3) 4.3 Second Supplemental Indenture, dated November 22, 2017, relating to the 4.50% Notes due 2023, between the Registrant and U.S.Bank National Association as trustee, including the Form of 4.50% Notes due 2023(12) 4.4 In accordance with Item 601(b)(4)(iii)(A) of Regulation S-K, certain instruments respecting long-term debt of the Registrant have beenomitted but will be furnished to the SEC upon request10.1 Dividend Reinvestment Plan(1)10.2 Form of Senior Secured Credit Agreement by and between the Registrant, Citibank, N.A., as administrative agent, the lenders partythereto, JPMorgan Chase Bank, N.A., as syndication agent, and SunTrust Bank, as documentation agent(8)10.3 Form of Amendment No. 1 to the Senior Secured Credit Agreement by and between the Registrant, the Lenders and Citibank, N.A., asadministrative agent(5)10.4 Form of Amendment No. 2 to the Senior Secured Credit Agreement by and between the Registrant, the Lenders and Citibank, N.A., asadministrative agent(9)10.5 Form of Amendment No. 3 to the Senior Secured Credit Agreement by and between the Registrant, the Lenders and Citibank, N.A., asadministrative agent* 142Table of ContentsExhibitNumber Description10.6 Third Amended and Restated Investment Advisory and Management Agreement by and between the Registrant and Solar CapitalPartners, LLC(11)10.7 Form of Custodian Agreement(7)10.8 Amended and Restated Administration Agreement by and between Registrant and Solar Capital Management, LLC(6)10.9 Form of Indemnification Agreement by and between Registrant and each of its directors(1)10.10 Trademark License Agreement by and between Registrant and Solar Capital Partners, LLC(1)10.11 Form of Share Purchase Agreement by and between Registrant and Solar Capital Investors II, LLC(2)10.12 Form of Registration Rights Agreement(4)10.13 Form of Subscription Agreement(4)10.14 Consent and Omnibus Amendment to Transaction Documents by and among the Registrant, SSLP 2016-1, LLC, each of the ConduitLenders and Institutional Lenders and Wells Fargo Bank, N.A., as administrative agent and collateral agent *14.1 Code of Ethics(10)14.2 Code of Business Conduct(7)21.1 Subsidiaries of Solar Capital Ltd.*31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.*31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.*32.1 Certification of Chief Executive Officer pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.*32.2 Certification of Chief Financial Officer pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.*99.1 Crystal Financial LLC (A Delaware Limited Liability Company) Consolidated Financial Statements for the years ended December 31,2018 and December 31, 2017*99.2 NEF Holdings, LLC (A Delaware Limited Liability Company) Consolidated Financial Statements for the year ended December 31,2018 and the period ended December 31, 2017* (1)Previously filed in connection with Solar Capital Ltd.’s registration statement on Form N-2 Pre-Effective Amendment No. 7 (FileNo. 333-148734) filed on January 7, 2010. (2)Previously filed in connection with Solar Capital Ltd.’s registration statement on Form N-2 (File No 333-148734) filed on February 9, 2010. (3)Previously filed in connection with Solar Capital Ltd.’s registration statement on Form N-2 Post-Effective Amendment No. 6 (FileNo. 333-172968) filed on November 16, 2012. (4)Previously filed in connection with Solar Capital Ltd.’s report on Form 8-K filed on November 29, 2010. (5)Previously filed in connection with Solar Capital Ltd.’s report on Form 10-Q filed on July 31, 2013. (6)Previously filed in connection with Solar Capital Ltd.’s registration statement on Form N-2 Post-Effective Amendment No. 10 (FileNo. 333-172968) filed on November 12, 2013. 143Table of Contents(7)Previously filed in connection with Solar Capital Ltd.’s report on Form 10-K filed on February 25, 2014. (8)Previously filed in connection with Solar Capital Ltd.’s report on Form 8-K filed on July 6, 2012. (9)Previously filed in connection with Solar Capital Ltd.’s report on Form 10-Q filed on November 2, 2016. (10)Previously filed in connection with Solar Capital Ltd.’s registration statement on Form N-2 (File No. 333-223663) filed on March 14, 2018. (11)Previously filed in connection with Solar Capital Ltd.’s report on Form 10-Q filed on August 6, 2018. (12)Previously filed in connection with Solar Capital Ltd.’s registration statement on Form N-2 Post-Effective Amendment No. 5 (FileNo. 333-194870) filed on November 22, 2017. *Filed herewith.c. Consolidated Financial Statement SchedulesSeparate Financial Statements of Subsidiaries Not Consolidated:Consolidated Financial Statements for Crystal Financial LLC’s (A Delaware Limited Liability Company) years ended December 31, 2018 andDecember 31, 2017 are attached as Exhibit 99.1 hereto.Consolidated Financial Statements for NEF Holdings, LLC’s (A Delaware Limited Liability Company) year ended December 31, 2018 and periodended December 31, 2017 are attached as Exhibit 99.2 hereto. Item 16.Form 10-K SummaryNone. 144Table of ContentsSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized. SOLAR CAPITAL LTD.By: /S/ MICHAEL S. GROSS Michael S. GrossChief Executive Officer, President, Chairman of the Board andDirectorDate: February 21, 2019Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacity and on the dates indicated. Date Signature TitleFebruary 21, 2019 /s/ MICHAEL S. GROSSMichael S. Gross Chief Executive Officer, President, Chairman ofthe Board and Director (Principal ExecutiveOfficer)February 21, 2019 /s/ STEVEN HOCHBERGSteven Hochberg DirectorFebruary 21, 2019 /s/ DAVID S. WACHTERDavid S. Wachter DirectorFebruary 21, 2019 /s/ LEONARD A. POTTERLeonard A. Potter DirectorFebruary 21, 2019 /s/ BRUCE SPOHLERBruce Spohler Chief Operating Officer and DirectorFebruary 21, 2019 /s/ RICHARD L. PETEKARichard L. Peteka Chief Financial Officer (Principal FinancialOfficer) and Secretary 145Exhibit 10.5Execution VersionAMENDMENT NO. 3 TO SENIOR SECURED CREDIT AGREEMENTAMENDMENT NO. 3 dated as of November 21, 2018 (this “Amendment No. 3”) among SOLAR CAPITAL LTD., a Maryland corporation (the“Borrower”), the undersigned Lenders constituting the Required Lenders (as defined in the Credit Agreement) (the “Consenting Lenders”) andCITIBANK, N.A., as administrative agent for the lenders party to the Credit Agreement referenced below (in such capacity, together with its successorsin such capacity, the “Administrative Agent”).WHEREAS, the Borrower, the lenders party thereto and the Administrative Agent are parties to a Senior Secured Credit Agreement dated as ofJune 29, 2012 (as amended, modified and supplemented and in effect immediately prior to the effectiveness of this Amendment No. 3, the “CreditAgreement”);Whereas, the Borrower has requested, and each of the Consenting Lenders and the Administrative Agent have agreed, to amend the CreditAgreement in order to effect the changes described below;WHEREAS, pursuant to Section 9.02(b) of the Credit Agreement, the amendments requested by the Borrower must be contained in a writtenagreement signed by the Borrower and the Required Lenders;NOW THEREFORE, in consideration of the promises and the mutual agreements contained herein, and for other good and valuableconsideration, the receipt and sufficiency of which are hereby acknowledged, each of the Borrower, the Consenting Lenders and the AdministrativeAgent hereby agrees as follows:Section 1. Definitions.(a) Except as otherwise defined in this Amendment No. 3, terms defined in the Credit Agreement (including the preamble and recitalsabove) are used herein as defined therein.(b) References in the Credit Agreement and the other Loan Documents (including references to the Credit Agreement as amended hereby)to “this Agreement” (and indirect references such as “hereunder”, “hereby”, “herein”, “hereof” “thereunder”, “thereby”, “therein”, or “thereof”)shall be deemed to be references to the Credit Agreement, as amended hereby.Section 2. Amendments to Credit Agreement.(a) The definition of “Applicable Margin” set forth in Section 1.01 of the Credit Agreement is hereby amended and restated in its entiretyto read as follows:“Applicable Margin” means, (a) with respect to any Non-Extending Lender: (i) 1.25% per annum in the case of ABR Loans and(ii) 2.25% per annum in the case of Eurocurrency Loans, and (b) with respect to any Extending Lender: (i) if the Gross Borrowing Base (asof the most recently delivered Borrowing Base Certificate) is equal to or greater than 1.85 times the Covered Debt Amount (as of the mostrecently delivered Borrowing Base Certificate), (A) with respect to any ABR Loan, 1.00% per annum, and (B) with respect to anyEurocurrency Loan, 2.00% per annum and (ii) if the Gross Borrowing Base (as of the most recently delivered Borrowing Base Certificate) isless than 1.85 times the Covered Debt Amount (as of the most recently delivered Borrowing Base Certificate), (A) with respect to any ABRLoan, 1.25% per annum, and (B) with respect to any Eurocurrency Loan, 2.25% per annum. Any change in the Applicable Margin due to achange in the ratio of the Gross Borrowing Base to the Covered Debt Amount as set forth in any Borrowing Base Certificate shall beeffective from and including the day immediately succeeding the date of delivery of such Borrowing Base Certificate; provided that (x) ifany Borrowing Base Certificate has not been delivered in accordance with Section 5.01(d), then from and including the day immediatelysucceeding the date on which such Borrowing Base Certificate was required to be delivered, the Applicable Margin shall be the ApplicableMargin set forth in clause (b)(ii) above, to and including the date on which the required Borrowing Base Certificate is delivered and (y) atany time that an Event of Default has occurred and is continuing to but excluding the date on which such Event of Default shall cease to becontinuing, the Applicable Margin shall be the Applicable Margin set forth in clause (b)(ii) above.(b) Section 1.01 of the Credit Agreement is hereby amended by inserting the following new definitions in the correct alphabetical ordertherein:“Collateral Pool” means, at any time, each Portfolio Investment that has been Delivered (as defined in the Guarantee and SecurityAgreement) to the Collateral Agent and is subject to the Lien of the Guaranty and Security Agreement, and then only for so long as suchPortfolio Investment continues to be Delivered as contemplated therein and in which the Collateral Agent has a first-priority perfected Lienas security for the Secured Obligations (subject to any Lien permitted by Section 6.02 hereof), provided that in the case of any PortfolioInvestment in which the Collateral Agent has a first-priority perfected security interest pursuant to a valid Uniform Commercial Code filing(and for which no other method of perfection with a higher priority is possible), such Portfolio Investment may be included in theBorrowing Base so long as all remaining actions to complete “Delivery” are satisfied in full within 7 days of such inclusion. 2“Combined Debt Amount” means, as of any date, (i) the aggregate amount of the Dollar Commitments and the MulticurrencyCommitments as of such date (or, if greater, the Revolving Credit Exposures of all Lenders as of such date) plus (ii) the aggregateoutstanding amount of Term Loans as of such date plus (iii) the aggregate amount of outstanding Designated Indebtedness.“EBITDA” means the consolidated net income of the applicable Person (excluding extraordinary, unusual or non-recurring gains andextraordinary losses (to the extent excluded in the definition of “EBITDA” (or similar defined term used for the purposes contemplatedherein) in the relevant agreement relating to the applicable Portfolio Investment)) for the relevant period plus, without duplication, thefollowing to the extent deducted in calculating such consolidated net income in the relevant agreement relating to the applicable PortfolioInvestment for such period: (i) consolidated interest charges for such period, (ii) the provision for federal, state, local and foreign incometaxes payable for such period, (iii) depreciation and amortization expense for such period, and (iv) such other adjustments included in thedefinition of “EBITDA” (or similar defined term used for the purposes contemplated herein) in the relevant agreement relating to theapplicable Portfolio Investment, provided that such adjustments are usual and customary and substantially comparable to market terms forsubstantially similar debt of other similarly situated borrowers at the time such relevant agreements are entered into as reasonablydetermined in good faith by the Borrower.“Gross Borrowing Base” has the meaning assigned to such term in Section 5.13(a)(vi).“Relevant Asset Coverage Ratio” means, as of any date, the Asset Coverage Ratio as of the most recent Quarterly Date.(c) Section 2.10(c) of the Credit Agreement is hereby amended by inserting the following proviso at the end thereof:“; provided, solely to the extent such Borrowing Base Deficiency is due to a failure to satisfy the requirements of Section 5.13(a)(vi) as aconsequence of a change in either (x) the ratio of the Gross Borrowing Base to the Senior Debt Amount or (y) the Relevant Asset CoverageRatio from one quarterly period to the next, such 30-Business Day period shall be extended to a 45-Business Day period solely withrespect to compliance with Section 5.13(a)(vi).”(d) Section 5.13 of the Credit Agreement is hereby amended and restated as set forth on Annex A hereto. 3(e) Section 6.07(b) of the Credit Agreement is hereby amended by replacing the reference to “2.00” therein with “1.50”.(f) Clause (e) of Article VII is hereby amended by inserting the following proviso at the end thereof:“; provided further, such 30-Business Day period shall be extended to a 45-Business Day period solely to the extent as provided inSection 2.10(c) in order to cure any failure to satisfy Section 5.13(a)(vi)”(g) The reference to the “Borrowing Base” in Sections 6.03(d)(ii)(y), 6.05(d) and 9.02(c)(ii)(2)(B)(II) of the Credit Agreement are herebyamended to be references to “Gross Borrowing Base”.(h) Exhibit C to the Credit Agreement is hereby amended and restated in its entirety as set forth on Annex B hereto.Section 3. Representations and Warranties.The Borrower represents and warrants to the Consenting Lenders and the Administrative Agent, as of the date of this Amendment No. 3 and onand as of the Amendment Effective Date (as defined below) and immediately after giving effect to this Amendment No. 3, as follows:(a) Authorization; Enforceability. This Amendment No. 3 has been duly authorized, executed and delivered by the Borrower and each ofthis Amendment No. 3 and the Credit Agreement, as amended by this Amendment No. 3, constitutes a legal, valid and binding obligation of theBorrower, enforceable against the Borrower in accordance with its terms, except as such enforceability may be limited by (i) bankruptcy,insolvency, reorganization, moratorium or similar laws of general applicability affecting the enforcement of creditors’ rights and (ii) theapplication of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).(b) No Conflict. Neither the execution, delivery and performance of this Amendment No. 3 nor the transactions contemplated herein will(i) violate any applicable law or regulation or the limited liability company operating agreement, charter, by-laws or other organizationaldocuments of the Borrower or any of its Subsidiaries or any order of any Governmental Authority or (ii) violate or result in a default in anymaterial respect under any Loan Document or any indenture, agreement or other instrument binding upon the Borrower or any of its Subsidiariesor assets, or give rise to a right thereunder to require any payment to be made by any such Person.(c) Continued Security Interest. On the date of this Amendment No. 3 and after giving effect to this Amendment No. 3 and the transactionscontemplated herein, the security interest created by and provided for in the Security Documents, shall constitute a valid first and prior perfectedLien on the Collateral (except that any 4such security interest in a Special Equity Interest may be subject to a Lien in favor of a creditor of the issuer of such Special Equity Interest ascontemplated by the definition of such term in Section 1.02 of the Guarantee and Security Agreement). The Borrower hereby acknowledges andagrees that this Amendment No. 3 shall in no way constitute a release of the Borrower from its obligations under the Guarantee and SecurityAgreement.(d) Solvency. Immediately after the consummation of the transactions contemplated by this Amendment No. 3, the present fair value of theassets of the Borrower will exceed the sum of the probable liabilities and identified contingent liabilities of the Borrower. The Borrower issolvent both before and after giving effect to the execution, delivery and performance of this Amendment No. 3 and the Credit Agreement (asamended by this Amendment No. 3) and the other Loan Documents and the consummation of the transactions contemplated by this AmendmentNo. 3, and is not, and after giving effect to the execution, delivery and performance of this Amendment No. 3 and the Credit Agreement (asamended by this Amendment No. 3) and the other Loan Documents and the consummation of the transactions contemplated by this AmendmentNo. 3, will not be (A) left with unreasonably small capital with which to carry on its business as it is proposed to be conducted and (B) unable topay its debts (contingent or otherwise) as they mature.(e) Representations in Loan Documents. The representations and warranties of the Borrower set forth in Article III of the Credit Agreement(as amended hereby) and in the other Loan Documents are true and correct in all material respects (except to the extent any such representation orwarranty is itself qualified by materiality or reference to a Material Adverse Effect, in which case it is true and correct in all respects, subject tosuch qualification) on and as of the date of this Amendment No. 3 and on the Amendment Effective Date (as defined below).(f) No Default. No Default has occurred and is continuing.Section 4. Conditions Precedent.This Amendment No. 3 shall become effective as of the date (the “Amendment Effective Date”) when, and only when, each of the followingconditions precedent shall have been satisfied:(a) The Administrative Agent shall have received one or more counterparts of this Amendment No. 3 executed by the Borrower and each ofthe Consenting Lenders;(b) The Borrower shall have paid such reasonable and documented fees and expenses of Chadbourne & Parke LLP, special New Yorkcounsel to the Administrative Agent, in connection with the ongoing administration of the Credit Agreement, the negotiation, preparation,execution and delivery of this Amendment No. 3 and the other Loan Documents (to the extent that statements for such fees and expenses havebeen delivered to the Borrower). 5Section 5. Miscellaneous.(a) Except as herein provided, the Credit Agreement shall remain unchanged. The Credit Agreement, as specifically amended by thisAmendment No. 3, and each of the other Loan Documents are and shall continue to be in full force and effect and are hereby in all respectsratified and confirmed.(b) This Amendment No. 3 may be executed in any number of counterparts, all of which taken together shall constitute one and the sameamendatory instrument and any of the parties hereto may execute this Amendment No. 3 by signing any such counterpart. Delivery of anexecuted counterpart of a signature page of this Amendment No. 3 by telecopy or other electronic means shall be effective as delivery of amanually executed counterpart of this Amendment No. 3.(c) This Amendment No. 3 shall be construed in accordance with and governed by the law of the State of New York. The provisions ofSections 9.09(b), 9.09(c) , 9.09(d) and Section 9.10 of the Credit Agreement are hereby incorporated herein, mutatis mutandis, as if a part hereof.(d) This Amendment No. 3 is a Loan Document.(e) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of anyright, power or remedy of any Lender or the Administrative Agent under any of the Loan Documents, nor constitute a waiver of any provision ofany of the Loan Documents.[Remainder of page intentionally left blank; signatures follow] 6IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 3 to be duly executed and delivered as of the day and year firstabove written. SOLAR CAPITAL LTD.By: Name:Title:[Signature Page to Amendment No. 3]CITIBANK, N.A., as Administrative Agent and as aLenderBy: Name:Title:[Signature Page to Amendment No. 3][LENDER SIGNATURE PAGES TO BE INSERTED][Signature Page to Amendment No. 3]Annex ASECTION 5.13. Calculation of Borrowing Base.(a) For purposes of this Agreement, the “Borrowing Base” shall be determined, as at any date of determination, as the sum of the Advance Ratesof the Value of each Portfolio Investment (excluding any cash held by the Administrative Agent pursuant to Section 2.05(k)), provided that:(i) if, as of such date, the Relevant Asset Coverage Ratio is (A) greater than or equal to 2.00:1:00, the Advance Rate applicable to thatportion of the aggregate Value of the Portfolio Investments (other than Cash and Cash Equivalents) of all issuers in a consolidated group ofcorporations or other entities in accordance with GAAP exceeding 6% of the aggregate Value of all Portfolio Investments in the Collateral Pool,shall be 50% of the otherwise applicable Advance Rate; (B) less than 2.00:1:00 and greater than or equal to 1.75:1.00, the Advance Rateapplicable to that portion of the aggregate Value of the Portfolio Investments (other than Cash and Cash Equivalents) of all issuers in aconsolidated group of corporations or other entities in accordance with GAAP exceeding 5% of the aggregate Value of all Portfolio Investmentsin the Collateral Pool, shall be 50% of the otherwise applicable Advance Rate or (C) less than 1.75:1:00, the Advance Rate applicable to thatportion of the aggregate Value of the Portfolio Investments (other than Cash and Cash Equivalents) of all issuers in a consolidated group ofcorporations or other entities in accordance with GAAP exceeding 4% of the aggregate Value of all Portfolio Investments in the Collateral Pool,shall be 50% of the otherwise applicable Advance Rate;(ii) if, as of such date, the Relevant Asset Coverage Ratio is (A) greater than or equal to 2.00:1:00, the Advance Rate applicable to thatportion of the aggregate Value of the Portfolio Investments (other than Cash and Cash Equivalents) of all issuers in a consolidated group ofcorporations or other entities in accordance with GAAP exceeding 12% of the aggregate Value of all Portfolio Investments in the Collateral Poolshall be 0%; (B) less than 2.00:1:00 and greater than or equal to 1.75:1.00, the Advance Rate applicable to that portion of the aggregate Value ofthe Portfolio Investments (other than Cash and Cash Equivalents) of all issuers in a consolidated group of corporations or other entities inaccordance with GAAP exceeding 10% of the aggregate Value of all Portfolio Investments in the Collateral Pool shall be 0% or (C) less than1.75:1:00, the Advance Rate applicable to that portion of the aggregate Value of the Portfolio Investments (other than Cash and CashEquivalents) of all issuers in a consolidated group of corporations or other entities in accordance with GAAP exceeding 8% of the aggregateValue of all Portfolio Investments in the Collateral Pool shall be 0%;(iii) if, as of such date, the Relevant Asset Coverage Ratio is (A) greater than or equal to 2.00:1:00, the Advance Rate applicable to thatportion of the aggregate Value of the Portfolio Investments (other than Cash and Cash Equivalents) in any single Industry Classification Groupthat exceeds 25% of the aggregate Value of all Portfolio Investments in the Collateral Pool shall be 0%, (B) less than 2.00:1:00 and greater thanorequal to 1.75:1.00, the Advance Rate applicable to that portion of the aggregate Value of the Portfolio Investments (other than Cash and CashEquivalents) in any single Industry Classification Group that exceeds 20% of the aggregate Value of all Portfolio Investments in the CollateralPool shall be 0%, provided that, with respect to Portfolio Investments in the Collateral Pool in a single Industry Classification Group from time totime designated by the Borrower to the Administrative Agent, such 20% figure shall be increased to 25%, or (C) less than 1.75:1:00, the AdvanceRate applicable to that portion of the aggregate Value of the Portfolio Investments (other than Cash and Cash Equivalents) in any single IndustryClassification Group that exceeds 20% of the aggregate Value of all Portfolio Investments in the Collateral Pool shall be 0%;(iv) if, as of such date, the Relevant Asset Coverage Ratio is (A) greater than or equal to 2.00:1:00, the Advance Rate applicable to thatportion of the aggregate Value of the Borrower’s investments in Non-Core Investments shall be 0% to the extent necessary so that no more than20% of the Borrowing Base is attributable to such investments, (B) less than 2.00:1:00 and greater than or equal to 1.75:1.00, the Advance Rateapplicable to that portion of the aggregate Value of the Borrower’s investments in Non-Core Investments shall be 0% to the extent necessary sothat no more than 10% of the Borrowing Base is attributable to such investments or (C) less than 1.75:1:00, the Advance Rate applicable to thatportion of the aggregate Value of the Borrower’s investments in Non-Core Investments shall be 0% to the extent necessary so that no more than5% of the Borrowing Base is attributable to such investments;(v) if, as of such date, the Relevant Asset Coverage Ratio is (A) less than 2.00:1:00 and greater than or equal to 1.75:1.00, the Advance Rateapplicable to that portion of the aggregate Value of the Borrower’s investments in Junior Investments and Non-Core Investments shall be 0% tothe extent necessary so that no more than 30% of the Borrowing Base is attributable to such investments or (B) less than 1.75:1:00, the AdvanceRate applicable to that portion of the aggregate Value of the Borrower’s investments in Junior Investments and Non-Core Investments shall be0% to the extent necessary so that no more than 20% of the Borrowing Base is attributable to such investments;(vi) if, as of such date, (A)(1) the Borrowing Base (without giving effect to any adjustment required pursuant to this paragraph (a)(vi), the“Gross Borrowing Base”) is less than 1.5 times the Senior Debt Amount and (2) the Relevant Asset Coverage Ratio is less than 2.00:1:00 andgreater than or equal to 1.75:1.00, then the Borrowing Base shall be reduced to the extent necessary such that the contribution of SeniorInvestments to the Borrowing Base may not be less than 60% of the Covered Debt Amount, (B)(1) the Gross Borrowing Base is less than 1.5 timesthe Senior Debt Amount and (2) the Relevant Asset Coverage Ratio is less than 1.75:1.00, then the Borrowing Base shall be reduced to the extentnecessary such that the contribution of Senior Investments to the Borrowing Base may not be less than 75% of the Covered Debt Amount, (C)(1)the Gross Borrowing Base is greater than or equal to 1.5 times the Senior Debt Amount and (2) the Relevant Asset Coverage Ratio is less than2.00:1.00 and greater than or equal to 1.75:1.00, then the Borrowing Base shall be reduced to the extent necessary such that thecontribution of Senior Investments to the Borrowing Base may not be less than 40% of the Covered Debt Amount or (D)(1) the Gross BorrowingBase is greater than or equal to 1.5 times the Senior Debt Amount and (2) the Relevant Asset Coverage Ratio is less than 1.75:1.00, then theBorrowing Base shall be reduced to the extent necessary such that the contribution of Senior Investments to the Borrowing Base may not be lessthan 60% of the Covered Debt Amount;(vii) if, as of such date, the Relevant Asset Coverage Ratio is (i) greater than or equal to 2.00:1:00, the Advance Rate applicable to thatportion of the aggregate Value of the Portfolio Investments (other than Cash and Cash Equivalents) attributable to Venture Loans exceeding 30%of the aggregate Value of all Portfolio Investments in the Collateral Pool, shall be 0%; (ii) less than 2.00:1:00 and greater than or equal to1.75:1.00, the Advance Rate applicable to that portion of the aggregate Value of the Portfolio Investments (other than Cash and CashEquivalents) attributable to Venture Loans exceeding 25% of the aggregate Value of all Portfolio Investments in the Collateral Pool, shall be 0%or (iii) less than 1.75:1:00, the Advance Rate applicable to that portion of the aggregate Value of the Portfolio Investments (other than Cash andCash Equivalents) attributable to Venture Loans exceeding 20% of the aggregate Value of all Portfolio Investments in the Collateral Pool, shallbe 0%;(viii) the Advance Rate applicable to that portion of the aggregate Value of the Portfolio Investments (other than Common Equity) inwhich the Borrower has a controlling influence as determined under the Investment Company Act that exceeds 5% of Shareholders’ Equity of theBorrower (which for purposes of this calculation shall exclude the aggregate amount of investments in, and advances to, Financing Subsidiaries)shall be the Advance Rate applicable to Performing Common Equity (to the extent such Portfolio Investments are Performing) or 0%; and(ix) the Advance Rate applicable to that portion of the Value of the Portfolio Investments attributable to any investment in a FinancingSubsidiary shall be 0%.(b) No Portfolio Investment may be included in the Borrowing Base until such time as such Portfolio Investment has been Delivered (asdefined in the Guarantee and Security Agreement) to the Collateral Agent, and then only for so long as such Portfolio Investment continues to beDelivered as contemplated therein; provided that in the case of any Portfolio Investment in which the Collateral Agent has a first-priority perfectedsecurity interest pursuant to a valid Uniform Commercial Code filing (and for which no other method of perfection with a higher priority is possible),such Portfolio Investment may be included in the Borrowing Base so long as all remaining actions to complete “Delivery” are satisfied within 7 days ofsuch inclusion. Voting stock of any Controlled Foreign Corporation in excess of 66% of the issued and outstanding voting stock of such ControlledForeign Corporation shall not be included as a Portfolio Investment for purposes of calculating the Borrowing Base.For the avoidance of doubt, to avoid double-counting of excess concentrations, any Advance Rate reductions set forth under thisSection 5.13 shall be without duplication of any other such Advance Rate reductions. For purposes of the categorization of each PortfolioInvestment in accordance with this Section 5.13, the amount of any “first lien debt” or EBITDA with respect to any Portfolio Investment shall bedetermined using the most recent quarterly valuation determined in accordance with the valuation procedures set forth in Section 5.12(b)(ii)(B).(c) As used herein, the following terms have the following meanings:“Advance Rate” means, as to any Portfolio Investment as of any date and subject to adjustment as provided in Section 5.13(a)(i) through(x) (other than clause (vi) and as provided below based on the Relevant Asset Coverage Ratio as of such date, the following percentages with respect tosuch Portfolio Investment: Portfolio Investment1 Relevant AssetCoverage Ratio >2.00:1:00 2.00:1:00 >Relevant AssetCoverage Ratio >1.75:1.00 1.75:1:00 >Relevant AssetCoverage Ratio >1.50:1.00 Quoted Unquoted Quoted Unquoted Quoted Unquoted Cash, Cash Equivalents and Short-Term U.S. GovernmentSecurities 100% n.a. 100% n.a. 100% n.a. Long-Term U.S. Government Securities 95% n.a. 95% n.a. 95% n.a. Performing First Lien Bank Loans 85% 75% 85% 75% 85% 75% Performing First Lien Venture Loans 85% 75% 80% 70% 75% 65% Performing First Lien Unitranche Bank Loans 85% 75% 80% 70% 75% 65% Performing First Lien Last Out Bank Loans 80% 70% 75% 65% 70% 60% Performing Second Lien Bank Loans 75% 65% 70% 60% 65% 55% Performing Cash Pay High Yield Securities 70% 60% 65% 55% 60% 50% 1 The above categories are intended to be indicative of the traditional investment types in a fully capitalized issuer. All determinations of whether aparticular portfolio investment belongs to one category or another shall be made by the Borrower on a consistent basis with the foregoing.Portfolio Investment1 Relevant AssetCoverage Ratio >2.00:1:00 2.00:1:00 >Relevant AssetCoverage Ratio >1.75:1.00 1.75:1:00 >Relevant AssetCoverage Ratio >1.50:1.00 Quoted Unquoted Quoted Unquoted Quoted Unquoted Performing Cash Pay Mezzanine Investments 65% 55% 60% 50% 55% 45% Performing Non-Cash Pay High Yield Securities 60% 50% 55% 45% 50% 40% Performing Non-Cash Pay Mezzanine Investments 55% 45% 50% 40% 45% 35% Performing Preferred Equity 55% 45% 50% 40% 45% 35% Performing Common Equity 30% 20% 25% 20% 20% 20% Non-Performing First Lien Bank Loans 45% 45% 40% 40% 35% 35% Non-Performing First Lien Unitranche Bank Loans 45% 45% 40% 40% 35% 35% Non-Performing Venture Loans 40% 35% 35% 30% 30% 25% Non-Performing First Lien Last Out Bank Loans 40% 35% 35% 30% 30% 25% Non-Performing Second Lien Bank Loans 40% 30% 35% 25% 30% 20% Non-Performing High Yield Securities 30% 30% 25% 25% 20% 20% Non-Performing Mezzanine Investments 30% 25% 25% 20% 20% 20% Non-Performing Preferred Equity 0% 0% 0% 0% 0% 0% Non-Performing Common Equity 0% 0% 0% 0% 0% 0% “Bank Loans” means debt obligations (including, without limitation, term loans, revolving loans, debtor-in-possession financings, thefunded and unfunded portion of revolving credit lines and letter of credit facilities and other similar loans and investments including interim loans andsenior subordinated loans) which are generally under a loan or credit facility.“Capital Stock” of any Person means any and all shares of corporate stock (however designated) of, and any and all other equity interestsand participations representing ownership interests (including membership interests and limited liability company interests) in, such Person; provided,however, that trust certificates, preference shares, unrated subordinated notes, combination notes and other residual or equity interests of a Personwhose primary business is investing in and/or purchasing loans or other financial assets shall not be considered “Capital Stock” to the extent that suchPerson finances the purchase of or investment in such loans or financial assets through the issuance of debt securities.“Cash” has the meaning assigned to such term in Section 1.01 of this Agreement.“Cash Equivalents” has the meaning assigned to such term in Section 1.01 of this Agreement.“Cash Pay Bank Loans” means First Lien Bank Loans, First Lien Unitranche Bank Loans, First Lien Last Out Bank Loans and Second LienBank Loans as to which, at the time of determination, all of the interest on which is payable not less frequently than quarterly and for which not lessthan 2/3rds of the interest (including accretions and “pay-in-kind” interest) for the current monthly or quarterly period (as applicable) is payable incash.“Cash Pay Venture Loan” means First Lien Venture Loans as to which, at the time of determination, all of the interest on which is payablenot less frequently than quarterly and for which not less than 2/3rds of the interest (including accretions and “pay-in-kind” interest) for the currentmonthly or quarterly period (as applicable) is payable in cash.“First Lien Bank Loan” means a Bank Loan that is entitled to the benefit of a first lien and first priority perfected security interest (subjectto any Permitted Prior Working Capital Lien and other customary encumbrances) on a substantial portion of the assets of the respective borrower andguarantors obligated in respect thereof, provided that any First Lien Bank Loan that is also a First Lien Unitranche Bank Loan shall be treated forpurposes of determining the applicable Advance Rate as a First Lien Unitranche Bank Loan; provided, further, that any First Lien Bank Loan that isalso a First Lien Last Out Bank Loan shall be treated for purposes of determining the applicable Advance Rate as a First Lien Last Out Bank Loan.“First Lien Last Out Bank Loan” means a Bank Loan that is a First Lien Bank Loan, a portion of which is, in effect, subject to debtsubordination and superpriority rights of other lenders following an event of default (such portion, a “last out” portion) provided, that the aggregateprincipal amount of the “last out” portion of such Bank Loan is at least 50% of the aggregate principal amount of any “first out” portion of such BankLoan, provided, further that the underlying obligor with respect to such Bank Loan shall have a ratio of first lien debt (including the “first out” portionof such Bank Loan, but excluding the “last out” portion of such Bank Loan) to EBITDAthat does not exceed 3.25:1.00 and a ratio of aggregate first lien debt (including both the “first out” portion and the “last out” portion of such BankLoan) to EBITDA that does not exceed 5.25:1.00. An Obligor’s investment in the “last out” portion of a First Lien Last Out Bank Loan shall be treatedas a First Lien Last Out Bank Loan for purposes of determining the applicable Advance Rate for such Portfolio Investment under this Agreement. Forthe avoidance of doubt, an Obligor’s investment in the portion of such Bank Loan that is not the last out portion (the “first out” portion) shall betreated as a First Lien Bank Loan for purposes of determining the applicable Advance Rate for such Portfolio Investment under this Agreement and anObligor’s investment in any “last out” portion of a First Lien Bank Loan that does not meet the foregoing criteria shall be treated as a Second LienBank Loan.“First Lien Unitranche Bank Loan” means a First Lien Bank Loan with a ratio of first lien debt to EBITDA that exceeds 5.25:1.00, andwhere the underlying borrower does not also have a Second Lien Bank Loan outstanding.“First Lien Venture Loan” means a Venture Loan that is entitled to the benefit of a first lien and first priority perfected security interest(subject to any Permitted Prior Working Capital Lien and other customary encumbrances) on a substantial portion of the assets of the respectiveborrower and guarantors obligated in respect thereof.“High Yield Securities” means debt Securities, in each case (a) issued by public or private issuers, (b) issued pursuant to an effectiveregistration statement or pursuant to Rule 144A under the Securities Act (or any successor provision thereunder) and (c) that are not Cash Equivalents,Mezzanine Investments or Bank Loans.“Junior Investments” means, collectively, Performing Cash Pay High Yield Securities and Performing Cash Pay Mezzanine Investments.“Long-Term U.S. Government Securities” means U.S. Government Securities maturing more than three months from the applicable date ofdetermination.“Mezzanine Investments” means debt Securities (including convertible debt Securities (other than the “in-the-money” equity componentthereof)) (a) issued by public or private issuers, (b) issued without registration under the Securities Act, (c) not issued pursuant to Rule 144A under theSecurities Act (or any successor provision thereunder), (d) that are not Cash Equivalents and (e) contractually subordinated in right of payment to otherdebt of the same issuer.“Non-Core Investments” means, collectively, Portfolio Investments in common equity, warrants, Non-Performing Bank Loans, Non-Performing High Yield Securities, Non-Performing Mezzanine Investments, Performing Non-Cash Pay High Yield Securities, Performing PreferredEquity, Performing Non-Cash Pay Mezzanine Investments and Performing Common Equity.“Non-Performing Bank Loans” means, collectively, Non-Performing First Lien Bank Loans, Non-Performing First Lien Last Out BankLoans, Non-Performing First Lien Unitranche Loans, Non-Performing Second Lien Bank Loans and Non-Performing Venture Loans.“Non-Performing Common Equity” means Capital Stock (other than Preferred Stock) and warrants of an issuer having any debt outstandingthat is non-Performing.“Non-Performing First Lien Bank Loans” means First Lien Bank Loans other than Performing First Lien Bank Loans.“Non-Performing Venture Loans” means Venture Loans other than Performing First Lien Venture Loans.“Non-Performing First Lien Last Out Bank Loans” means First Lien Last Out Bank Loans other than Performing First Lien Bank Loans.“Non-Performing First Lien Unitranche Bank Loans” means First Lien Unitranche Bank Loans other than Performing First Lien BankUnitranche Loans.“Non-Performing High Yield Securities” means High Yield Securities other than Performing High Yield Securities.“Non-Performing Mezzanine Investments” means Mezzanine Investments other than Performing Mezzanine Investments.“Non-Performing Preferred Equity” means Preferred Stock other than Performing Preferred Equity.“Non-Performing Second Lien Bank Loans” means Second Lien Bank Loans other than Performing Second Lien Bank Loans.“Performing” means (a) with respect to any Portfolio Investment that is debt, the issuer of such Portfolio Investment is not in default of anypayment obligations in respect thereof, after the expiration of any applicable grace period and (b) with respect to any Portfolio Investment that isPreferred Stock, the issuer of such Portfolio Investment has not failed to meet any scheduled redemption obligations or to pay its latest declared cashdividend, after the expiration of any applicable grace period.“Performing Cash Pay High Yield Securities” means High Yield Securities (a) as to which, at the time of determination, not less than 2/3rdsof the interest (including accretions and “pay-in-kind” interest) for the current monthly, quarterly, semi-annual or annual period (as applicable) ispayable in cash and (b) which are Performing.“Performing Cash Pay Mezzanine Investments” means Mezzanine Investments (a) as to which, at the time of determination, not less than2/3rds of the interest (including accretions and “pay-in-kind” interest) for the current monthly, quarterly, semi-annual or annual period (as applicable)is payable in cash and (b) which are Performing.“Performing Common Equity” means Capital Stock (other than Preferred Stock) and warrants of an issuer all of whose outstanding debt isPerforming.“Performing First Lien Bank Loans” means First Lien Bank Loans which are Cash Pay Bank Loans and are Performing.“Performing First Lien Last Out Bank Loans” means First Lien Last Out Bank Loans which are Cash Pay Bank Loans and are Performing.“Performing First Lien Unitranche Bank Loans” means First Lien Unitranche Bank Loans which are Cash Pay Bank Loans and arePerforming.“Performing First Lien Venture Loans” means First Lien Venture Loans which are Cash Pay Venture Loans and are Performing.“Performing Non-Cash Pay High Yield Securities” means Performing High Yield Securities other than Performing Cash Pay High YieldSecurities.“Performing Non-Cash Pay Mezzanine Investments” means Performing Mezzanine Investments other than Performing Cash Pay MezzanineInvestments.“Performing Preferred Equity” means Preferred Stock of an issuer that has not failed to meet any scheduled redemption obligations or topay its latest declared cash dividend, after the expiration of any applicable grace period.“Performing Second Lien Bank Loans” means Second Lien Bank Loans which are Cash Pay Bank Loans and are Performing.“Permitted Prior Working Capital Lien” means, with respect to any borrower under a Bank Loan, a security interest to secure a revolvingfacility for such borrower and any of its subsidiaries; provided that (i) such Bank Loan has a second priority lien on the collateral that is subject to thefirst priority lien of such revolving facility (or a pari passu lien on such collateral where the revolving facility has a super-priority right of payment),(ii) such revolving facility is not secured by any other assets (other than a pari passu lien or a second priority lien, subject to the first priority lien of theBank Loan) and does not benefit from any standstill rights or other agreements (other than customary rights) with respect to any other assets and(iii) the maximum outstanding amount of such revolving facility is not greater than the lower of (a) 1.0x EBITDA of the borrower under such BankLoan, and (b) 20% of the outstanding amount of the associated First Lien Bank Loan.“Preferred Stock” as applied to the Capital Stock of any Person, means Capital Stock of such Person of any class or classes (howeverdesignated) that ranks prior, as to the payment of dividends or as to the distribution of assets upon any voluntary or involuntary liquidation,dissolution or winding up of such Person, to any shares (or other interests) of other Capital Stock of such Person, and shall include, without limitation,cumulative preferred, non-cumulative preferred, participating preferred and convertible preferred Capital Stock.“Second Lien Bank Loan” means a Bank Loan that is entitled to the benefit of a second lien and second priority perfected security interest(subject to customary encumbrances) on a substantial portion of the assets of the respective borrower and guarantors obligated in respect thereof.“Securities” means common and preferred stock, units and participations, member interests in limited liability companies, partnershipinterests in partnerships, notes, bonds, debentures, trust receipts and other obligations, instruments or evidences of indebtedness, including debtinstruments of public and private issuers and tax-exempt securities (including warrants, rights, put and call options and other options relating thereto,representing rights, or any combination thereof) and other property or interests commonly regarded as securities or any form of interest or participationtherein, but not including Bank Loans.“Senior Debt Amount” means, on any date, the greater of (i) the Covered Debt Amount and (ii) the Combined Debt Amount.“Senior Investments” means Cash, Cash Equivalents, Short-Term U.S. Government Securities, Long-Term U.S. Government Securities,Performing First Lien Bank Loans, Performing First Lien Last Out Bank Loans, Performing First Lien Unitranche Loans and Performing First LienVenture Loans.“Short-Term U.S. Government Securities” means U.S. Government Securities maturing within three months of the applicable date ofdetermination.“U.S. Government Securities” has the meaning assigned to such term in Section 1.01 of this Agreement.“Value” means, with respect to any Portfolio Investment, the most recent value as determined pursuant to Section 5.12(b)(ii).“Venture Loan” means a Portfolio Investment that is a “venture” loan and whose principal underlying collateral consists of an all asset lien(including accounts, inventory and equipment, where applicable) (subject to any “permitted liens” as defined in the applicable loan agreement for suchPortfolio Investment or such comparable definition or provision if “permitted liens” is not defined therein) but with at least a negative pledge on theintellectual property, of an underlying obligor that is in the startup, R&D or early-stage commercial phase and whose principal business is in the bio-pharmaceutical, medical device, healthcare IT or Healthcare Services industries.Annex B[Form of Borrowing Base Certificate]Monthly accounting period ended , 20 _Reference is made to the Senior Secured Credit Agreement, dated as of June 29, 2012 (as modified and supplemented and in effect from time totime, the “Credit Agreement”), by and among Solar Capital Ltd. (the “Company”), the Lenders party thereto, Citibank, N.A., as Administrative Agentand the other parties party thereto. Terms defined in the Credit Agreement are used herein as defined therein. The contents of this certificate areconfidential and subject to Section 9.13 of the Credit Agreement.Pursuant to Section 5.01(d) of the Credit Agreement, the undersigned, the of the Company, and as such a Financial Officer of theCompany, hereby certifies on behalf of the Company that attached hereto as Annex 1 is (a) a complete and correct list as at the end of the monthlyaccounting period ended , 20 of all Portfolio Investments included in the Collateral, indicating, in the case of each such PortfolioInvestment, (i) the classification thereof for purposes of Section 5.13 of the Credit Agreement, (ii) the Value thereof as determined in accordance withSection 5.12 of the Credit Agreement, (iii) whether or not such Portfolio Investment has been Delivered (as defined in the Guarantee and SecurityAgreement), (iv) the Advance Rates (as adjusted pursuant to Section 5.13 of the Credit Agreement) applicable to each Portfolio Investment and (b) atrue and correct calculation of the Borrowing Base as at the end of such monthly accounting determined in accordance with the requirements of theCredit Agreement.IN WITNESS WHEREOF, the undersigned has caused this certificate to be duly executed as of the day of , 20 . Title: [Financial Officer]Borrowing Base CertificateBorrowing Base Calculations Calculation of Available Borrowing Base or Deficiency: (1)    Total Borrowing Base: $ (2)    Calculation of Covered Debt Amount: $ (a)   Revolving Credit Exposure $ (b)   Principal amount of Term Loans outstanding $ (c)   The aggregate amount of Other Covered Indebtedness $ (d) from the date that is nine months prior to the maturity date of anyUnsecured Longer-Term Indebtedness that matures less than six months afterthe Maturity Date, the outstanding amount of any such Unsecured Longer-TermIndebtedness $ (e)   LC Exposures fully cash collateralized $ (f)   Sum of (2)(a) plus (2)(b) plus (2)(c) plus (2)(d) minus (2)(e) $ (3)    Available Borrowing Base (Borrowing Base Deficiency): (1) minus (2)(f) $ Gross Borrowing Base: (1) without giving effect to any adjustment required pursuant toSection 5.13(a)(vi) $ Borrowing Base CertificateAnnex IPortfolio Investments PortfolioInvestment Classification Value Delivered[Yes/No] Advance Rate Borrowing Base CertificateExhibit A to Annex 1Section 5.13(a)(i)If, as of such date, the Relevant Asset Coverage Ratio is greater than or equal to 2.00:1:00, adjustments to the Advance Rate applicable to that portionof the aggregate Value of the Portfolio Investments (other than Cash and Cash Equivalents) of all issuers in a consolidated group of corporations orother entities in accordance with GAAP exceeding 6% of the aggregate Value of all Portfolio Investments in the Collateral Pool:50% of the otherwise applicable Advance RateIf, as of such date, the Relevant Asset Coverage Ratio is less than 2.00:1:00 and greater than or equal to 1.75:1.00, adjustments to the Advance Rateapplicable to that portion of the aggregate Value of the Portfolio Investments (other than Cash and Cash Equivalents) of all issuers in a consolidatedgroup of corporations or other entities in accordance with GAAP exceeding 5% of the aggregate Value of all Portfolio Investments in the CollateralPool:50% of the otherwise applicable Advance RateIf, as of such date, the Relevant Asset Coverage Ratio is less than 1.75:1:00, adjustments to the Advance Rate applicable to that portion of theaggregate Value of the Portfolio Investments (other than Cash and Cash Equivalents) of all issuers in a consolidated group of corporations or otherentities in accordance with GAAP exceeding 4% of the aggregate Value of all Portfolio Investments in the Collateral Pool:50% of the otherwise applicable Advance RateSection 5.13(a)(ii)If, as of such date, the Relevant Asset Coverage Ratio is greater than or equal to 2.00:1:00, adjustments to the Advance Rate applicable to that portionof the aggregate Value of the Portfolio Investments (other than Cash and Cash Equivalents) of all issuers in a consolidated group of corporations orother entities in accordance with GAAP exceeding 12% of the aggregate Value of all Portfolio Investments in the Collateral Pool:0% of the otherwise applicable Advance RateIf, as of such date, the Relevant Asset Coverage Ratio is less than 2.00:1:00 and greater than or equal to 1.75:1.00, adjustments to the Advance Rateapplicable to that portion of the aggregate Value of the Portfolio Investments (other than Cash and Cash Equivalents) of all issuers in a consolidatedgroup of corporations or other entities in accordance with GAAP exceeding 10% of the aggregate Value of all Portfolio Investments in the CollateralPool:0% of the otherwise applicable Advance RateIf, as of such date, the Relevant Asset Coverage Ratio is less than 1.75:1:00, adjustments to the Advance Rate applicable to that portion of theaggregate Value of the Portfolio InvestmentsBorrowing Base Certificate(other than Cash and Cash Equivalents) of all issuers in a consolidated group of corporations or other entities in accordance with GAAP exceeding 8%of the aggregate Value of all Portfolio Investments in the Collateral Pool:0% of the otherwise applicable Advance RateSection 5.13(a)(iii)If, as of such date, the Relevant Asset Coverage Ratio is greater than or equal to 2.00:1:00, adjustments to the Advance Rate applicable to that portionof the aggregate Value of the Portfolio Investments (other than Cash and Cash Equivalents) in any single Industry Classification Group that exceeds25% of the aggregate Value of all Portfolio Investments in the Collateral Pool:0% of the otherwise applicable Advance RateIf, as of such date, the Relevant Asset Coverage Ratio is less than 2.00:1:00 and greater than or equal to 1.75:1.00, adjustments to the Advance Rateapplicable to that portion of the aggregate Value of the Portfolio Investments (other than Cash and Cash Equivalents) in any single IndustryClassification Group that exceeds 20% (or, with respect to Portfolio Investments in the Collateral Pool in a single Industry Classification Group fromtime to time designated by the Borrower to the Administrative Agent, such 20% figure shall be increased to 25%) of the aggregate Value of allPortfolio Investments in the Collateral Pool:0% of the otherwise applicable Advance RateIf, as of such date, the Relevant Asset Coverage Ratio is less than 1.75:1:00, adjustments to the Advance Rate applicable to that portion of theaggregate Value of the Portfolio Investments (other than Cash and Cash Equivalents) in any single Industry Classification Group that exceeds 20% ofthe aggregate Value of all Portfolio Investments in the Collateral Pool:0% of the otherwise applicable Advance RateSection 5.13(a)(iv)If, as of such date, the Relevant Asset Coverage Ratio is greater than or equal to 2.00:1:00, adjustments to the Advance Rate applicable to that portionof the aggregate Value of the Borrower’s investments in Non-Core Investments:0% of the otherwise applicable Advance Rate to the extent necessary so that no more than 20% of the Borrowing Base is attributable to suchinvestmentsIf, as of such date, the Relevant Asset Coverage Ratio is less than 2.00:1:00 and greater than or equal to 1.75:1.00, adjustments to the Advance Rateapplicable to that portion of the aggregate Value of the Borrower’s investments in Non-Core Investments:0% of the otherwise applicable Advance Rate to the extent necessary so that no more than 10% of the Borrowing Base is attributable to suchinvestmentsBorrowing Base CertificateIf, as of such date, the Relevant Asset Coverage Ratio is less than 1.75:1:00, adjustments to the Advance Rate applicable to that portion of theaggregate Value of the Borrower’s investments in Non-Core Investments:0% of the otherwise applicable Advance Rate to the extent necessary so that no more than 5% of the Borrowing Base is attributable to suchinvestmentsSection 5.13(a)(v)If, as of such date, the Relevant Asset Coverage Ratio is less than 2.00:1:00 and greater than or equal to 1.75:1.00, adjustments to the Advance Rateapplicable to that portion of the aggregate Value of the Borrower’s investments in Junior Investments and Non-Core Investments:0% of the otherwise applicable Advance Rate to the extent necessary so that no more than 30% of the Borrowing Base is attributable to suchinvestmentsIf, as of such date, the Relevant Asset Coverage Ratio is less than 1.75:1:00, adjustments to the Advance Rate applicable to that portion of theaggregate Value of the Borrower’s investments in Junior Investments and Non-Core Investments0% of the otherwise applicable Advance Rate to the extent necessary so that no more than 20% of the Borrowing Base is attributable to suchinvestmentsSection 5.13(a)(vi)If, as of such date, (1) the Gross Borrowing Base, is less than 1.5 times the Senior Debt Amount and (2) the Relevant Asset Coverage Ratio is less than2.00:1:00 and greater than or equal to 1.75:1.00:Reduction of the Borrowing Base to the extent necessary such that the contribution of Senior Investments to the Borrowing Base may not be lessthan 60% of the Covered Debt AmountIf, as of such date, (1) the Gross Borrowing Base is less than 1.5 times the Senior Debt Amount and (2) the Relevant Asset Coverage Ratio is less than1.75:1.00:Reduction of the Borrowing Base to the extent necessary such that the contribution of Senior Investments to the Borrowing Base may not be lessthan 75% of the Covered Debt Amount,If, as of such date, (1) the Gross Borrowing Base is greater than or equal to 1.5 times the Senior Debt Amount and (2) the Relevant Asset Coverage Ratiois less than 2.00:1.00 and greater than or equal to 1.75:1.00:Reduction of the Borrowing Base to the extent necessary such that the contribution of Senior Investments to the Borrowing Base may not be lessthan 40% of the Covered Debt AmountBorrowing Base CertificateIf, as of such date, (1) the Gross Borrowing Base is greater than or equal to 1.5 times the Senior Debt Amount and (2) the Relevant Asset Coverage Ratiois less than 1.75:1.00:Reduction of the Borrowing Base to the extent necessary such that the contribution of Senior Investments to the Borrowing Base may not be lessthan 60% of the Covered Debt Amount;Section 5.13(a)(vii)If, as of such date, the Relevant Asset Coverage Ratio is greater than or equal to 2.00:1:00, adjustments to the Advance Rate applicable to that portionof the aggregate Value of the Portfolio Investments (other than Cash and Cash Equivalents) attributable to Venture Loans exceeding 30% of theaggregate Value of all Portfolio Investments in the Collateral Pool:0% of the otherwise applicable Advance RateIf, as of such date, the Relevant Asset Coverage Ratio is less than 2.00:1:00 and greater than or equal to 1.75:1.00, adjustments to the Advance Rateapplicable to that portion of the aggregate Value of the Portfolio Investments (other than Cash and Cash Equivalents) attributable to Venture Loansexceeding 25% of the aggregate Value of all Portfolio Investments in the Collateral Pool:0% of the otherwise applicable Advance RateIf, as of such date, the Relevant Asset Coverage Ratio is less than 1.75:1:00, adjustments to the Advance Rate applicable to that portion of theaggregate Value of the Portfolio Investments (other than Cash and Cash Equivalents) attributable to Venture Loans exceeding 20% of the aggregateValue of all Portfolio Investments in the Collateral Pool:0% of the otherwise applicable Advance RateSection 5.13(a)(viii)Adjustments to Advance Rate applicable to that portion of the aggregate Value of the Portfolio Investments (other than Common Equity) in which theBorrower has a controlling influence as determined under the Investment Company Act that exceeds 5% of Shareholders’ Equity of the Borrower(which for purposes of this calculation shall exclude the aggregate amount of investments in, and advances to, Financing Subsidiaries):Advance Rate applicable to Performing Common Equity (to the extent such Portfolio Investments are Performing) or 0% of the Advance Rateotherwise applicable.Section 5.13(a)(ix)Adjustments to Advance Rate applicable to that portion of the Value of the Portfolio Investments attributable to any investment in a FinancingSubsidiary:0% of the Advance Rate otherwise applicableBorrowing Base CertificateExhibit 10.14EXECUTION VERSIONCONSENT AND OMNIBUS AMENDMENTTHIS CONSENT AND OMNIBUS AMENDMENT TO TRANSACTION DOCUMENTS (this “Amendment”) is made as of December 19, 2018,by and among:(1) SSLP 2016-1, LLC, a Delaware limited liability company, as the borrower (together with its successors and assigns in such capacity, the“Borrower”);(2) SOLAR CAPITAL LTD., a Maryland corporation, as servicer (together with its successors and assigns in such capacity, the “Servicer”);(3) SOLAR CAPITAL LTD., a Maryland corporation, as transferor (in such capacity, the “Transferor”);(4) EACH OF THE CONDUIT LENDERS FROM TIME TO TIME PARTY HERETO (together with its respective successors and assigns insuch capacity, each a “Conduit Lender” and collectively, the “Conduit Lenders”);(5) EACH OF THE INSTITUTIONAL LENDERS FROM TIME TO TIME PARTY HERETO (together with its respective successors andassigns in such capacity, each an “Institutional Lender”, collectively, the “Institutional Lenders” and, together with the Conduit Lenders, the“Lenders”);(6) EACH OF THE LENDER AGENTS FROM TIME TO TIME PARTY HERETO (together with its respective successors and assigns insuch capacity, each a “Lender Agent” and collectively, the “Lender Agents”);(7) WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, as the administrative agent for the Lender Agentshereunder (together with its successors and assigns in such capacity, the “Administrative Agent”), and as the Lender Agent for Wells Fargo Bank,National Association as an Institutional Lender (together with its successors and assigns in such capacity, the “WFBNA Agent”); and(8) WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association (together with its successors and assigns, “WFBNA”),as the collateral agent (together with its successors and assigns in such capacity, the “Collateral Agent”), as the collateral custodian (together with itssuccessors and assigns in such capacity, the “Collateral Custodian”), as the account bank (together with its successors and assigns in such capacity, the“Account Bank”) and as the securities intermediary (together with its successors and assigns in such capacity, the “Securities Intermediary”).Capitalized terms used and not otherwise defined herein shall have the meanings given to such terms in the Agreement (as defined below).R E C I T A L SWHEREAS, the Borrower, the Servicer, Senior Secured Unitranche Loan Program LLC, as transferor (the “Existing Transferor”), theAdministrative Agent, each of the Conduit Lenders from time to time party thereto, each of the Institutional Lenders from time to time party thereto,each of the Lender Agents from time to time party thereto, the Collateral Agent and the Collateral Custodian are parties to that certain Loan andServicing Agreement dated as of June 30, 2016 (such agreement as amended, modified, supplemented, waived or restated from time to time, the“Agreement”);WHEREAS, Senior Secured Unitranche Loan Program LLC will merge with and into Solar Capital Ltd. on the date hereof (the “TransferorMerger”);WHEREAS, Solar Capital Ltd. agrees to act in the capacity of transferor under the Agreement from and after the date hereof;WHEREAS, the Borrower will merge with and into SSLP II 2016-1, LLC, a Delaware limited liability company, on the date hereof and followingsuch merger the Borrower will be the surviving entity (the “Borrower Merger” and together with the Transferor Merger, the “Mergers”);WHEREAS, the relevant parties are not permitted to enter into the Mergers without the consent of the Administrative Agent;WHEREAS, pursuant to the Purchase and Sale Agreement, the Existing Transferor is not permitted to enter into the Transferor Merger;WHEREAS, pursuant to Section 2.07 of the Agreement, the Borrower transferred certain of the Loan Assets pursuant to a Purchase Agreement,dated as of September 14, 2018, by and among Senior Secured Unitranche Program LLC, Solar Capital Ltd., as buyer, Voya Retirement Insurance andAnnuity Company and ReliaStar Life Insurance Company, as sellers, and Voya Investment Management, LLC (the “Sale”);WHEREAS, the parties have requested the Administrative Agent (i) consent to the Mergers and the Sale on the terms set forth herein and(ii) waive the requirements set forth in Section 5.3(c) of the Purchase and Sale Agreement in connection with the Transferor Merger; andWHEREAS, Section 11.01 of the Agreement provides that the parties to the Agreement may amend, waive, supplement or otherwise modify anyof the provisions of the Agreement under the circumstances and subject to the satisfaction of the conditions set forth therein.NOW, THEREFORE, based upon the above Recitals, the mutual promises and agreements contained herein, and other good and valuableconsideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree asfollows:SECTION 1. Consent and Waiver. Pursuant to Section 2.07(b) of the Agreement, the Administrative Agent hereby consents to the Sale by theBorrower, pursuant to Section 5.02(g) of the Agreement, the Administrative Agent hereby consents to the Borrower Merger and 2pursuant to Section 5.04(a) of the Agreement, the Administrative Agent hereby consents to the Transferor Merger. In connection with the TransferorMerger, the Administrative Agent hereby waives the requirements of Section 5.3(c) of the Purchase and Sale Agreement on a one-time basis.SECTION 2. Amendments to all Transaction Documents.(a) As of the date of this Amendment, each reference (if any) in each Transaction Document to “Senior Secured Unitranche Loan ProgramLLC, a Delaware limited liability company” or “Senior Secured Unitranche Loan Program LLC” shall be deleted in its entirety and the text“Solar Capital Ltd., a Maryland corporation” or “Solar Capital Ltd.”, as the case may be, shall be inserted in the place thereof, and Solar CapitalLtd. hereby agrees to assume the obligations of Senior Secured Unitranche Program LLC as set forth in each such Transaction Document.(b) As of the date of this Amendment, each reference (if any) in each Transaction Document to the Transferor being a “limited liabilitycompany”, maintaining its “limited liability company existence” (or words of similar import), having “limited liability company power” (orwords of similar import), taking “limited liability company action” (or words of similar import), being subject to a “limited liability companyrestriction” (or words of similar import) or having “limited liability company obligations” (or words of similar import) shall be replaced with areference to such Person being a “corporation”, maintaining its “corporate existence”, having “corporate power”, taking “corporate action”,being subject to a “corporate restriction” or having “corporate obligations”, as applicable.(c) As of the date of this Amendment, each reference (in any) in each Transaction Document to the Transferor being a “Delaware” entityshall be replaced with a reference to the Transferor being a “Maryland” entity.SECTION 3. Amendments to Agreement. As of the date of this Amendment, the Agreement is hereby amended by deleting the stricken text(indicated textually in the same manner as the following example: stricken text) and by adding the bold and double-underlined text (indicatedtextually in the same manner as the following example: bold and double-underlined text) as set forth on the pages of the Agreement attached asAppendix A hereto.SECTION 4. Agreement in Full Force and Effect as Amended. Except as specifically amended hereby, all provisions of the Agreement and theother Transaction Documents shall remain in full force and effect. All references to the Agreement and the other Transaction Documents in theTransaction Documents shall be deemed to mean the Agreement or the other Transaction Documents as modified hereby. This Amendment shall not bedeemed to expressly or impliedly waive, amend or supplement any provision of the Agreement or the other Transaction Documents other than asexpressly set forth herein and shall not constitute a novation of the Agreement or any other Transaction Document. None of the consents containedherein will be deemed to expressly or impliedly waive, amend or supplement any provision of the Agreement or any other Transaction Document otherthan as expressly set forth herein and shall not constitute a novation of the Agreement or any other Transaction Document. 3SECTION 5. Representations. Each of the Borrower and the Servicer hereby represent and warrant as of the date of this Amendment as follows:(a) the representations and warranties contained in Section 4.01, 4.02 and 4.03 of the Agreement are true and correct in all material respectson and as of the date hereof as though made on and as of the date hereof, except (i) to the extent specifically made with regard to a particular dateand (ii) for such changes as are a result of any act or omission specifically permitted under the Agreement, or as otherwise specifically permittedby the Administrative Agent and Lender Agents;(b) the execution, delivery and performance by it of this Amendment and the Agreement as amended hereby are within its powers, havebeen duly authorized, and do not contravene (A) its limited liability company agreement, charter, by-laws, or other organizational documents, or(B) any Applicable Law;(c) this Amendment has been duly executed and delivered by it;(d) each of this Amendment and the Agreement as amended hereby constitutes its legal, valid and binding obligation enforceable against itin accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium orsimilar laws affecting creditors’ rights generally or by general principles of equity;(e) it is not in default under the Agreement as amended hereby; and(f) no Unmatured Event of Default, Servicer Termination Event or Event of Default has occurred and is continuing.SECTION 6. Conditions to Effectiveness. This Amendment shall become effective as of the date hereof upon satisfaction of the followingconditions:(a) the delivery of executed signature pages by all parties hereto to the Administrative Agent;(b) a certificate of the Secretary, Assistant Secretary or managing member, as applicable, of each of the Borrower, the Transferor and theServicer, dated the date of this Agreement, (i) certifying the names and true signatures of the incumbent officers of such Person authorized to signon behalf of such Person, (ii) attaching a copy of the limited liability company agreement or by-laws, as applicable, of such Person and certifyingthat such copy is a complete and correct copy, and that such limited liability company agreement or by-laws have not been amended, modified orsupplemented and are in full force and effect, and (iii) attaching the resolutions of the board of directors or the written consent of the members ofsuch Person, as applicable, approving and authorizing the execution, delivery and performance by such Person of the Transaction Documentsand this Amendment, as applicable; 4(c) a good standing certificate, dated as of a recent date for each of the Borrower, the Transferor and the Servicer, issued by the Secretary ofState of such Person’s State of formation or organization, as applicable;(d) the Administrative Agent and the Lenders shall have received the executed legal opinion of Latham & Watkins LLP, counsel to theBorrower, in form and substance acceptable to the Lender in its reasonable discretion;(e) the Administrative Agent and the Lenders shall have received the executed legal opinion of Venable LLP, counsel to the Transferor, inform and substance acceptable to the Lender in its reasonable discretion;(f) the Administrative Agent has received a copy of the unfiled certificate of merger and confirmation from the Servicer that filed suchcertificate in connection with the Mergers and has received all necessary certifications in connection with the Mergers in accordance with theTransaction Documents; and(g) the Administrative Agent shall have received a financing statement naming Solar Capital Ltd., in its capacity of Transferor, as debtor,the Borrower as assignor and the Collateral Agent, on behalf of the Secured Parties, as secured party/total assignee.SECTION 7. Purchase and Sale Agreement. Solar Capital Ltd. hereby agrees to be bound by the terms of the Purchase and Sale Agreement, inits capacity as the Servicer thereunder. Without limiting the generality of the foregoing, in the event that, notwithstanding the intent of the parties tothe Purchase and Sale Agreement, the Sale Portfolio (as defined in the Purchase and Sale Agreement) is held to continue to be property of Solar CapitalLtd., then Solar Capital Ltd. agrees to be bound by Section 2.4 of the Purchase and Sale Agreement and hereby grants to the Borrower a first prioritysecurity interest (subject only to Permitted Liens) in all of Solar Capital Ltd.’s right, title and interest in and to the Sale Portfolio and all amountspayable to the holders of the Sale Portfolio in accordance with the terms thereof and all proceeds of the conversion, voluntary or involuntary, of theforegoing into cash, instruments, securities or other property, including all amounts from time to time held or invested in the Collection Account,whether in the form of cash, instruments, securities or other property, to secure the prompt and complete payment of a loan deemed to have been madein an amount equal to the aggregate Purchase Price (as defined in the Purchase and Sale Agreement) of the Sale Portfolio together with all of the otherobligations of Solar Capital Ltd. under the Purchase and Sale Agreement.SECTION 8. Miscellaneous.(a) Without in any way limiting any other obligation hereunder or under the Transaction Documents, the Borrower agrees to provide, from timeto time, any additional documentation and to execute additional acknowledgements, amendments, instruments or other agreements as may bereasonably requested and required by the Administrative Agent to effectuate the foregoing.(b) This Amendment may be executed in any number of counterparts (including by facsimile or in portable document format), and by thedifferent parties hereto on the same or separate counterparts, each of which shall be deemed to be an original instrument but all of which together shallconstitute one and the same agreement. 5(c) The descriptive headings of the various sections of this Amendment are inserted for convenience of reference only and shall not be deemed toaffect the meaning or construction of any of the provisions hereof.(d) This Amendment may not be amended or otherwise modified except as provided in the Agreement.(e) The failure or unenforceability of any provision hereof shall not affect the other provisions of this Amendment or the Agreement.(f) Whenever the context and construction so require, all words used in the singular number herein shall be deemed to have been used in theplural, and vice versa, and the masculine gender shall include the feminine and neuter and the neuter shall include the masculine and feminine.(g) This Amendment and the Agreement represent the final agreement between the parties only with respect to the subject matter expresslycovered hereby and may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements between the parties. There are nounwritten oral agreements between the parties.(h) The provisions of Sections 11.08 and 11.09 of the Agreement are each incorporated by reference herein mutatis mutandis.(i) THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT SHALL BEGOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE CHOICE OF LAW PROVISIONS SET FORTH INTHE AGREEMENT AND SHALL BE SUBJECT TO THE WAIVER OF JURY TRIAL AND NOTICE PROVISIONS SET FORTH IN THEAGREEMENT.[Remainder of Page Intentionally Left Blank] 6IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of thedate first above written. SSLP 2016-1, LLC, as the Borrower, debtor andpurchaserBy: /s/ Richard Peteka Name: Richard Peteka Title: Chief Financial Officer and Secretary SOLAR CAPITAL LTD., as the serBy: /s/ Richard Peteka Name: Richard Peteka Title: Chief Financial Officer and Secretary[SIGNATURES CONTINUE ON THE FOLLOWING PAGE][Signature Page to Omnibus Amendment]SOLAR CAPITAL LTD., as the TransferorBy: /s/ Richard Peteka Name: Richard Peteka Title: Chief Financial Officer and Secretary[SIGNATURES CONTINUE ON THE FOLLOWING PAGE][Signature Page to Omnibus Amendment] WELLS FARGO BANK, NATIONAL ASSOCIATION, asthe Administrative Agent and the WFBNA AgentBy: /s/ Steve Sebo Name: Steve Sebo Title: Vice President[Signature Page to Omnibus Amendment] WELLS FARGO BANK, NATIONAL ASSOCIATION, asan Institutional LenderBy: /s/ Ben Love Name: Ben Love Title: Vice President[Signature Page to Omnibus Amendment]WELLS FARGO BANK, NATIONAL ASSOCIATION, asthe Collateral Agent, Collateral Custodian, SecuritiesIntermediary and Account BankBy: /s/ Rupinder Suri Name: Rupinder Suri Title: Vice President[Signature Page to Omnibus Amendment]Appendix A Appendix AEXECUTION VERSIONConformed through the First Amendment Up to $200,000,000LOAN AND SERVICING AGREEMENTDated as of June 30, 2016amongSSLP 2016-1, LLC,as the BorrowerSENIOR SECURED UNITRANCHE LOAN PROGRAM LLCSOLAR CAPITAL LTD.,as the TransferorSOLAR CAPITAL LTD.,as the ServicerWELLS FARGO BANK, NATIONAL ASSOCIATION,as the Administrative AgentEACH OF THE CONDUIT LENDERS AND INSTITUTIONAL LENDERS FROM TIME TOTIME PARTY HERETO,as the LendersEACH OF THE LENDER AGENTS FROM TIME TO TIME PARTY HERETO,as the Lender AgentsandWELLS FARGO BANK, NATIONAL ASSOCIATION,as the Collateral Agent, Collateral Custodian and Account Bank TABLE OF CONTENTS Page ARTICLE I. DEFINITIONS 2 Section 1.01 Certain Defined Terms. 2 Section 1.02 Other Terms. 4345 Section 1.03 Computation of Time Periods. 4346 Section 1.04 Interpretation. 4346 ARTICLE II. THE FACILITY 4447 Section 2.01 Advances. 4447 Section 2.02 Procedure for Advances. 4547 Section 2.03 Determination of Yield. 4649 Section 2.04 Remittance Procedures. 4749 Section 2.05 Instructions to the Collateral Agent and the Account Bank. 5153 Section 2.06 Borrowing Base Deficiency Payments. 5154 Section 2.07 Substitution and Sale of Loan Assets; Affiliate Transactions. 5255 Section 2.08 Payments and Computations, Etc. 5659 Section 2.09 Non-Usage Fee. 5760 Section 2.10 Increased Costs; Capital Adequacy. 5760 Section 2.11 Taxes. 6063 Section 2.12 Collateral Assignment of Agreements. 6467 Section 2.13 Grant of a Security Interest. 6467 Section 2.14 Evidence of Debt. 6568 Section 2.15 Survival of Representations and Warranties. 6568 Section 2.16 Release of Loan Assets. 6568 Section 2.17 Treatment of Amounts Received by the Borrower. 6568 Section 2.18 Prepayment; Termination. 6669 Section 2.19 Collections and Allocations. 6770 Section 2.20 Reinvestment of Principal Collections. 6871 Section 2.21 Additional Lenders. 6972 Section 2.22 Defaulting Lenders. 6972 ARTICLE III. CONDITIONS PRECEDENT 7074 Section 3.01 Conditions Precedent to Effectiveness. 7074 Section 3.02 Conditions Precedent to All Advances. 7275 Section 3.03 Advances Do Not Constitute a Waiver. 7477 Section 3.04 Conditions to Acquisitions of Loan Assets. 7477 -i-ARTICLE IV. REPRESENTATIONS AND WARRANTIES 7579 Section 4.01 Representations and Warranties of the Borrower. 7579 Section 4.02 Representations and Warranties of the Borrower Relating to the Agreement and the Collateral Portfolio. 8487 Section 4.03 Representations and Warranties of the Servicer. 8588 Section 4.04 Representations and Warranties of the Collateral Agent. 8892 Section 4.05 Representations and Warranties of each Lender. 8993 Section 4.06 Representations and Warranties of the Collateral Custodian. 8993 ARTICLE V. GENERAL COVENANTS 9094 Section 5.01 Affirmative Covenants of the Borrower. 9094 Section 5.02 Negative Covenants of the Borrower. 96101 Section 5.03 Affirmative Covenants of the Servicer. 99104 Section 5.04 Negative Covenants of the Servicer. 103108 Section 5.05 Affirmative Covenants of the Collateral Agent. 105110 Section 5.06 Affirmative Covenants of the Collateral Custodian. 105110 Section 5.07 Negative Covenants of the Collateral Custodian. 105111 ARTICLE VI. ADMINISTRATION AND SERVICING OF CONTRACTS 106111 Section 6.01 Appointment and Designation of the Servicer. 106111 Section 6.02 Duties of the Servicer. 108113 Section 6.03 Authorization of the Servicer. 110116 Section 6.04 Collection of Payments; Accounts. 111116 Section 6.05 Realization Upon Loan Assets. 113119 Section 6.06 Servicing Compensation. 113119 Section 6.07 Payment of Certain Expenses by Servicer. 114119 Section 6.08 Reports to the Administrative Agent; Account Statements; Servicing Information. 114119 Section 6.09 Annual Statement as to Compliance. 116121 Section 6.10 Annual Independent Public Accountant or Other Third Party’s Servicing Reports. 116121 Section 6.11 The Servicer Not to Resign. 117122 ARTICLE VII. EVENTS OF DEFAULT 117123 Section 7.01 Events of Default. 117123 Section 7.02 Additional Remedies of the Administrative Agent. 120126 ARTICLE VIII. INDEMNIFICATION 123128 Section 8.01 Indemnities by the Borrower. 123128 Section 8.02 Indemnities by Servicer. 126132 -ii-Section 8.03 Legal Proceedings. 128134 Section 8.04 After-Tax Basis. 129134 ARTICLE IX. THE ADMINISTRATIVE AGENT AND LENDER AGENTS 129135 Section 9.01 The Administrative Agent. 129135 Section 9.02 The Lender Agents. 133138 ARTICLE X. COLLATERAL AGENT 135140 Section 10.01 Designation of Collateral Agent. 135140 Section 10.02 Duties of Collateral Agent. 135141 Section 10.03 Merger or Consolidation. 138144 Section 10.04 Collateral Agent Compensation. 138144 Section 10.05 Collateral Agent Removal. 138144 Section 10.06 Limitation on Liability. 139144 Section 10.07 Collateral Agent Resignation. 140146 ARTICLE XI. MISCELLANEOUS 141147 Section 11.01 Amendments and Waivers. 141147 Section 11.02 Notices, Etc. 142148 Section 11.03 No Waiver; Remedies. 143149 Section 11.04 Binding Effect; Assignability; Multiple Lenders. 143149 Section 11.05 Term of This Agreement. 145151 Section 11.06 GOVERNING LAW; JURY WAIVER. 145151 Section 11.07 Costs, Expenses and Taxes. 145152 Section 11.08 No Proceedings. 146152 Section 11.09 Recourse Against Certain Parties. 147153 Section 11.10 Execution in Counterparts; Severability; Integration. 148154 Section 11.11 Consent to Jurisdiction; Service of Process. 149155 Section 11.12 Characterization of Conveyances Pursuant to the Purchase and Sale Agreement. 149155 Section 11.13 Confidentiality. 150156 Section 11.14 Non-Confidentiality of Tax Treatment. 151157 Section 11.15 Waiver of Set Off. 152158 Section 11.16 Headings and Exhibits. 152158 Section 11.17 Ratable Payments. 152158 Section 11.18 Failure of Borrower or Servicer to Perform Certain Obligations. 152158 Section 11.19 Power of Attorney. 152158 Section 11.20 Delivery of Termination Statements, Releases, etc. 153159 Section 11.21 Intent of the Parties. 153159 ARTICLE XII. COLLATERAL CUSTODIAN 153159 Section 12.01 Designation of Collateral Custodian. 153159 -iii-Section 12.02 Duties of Collateral Custodian. 153159 Section 12.03 Merger or Consolidation. 157163 Section 12.04 Collateral Custodian Compensation. 157163 Section 12.05 Collateral Custodian Removal. 157163 Section 12.06 Limitation on Liability. 157163 Section 12.07 Collateral Custodian Resignation. 159165 Section 12.08 Release of Documents. 159165 Section 12.09 Return of Required Loan Documents. 160166 Section 12.10 Access to Certain Documentation and Information Regarding the Collateral Portfolio; Audits of Servicer. 160166 Section 12.11 Bailment. 161167 -iv-LIST OF SCHEDULES AND EXHIBITS SCHEDULES SCHEDULE I Conditions Precedent DocumentsSCHEDULE II Prior Names, Tradenames, Fictitious Names and “Doing Business As” NamesSCHEDULE III Agreed-Upon Procedures For Independent Public Accountants or Other Third PartiesSCHEDULE IV Loan TapeEXHIBITS EXHIBIT A Form of Approval NoticeEXHIBIT B Form of Borrowing Base CertificateEXHIBIT C Form of Disbursement RequestEXHIBIT D Form of Joinder SupplementEXHIBIT E Form of Notice of BorrowingEXHIBIT F Form of Notice of Reduction (Reduction of Advances Outstanding)EXHIBIT G [Reserved]EXHIBIT H Form of Certificate of Closing AttorneysEXHIBIT I Form of Servicer’s Certificate (Servicing Report)EXHIBIT J Form of Release of Required Loan DocumentsEXHIBIT K [Reserved]EXHIBIT L Form of Power of Attorney for ServicerEXHIBIT M Form of Power of Attorney for BorrowerEXHIBIT N Form of Loan Asset ChecklistEXHIBIT O Form of Notice of Lien Release DividendEXHIBIT P-1 Form of U.S. Tax Compliance Certificate (For Foreign Lenders That Are Not Partnerships For U.S. Federal Income TaxPurposes)EXHIBIT P-2 Form of U.S. Tax Compliance Certificate (For Foreign Participants That Are Not Partnerships For U.S. Federal IncomeTax Purposes)EXHIBIT P-3 Form of U.S. Tax Compliance Certificate (For Foreign Participants That Are Partnerships For U.S. Federal Income TaxPurposes)EXHIBIT P-4 Form of U.S. Tax Compliance Certificate (For Foreign Lenders That Are Partnerships For U.S. Federal Income TaxPurposes)ANNEXES ANNEX A CommitmentsThis LOAN AND SERVICING AGREEMENT is made as of June 30, 2016, among:(1) SSLP 2016-1, LLC, a Delaware limited liability company (together with its successors and assigns in such capacity, the “Borrower”);(2) SENIOR SECURED UNITRANCHE LOAN PROGRAM LLC, a Delaware limited liability companySOLAR CAPITAL LTD., a Marylandcorporation, as the Transferor (as defined herein);(3) SOLAR CAPITAL LTD., a Maryland corporation, as the Servicer (as defined herein);(4) EACH OF THE CONDUIT LENDERS FROM TIME TO TIME PARTY HERETO, as a Conduit Lender;(5) EACH OF THE INSTITUTIONAL LENDERS FROM TIME TO TIME PARTY HERETO, as an Institutional Lender;(6) EACH OF THE LENDER AGENTS FROM TIME TO TIME PARTY HERETO, as a Lender Agent;(7) WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent (“Administrative Agent”); and(8) WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association (“WFBNA”), not in its individual capacity but solely asthe collateral agent (together with its successors and assigns in such capacity, the “Collateral Agent”), not in its individual capacity but solely as thecollateral custodian (together with its successors and assigns in such capacity, the “Collateral Custodian”) and not in its individual capacity but solelyas the Account Bank (as defined herein).PRELIMINARY STATEMENTThe Lenders have agreed, on the terms and conditions set forth herein, to provide a secured revolving credit facility which shall provide forAdvances from time to time in an aggregate principal amount not to exceed the Borrowing Base. The proceeds of the Advances will be used to financethe Borrower’s origination of Eligible Loan Assets or purchase, on a “true sale” basis, of Eligible Loan Assets from (i) the Transferor, pursuant to thePurchase and Sale Agreement between the Borrower and the Transferor or (ii) other third parties, in each case, with the prior written approval of theAdministrative Agent. Accordingly, the parties agree as follows:ARTICLE I.DEFINITIONSSection 1.01 Certain Defined Terms.(a) Certain capitalized terms used throughout this Agreement are defined above or in this Section 1.01.(b) As used in this Agreement and the exhibits, schedules and annexes thereto (each of which is hereby incorporated herein and made a parthereof), the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of theterms defined):“1940 Act” means the Investment Company Act of 1940, as amended, and the rules and regulations promulgated thereunder.“Account Bank” means Wells Fargo Bank, National Association, in its capacity as the “Account Bank” pursuant to the Control Agreement.“Account Bank Expenses” means the expenses set forth in the WFBNA Fee Letter that are payable to the Account Bank and any other accruedand unpaid expenses (including reasonable and documented attorneys’ fees, costs and expenses) and indemnity amounts in each case payable by theBorrower to the Account Bank under the Transaction Documents.“Account Bank Fees” means the fees set forth in the WFBNA Fee Letter, as such fee letter may be amended, restated, supplemented and/orotherwise modified from time to time.“Accreted Interest” means interest accrued on a Loan Asset that is added to the principal amount of such Loan Asset instead of being paid asinterest as it accrues.“Action” has the meaning assigned to that term in Section 8.03.“Adjusted Borrowing Value” means for any Eligible Loan Asset, for any date of determination, an amount equal to the Assigned Value of suchEligible Loan Asset at such time multiplied by the Outstanding Balance of such Eligible Loan Asset at such time; provided that (A) the parties herebyagree that the Adjusted Borrowing Value of any Loan Asset that is no longer an Eligible Loan Asset shall be zero and (B) the aggregate AdjustedBorrowing Value with respect to all Eligible Loan Assets that are loans to a single Obligor and its Affiliates shall not exceed the greater of (i) 5% of theaggregate Outstanding Balance of all Eligible Loan Assets or (ii) $15,000,000; provided, however, solely with respect to any three Obligors, theaggregate Adjusted Borrowing Value of all Eligible Loan Assets that are loans to a single Obligor and its Affiliates may exceed $15,000,000 so long as(x) such Adjusted Borrowing Value does not exceed the greater of (i) 6.5% of the aggregate Outstanding Balance of all Eligible Loan Assets or(ii) $17,500,000. For the avoidance of doubt, companies owned by the same Financial Sponsor shall not be considered “Affiliates” for purposes of thisdefinition of “Adjusted Borrowing Value”. -2-“Administrative Agent” means Wells Fargo Bank, National Association, in its capacity as administrative agent for the Lender Agents, togetherwith its successors and assigns, including any successor appointed pursuant to Article IX.“Advance” means each loan advanced by the Lenders to the Borrower on an Advance Date pursuant to Article II.“Advance Date” means, with respect to any Advance, the date on which such Advance is made.“Advances Outstanding” means, at any time, the sum of the principal amounts of Advances loaned to the Borrower for the initial and anysubsequent borrowings pursuant to Sections 2.01 and 2.02 as of such time, reduced by the aggregate Available Collections received and distributed asrepayment of principal amounts of Advances outstanding pursuant to Section 2.04 at or prior to such time and any other amounts received by theLenders to repay the principal amounts of Advances outstanding pursuant to Section 2.18 or otherwise at or prior to such time; provided that theprincipal amounts of Advances outstanding shall not be reduced by any Available Collections or other amounts if at any time such AvailableCollections or other amounts are rescinded or must be returned for any reason.“Affected Party” has the meaning assigned to that term in Section 2.10.“Affiliate” when used with respect to a Person, means any other Person controlling, controlled by or under common control with such Person. Forthe purposes of this definition, “control,” when used with respect to any specified Person, means the power to vote 20% or more of the voting securitiesof such Person or to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, bycontract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing; provided that for purposes ofdetermining whether any Loan Asset is an Eligible Loan Asset, the term Affiliate shall not include any Affiliate relationship which may exist solely asa result of direct or indirect ownership of, or control by, a common Financial Sponsor; provided, further, that for purposes of Section 2.07(e),Section 4.01(gg), Section 4.03(o), Section 5.01(n) and Section 5.03(i) of this Agreement, as well as Section 4.1(aa) and Section 5.2(h)(iv) of thePurchase and Sale Agreement, the term “Affiliate” shall not include any portfolio company of the Servicer or the Transferor, as applicable, that is notconsolidated on the financial statements of the Servicer or the Transferor, as applicable.“Agented Loan” means any Loan Asset originated as a part of a syndicated loan transaction that has one or more administrative, paying and/orcollateral agents who receive payments and hold the collateral pledged by the related Obligor on behalf of all lenders with respect to the related creditfacility. -3-“Aggregate Unfunded Exposure Amount” means, as of any date of determination, the sum of the Unfunded Exposure Amounts of all DelayedDraw Loan Assets held by the Borrower on such date.“Agreement” means this Loan and Servicing Agreement, as the same may be amended, restated, supplemented and/or otherwise modified fromtime to time hereafter.“Anti-Corruption Laws” means (a) the U.S. Foreign Corrupt Practices Act of 1977, as amended; (b) the U.K. Bribery Act 2010, as amended; and(c) any other anti-bribery or anti-corruption laws, regulations or ordinances in any jurisdiction in which the Borrower, the Servicer, the Transferor orany of their respective Subsidiaries is located or doing business.“Anti-Money Laundering Laws” means the Applicable Laws in any jurisdiction in which the Borrower, the Servicer, the Transferor or any of theirrespective Subsidiaries is located or doing business that relates to money laundering or terrorism financing.“Applicable Law” means for any Person or property of such Person, all existing and future laws, rules, regulations (including proposed, temporaryand final income tax regulations), statutes, treaties, codes, ordinances, permits, certificates, orders and licenses of and interpretations by anyGovernmental Authority applicable to such Person or property (including, without limitation, predatory lending laws, usury laws, the Dodd-Frank WallStreet Reform and Consumer Protection Act, the Federal Truth in Lending Act, Regulation Z and Regulation B of the Board of Governors of theFederal Reserve System and the Investment Advisers Act of 1940, as amended) and applicable judgments, decrees, injunctions, writs, awards or ordersof any court, arbitrator or other administrative, judicial, or quasi-judicial tribunal or agency of competent jurisdiction.“Applicable LIBOR Rate” means, with respect to any Loan Asset, the definition of “LIBOR Rate” or any comparable definition in the LoanAgreement for such Loan Asset.“Applicable Percentage” means, (i) with respect to any First Lien Loan Asset, 67.5% and (ii) with respect to any First Lien Last-Out Loan Asset,45.0%.“Applicable Prime Rate” means with respect to any Loan Asset, the prime or base rate (or any comparable definition) applicable to such LoanAsset pursuant to the Loan Agreement for such Loan Asset.“Applicable Spread” shall be 2.50% per annum; provided that, at any time after the occurrence and during the continuance of an Event ofDefault, the Applicable Spread shall be 4.50% per annum.“Approval Notice” means, with respect to any Eligible Loan Asset, the written notice, in substantially the form attached hereto as Exhibit A,evidencing the approval by the Administrative Agent, in its sole discretion, of the acquisition or origination, as applicable, of such Eligible Loan Assetby the Borrower. -4-“Asset Coverage Ratio” means the ratio, determined on a consolidated basis, without duplication and in accordance with GAAP of (a) the fairmarket value of the total assets of the BDC and its consolidated Subsidiaries as required by, and in accordance with, GAAP and Applicable Law andany orders of the Securities and Exchange Commission issued to the BDC, to be determined by the board of directors of the BDC and reviewed by itsauditors, less all liabilities (other than Indebtedness, including Indebtedness hereunder) of the BDC and its consolidated Subsidiaries, to (b) theaggregate amount of Indebtedness of the BDC and its consolidated Subsidiaries, in each case determined pursuant to Section 18 under the 1940 Act, asmodified by Section 61 thereunder, and any orders of the Securities and Exchange Commission issued thereunder, including any exemptive reliefgranted by the Securities and Exchange Commission with respect to the Indebtedness of any Person.“Assigned Documents” has the meaning assigned to that term in Section 2.12.“Assigned Value” means, with respect to each Eligible Loan Asset, as of any date of determination, the lower of (i) the Purchase Price of suchEligible Loan Asset or (ii) the value (expressed as a percentage of the Outstanding Balance of such Eligible Loan Asset) of such Eligible Loan Asset asdetermined by the Administrative Agent in its sole discretion as of the Cut-Off Date of such Eligible Loan Asset, subject to the following terms:(a) If a Value Adjustment Event of the type described in clauses (ii), (iii), (iv) or (vii) of the definition thereof with respect to such EligibleLoan Asset occurs, the Assigned Value of such Eligible Loan Asset will be zero.(b) If a Value Adjustment Event of the type described in clauses (i), (v) or (vi) of the definition thereof with respect to such Eligible LoanAsset occurs, the “Assigned Value” may be amended by the Administrative Agent at any time upon each such occurrence of a Value AdjustmentEvent, in its sole discretion; provided that, solely with respect to the occurrence of a Value Adjustment Event of the type described in clause (i)(y) of the definition thereof, immediately after giving effect to any such Assigned Value decrease, the Assigned Value shall, to the extentapplicable, be increased to the lower of (x) the original Assigned Value and (y) such value that would result in the Facility Attachment Ratio forsuch Loan Asset being lower than the “Minimum Facility Attachment Ratio” specified therefor in accordance with the grid below: -5-First Lien Loan Assets Net Senior Leverage Ratio Minimum Facility Attachment RatioLess than 4.25x 2.90xGreater than or equal to 4.25 and less than 5.00x 2.80xGreater than or equal to 5.00 and less than 6.00x 2.70xGreater than or equal to 6.00 and less than 7.00x 2.60xGreater than or equal to 7.00 and less than 8.00x 2.40xGreater than or equal to 8.00x 0.00xFirst Lien Last-Out Loan Assets Net Senior Leverage Ratio Minimum Facility Attachment RatioLess than 5.00x Facility Attachment Ratio as of Cut-Off DateGreater than or equal to 5.00 and less than 6.00x Facility Attachment Ratio as of Cut-Off Dateless 0.25xGreater than or equal to 6.00 and less than 7.00x Facility Attachment Ratio as of Cut-Off Dateless 0.50xGreater than or equal to 7.00x 0.00xDesignated Loan Assets Total Net Leverage Ratio Minimum Facility Attachment RatioLess than 6.00x The lesser of (i) Facility Attachment Ratio as of Cut-Off Date and (ii) 2.00xGreater than or equal to 6.00x 0.00x(c) If the Net Senior Leverage Ratio or the Interest Coverage Ratio, as the case may be, of any Eligible Loan Asset for which the AssignedValue has been decreased due to a Value Adjustment Event, as described in clause (i) of the definition thereof, improves to a level such that noValue Adjustment Event would be required at the time of determination, then the Borrower may request in writing the revaluation from time totime, with respect to any Eligible Loan Asset subject to this clause (c), and upon such request the Administrative Agent shall revaluate theAssigned Value of such Loan Asset; provided that such Assigned Value may not increase above the Purchase Price of such Loan Asset as of theapplicable Cut-Off Date.(d) The Administrative Agent shall promptly notify the Servicer of any change effectuated by the Administrative Agent of the AssignedValue of any Loan Asset. -6-“Available Collections” means, all cash collections and other cash proceeds with respect to any Eligible Loan Asset, including, withoutlimitation, all Principal Collections, all Interest Collections, all proceeds of any sale or disposition with respect to such Loan Asset, all cash proceeds orother funds received by the Borrower or the Servicer with respect to any Underlying Collateral (including from any guarantors), all other amounts ondeposit in the Collection Account from time to time, and all proceeds of Permitted Investments with respect to the Controlled Accounts; provided that,for the avoidance of doubt, “Available Collections” shall not include amounts on deposit in the Unfunded Exposure Account which do not representproceeds of Permitted Investments.“Bankruptcy Code” means Title 11, United States Code, 11 U.S.C. §§ 101 et seq., as amended from time to time.“Bankruptcy Event” shall be deemed to have occurred with respect to a Person if either:(i) a case or other proceeding shall be commenced, without the application or consent of such Person, in any court, seeking the liquidation,reorganization, debt arrangement, dissolution, winding up, or composition or readjustment of debts of such Person, the appointment of a trustee,receiver, custodian, liquidator, assignee, sequestrator or the like for such Person or all or substantially all of its assets under any BankruptcyLaws, or any similar action with respect to such Person under any law relating to bankruptcy, insolvency, reorganization, winding up orcomposition or adjustment of debts, and such case or proceeding shall continue undismissed, or unstayed and in effect, for a period of 60consecutive days; or an order for relief in respect of such Person shall be entered in an involuntary case under the federal bankruptcy laws orother similar laws now or hereafter in effect; or(ii) such Person shall commence a voluntary case or other proceeding under any Bankruptcy Laws now or hereafter in effect, or shallconsent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) forsuch Person or all or substantially all of its assets under any Bankruptcy Laws or shall make any general assignment for the benefit of creditors, orshall fail to, or admit in writing its inability to, pay its debts generally as they become due, or, if a corporation or similar entity, its board ofdirectors or members shall vote to implement any of the foregoing.“Bankruptcy Laws” means the Bankruptcy Code and all other applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement,receivership, insolvency, reorganization, suspension of payments, or similar debtor relief laws from time to time in effect affecting the rights ofcreditors generally.“Bankruptcy Proceeding” means any case, action or proceeding before any court or other Governmental Authority relating to any BankruptcyEvent. -7-“Base Rate” means, on any date, a fluctuating per annum interest rate equal to the higher of (a) the Prime Rate or (b) the Federal Funds Rate plus0.5%.“BDC” means Solar Capital Ltd., a Maryland corporation that has elected to be regulated as a business development company under the 1940Act.“BDC Asset Coverage Event” has the meaning specified in Section 6.08(h).“BDC Reporting Date” means any date on which the BDC publicly files its financial statements.“Beneficial Ownership Certification” means a certification regarding beneficial ownership required by the Beneficial Ownership Regulation,which certification shall be substantially similar in form and substance to the form of Certification Regarding Beneficial Owners of Legal EntityCustomers published jointly, in May 2018, by the Loan Syndications and Trading Association and Securities Industry and Financial MarketsAssociation.“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.“Benefit Plan Investor” means a “benefit plan investor” as defined in Department of Labor regulation 29 C.F.R. Section 2510.3-101, as modifiedby Section 3(42) of ERISA, and includes an employee benefit plan that is subject to the fiduciary responsibility provisions of Title I of ERISA, a planthat is subject to Section 4975 of the Code, and an entity the underlying assets of which are deemed to include plan assets.“Borrower” has the meaning assigned to that term in the preamble hereto.“Borrowing Base” means, as of any date of determination, an amount equal to the lesser of:(a) (i) the aggregate sum of the products of (A) the Applicable Percentage for each Eligible Loan Asset as of such date and (B) the AdjustedBorrowing Value of such Eligible Loan Asset as of such date, plus (ii) the amount on deposit in the Principal Collection Account as of such dateplus (iii) the amount on deposit in the Unfunded Exposure Account minus the Unfunded Exposure Equity Amount; or(b) (i) the aggregate Adjusted Borrowing Value of all Eligible Loan Assets as of such date minus (ii) the Minimum Equity Amount, plus(iii) the amount on deposit in the Principal Collection Account as of such date plus (iv) the amount on deposit in the Unfunded ExposureAccount minus the Unfunded Exposure Equity Amount; or(c) the Maximum Facility Amount minus the Aggregate Unfunded Exposure Amount plus the lesser of (x) the Aggregate UnfundedExposure Amount and (y) the amount on deposit in the Unfunded Exposure Account;provided that, for the avoidance of doubt, any Loan Asset which at any time is no longer an Eligible Loan Asset shall not be included in thecalculation of “Borrowing Base”. -8-“Borrowing Base Certificate” means a certificate setting forth the calculation of the Borrowing Base as of the applicable date of determinationsubstantially in the form of Exhibit B hereto, prepared by the Servicer.“Borrowing Base Deficiency” means, as of any date of determination, an amount equal to the positive difference, if any, of (a) AdvancesOutstanding on such date over (b) the Borrowing Base.“Breakage Fee” means, for Advances which are repaid (in whole or in part) on any date other than a Payment Date, the breakage costs (other thanlost profits), if any, related to such repayment, based upon the assumption that the Lender funded its loan commitment in the London InterbankEurodollar market and using any reasonable attribution or averaging methods which the Lender deems appropriate and practical, it hereby beingunderstood that the amount of any loss, costs or expense payable by the Borrower to any Lender as Breakage Fee shall be determined in the respectiveLender Agent’s reasonable discretion and shall be conclusive absent manifest error.“Business Day” means a day of the year other than (i) Saturday or a Sunday or (ii) any other day on which commercial banks in New York, NewYork, Charlotte, North Carolina, or the city in which the offices of the Collateral Agent are authorized or required by applicable law, regulation orexecutive order to close; provided that, if any determination of a Business Day shall relate to an Advance bearing interest at LIBOR, the term “BusinessDay” shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market. For avoidance of doubt,if the offices of the Collateral Agent are authorized by applicable law, regulation or executive order to close but remain open, such day shall not be a“Business Day”.“Capital Lease Obligations” means, with respect to any entity, the obligations of such entity to pay rent or other amounts under any lease of (orother arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified andaccounted for as capital leases on a balance sheet of such entity under GAAP, and the amount of such obligations shall be the capitalized amountthereof determined in accordance with GAAP.“Change of Control” shall be deemed to have occurred if any of the following occur:(a) the creation or imposition of any Lien (other than Permitted Liens) on any limited liability company membership interest in theBorrower;(b) the failure by the EquityholderSolar to own, directly or indirectly, 100% of the limited liability company membership interests in theBorrower;(c) the dissolution, termination or liquidation in whole or in part, transfer or other disposition, in each case, of all or substantially all of theassets of, Solar, other than as permitted pursuant to Section 5.04(a); or -9-(d) any change of control of the Servicer that takes the form of either a merger or consolidation that does not comply with the provisions ofSection 5.04(a);(e) the failure by Solar to own at least 51% of the limited liability company membership interests in the Equityholder; or(f) the addition ofany Person, other than Solar, Voya Retirement Insurance and Annuity Company, ReliaStar Life Insurance Company or Voya Insurance andAnnuity Company (or in each case, any Affiliate thereof with prior written notice provided to the Administrative Agent), as a member under theEquityholder’s limited liability company agreement.“Closing Date” means June 30, 2016.“Code” means the Internal Revenue Code of 1986, as amended.“Collateral Agent” has the meaning assigned to that term in the preamble hereto.“Collateral Agent Expenses” means the expenses set forth in the WFBNA Fee Letter and any other accrued and unpaid expenses (includingreasonable and documented attorneys’ fees, costs and expenses) and indemnity amounts, in each case payable by the Borrower to the Collateral Agentunder the Transaction Documents.“Collateral Agent Fees” means the fees set forth in the WFBNA Fee Letter that are payable to the Collateral Agent, as such fee letter may beamended, restated, supplemented and/or otherwise modified from time to time.“Collateral Agent Termination Notice” has the meaning assigned to that term in Section 10.05.“Collateral Custodian” means WFBNA, not in its individual capacity, but solely as collateral custodian pursuant to the terms of this Agreement.“Collateral Custodian Expenses” means the expenses set forth in the WFBNA Fee Letter that are payable to the Collateral Custodian and anyother accrued and unpaid expenses (including reasonable and documented attorneys’ fees, costs and expenses) and indemnity amounts in each casepayable by the Borrower to the Collateral Custodian under the Transaction Documents.“Collateral Custodian Fees” means the fees set forth in the WFBNA Fee Letter, as such fee letter may be amended, restated, supplemented and/orotherwise modified from time to time.“Collateral Custodian Termination Notice” has the meaning assigned to that term in Section 12.05.“Collateral Portfolio” means all right, title, and interest (whether now owned or hereafter acquired or arising, and wherever located) of theBorrower in the property identified below in clauses (i) through (iv) and all accounts, cash and currency, chattel paper, tangible -10-chattel paper, electronic chattel paper, copyrights, copyright licenses, equipment, fixtures, contract rights, general intangibles, instruments, certificatesof deposit, certificated securities, uncertificated securities, financial assets, securities entitlements, commercial tort claims, deposit accounts, inventory,investment property, letter-of-credit rights, software, supporting obligations, accessions, or other property consisting of, arising out of, or related to anyof the following (in each case excluding the Retained Interest and the Excluded Amounts):(i) the Loan Assets, and all monies due or to become due in payment under such Loan Assets on and after the related Cut-Off Date,including, but not limited to, all Available Collections;(ii) the Portfolio Assets with respect to the Loan Assets referred to in clause (i) above;(iii) the Controlled Accounts and all Permitted Investments purchased with funds on deposit in the Controlled Accounts; and(iv) all income and Proceeds of the foregoing.For the avoidance of doubt, the term “Collateral Portfolio” shall, for all purposes of this Agreement, be deemed to include any Loan Assetacquired directly by the Borrower from a third party in a transaction underwritten by the Transferor or any transaction in which the Borrower is thedesignee of the Transferor under the instruments of conveyance relating to the applicable Loan Asset.“Collection Account” has the meaning assigned to that term in Section 6.04(f).“Collection Date” means the date on which the aggregate outstanding principal amount of the Advances have been repaid in full and all Yieldand Fees and all other Obligations (other than contingent indemnification and reimbursement obligations which are unknown, unmatured and/or forwhich no claim giving rise thereto has been asserted) have been paid in full, and the Borrower shall have no further right to request any additionalAdvances.“Commercial Paper Notes” means, any short-term promissory notes of any Conduit Lender issued by such Conduit Lender in the commercialpaper market.“Commitment” means, with respect to each Lender, (i) prior to the end of the Reinvestment Period or for purposes of Advances made pursuant toSection 2.02(f), the dollar amount set forth opposite such Lender’s name on Annex A hereto (as such amount may be revised from time to time inaccordance with the terms hereof) or the amount set forth as such Lender’s “Commitment” on Schedule I to the Joinder Supplement relating to suchLender, as applicable and (ii) on or after the Reinvestment Period (other than for purposes of Advances made pursuant to Section 2.02(f)), such Lender’sPro Rata Share of the aggregate Advances Outstanding.“Committed Equity Capital” means equity capital committed to the Equityholder (which, for the avoidance of doubt, includes funded andunfunded commitments) pursuant to binding documentation satisfactory to the Administrative Agent in its sole discretion. On the Closing Date, theCommitted Equity Capital is $200,000,000. -11-“Conduit Lender” means each commercial paper conduit as may from time to time become a Lender hereunder by executing and delivering aJoinder Supplement to the Administrative Agent and the Borrower as contemplated by Section 2.21.“Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that arefranchise Taxes or branch profits Taxes.“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person,whether through the ability to exercise voting power, by contract or otherwise.“Control Agreement” means that certain Account Control Agreement, dated the date of this Agreement, among the Borrower, the Servicer, theAccount Bank, the Administrative Agent and the Collateral Agent, which agreement relates to the Collection Account and the Unfunded ExposureAccount, as such agreement may from time to time be amended, supplemented or otherwise modified in accordance with the terms thereof.“Controlled Accounts” means the Collection Account and the Unfunded Exposure Account.“Cut-Off Date” means, with respect to each Loan Asset, the date such Loan Asset is Pledged hereunder.“Defaulting Lender” means any Lender that (i) has failed to fund any portion of the Advances required to be funded by it hereunder within oneBusiness Day of the date required to be funded by it hereunder, (ii) has otherwise failed to pay over to the Administrative Agent or any other Lenderany other amount required to be paid by it hereunder within three Business Days of the date when due, unless such amount is the subject of a goodfaith dispute, (iii) has notified the Borrower, the Administrative Agent or any other Lender in writing that it does not intend to comply with any of itsfunding obligations under this Agreement or has made a public statement to the effect that it does not intend to comply or has failed to comply with itsfunding obligations under this Agreement or generally under other agreements in which it commits or is obligated to extend credit, or (iv) has becomeor is insolvent or has become the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee or custodian appointedfor it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment.“Defaulted Loan Asset” means a Loan Asset which has become subject to a Value Adjustment Event of the type described in clauses (ii), (iii),(iv) or (vii) in the definition thereof. If the Value Adjustment Event which gave rise to a Defaulted Loan Asset is cured, waived or no longer inexistence, the Borrower may submit such Loan Asset for review by the Administrative Agent (in its sole discretion) for the purpose of re-classifyingsuch Loan Asset as a Loan Asset which is no longer a Defaulted Loan Asset. -12-“Delayed Draw Loan Asset” means a Loan Asset that is fully committed on the initial funding date of such Loan Asset and is required to be fullyfunded in one or more installments on draw dates but which, once all such installments have been made, does not permit the re-borrowing of anyamount previously repaid by the related Obligor; provided that upon the making of each installment, such portion shall no longer be deemed to be a“Delayed Draw Loan Asset” for purposes of this Agreement.“Designated Loan Asset” means any Loan Asset that the Administrative Agent, in its sole discretion, has designated as a “Designated LoanAsset” on the related Approval Notice.“Determination Date” means the last day of each calendar month.“Disbursement Request” means a disbursement request from the Borrower to the Administrative Agent and the Collateral Agent in the formattached hereto as Exhibit C in connection with a disbursement request from the Unfunded Exposure Account in accordance with Section 2.04(d) or adisbursement request from the Principal Collection Account in accordance with Section 2.20, as applicable.“Dollars” means, and the conventional “$” signifies, the lawful currency of the United States.“EBITDA” means, with respect to any period and any Loan Asset, the meaning of “EBITDA”, “Adjusted EBITDA” or any comparable definitionin the Loan Agreement for each such Loan Asset (together with all add-backs and exclusions as designated in such Loan Agreement), and in any casethat “EBITDA”, “Adjusted EBITDA” or such comparable definition is not defined in such Loan Agreement, an amount, for the principal obligor onsuch Loan Asset and any of its parents or Subsidiaries that are obligated pursuant to the Loan Agreement for such Loan Asset (determined on aconsolidated basis without duplication in accordance with GAAP) equal to earnings from continuing operations for such period plus interest expense,income taxes and unallocated depreciation and amortization for such period (to the extent deducted in determining earnings from continuingoperations for such period), and any other item the Borrower and the Administrative Agent mutually deem to be appropriate.“Eligibility Criteria” means, collectively, all of the following criteria with respect to any Loan Asset (other than any individual clause listedbelow that the Administrative Agent in its sole discretion has, prior to the applicable Cut-Off Date, waived in writing with respect to such Loan Asset,which waiver shall solely be for the specific fact or circumstance that existed at the time of such waiver):(i) As of the related Cut-Off Date, each such Loan Asset is a First Lien Loan Asset or a First Lien Last-Out Loan Asset.(ii) With respect to each such Loan Asset, the Primary Obligor is organized under the laws of the United States or any state thereof.(iii) Each such Loan Asset is denominated in Dollars. -13-(iv) As of the related Cut-Off Date, no such Loan Asset is Margin Stock.(v) The acquisition of such Loan Asset would not cause the Borrower or the assets constituting the Collateral Portfolio to be required to beregistered as an investment company under the 1940 Act, as amended.(vi) No such Loan Asset is a financing by a debtor-in-possession in any Bankruptcy Proceeding.(vii) No such Loan Asset is principally secured by real estate.(viii) Each such Loan Asset constitutes a legal, valid, binding and enforceable obligation of the Obligor thereunder and each guarantorthereof, enforceable against each such Person in accordance with its terms, subject to usual and customary bankruptcy, insolvency and equitylimitations.(ix) Each such Loan Asset is in the form of, and is treated as, indebtedness for United States federal income tax purposes.(x) As of the related Cut-Off Date, each such Loan Asset is not in payment default.(xi) As of the related Cut-Off Date, the acquisition of each such Loan Asset by the Borrower, and the Pledge of each such Loan Asset, hasbeen approved by the Administrative Agent in its sole discretion.(xii) The Obligor with respect to each such Loan Asset is not an Affiliate of the Servicer or the Transferor with respect to such Loan Asset.(xiii) The acquisition of any such Loan Asset by the Borrower or the Pledge thereof will not (a) violate in any material respect anyApplicable Law or (b) cause the Administrative Agent, the Lenders or the Lender Agents to fail to comply with any request or directive (whetheror not having the force of law) from any banking or other Governmental Authority having jurisdiction over the Administrative Agent, theLenders or the Lender Agents.(xiv) Pursuant to the Loan Agreement with respect to such Loan Asset, either (a) such Loan Asset is freely assignable to the Borrower andable to be Pledged to the Collateral Agent, on behalf of the Secured Parties, without the consent of the Obligor or (b) all consents necessary forassignment of such Loan Asset to the Borrower and Pledge to the Collateral Agent for the benefit of the Secured Parties have been obtained.(xv) The funding obligations for each such Loan Asset and the Loan Agreement under which such Loan Asset was created have been fullysatisfied and all sums available thereunder have been fully advanced, or if such Loan Asset -14-is a Delayed Draw Loan Asset, either (a) the Borrower shall have or have caused to be, at the time of the acquisition of such Loan Asset by theBorrower, deposited into the Unfunded Exposure Account an amount in Dollars equal to the Unfunded Exposure Equity Amount or (b) theUnfunded Exposure Equity Amount with respect to such Loan Asset shall not create a Borrowing Base Deficiency.(xvi) (a) As of the related Cut-Off Date, no such Loan Asset is the subject of any assertions in respect of, any litigation on the part of anyPerson, right of rescission, set-off, counterclaim or defense, including the defense of usury, by the related Obligor and (b) the Loan Agreementswith respect to such Loan Asset contain provisions substantially to the effect that the payment obligations of the Obligor(s) thereunder areabsolute and unconditional without any right of rescission, setoff, counterclaim or defense against the Transferor or other assignor, as applicable,and the assignees thereof and the Loan Agreements with respect to the Loan Asset provide for an affirmative waiver by the related Obligor of allrights of rescission, set-off and counterclaim against the Transferor and its assignees.(xvii) With respect to each such Loan Asset acquired by the Borrower from the Transferor under the Purchase and Sale Agreement, by theCut-Off Date on which such Loan Asset is Pledged under the Agreement and on each day thereafter on which the Borrower continues to own suchLoan Asset, the Transferor will have caused its master computer records relating to such Loan Asset to be clearly and unambiguously marked toshow that such Loan Asset has been sold to the Borrower.(xviii) As of the related Cut-Off Date, no such Loan Asset has been repaid, prepaid, satisfied, in each case, in full or rescinded in part or infull.(xix) No such Loan Asset has been sold, transferred, assigned or pledged by the Borrower to any Person other than the Collateral Agent forthe benefit of the Secured Parties.(xx) Such Loan Asset is not subject to withholding tax unless the Obligor thereon is required under the terms of the related LoanAgreement to make “gross-up” payments that cover the full amount of such withholding tax on an after-tax basis. The transfer, assignment andconveyance of such Loan Asset (and the other Portfolio Assets related thereto) is not subject to and will not result in any tax, fee or governmentalcharge (other than income taxes) payable by the Borrower or any other Person to any federal, state or local government.(xxi) To the knowledge of the Borrower and the Servicer, as of the Cut-Off Date, the Obligor with respect to such Loan Asset (and anyguarantor of such Obligor’s obligations thereunder) had full legal capacity to execute and deliver the Loan Agreement which creates such LoanAsset and any other documents related thereto. -15-(xxii) As of the related Cut-Off Date, the Obligor of each such Loan Asset is not a Governmental Authority.(xxiii) For each such Loan Asset acquired by the Borrower from the Transferor, (a) such Loan Asset was originated or sourced by theTransferor in the ordinary course of the Transferor’s business and, to the extent required by Applicable Law, the Transferor had all necessarylicenses and permits to originate such Loan Asset in the State where the Obligor was located and (b) such Loan Asset was sold by the Transferorto the Borrower under the Purchase and Sale Agreement and, to the extent required by Applicable Law, the Borrower has all necessary licensesand permits to purchase and own such Loan Assets and enter into Loan Agreements pursuant to which each such Loan Asset was created, in theState where the Obligor is located.(xxiv) As of the related Cut-Off Date, there are no proceedings pending or, to the Borrower’s knowledge, threatened (a) asserting insolvencyof the Obligor of such Loan Asset or (b) wherein the Obligor of such Loan Asset, any other party or any Governmental Authority has alleged thatsuch Loan Asset or the Loan Agreement which creates such Loan Asset is illegal or unenforceable.(xxv) Each such Loan Asset requires the related Obligor to maintain the Underlying Collateral with respect to such Loan Asset in goodrepair and to maintain adequate insurance with respect to such related Underlying Collateral.(xxvi) To the knowledge of the Borrower and the Servicer, the Underlying Collateral related to each such Loan Asset has not, and will not,be used by the related Obligor in any manner or for any purpose which would result in any material risk of material liability being imposed uponthe Transferor, the Borrower or the Lenders under any federal, state, local or foreign laws, common laws, statutes, codes, ordinances, rules,regulations, permits, judgments, agreements or order related to or addressing the environment, health or safety.(xxvii) Each such Loan Asset has an original term to maturity of not greater than seven years.(xxviii) Each such Loan Asset does not contain confidentiality restrictions that would prohibit the Lenders, the Lender Agents or theAdministrative Agent from accessing all necessary information (as required to be provided pursuant to the Transaction Documents) with regardsto such Loan Asset.(xxix) (a) Each Floating Rate Loan Asset has a current cash coupon of at least 3.00% and such coupon is payable at least quarterly. EachFixed Rate Loan Asset has a current cash coupon of at least 7.00%.(xxx) Each such Loan Asset (i) was originated or sourced and underwritten, or purchased and re-underwritten, by the Transferor or theBorrower (or the Servicer, on the Borrower’s behalf), including, without -16-limitation, the completion of due diligence and, if applicable, a collateral assessment as the Transferor or the Servicer on the Borrower’s behalfconsidered necessary and (ii) is being serviced by the Servicer.(xxxi) In accordance with Section 3.02, all of the Required Loan Documents and the Loan Asset Checklist, acceptable to theAdministrative Agent and the Transferor, with respect to such Loan Asset have been, or will be, delivered to the Collateral Custodian within fiveBusiness Days of the applicable Cut-Off Date.(xxxii) Each such Loan Asset is not an extension of credit to the Obligor for the purpose of (a) making any past due principal, interest orother payments due on such Loan Asset, (b) preventing such Loan Asset or any other loan to the related Obligor from becoming past due or(iii) preventing such Loan Asset from becoming a Defaulted Loan Asset.(xxxiii) To the knowledge of the Borrower and the Servicer, the Obligor with respect to such Loan Asset, on the applicable date ofdetermination, (a) is a business organization (and not a natural person) duly organized and validly existing under the laws of its jurisdiction oforganization; (b) is a legal operating entity or holding company; (c) has not entered into the Loan Asset primarily for personal, family orhousehold purposes; and (d) as of the related Cut-Off Date is not the subject of a Bankruptcy Event, and, as of the related Cut-Off Date, suchObligor is not in financial distress and has not experienced a material adverse change in its condition, financial or otherwise, in each case, asdetermined by the Servicer in its reasonable discretion unless approved in writing by the Administrative Agent.(xxxiv) All information provided by the Borrower or the Servicer to the Administrative Agent in writing with respect to such Loan Asset istrue and correct in all material respects as of the date such information is provided.(xxxv) No Loan Asset is an Equity Security nor does any Loan Asset provide for the conversion into an Equity Security at any time on orafter the date it is included as part of the Collateral Portfolio.(xxxvi) As of the related Cut-Off Date, no selection procedures adverse to the interests of the Secured Parties were utilized by the Borrowerin the selection of such Loan Asset.(xxxvii) As of the related Cut-Off Date and immediately after giving effect to the acquisition of such Loan Asset, the Adjusted BorrowingValue with respect to all Eligible Loan Assets consisting of Fixed Rate Loan Assets will not exceed, in the aggregate, 5.0% of the MaximumFacility Amount. -17-(xxxviii) As of the related Cut-Off Date and immediately after giving effect to the acquisition of such Loan Asset, the Aggregate UnfundedExposure Amount will not exceed, in the aggregate, 10.0% of the Maximum Facility Amount.(xxxix) As of the related Cut-Off Date and immediately after giving effect to the acquisition of such Loan Asset, the Adjusted BorrowingValue with respect to all Eligible Loan Assets consisting of First Lien Last-Out Loan Assets will not exceed, in the aggregate, 10.0% of theMaximum Facility Amount.(xl) Such Loan Asset is not a participation interest in all or a portion of a loan (for the avoidance of doubt, a syndication or co-lendinginterest which is not documented as a participation interest shall not be deemed a participation interest).“Eligible Loan Asset” means, at any time, a Loan Asset in respect of which each of the representations and warranties contained in Section 4.02 istrue and correct in respect of such Loan Asset.“Environmental Laws” means any and all foreign, federal, state and local laws, statutes, ordinances, rules, regulations, permits, licenses,approvals, interpretations (with the force of law) and orders of courts or Governmental Authorities, relating to the protection of human health or theenvironment, including, but not limited to, requirements pertaining to the manufacture, processing, distribution, use, treatment, storage, disposal,transportation, handling, reporting, licensing, permitting, investigation or remediation of Hazardous Materials. Environmental Laws include, withoutlimitation, the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. § 9601 et seq.), the Hazardous MaterialTransportation Act (49 U.S.C. § 331 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), the Federal Water PollutionControl Act (33 U.S.C. § 1251 et seq.), the Clean Air Act (42 U.S.C. § 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. § 2601 et seq.), theSafe Drinking Water Act (42 U.S.C. § 300, et seq.), the Environmental Protection Agency’s regulations relating to underground storage tanks (40 C.F.R.Parts 280 and 281), and the Occupational Safety and Health Act (29 U.S.C. § 651 et seq.), and the rules and regulations thereunder, each as amended orsupplemented from time to time.“Equity Security” means (i) any equity security or any other security that is not eligible for purchase by the Borrower as a Loan Asset, (ii) anysecurity purchased as part of a “unit” with a Loan Asset and that itself is not eligible for purchase by the Borrower as a Loan Asset, and (iii) anyobligation that, at the time of commitment to acquire such obligation, was eligible for purchase by the Borrower as a Loan Asset but that, as of anysubsequent date of determination, no longer is eligible for purchase by the Borrower as a Loan Asset, for so long as such obligation fails to satisfy suchrequirements.“Equityholder” means Senior Secured Unitranche Loan Program LLC. The Equityholder shall provide the Minimum Equity Amount to theBorrower by way of a capital contribution to the Borrower. -18-“Equityholder Operating Agreement” means the Amended & Restated Limited Liability Company Agreement of the Equityholder, dated as ofOctober 15, 2015, as the same may be amended, restated, modified or supplemented from time to time.“ERISA” means the United States Employee Retirement Income Security Act of 1974, as amended from time to time.“ERISA Affiliate” means with respect to a Person (a) any corporation that is a member of the same controlled group of corporations (within themeaning of Section 414(b) of the Code) as that Person, (b) a trade or business (whether or not incorporated) under common control (within the meaningof Section 414(c) of the Code) with that Person, or (c) a member of the same affiliated service group (within the meaning of Section 414(m) of the Code)as that Person, any corporation described in clause (a) above or any trade or business described in clause (b) above.“Eurodollar Disruption Event” means the occurrence of any of the following: (a) Wells Fargo shall have notified the Administrative Agent of adetermination by Wells Fargo, as Lender, or any of its assignees or participants that it would be contrary to law or to the directive of any central bank orother Governmental Authority (whether or not having the force of law) to obtain Dollars in the London interbank market to fund any Advance,(b) Wells Fargo shall have notified the Administrative Agent of the inability, for any reason, of Wells Fargo or any of its respective assignees orparticipants to determine LIBOR, (c) Wells Fargo, as Lender, shall have notified the Administrative Agent of a determination by Wells Fargo, asLender, or any of its respective assignees or participants that the rate at which deposits of Dollars are being offered to Wells Fargo or any of itsrespective assignees or participants in the London interbank market does not accurately reflect the cost to Wells Fargo or its assignee or participant ofmaking, funding or maintaining any Advance or (d) Wells Fargo shall have notified the Administrative Agent of the inability of Wells Fargo or any ofits respective assignees or participants to obtain Dollars in the London interbank market to make, fund or maintain any Advance.“Event of Default” has the meaning assigned to that term in Section 7.01.“Excepted Persons” has the meaning assigned to that term in Section 11.13(a).“Exchange Act” means the United States Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.“Excluded Amounts” means (a) any amount received in the Collection Account with respect to any Loan Asset included as part of the CollateralPortfolio, which amount is attributable to the payment of any Tax, fee or other charge imposed by any Governmental Authority on such Loan Asset oron any Underlying Collateral and (b) any amount received in the Collection Account or other Controlled Account representing (i) any amountrepresenting a reimbursement of insurance premiums, (ii) any escrows relating to Taxes, insurance and other amounts in connection with Loan Assetswhich are held in an escrow account for the benefit of the Obligor and the secured party pursuant to escrow arrangements under a Loan Agreement and(iii) any amount received in the Collection Account with respect to any Loan Asset retransferred -19-or substituted for upon the occurrence of a Warranty Event or that is otherwise replaced by a Substitute Eligible Loan Asset, or that is otherwise sold ortransferred by the Borrower pursuant to Section 2.07, to the extent such amount is attributable to a time after the effective date of such replacement orsale.“Excluded Taxes” means any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from apayment to a Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in eachcase, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, itsapplicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes,(b) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to anapplicable interest in an Obligation or Commitment pursuant to a law in effect on the date on which (i) such Lender acquires such interest in theObligation or Commitment (other than pursuant to an assignment request by the Borrower under Section 2.11(i)) or (ii) such Lender changes its lendingoffice, except in each case to the extent that, pursuant to Section 2.11, amounts with respect to such Taxes were payable either to such Lender’sassignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its lending office, (c) Taxesattributable to such Recipient’s failure to comply with Section 2.11(g) and (d) any withholding Taxes imposed under FATCA.“Facility Attachment Ratio” means, with respect to any Eligible Loan Asset, as of any date of determination, an amount equal to (i) if suchEligible Loan Asset is a First Lien Loan Asset, the product of (a) the Net Senior Leverage Ratio, (b) the Applicable Percentage and (c) the AssignedValue, (ii) if such Eligible Loan Asset is a First Lien Last-Out Loan Asset, the sum of (a) the First Out Attachment Ratio and (b) the product of (I)(x) theLast Out Attachment Ratio less (y) the First Out Attachment Ratio, (II) the Applicable Percentage and (III) the Assigned Value, in each case, as of suchdate and (iii) if such Eligible Loan Asset is a Designated Loan Asset, the product of (I) the Net Senior Leverage Ratio, (II) the Applicable Percentageand (III) the Assigned Value.“Facility Maturity Date” means the earliest to occur of (i) the Stated Maturity Date, (ii) the date of the declaration, or automatic occurrence, of theFacility Maturity Date pursuant to Section 7.01, (iii) the Collection Date and (iv) the occurrence of the termination of this Agreement pursuant toSection 2.18(b) hereof.“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (and any amended or successor version that issubstantively comparable and not materially more onerous to comply with), the United States Treasury Regulations promulgated thereunder andofficial published guidance with respect thereto and any agreements entered into pursuant to Section 1471(b)(1) of the Code and any fiscal orregulatory legislation rules or practices adopted pursuant to any intergovernmental agreement entered into in connection with the implementation ofsuch Sections of the Code.“Federal Funds Rate” means, for any period, a fluctuating interest per annum rate equal, for each day during such period, to the weighted averageof the overnight federal funds -20-rates as in Federal Reserve Board Statistical Release H.15(519) or any successor or substitute publication selected by the Administrative Agent (or, ifsuch day is not a Business Day, for the next preceding Business Day), or, if for any reason such rate is not available on any day, the rate determined, inthe sole discretion of the Administrative Agent, to be the rate at which overnight federal funds are being offered in the national federal funds market at9:00 a.m. on such day.“Fees” means (i) the Non-Usage Fee and (ii) the fees payable to each Lender or Lender Agent pursuant to the terms of any Lender Fee Letter.“Financial Asset” has the meaning specified in Section 8-102(a)(9) of the UCC.“Financial Sponsor” means any Person, including any Subsidiary of such Person, whose principal business activity is acquiring, holding, andselling investments (including controlling interests) in otherwise unrelated companies that each are distinct legal entities with separate management,books and records and bank accounts, whose operations are not integrated with one another and whose financial condition and creditworthiness areindependent of the other companies so owned by such Person.“First Lien Last-Out Loan Asset” means a commercial loan that would constitute a First Lien Loan Asset but that, at any time prior to and/or afteran event of default under the related Loan Agreement of such Eligible Loan Asset, will be paid after one or more tranches of First Lien Loan Assetsissued by the same Obligor have been paid in full in accordance with a specified waterfall or other priority of payments; provided that theAdministrative Agent may, in its sole discretion, designate an Eligible Loan Asset that would otherwise constitute a First Lien Last-Out Loan Asset as aFirst Lien Loan Asset in the related Approval Notice.“First Lien Loan Asset” means a commercial loan (a) that is not (and cannot by its terms become) subordinate in right of payment to anyobligation of the Obligor in any bankruptcy, reorganization, arrangement, insolvency, moratorium or liquidation proceedings, (b) that is secured by apledge of collateral, which security interest is validly perfected and first priority under Applicable Law (subject to liens permitted under the applicablecredit agreement that are reasonable and customary for similar loans, and liens accorded priority by law in favor of the United States or any State oragency), and (c) the Servicer determines in good faith that the value of the collateral securing the loan on or about the time of origination equals orexceeds the outstanding principal balance of the loan plus the aggregate outstanding balances of all other loans of equal or higher seniority secured bythe same collateral; provided that, for the avoidance of doubt, a First Lien Last-Out Loan Asset shall not constitute a First Lien Loan Asset unless theAdministrative Agent, in its sole discretion, designates an Eligible Loan Asset that would otherwise constitute a First Lien Last-Out Loan Asset as aFirst Lien Loan Asset in the related Approval Notice.“First Out Attachment Ratio” means, with respect to any Eligible Loan Asset, as of any date of determination, an amount equal to the Net SeniorLeverage Ratio with respect to all or any portion of such Eligible Loan Asset that constitutes first lien senior secured Indebtedness that is not (andcannot by its terms become) subordinate in right of payment to any obligation of the Obligor in any bankruptcy, reorganization, arrangement,insolvency, moratorium or liquidation proceedings (excluding any First Lien Last-Out Loan Asset or other first lien last out Indebtedness within thecapital structure). -21-“Fixed Rate Loan Asset” means an Eligible Loan Asset other than a Floating Rate Loan Asset.“Floating Rate Loan Asset” means an Eligible Loan Asset under which the Loan Rate payable by the Obligor thereof is based on the ApplicablePrime Rate or the Applicable LIBOR Rate, plus some specified interest percentage in addition thereto, and the Eligible Loan Asset provides that suchLoan Rate will reset in accordance with customary terms immediately upon any change in the related Applicable Prime Rate or the Applicable LIBORRate.“Foreign Lender” means (a) if the Borrower is a U.S. Person, a Lender that is not a U.S. Person, and (b) if the Borrower is not a U.S. Person, aLender that is resident or organized under the laws of a jurisdiction other than that in which the Borrower is resident for tax purposes.“GAAP” means generally accepted accounting principles as in effect from time to time in the United States.“Governmental Authority” means, with respect to any Person, any nation or government, any state or other political subdivision thereof, anycentral bank (or similar monetary or regulatory authority) thereof, any body or entity exercising executive, legislative, judicial, regulatory oradministrative functions of or pertaining to government and any court or arbitrator having jurisdiction over such Person.“Governmental Plan Entity” means a “governmental plan” within the meaning of Section 3(32) of ERISA or any other entity the assets of whichare subject to state statutes regulating investments of and fiduciary obligations with respect to such governmental plans or to state statutes that imposeprohibitions similar to those contained in Section 406 of ERISA or Section 4975 of the Code.“Hazardous Materials” means all materials subject to any Environmental Law, including, without limitation, materials listed in 49 C.F.R. §172.010, materials defined as hazardous pursuant to § 101(14) of the Comprehensive Environmental Response, Compensation and Liability Act of1980, as amended, flammable, explosive or radioactive materials, hazardous or toxic wastes or substances, lead-based materials, petroleum orpetroleum distillates or asbestos or material containing asbestos, polychlorinated biphenyls, radon gas, urea formaldehyde and any substancesclassified as being “in inventory”, “usable work in process” or similar classification that would, if classified as unusable, be included in the foregoingdefinition.“Indebtedness” means:(i) with respect to any Obligor under any Loan Asset, for the purposes of the definition of “Interest Coverage Ratio”, “Net Senior LeverageRatio,” and “Total Net Leverage Ratio” the meaning of “Indebtedness” or any comparable definition in the Loan Agreement for each such LoanAsset, and in any case that -22-“Indebtedness” or such comparable definition is not defined in such Loan Agreement, without duplication, (a) all obligations of such entity forborrowed money or with respect to deposits or advances of any kind, (b) all obligations of such entity evidenced by bonds, debentures, notes orsimilar instruments, (c) all obligations of such entity under conditional sale or other title retention agreements relating to property acquired bysuch entity, (d) all obligations of such entity in respect of the deferred purchase price of property or services (excluding current accounts payableincurred in the ordinary course of business), (e) all indebtedness of others secured by (or for which the holder of such indebtedness has anexisting right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such entity, whether or not the indebtednesssecured thereby has been assumed, (f) all guarantees by such entity of indebtedness of others, (g) all Capital Lease Obligations of such entity,(h) all obligations, contingent or otherwise, of such entity as an account party in respect of letters of credit and letters of guaranty and (i) allobligations, contingent or otherwise, of such entity in respect of bankers’ acceptances; and(ii) for all other purposes, with respect to any Person at any date, (a) all indebtedness of such Person for borrowed money or for the deferredpurchase price of property or services (other than current liabilities incurred in the ordinary course of business and payable in accordance withcustomary trade practices) or that is evidenced by a note, bond, debenture or similar instrument or other evidence of indebtedness customary forindebtedness of that type, (b) all obligations of such Person under leases that have been or should be, in accordance with GAAP, recorded ascapital leases, (c) all obligations of such Person in respect of acceptances issued or created for the account of such Person, (d) all liabilitiessecured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for thepayment thereof, (e) all indebtedness, obligations or liabilities of that Person in respect of derivatives, and (f) all obligations under direct orindirect guaranties in respect of obligations (contingent or otherwise) to purchase or otherwise acquire, or to otherwise assure a creditor againstloss in respect of, indebtedness or obligations of others of the kind referred to in clauses (a) through (e) of this clause (ii). The amount of anyIndebtedness under clause (d) shall be equal to the lesser of (A) the aggregate unpaid amount of the relevant obligations and (B) the fair marketvalue (as determined by such Person in good faith) of the property subject to the relevant Lien.“Indemnified Amounts” has the meaning assigned to that term in Section 8.01.“Indemnified Party” has the meaning assigned to that term in Section 8.01.“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of anyobligation of the Borrower under any Transaction Document and (b) to the extent not otherwise described in (a), Other Taxes.“Indemnifying Party” has the meaning assigned to that term in Section 8.03. -23-“Independent Director” means a natural person who, (A) for the five-year period prior to his or her appointment as Independent Director, has notbeen, and during the continuation of his or her service as Independent Director is not: (i) an employee, director, stockholder, member, manager, partneror officer of the Borrower or any of its Affiliates (other than his or her service as an Independent Director, independent officer or other independentcapacity of the Borrower or other Affiliates that are structured to be “bankruptcy remote”); (ii) a customer or supplier of the Borrower or any of itsAffiliates (other than his or her service as an Independent Director, independent officer or other independent capacity of the Borrower or other Affiliatesthat are structured to be “bankruptcy remote”); or (iii) any member of the immediate family of a person described in (i) or (ii), and (B) has, (i) priorexperience as an Independent Director for a corporation or limited liability company whose charter documents required the unanimous consent of allIndependent Directors thereof before such corporation or limited liability company could consent to the institution of bankruptcy or insolvencyproceedings against it or could file a petition seeking relief under any applicable federal or state law relating to bankruptcy and (ii) at least three yearsof employment experience with one or more entities that provide, in the ordinary course of their respective businesses, advisory, management orplacement services to issuers of securitization or structured finance instruments, agreements or securities.“Indorsement” has the meaning specified in Section 8-102(a)(11) of the UCC, and “Indorsed” has a corresponding meaning.“IFRS” means the international financial reporting standards applicable to private enterprises in the applicable jurisdiction, which are applicableto the circumstances as of any day.“Initial Advance” means the first Advance made pursuant to Article II.“Institutional Lender” means (i) Wells Fargo and (ii) each financial institution other than a Conduit Lender which may from time to time becomea Lender hereunder by executing and delivering a Joinder Supplement to the Administrative Agent and the Borrower as contemplated by Section 2.21.“Instrument” has the meaning specified in Section 9-102(a)(47) of the UCC.“Insurance Policy” means, with respect to any Loan Asset, an insurance policy covering liability and physical damage to, or loss of, theUnderlying Collateral.“Insurance Proceeds” means any amounts received by the Borrower on or with respect to a Loan Asset under any Insurance Policy or with respectto any condemnation proceeding or award in lieu of condemnation which is neither required to be used to restore, improve or repair the relatedproperty nor required to be paid to the Obligor under the Loan Agreement.“Interest” means, with respect to any Obligor for any period, the amount which, in conformity with GAAP, would be set forth opposite thecaption “interest expense” (exclusive of any PIK Interest) or any like caption reflected on the most recent financial statements delivered by suchObligor to the Borrower for such period. -24-“Interest Collection Account” has the meaning assigned to that term in Section 6.04(f).“Interest Collections” means, (i) with respect to any Loan Asset, all payments and collections attributable to interest on such Loan Asset,including, without limitation, all scheduled payments of interest and payments of interest relating to principal prepayments, all guaranty paymentsattributable to interest and proceeds of any liquidations, sales, dispositions or securitizations attributable to interest on such Loan Asset and(ii) amendment fees, late fees, waiver fees, prepayment fees or other amounts received in respect of Loan Assets.“Interest Coverage Ratio” means, with respect to any Loan Asset for any Relevant Test Period, the meaning of “Interest Coverage Ratio” or anycomparable definition in the Loan Agreement for each such Loan Asset, and in any case that “Interest Coverage Ratio” or such comparable definitionis not defined in such Loan Agreement, the ratio of (a) EBITDA to (b) Interest.“IRS” means the United States Internal Revenue Service.“Joinder Supplement” means an agreement among the Borrower, a Lender, its Lender Agent and the Administrative Agent in the form of ExhibitD to this Agreement (appropriately completed) delivered in connection with a Person becoming a Lender hereunder after the Closing Date.“Last Out Attachment Ratio” means, with respect to any Eligible Loan Asset, as of any date of determination, an amount equal to the Net SeniorLeverage Ratio with respect to all or any portion of such Eligible Loan Asset that constitutes first lien senior secured Indebtedness that is (or by itsterms could become) subordinate in right of payment to one or more tranches of first lien senior secured Indebtedness.“Lender” means any Institutional Lender or Conduit Lender, and/or any other Person to whom an Institutional Lender or Conduit Lender assignsany part of its rights and obligations under this Agreement and the other Transaction Documents in accordance with the terms of Section 11.04.“Lender Agent” means, with respect to (i) Wells Fargo, Wells Fargo; (ii) each Conduit Lender which may from time to time become party hereto,the Person designated as the “Lender Agent” with respect to such Conduit Lender in the applicable Joinder Supplement and (iii) each InstitutionalLender which may from time to time become a party hereto, each shall be deemed to be its own Lender Agent, and, in each case, each of their respectivesuccessors and assigns.“Lender Fee Letter” means each fee letter agreement that shall be entered into by and among the Borrower, the Servicer, the applicable Lenderand its related Lender Agent in connection with the transactions contemplated by this Agreement, as amended, modified, waived, supplemented,restated or replaced from time to time. -25-“LIBOR” means, for any day during the Remittance Period, with respect to any Advance (or portion thereof) (a) the rate per annum appearing onReuters Screen LIBOR01 Page (or any successor or substitute page) as the London interbank offered rate for deposits in Dollars at approximately 11:00a.m., London time, for such day; provided that, if such day is not a Business Day, the immediately preceding Business Day, for a three- month maturity;and (b) if no rate specified in clause (a) of this definition so appears on Reuters Screen LIBOR01 Page (or any successor or substitute page), the interestrate per annum at which dollar deposits of $5,000,000 and for a three-month maturity are offered by the principal London office of Wells Fargo inimmediately available funds in the London interbank market at approximately 11:00 a.m., London time, for such day. Notwithstanding any otherprovision in this Agreement, for purposes of calculating the Yield Rate, “LIBOR” shall not at any time be deemed to be lower than 0%.“Lien” means any mortgage or deed of trust, pledge, hypothecation, collateral assignment, deposit arrangement, encumbrance, lien (statutory orother), charge, claim, preference, priority or other security interest or preferential arrangement in the nature of a security interest of any kind or naturewhatsoever (including any conditional sale, lease or other title retention agreement, sale subject to a repurchase obligation, any easement, right of wayor other encumbrance on title to real property, and any financing lease having substantially the same economic effect as any of the foregoing) or theauthorized filing of or agreement to give any financing statement perfecting a security interest under the UCC or comparable law of any jurisdiction.“Lien Release Dividend” has the meaning assigned to that term in Section 2.07(g).“Lien Release Dividend Date” means the date specified by the Borrower, which date may be any Business Day; provided that written notice isgiven in accordance with Section 2.07(g).“Liquidity Agreement” means any agreement entered into in connection with this Agreement pursuant to which a Liquidity Bank agrees to makepurchases from or advances to, or purchase assets from, any Conduit Lender in order to provide liquidity support for such Conduit Lender’s Advanceshereunder.“Liquidity Bank” means the Person or Persons who provide liquidity support to any Conduit Lender pursuant to a Liquidity Agreement inconnection with the issuance by such Conduit Lender of Commercial Paper Notes.“Loan Agreement” means the loan agreement, credit agreement or other agreement pursuant to which a Loan Asset has been issued or created andeach other agreement that governs the terms of or secures the obligations represented by such Loan Asset or of which the holders of such Loan Asset arethe beneficiaries.“Loan Asset” means any loan originated, sourced or acquired by the Borrower in the ordinary course of its business, which loan includes, withoutlimitation, (i) the Required -26-Loan Documents and Loan Asset File, and (ii) all right, title and interest of the Transferor and/or the Borrower, as applicable, in and to the loan and anyUnderlying Collateral, but excluding, as applicable, the Retained Interest and Excluded Amounts.“Loan Asset Checklist” means an electronic or hard copy, as applicable, of a checklist in the form of Exhibit N delivered by or on behalf of theBorrower to the Collateral Custodian, for each Loan Asset, of all applicable Required Loan Documents.“Loan Asset File” means, with respect to each Loan Asset, a file containing (a) each of the documents and items as set forth on the Loan AssetChecklist with respect to such Loan Asset and (b) duly executed originals (to the extent required by the Servicing Standard) and electronic copies ofany other Records relating to such Loan Assets and Portfolio Assets pertaining thereto.“Loan Asset Register” has the meaning assigned to that term in Section 5.03(k).“Loan Assignment” has the meaning set forth in the Purchase and Sale Agreement.“Loan Rate” means for each Loan Asset in a Remittance Period, the current cash pay interest rate for such Loan Asset in such period, as specifiedin the related Loan Agreement.“Loan Tape” means the current schedule of Loan Assets held by the Borrower, which shall set forth the information specified on Schedule IV.“Make-Whole Premium” means, in the event that the Maximum Facility Amount is voluntarily reduced, in whole or in part, pursuant toSection 2.18(b) prior to the second anniversary of the Closing Date, an amount, payable pro rata to each Lender Agent (for the account of theapplicable Lender), equal to (i) to the extent the Maximum Facility Amount is reduced prior to the first anniversary of the Closing Date, 2.00% of theamount by which the Maximum Facility Amount has been reduced, and (ii) to the extent the Maximum Facility Amount is reduced on or after the firstanniversary of the Closing Date but prior to the second anniversary of the Closing Date, 1.00% of the amount by which the Maximum Facility Amounthas been reduced; provided that, in the foregoing clauses (i) and (ii), the Make-Whole Premium shall be calculated without giving effect to the provisoin the definition of “Maximum Facility Amount”. For the avoidance of doubt, a Make-Whole Premium shall only be applicable in connection with apermanent reduction of the Maximum Facility Amount.“Management Agreement” means the Investment Advisory and Management Agreement, dated as of March 6, 2007, between Solar Capital Ltd.and Solar Capital Partners, LLC.“Margin Stock” means “margin stock” as such term is defined in Regulation T, U or X of the Federal Reserve Board.“Material Adverse Effect” means, with respect to any event or circumstance, a material adverse effect on (a) the business, condition (financial orotherwise), operations, performance or properties of the Transferor, the Servicer or the Borrower, (b) the validity, -27-enforceability or collectability of this Agreement or any other Transaction Document or the validity, enforceability or collectability of the Loan Assetsgenerally or any material portion of the Loan Assets, (c) the rights and remedies of the Collateral Agent, the Collateral Custodian, the Account Bank,the Administrative Agent, any Lender, any Lender Agent and the Secured Parties with respect to matters arising under this Agreement or any otherTransaction Document, (d) the ability of each of the Borrower and the Servicer, to perform their respective obligations under this Agreement or anyother Transaction Document, or (e) the status, existence, perfection, priority or enforceability of the Collateral Agent’s Lien on the Collateral Portfolio.“Material Modification” means any amendment or waiver of, or modification or supplement to, a Loan Agreement governing an Eligible LoanAsset executed or effected on or after the Cut-Off Date for such Eligible Loan Asset (or, solely in the case of clause (d), a change to any loan that issenior to an Eligible Loan Asset) which:(a) reduces or forgives any or all of the principal amount due under such Eligible Loan Asset;(b) delays or extends the stated maturity date for such Eligible Loan Asset;(c) waives one or more interest payments, permits any interest due in cash to be deferred or capitalized and added to the principal amount ofsuch Eligible Loan Asset (other than any deferral or capitalization already allowed by the terms of the Loan Agreement of any PIK Loan Asset),or reduces amount of interest due with respect to such Eligible Loan Asset when the Interest Coverage Ratio is less than 150% (prior to givingeffect to such reduction in interest expense);(d) contractually or structurally subordinates such Eligible Loan Asset (other than, for the avoidance of doubt, in the case of a First LienLast-Out Loan Asset, any loan which existed at the Cut-Off Date for such Eligible Loan Asset which is senior to such Eligible Loan Asset) byoperation of a priority of payments, turnover provisions, the transfer of assets in order to limit recourse to the related Obligor or the granting ofLiens (other than Permitted Liens) on any of the Underlying Collateral securing such Loan Asset or increases the commitment amount of anyloan senior to such Loan Asset;(e) substitutes, alters or releases the Underlying Collateral securing such Eligible Loan Asset and each such substitution, alteration orrelease, as determined in the sole reasonable discretion of the Administrative Agent, materially and adversely affects the value of such EligibleLoan Asset; provided that the foregoing clause (e) shall not apply to any release in conjunction with a relatively contemporaneous dispositionby the related Obligor accompanied by a mandatory reinvestment of net proceeds or mandatory repayment of the related loan facility with the netproceeds of such collateral; or(f) amends, waives, forbears, supplements or otherwise modifies (i) the meaning of “Net Senior Leverage Ratio”, “Interest Coverage Ratio”,“Total Net Leverage Ratio” or “Permitted Liens” or any respective comparable definitions in the Loan Agreement for such Eligible Loan Asset or(ii) any term or provision of such Loan Agreement referenced in or utilized in the calculation of the “Net Senior Leverage -28-Ratio”, “Interest Coverage Ratio”, “Total Net Leverage Ratio” or “Permitted Liens” or any respective comparable definitions for such EligibleLoan Asset, in either case in a manner that, in the commercially reasonable judgment of the Administrative Agent, is materially adverse to theSecured Parties.“Maximum Facility Amount” means the aggregate Commitments as then in effect, which amount shall not exceed $200,000,000; provided thatat all times after the Reinvestment Period, the Maximum Facility Amount shall mean the aggregate Advances Outstanding at such time.“Minimum Equity Amount” means, as of any date of determination, an amount equal to the greater of (i) (a) if such date is prior to the first dateon which the Adjusted Borrowing Value of all Eligible Loan Assets exceeds $175,000,000, $50,000,000 or (b) otherwise, $ 70,000,000 and (ii) the sumof the Adjusted Borrowing Value of the three largest Loan Assets in the facility.“Moody’s” means Moody’s Investors Service, Inc. (or its successors in interest).“Multiemployer Plan” means a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA to which a Person or any ERISA Affiliate of thatPerson contributed or had any obligation to contribute on behalf of its employees at any time during the current year or the preceding five years.“Net Senior Leverage Ratio” means, with respect to any Loan Asset for any Relevant Test Period, the meaning of “Net Senior Leverage Ratio” orany comparable definition in the Loan Agreement for each such Loan Asset, and in any case that “Net Senior Leverage Ratio” or such comparabledefinition is not defined in such Loan Agreement, the ratio of (a) all senior Indebtedness of the Primary Obligor with respect to such Loan Asset minusUnrestricted Cash to (b) EBITDA.“Non-Usage Fee” has the meaning assigned to that term in Section 2.09.“Non-Usage Fee Rate” has the meaning assigned to that term in Section 2.09.“Noteless Loan Asset” means a Loan Asset with respect to which the Loan Agreements either (i) do not require the Obligor to execute and delivera promissory note to evidence the indebtedness created under such Loan Asset or (ii) require execution and delivery of such a promissory note onlyupon the request of any holder of the indebtedness created under such Loan Asset and as to which the Borrower has not requested a promissory notefrom the related Obligor.“Notice of Borrowing” means an irrevocable written notice of borrowing from the Borrower to the Administrative Agent and each Lender Agentin the form attached hereto as Exhibit E.“Notice of Exclusive Control” has the meaning given to such term in the Control Agreement. -29-“Notice of Lien Release Dividend” means a notice pursuant to Section 2.07(g), in the form attached hereto as Exhibit O.“Notice of Reduction” means a notice of a reduction of the Advances Outstanding pursuant to Section 2.18, in the form attached hereto asExhibit F.“Obligations” means all present and future indebtedness and other liabilities and obligations (howsoever created, arising or evidenced, whetherdirect or indirect, absolute or contingent, or due or to become due) of the Borrower to the Lenders, the Lender Agents, the Administrative Agent, theAccount Bank, the Collateral Agent or the Collateral Custodian arising under this Agreement and/or any other Transaction Document and shallinclude, without limitation, all liability for principal of and interest on the Advances, Breakage Fees, indemnifications and other amounts due or tobecome due by the Borrower to the Lenders, the Lender Agents, the Administrative Agent, the Collateral Agent, the Collateral Custodian and theAccount Bank under this Agreement and/or any other Transaction Document, including, without limitation, any amounts payable under any LenderFee Letter, the WFBNA Fee Letter, any Make-Whole Premium and costs and expenses payable by the Borrower to the Lenders, the Lender Agents, theAdministrative Agent, the Account Bank, the Collateral Agent or the Collateral Custodian, including reasonable and documented attorneys’ fees, costsand expenses, including without limitation, interest, fees and other obligations that accrue after the commencement of an insolvency proceeding (ineach case whether or not allowed as a claim in such insolvency proceeding).“Obligor” means, collectively, each Person obligated to make payments under a Loan Agreement, including any guarantor thereof.“Officer’s Certificate” means a certificate signed by the president, the secretary, an assistant secretary, the chief financial officer or any vicepresident, as an authorized officer, of any Person.“Operating Lease Implementation” means the implementation by an Obligor of IFRS 16/ASC 842.“Opinion of Counsel” means a written opinion of counsel, which opinion and counsel are acceptable to the Administrative Agent in its solediscretion; provided that Latham & Watkins LLP and Sutherland Asbill & Brennan LLP shall be considered acceptable counsel for purposes of thisdefinition.“Outstanding Balance” means the principal balance of a Loan Asset, expressed exclusive of PIK Interest and accrued interest.“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between suchRecipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to,performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant toor enforced any Transaction Document, or sold or assigned an interest in any Obligation or Transaction Document). -30-“Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any paymentmade under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, orotherwise with respect to, any Transaction Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment(other than an assignment made pursuant to Section 2.11(i)).“Payment Date” means the 15th calendar day of each January, April, July and October or, if such day is not a Business Day, the next succeedingBusiness Day, commencing in October 2016; provided that the final Payment Date shall occur on the Collection Date.“Payment Duties” has the meaning assigned to that term in Section 10.02(b)(ii).“Pension Plan” has the meaning assigned to that term in Section 4.01(w).“Permitted Assignee” means any lender which has a long-term unsecured debt rating of not less than “A3” from Moody’s and not less than “A”from S&P.“Permitted Investments” means, at any time:(i) direct interest bearing obligations of, and interest bearing obligations guaranteed as to timely payment of principal and interest by, theUnited States or any agency or instrumentality of the United States, the obligations of which are backed by the full faith and credit of the UnitedStates;(ii) demand or time deposits in, certificates of deposit of, demand notes of, or bankers’ acceptances issued by any depository institution ortrust company organized under the laws of the United States or any State thereof (including any federal or state branch or agency of a foreigndepository institution or trust company) and subject to supervision and examination by federal and/or state banking authorities (including, ifapplicable, the Collateral Agent, the Collateral Custodian or the Administrative Agent or any agent thereof acting in its commercial capacity);provided that, the short-term unsecured debt obligations of such depository institution or trust company at the time of such investment, orcontractual commitment providing for such investment, are rated at least “A-1” by S&P’s and “P-1” by Moody’s;(iii) commercial paper that (i) is payable in Dollars and (ii) is rated at least “A-1” by S&P’s and “P-1” by Moody’s; and(iv) registered money market funds that have, at all times, credit ratings of “Aaa-mf” by Moody’s and “AAAm” or “AAAm-G” by S&P.No Permitted Investment shall have an “f,” “r,” “p,” “pi,” “q,” “sf” or “t” subscript affixed to its S&P rating. Any such investment may be made oracquired from or -31-through the Collateral Agent or the Administrative Agent or any of their respective affiliates, or any entity for whom the Collateral Agent, theAdministrative Agent, the Collateral Custodian or any of their respective affiliates provides services and receives compensation (so long as suchinvestment otherwise meets the applicable requirements of the foregoing definition of Permitted Investment at the time of acquisition); provided that,notwithstanding the foregoing clauses (i) through (iv), Permitted Investments may only include obligations or securities that constitute cashequivalents for purposes of the rights and assets in paragraph (c)(8)(i)(B) of the exclusions from the definition of “covered fund” for purposes of theVolcker Rule. The Collateral Agent and Collateral Custodian shall have no obligation to determine or oversee compliance with the foregoing.“Permitted Liens” means any of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have beencommenced (a) Liens for Taxes if such Taxes shall not at the time be due and payable or if a Person shall currently be contesting the validity thereof ingood faith by appropriate proceedings and with respect to which reserves in accordance with GAAP have been provided on the books of such Person,(b) Liens imposed by law, such as materialmen’s, warehousemen’s, mechanics’, carriers’, workmen’s and repairmen’s Liens and other similar Liens,arising by operation of law in the ordinary course of business for sums that are not overdue or are being contested in good faith, (c) with respect to anyUnderlying Collateral, Liens permitted under the related Loan Agreements that are customary for similar Loan Assets and consistent with the ServicingStandard, (d) with respect to Agented Loans, Liens in favor of the lead agent, the collateral agent or the paying agent for the benefit of all holders ofindebtedness of such Obligor, and (e) Liens granted pursuant to or by the Transaction Documents.“Person” means an individual, partnership, corporation (including a statutory or business trust), company, limited liability company, limitedliability partnership, joint stock company, trust (including a statutory or business trust), estate, unincorporated association, sole proprietorship, jointventure, nonprofit corporation, group, sector, government (or any agency, instrumentality or political subdivision thereof), territory or other entity ororganization.“PIK Interest” means interest accrued on a Loan Asset that is added to the principal amount of such Loan Asset instead of being paid as interest asit accrues.“PIK Loan Asset” means a Loan Asset which provides for a portion of the interest that accrues thereon to be added to the principal amount ofsuch Loan Asset for some period of the time prior to such Loan Asset requiring the current cash payment of such previously capitalized interest, whichcash payment shall be treated as an Interest Collection at the time it is received.“Pledge” means the pledge of any Eligible Loan Asset or other Portfolio Asset pursuant to Article II.“Portfolio Assets” means all Loan Assets in which the Borrower has an interest, together with all proceeds thereof and other assets or propertyrelated thereto, including all right, title and interest of the Borrower in and to: -32-(i) any amounts on deposit in any cash reserve, collection, custody or lockbox accounts securing the Loan Assets;(ii) all rights with respect to the Loan Assets to which the Borrower is entitled as lender under the applicable Loan Agreement;(iii) the Controlled Accounts, together with all cash and investments in each of the foregoing other than amounts earned on investmentstherein;(iv) any Underlying Collateral securing a Loan Asset and all Recoveries related thereto, all payments paid in respect thereof and all moniesdue, to become due and paid in respect thereof accruing after the applicable Cut-Off Date and all liquidation proceeds;(v) all Required Loan Documents, the Loan Asset Files related to any Loan Asset, any Records, and the documents, agreements, andinstruments included in the Loan Asset Files or Records;(vi) all Insurance Policies with respect to any Loan Asset;(vii) all Liens, guaranties, indemnities, warranties, letters of credit, accounts, bank accounts and property subject thereto from time to timepurporting to secure or support payment of any Loan Asset, together with all UCC financing statements, mortgages or similar filings signed orauthorized by an Obligor relating thereto;(viii) the Purchase and Sale Agreement (including, without limitation, rights of recovery of the Borrower against the Transferor) and theassignment to the Collateral Agent, for the benefit of the Secured Parties, of all UCC financing statements filed by the Borrower against theTransferor under or in connection with the Purchase and Sale Agreement;(ix) all records (including computer records) with respect to the foregoing; and(x) all collections, income, payments, proceeds and other benefits of each of the foregoing.“Primary Obligor” means, with respect to any Loan Asset, any Obligor in principal reliance on which the lenders under such Loan Asset grantedtheir credit approval.“Prime Rate” means the rate announced by Wells Fargo, as Lender, from time to time as its prime rate in the United States, such rate to change asand when such designated rate changes. The Prime Rate is not intended to be the lowest rate of interest charged by Wells Fargo or any other specifiedfinancial institution in connection with extensions of credit to debtors. -33-“Principal Collection Account” has the meaning assigned to that term in Section 6.04(f).“Principal Collections” means (i) any amounts deposited by the Borrower in accordance with Section 2.06(a)(i) or Section 2.07(c)(i) and (ii) withrespect to any Loan Asset, all amounts received which are not Interest Collections, including, without limitation, all Recoveries, all InsuranceProceeds, all scheduled payments of principal and principal prepayments and all guaranty payments and proceeds of any liquidations, sales,dispositions or securitizations, in each case, attributable to the principal of such Loan Asset. For the avoidance of doubt, “Principal Collections” shallnot include amounts on deposit in the Unfunded Exposure Account.“Pro Rata Share” means, with respect to each Lender, the percentage obtained by dividing the Commitment of such Lender (or, following thetermination thereof, the outstanding principal amount of all Advances of such Lender), by the aggregate Commitments of all the Lenders (or, followingthe termination thereof, the aggregate Advances Outstanding).“Proceeds” means, with respect to any assets included in the Collateral Portfolio, all property that is receivable or received when such assets arecollected, sold, liquidated, foreclosed, exchanged, or otherwise disposed of, whether such disposition is voluntary or involuntary, and includes allrights to payment with respect to any insurance relating thereto.“Prohibited Transferee” means any hedge fund, any so- called vulture fund or loan-to-own fund, any distressed debt fund or any other fund that issimilar to any of the foregoing or any other Person engaged in the business of making loans to, and other investments in, middle-market companies thatis in competition with Solar, but excluding (i) banks, (ii) insurance companies and (iii) funds that primarily invest in publicly traded securities.“Purchase and Sale Agreement” means that certain Purchase and Sale Agreement, dated as of the date hereof, between the Transferor, as the seller,and the Borrower, as the purchaser, as amended, modified, waived, supplemented, restated or replaced from time to time.“Purchase Price” means with respect to any Eligible Loan Asset, an amount (expressed as a percentage) equal to (i) the purchase price paid by theBorrower for such Eligible Loan Asset (exclusive of any accrued interest, Accreted Interest and original issue discount) divided by (ii) the principalbalance of such Eligible Loan Asset outstanding as of the date of such purchase (exclusive of any accrued interest, Accreted Interest and original issuediscount); provided that any Eligible Loan Asset acquired by the Borrower with a “Purchase Price” equal to or greater than 97% (including, for theavoidance of doubt, in excess of 100%) shall be deemed to have a “Purchase Price” equal to 100%.“Recipient” means (a) the Administrative Agent, (b) any Lender or (c) any Lender Agent, as applicable.“Records” means all documents relating to the Loan Assets, including books, records and other information executed in connection with theorigination or acquisition of the Collateral Portfolio or maintained with respect to the Collateral Portfolio and the related -34-Obligors that the Borrower, the Transferor or the Servicer have generated, in which the Borrower has acquired an interest pursuant to the Purchase andSale Agreement or in which the Borrower or the Transferor have otherwise obtained an interest.“Recoveries” means, as of the time any Underlying Collateral with respect to any Loan Asset subject to clauses (ii) or (iv) of the definition of“Value Adjustment Event”, as applicable, is sold, discarded or abandoned (after a determination by the Servicer that such Underlying Collateral haslittle or no remaining value) or otherwise determined to be fully liquidated by the Servicer in accordance with the Servicing Standard, the proceedsfrom the sale of the Underlying Collateral, the proceeds of any related Insurance Policy, any other recoveries with respect to such Loan Asset, asapplicable, the Underlying Collateral, and amounts representing late fees and penalties, net of any amounts received that are required under such LoanAsset, as applicable, to be refunded to the related Obligor.“Register” has the meaning assigned to that term in Section 2.14.“Regulation U” means Regulation U of the Board of Governors of the Federal Reserve System, 12 C.F.R. §221, or any successor regulation.“Reinvestment Period” shall mean the period commencing on the Closing Date and ending on the day preceding the earliest of (i) June 30, 2019(notwithstanding Section 1.04(i)), (ii) the occurrence of an Event of Default (past any applicable notice or cure period provided in the definitionthereof) and (iii) the date of any voluntary termination by the Borrower pursuant to Section 2.18(b); provided that if any of the foregoing is not aBusiness Day, the Reinvestment Period shall end on the next succeeding Business Day.“Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees,administrators, managers, advisors and representatives of such Person and such Person’s Affiliates.“Release Date” has the meaning set forth in Section 2.07(c).“Relevant Test Period” means, with respect to any Loan Asset, the relevant test period for the calculation of Total Net Leverage Ratio, Net SeniorLeverage Ratio or Interest Coverage Ratio, as applicable, for such Loan Asset in the Loan Agreements or, if no such period is provided for therein, forObligors delivering monthly financial statements, each period of the last 12 consecutive reported calendar months, and for Obligors deliveringquarterly financial statements, each period of the last four consecutive reported fiscal quarters of the principal Obligor on such Loan Asset; providedthat with respect to any Loan Asset for which the relevant test period is not provided for in the Loan Agreement, if an Obligor is a newly-formed entityas to which 12 consecutive calendar months have not yet elapsed, “Relevant Test Period” shall initially include the period from the date of formationof such Obligor to the end of the twelfth calendar month or fourth fiscal quarter (as the case may be) from the date of formation, and shall subsequentlyinclude each period of the last 12 consecutive reported calendar months or four consecutive reported fiscal quarters (as the case may be) of suchObligor. -35-“Remittance Period” means, (i) as to the initial Payment Date, the period beginning on the Closing Date and ending on, and including, theDetermination Date immediately preceding such Payment Date and (ii) as to any subsequent Payment Date, the period beginning on the first day afterthe most recently ended Remittance Period and ending on, and including, the Determination Date immediately preceding such Payment Date, or, withrespect to the final Remittance Period, the Collection Date.“Replacement Servicer” has the meaning assigned to that term in Section 6.01(c).“Reporting Date” means the date that is two Business Days prior to the 15th day of each calendar month, commencing in August 2016.“Required Lenders” means (i) Wells Fargo (as a Lender hereunder) and its successors and assigns and (ii) the Lenders representing an aggregate ofat least 51% of the aggregate Commitments of the Lenders then in effect; provided that the Commitment of, and the portion of any outstandingAdvances, as applicable, held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of the RequiredLenders.“Required Loan Documents” means, for each Loan Asset, the following documents or instruments, all as specified on the related Loan AssetChecklist:(a) (i) the original executed promissory note or, in the case of a lost note, a copy of the executed underlying promissory note accompaniedby an original executed affidavit and indemnity endorsed by the Borrower in blank or to the Collateral Agent (and an unbroken chain ofendorsements from each prior holder of such promissory note to the Borrower), or (ii) if such promissory note is not issued in the name of theBorrower or is a Noteless Loan Asset, an executed copy of each assignment and assumption agreement, transfer document or instrument relatingto such Loan Asset evidencing the assignment of such Loan Asset from any prior third party owner thereof to the Borrower and from the Borrowerin blank;(b) to the extent applicable for the related Loan Asset, copies of the executed (i) guaranty, (ii) underlying credit or loan agreement (orsimilar agreement pursuant to which the related Loan Asset has been issued or created), (iii) acquisition agreement (or similar agreement) and(iv) security agreement, mortgage or other agreement that secures the obligations represented by such Loan Asset, in each case as set forth on theLoan Asset Checklist; and(c) with respect to any Loan Asset originated by the Transferor and with respect to which the Transferor acts as administrative agent (or in acomparable capacity), either (i) copies of the UCC-1 financing statements, if any, and any related continuation statements, each showing theObligor as debtor and the Collateral Agent as total assignee or showing the Obligor, as debtor and the Transferor as secured party and each withevidence of filing thereon, or (ii) copies of any such financing statements certified by the Servicer to be true and complete copies thereof ininstances where the original financing statements have been sent to the appropriate public filing office for filing, in each case, as set forth in theLoan Asset Checklist. -36-“Required Reports” means, collectively, the Servicing Report required pursuant to Section 6.08(b), the Servicer’s Certificate required pursuant toSection 6.08(c), the financial statements of the Servicer required pursuant to Section 6.08(d), the financial statements and valuation reports of eachObligor required pursuant to Section 6.08(e), the annual statements as to compliance required pursuant to Section 6.09, and the annual independentpublic accountant’s (or other third party’s) report required pursuant to Section 6.10.“Responsible Officer” means, with respect to any Person, any duly authorized officer of such Person (or, if applicable, a duly authorized officer ofthe general partner or manager of such Person) with direct responsibility for the administration of this Agreement and also, with respect to a particularmatter, any other duly authorized officer of such Person to whom such matter is referred because of such officer’s knowledge of and familiarity with theparticular subject.“Restricted Junior Payment” means (i) any dividend or other distribution, direct or indirect, on account of any class of membership interests ofthe Borrower now or hereafter outstanding, except a dividend paid solely in interests of that class of membership interests or in any junior class ofmembership interests of the Borrower; (ii) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, director indirect, of any class of membership interests of the Borrower now or hereafter outstanding, (iii) any payment made to redeem, purchase, repurchaseor retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire membership interests of the Borrower now orhereafter outstanding, and (iv) any payment of management fees by the Borrower. For the avoidance of doubt, (x) payments and reimbursements due tothe Servicer in accordance with this Agreement or any other Transaction Document do not constitute Restricted Junior Payments, and (y) distributionsby the Borrower to holders of its membership interests of Loan Assets or of cash or other proceeds relating thereto which have been substituted by theBorrower in accordance with this Agreement shall not constitute Restricted Junior Payments.“Retained Interest” means, with respect to any Agented Loan that is transferred to the Borrower, (i) all of the obligations, if any, of the agent(s)under the documentation evidencing such Agented Loan and (ii) the applicable portion of the interests, rights and obligations under thedocumentation evidencing such Agented Loan that relate to such portions of the indebtedness that are owned by another lender (including suchportion held in a separate account managed by the Servicer).“Revenue Recognition Implementation” means the implementation by an Obligor of IFRS 15/ASC 606.“Review Criteria” has the meaning assigned to that term in Section 12.02(b)(i).“S&P” means Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business (or its successors in interest). -37-“Sanction” or “Sanctions” means, individually and collectively, respectively, any and all economic or financial sanctions, sectoral sanctions,secondary sanctions, trade embargoes and anti-terrorism laws including but not limited to those imposed, administered or enforced from time to timeby: (a) the United States of America, including those administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”),the U.S. Department of State, the U.S. Department of Commerce, or through any existing or future executive order; (b) the United Nations SecurityCouncil; (c) the European Union; (d) the United Kingdom; or (e) any other Governmental Authorities with jurisdiction over the Borrower, theTransferor, the Servicer or any of their respective Subsidiaries.“Sanctioned Person” means any Person that is a target of Sanctions, including without limitation, a Person that is: (a) listed on OFAC’s SpeciallyDesignated Nationals (SDN) and Blocked Persons List; (b) a Person organized or resident in a country or territory that is the target of comprehensivesanctions (presently, Cuba, Iran, North Korea, Syria, and the Crimea region of Ukraine); or (c) any Person 50% or more owned or, where relevant underapplicable Sanctions laws, controlled by any of the foregoing.“Scheduled Payment” means each scheduled payment of principal and/or interest required to be made by an Obligor on the related Loan Asset, asadjusted pursuant to the terms of the related Loan Agreement.“Secured Party” means each of the Administrative Agent, each Lender (together with its successors and assigns), each Lender Agent, eachAffected Party, each Indemnified Party, the Collateral Custodian, the Collateral Agent and the Account Bank.“Securities Act” means the U.S. Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.“Servicer” means at any time the Person then authorized, pursuant to Section 6.01 to service, administer, and collect on the Loan Assets andexercise rights and remedies in respect of the same.“Servicer Pension Plan” has the meaning set forth in Section 4.03(n).“Servicer Termination Event” means the occurrence of any one or more of the following events:(a) any failure by the Servicer to make any payment, transfer or deposit into the Collection Account (including, without limitation, withrespect to bifurcation and remittance of Interest Collections and Principal Collections) or the Unfunded Exposure Account, as required by thisAgreement or any Transaction Document which continues unremedied for a period of three Business Days (or if due to administrative error, threeBusiness Days after notice or knowledge thereof);(b) any failure on the part of the Servicer duly to (i) observe or perform in any material respect any other covenants or agreements of theServicer set forth in this Agreement or the other Transaction Documents to which the Servicer is a party -38-(including, without limitation, any delegation of the Servicer’s duties that is not permitted by Section 6.01) or (ii) comply in any material respectwith the Servicing Standard regarding the servicing of the Collateral Portfolio and in each case the same continues unremedied for a period of 30days (if such failure can be remedied) after the earlier to occur of (x) the date on which written notice of such failure requiring the same to beremedied shall have been given to the Servicer by the Administrative Agent or the Collateral Agent (at the direction of the Administrative Agent)and (y) the date on which a Responsible Officer of the Servicer acquires knowledge thereof;(c) the failure of the Servicer to make any payment when due (after giving effect to any related grace period) under one or more agreementsfor borrowed money to which it is a party in an aggregate amount in excess of $2,500,000, individually or in the aggregate, or the occurrence ofany event or condition that has resulted in the acceleration of such amount of recourse debt whether or not waived;(d) a Bankruptcy Event shall occur with respect to the Servicer;(e) Solar shall assign its rights or obligations as “Servicer” hereunder to any Person other than Solar Senior Capital Ltd.;(f) any failure by the Servicer to deliver (i) any required Servicing Report on or before the date occurring two Business Days after the datesuch report is required to be made or given, as the case may be or (ii) any other Required Reports hereunder on or before the date occurring sevenBusiness Days after the date such report is required to be made or given, as the case may be, in each case under the terms of this Agreement;(g) any representation, warranty or certification made by the Servicer in any Transaction Document or in any certificate delivered pursuantto any Transaction Document shall prove to have been incorrect when made, which inaccuracy has a Material Adverse Effect on theAdministrative Agent, the Collateral Agent or any Secured Party and which continues to be unremedied for a period of 30 days after the earlier tooccur of (i) the date on which written notice of such incorrectness requiring the same to be remedied shall have been given to the Servicer by theAdministrative Agent or the Collateral Agent (at the direction of the Administrative Agent) and (ii) the date on which a Responsible Officer ofthe Servicer acquires knowledge thereof;(h) any financial or other information reasonably requested by the Administrative Agent, a Lender Agent or Collateral Agent is notprovided within a reasonable amount of time following such written (which may be delivered via email) request;(i) the rendering against the Servicer of one or more final judgments, decrees or orders for the payment of money in excess of $5,000,000,individually or in the aggregate (excluding, in each case, any amounts covered by insurance; provided that this parenthetical shall not beapplicable to (a) more than two such final judgments, decrees or orders in any 60 month period and shall not be applicable to more than one suchfinal judgment, decree or order in the event a second judgment, decree or order occurs in a 12 -39-month period following the first final judgment and (b) any such final judgment, decree or order if the Administrative Agent determines that suchjudgment, decree or order reasonably could cause a Material Adverse Effect on the assets, liabilities, financial condition, business or operationsof the Servicer or the ability of the Servicer to meets its obligations under the Transaction Documents to which it is party), and the continuance ofsuch judgment, decree or order unsatisfied and in effect for any period of more than 60 consecutive days without a stay of execution;(j) the occurrence of an Event of Default;(k) any other event which has caused a Material Adverse Effect on the assets, liabilities, financial condition, business or operations of theServicer or the ability of the Servicer to meet its obligations under the Transaction Documents to which it is a party; or(l) the Management Agreement shall fail to be in full force and effect.“Servicer Termination Notice” has the meaning assigned to that term in Section 6.01(b).“Servicer’s Certificate” has the meaning assigned to that term in Section 6.08(c).“Servicing Fees” means the fee payable to the Servicer on each Payment Date in arrears in respect of each Remittance Period, which fee shall beequal to the product of (i) 0.50%, (ii) the arithmetic mean of the aggregate Outstanding Balance of all Loan Assets on the first day and on the last dayof the related Remittance Period and (iii) the actual number of days in such Remittance Period divided by 360; provided that at any time from and afterthe Closing Date during which Solar, or an Affiliate thereof acts as Servicer, clause (i) above shall be 0.00%.360.“Servicing File” means, for each Loan Asset, (a) copies of each of the Required Loan Documents and (b) any other portion of the Loan Asset Filewhich is not part of the Required Loan Documents.“Servicing Report” has the meaning assigned to that term in Section 6.08(b).“Servicing Standard” means, with respect to any Loan Assets included in the Collateral Portfolio, to service and administer such Loan Assets onbehalf of the Secured Parties in accordance with Applicable Law, the terms of this Agreement, the Loan Agreements, all customary and usual servicingpractices for loans like the Loan Assets and to the extent consistent with the foregoing, (a)(i) if the Servicer is the Transferor or an Affiliate thereof, thehigher of: (A) the standards, policies and procedures that the Servicer reasonably believes to be customarily followed by institutional managers ofnational standing relating to assets of the nature and character of the Collateral Portfolio, and (B) the same care, skill, prudence and diligence withwhich the Servicer services and administers loans for its own account or for the account of others, and (ii) if the Servicer is not the Transferor or anAffiliate thereof, the same care, skill, prudence and diligence with which the Servicer services and administers loans for its own account or for theaccount of others; (b) with a view to maximize the value of the Loan -40-Assets; and (c) without regard to: (i) the Servicer’s obligations to incur servicing and administrative expenses with respect to a Loan Asset, (ii) theServicer’s right to receive compensation for its services hereunder or with respect to any particular transaction, (iii) the ownership by the Servicer orany Affiliate thereof of any Loan Assets, or (iv) the ownership, servicing or management for others by the Servicer of any other loans or property by theServicer.“Similar Law” means state statutes regulating investments of and/or fiduciary obligations with respect to “governmental plans” within themeaning of Section 3(32) of ERISA and state statutes that impose prohibitions similar to those contained in Section 406 of ERISA or Section 4975 ofthe Code.“Solar” means Solar Capital Ltd.“Solvent” means, as to any Person at any time, having a state of affairs such that all of the following conditions are met: (a) the fair value of theproperty of such Person is greater than the amount of such Person’s liabilities (including disputed, contingent and unliquidated liabilities) as suchvalue is established and liabilities evaluated for purposes of Section 101(32) of the Bankruptcy Code; (b) the present fair saleable value of the propertyof such Person in an orderly liquidation of such Person is not less than the amount that will be required to pay the probable liability of such Person onits debts and other liabilities as they become absolute and matured; (c) such Person is able to realize upon its property and pay its debts and otherliabilities (including disputed, contingent and unliquidated liabilities) as they mature in the normal course of business; (d) such Person does not intendto, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay as such debts and liabilities mature; and (e) suchPerson is not engaged in a business or a transaction, and does not propose to engage in a business or a transaction, for which such Person’s propertyassets would constitute unreasonably small capital.“State” means one of the fifty states of the United States or the District of Columbia.“Stated Maturity Date” means June 30, 2021.“Structuring Fee” means the structuring fee set forth in the Lender Fee Letter, as such fee letter may be amended, restated, supplemented and/orotherwise modified from time to time.“Subsidiary” means with respect to a person, a corporation, partnership or other entity of which shares of stock or other ownership interestshaving ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of acontingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or themanagement of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such person. -41-“Substitute Eligible Loan Asset” means each Eligible Loan Asset Pledged by the Borrower to the Collateral Agent, on behalf of the SecuredParties, pursuant to Section 2.07(a) or Section 2.07(c)(ii).“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees orother charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.“Total Net Leverage Ratio” means, with respect to any Loan Asset that is not a First Lien Loan Asset for any Relevant Test Period, the meaningof “Total Net Leverage Ratio” or any comparable definition in the Loan Agreement for each such Loan Asset, and in any case that “Total Net LeverageRatio” or such comparable definition is not defined in such Loan Agreement, the ratio of (a) Indebtedness minus Unrestricted Cash, as of the applicabletest date, to (b) EBITDA, for the applicable test period, as calculated by the Servicer in good faith using information from and calculations consistentwith the relevant compliance statements and financial reporting packages provided by the relevant Obligor as per the requirements of the related LoanAgreement.“Transaction Documents” means this Agreement, any Joinder Supplement, the Purchase and Sale Agreement, the Control Agreement, theWFBNA Fee Letter, each Lender Fee Letter and each document, instrument or agreement related to any of the foregoing.“Transferor” means the EquityholderSolar Capital Ltd., in its capacity as the Transferor hereunder and as the seller under the Purchase and SaleAgreement, together with its successors and assigns in such capacity.“U.S. Borrower” means any Borrower that is a U.S. Person.“U.S. Person” means any Person that is a “United States Person” as defined in Section 7701(a)(30) of the Code.“U.S. Tax Compliance Certificate” has the meaning specified in Section 2.11(g).“UCC” means the Uniform Commercial Code as from time to time in effect in the specified jurisdiction.“Underlying Collateral” means, with respect to a Loan Asset, any property or other assets designated and pledged or mortgaged as collateral tosecure repayment of such Loan Asset, as applicable, including, without limitation, mortgaged property and/or a pledge of the stock, membership orother ownership interests in the related Obligor and all proceeds from any sale or other disposition of such property or other assets.“Unfunded Exposure Account” has the meaning assigned to that term in Section 6.04(h). -42-“Unfunded Exposure Amount” means, as of any date of determination, with respect to an Eligible Loan Asset, an amount equal to the aggregateamount of all unfunded commitments associated with such Eligible Loan Asset.“Unfunded Exposure Amount Shortfall” has the meaning assigned to that term in Section 2.02(f).“Unfunded Exposure Equity Amount” means, on any date of determination, an amount equal to:(i) for all Eligible Loan Assets which have any unfunded commitments, the aggregate sum of the products of (a) the Unfunded ExposureAmount for each such Eligible Loan Asset multiplied by (b) the difference of (x) 100% minus (y) the Applicable Percentage for each such EligibleLoan Asset;plus(ii) for all Eligible Loan Assets which have any unfunded commitments, the aggregate sum of the products of (a)(x) 100% minus theAssigned Value for each such Loan Asset multiplied by (y) the Unfunded Exposure Amount of each such Loan Asset multiplied by (b) theApplicable Percentage for each such Eligible Loan Asset.“United States” or “U.S.” means the United States of America.“Unmatured Event of Default” means any event that, if it continues uncured, will, with lapse of time, notice or lapse of time and notice, constitutean Event of Default.“Unrestricted Cash” the meaning of “Unrestricted Cash” or any comparable definition in the Loan Agreements for each Loan Asset, and in anycase that “Unrestricted Cash” or such comparable definition is not defined in such Loan Agreement, all cash available for use for general corporatepurposes and not held in any reserve account or legally or contractually restricted for any particular purposes or subject to any lien (other than blanketliens permitted under or granted in accordance with such Loan Agreement).“Unused Portion” has the meaning assigned to that term in Section 2.09.“USA PATRIOT Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and ObstructTerrorism Act of 2001, Public Law 107-56.“Value Adjustment Event” means, with respect to any Eligible Loan Asset, the occurrence of any one or more of the following events after therelated Cut-Off Date (any of which, for the avoidance of doubt, may occur more than once):(i) occurrence of one or more of the following (as tested and reported on a quarterly basis): (x) the Interest Coverage Ratio for any RelevantTest -43-Period with respect to such Loan Asset is both (1) less than 85% of the Interest Coverage Ratio with respect to any such Loan Asset as of theapplicable Cut-Off Date and (2) less than 1.50x or (y) the Net Senior Leverage Ratio for any Relevant Test Period of the related Obligor withrespect to such Loan Asset is both (1) more than 0.50x higher than such Net Senior Leverage Ratio as calculated on the applicable Cut-Off Dateand (2) is greater than 3.50x; provided that in connection with any Revenue Recognition Implementation or any Operating LeaseImplementation, the Administrative Agent may retroactively adjust the Interest Coverage Ratio or the Net Senior Leverage Ratio for any LoanAsset as determined on the related Cut-Off Date;(ii) an Obligor payment default as to principal or interest under any Loan Asset (after giving effect to any grace and/or cure period set forthin the Loan Agreement, but not to exceed five Business Days);(iii) a payment default has occurred in relation to any other Indebtedness of the related Obligor that is pari passu with or senior to therelated Loan Asset (after giving effect to any grace and/or cure period set forth in the loan agreement with respect to such other Indebtedness, butnot to exceed five Business Days) which such default would trigger a default under the related Loan Agreement;(iv) a Bankruptcy Event with respect to the related Obligor;(v) the failure to deliver a “loan level” financial reporting package as required hereunder with respect to such Loan Asset no later than(x) 60 days after the end of the first, second or third quarter of any fiscal year or (y) 120 days after the end of each fiscal year (in each case, unlesswaived or otherwise agreed to by the Administrative Agent in its sole discretion);(vi) the occurrence of a Material Modification (in accordance with clauses (b)-(f) of the definition thereof) with respect to such Loan Asset;or(vii) the occurrence of a Material Modification (in accordance with clause (a) of the definition thereof) with respect to such Loan Asset.“Volcker Rule” means Section 13 of the U.S. Bank Holding Company Act of 1956, as amended, and the applicable rules and regulationsthereunder.“Warranty Event” means, as to any Loan Asset, the discovery that as of the related Cut-Off Date for such Loan Asset, (i) there existed a breach ofany representation or warranty relating to such Loan Asset and the failure of the Borrower to cure such breach, or cause the same to be cured, within 30days after the earlier to occur of the Borrower’s receipt of notice thereof from the Administrative Agent or the Borrower becoming aware thereof(without duplication of the grace period set forth in Section 2.07(c)) or (ii) such Loan Asset fails to satisfy one or more criteria of the definition of“Eligibility Criteria.” -44-“Warranty Loan Asset” means any Loan Asset with respect to which a Warranty Event has occurred.“Wells Fargo” shall mean Wells Fargo Bank, National Association, and its successors and assigns.“WFBNA” has the meaning assigned to that term in the preamble hereto.“WFBNA Fee Letter” means the fee letter, dated as of the date hereof, among the Collateral Agent, the Collateral Custodian, the Account Bank,and the Borrower, as such letter may be amended, modified, supplemented, restated or replaced from time to time.“Withholding Agent” means the Borrower, the Administrative Agent, the Collateral Agent, the Servicer, and each Lender Agent, as applicable.“Yield” means with respect to any Remittance Period, the sum for each day in such Remittance Period determined in accordance with thefollowing formula: YR x LD where: YR =   the Yield Rate applicable on such day; L =   the Advances Outstanding on such day; and D =   360 or, to the extent the Yield Rate is the BaseRate, 365 or 366 days, as applicable;provided that (i) no provision of this Agreement shall require the payment or permit the collection of Yield in excess of the maximum permitted byApplicable Law and (ii) Yield shall not be considered paid by any distribution if at any time such distribution is later required to be rescinded by anyLender to the Borrower or any other Person for any reason including, without limitation, such distribution becoming void or otherwise avoidable underany statutory provision or common law or equitable action, including, without limitation, any provision of the Bankruptcy Code.“Yield Rate” means, as of any date of determination, an interest rate per annum equal to LIBOR for such date plus the Applicable Spread;provided that if Wells Fargo, as Lender, shall have notified the Administrative Agent (and the Administrative Agent shall in turn have notified theBorrower) that a Eurodollar Disruption Event has occurred and is continuing, the Yield Rate shall be equal to the Base Rate plus the Applicable Spreadminus 1.00% until Wells Fargo shall have notified the Administrative Agent that such Eurodollar Disruption Event has ceased, at which time the YieldRate shall again be equal to LIBOR for such date plus the Applicable Spread.Section 1.02 Other Terms. All accounting terms used but not specifically defined herein shall be construed in accordance with GAAP. All termsused in Article 9 of the UCC in the State of New York, and used but not specifically defined herein, are used herein as defined in such Article 9. -45-Section 1.03 Computation of Time Periods. Unless otherwise stated in this Agreement, in the computation of a period of time from a specifieddate to a later specified date, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding.”Section 1.04 Interpretation.In each Transaction Document, unless a contrary intention appears:(a) the singular number includes the plural number and vice versa;(b) reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are permitted bythe Transaction Documents;(c) reference to any gender includes each other gender;(d) reference to day or days without further qualification means calendar days;(e) reference to any time means New York, New York time;(f) reference to the words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”;(g) reference to any agreement (including any Transaction Document), document or instrument means such agreement, document or instrument asamended, modified, waived, supplemented, restated or replaced and in effect from time to time in accordance with the terms thereof and, if applicable,the terms of the other Transaction Documents, and reference to any promissory note includes any promissory note that is an extension or renewalthereof or a substitute or replacement therefor;(h) reference to any Applicable Law means such Applicable Law as amended, modified, codified, replaced or reenacted, in whole or in part, andin effect from time to time, including rules and regulations promulgated thereunder and reference to any Section or other provision of any ApplicableLaw means that provision of such Applicable Law from time to time in effect and constituting the substantive amendment, modification, codification,replacement or reenactment of such Section or other provision;(i) if any date for compliance with the terms or conditions of any Transaction Document falls due on a day which is not a Business Day, then suchdue date shall be deemed to be the immediately following Business Day;(j) reference to the “occurrence” of an Unmatured Event of Default, Event of Default or Servicer Termination Event means after any grace periodapplicable to such Unmatured Event of Default, Event of Default or Servicer Termination Event and shall not include any Unmatured Event of Default,Event of Default or Servicer Termination Event that has been expressly waived in writing in accordance with the terms of this Agreement; and -46-(k) reference to the term “knowledge” or “actual knowledge” shall mean actual knowledge after commercially reasonable inquiry; and(l) unless otherwise expressly stated in this Agreement, if at any time any change in generally accepted accounting principles (including theadoption of IFRS) would affect the computation of any covenant (including the computation of any financial covenant) set forth in this Agreement orany other Transaction Document, Borrower and Administrative Agent shall negotiate in good faith to amend such covenant to preserve the originalintent in light of such change; provided, that, until so amended, (i) such covenant shall continue to be computed in accordance with the application ofgenerally accepted accounting principles prior to such change and (ii) Borrower shall provide to Administrative Agent a written reconciliation in formand substance reasonably satisfactory to Administrative Agent, between calculations of such covenant made before and after giving effect to suchchange in generally accepted accounting principles.ARTICLE II.THE FACILITYSection 2.01 Advances.(a) Advances. On the terms and conditions hereinafter set forth, from time to time from the Closing Date until the end of the Reinvestment Period,the Lenders shall make Advances, secured by the Collateral Portfolio, (x) to the Borrower for the purpose of purchasing Eligible Loan Assets or (y) tothe Unfunded Exposure Account in an amount up to the Aggregate Unfunded Exposure Amount. Other than pursuant to Section 2.02(f), under nocircumstances shall any Lender be required to make any Advance if after giving effect to such Advance and the addition to the Collateral Portfolio ofthe Eligible Loan Assets being acquired by the Borrower using the proceeds of such Advance, (i) an Event of Default has occurred and is continuing orwould result therefrom or an Unmatured Event of Default exists or would result therefrom or (ii) the aggregate Advances Outstanding would exceed theBorrowing Base. Notwithstanding anything to the contrary herein (other than pursuant to Section 2.02(f)), no Lender shall be obligated to provide theBorrower (or to the Unfunded Exposure Account, if applicable) with aggregate funds in connection with an Advance that would exceed the lesser of(x) such Lender’s unused Commitment then in effect and (y) the aggregate unused Commitments then in effect.Section 2.02 Procedure for Advances.(a) During the Reinvestment Period, the Lenders will make Advances on any Business Day at the request of the Borrower, subject to and inaccordance with the terms and conditions of Sections 2.01 and 2.02 and subject to the provisions of Article III hereof. -47-(b) Each Advance shall be made on a same-day basis on irrevocable written notice from the Borrower to the Administrative Agent and eachLender Agent, with a copy to the Collateral Agent and the Collateral Custodian, in the form of a Notice of Borrowing; provided that such Notice ofBorrowing shall be deemed to have been received by the Administrative Agent and each Lender Agent on a Business Day if delivered no later than2:00 p.m. on the proposed date of such Advance and, if not delivered by such time, shall be deemed to have been received on the following BusinessDay. Each Notice of Borrowing shall include a duly completed Borrowing Base Certificate (updated to the date such Advance is requested and givingpro forma effect to the Advance requested and the use of the proceeds thereof), and shall specify:(i) the aggregate amount of such Advance, which amount shall not cause the Advances Outstanding to exceed the Borrowing Base;provided that, except with respect to an Advance pursuant to Section 2.02(f) or, in the case of an Advance to be applied to fund any DelayedDraw Loan Asset, the amount of such Advance must be at least equal to $500,000;(ii) the proposed date of such Advance;(iii) a representation that all conditions precedent for an Advance described in Article III hereof have been satisfied;(iv) the amount of cash that will be funded by the Transferor into the Unfunded Exposure Account in connection with any Delayed DrawLoan Asset funded by such Advance, if applicable; and(v) whether such Advance should be remitted to the Borrower or the Unfunded Exposure Account.On the date of each Advance, upon satisfaction of the applicable conditions set forth in Article III, each Lender shall, in accordance with instructionsreceived by Administrative Agent or the applicable Lender Agent from the Borrower, either (i) make available to the Borrower, in same day funds, anamount equal to such Lender’s Pro Rata Share of such Advance, by payment into the account which the Borrower has designated in writing or (ii) remitin same day funds an amount equal to such Lender’s Pro Rata Share of such Advance into the Unfunded Exposure Account, as applicable; providedthat, with respect to an Advance funded pursuant to Section 2.02(f), each Lender may remit the Advance equal to such Lender’s Pro Rata Share of theUnfunded Exposure Amount Shortfall in same day funds to the Unfunded Exposure Account.(c) The Advances shall bear interest at the Yield Rate.(d) Subject to Section 2.18 and the other terms, conditions, provisions and limitations set forth herein (including, without limitation, the paymentof the Make-Whole Premium, as applicable), the Borrower may borrow, repay or prepay and reborrow Advances without any penalty, fee or premium onand after the Closing Date and prior to the end of the Reinvestment Period. -48-(e) A determination by Wells Fargo, as Lender, of the existence of any Eurodollar Disruption Event (any such determination to be communicatedto the Borrower by written notice from the Administrative Agent promptly after the Administrative Agent learns of such event), or of the effect of anyEurodollar Disruption Event on its making or maintaining Advances at LIBOR, shall be conclusive absent manifest error.(f) Notwithstanding anything to the contrary herein (including, without limitation, the occurrence of an Event of Default or the existence of anUnmatured Event of Default or a Borrowing Base Deficiency), if, upon the occurrence of an Event of Default or on the last day of the ReinvestmentPeriod, the amount on deposit in the Unfunded Exposure Account is less than the Aggregate Unfunded Exposure Amount, the Borrower shall requestan Advance in the amount of such shortfall (the “Unfunded Exposure Amount Shortfall”). Following receipt of a Notice of Borrowing (which shallspecify the account details of the Unfunded Exposure Account where the funds will be made available), each Lender shall fund such UnfundedExposure Amount Shortfall in accordance with Section 2.02(b), notwithstanding anything to the contrary herein (including, without limitation, theBorrower’s failure to satisfy any of the conditions precedent set forth in Section 3.02); provided that such Advance shall not exceed the MaximumFacility Amount.(g) The obligation of each Conduit Lender and each Institutional Lender to remit its Pro Rata Share of any Advance shall be several from that ofeach other Lender and the failure of any Conduit Lender or Institutional Lender to so make such amount available to the Borrower shall not relieve anyother Lender of its obligation hereunder.Section 2.03 Determination of Yield. Each applicable Lender Agent shall determine the Yield for its portion of the Advances (including unpaidYield related thereto, if any, due and payable on a prior Payment Date) to be paid by the Borrower on each Payment Date for the related RemittancePeriod and shall advise the Servicer thereof on the third Business Day prior to such Payment Date. The Borrower shall pay all such Yield on suchPayment Date.Section 2.04 Remittance Procedures. On each Payment Date, the Servicer shall instruct the Collateral Agent by delivery of the Servicing Reportand, if the Servicer fails to do so, the Administrative Agent may instruct the Collateral Agent, to apply funds on deposit in the Controlled Accounts asdescribed in this Section 2.04; provided that, at any time after delivery of a Notice of Exclusive Control, the Administrative Agent shall instruct theCollateral Agent to apply funds on deposit in the Controlled Accounts as described in this Section 2.04.(a) Interest Payments prior to an Event of Default. Prior to the occurrence and continuance of an Event of Default or the Facility Maturity Date, oneach Payment Date the Collateral Agent shall (as directed pursuant to the first paragraph of this Section 2.04) transfer Interest Collections held by theAccount Bank in the Collection Account to the following Persons in the following amounts, calculated as of the most recent Determination Date, andpriority:(i) pari passu to (a) the payment of taxes and any applicable government fees; provided that amounts payable pursuant to this subclause (a) -49-(and Sections 2.04(b)(i)(a) and 2.04(c)(i)(a), if applicable) shall not, collectively, exceed $50,000 for any 12 month period, (b) the CollateralAgent, in payment in full of all accrued Collateral Agent Fees and Collateral Agent Expenses, (c) the Collateral Custodian, in payment in full ofall accrued Collateral Custodian Fees and Collateral Custodian Expenses and (d) the Account Bank, in payment in full of all accrued AccountBank Fees and Account Bank Expenses; provided that amounts payable with respect to Collateral Agent Expenses, Collateral CustodianExpenses and the Account Bank Expenses pursuant to this clause (i) (and Sections 2.04(b)(i) and 2.04(c)(i), if applicable) shall not, collectively,exceed $100,000 for any 12 month period;(ii) to the Servicer, in payment in full of all accrued and unpaid Servicing Fees;(iii) pro rata, in accordance with the amounts due under this clause, to each Lender Agent, for the account of the applicable Lender, allYield and the Non-Usage Fee, that are accrued and unpaid as of the last day of the related Remittance Period;(iv) pro rata, to each Lender Agent (for the account of the applicable Lender) and the Administrative Agent, as applicable, all accrued andunpaid fees, expenses (including reasonable and documented attorneys’ fees, costs and expenses) and indemnity amounts payable by theBorrower to the Administrative Agent, any Lender Agent or any Lender under the Transaction Documents;(v) to pay the Advances Outstanding up to the amount required to eliminate any outstanding Borrowing Base Deficiency;(vi) to pay the Advances Outstanding, together with any applicable Make-Whole Premium, in connection with any complete refinancing ortermination of this Agreement;(vii) pari passu to (a) the Collateral Agent, in payment in full of all accrued Collateral Agent Expenses to the extent not previously paid,(b) the Collateral Custodian, in payment in full of all accrued Collateral Custodian Expenses to the extent not previously paid, and (c) theAccount Bank, in payment in full of all accrued Account Bank Expenses to the extent not previously paid;(viii) to pay any other amounts due and payable (other than with respect to the repayment of Advances Outstanding) under this Agreementand the other Transaction Documents;(ix) to the Servicer in respect of all reasonable expenses (except allocated overhead) incurred in connection with the performance of itsduties hereunder or paid on behalf of the Borrower; and(x) (a) during an Unmatured Event of Default, to remain in the Collection Account or (b) otherwise, to the Borrower, any remainingamounts. -50-(b) Principal Payments prior to an Event of Default. Prior to an Event of Default occurring and continuing or prior to the Facility Maturity Date,on each Payment Date the Collateral Agent shall (as directed pursuant to the first paragraph of this Section 2.04) transfer Principal Collections held bythe Account Bank in the Collection Account to the following Persons in the following amounts, calculated as of the most recent Determination Date,and priority:(i) to pay amounts due under Section 2.04(a)(i) through (a)(iv), to the extent not paid thereunder;(ii) (x) prior to the end of the Reinvestment Period (at the discretion of the Servicer), to the Unfunded Exposure Account in an amountnecessary to cause the amount on deposit in the Unfunded Exposure Account to equal the aggregate Unfunded Exposure Equity Amount; or(y) after the end of the Reinvestment Period, to the Unfunded Exposure Account in an amount necessary to cause the amount on deposit in theUnfunded Exposure Account to equal the Aggregate Unfunded Exposure Amount;(iii) (x) prior to the end of the Reinvestment Period, to pay the Advances Outstanding up to the amount required to eliminate anyoutstanding Borrowing Base Deficiency; or (y) after the end of the Reinvestment Period, to pay the Advances Outstanding, and any applicableMake-Whole Premium incurred in connection with any complete refinancing or termination of this Agreement, in each case, until paid in full;(iv) pari passu to (a) the Collateral Agent, in payment in full of all accrued Collateral Agent Expenses to the extent not previously paid,(b) the Collateral Custodian in payment in full of all accrued Collateral Custodian Expenses to the extent not previously paid, and (c) theAccount Bank, in payment in full of all accrued Account Bank Expenses to the extent not previously paid;(v) to pay any other amounts due and payable under this Agreement and the other Transaction Documents;(vi) to the Servicer in respect of all reasonable expenses incurred in connection with the performance of its duties hereunder; and(vii) (a) during an Unmatured Event of Default, to remain in the Collection Account or (b) otherwise, to the Borrower (x) prior to the end ofthe Reinvestment Period, any remaining amounts (provided that the Borrower will not be permitted to receive an amount greater than 7.0% of theMaximum Facility Amount per annum pursuant to this clause (vii)(b)(x)) and (y) after the end of the Reinvestment Period, any remainingamounts.(c) Transfers Upon the occurrence of an Event of Default. If an Event of Default has occurred and is continuing or, in any case, after thedeclaration, or automatic occurrence, of the Facility Maturity Date, on each Payment Date thereafter the Collateral Agent -51-shall (as directed pursuant to the first paragraph of this Section 2.04) transfer collected funds held by the Account Bank in the Collection Account tothe following Persons in the following amounts, calculated as of the prior Business Day, and priority:(i) pari passu to (a) the payment of taxes and any applicable government fees; provided that amounts payable pursuant to this subclause(a) (and Sections 2.04(a)(i)(a) and 2.04(b)(i)(a), if applicable) shall not, collectively, exceed $50,000 for any 12 month period, (b) the CollateralAgent, in payment in full of all accrued Collateral Agent Fees and Collateral Agent Expenses, (b) the Collateral Custodian, in payment in full ofall accrued Collateral Custodian Fees and Collateral Custodian Expenses and (c) the Account Bank, in payment in full of all accrued AccountBank Fees and Account Bank Expenses; provided that amounts payable with respect to Collateral Agent Expenses, Collateral CustodianExpenses and the Account Bank Expenses pursuant to this clause (i) (and Sections 2.04(a)(i) and (b)(i), if applicable) shall not, collectively,exceed $100,000 for any 12 month period;(ii) to the Servicer, in payment in full of all accrued and unpaid Servicing Fees;(iii) pro rata, in accordance with the amounts due under this clause, to each Lender Agent, for the account of the applicable Lender, allYield and the Non-Usage Fee that is accrued and unpaid as of the last day of the related Remittance Period;(iv) pro rata, to each Lender Agent (for the account of the applicable Lender) and the Administrative Agent, as applicable, all accrued andunpaid fees, expenses (including reasonable and documented attorneys’ fees, costs and expenses) and indemnity amounts payable by theBorrower to the Administrative Agent, any Lender Agent or any Lender under the Transaction Documents;(v) to the Unfunded Exposure Account in an amount necessary to cause the amount on deposit in the Unfunded Exposure Account to equalthe Aggregate Unfunded Exposure Amount;(vi) to pay the Advances Outstanding, and any applicable Make-Whole Premium incurred in connection with any complete refinancing ortermination of this Agreement, in each case, until paid in full;(vii) pari passu to (a) the Collateral Agent, in payment in full of all accrued Collateral Agent Expenses to the extent not previously paid,(b) the Collateral Custodian, in payment in full of all accrued Collateral Custodian Expenses to the extent not previously paid, and (c) theAccount Bank, in payment in full of all accrued Account Bank Expenses to the extent not previously paid;(viii) to pay any other amounts due and payable under this Agreement and the other Transaction Documents; -52-(ix) to the Servicer in respect of all reasonable expenses (except allocated overhead) incurred in connection with the performance of itsduties hereunder; and(x) to the Borrower, any remaining amounts.(d) Unfunded Exposure Account. Funds on deposit in the Unfunded Exposure Account may be withdrawn to fund draw requests of the relevantObligors under any Delayed Draw Loan Asset; provided that, until the earlier to occur of the end of the Reinvestment Period or the Facility MaturityDate, the amount withdrawn to fund such draw request shall not create any Borrowing Base Deficiency. Any such draw request made by an Obligor,along with wiring instructions for the applicable Obligor, shall be forwarded by the Borrower or the Servicer to the Collateral Agent (with a copy to theAdministrative Agent and each Lender Agent) in the form of a Disbursement Request, and the Collateral Agent shall instruct the Account Bank to fundsuch draw request in accordance with the Disbursement Request. As of any date of determination, the Servicer (or, after delivery of a Notice ofExclusive Control, the Administrative Agent) may cause any amounts on deposit in the Unfunded Exposure Account that exceed (i) the aggregateUnfunded Exposure Equity Amount prior to the earlier to occur of the end of the Reinvestment Period or the Facility Maturity Date and (ii) theaggregate of all Unfunded Exposure Amounts following the earlier to occur of the end of the Reinvestment Period or the Facility Maturity Date to bedeposited into the Principal Collection Account as Principal Collections.(e) Insufficiency of Funds. For the sake of clarity, the parties hereby agree that if the funds on deposit in the Collection Account are insufficientto pay any amounts due and payable on a Payment Date or otherwise, the Borrower shall nevertheless remain responsible for, and shall pay when due,all amounts payable under this Agreement and the other Transaction Documents in accordance with the terms of this Agreement and the otherTransaction Documents. Notwithstanding the foregoing, the EquityholderServicer, in its capacity as the sole owner of the Borrower, may at any timecontribute amounts to the Borrower for deposit into the Collection Account or the Unfunded Exposure Account for application in accordance with theterms of this Agreement.Section 2.05 Instructions to the Collateral Agent and the Account Bank. All instructions and directions given to the Collateral Agent or theAccount Bank by the Servicer, the Borrower or the Administrative Agent pursuant to Section 2.04 shall be in writing (including instructions anddirections transmitted to the Collateral Agent or the Account Bank by telecopy or e-mail), and such written instructions and directions shall bedelivered with a written certification that such instructions and directions are in compliance with the provisions of Section 2.04. The Servicer and theBorrower shall promptly transmit to the Administrative Agent by telecopy or e-mail a copy of all instructions and directions given to the CollateralAgent or the Account Bank by such party pursuant to Section 2.04. The Administrative Agent shall promptly transmit to the Servicer and the Borrowerby telecopy or e-mail a copy of all instructions and directions given to the Collateral Agent or the Account Bank by the Administrative Agent,pursuant to Section 2.04. If either the Administrative Agent or Collateral Agent disagrees with the computation of any amounts to be paid or depositedby the Borrower or -53-the Servicer under Section 2.04 or otherwise pursuant to this Agreement, or upon their respective instructions, it shall so notify the Borrower, theServicer and the Collateral Agent in writing and in reasonable detail to identify the specific disagreement. If such disagreement cannot be resolvedwithin two Business Days, the determination of the Administrative Agent as to such amounts shall be conclusive and binding on the parties heretoabsent manifest error. In the event the Collateral Agent or the Account Bank receives instructions from the Servicer or the Borrower which conflict withany instructions received by the Administrative Agent, the Collateral Agent or the Account Bank, as applicable, shall rely on and follow theinstructions given by the Administrative Agent; provided that the Collateral Agent or Account Bank, as applicable, shall promptly providenotification to the Servicer or the Borrower of such conflicting instructions; provided, further, that any such failure on the part of the Collateral Agentto deliver such notice shall not render such action by the Collateral Agent invalid.Section 2.06 Borrowing Base Deficiency Payments.(a) In addition to any other obligation of the Borrower to cure any Borrowing Base Deficiency pursuant to the terms of this Agreement, if, on anyday prior to the Collection Date, any Borrowing Base Deficiency exists, then the Borrower shall, within three (3) Business Days from the date of suchBorrowing Base Deficiency, cure such Borrowing Base Deficiency in its entirety; provided that, notwithstanding the foregoing, if the Borrower shallprovide to the Administrative Agent within three (3) Business Days of the occurrence of such Borrowing Base Deficiency a plan, acceptable to theAdministrative Agent in its sole discretion, enabling such Borrowing Base Deficiency to be eliminated in its entirety within a time period establishedin such plan (which period shall in no case extend beyond the immediately succeeding Payment Date), such Borrowing Base Deficiency shall notconstitute an Event of Default; provided, further, that during the period of time that such event remains unremedied, (i) no additional Advances will bemade under this Agreement, (ii) any payments required to be made by the Borrower on a Payment Date shall be made under Section 2.04(c) and (iii) theApplicable Spread shall be equal to 4.50% per annum for all Advances.A Borrowing Base Deficiency may be remedied by effecting one or more (or any combination thereof) of the following actions in order toeliminate such Borrowing Base Deficiency as of such date of determination: (i) deposit cash in Dollars into the Principal Collection Account, (ii) repayAdvances Outstanding (together with any Breakage Fees and all accrued and unpaid costs and expenses of the Administrative Agent, the LenderAgents and the Lenders, in each case in respect of the amount so prepaid), and/or (iii) subject to the approval of the Administrative Agent, in its solediscretion, Pledge additional Eligible Loan Assets. The Administrative Agent shall use all commercially reasonable efforts to respond to any approvalrequest in a timely manner.(b) No later than 2:00 p.m. on the Business Day prior to the proposed repayment of Advances or Pledge of additional Eligible Loan Assetspursuant to Section 2.06(a), the Borrower (or the Servicer on its behalf) shall deliver (i) to the Administrative Agent (with a copy to the CollateralAgent and the Collateral Custodian), notice of such repayment or Pledge and a duly completed Borrowing Base Certificate, updated to the date suchrepayment or Pledge is being made and giving pro forma effect to such repayment or Pledge, and (ii) to the Administrative Agent, if applicable, adescription of any Eligible Loan Asset and each Obligor of such Eligible Loan Asset to be Pledged and added to the updated Loan Tape. Any noticepertaining to any repayment or any Pledge pursuant to this Section 2.06 shall be irrevocable. -54-Section 2.07 Substitution and Sale of Loan Assets; Affiliate Transactions.(a) Substitutions. The Borrower may, with the consent of the Administrative Agent in its sole discretion, replace any Loan Asset with an EligibleLoan Asset so long as (i)(A) no event has occurred and is continuing, or would result from such substitution, which constitutes an Event of Default,(B) no event has occurred and is continuing, or would result from such substitution, which constitutes an Unmatured Event of Default and (C) bothbefore and after giving effect to such substitution, no Borrowing Base Deficiency shall exist (provided that the Borrower may effect a substitution asnecessary to facilitate a cure of a Borrowing Base Deficiency (and any Unmatured Event of Default arising therefrom) with the contribution of anEligible Loan Asset) and (ii) simultaneously therewith, the Borrower Pledges (in accordance with all of the terms and provisions contained herein) aSubstitute Eligible Loan Asset.(b) Discretionary Sales. The Borrower shall be permitted to sell Loan Assets to Persons from time to time; provided that (i) the proceeds of suchsale shall be deposited into the Collection Account to be disbursed in accordance with Section 2.04 hereof, (ii)(A) no event has occurred and iscontinuing, or would result from such sale, which constitutes an Event of Default, (B) no event has occurred and is continuing, or would result fromsuch sale, which constitutes an Unmatured Event of Default and (C) both before and after giving effect to such sale, no Borrowing Base Deficiencyshall exist (provided that the Borrower may sell Loan Assets pursuant to this clause (b) as necessary to facilitate a cure of a Borrowing Base Deficiency(and any Unmatured Event of Default arising therefrom) with the contribution of an Eligible Loan Asset); and (iii) the prior written consent of theAdministrative Agent shall be required if such Loan Asset is sold for an amount which is less than the Adjusted Borrowing Value.(c) Repurchase or Substitution of Warranty Loan Assets. If on any day a Loan Asset is (or becomes) a Warranty Loan Asset, no later than 30 daysfollowing the earlier of knowledge by the Borrower or the Servicer of such Loan Asset becoming a Warranty Loan Asset or receipt by the Borrowerfrom the Administrative Agent or the Servicer of written notice thereof, the Borrower shall either:(i) make a deposit to the Collection Account (for allocation pursuant to Section 2.04) in immediately available funds in an amount equal to(x) the Assigned Value as of the Cut-Off Date with respect to such Loan Asset multiplied by the Outstanding Balance of such Loan Asset and(y) any expenses or fees with respect to such Loan Asset and costs and damages incurred by the Administrative Agent or by any Lender inconnection with any violation by such Loan Asset of any predatory or abusive lending law which is an Applicable Law (a notification regardingthe amount of such expenses or fees to be provided by the Administrative Agent to the Borrower); provided that the Administrative Agent shallhave the right to determine whether the amount so deposited is sufficient to satisfy the foregoing requirements; or -55-(ii) with the prior written consent of the Administrative Agent, in its sole discretion, substitute for such Warranty Loan Asset a SubstituteEligible Loan Asset.Upon confirmation of the deposit of the amounts set forth in Section 2.07(c)(i) into the Collection Account or the delivery by the Borrower of aSubstitute Eligible Loan Asset for each Warranty Loan Asset (the date of such confirmation or delivery, the “Release Date”), such Warranty Loan Assetand related Portfolio Assets shall be removed from the Collateral Portfolio and, as applicable, the Substitute Eligible Loan Asset and related PortfolioAssets shall be included in the Collateral Portfolio. On the Release Date of each Warranty Loan Asset, the Collateral Agent, for the benefit of theSecured Parties, shall automatically and without further action be deemed to release to the Borrower, without recourse, representation or warranty, allthe right, title and interest and any Lien of the Collateral Agent, for the benefit of the Secured Parties in, to and under the Warranty Loan Asset and anyrelated Portfolio Assets and all future monies due or to become due with respect thereto.(d) Conditions to Sales, Substitutions and Repurchases. Any sales, substitutions or repurchases effected pursuant to Sections 2.07, (b), or (c) shallbe subject to the satisfaction of the following conditions (as certified in writing to the Administrative Agent and Collateral Agent by the Borrower):(i) the Borrower shall deliver a Borrowing Base Certificate to the Administrative Agent in connection with such sale, substitution orrepurchase;(ii) the Borrower shall deliver a list of all Loan Assets to be sold, substituted, or repurchased;(iii) no selection procedures adverse to the interests of the Administrative Agent, the Lender Agents or the Lenders were utilized by theBorrower in the selection of the Loan Assets to be sold, repurchased or substituted;(iv) the Borrower shall give one Business Day’s notice of such sale, substitution or repurchase;(v) the Borrower shall notify the Administrative Agent of any amount to be deposited into the Collection Account in connection with anysale, substitution or repurchase;(vi) the representations and warranties contained in Sections 4.01, 4.02 and 4.03 hereof shall continue to be true and correct in all respects,except to the extent relating to an earlier date; and(vii) the Borrower shall agree to pay the reasonable and documented legal fees and expenses of the Administrative Agent, the CollateralAgent and the Collateral Custodian in connection with any such sale, substitution or repurchase (including, but not limited to, expenses incurredin connection with the release of -56-the Lien of the Collateral Agent on behalf of the Secured Parties and any other party having an interest in the Loan Asset in connection with suchsale, substitution or repurchase), which agreement to pay is set forth in Section 11.07 hereof.(e) Affiliate Transactions. Notwithstanding anything to the contrary set forth herein or in any other Transaction Document, the Transferor (or anAffiliate thereof) shall not reacquire from the Borrower and the Borrower shall not transfer to the Transferor or to Affiliates of the Transferor, and noneof the Transferor nor any Affiliates thereof will have a right or ability to purchase, the Loan Assets unless (i) such transfer shall be on an arms’ lengthbasis and for fair market value (except in the case of repurchases of Loan Assets by the Transferor pursuant to Section 6.1 of the Purchase and SaleAgreement or substitutions of Loan Assets pursuant to Section 6.2 of the Purchase and Sale Agreement) and (ii) to the extent any Loan Asset with anAssigned Value of less than or equal to 90% is sold, the prior written consent of the Administrative Agent has been obtained. For the avoidance ofdoubt, nothing in this clause (e) shall prohibit the Borrower from transferring or distributing its Loan Assets to the holders of its equity or Affiliates, asapplicable, in accordance with Section 2.07(a), (e) or (g) herein and subject to the limitations, if applicable of Section 2.07(f); provided that noselection procedures adverse to the interests of the Administrative Agent, the Lender Agents or the Lenders were utilized by the Borrower in theselection of the Loan Assets to be transferred or distributed.(f) Limitations on Sales and Substitutions. The Outstanding Balance of the Loan Asset(s) (other than Warranty Loan Assets) which are the subjectof a proposed sale or substitution or Lien Release Dividend, together with the Outstanding Balance of all Loan Assets (other than Warranty LoanAssets) sold pursuant to Section 2.07(b) or substituted pursuant to Section 2.07(a) during the 12-month period immediately preceding the proposeddate of sale or substitution (or such lesser number of months as shall have elapsed as of such date) does not exceed 25% of the Maximum FacilityAmount; provided that the Outstanding Balance of the Loan Assets sold pursuant to that certain Purchase Agreement, dated as of September 14, 2018,by and among Senior Secured Unitranche Loan Program LLC, Solar Capital Ltd., as buyer, Voya Retirement Insurance and Annuity Company andReliaStar Life Insurance Company, as sellers, and Voya Investment Management, LLC, with the consent of the Administrative Agent shall not besubject to, or be included in the calculation of, the foregoing threshold.(g) Lien Release Dividend. Notwithstanding any provision contained in this Agreement to the contrary, provided no Event of Default hasoccurred and is continuing and no Unmatured Event of Default exists, on a Lien Release Dividend Date, the Borrower may dividend to the TransferorLoan Assets, or portions thereof (each, a “Lien Release Dividend”), subject to the following terms and conditions, as certified by the Borrower and theTransferor to the Administrative Agent (with a copy to the Collateral Agent and the Collateral Custodian):(i) The Borrower and the Transferor shall have given the Administrative Agent, with a copy to the Collateral Agent and the CollateralCustodian, at least five Business Days prior written notice to the Administrative Agent regarding the effectuation of a Lien Release Dividend, inthe form of Exhibit O hereto (a “Notice of Lien Release Dividend”); -57-(ii) On any Lien Release Dividend Date, no more than four Lien Release Dividends shall have been made during the 12-month periodimmediately preceding the proposed Lien Release Dividend Date;(iii) After giving effect to the Lien Release Dividend on the Lien Release Dividend Date, (A) no Borrowing Base Deficiency, Event ofDefault or Unmatured Event of Default shall exist, (B) the representations and warranties contained in Sections 4.01, 4.02 and 4.03 hereof shallcontinue to be correct in all respects, except to the extent relating to an earlier date, (C) the eligibility of any Loan Asset remaining as part of theCollateral Portfolio after the Lien Release Dividend will be redetermined as of the Lien Release Dividend Date, (D) no claim shall have beenasserted or proceeding commenced challenging the enforceability or validity of any of the Required Loan Documents and (E) there shall havebeen no material adverse change as to the Servicer or the Borrower;(iv) Such Lien Release Dividend must be in compliance with Applicable Law and may not (A) be made with the intent to hinder, delay ordefraud any creditor of the Borrower or (B) leave the Borrower, immediately after giving effect to the Lien Release Dividend, (x) insolvent,(y) with insufficient funds to pay its obligations as and when they become due or (z) with inadequate capital for its present and anticipatedbusiness and transactions;(v) On or prior to the Lien Release Dividend Date, the Borrower shall have delivered to the Administrative Agent, with a copy to theCollateral Agent and the Collateral Custodian, a list specifying all Loan Assets or portions thereof to be transferred pursuant to such Lien ReleaseDividend;(vi) A portion of a Loan Asset may be transferred pursuant to a Lien Release Dividend; provided that (A) such transfer does not have anadverse effect on the portion of such Loan Asset remaining as a part of the Collateral Portfolio, any other aspect of the Collateral Portfolio, theLenders, the Lender Agents, the Administrative Agent or any other Secured Party and (B) a new promissory note (other than with respect to aNoteless Loan Asset) for the portion of the Loan Asset remaining as a part of the Collateral Portfolio has been executed, and the original thereofhas been endorsed to the Collateral Agent and delivered to the Collateral Custodian;(vii) Each Loan Asset, or portion thereof, as applicable, shall be transferred at a value equal to, or greater than, the Adjusted BorrowingValue thereof;(viii) The Borrower shall deliver a Borrowing Base Certificate (including a calculation of the Borrowing Base after giving effect to suchLien Release Dividend) to the Administrative Agent; -58-(ix) The Borrower shall have paid in full an aggregate amount equal to the sum of all amounts due and owing to the Administrative Agent,the Lenders, the Collateral Agent or the Collateral Custodian, as applicable, under this Agreement and the other Transaction Documents, if any,to the extent accrued to such date (including, without limitation, Breakage Fees) with respect to the Loan Assets to be transferred pursuant tosuch Lien Release Dividend and incurred in connection with the transfer of such Loan Assets pursuant to such Lien Release Dividend; and(x) The Borrower and the Servicer (on behalf of the Borrower) shall pay the reasonable and documented legal fees and expenses of theAdministrative Agent, the Collateral Agent and the Collateral Custodian in connection with any Lien Release Dividend (including, but notlimited to, reasonable and documented expenses incurred in connection with the release of the Lien of the Collateral Agent, on behalf of theSecured Parties, and any other party having an interest in the Loan Asset in connection with such Lien Release Dividend).Section 2.08 Payments and Computations, Etc.(a) All amounts to be paid or deposited by the Borrower or the Servicer hereunder shall be paid or deposited in accordance with the terms hereofno later than 5:00 p.m. on the day when due in lawful money of the United States in immediately available funds to the Collection Account or suchother account as is designated by the Administrative Agent. The Borrower or the Servicer, as applicable, shall, to the extent permitted by law, pay tothe Secured Parties interest on all amounts not paid or deposited when due (taking into account any grace period provided for herein) to any of theSecured Parties hereunder at 2.0% per annum above the Base Rate (other than with respect to any Advances outstanding, which shall accrue at theYield Rate), payable on demand, from the date of such nonpayment until such amount is paid in full (as well after as before judgment); provided thatsuch interest rate shall not at any time exceed the maximum rate permitted by Applicable Law. Any Obligation hereunder shall not be reduced by anydistribution of any portion of Available Collections if at any time such distribution is rescinded or required to be returned by any Lender to theBorrower or any other Person for any reason. All computations of interest and all computations of Yield and other fees hereunder shall be made on thebasis of a year of 360 days for the actual number of days (including the first but excluding the last day) elapsed, other than calculations with respect tothe Base Rate, which shall be based on a year consisting of 365 or 366 days, as applicable.(b) Whenever any payment hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the nextsucceeding Business Day, and such extension of time shall in such case be included in the computation of payment of Yield or any fee payablehereunder, as the case may be.(c) If any Advance requested by the Borrower and approved by the Lender Agents and the Administrative Agent pursuant to Section 2.02 is notfor any reason whatsoever, except as a result of the gross negligence or willful misconduct of, or failure to fund such Advance on the part of, theLenders, the Administrative Agent or an Affiliate thereof, made or -59-effectuated, as the case may be, on the date specified therefor, the Borrower shall indemnify such Lender against any loss, cost or expense incurred bysuch Lender related thereto (other than any such loss, cost or expense solely due to the gross negligence or willful misconduct or failure to fund suchAdvance on the part of the Lenders, the Administrative Agent or an Affiliate thereof), including, without limitation, any loss (including cost of fundsand reasonable out-of-pocket expenses but excluding lost profits), cost or expense incurred by reason of the liquidation or reemployment of deposits orother funds acquired by such Lender to fund Advances or maintain the Advances. Any such Lender shall provide to the Borrower documentationsetting forth the amounts of any loss, cost or expense referred to in the previous sentence, such documentation to be conclusive absent manifest error.Section 2.09 Non-Usage Fee.The Borrower shall pay, in accordance with Section 2.04, pro rata to each Lender (either directly or through the applicable Lender Agent), a non-usage fee (the “Non-Usage Fee”) payable in arrears for each Remittance Period, equal to the sum of the products for each day during such RemittancePeriod of (i) one divided by 360, (ii) the applicable Non-Usage Fee Rate (as defined below), and (iii) the aggregate Commitments minus the AdvancesOutstanding on such day (such amount, the “Unused Portion”). The Non-Usage Fee Rate (the “Non-Usage Fee Rate”) shall be equal to:(a) for the period from (and including) the Closing Date through (and excluding) the twelve month anniversary thereof, 0.50%;(b) for the period from (and including) the twelve month anniversary of the Closing Date and thereafter, (i) 0.50% on any Unused Portion up to orequal to 30.0% of the Maximum Facility Amount and (ii) 2.00% on any Unused Portion in excess of 30.0% of the Maximum Facility Amount.Section 2.10 Increased Costs; Capital Adequacy.(a) If, due to either (i) the introduction of or any change following the date hereof (including, without limitation, any change by way ofimposition or increase of reserve requirements) in or in the interpretation, administration or application following the date hereof of any ApplicableLaw (including, without limitation, any law or regulation resulting in any interest payments paid to any Lender under this Agreement being subject toany Tax), in each case whether foreign or domestic or (ii) the compliance with any guideline or request following the date hereof from any central bankor other Governmental Authority (whether or not having the force of law): (x) there shall be any increase in the cost to the Administrative Agent, anyLender, any Lender Agent, any Liquidity Bank or any Affiliate, participant (provided that a participant shall not be entitled to receive any greaterpayment under this Section 2.10 than the Lender would have been entitled to receive with respect to the participation sold to such participant exceptto the extent provided in Section 11.04(d)), successor or assign thereof (each of which shall be an “Affected Party”) of agreeing to make or making,funding or maintaining any Advance (or any reduction of the amount of any payment (whether of principal, interest, fee, compensation or otherwise) toany Affected Party hereunder), as the case may be; (y) there shall be any reduction in the amount of any sum received or receivable by an Affected Partyunder this -60-Agreement, under any other Transaction Document or any Liquidity Agreement; or (z) any Affected Party shall be subject to any Taxes (other than(A) Indemnified Taxes, (B) Taxes described in clauses (b) through (d) of the definition of Excluded Taxes and (C) Connection Income Taxes) on itsloans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto, thenthe Borrower shall, from time to time, after written demand by the Administrative Agent (which demand shall be accompanied by a statement settingforth in reasonable detail the basis for such demand), on behalf of such Affected Party, pay to the Administrative Agent, on behalf of such AffectedParty, additional amounts sufficient to compensate such Affected Party for such increased costs or reduced payments within 10 days after such demand;provided that the amounts payable under this Section 2.10 shall be without duplication of amounts payable under Section 2.11. If either (i) theintroduction of or any change following the date hereof in or in the interpretation, administration or application following the date hereof of any law,guideline, rule or regulation, directive or request or (ii) the compliance by any Affected Party with any law, guideline, rule, regulation, directive orrequest following the date hereof, from any central bank, any Governmental Authority or agency, including, without limitation, compliance by anAffected Party with any request or directive regarding capital adequacy, but, in each case, excluding Taxes, has or would have the effect of reducingthe rate of return on the capital of any Affected Party, as a consequence of its obligations hereunder or any related document or arising in connectionherewith or therewith to a level below that which any such Affected Party could have achieved but for such introduction, change or compliance (takinginto consideration the policies of such Affected Party with respect to capital adequacy), by an amount deemed by such Affected Party to be material,then, from time to time, after demand by such Affected Party (which demand shall be accompanied by a statement setting forth in reasonable detail thebasis for such demand), the Borrower shall pay the Administrative Agent on behalf of such Affected Party such additional amounts as will compensatesuch Affected Party for such reduction. For the avoidance of doubt, any increase in cost and/or reduction in Yield with respect to any Affected Partycaused by regulatory capital allocation adjustments due to FAS 166, 167 and subsequent statements and interpretations shall constitute a circumstanceon which such Affected Party may base a claim for reimbursement under this Section 2.10; provided that, for the avoidance of doubt, the amountspayable under this clause (a) shall be without duplication of amounts payable under Article XI and shall not include Indemnified Taxes.(b) If either (i) the introduction of or any change following the date hereof in or in the interpretation, administration or application following thedate hereof of any law, guideline, rule or regulation, directive or request or (ii) the compliance by any Affected Party with any law, guideline, rule,regulation, directive or request following the date hereof, from any central bank, any Governmental Authority or agency, including, without limitation,compliance by an Affected Party with any request or directive regarding capital adequacy, but, in each case, excluding Taxes, has or would have theeffect of reducing the rate of return on the capital of any Affected Party, as a consequence of its obligations hereunder or any related document orarising in connection herewith or therewith to a level below that which any such Affected Party could have achieved but for such introduction, changeor compliance (taking into consideration the policies of such Affected Party with respect to capital adequacy), by an amount deemed by such AffectedParty to be material, then, from time to time, after demand by such Affected Party (which demand shall be accompanied by a statement setting forth inreasonable detail the basis for such demand), the Borrower shall pay the Administrative Agent on behalf of such Affected -61-Party such additional amounts as will compensate such Affected Party for such reduction. For the avoidance of doubt, any increase in cost and/orreduction in Yield with respect to any Affected Party caused by regulatory capital allocation adjustments due to FAS 166, 167 and subsequentstatements and interpretations shall constitute a circumstance on which such Affected Party may base a claim for reimbursement under thisSection 2.10.(c) If as a result of any event or circumstance similar to those described in clause (a) or (b) of this Section 2.10, any Affected Party is required tocompensate a bank or other financial institution providing liquidity support, credit enhancement or other similar support to such Affected Party inconnection with this Agreement or the funding or maintenance of Advances hereunder, then within ten days after demand by such Affected Party, theBorrower shall pay to such Affected Party such additional amount or amounts as may be necessary to reimburse such Affected Party for any amountspayable or paid by it.(d) In determining any amount provided for in this Section 2.10, the Affected Party may use any reasonable averaging and attribution methods.The Administrative Agent, on behalf of any Affected Party making a claim under this Section 2.10, shall submit to the Borrower a certificate settingforth in reasonable detail the basis for and the computations of such additional or increased costs, which certificate shall be conclusive absent manifesterror.(e) Failure or delay on the part of any Affected Party to demand compensation pursuant to this Section 2.10 shall not constitute a waiver of suchAffected Party’s right to demand or receive such compensation.(f) Notwithstanding anything herein to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all rules andregulations promulgated thereunder or issued in connection therewith and (ii) all requests, rules, guidelines, requirements and directives promulgatedby the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States orforeign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to have been introduced after the Closing Date, therebyconstituting a change for which a claim for increased costs or additional amounts may be made hereunder with respect to the Affected Parties,regardless of the date enacted, adopted or issued.(g) If at any time the Borrower shall be liable for the payment of any additional amounts in accordance with this Section 2.10, then the Borrowershall have the option, at its sole expense and effort, upon notice to the applicable Affected Party and the Administrative Agent, to require such AffectedParty to assign and delegate in accordance with Section 11.04, all of its interests, rights and obligations under this Agreement to an assignee that shallassume such obligations; provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent and (ii) such AffectedParty shall have received payment of an amount equal to all Obligations due and payable to such Affected Party. An Affected Party shall not berequired to make any such assignment and delegation if, prior thereto, it has waived any amounts owed to it under this Section 2.10. -62-Section 2.11 Taxes.(a) For purposes of this Section 2.11, the term “applicable law” includes FATCA.(b) Any and all payments by or on account of any obligation of the Borrower under any Transaction Document shall be made without deductionor withholding for any Taxes, except as required by applicable law. If any applicable law (as determined in the good faith discretion of an applicableWithholding Agent) requires the deduction or withholding of any Tax from any such payment by a Withholding Agent, then the applicableWithholding Agent shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevantGovernmental Authority in accordance with applicable law and, if such Tax is an Indemnified Tax, then the sum payable by the Borrower shall beincreased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable toadditional sums payable under this Section 2.11) the applicable Recipient receives an amount equal to the sum it would have received had no suchdeduction or withholding been made.(c) The Borrower shall timely pay to the relevant Governmental Authority in accordance with applicable law, or at the option of theAdministrative Agent timely reimburse it for the payment of, any Other Taxes.(d) The Borrower shall indemnify each Recipient, within 10 days after demand therefor, for the full amount of any Indemnified Taxes (includingIndemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 2.11) payable or paid by such Recipient or required tobe withheld or deducted from a payment to such Recipient and any reasonable expenses arising therefrom or with respect thereto, whether or not suchIndemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of suchpayment or liability delivered to the Borrower by a Recipient (with a copy to the Administrative Agent), or by the Administrative Agent on its ownbehalf or on behalf of a Recipient, shall be conclusive absent manifest error.(e) Each Lender shall severally indemnify the Administrative Agent, within 10 days after demand therefor, for (i) any Indemnified Taxesattributable to such Lender (but only to the extent that the Borrower has not already indemnified the Administrative Agent for such Indemnified Taxesand without limiting the obligation of the Borrower to do so), (ii) any Taxes attributable to such Lender’s failure to comply with the provisions ofSection 2.14 relating to the maintenance of a Participant Register and (iii) any Excluded Taxes attributable to such Lender, in each case, that arepayable or paid by the Administrative Agent in connection with any Transaction Document, and any reasonable expenses arising therefrom or withrespect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to theamount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lenderhereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under any TransactionDocument or otherwise payable by the Administrative Agent to the Lender from any other source against any amount due to the Administrative Agentunder this paragraph (e). -63-(f) As soon as practicable after any payment of Taxes by the Borrower to a Governmental Authority pursuant to this Section 2.11, the Borrowershall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment,a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.(g) (i) For purposes of this Section 2.11(g), the term “Lender” includes any Lender Agent. Any Lender that is entitled to an exemption from orreduction of withholding Tax with respect to payments made under any Transaction Document shall deliver to the Borrower and the AdministrativeAgent, at the time or times reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentationreasonably requested by the Borrower or the Administrative Agent as will permit such payments to be made without withholding or at a reduced rate ofwithholding. In addition, any Lender, if reasonably requested by the Borrower or the Administrative Agent, shall deliver such other documentationprescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the AdministrativeAgent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything tothe contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation setforth in Section 2.11(g)(ii)(A), (g)(ii)(B) and (g)(ii)(D) below) shall not be required if in the Lender’s reasonable judgment such completion, executionor submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial positionof such Lender.(ii) Without limiting the generality of the foregoing, in the event that the Borrower is a U.S. Borrower,(A) any Lender that is a U.S. Person shall deliver to the Borrower and the Administrative Agent on or prior to the date on which such Lenderbecomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the AdministrativeAgent), executed copies of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding tax;(B) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in suchnumber of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under thisAgreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), whichever of thefollowing is applicable:(1) in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party (x) with respectto payments of interest under any Transaction Document, executed copies of -64-IRS Form W-8BEN or IRS Form W-8BEN-E (as applicable) establishing an exemption from, or reduction of, U.S. federal withholding Taxpursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Transaction Document,IRS Form W-8BEN or IRS Form W-8BEN-E (as applicable) establishing an exemption from, or reduction of, U.S. federal withholding Taxpursuant to the “business profits” or “other income” article of such tax treaty;(2) executed copies of IRS Form W-8ECI;(3) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code,(x) a certificate substantially in the form of Exhibit P-1 to the effect that such Foreign Lender is not a “bank” within the meaning ofSection 881(c)(3)(A) of the Code, a “10 percent shareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a“controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y) executedcopies of IRS Form W-8BEN or IRS Form W-8BEN-E (as applicable); or(4) to the extent a Foreign Lender is not the beneficial owner, executed copies of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN, IRS Form W-8BEN-E, a U.S. Tax Compliance Certificate substantially in the form of Exhibit P-2 or Exhibit P-3,IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is apartnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such ForeignLender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit P-4 on behalf of each such direct and indirectpartner;(C) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in suchnumber of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under thisAgreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed copies of anyother form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed,together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower or the Administrative Agent todetermine the withholding or deduction required to be made; and(D) if a payment made to a Lender under any Transaction Document would be subject to U.S. federal withholding Tax imposed by FATCAif such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Administrative -65-Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent suchdocumentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additionaldocumentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the AdministrativeAgent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations underFATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (D), “FATCA” shall includeany amendments made to FATCA after the date of this Agreement.Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shallupdate such form or certification or promptly notify the Borrower and the Administrative Agent in writing of its legal inability to do so.(h) If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has beenindemnified pursuant to this Section 2.11 (including by the payment of additional amounts pursuant to this Section 2.11), it shall pay to theindemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section 2.11 with respect to theTaxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than anyinterest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnifiedparty, shall repay to such indemnified party the amount paid over pursuant to this paragraph (h) (plus any penalties, interest or other charges imposedby the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority.Notwithstanding anything to the contrary in this paragraph (h), in no event will the indemnified party be required to pay any amount to anindemnifying party pursuant to this paragraph (h) the payment of which would place the indemnified party in a less favorable net after-Tax positionthan the indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld orotherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This paragraph shall not beconstrued to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential)to the indemnifying party or any other Person.(i) If at any time the Borrower shall be liable for the payment of any additional amounts in accordance with this Section 2.11, then the Borrowershall have the option, at its sole expense and effort, upon notice to the applicable Affected Party and the Administrative Agent, require suchindemnified party to assign and delegate in accordance with Section 11.04, all of its interests, rights and obligations under this Agreement to anassignee that shall assume such obligations; provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent;(ii) such indemnified party shall have received payment of an amount equal to all Obligations due and payable to such indemnified party. Anindemnified party shall not be required to make any such assignment and delegation if, prior thereto, it has waived any amounts owed to it under thisSection 2.11; and (iii) such assignment and delegation would not subject such Indemnified Party to any unreimbursed cost or expense and would nototherwise be disadvantageous to such Indemnified Party. -66-Each party’s obligations under this Section 2.11 shall survive the resignation or replacement of the Administrative Agent or any assignment ofrights by, or the replacement of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all obligations under anyTransaction Document.Section 2.12 Collateral Assignment of Agreements. The Borrower hereby collaterally assigns to the Collateral Agent, for the benefit of theSecured Parties, all of the Borrower’s right and title to and interest in, to and under (but not any obligations under) the Purchase and Sale Agreement(and any UCC financing statements filed under or in connection therewith), the Loan Agreements related to each Loan Asset, all other agreements,documents and instruments evidencing, securing or guarantying any Loan Asset and all other agreements, documents and instruments related to any ofthe foregoing but excluding any Excluded Amounts or Retained Interest (the “Assigned Documents”). In furtherance and not in limitation of theforegoing, the Borrower hereby collaterally assigns to the Collateral Agent, for the benefit of the Secured Parties, its right to indemnification underArticle IX of the Purchase and Sale Agreement. The Borrower confirms that until the Collection Date the Collateral Agent (at the direction of theAdministrative Agent) on behalf of the Secured Parties shall have the sole right to enforce the Borrower’s rights and remedies under the Purchase andSale Agreement and any UCC financing statements filed under or in connection therewith for the benefit of the Secured Parties. The parties heretoagree that such collateral assignment to the Collateral Agent, for the benefit of the Secured Parties, shall terminate upon the Collection Date.Section 2.13 Grant of a Security Interest. To secure the prompt, complete and indefeasible payment in full when due, whether by lapse of time,acceleration or otherwise, of the Obligations and the performance by the Borrower of all of the covenants and obligations to be performed by itpursuant to this Agreement and each other Transaction Document, whether now or hereafter existing, due or to become due, direct or indirect, orabsolute or contingent, the Borrower hereby (a) collaterally assigns and pledges to the Collateral Agent, on behalf of the Secured Parties, and (b) grantsa security interest to the Collateral Agent, on behalf of the Secured Parties, in all of the Borrower’s right, title and interest in, to and under (but none ofthe obligations under) all of the Collateral Portfolio, whether now existing or hereafter arising or acquired by the Borrower, and wherever the same maybe located. For the avoidance of doubt, the Collateral Portfolio shall not include any Excluded Amounts, and the Borrower does not hereby assign,pledge or grant a security interest in any such Excluded Amounts. Anything herein to the contrary notwithstanding, (a) the Borrower shall remainliable under the Collateral Portfolio to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if thisAgreement had not been executed, (b) the exercise by the Collateral Agent, for the benefit of the Secured Parties, of any of its rights in the CollateralPortfolio shall not release the Borrower from any of its duties or obligations under the Collateral Portfolio, and (c) none of the Administrative Agent,the Collateral Agent, any Lender (nor its successors and assigns), any Lender Agent, any Liquidity Bank nor any Secured Party shall have anyobligations or liability under the Collateral Portfolio by reason of this Agreement, nor shall the Administrative Agent, the Collateral Agent, any Lender(nor its successors and assigns), any Lender Agent, any Liquidity Bank nor any Secured Party be obligated to perform any of the obligations or dutiesof the Borrower thereunder or to take any action to collect or enforce any claim for payment assigned hereunder. -67-Section 2.14 Evidence of Debt. The Administrative Agent shall maintain, solely for this purpose as the agent of the Borrower, at its addressreferred to in Section 11.02 a copy of each assignment and acceptance agreement delivered to and accepted by it and a register for the recordation ofthe names and addresses and interests of the Lenders (the “Register”). The entries in the Register shall be conclusive and binding for all purposes,absent manifest error, and the Borrower, the Administrative Agent, each Lender and each Lender Agent shall treat each person whose name is recordedin the Register as a Lender under this Agreement for all purposes of this Agreement. The Register shall be available for inspection by the Borrower orany Lender Agent at any reasonable time and from time to time upon reasonable prior notice.Section 2.15 Survival of Representations and Warranties. It is understood and agreed that the representations and warranties set forth in Sections4.01, 4.02 and 4.03 are made and are true and correct on the date of this Agreement and on each Cut-Off Date unless such representations andwarranties are made as of a specific date.Section 2.16 Release of Loan Assets.(a) The Borrower may obtain the release of (i) any Loan Asset (and the related Portfolio Assets pertaining thereto) released pursuant to a LienRelease Dividend or sold or substituted in accordance with the applicable provisions of Section 2.07 or liquidated in accordance with Sections 6.05and 12.08(a) and any Portfolio Assets pertaining to such Loan Asset and (ii) any Collateral Portfolio that expires by its terms and all amounts in respectthereof have been paid in full by the related Obligor and deposited in the Collection Account. The Collateral Agent, for the benefit of the SecuredParties, shall at the sole expense of the Servicer and at the direction of the Administrative Agent, execute such documents and instruments of release asmay be prepared by the Servicer on behalf of the Borrower, give notice of such release to the Collateral Custodian (in the form of Exhibit J) (unless theCollateral Custodian and Collateral Agent are the same Person) and take other such actions as shall reasonably be requested by the Borrower to effectsuch release of the Lien created pursuant to this Agreement. Upon receiving such notification by the Collateral Agent as described in the immediatelypreceding sentence, if applicable, the Collateral Custodian shall deliver the Required Loan Documents to the Borrower.(b) Promptly after the Collection Date has occurred, each Lender and the Administrative Agent, in accordance with their respective interests, shallrelease to the Borrower, for no consideration but at the sole expense of the Borrower, their respective remaining interests in the Portfolio Assets, freeand clear of any Lien resulting solely from an act by the Collateral Agent, any Lender or the Administrative Agent but without any other representationor warranty, express or implied, by or recourse against any Lender or the Administrative Agent.Section 2.17 Treatment of Amounts Received by the Borrower. Amounts received by the Borrower pursuant to Section 2.07 on account of LoanAssets shall be treated as payments of Principal Collections or Interest Collections, as applicable, on Loan Assets hereunder. -68-Section 2.18 Prepayment; Termination.(a) Except as expressly permitted or required herein, including, without limitation, any repayment necessary to cure a Borrowing BaseDeficiency, Advances Outstanding may only be prepaid in whole or in part at the option of the Borrower at any time by delivering a Notice ofReduction (which notice shall include a Borrowing Base Certificate) to the Administrative Agent, the Collateral Agent and the Lender Agents at leastone Business Day prior to such reduction. Upon any prepayment, the Borrower shall also pay in full any Breakage Fees (solely to the extent suchprepayment occurs on any day other than a Payment Date) and other accrued and unpaid costs and expenses of Administrative Agent, Lender Agentsand Lenders related to such prepayment; provided that no reduction in Advances Outstanding shall be given effect unless (i) sufficient funds have beenremitted to pay all such amounts in full, as determined by the Administrative Agent, in its sole discretion and (ii) no event would result from suchprepayment which would constitute an Event of Default or an Unmatured Event of Default. The Administrative Agent shall apply amounts receivedfrom the Borrower pursuant to this Section 2.18(a) to the payment of any Breakage Fees and to the pro rata reduction of the Advances Outstanding.Any notice relating to any repayment pursuant to this Section 2.18(a) shall be irrevocable.(b) The Borrower may, at its option, terminate this Agreement and the other Transaction Documents upon three Business Days’ prior writtennotice to the Administrative Agent and the Lender Agents and upon payment in full of all Advances Outstanding, all accrued and unpaid Yield, anyBreakage Fees, all accrued and unpaid costs and expenses of the Administrative Agent, Lender Agents and Lenders, payment of the Make-WholePremium pro rata to each Lender Agent (for the account of the applicable Lender) and payment of all other Obligations (other than contingentindemnification obligations which are unknown, unmatured and/or for which no claim giving rise thereto has been asserted). In addition, the Borrowermay reduce the Maximum Facility Amount in part upon payment in full of the Make-Whole Premium, if applicable, and delivery of a Notice ofReduction at least one Business Day prior to such reduction; provided that no Event of Default or Unmatured Event of Default would result from suchreduction in the Maximum Facility Amount. Any termination of this Agreement shall be subject to Section 11.05.(c) Notwithstanding anything to the contrary in Section 2.18(b), no Make-Whole Premium shall be payable by the Borrower in the event that theObligations are refinanced by the proceeds of any other financing of the Transferor or any of its Affiliates by any of the Administrative Agent or any ofits respective Affiliates (provided that the aggregate commitments of such financing shall equal or exceed the Advances Outstanding on such date, andthe Administrative Agent or its respective Affiliates hold at least 51% of the aggregate commitments of such replacement or other financing).(d) The Borrower hereby acknowledges and agrees that the Make-Whole Premium constitutes additional consideration for the Lenders to enterinto this Agreement. -69-(e) Unless sooner prepaid pursuant to the terms hereof, the Advances Outstanding shall be repaid in full on the Facility Maturity Date or on suchlater date as is agreed to in writing by the Borrower, the Servicer, the Administrative Agent and the Lenders.Section 2.19 Collections and Allocations.(a) The Servicer shall promptly identify to the Collateral Agent all Available Collections received in the Collection Account as being on accountof Interest Collections or Principal Collections and shall segregate all Principal Collections and Interest Collections and transfer the same to thePrincipal Collection Account and the Interest Collection Account, respectively. The Servicer shall transfer, or cause to be transferred, any collectionsreceived directly by it (if any) to the Collection Account by the close of business within two Business Days after such Principal Collections andInterest Collections are received; provided that the Servicer shall identify to the Collateral Agent any collections received directly by the Servicer asbeing on account of Interest Collections or Principal Collections. The Collateral Agent shall further provide to the Servicer a statement as to theamount of Principal Collections and Interest Collections on deposit in the Principal Collection Account and the Interest Collection Account no laterthan three Business Days after each Determination Date for inclusion in the Servicing Report delivered pursuant to Section 6.08(b). It is understoodand agreed that the Servicer shall remain liable for the proper allocation of the aforementioned Principal Collections and Interest Collections into theappropriate accounts.(b) On and after the Cut-Off Date with respect to any Loan Asset, the Servicer will deposit or will cause the Borrower to deposit into theCollection Account all Available Collections received in respect of Eligible Loan Assets being transferred to and included as part of the CollateralPortfolio on such date.(c) With the prior written consent of the Administrative Agent (a copy of which will be provided by the Servicer to the Collateral Agent), theServicer may direct the Collateral Agent to withdraw from the Collection Account any deposits thereto constituting Excluded Amounts if the Servicerhas, prior to such withdrawal and consent, delivered to the Administrative Agent (with a copy to the Collateral Agent) a report setting forth thecalculation of such Excluded Amounts in form and substance satisfactory to the Administrative Agent in its sole discretion.(d) Prior to the delivery of a Notice of Exclusive Control, the Servicer shall, pursuant to written instruction (which may be in the form of standinginstructions), direct the Collateral Agent to invest, or cause the investment of, funds on deposit in the Collection Account in Permitted Investments,from the date of this Agreement until the Collection Date. Absent any such written instruction, such funds shall not be invested. A PermittedInvestment acquired with funds deposited in the Collection Account shall mature not later than the Business Day immediately preceding any PaymentDate, and shall not be sold or disposed of prior to its maturity unless (i) the Servicer determines (in its commercially reasonable discretion) there is asubstantial risk of material deterioration of such Permitted Investment and (ii) the Administrative Agent consents, in its sole discretion, to such sale ordisposition. All such Permitted Investments shall be registered in the name of the Account Bank or its nominee for the benefit of the -70-Administrative Agent or the Collateral Agent, and shall otherwise comply with the assumptions of the legal opinions of Latham & Watkins LLP datedthe Closing Date and delivered in connection with this Agreement; provided that compliance shall be the responsibility of the Borrower and theServicer and not the Collateral Agent and Account Bank. All income and gain realized from any such investment, as well as any interest earned ondeposits in the Collection Account shall be distributed in accordance with the provisions of Article II hereof. The Borrower shall and theEquityholderServicer, in its capacity as the sole owner of the Borrower, may deposit in the Collection Account or the Unfunded Exposure Account, asthe case may be (with respect to investments made hereunder of funds held therein), an amount equal to the amount of any actual loss incurred, inrespect of any such investment, immediately upon realization of such loss. None of the Account Bank, the Collateral Agent, the Administrative Agent,any Lender Agent or any Lender shall be liable for the amount of any loss incurred, in respect of any investment, or lack of investment, of funds held inthe Collection Account, other than with respect to fraud or their own gross negligence or willful misconduct. The parties hereto acknowledge that theCollateral Agent or any of its Affiliates may receive compensation with respect to the Permitted Investments.(e) Until the Collection Date, neither the Borrower nor the Servicer shall have any rights of direction or withdrawal with respect to amounts heldin the Collection Account, except to the extent explicitly set forth in Sections 2.04, 2.19(d) or 2.20.Section 2.20 Reinvestment of Principal Collections.On the terms and conditions hereinafter set forth as certified in writing to the Collateral Agent, the Lender Agents and Administrative Agent, theServicer may, to the extent of any Principal Collections on deposit in the Principal Collection Account:(a) prior to the end of the Reinvestment Period, withdraw such funds for the purpose of reinvesting in additional Eligible Loan Assets to bePledged hereunder; provided that the following conditions are satisfied:(i) all conditions precedent set forth in Section 3.04 have been satisfied;(ii) no Event of Default has occurred and is continuing, or would result from such withdrawal and reinvestment, and no Unmatured Event ofDefault or Borrowing Base Deficiency exists or would result from such withdrawal and reinvestment;(iii) the representations and warranties contained in Sections 4.01, 4.02 and 4.03 hereof shall continue to be true and correct in all respects,except to the extent relating to an earlier date;(iv) the Servicer provides same day written notice to the Administrative Agent and the Collateral Agent by facsimile or email (to bereceived no later than 1:00 p.m. on such day) of the request to withdraw Principal Collections and the amount of such request; -71-(v) the notice required in clause (iv) above shall be accompanied by a Disbursement Request and a Borrowing Base Certificate, eachexecuted by the Borrower and a Responsible Officer of the Servicer; and(vi) the Collateral Agent provides to the Administrative Agent by facsimile or e-mail (to be received no later than 1:30 p.m. on that sameday) a statement reflecting the total amount on deposit as of the opening of business on such day in the Principal Collection Account; or(b) prior to the Facility Maturity Date, withdraw such funds for the purpose of making payments in respect of the Advances Outstanding at suchtime in accordance with and subject to the terms of Section 2.18.Upon the satisfaction of the applicable conditions set forth in this Section 2.20 (as certified by the Borrower to the Collateral Agent and theAdministrative Agent), the Collateral Agent shall instruct the Account Bank to release funds from the Principal Collection Account to the Servicer inan amount not to exceed the lesser of (A) the amount requested by the Servicer and (B) the amount on deposit in the Principal Collection Account onsuch day.Section 2.21 Additional Lenders.The Borrower may, with the written consent of the Administrative Agent, add additional Persons as Lenders. Each additional Lender and itsapplicable Lender Agent shall become a party hereto by executing and delivering to the Administrative Agent and the Borrower a Joinder Supplement.Section 2.22 Defaulting Lenders.(a) Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a Defaulting Lender, then, until such time asthat Lender is no longer a Defaulting Lender, to the extent permitted by Applicable Law:(i) That Defaulting Lender’s right to approve or disapprove any amendment, waiver or consent with respect to this Agreement shall berestricted as set forth in Section 11.01.(ii) Any payment of principal interest, fees or other amounts received by the Administrative Agent for the account of that Defaulting Lender(whether voluntary or mandatory, at maturity, or otherwise), shall be applied at such time or times as may be determined by the AdministrativeAgent as follows: first, to the payment of any amounts owing by that Defaulting Lender to the Administrative Agent hereunder: second, as theBorrower may request (so long as no Unmatured Event of Default or Event of Default exists), to the funding of any Advance in respect of whichthat Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Administrative Agent; third, ifso determined by the Administrative Agent and the Borrower, to be held in a non-interest bearing deposit account and released in -72-order to satisfy obligations of that Defaulting Lender to fund Advances under this Agreement; fourth, to the payment of any amounts owing tothe Lenders as a result of any judgment of a court of competent jurisdiction obtained by any Lender against that Defaulting Lender as a result ofthat Defaulting Lender’s breach of its obligations under this Agreement fifth, so long as no Unmatured Event of Default or Event of Defaultexists, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by suchBorrower against that Defaulting Lender as a result of that Defaulting Lender’s breach of its obligations under this Agreement; and sixth, to thatDefaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if such payment is a payment of the principalamount of any Advances in respect of which that Defaulting Lender has not fully funded its appropriate share, such payment shall be appliedsolely to pay the Advances of all non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Advances of thatDefaulting Lender. Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to payamounts owed by a Defaulting Lender or to post cash collateral pursuant to this Section 2.22 shall be deemed paid to and redirected by thatDefaulting Lender, and each Lender irrevocably consents hereto.(iii) For any period during which that Lender is a Defaulting Lender, that Defaulting Lender shall not be entitled to receive any Non-UsageFee for any period during which that Lender is a Defaulting Lender (and the Borrower shall not be required to pay any such fee that otherwisewould have been required to have been paid to such Defaulting Lender).(b) If the Administrative Agent determines (subject to the consent of the Borrower, not to be unreasonably withheld, conditioned or delayed) thata Defaulting Lender should no longer be deemed to be a Defaulting Lender, the Administrative Agent will so notify the parties hereto, whereupon as ofthe effective date specified in such notice and subject to any conditions set forth therein (which may include arrangements with respect to any cashcollateral), that Lender will, to the extent applicable purchase that portion of outstanding Advances of the other Lenders or take such other actions asthe Administrative Agent may determine to be necessary to cause the Advances to be held on a pro rata basis by the Lenders in accordance with theirPro Rata Shares, whereupon that Lender will cease to be a Defaulting Lender; provided that no adjustments will be made retroactively with respect tofees accrued or payments made by or on behalf of the Borrower while that Lender was a Defaulting Lender; and provided, further, that except to theextent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release ofany claim of any party hereunder arising from that Lender’s having been a Defaulting Lender. For the avoidance of doubt, no Breakage Fee shall bepayable to any Lender under this Section 2.22(b). -73-ARTICLE III.CONDITIONS PRECEDENTSection 3.01 Conditions Precedent to Effectiveness. This Agreement shall be effective upon satisfaction of the conditions precedent that:(i) all fees and reasonable and documented out-of-pocket expenses (including reasonable legal fees, the Structuring Fee and any feesrequired under any Lender Fee Letter and the WFBNA Fee Letter) that are invoiced at or prior to the Closing Date shall have been paid in full andall other acts and conditions (including, without limitation, the obtaining of any necessary consents, all required legal opinions and regulatoryapprovals and the making of any required filings, recordings or registrations) required to be done and performed and to have happened prior tothe execution, delivery and performance of this Agreement and all related Transaction Documents and to constitute the same legal, valid andbinding obligations, enforceable in accordance with their respective terms, shall have been done and performed and shall have happened in dueand strict compliance with all Applicable Law;(ii) in the reasonable judgment of the Administrative Agent and each Lender Agent, there has not been any change after the date hereof inApplicable Law which adversely affects any Lender’s or the Administrative Agent’s ability to enter into the transactions contemplated by theTransaction Documents or any material adverse change or material disruption after the date hereof in the financial, banking or commercial loanor capital markets generally;(iii) any and all information in writing submitted to each Lender, Lender Agent and the Administrative Agent by the Borrower, theTransferor or the Servicer or any of their Affiliates is true, accurate, complete in all material respects and not misleading in any material respect;(iv) each Lender Agent shall have received, all documentation and other information requested by such Lender Agent in its sole discretionand/or required by regulatory authorities with respect to the Borrower, the Transferor and the Servicer (and each Affiliate and any key personnelof the foregoing) under applicable “know your customer” and anti-money laundering rules and regulations, including, without limitation, theUSA PATRIOT Act, all in form and substance satisfactory to each Lender Agent;(v) the Administrative Agent shall have received on or before the date of such effectiveness the items listed in Schedule I hereto, each inform and substance satisfactory to the Administrative Agent and each Lender Agent;(vi) in the judgment of the Administrative Agent, there shall have been no material adverse changes in the Borrower’s (and the Servicer’s,as applicable) underwriting, servicing, collection, operating, and reporting procedures and systems since the completion of due diligence; and -74-(vii) the results of Administrative Agent’s financial, legal, tax and accounting due diligence relating to the Transferor, the Borrower, theServicer, the Eligible Loan Assets and the transactions contemplated hereunder are satisfactory to Administrative Agent; and(viii) theAdministrative; Agent has received confirmation that the Committed Equity Capital is at least $200,000,000 as of the Closing Date.Section 3.02 Conditions Precedent to All Advances. Each Advance (including the Initial Advance, except as explicitly set forth below) to theBorrower from the Lenders shall be subject to the further conditions precedent that:(a) On the Advance Date of such Advance, the following statements shall be true and correct, and the Borrower by accepting any amount of suchAdvance shall be deemed to have certified that:(i) the Servicer (on behalf of the Borrower) shall have delivered to the Administrative Agent and each Lender Agent (with a copy to theCollateral Custodian and the Collateral Agent) no later than 2:00 p.m. on the date of such Advance: (A) a Notice of Borrowing, (B) a BorrowingBase Certificate, (C) a Loan Tape, (D) an Approval Notice (with respect to any such Loan Asset added to the Collateral Portfolio on the relatedAdvance Date) and (E) such additional information as may be reasonably requested by the Administrative Agent and, except with respect to anAdvance under Section 2.02(f), and an executed copy of each assignment and assumption agreement, transfer document or instrument (includingany Loan Assignment) relating to each Loan Asset to be Pledged evidencing the assignment of such Loan Asset from any prior third party ownerthereof directly to the Borrower (other than in the case of any Loan Asset acquired or funded by the Borrower at origination) and a LoanAssignment in the form of Exhibit A to the Purchase and Sale Agreement (including Schedule I thereto);(ii) except with respect to an Advance under Section 2.02(f), the Borrower shall have delivered to the Collateral Custodian (with a copy tothe Administrative Agent), no later than 2:00 p.m. on the related Advance Date, a faxed or e-mailed copy of the duly executed originalpromissory notes of the Loan Assets (and, in the case of any Noteless Loan Asset, a fully executed assignment agreement) and if any Loan Assetsare closed in escrow, a certificate (in the form of Exhibit H) from the closing attorneys of such Loan Assets certifying the possession of theRequired Loan Documents; provided that, notwithstanding the foregoing, the Borrower shall cause the Loan Asset Checklist and the RequiredLoan Documents to be in the possession of the Collateral Custodian within five Business Days of any related Advance Date as to any LoanAssets; -75-(iii) except with respect to an Advance required by Section 2.02(f), the representations and warranties contained in Sections 4.01, 4.02 and4.03 are true and correct in all respects, and there exists no breach of any covenant contained in Sections 5.01, 5.02, 5.03 and 5.04 before andafter giving effect to the Advance to take place on such Advance Date and to the application of proceeds therefrom, on and as of such day asthough made on and as of such date (other than any representation and warranty that is made as of a specific date);(iv) except with respect to an Advance under Section 2.02(f), no Event of Default has occurred and is continuing, or would result from suchAdvance, and no Unmatured Event of Default or Borrowing Base Deficiency exists or would result from such Advance;(v) no event has occurred and is continuing, or would result from such Advance, which constitutes a Servicer Termination Event or anyevent which, if it continues uncured, will, with notice or lapse of time, constitute a Servicer Termination Event;(vi) since the Closing Date, no material adverse change has occurred in the ability of the Servicer, Transferor or the Borrower to perform itsobligations under any Transaction Document;(vii) no Liens (other than Permitted Liens) exist in respect of Taxes which are prior to the lien of the Collateral Agent on the Loan Asset tobe pledged on such Advance Date; and(viii) all terms and conditions of the Purchase and Sale Agreement required to be satisfied in connection with the assignment of each LoanAsset being pledged hereunder on such Advance Date (and the Portfolio Assets related thereto), including, without limitation, the perfection ofthe Borrower’s interests therein, shall have been satisfied in full, and all filings (including, without limitation, UCC filings) required to be madeby any Person and all actions required to be taken or performed by any Person in any jurisdiction to give the Collateral Agent, for the benefit ofthe Secured Parties, a first priority perfected security interest (subject only to Permitted Liens) in such Loan Assets and the Portfolio Assetsrelated thereto and the proceeds thereof shall have been made, taken or performed;(b) The Administrative Agent shall have delivered an Approval Notice to the Borrower with respect to each of the Eligible Loan Assets identifiedin the applicable Loan Tape for inclusion in the Collateral Portfolio on the applicable Advance Date.(c) No Applicable Law shall prohibit, and no order, judgment or decree of any federal, state or local court or governmental body, agency orinstrumentality shall prohibit or enjoin, the making of such Advances by any Lender or the proposed Pledge of Eligible Loan Assets in accordancewith the provisions hereof. -76-(d) Except with respect to an Advance required by Section 2.02(f), the proposed Advance Date shall take place during the Reinvestment Periodand the Facility Maturity Date has not yet occurred.(e) The Borrower shall have paid all fees then required to be paid, including all fees required hereunder and under the applicable Lender FeeLetters and the WFBNA Fee Letter and shall have reimbursed the Lenders, the Administrative Agent, each Lender Agent, the Collateral Custodian, theAccount Bank and the Collateral Agent for all fees, costs and expenses of closing the transactions contemplated hereunder and under the otherTransaction Documents, including the reasonable attorney fees and any other legal and document preparation costs incurred by the Lenders, theAdministrative Agent and each Lender Agent.(f) Evidence shall have been provided to the Administrative Agent in form and substance satisfactory to the Administrative Agent that theMinimum Equity Amount has been contributed to the Borrower.The failure of the Borrower to satisfy any of the foregoing conditions precedent in respect of any Advance shall give rise to a right of theAdministrative Agent and the applicable Lender Agent, which right may be exercised at any time on the demand of the applicable Lender Agent, torescind the related Advance and direct the Borrower to pay to the applicable Lender Agent for the benefit of the applicable Lender an amount equal tothe Advances made during any such time that any of the foregoing conditions precedent were not satisfied or waived in writing.Section 3.03 Advances Do Not Constitute a Waiver. No Advance made hereunder shall constitute a waiver of any condition to any Lender’sobligation to make such an advance unless such waiver is in writing and executed by such Lender.Section 3.04 Conditions to Acquisitions of Loan Assets. Each Pledge of an additional Eligible Loan Asset pursuant to Section 2.06, a SubstituteEligible Loan Asset pursuant to Section 2.07(a) or (c), an additional Eligible Loan Asset pursuant to Section 2.20 or any other Pledge of a Loan Assethereunder and the inclusion of each such Eligible Loan Asset in the calculation of the Borrowing Base shall be subject to the further conditionsprecedent that (as certified to the Collateral Agent by the Borrower):(a) the Servicer (on behalf of the Borrower) shall have delivered to the Administrative Agent and each Lender Agent (with a copy to theCollateral Custodian and the Collateral Agent) no later than 2:00 p.m. on the related Cut-Off Date: (A) a Borrowing Base Certificate, (B) a Loan Tape,(C) an Approval Notice (with respect to each Loan Asset added to the Collateral Portfolio on the related Cut-Off Date) and (D) such additionalinformation as may be reasonably requested by the Administrative Agent and an executed copy of each assignment and assumption agreement, transferdocument or instrument (including any Loan Assignment) relating to each Loan Asset to be pledged evidencing the assignment of such Loan Assetfrom any prior third party owner thereof directly to the Borrower (other than in the case of any Loan Asset acquired by the Borrower at origination) anda Loan Assignment in the form of Exhibit A to the Purchase and Sale Agreement (including Schedule I thereto); -77-(b) the Borrower shall have delivered to the Collateral Custodian (with a copy to the Administrative Agent), no later than 2:00 p.m. on the relatedCut-Off Date, a faxed or e-mailed copy of the duly executed original promissory notes of the Loan Assets (and, in the case of any Noteless Loan Asset, afully executed assignment agreement) and if any Loan Assets are closed in escrow, a certificate (in the form of Exhibit H) from the closing attorneys ofsuch Loan Assets certifying the possession of the Required Loan Documents; provided that, notwithstanding the foregoing, the Borrower shall causethe Loan Asset Checklist and the Required Loan Documents for a Loan Asset to be in the possession of the Collateral Custodian within five BusinessDays after the related Cut-Off Date as to such Loan Asset;(c) the Administrative Agent shall have delivered an Approval Notice to the Borrower with respect to each of the Eligible Loan Assets identifiedin the applicable Loan Tape for inclusion in the Collateral Portfolio on the applicable Cut-Off Date;(d) no Event of Default has occurred and is continuing, or would result from such Pledge, and no Unmatured Event of Default exists, or wouldresult from such Pledge (other than, with respect to any Pledge of an Eligible Loan Asset necessary to facilitate a cure of a Borrowing Base Deficiencyin accordance with Section 2.06 or Section 2.07, an Unmatured Event of Default arising solely pursuant to such Borrowing Base Deficiency);(e) no event has occurred and is continuing, or would result from such Pledge, which constitutes a Servicer Termination Event or any eventwhich, if it continues uncured, will, with notice or lapse of time, constitute a Servicer Termination Event;(f) since the Closing Date, no material adverse change has occurred in the ability of the Servicer, Transferor or the Borrower to perform itsobligations under any Transaction Document;(g) no Liens (other than Permitted Liens) exist in respect of Taxes which are prior to the lien of the Collateral Agent on the Loan Asset to bepledged on such Cut-Off Date;(h) all terms and conditions of the Purchase and Sale Agreement required to be satisfied in connection with the assignment of each Loan Assetbeing Pledged (and the Portfolio Assets related thereto), including, without limitation, the perfection of the Borrower’s interests therein, shall havebeen satisfied in full, and all filings (including, without limitation, UCC filings) required to be made by any Person and all actions required to be takenor performed by any Person in any jurisdiction to give the Collateral Agent, for the benefit of the Secured Parties, a first priority perfected securityinterest (subject only to Permitted Liens) in such Loan Assets and the Portfolio Assets related thereto and the proceeds thereof shall have been made,taken or performed; and(i) the representations and warranties contained in Sections 4.01, 4.02 and 4.03 are true and correct in all respects, and there exists no breach ofany covenant contained in Sections 5.01, 5.02, 5.03 and 5.04 before and after giving effect to the Pledge to take place on such date, on and as of suchday as though made on and as of such date (other than any representation and warranty that is made as of a specific date). -78-ARTICLE IV.REPRESENTATIONS AND WARRANTIESSection 4.01 Representations and Warranties of the Borrower. The Borrower hereby represents and warrants, as of the Closing Date, as of eachapplicable Cut-Off Date, as of each applicable Advance Date, as of each Reporting Date and as of each other date provided under this Agreement or theother Transaction Documents on which such representations and warranties are required to be (or deemed to be) made (unless a specific date isspecified below):(a) Organization, Good Standing and Due Qualification. The Borrower is a limited liability company duly organized, validly existing and ingood standing under the laws of Delaware (subject to Section 5.02(p)) and has the power and all licenses necessary to own its assets and to transact thebusiness in which it is engaged and is duly qualified and in good standing under the laws of each jurisdiction where the transaction of such business orits ownership of the Loan Assets and the Collateral Portfolio requires such qualification.(b) Power and Authority; Due Authorization; Execution and Delivery. The Borrower has the power, authority and legal right to make, deliver andperform this Agreement and each of the Transaction Documents to which it is a party and all of the transactions contemplated hereby and thereby, andhas taken all necessary action to authorize the execution, delivery and performance of this Agreement and each of the Transaction Documents to whichit is a party, and to grant to the Collateral Agent, for the benefit of the Secured Parties, a first priority perfected security interest in the CollateralPortfolio on the terms and conditions of this Agreement, subject only to Permitted Liens.(c) Binding Obligation. This Agreement and each of the Transaction Documents to which the Borrower is a party constitutes the legal, valid andbinding obligation of the Borrower, enforceable against it in accordance with their respective terms, except as the enforceability hereof and thereofmay be limited by Bankruptcy Laws and by general principles of equity (whether such enforceability is considered in a proceeding in equity or at law).(d) All Consents Required. No consent of any other party and no consent, license, approval or authorization of, or registration or declaration with,any Governmental Authority, bureau or agency is required in connection with the execution, delivery or performance by the Borrower of thisAgreement or any Transaction Document to which it is a party or the validity or enforceability of this Agreement or any such Transaction Document orthe Loan Assets or the transfer of a security interest in such Loan Assets, other than such as have been met or obtained and are in full force and effect.(e) No Violation. The execution, delivery and performance of this Agreement by the Borrower and all other agreements and instruments executedand delivered or to be executed and delivered by it pursuant hereto or thereto in connection with the Pledge of the Collateral Portfolio will not(i) create any Lien on the Collateral Portfolio other than Permitted Liens or (ii) violate any Applicable Law or the certificate of formation or limitedliability company agreement of the Borrower or (iii) violate any contract or other material agreement to which the Borrower is a party or by which theBorrower or any property or assets of the Borrower may be bound. -79-(f) No Proceedings. There is no litigation or administrative proceeding or investigation pending or, to the knowledge of the Borrower, threatenedagainst the Borrower or any properties of the Borrower, before any Governmental Authority (i) asserting the invalidity of this Agreement or any otherTransaction Document to which the Borrower is a party, (ii) seeking to prevent the consummation of any of the transactions contemplated by thisAgreement or any other Transaction Document to which the Borrower is a party or (iii) seeking any determination or ruling that could reasonably beexpected to have a Material Adverse Effect.(g) Bulk Sales. The grant of the security interest in the Collateral Portfolio by the Borrower to the Collateral Agent, for the benefit of the SecuredParties, pursuant to this Agreement, is in the ordinary course of business for the Borrower and is not subject to the bulk transfer or any similar statutoryprovisions in effect in any applicable jurisdiction.(h) Pledge of Collateral Portfolio. Except as otherwise expressly permitted by the terms of this Agreement, no item of Collateral Portfolio hasbeen sold, transferred, assigned or pledged by the Borrower to any Person, other than as contemplated by Article II and the Pledge of such CollateralPortfolio to the Collateral Agent, for the benefit of the Secured Parties, pursuant to the terms of this Agreement.(i) Indebtedness. The Borrower has no Indebtedness or other indebtedness, secured or unsecured, direct or contingent (including guaranteeingany obligation), other than (i) Indebtedness incurred under the terms of the Transaction Documents and (ii) Indebtedness incurred pursuant to certainordinary business expenses arising pursuant to the transactions contemplated by this Agreement and the other Transaction Documents.(j) Sole Purpose. The Borrower has been formed solely for the purpose of engaging in transactions of the types contemplated by this Agreement,and has not engaged in any business activity other than the negotiation, execution and to the extent applicable, performance of this Agreement and thetransactions contemplated by the Transaction Documents.(k) No Injunctions. No injunction, writ, restraining order or other order of any nature adversely affects the Borrower’s performance of itsobligations under this Agreement or any Transaction Document to which the Borrower is a party.(l) Taxes. The Borrower has filed or caused to be filed (on a consolidated basis or otherwise) on a timely basis all federal and all other material taxreturns (including, without limitation, all federal and material foreign, state, local and other tax returns) required to be filed by it (subject to anyextensions to file properly obtained by the same), is not liable for Taxes payable by any other Person and has paid or made adequate provisions for thepayment of all Taxes, assessments and other governmental charges due and payable from the Borrower except for those Taxes being contested in goodfaith by appropriate proceedings and in respect of which it has established proper reserves on its books in accordance with GAAP. No Tax lien orsimilar adverse claim has been filed, and no claim is being asserted, with respect to any such -80-Tax, assessment or other governmental charge. Any Taxes, fees and other governmental charges due and payable by the Borrower, as applicable, inconnection with the execution and delivery of this Agreement and the other Transaction Documents and the transactions contemplated hereby orthereby have been paid or shall have been paid if and when due.(m) Location. The Borrower’s location (within the meaning of Article 9 of the UCC) is Delaware. The chief executive office of the Borrower (andthe location of the Borrower’s records regarding the Collateral Portfolio (other than those delivered to the Collateral Custodian)) is located at theaddress set forth under its name in Section 11.02 (or at such other address as shall be designated by such party in a written notice to the other partieshereto).(n) Tradenames. Except as permitted hereunder, the Borrower’s legal name is as set forth in this Agreement. Except as permitted hereunder, theBorrower has not changed its name since its formation; does not have tradenames, fictitious names, assumed names or “doing business as” names otherthan as disclosed on Schedule II hereto (as such schedule may be updated from time to time by the Administrative Agent upon receipt of a noticedelivered to the Administrative Agent pursuant to Section 5.02(p)); the Borrower’s only jurisdiction of formation is Delaware, and, except as permittedhereunder, the Borrower has not changed its jurisdiction of formation.(o) Solvency. The Borrower is not the subject of any Bankruptcy Proceedings or Bankruptcy Event. The Borrower is Solvent, and the transactionsunder this Agreement and any other Transaction Document to which the Borrower is a party do not and will not render the Borrower not Solvent. TheBorrower is paying its debts as they become due (subject to any applicable grace period); and the Borrower, after giving effect to the transactionscontemplated hereby, will have adequate capital to conduct its business.(p) No Subsidiaries. The Borrower has no Subsidiaries except as permitted pursuant to Section 5.02(a).(q) Value Given. The Borrower has given fair consideration and reasonably equivalent value to the Transferor in exchange for the purchase of theLoan Assets (or any number of them) purchased from the Transferor pursuant to the Purchase and Sale Agreement. No such transfer has been made for oron account of an antecedent debt owed by the Borrower to the Transferor and no such transfer is or may be voidable or subject to avoidance under anysection of the Bankruptcy Code.(r) Reports Accurate. All Servicer’s Certificates, Servicing Reports (if prepared by the Borrower or to the extent that information contained thereinis supplied by the Borrower), Notices of Borrowing, Borrowing Base Certificates and other written or electronic information, exhibits, financialstatements, documents, books, records or reports furnished by the Borrower (or the Servicer on its behalf) to the Administrative Agent, the CollateralAgent, the Lenders, the Lender Agents, or the Collateral Custodian in connection with this Agreement are as of their date true, complete and correct inall material respects and no such document, certificate or information contains any material misstatement of fact or omits to state a material factnecessary to make the statements contained therein not misleading; provided that, solely -81-with respect to written or electronic information furnished by the Borrower which was provided to the Servicer from an Obligor with respect to a LoanAsset, such information need only be true, complete and correct in all material respects to the knowledge of the Borrower; provided, further, that theforegoing proviso shall not apply to any information presented in a Servicer’s Certificate, Servicing Report, Notice of Borrowing or Borrowing BaseCertificate.(s) Exchange Act Compliance; Regulations T, U and X. None of the transactions contemplated herein or in the other Transaction Documents(including, without limitation, the use of proceeds from the sale of the Collateral Portfolio) will violate or result in a violation of Section 7 of theExchange Act, or any regulations issued pursuant thereto, including, without limitation, Regulations T, U and X of the Board of Governors of theFederal Reserve System, 12 C.F.R., Chapter II. The Borrower does not own or intend to carry or purchase, and no proceeds from the Advances will beused to carry or purchase, any “margin stock” within the meaning of Regulation U or to extend “purpose credit” within the meaning of Regulation U.(t) No Adverse Agreements. There are no agreements in effect adversely affecting the rights of the Borrower to make, or cause to be made, thegrant of the security interest in the Collateral Portfolio contemplated by Section 2.13.(u) Event of Default/Unmatured Event of Default. No event has occurred and is continuing which constitutes an Event of Default, and no eventhas occurred and is continuing which constitutes an Unmatured Event of Default (other than any Event of Default or Unmatured Event of Defaultwhich has previously been disclosed to the Administrative Agent as such).(v) Servicing Standard. Borrower has purchased and will purchase only Loan Assets underwritten in accordance with the Servicing Standard.(w) ERISA.(i) The present value of all benefits vested under each “employee pension benefit plan,” as such term is defined in Section 3(3) of ERISA,that is subject to Title IV of ERISA, Section 412 of the Code or Section 302 of ERISA (other than any Multiemployer Plan) and that is, or at anytime during the preceding six years was, maintained by the Borrower or any ERISA Affiliate of the Borrower, or open to participation byemployees of the Borrower or of any ERISA Affiliate of the Borrower, as from time to time in effect (each, a “Pension Plan”), does not exceed thevalue of the assets of the Pension Plan allocable to such vested benefits (based on the value of such assets as of the last annual valuation date).No non-exempt prohibited transactions, failure to meet the minimum funding standard set forth in Section 302(a) of ERISA and Section 412(a) ofthe Code (with respect to any Pension Plan other than a Multiemployer Plan), withdrawals or reportable events have occurred with respect to anyPension Plan that, in the aggregate, could subject the Borrower to any material Tax, penalty or other liability. No notice of intent to terminate aPension Plan has been filed, nor has any Pension Plan been terminated under Section 4041(c) of ERISA, nor has the Pension Benefit GuarantyCorporation instituted proceedings to terminate, or appoint a trustee to administer a Pension Plan and no event has -82-occurred or condition exists that might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee toadminister, any Pension Plan.(ii) Borrower is not a Benefit Plan Investor or a Governmental Plan Entity.(x) Allocation of Charges. There is not any agreement or understanding between the Servicer and the Borrower (other than as expressly set forthherein or as consented to by the Administrative Agent), providing for the allocation or sharing of obligations to make payments or otherwise in respectof any Taxes, fees, assessments or other governmental charges; provided that it is understood and acknowledged that the Borrower will be consolidatedwith the EquityholderTransferor for tax purposes.(y) Broker-Dealer. The Borrower is not a broker-dealer or subject to the Securities Investor Protection Act of 1970, as amended.(z) Instructions to Obligors. The Collection Account is the only account to which Obligors have been instructed by the Borrower, or the Serviceron the Borrower’s behalf, to send Principal Collections and Interest Collections on the Collateral Portfolio. The Borrower has not granted any Personother than the Collateral Agent, on behalf of the Secured Parties, an interest in the Collection Account.(aa) Investment Company Act. The Borrower is not required to register as an “investment company” under the provisions of the 1940 Act.(bb) Compliance with Law. The Borrower has complied in all material respects with all Applicable Law to which it may be subject, and no itemof the Collateral Portfolio contravenes any Applicable Law.(cc) Collections. The Borrower acknowledges that all Available Collections received by it or its Affiliates with respect to the Collateral PortfolioPledged hereunder are held and shall be held in trust for the benefit of the Collateral Agent, on behalf of the Secured Parties until deposited into theCollection Account within two Business Days after receipt as required herein.(dd) Set-Off, etc. No Loan Asset has been compromised, adjusted, extended, satisfied, subordinated, rescinded, set-off or modified by theBorrower, the Transferor or the Obligor thereof, and no Loan Asset in the Collateral Portfolio is subject to compromise, adjustment, extension,satisfaction, subordination, rescission, set-off, counterclaim, defense, abatement, suspension, deferment, deduction, reduction, termination ormodification, whether arising out of transactions concerning the Collateral Portfolio or otherwise, by the Borrower, the Transferor or the Obligor withrespect thereto, except, in each case, for amendments, extensions and modifications, if any, to such Collateral Portfolio otherwise permitted pursuant toSection 6.02(a) of this Agreement and in accordance with the Servicing Standard. -83-(ee) Full Payment. As of the applicable Cut-Off Date thereof, the Borrower has no knowledge of any fact which should lead it to expect that anyLoan Asset will not be paid in full.(ff) Environmental. With respect to each item of Underlying Collateral as of the applicable Cut-Off Date for the Loan Asset related to suchUnderlying Collateral, to the actual knowledge of a Responsible Officer of the Borrower: (a) the related Obligor’s operations comply with allapplicable Environmental Laws; and (b) the related Obligor does not have any contingent liability in connection with any release of any HazardousMaterials into the environment. As of the applicable Cut-Off Date for the Loan Asset related to such Underlying Collateral and except as disclosed inwriting to the Administrative Agent as a notice or inquiry that may contravene this Section 4.01(ff) in connection with the approval of such LoanAsset, the Borrower has not received any written or verbal notice of, or inquiry from any Governmental Authority regarding, any violation, allegedviolation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws that wouldreasonably be expected to impact the value of any of the Underlying Collateral.(gg) USA PATRIOT Act. Neither the Borrower nor any Affiliate of the Borrower is (i) a country, territory, organization, person or entity named onan Office of Foreign Asset Control (OFAC) list; (ii) a Person that resides or has a place of business in a country or territory named on such lists or whichis designated as a “Non-Cooperative Jurisdiction” by the Financial Action Task Force on Money Laundering, or whose subscription funds aretransferred from or through such a jurisdiction; (iii) a “Foreign Shell Bank” within the meaning of the USA PATRIOT Act, i.e., a foreign bank that doesnot have a physical presence in any country and that is not affiliated with a bank that has a physical presence and an acceptable level of regulation andsupervision; or (iv) a person or entity that resides in or is organized under the laws of a jurisdiction designated by the United States Secretary of theTreasury under Sections 311 or 312 of the USA PATRIOT Act as warranting special measures due to money laundering concerns.Sanctions. None of theBorrower nor, to its knowledge, any Person directly or indirectly Controlling the Borrower (i) is a Sanctioned Person; (ii) is controlled by or is actingon behalf of a Sanctioned Person; or (iii) shall cause the Obligations to be repaid with proceeds derived from any transaction that would be prohibitedby Sanctions or would otherwise cause any Lender or any other party to this Agreement to be in breach of any Sanctions. To each such Person’sknowledge, no investor in such Person is a Sanctioned Person.(hh) Beneficial Ownership Certification. The information included in the Beneficial Ownership Certification, if any, is true and correct in allrespects.(ii) (hh) Confirmation from the EquityholderServicer. The Borrower has received in writing from the EquityholderServicer confirmation that suchEquityholderServicer will not cause the Borrower to file a voluntary bankruptcy petition under the Bankruptcy Code.(jj) (ii) Accuracy of Representations and Warranties. Each representation or warranty by the Borrower contained herein or in any certificate orother document furnished by the Borrower pursuant hereto or in connection herewith is true and correct in all respects. -84-(kk) (jj) Reaffirmation of Representations and Warranties. On each day that any Advance is made hereunder, the Borrower shall be deemed tohave certified that all representations and warranties described in Section 4.01 and Section 4.02 are true and correct on and as of such day as thoughmade on and as of such day, except for any such representations or warranties which are made as of a specific date.(ll) (kk) Security Interest.(i) This Agreement creates a valid and continuing security interest (as defined in the applicable UCC) in the Borrower’s right in theCollateral Portfolio in favor of the Collateral Agent, on behalf of the Secured Parties, which security interest is prior to all other Liens (except forPermitted Liens), and is enforceable as such against creditors of and purchasers from the Borrower;(ii) the Collateral Portfolio is comprised of “instruments”, “security entitlements”, “general intangibles”, “tangible chattel paper”,“accounts”, “certificated securities”, “uncertificated securities”, “securities accounts”, “deposit accounts”, “supporting obligations” or“insurance” (each as defined in the applicable UCC), real property and/or such other category of collateral under the applicable UCC as to whichthe Borrower has complied with its obligations under this Section 4.01(kkll);(iii) with respect to Collateral Portfolio that constitute “security entitlements”:a. all of such security entitlements have been credited to one of the Controlled Accounts and the securities intermediary for eachControlled Account has agreed to treat all assets credited to such Controlled Account as “financial assets” within the meaning of theapplicable UCC;b. the Borrower has taken all steps necessary to cause the securities intermediary to identify in its records the Borrower, subject to thelien of the Collateral Agent, for the benefit of the Secured Parties, as the Person having a security entitlement against the securitiesintermediary in each of the Controlled Accounts; andc. the Controlled Accounts are not in the name of any Person other than the Borrower, subject to the lien of the Collateral Agent, forthe benefit of the Secured Parties. The securities intermediary of any Controlled Account which is a “securities account” under the UCChas agreed to comply with the entitlement orders and instructions of the Borrower, the Servicer and the Collateral Agent (acting at thedirection of the Administrative Agent) in accordance with the Transaction Documents, including causing cash to be invested in PermittedInvestments; provided that, upon the delivery of a Notice of Exclusive Control by the Collateral -85-Agent (acting at the direction of the Administrative Agent), the securities intermediary has agreed to only follow the entitlement orders andinstructions of the Collateral Agent, on behalf of the Secured Parties, including with respect to the investment of cash in PermittedInvestments.(iv) all Controlled Accounts constitute “securities accounts” or “deposit accounts” as defined in the applicable UCC;(v) with respect to any Controlled Account which constitutes a “deposit account” as defined in the applicable UCC, the Borrower, theAccount Bank and the Collateral Agent, on behalf of the Secured Parties, have entered into an account control agreement which permits theCollateral Agent on behalf of the Secured Parties to direct disposition of the funds in such deposit account following delivery of a Notice ofExclusive Control;(vi) the Borrower owns and has good and marketable title to (or with respect to assets securing any Loan Assets, a valid security interest in)the Collateral Portfolio free and clear of any Lien (other than Permitted Liens) of any Person;(vii) the Borrower has received all consents and approvals required by the terms of any Loan Asset to the granting of a security interest inthe Loan Assets hereunder to the Collateral Agent, on behalf of the Secured Parties;(viii) the Borrower has caused the filing of all appropriate financing statements in the proper filing office in the appropriate jurisdictionsunder Applicable Law in order to perfect the security interest in the Collateral Portfolio and that portion of the Loan Assets in which a securityinterest may be perfected by filing of a UCC financing statement granted to the Collateral Agent, on behalf of the Secured Parties, under thisAgreement;(ix) other than as expressly permitted by the terms of this Agreement the security interest granted to the Collateral Agent, on behalf of theSecured Parties, pursuant to this Agreement, the Borrower has not pledged, assigned, sold, granted a security interest in or otherwise conveyedany of the Collateral Portfolio. The Borrower has not authorized the filing of and is not aware of any financing statements against the Borrowerthat include a description of collateral covering the Collateral Portfolio other than any financing statement (A) relating to the security interestsgranted to the Borrower under the Purchase and Sale Agreement, or (B) that has been terminated and/or fully and validly assigned to theCollateral Agent on or prior to the date hereof. The Borrower is not aware of the filing of any judgment or Tax lien filings against the Borrower;(x) all original executed copies of each underlying promissory note or electronic copies of each Loan Asset Register, as applicable, thatconstitute or evidence each Loan Asset has been, or subject to the delivery requirements contained herein, will be delivered to the CollateralCustodian; -86-(xi) other than in the case of Noteless Loan Assets, the Borrower has received, or subject to the delivery requirements contained herein willreceive, a written acknowledgment from the Collateral Custodian that the Collateral Custodian, as the bailee of the Collateral Agent, is holdingthe underlying promissory notes that constitute or evidence the Loan Assets solely on behalf of and for the Collateral Agent, for the benefit of theSecured Parties; provided that the acknowledgement of the Collateral Custodian set forth in Section 12.11 may serve as such acknowledgement;(xii) none of the underlying promissory notes, or Loan Asset Registers, as applicable, that constitute or evidence the Loan Assets has anymarks or notations indicating that they have been pledged, assigned or otherwise conveyed to any Person other than the Collateral Agent, onbehalf of the Secured Parties;(xiii) with respect to any Collateral Portfolio that constitutes a “certificated security,” such certificated security has been delivered to theCollateral Custodian, on behalf of the Secured Parties and, if in registered form, has been specially Indorsed to the Collateral Custodian, for thebenefit of the Secured Parties, or in blank by an effective Indorsement or has been registered in the name of the Collateral Custodian, for thebenefit of the Secured Parties, upon original issue or registration of transfer by the Borrower of such certificated security; and(xiv) with respect to any Collateral Portfolio that constitutes an “uncertificated security”, that the Borrower shall either cause the issuer ofsuch uncertificated security to register the Collateral Agent, on behalf of the Secured Parties, as the registered owner of such uncertificatedsecurity or will cause the issuer to comply with the instructions of the Collateral Agent without further consent of the Borrower.Section 4.02 Representations and Warranties of the Borrower Relating to the Agreement and the Collateral Portfolio. The Borrower herebyrepresents and warrants, as of the Closing Date, as of each applicable Cut-Off Date, as of each applicable Advance Date, as of each Reporting Date andany date which Loan Assets are Pledged hereunder and as of each other date provided under this Agreement or the other Transaction Documents onwhich such representations and warranties are required to be (or deemed to be) made (unless a specific date is specified below):(a) Valid Transfer and Security Interest. This Agreement constitutes a grant of a security interest in all of the Collateral Portfolio to the CollateralAgent, for the benefit of the Secured Parties, which upon the delivery of the Required Loan Documents to the Collateral Custodian, the crediting ofLoan Assets to the Controlled Accounts and the filing of the financing statements, shall be a valid and first priority perfected security interest in theLoan Assets forming a part of the Collateral Portfolio and in that portion of the Loan Assets in which a security interest may be perfected by filingsubject only to Permitted Liens. Neither the Borrower nor any Person claiming through or under the Borrower shall have any claim to or -87-interest in the Controlled Accounts and, if this Agreement constitutes the grant of a security interest in such property, except for the interest of theBorrower in such property as a debtor for purposes of the UCC.(b) Eligibility of Collateral Portfolio. (i) The Loan Tape and the information contained in each Notice of Borrowing, is an accurate and completelisting of all the Loan Assets contained in the Collateral Portfolio as of the related Cut-Off Date and the information contained therein with respect tothe identity of such item of Collateral Portfolio and the amounts owing thereunder is true and correct in all material respects as of the related Cut-OffDate, (ii) each Loan Asset designated on any Borrowing Base Certificate as an Eligible Loan Asset and each Loan Asset included as an Eligible LoanAsset in any calculation of Borrowing Base or Borrowing Base Deficiency is an Eligible Loan Asset, in each case, satisfying all criteria set forth in thedefinition of “Eligibility Criteria” and (iii) with respect to each item of Collateral Portfolio, all consents, licenses, approvals or authorizations of orregistrations or declarations of any Governmental Authority or any Person required to be obtained, effected or given by the Borrower in connectionwith the transfer of a security interest in each item of Collateral Portfolio to the Collateral Agent, for the benefit of the Secured Parties, have been dulyobtained, effected or given and are in full force and effect. For the avoidance of doubt, any inaccurate representation that a Loan Asset is an EligibleLoan Asset hereunder or under the Purchase and Sale Agreement shall not constitute an Event of Default if the Borrower complies with Section 2.07(c)hereunder and the Transferor complies with Section 6.1 of the Purchase and Sale Agreement.(c) No Fraud. Each Loan Asset was originated or acquired without any fraud or material misrepresentation by the Transferor or, to the Borrower’sknowledge, on the part of the Obligor.Section 4.03 Representations and Warranties of the Servicer. The Servicer hereby represents and warrants, as of the Closing Date, as of eachapplicable Cut-Off Date, as of each applicable Advance Date, as of each Reporting Date and as of each other date provided under this Agreement or theother Transaction Documents on which such representations and warranties are required to be (or deemed to be) made (unless a specific date isspecified below):(a) Organization and Good Standing. The Servicer has been duly organized and is validly existing as a corporation in good standing under thelaws of the State of Maryland (except as such jurisdiction is changed as permitted hereunder), with all requisite power and authority to own or lease itsproperties and to conduct its business as such business is presently conducted and to enter into and perform its obligations pursuant to this Agreement.(b) Due Qualification. The Servicer is duly qualified to do business as a corporation and is in good standing as a corporation, and has obtained allnecessary licenses and approvals in all jurisdictions in which the ownership or lease of its property and or the conduct of its business requires suchqualification, licenses or approvals, except where failure to be in good standing or obtain such licenses or approvals would not reasonably be expectedto have a Material Adverse Effect. -88-(c) Power and Authority; Due Authorization; Execution and Delivery. The Servicer (i) has all necessary power, authority and legal right to(a) execute and deliver this Agreement and the other Transaction Documents to which it is a party, (b) carry out the terms of the Transaction Documentsto which it is a party, and (ii) has duly authorized by all necessary corporate action the execution, delivery and performance of this Agreement and theother Transaction Documents to which it is a party. This Agreement and each other Transaction Document to which the Servicer is a party have beenduly executed and delivered by the Servicer.(d) Binding Obligation. This Agreement and each other Transaction Document to which the Servicer is a party constitutes a legal, valid andbinding obligation of the Servicer enforceable against the Servicer in accordance with its respective terms, except as such enforceability may belimited by Bankruptcy Laws and general principles of equity (whether considered in a suit at law or in equity).(e) No Violation. The consummation of the transactions contemplated by this Agreement and the other Transaction Documents to which it is aparty and the fulfillment of the terms hereof and thereof will not (i) conflict with, result in any breach of any of the terms and provisions of, orconstitute (with or without notice or lapse of time or both) a default under, the Servicer’s articles of incorporation or by-laws or any contractualobligation of the Servicer, (ii) result in the creation or imposition of any Lien (other than Permitted Liens) upon any of the Servicer’s propertiespursuant to the terms of any such contractual obligation, other than this Agreement, or (iii) violate any Applicable Law.(f) No Proceedings. There is no litigation, proceeding or investigation pending or, to the knowledge of the Servicer, threatened against theServicer, before any Governmental Authority (i) asserting the invalidity of this Agreement or any other Transaction Document to which the Servicer isa party, (ii) seeking to prevent the consummation of any of the transactions contemplated by this Agreement or any other Transaction Document towhich the Servicer is a party or (iii) seeking any determination or ruling that could reasonably be expected to have a Material Adverse Effect.(g) All Consents Required. All approvals, authorizations, consents, orders, licenses or other actions of any Person or of any GovernmentalAuthority (if any) required for the due execution, delivery and performance by the Servicer of this Agreement and any other Transaction Document towhich the Servicer is a party have been obtained.(h) Reports Accurate. No Borrowing Base Certificate, information, exhibit, financial statement, document, book, record or report furnished by theServicer to the Administrative Agent, the Collateral Agent, the Lenders, the Lender Agents, or the Collateral Custodian in connection with thisAgreement is inaccurate in any material respect as of the date it is dated, and no such document, certificate or information contains any misstatement ofmaterial fact or omits to state a material fact necessary to make the statements contained therein not misleading; provided that, solely with respect towritten or electronic information furnished by the Borrower which was provided to the Servicer from an Obligor with respect to a Loan Asset, suchinformation need only be true, complete and correct in all material respects to the -89-knowledge of the Borrower; provided, further, that the foregoing proviso shall not apply to any information presented in a Servicer’s Certificate,Servicing Report, Notice of Borrowing or Borrowing Base Certificate.(i) Collections. The Servicer acknowledges that all Available Collections received by the Borrower or its Affiliates with respect to the CollateralPortfolio Pledged hereunder are held and shall be held in trust for the benefit of the Collateral Agent, on behalf of the Secured Parties until depositedinto the Collection Account within two Business Days after receipt as required herein.(j) Investment Company Act. The Servicer is an “investment company” that has elected to be regulated as a “business development company”within the meaning of the 1940 Act.(k) Solvency. The Servicer is not the subject of any Bankruptcy Proceedings or Bankruptcy Event. The transactions under this Agreement andany other Transaction Document to which the Servicer is a party do not and will not render the Servicer not Solvent.(l) Taxes. The Servicer has filed or caused to be filed all federal and all other material tax returns (including, without limitation, all federal andmaterial foreign, state, local and other tax returns) that are required to be filed by it (subject to any extensions to file properly obtained by the same).The Servicer has paid or made adequate provisions for the payment of all Taxes and all assessments made against it or any of its property (other thanany amount of Tax the validity of which is currently being contested in good faith by appropriate proceedings and with respect to which reserves inaccordance with GAAP have been provided on the books of the Servicer), and no Tax lien has been filed and, to the Servicer’s knowledge, no claim isbeing asserted, with respect to any such Tax, assessment or other governmental charge.(m) Security Interest. Upon the filing of UCC-1 financing statements naming the Collateral Agent as secured party and the Borrower as debtor,the Collateral Agent, for the benefit of the Secured Parties, shall have a valid and first priority perfected security interest in the Loan Assets and in theBorrower’s right in that portion of the Collateral Portfolio in which a security interest may be perfected by filing of a UCC financing statement (exceptfor any Permitted Liens). All filings (including, without limitation, such UCC filings) as are necessary for the perfection of the Secured Parties’ securityinterest in the Loan Assets and that portion of the Collateral Portfolio in which a security interest may be perfected by filing of a financing statementhave been (or prior to the applicable Advance will be) made.(n) ERISA. The present value of all benefits vested under each “employee pension benefit plan”, as such term is defined in Section 3(3) of ERISA,that is subject to Title IV of ERISA, Section 412 of the Code or Section 302 of ERISA (other than any Multiemployer Plan) and that is, or at any timeduring the preceding six years was, maintained by the Servicer or any ERISA Affiliate of the Servicer, or open to participation by employees of theServicer or of any ERISA Affiliate of the Servicer, as from time to time in effect (each, a “Servicer Pension Plan”) does not exceed the value of the assetsof the Servicer Pension Plan allocable to such vested benefits (based on the value of such assets as of the last annual valuation date). No prohibitedtransactions, failure to meet the minimum funding standard set forth in Section 302(a) -90-of ERISA and Section 412(a) of the Code (with respect to any Servicer Pension Plan other than a Multiemployer Plan), withdrawals or reportable eventshave occurred with respect to any Servicer Pension Plan that, in the aggregate, could subject the Servicer to any material Tax, penalty or other liability.No notice of intent to terminate a Servicer Pension Plan has been filed, nor has any Servicer Pension Plan been terminated under Section 4041(c) ofERISA, nor has the Pension Benefit Guaranty Corporation instituted proceedings to terminate, or appoint a trustee to administer, a Servicer PensionPlan and no event has occurred or condition exists that might constitute grounds under Section 4042 of ERISA for the termination of, or theappointment of a trustee to administer, any Servicer Pension Plan.(o) USA PATRIOT Act. Neither the Servicer nor any Affiliate of the Servicer is (i) a country, territory, organization, person or entity named on anOFAC list; (ii) a Person that resides or has a place of business in a country or territory named on such lists or which is designated as a “Non-CooperativeJurisdiction” by the Financial Action Task Force on Money Laundering, or whose subscription funds are transferred from or through such ajurisdiction; (iii) a “Foreign Shell Bank” within the meaning of the USA PATRIOT Act, i.e., a foreign bank that does not have a physical presence inany country and that is not affiliated with a bank that has a physical presence and an acceptable level of regulation and supervision; or (iv) a person orentity that resides in or is organized under the laws of a jurisdiction designated by the United States Secretary of the Treasury under Sections 311 or312 of the USA PATRIOT Act as warranting special measures due to money laundering concerns.Sanctions. None of the Servicer nor, to its knowledge,any Person directly or indirectly Controlling the Servicer (i) is a Sanctioned Person; (ii) is controlled by or is acting on behalf of a Sanctioned Person;or (iii) shall cause the Obligations to be repaid with proceeds derived from any transaction that would be prohibited by Sanctions or would otherwisecause any Lender or any other party to this Agreement to be in breach of any Sanctions. The Servicer will notify each Lender and Administrative Agentin writing promptly after becoming aware of any breach of this Section 4.03(o).(p) Environmental. With respect to each item of Underlying Collateral as of the applicable Cut-Off Date for the Loan Asset related to suchUnderlying Collateral, to the actual knowledge of a Responsible Officer of the Servicer: (a) the related Obligor’s operations comply with all applicableEnvironmental Laws; and (b) the related Obligor does not have any contingent liability in connection with any release of any Hazardous Materials intothe environment. As of the applicable Cut-Off Date for the Loan Asset related to such Underlying Collateral and except as disclosed in writing to theAdministrative Agent as a notice or inquiry that may contravene this Section 4.03(p) in connection with the approval of such Loan Asset, the Servicerhas not received any written or verbal notice of, or inquiry from any Governmental Authority regarding, any violation, alleged violation,non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws that would reasonably beexpected to impact the value of any of the Underlying Collateral.(q) No Injunctions. No injunction, writ, restraining order or other order of any nature adversely affects the Servicer’s performance of itsobligations under this Agreement or any Transaction Document to which the Servicer is a party. -91-(r) Instructions to Obligors. The Collection Account is the only account to which Obligors have been instructed by the Servicer on the Borrower’sbehalf to send Principal Collections and Interest Collections on the Collateral Portfolio.(s) Broker-Dealer. The Servicer is not a broker-dealer or subject to the Securities Investor Protection Act of 1970, as amended.(t) Servicer Termination Event. No event has occurred and is continuing which constitutes a Servicer Termination Event (other than any ServicerTermination Event which has previously been disclosed to the Administrative Agent as such).(u) Compliance with Applicable Law. The Servicer has complied in all material respects with all Applicable Law to which it may be subject, andno item in the Collateral Portfolio contravenes any Applicable Law.Section 4.04 Representations and Warranties of the Collateral Agent. The Collateral Agent in its individual capacity and as Collateral Agentrepresents and warrants as follows:(a) Organization; Power and Authority. It is a duly organized and validly existing national banking association in good standing under the lawsof the United States. It has full corporate power, authority and legal right to execute, deliver and perform its obligations as Collateral Agent under thisAgreement.(b) Due Authorization. The execution and delivery of this Agreement and the consummation of the transactions provided for herein have beenduly authorized by all necessary association action on its part, either in its individual capacity or as Collateral Agent, as the case may be.(c) No Conflict. The execution and delivery of this Agreement, the performance of the transactions contemplated hereby and the fulfillment ofthe terms hereof will not conflict with, result in any breach of its articles of incorporation or bylaws or any of the terms and provisions of, or constitute(with or without notice or lapse of time or both) a default under any indenture, contract, agreement, mortgage, deed of trust, or other instrument towhich the Collateral Agent is a party or by which it or any of its property is bound.(d) No Violation. The execution and delivery of this Agreement, the performance of the transactions contemplated hereby and the fulfillment ofthe terms hereof will not conflict with or violate, in any respect, any Applicable Law.(e) All Consents Required. All approvals, authorizations, consents, orders or other actions of any Person or Governmental Authority applicable tothe Collateral Agent, required in connection with the execution and delivery of this Agreement, the performance by the Collateral Agent of thetransactions contemplated hereby and the fulfillment by the Collateral Agent of the terms hereof have been obtained. -92-(f) Validity, Etc. The Agreement constitutes the legal, valid and binding obligation of the Collateral Agent, enforceable against the CollateralAgent in accordance with its terms, except as such enforceability may be limited by applicable Bankruptcy Laws and general principles of equity(whether considered in a suit at law or in equity).Section 4.05 Representations and Warranties of each Lender. Each Lender hereby individually represents and warrants, as to itself, that it actingfor its own account in the aggregate owns and invests on a discretionary basis, not less than $25,000,000 in investments. Notwithstanding anyprovision herein to the contrary, the parties hereto intend that the Advances made hereunder shall constitute a “loan” and not a “security” for purposeof Section 8-102(15) of the UCC.Section 4.06 Representations and Warranties of the Collateral Custodian. The Collateral Custodian in its individual capacity and as CollateralCustodian represents and warrants as follows:(a) Organization; Power and Authority. It is a duly organized and validly existing national banking association in good standing under the lawsof the United States. It has full corporate power, authority and legal right to execute, deliver and perform its obligations as Collateral Custodian underthis Agreement.(b) Due Authorization. The execution and delivery of this Agreement and the consummation of the transactions provided for herein have beenduly authorized by all necessary association action on its part, either in its individual capacity or as Collateral Custodian, as the case may be.(c) No Conflict. The execution and delivery of this Agreement, the performance of the transactions contemplated hereby and the fulfillment ofthe terms hereof will not conflict with, result in any breach of its articles of incorporation or bylaws or any of the terms and provisions of, or constitute(with or without notice or lapse of time or both) a default under any indenture, contract, agreement, mortgage, deed of trust, or other instrument towhich the Collateral Custodian is a party or by which it or any of its property is bound.(d) No Violation. The execution and delivery of this Agreement, the performance of the transactions contemplated hereby and the fulfillment ofthe terms hereof will not conflict with or violate, in any respect, any Applicable Law.(e) All Consents Required. All approvals, authorizations, consents, orders or other actions of any Person or Governmental Authority applicable tothe Collateral Custodian, required in connection with the execution and delivery of this Agreement, the performance by the Collateral Custodian of thetransactions contemplated hereby and the fulfillment by the Collateral Custodian of the terms hereof have been obtained.(f) Validity, Etc. The Agreement constitutes the legal, valid and binding obligation of the Collateral Custodian, enforceable against theCollateral Custodian in accordance with its terms, except as such enforceability may be limited by applicable Bankruptcy Laws and general principlesof equity (whether considered in a suit at law or in equity). -93-ARTICLE V.GENERAL COVENANTSSection 5.01 Affirmative Covenants of the Borrower.From the Closing Date until the Collection Date:(a) Organizational Procedures and Scope of Business. The Borrower will observe all organizational procedures required by its certificate offormation, limited liability company agreement and the laws of its jurisdiction of formation. Without limiting the foregoing, the Borrower will limit thescope of its business to: (i) the acquisition of Eligible Loan Assets and the ownership and management of the Portfolio Assets and the related assets inthe Collateral Portfolio; (ii) the sale, transfer or other disposition of Loan Assets as and when permitted under the Transaction Documents; (iii) enteringinto and performing under the Transaction Documents; (iv) consenting or withholding consent as to proposed amendments, waivers and othermodifications of the Loan Agreements to the extent not in conflict with the terms of this Agreement or any other Transaction Document; (v) exercisingany rights (including but not limited to voting rights and rights arising in connection with a Bankruptcy Event with respect to an Obligor or theconsensual or non-judicial restructuring of the debt or equity of an Obligor) or remedies in connection with the Loan Assets and participating in thecommittees (official or otherwise) or other groups formed by creditors of an Obligor to the extent not in conflict with the terms of this Agreement or anyother Transaction Document; and (vi) engaging in any activity and to exercise any powers permitted to limited liability companies under the laws ofthe State of Delaware that are related to the foregoing and necessary, convenient or advisable to accomplish the foregoing.(b) Special Purpose Entity Requirements. The Borrower will at all times: (i) maintain at least one Independent Director; (ii) maintain its ownseparate books and records and bank accounts; (iii) hold itself out to the public and all other Persons as a legal entity separate from theEquityholderTransferor and any other Person (although, in connection with certain advertising and marketing, the Borrower may be identified as aSubsidiary of the Transferor); (iv) have a board of directors separate from that of the EquityholderTransferor and any other Person; (v) file its own Taxreturns, if any, as may be required under Applicable Law, to the extent (1) not part of a consolidated group filing a consolidated return or returns or(2) not treated as a division for Tax purposes of another taxpayer, and pay any Taxes so required to be paid under Applicable Law in accordance withthe terms of this Agreement; (vi) not commingle its assets with assets of any other Person; (vii) conduct its business in its own name and strictly complywith all organizational formalities to maintain its separate existence (although, in connection with certain advertising and marketing, the Borrowermay be identified as a Subsidiary of Solar); (viii) maintain separate financial statements, except to the extent that the Borrower’s financial andoperating results are consolidated with those of the EquityholderTransferor in consolidated financial statements; (ix) pay its own liabilities only out ofits own funds; (x) maintain an arm’s-length relationship with its Affiliates and the -94-EquityholderTransferor; (xi) pay the salaries of its own employees, if any; (xii) not hold out its credit or assets as being available to satisfy theobligations of others; (xiii) maintain separate office space (which may be a separately identified area in office space shared with one or more Affiliatesof the Borrower) and allocate fairly and reasonably any overhead for shared office space; (xiv) use separate stationery, invoices and checks; (xv) notpledge its assets as security for the obligations of any other Person; (xvi) correct any known misunderstanding regarding its separate identity;(xvii) maintain adequate capital in light of its contemplated business purpose, transactions and liabilities and pay its operating expenses and liabilitiesfrom its own assets; (xviii) cause its board of directors to meet or act pursuant to written consents and keep minutes of such meetings and actions, ineach case in accordance with Delaware limited liability company formalities, and observe in all material respects all other Delaware limited liabilitycompany formalities; (xix) not acquire the obligations or any securities of its Affiliates; and (xx) cause the directors, officers, agents and otherrepresentatives of the Borrower to act at all times with respect to the Borrower consistently and in furtherance of the foregoing and in the best interestsof the Borrower and (xxi) not divide or permit any division of the Borrower. Where necessary, the Borrower will obtain proper authorization from itsmembers for limited liability company action.(c) Preservation of Company Existence. The Borrower will maintain its limited liability company existence in good standing under the laws of itsjurisdiction of formation and will promptly obtain and thereafter maintain qualifications to do business as a foreign limited liability company in anyother state in which it is required to so qualify under Applicable Law, in each case (other than in respect of maintenance of its existence) where thefailure to obtain and maintain such standing and qualification could reasonably be expected to have a Material Adverse Effect.(d) Compliance with Legal Opinions. The Borrower shall take all other actions necessary to maintain the accuracy of the factual assumptions setforth in the legal opinions of Latham & Watkins LLP, as special counsel to the Borrower, issued in connection with the Purchase and Sale Agreementand relating to the issues of substantive consolidation and true sale of the Loan Assets.(e) Deposit of Collections. The Borrower shall promptly (but in no event later than two Business Days after receipt) deposit or cause to bedeposited into the Collection Account any and all Available Collections received by the Borrower.(f) Disclosure of Purchase Price. The Borrower shall disclose to the Administrative Agent and the Lender Agents (which such disclosure may beincluded in the Borrowing Base Certificate) the purchase price for each Loan Asset proposed to be acquired by the Borrower.(g) Obligor Defaults and Bankruptcy Events. The Borrower shall give, or shall cause the Servicer to give, notice to the Administrative Agent andthe Lender Agents within five Business Days of the Borrower’s, the Transferor’s or the Servicer’s actual knowledge of the occurrence of any default byan Obligor under any Loan Asset or any Bankruptcy Event with respect to any Obligor under any Loan Asset. -95-(h) Required Loan Documents. The Borrower shall deliver to the Collateral Custodian copies of the Required Loan Documents and the LoanAsset Checklist pertaining to each Loan Asset within five Business Days after the Cut-Off Date pertaining to such Loan Asset.(i) Taxes. The Borrower will file or cause to be filed all tax returns required to be filed by it (including, without limitation, all foreign, federal,state, local and other tax returns) and pay any and all Taxes imposed on it or its property as required by the Transaction Documents (except for thoseTaxes contested in good faith by appropriate proceedings and in respect of which it establishes proper reserves on its books in accordance with GAAP).(j) Notice of Event of Default. The Borrower shall notify the Administrative Agent and each Lender Agent of the occurrence of any Event ofDefault under this Agreement promptly upon obtaining knowledge of such event. In addition, no later than two Business Days following theBorrower’s knowledge or notice of the occurrence of any Event of Default or Unmatured Event of Default, the Borrower will provide to theAdministrative Agent and each Lender Agent a written statement of a Responsible Officer of the Borrower setting forth the details of such event and theaction that the Borrower proposes to take with respect thereto.(k) Notice of Material Events. The Borrower shall promptly upon becoming aware thereof notify the Administrative Agent and each LenderAgent of any event or other circumstance that is reasonably likely to have a Material Adverse Effect.(l) Notice of Income Tax Liability. The Borrower shall furnish to the Administrative Agent and each Lender Agent notice within 10 BusinessDays of the receipt of revenue agent reports or other written proposals, determinations or assessments of the Internal Revenue Service or any othertaxing authority which propose, determine or otherwise set forth positive adjustments to the Tax liability of the Borrower itself in an amount equal toor greater than $500,000 in the aggregate. Any such notice shall specify the nature of the items giving rise to such adjustments and the amountsthereof.(m) Notice of Auditors’ Management Letters. The Borrower shall promptly notify the Administrative Agent and each Lender Agent after thereceipt of any auditors’ management letters received by the Borrower or by its accountants.(n) Notice of Proceedings. The Borrower shall notify the Administrative Agent and each Lender Agent, as soon as possible and in any eventwithin three Business Days, after the Borrower receives notice or obtains knowledge thereof, of any settlement of, material judgment (including amaterial judgment with respect to the liability phase of a bifurcated trial) in or commencement of any material labor controversy, material litigation,material action, material suit or material proceeding before any court or governmental department, commission, board, bureau, agency orinstrumentality, domestic or foreign, affecting the Collateral Portfolio, the Transaction Documents, the Collateral Agent’s, for the benefit of theSecured Parties, interest in the Collateral Portfolio, or the Borrower, the Servicer or the Transferor or any of their Affiliates. Solely for purposes of thisSection 5.01(n), (i) any settlement, judgment, labor controversy, litigation, action, suit or proceeding affecting the Collateral Portfolio, the TransactionDocuments, the Collateral Agent’s, for the benefit of the Secured Parties, interest in -96-the Collateral Portfolio, the Transferor or the Borrower in excess of $500,000, with respect to the Borrower, or $5,000,000, with respect to theTransferor, shall be deemed to be material and (ii) any settlement, judgment, labor controversy, litigation, action, suit or proceeding affecting theServicer in excess of $5,000,000 shall be deemed to be material.(o) ERISA Notices.(i) Notice of ERISA Reportable Events. The Borrower shall promptly notify the Administrative Agent and each Lender Agent afterreceiving notice of any “reportable event” (as defined in Title IV of ERISA, other than an event for which the reporting requirements have beenwaived by regulations) with respect to the Borrower (or any ERISA Affiliate thereof), and provide them with a copy of such notice.(ii) Notices Relating to Benefit Plan Investor or Governmental Plan Entity Status. The Borrower shall promptly notify the AdministrativeAgent and the Lender in the event the Borrower becomes a Benefit Plan Investor or a Governmental Plan Entity or in the event the Borrowerknows or expects that this Agreement or any other action or transaction in connection with this Agreement or any other Transaction Documentwill constitute or result in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or in a non-exemptviolation of Similar Law.(p) Notice of Accounting Changes. As soon as possible and in any event within three Business Days after the effective date thereof, the Borrowerwill provide to the Administrative Agent and each Lender Agent notice of any material change in the accounting policies of the Borrower.(q) Additional Documents. The Borrower shall provide the Administrative Agent and each Lender Agent with copies of such documents as theAdministrative Agent or any Lender Agent may reasonably request evidencing the truthfulness of the representations set forth in this Agreement.(r) Protection of Security Interest. With respect to the Collateral Portfolio acquired by the Borrower, the Borrower will (i) acquire such CollateralPortfolio pursuant to and in accordance with the terms of the Purchase and Sale Agreement or such other similar agreement, as applicable, (ii) (at theexpense of the Servicer, on behalf of the Borrower) take all action necessary to perfect, protect and more fully evidence the Borrower’s ownership ofsuch Collateral Portfolio free and clear of any Lien other than the Lien created hereunder and Permitted Liens, including, without limitation, (a) withrespect to the Loan Assets and that portion of the Collateral Portfolio in which a security interest may be perfected by filing, filing and maintaining (atthe expense of the Servicer, on behalf of the Borrower), effective financing statements against the Transferor in all necessary or appropriate filingoffices, (including any amendments thereto or assignments thereof) and filing continuation statements, amendments or assignments with respectthereto in such filing offices, (including any amendments thereto or assignments thereof) and (b) executing or causing to be executed such otherinstruments or notices as may be necessary or appropriate, (iii) (at the expense of the Servicer, on behalf of the -97-Borrower) take all action necessary to cause a valid, subsisting and enforceable first priority perfected security interest, subject only to Permitted Liens,to exist in favor of the Collateral Agent (for the benefit of the Secured Parties) in the Borrower’s interests in all of the Collateral Portfolio being Pledgedhereunder including the filing of a UCC financing statement in the applicable jurisdiction adequately describing the Collateral Portfolio (which mayinclude an “all asset” filing), and naming the Borrower as debtor and the Collateral Agent as the secured party, and filing continuation statements,amendments or assignments with respect thereto in such filing offices, (including any amendments thereto or assignments thereof), (iv) permit theAdministrative Agent or any Lender Agent or their respective agents or representatives to visit the offices of the Borrower during normal office hoursand upon reasonable advance notice examine and make copies of all documents, books, records and other information concerning the CollateralPortfolio and discuss matters related thereto with any of the officers or employees of the Borrower having knowledge of such matters no more thantwice in any fiscal year when no Event of Default is in existence, and (v) take all additional action that the Administrative Agent, any Lender Agent orthe Collateral Agent may reasonably request to perfect, protect and more fully evidence the respective first priority perfected security interests of theparties to this Agreement in the Collateral Portfolio, or to enable the Administrative Agent or the Collateral Agent to exercise or enforce any of theirrespective rights hereunder.(s) Liens. The Borrower will promptly notify the Administrative Agent and the Lender Agents of the existence of any Lien on the CollateralPortfolio and the Borrower shall defend the right, title and interest of the Collateral Agent, for the benefit of the Secured Parties, in, to and under theCollateral Portfolio against all claims of third parties (other than Permitted Liens).(t) Other Documents. At any time from time to time upon prior written request of the Administrative Agent or any Lender Agent, at the soleexpense of the Borrower, the Borrower will promptly and duly execute and deliver such further instruments and documents and take such furtheractions as the Administrative Agent or any Lender Agent may reasonably request for the purposes of obtaining or preserving the full benefits of thisAgreement including the first priority security interest (subject only to Permitted Liens) granted hereunder and of the rights and powers herein granted(including, among other things, authorizing the filing of such UCC financing statements as the Administrative Agent may request).(u) Compliance with Law. The Borrower shall at all times comply in all material respects with all Applicable Law applicable to Borrower or anyof its assets (including, without limitation, Environmental Laws, and all federal securities laws), and Borrower shall do or cause to be done all thingsnecessary to preserve and maintain in full force and effect its legal existence, and all licenses material to its business.(v) Proper Records. The Borrower shall at all times keep proper books of records and accounts in which full, true and correct entries shall be madeof its transactions in accordance with GAAP and set aside on its books all such proper reserves in accordance with GAAP.(w) Satisfaction of Obligations. The Borrower shall pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, asthe case may be, all -98-its obligations of whatever nature, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedingsand reserves with respect thereto have been provided on the books of the Borrower.(x) Performance of Covenants. The Borrower shall observe, perform and satisfy all the material terms, provisions, covenants and conditionsrequired to be observed, performed or satisfied by it, and shall pay when due all costs, fees and expenses required to be paid by it, under theTransaction Documents. The Borrower shall pay and discharge all Taxes, levies, liens and other charges on it or its assets and on the CollateralPortfolio that, in each case, in any manner would create any lien or charge upon the Collateral Portfolio, except for any such Taxes as are beingappropriately contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves have beenprovided in accordance with GAAP.(y) Tax Treatment. The Borrower shall treat the Advances advanced hereunder as indebtedness of the Borrower (or, so long as the Borrower istreated as a disregarded entity for U.S. federal income tax purposes, as indebtedness of the entity of which it is considered to be a part) for U.S. federalincome tax purposes and to file any and all Tax forms in a manner consistent therewith.(z) Maintenance of Records. The Borrower will maintain records with respect to the Collateral Portfolio and the conduct and operation of itsbusiness with no less a degree of prudence than if the Collateral Portfolio were held by the Borrower for its own account and will furnish theAdministrative Agent and each Lender Agent, upon the reasonable request by the Administrative Agent and each Lender Agent, information withrespect to the Collateral Portfolio and the conduct and operation of its business.(aa) Obligor Notification Forms. The Borrower shall furnish the Collateral Agent and the Administrative Agent with an appropriate power ofattorney to send (at the Administrative Agent’s discretion on the Collateral Agent’s behalf, after the occurrence and continuance of an Event ofDefault) Obligor notification forms to give notice to the Obligors of the Collateral Agent’s interest in the Collateral Portfolio and the obligation tomake payments as directed by the Administrative Agent on the Collateral Agent’s behalf.(bb) Officer’s Certificate. On or within 30 days prior to each anniversary of the date of this Agreement, the Borrower shall deliver an Officer’sCertificate, in form and substance acceptable to the Lender Agents and the Administrative Agent, providing (i) a certification, based upon a review andsummary of UCC search results, that there is no other interest in the Collateral Portfolio that is perfected by filing of a UCC financing statement otherthan in favor of the Collateral Agent and (ii) a certification, based upon a review and summary of Tax and judgment lien searches, that there is no otherinterest in the Collateral Portfolio based on any Tax or judgment lien.(cc) Continuation Statements. The Borrower shall, not earlier than six months and not later than three months prior to the fifth anniversary of thedate of filing of the financing statement referred to in Schedule I hereto or any other financing statement filed pursuant to this Agreement or inconnection with any Advance hereunder, unless the Collection Date shall have occurred: -99-(i) authorize and deliver and file or cause to be filed an appropriate continuation statement with respect to such financing statement; and(ii) deliver or cause to be delivered to the Collateral Agent, the Administrative Agent and the Lender Agents an opinion of the counsel forthe Borrower, in form and substance reasonably satisfactory to the Administrative Agent, confirming and updating the opinion deliveredpursuant to Schedule I with respect to perfection and otherwise to the effect that the security interest hereunder continues to be a valid andperfected security interest, and stating that counsel has reviewed applicable searches of the UCC filing office in the Borrower’s jurisdiction oforganization and that such searches do not indicate any other Liens of record except as specified therein, provided herein or otherwise permittedhereunder, which opinion may contain usual and customary assumptions, limitations and exceptions.(dd) Disregarded Entity. The Borrower will be disregarded as an entity separate from its owner pursuant to Treasury RegulationSection 301.7701-3(b), and neither the Borrower nor any other Person on its behalf shall make an election to be, or take any other action that isreasonably likely to result in the Borrower being treated as other than an entity disregarded from its owner under Treasury RegulationSection 301.7701-3(c).(ee) Beneficial Ownership Regulation. Promptly following any request therefor, the Borrower shall deliver to the Administrative Agentinformation and documentation reasonably requested by the Administrative Agent or any Lender for purposes of compliance with the BeneficialOwnership Regulation.(ff) Compliance with Anti-Money Laundering Laws and Anti-Corruption Laws. The Borrower shall and each Person directly or indirectlyControlling the Borrower shall: (i) comply with all applicable Anti-Money Laundering Laws and Anti-Corruption Laws in all material respects, andshall maintain policies and procedures reasonably designed to ensure compliance with the Anti-Money Laundering Laws and Anti-Corruption Laws;(ii) ensure it does not use any of the credit in violation of any Anti-Corruption Laws or Anti-Money Laundering Laws in any material respect; and(iii) ensure it does not fund any repayment of the Obligations in violation of any Anti-Corruption Laws or Anti-Money Laundering Laws in anymaterial respect. The Borrower shall conduct the requisite due diligence in connection with the transactions contemplated herein for purposes ofcomplying with the Anti-Money Laundering Laws, including with respect to the legitimacy of any applicable investor and the origin of the assets usedby such investor to purchase the property in question, and will maintain sufficient information to identify any applicable investor for purposes of theAnti-Money Laundering Laws. -100-Section 5.02 Negative Covenants of the Borrower.From the Closing Date until the Collection Date:(a) Special Purpose Entity Requirements. Except as otherwise permitted by this Agreement, the Borrower shall not (i) guarantee any obligation ofany Person, including any Affiliate; (ii) engage, directly or indirectly, in any business, other than the actions required or permitted to be performedunder the Transaction Documents; (iii) incur, create or assume any Indebtedness, other than Indebtedness incurred under the Transaction Documentsand arising in connection with ordinary business expenses arising pursuant to the transactions contemplated by this Agreement and the otherTransaction Documents; (iv) make or permit to remain outstanding any loan or advance to, or own or acquire any stock or securities (other than anyequity or other securities retained pursuant to Section 6.05) of, any Person, except that the Borrower may invest in those Loan Assets and otherinvestments permitted under the Transaction Documents and may make any advance required or expressly permitted to be made pursuant to anyprovisions of the Transaction Documents and permit the same to remain outstanding in accordance with such provisions; (v) fail to pay its debts andliabilities from its assets when due; (vi) create, form or otherwise acquire any Subsidiaries or (vii) release, sell, transfer, convey or assign any Loan Assetunless in accordance with the Transaction Documents.(b) Requirements for Material Actions. The Borrower shall not fail to provide (and at all times the Borrower’s organizational documents shallreflect) that the unanimous consent of all directors (including the consent of the Independent Director(s)) is required for the Borrower to (i) dissolve orliquidate, in whole or part, or institute proceedings to be adjudicated bankrupt or not Solvent, (ii) institute or consent to the institution of bankruptcyor insolvency proceedings against it, (iii) file a petition seeking or consent to reorganization or relief under any applicable federal or state law relatingto bankruptcy or insolvency, (iv) seek or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator, custodian or any similarofficial for the Borrower, (v) make any assignment for the benefit of the Borrower’s creditors, (vi) admit in writing its inability to pay its debts generallyas they become due, or (vii) take any action in furtherance of any of the foregoing.(c) Protection of Title. The Borrower shall not take any action which would directly or indirectly impair or adversely affect Borrower’s title to theCollateral Portfolio, except for dispositions of the Collateral Portfolio expressly permitted or contemplated by this Agreement.(d) Transfer Limitations. The Borrower shall not transfer, assign, convey, grant, bargain, sell, set over, deliver or otherwise dispose of, or pledge orhypothecate, directly or indirectly, any interest in the Collateral Portfolio to any person other than the Collateral Agent for the benefit of the SecuredParties, or engage in financing transactions or similar transactions with respect to the Collateral Portfolio with any person other than the AdministrativeAgent and the Lenders, in each case, except as otherwise expressly permitted or contemplated by the terms of this Agreement. -101-(e) Liens. The Borrower shall not create, incur or permit to exist any lien, encumbrance or security interest in or on any of the Collateral Portfoliosubject to the security interest granted by the Borrower pursuant to this Agreement, other than Permitted Liens.(f) Organizational Documents. The Borrower shall not modify or terminate any of the organizational documents of the Borrower without the priorwritten consent of the Administrative Agent.(g) Merger, Acquisitions, Sales, etc. The Borrower shall not change its organizational structure, enter into any transaction of merger orconsolidation or amalgamation, or asset sale (other than pursuant to Section 2.07, including sales of the Collateral Portfolio expressly permitted orcontemplated thereby), or liquidate, wind up or dissolve itself (or suffer any liquidation, winding up or dissolution) without the prior written consent ofthe Administrative Agent.(h) Use of Proceeds. The Borrower shall not use the proceeds of any Advance other than (x) to finance the purchase by the Borrower on a “truesale” basis, of Collateral Portfolio, (y) to fund the Unfunded Exposure Account in order to establish reserves for unfunded commitments of DelayedDraw Loan Assets included in the Collateral Portfolio or (z) in those instances where sufficient Borrowing Base capacity exists, to distribute suchproceeds to the EquityholderTransferor without a concurrent purchase by the Borrower of any Collateral Portfolio.(i) Limited Assets. The Borrower shall not hold or own any assets that are not part of the Collateral Portfolio other than with respect to any assetsreleased from the Lien of the Collateral Agent hereunder (and for which no Advances, if any, applicable to such asset remain outstanding) following(i) a substitution effected in accordance with Section 2.07(a) (so long as the Borrower has Pledged a Substitute Eligible Loan Asset in connectiontherewith), (ii) a repurchase or substitution of a Warranty Loan Asset effected in accordance with Section 2.07(c) or (iii) a Lien Release Dividendeffected in accordance with Section 2.07(g).(j) Extension or Amendment of Collateral Portfolio. The Borrower will not, except as otherwise permitted in Section 6.02(a) of this Agreementand in accordance with the Servicing Standard, extend, amend or otherwise modify the terms of any Loan Asset (including the Underlying Collateral).(k) Purchase and Sale Agreement. The Borrower will not amend, modify, waive or terminate any provision of the Purchase and Sale Agreementwithout the prior written consent of the Administrative Agent.(l) Restricted Junior Payments. The Borrower shall not make any Restricted Junior Payment, other than, so long as no Event of Default orUnmatured Event of Default has occurred and is continuing or would result therefrom (i) if the Administrative Agent has confirmed that the applicableUnmatured Event of Default has been cured, amounts on deposit in the Interest Collection Account that would have been distributed pursuant toSection 2.04(a)(x) or the Principal Collection Account that would have been distributed pursuant to Section 2.04(b)(vii) on the immediately precedingPayment Date except for the existence of an Unmatured Event of Default and (ii) distributions to its member on its membership interests. -102-(m) ERISA Matters. The Borrower will not (a) engage, and will exercise its best efforts not to permit any ERISA Affiliate to engage, in anyprohibited transaction (within the meaning of ERISA Section 406 or Code Section 4975) for which an exemption is not available or has not previouslybeen obtained from the United States Department of Labor, (b) fail to meet the minimum funding standard set forth in Section 302(a) of ERISA andSection 412(a) of the Code with respect to any Pension Plan other than a Multiemployer Plan, (c) fail to make any payments to a Multiemployer Planthat the Borrower or any ERISA Affiliate may be required to make under the agreement relating to such Multiemployer Plan or any law pertainingthereto, (d) terminate any Pension Plan so as to result, directly or indirectly in any liability to the Borrower, or (e) permit to exist any occurrence of anyreportable event described in Title IV of ERISA with respect to any Pension Plan, other than an event for which reporting requirements have beenwaived by regulations.(n) Instructions to Obligors. The Borrower will not make any change, or permit the Servicer to make any change, in its instructions to Obligorsregarding payments to be made with respect to the Collateral Portfolio to the Collection Account, unless the Administrative Agent has consented tosuch change (such consent not to be unreasonably withheld or delayed, it being understood that any such account to which the Obligors may beinstructed to make payments shall be subject to an account control agreement which provides the Collateral Agent with a first priority perfectedsecurity interest in such account, as evidenced by an Opinion of Counsel reasonably acceptable to the Administrative Agent).(o) Taxable Mortgage Pool Matters. The sum of the Outstanding Balances of all Loan Assets owned by the Borrower and that are principallysecured by an interest in real property (within the meaning of Treasury Regulation Section 301.7701(i)-1(d)(3)) shall not at any time exceed 35% of theaggregate Outstanding Balance of all Loan Assets.(p) Change of Jurisdiction, Location, Names or Location of Loan Asset Files. The Borrower shall not change the jurisdiction of its formation,make any change to its corporate name or use any tradenames, fictitious names, assumed names, “doing business as” names or other names (other thanthose listed on Schedule II hereto, as such schedule may be revised from time to time to reflect name changes and name usage permitted under the termsof this Section 5.02(p) after compliance with all terms and conditions of this Section 5.02(p) related thereto) unless, prior to the effective date of anysuch change in the jurisdiction of its formation, name change or use, the Borrower receives prior written consent from the Administrative Agent of suchchange and delivers to the Administrative Agent such financing statements as the Administrative Agent may request to reflect such name change oruse, together with such Opinions of Counsel and other documents and instruments as the Administrative Agent may request in connection therewith.The Borrower will not change the location of its chief executive office unless prior to the effective date of any such change of location, the Borrowernotifies the Administrative Agent of such change of location in writing. The Borrower will not move, or consent to the Collateral Custodian or theServicer moving, the Loan Asset Files from the location thereof on the Closing Date, unless the Administrative Agent shall consent to such move inwriting and the Servicer shall provide the Administrative Agent with such Opinions of Counsel and other documents and instruments as theAdministrative Agent may reasonably request in connection therewith. -103-(q) Allocation of Charges. There will not be any agreement or understanding between the Servicer and the Borrower (other than as expressly setforth herein or as consented to by the Administrative Agent), providing for the allocation or sharing of obligations to make payments or otherwise inrespect of any Taxes, fees, assessments or other governmental charges; provided that it is understood and acknowledged that the Borrower will beconsolidated with the EquityholderTransferor for tax purposes.(r) Compliance with Sanctions. None of the Borrower nor any Person directly or indirectly Controlling the Borrower will, directly or knowinglyindirectly, use the proceeds of any Advance hereunder, or lend, contribute, or otherwise make available such proceeds to any subsidiary, joint venturepartner, or other Person (i) to fund any activities or business of or with a Sanctioned Person, or (ii) in any manner that would be prohibited by Sanctionsor would otherwise cause any Lender to be in breach of any Sanctions. The Borrower shall comply with all applicable Sanctions in all material respects,and shall maintain policies and procedures reasonably designed to ensure compliance with Sanctions.Section 5.03 Affirmative Covenants of the Servicer.From the Closing Date until the Collection Date:(a) Compliance with Law. The Servicer will comply in all material respects with all Applicable Law, including those with respect to servicing theCollateral Portfolio or any part thereof pursuant to the terms hereof.(b) Preservation of Company Existence. The Servicer will preserve and maintain its corporate existence, rights, franchises and privileges in thejurisdiction of its incorporation, and qualify and remain qualified in good standing as a corporation in each jurisdiction where the failure to preserveand maintain such existence, rights, franchises, privileges and qualification could reasonably be expected to have a Material Adverse Effect.(c) Obligations and Compliance with Collateral Portfolio. The Servicer will take all actions within its control so as to permit the Borrower tofulfill and comply with all obligations on the part of the Borrower to be fulfilled or complied with under or in connection with the administration ofeach item of Collateral Portfolio and will do nothing to impair the rights of the Collateral Agent, for the benefit of the Secured Parties, or of the SecuredParties in, to and under the Collateral Portfolio. It is understood and agreed that the Servicer does not hereby assume any obligations of the Borrower inrespect of any Advances or assume any responsibility for the performance by the Borrower of any of its obligations hereunder or under any otheragreement executed in connection herewith that would be inconsistent with the limited recourse undertaking of the Servicer, in its capacity as seller,under Section 2.1(e) of the Purchase and Sale Agreement. -104-(d) Keeping of Records and Books of Account.(i) The Servicer will maintain and implement administrative and operating procedures (including, without limitation, an ability to recreaterecords evidencing Collateral Portfolio in the event of the destruction of the originals thereof), and keep and maintain all documents, books,records and other information reasonably necessary or advisable for the collection of all Collateral Portfolio and the identification of theCollateral Portfolio.(ii) The Servicer shall permit the Administrative Agent, each Lender Agent or their respective agents or representatives, to visit the officesof the Servicer during normal office hours and upon reasonable advance notice and examine and make copies of all documents, books, recordsand other information concerning the Collateral Portfolio and the Servicer’s servicing thereof and discuss matters related thereto with any of theofficers or employees of the Servicer having knowledge of such matters and to review the Servicer’s collection and administration of theCollateral Portfolio in order to assess compliance by the Servicer with the Servicing Standard, as well as with the Transaction Documents and toconduct an audit of the Collateral Portfolio and Required Loan Documents in conjunction with such a review. For the avoidance of doubt, theright of the Administrative Agent provided herein to visit and inspect the financial records and properties of the Borrower and the Servicer andconduct such audits shall be limited to not more than two such visits and inspections in any fiscal year; provided that after the occurrence andduring the continuance of an Event of Default, there shall be no limit to the number of such visits, inspections and audits.(iii) The Servicer will on or prior to the date hereof, mark its master data processing records and other books and records relating to theCollateral Portfolio indicating that the Collateral Portfolio is owned by the Borrower subject to the Lien of the Collateral Agent, for the benefit ofthe Secured Parties.(e) Preservation of Security Interest. The Servicer will take all steps necessary to ensure that the Borrower has granted a security interest (asdefined in the UCC) to the Collateral Agent, for the benefit of the Secured Parties, in the Collateral Portfolio, which is enforceable in accordance withApplicable Law. The Servicer (at its own expense, on behalf of the Borrower) will file such financing and continuation statements and any otherdocuments that may be required by any law or regulation of any Governmental Authority to preserve and protect fully the first priority perfectedsecurity interest of the Collateral Agent, for the benefit of the Secured Parties, in, to and under the Loan Assets and that portion of the CollateralPortfolio in which a security interest may be perfected by filing.(f) Events of Default. The Servicer will provide the Administrative Agent and each Lender Agent (with a copy to the Collateral Agent) withwritten notice of the occurrence of each Event of Default and each Unmatured Event of Default no later than two Business Days following theServicer’s knowledge or notice thereof. In addition, no later than two Business -105-Days following the Servicer’s knowledge or notice of the occurrence of any Event of Default or Unmatured Event of Default, the Servicer will provideto the Collateral Agent, the Administrative Agent and each Lender Agent a written statement of the chief financial officer or chief accounting officer ofthe Servicer setting forth the details of such event and the action that the Servicer proposes to take with respect thereto.(g) Taxes. The Servicer will file all federal and all other material tax returns required to be filed by it (including, without limitation, all federaland material foreign, state, local and other tax returns) and pay any and all Taxes imposed on it or its property as required under the TransactionDocuments (except for those Taxes contested in good faith by appropriate proceedings and in respect of which it establishes proper reserves on itsbooks in accordance with GAAP).(h) Other. The Servicer will promptly furnish to the Collateral Agent and the Administrative Agent such other information, documents, records orreports respecting the Collateral Portfolio or the condition or operations, financial or otherwise, of the Borrower or the Servicer as the Collateral Agentor the Administrative Agent may from time to time reasonably request in order to protect the interests of the Administrative Agent, the Collateral Agentor Secured Parties under or as contemplated by this Agreement.(i) Proceedings Related to the Borrower, the Transferor and the Servicer and the Transaction Documents. The Servicer shall notify theAdministrative Agent and each Lender Agent as soon as possible and in any event within three Business Days after any Responsible Officer of theServicer receives notice or obtains knowledge thereof of any settlement of, judgment (including a judgment with respect to the liability phase of abifurcated trial) in or commencement of any labor controversy, litigation, action, suit or proceeding before any court or governmental department,commission, board, bureau, agency or instrumentality, domestic or foreign, that could reasonably be expected to have a Material Adverse Effect on theBorrower, the Transferor or the Servicer (or any of their Affiliates) or the Transaction Documents. Solely for purposes of this Section 5.03(i), (i) anysettlement, judgment, labor controversy, litigation, action, suit or proceeding affecting the Transaction Documents or the Borrower in excess of$500,000 shall be deemed to be expected to have such a Material Adverse Effect and (ii) any settlement, judgment, labor controversy, litigation,action, suit or proceeding affecting the Servicer or the Transferor in excess of $5,000,000 shall be deemed to be expected to have such a MaterialAdverse Effect.(j) Deposit of Collections. The Servicer shall promptly (but in no event later than two Business Days after receipt) deposit or cause to bedeposited into the Collection Account any and all Available Collections received by the Borrower, the Servicer or any of their Affiliates.(k) Loan Asset Register. The Servicer shall maintain, or cause to be maintained, with respect to each Noteless Loan Asset a register (which may bein physical or electronic form and readily identifiable as the loan asset register) (each, a “Loan Asset Register”) in which it will record, or cause to berecorded, (v) the amount of such Noteless Loan Asset, (w) the amount of any principal or interest due and payable or to become due and payable fromthe Obligor thereunder, (x) the amount of any sum in respect of such Noteless Loan Asset received -106-from the Obligor, (y) the date of origination of such Noteless Loan Asset and (z) the maturity date of such Noteless Loan Asset. All of the information(and related certifications) required to be set forth with respect to the Loan Asset Register may be included in the applicable Borrowing BaseCertificate.(l) Special Purpose Entity Requirements. The Servicer shall take such actions as are necessary to cause the Borrower to be in compliance with thespecial purpose entity requirements set forth in Sections 5.01(a) and (b) and 5.02(a); provided that, for the avoidance of doubt, the Servicer shall not berequired to expend any of its own funds to cause the Borrower to be in compliance with Section 5.02(a)(viii) or Section 5.01(a)(xv) (it beingunderstood that this proviso shall in no way affect the obligation of the Servicer to manage the activities and liability of the Borrower such that theBorrower maintains compliance with either of the foregoing subsections).(m) Accounting Changes. As soon as possible and in any event within three Business Days after the effective date thereof, the Servicer willprovide to the Administrative Agent and the Lender Agents notice of any material change in the accounting policies of the Servicer.(n) Proceedings Related to the Collateral Portfolio. The Servicer shall notify the Administrative Agent and each Lender Agent as soon as possibleand in any event within three Business Days after any Responsible Officer of the Servicer receives notice or has actual knowledge of any settlement of,judgment (including a judgment with respect to the liability phase of a bifurcated trial) in or commencement of any labor controversy, litigation,action, suit or proceeding before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign,that could reasonably be expected to have a Material Adverse Effect on the interests of the Collateral Agent or the Secured Parties in, to and under theCollateral Portfolio. Solely for purposes of this Section 5.03(n), any settlement, judgment, labor controversy, litigation, action, suit or proceedingaffecting the Collateral Portfolio or the Collateral Agent’s or the Secured Parties’ interest in the Collateral Portfolio in excess of $5,000,000 or moreshall be deemed to be expected to have such a Material Adverse Effect.(o) Compliance with Legal Opinions. The Servicer shall take all other actions necessary to maintain the accuracy of the factual assumptions setforth in the legal opinions of Latham & Watkins LLP, as special counsel to the Servicer, issued in connection with the Transaction Documents andrelating to the issues of substantive consolidation and true sale of the Loan Assets.(p) Instructions to Agents and Obligors. The Servicer shall direct, or shall cause the Transferor to direct, any agent or administrative agent for anyLoan Asset to remit all payments and collections with respect to such Loan Asset, and, if applicable, to direct the Obligor with respect to such LoanAsset to remit all such payments and collections with respect to such Loan Asset directly to the Collection Account. The Borrower and the Servicershall take commercially reasonable steps to ensure, and shall cause the Transferor to take commercially reasonable steps to ensure, that only fundsconstituting payments and collections relating to Loan Assets shall be deposited into the Collection Account. -107-(q) Capacity as Servicer. The Servicer will ensure that, at all times when it is dealing with or in connection with the Loan Assets in its capacity asServicer, it holds itself out as Servicer, and not in any other capacity.(r) Audits. At the discretion of the Administrative Agent and each Lender Agent, the Servicer shall allow the Administrative Agent and eachLender Agent (during normal office hours and upon advance notice) to review the Servicer’s collection and administration of the Collateral Portfolio inorder to assess compliance by the Servicer with the Servicing Standard, as well as with the Transaction Documents and to conduct an audit of theCollateral Portfolio and Required Loan Documents in conjunction with such a review. Such review shall be reasonable in scope and shall be completedin a reasonable period of time. Any such review shall be subject to the limitations set forth in Section 5.03(d)(ii).(s) Insurance Policies. The Servicer will take such actions that are customarily taken by or on behalf of a lender in a syndicated loan facility topreserve the rights of such lender in respect of any Insurance Policies applicable to Loan Assets.(t) Disregarded Entity. The Servicer shall cause the Borrower to be disregarded as an entity separate from its owner pursuant to TreasuryRegulation Section 301.7701-3(b) and shall cause that neither the Borrower nor any other Person on its behalf shall make an election to be, or take anyother action that is reasonably likely to result in the Borrower being, treated as other than an entity disregarded from its owner under TreasuryRegulation Section 301.7701-3(c).(u) Compliance with Anti-Money Laundering Laws and Anti-Corruption Laws. The Servicer, each Person directly or indirectly Controlling theServicer and each Person directly or indirectly Controlled by the Servicer and, to the Servicer’s knowledge, any Related Party of the foregoing shall:(i) comply with all applicable Anti-Money Laundering Laws and Anti-Corruption Laws in all material respects, and shall maintain policies andprocedures reasonably designed to ensure compliance with the Anti-Money Laundering Laws and Anti-Corruption Laws; (ii) ensure it does not causethe Borrower to use any of the credit in violation of any Anti-Corruption Laws or Anti-Money Laundering Laws in any material respect; and (iii) ensureit does not cause the Borrower to fund any repayment of the Obligations in violation of any Anti-Corruption Laws or Anti-Money Laundering Laws inany material respect.(v) Sanctions. The Servicer shall promptly notify the Administrative Agent and the Lenders in writing of any breach of any representation,warranty or covenant relating to Sanctions or Sanctioned Persons by itself or by the Borrower.Section 5.04 Negative Covenants of the Servicer.From the Closing Date until the Collection Date:(a) Mergers, Acquisition, Sales, etc. The Servicer will not consolidate with or merge into any other Person or convey or transfer its properties andassets substantially as an entirety to any Person (other than an Affiliate), unless the Servicer is the surviving entity and unless: -108-(i) the Servicer has delivered to the Administrative Agent and each Lender Agent an Officer’s Certificate and an Opinion of Counsel eachstating that any such consolidation, merger, conveyance or transfer and any supplemental agreement executed in connection therewith complywith this Section 5.04 and that all conditions precedent herein provided for relating to such transaction have been complied with and, in the caseof the Opinion of Counsel, that such supplemental agreement is legal, valid and binding with respect to the Servicer and such other matters as theAdministrative Agent may reasonably request;(ii) the Servicer shall have delivered notice of such consolidation, merger, conveyance or transfer to the Administrative Agent and eachLender Agent;(iii) after giving effect thereto, no Event of Default or Servicer Termination Event or event that with notice or lapse of time wouldconstitute either an Event of Default or a Servicer Termination Event shall have occurred and be continuing; and(iv) the Administrative Agent shall have consented in writing to such consolidation, merger, conveyance or transfer (such consent not to beunreasonably withheld).(b) Change of Location of Loan Asset Files. The Servicer shall not (x) change the offices where it keeps records concerning the CollateralPortfolio from the address set forth under its name in Section 11.02, or (y) move, or consent to the Collateral Custodian moving, the Required LoanDocuments and Loan Asset Files from the location thereof on the initial Advance Date, unless, in each case, the Administrative Agent shall consent tosuch change or move in writing and the Servicer shall provide the Administrative Agent with such Opinions of Counsel and other documents andinstruments as the Administrative Agent may reasonably request in connection therewith and has taken all actions required under the UCC of eachrelevant jurisdiction in order to continue the first priority perfected security interest of the Collateral Agent, for the benefit of the Secured Parties, in theCollateral Portfolio.(c) Change in Payment Instructions to Obligors. The Servicer will not make any change in its instructions to Obligors regarding payments to bemade with respect to the Collateral Portfolio to the Collection Account, unless the Administrative Agent has consented to such change (such consentnot to be unreasonably withheld or delayed, it being understood that any such account to which the Obligors may be instructed to make paymentsshall be subject to an account control agreement which provides the Collateral Agent with a first priority perfected security interest in such account, asevidenced by an Opinion of Counsel reasonably acceptable to the Administrative Agent).(d) Extension or Amendment of Loan Assets. The Servicer will not, except as otherwise permitted in Section 6.02(a), extend, amend or otherwisemodify the terms of any Loan Asset (including the Underlying Collateral). -109-(e) Taxable Mortgage Pool Matters. The Servicer will manage the portfolio and advise the Borrower with respect to purchases from the Transferorso as to not at any time allow the sum of the Outstanding Balances of all Loan Assets owned by the Borrower and that are principally secured by aninterest in real property (within the meaning of Treasury Regulation Section 301.7701(i)-1(d)(3)) to exceed 35% of the aggregate Outstanding Balanceof all Loan Assets.(f) Allocation of Charges. There will not be any agreement or understanding between the Servicer and the Borrower (other than as expressly setforth herein or as consented to by the Administrative Agent), providing for the allocation or sharing of obligations to make payments or otherwise inrespect of any Taxes, fees, assessments or other governmental charges.(g) Compliance with Sanctions. None of the Servicer nor, to its knowledge, any Person directly or indirectly Controlling the Servicer will,directly or knowingly indirectly, cause the Borrower to use the proceeds of any Advance hereunder, or lend, contribute, or otherwise make availablesuch proceeds to any subsidiary, joint venture partner, or other Person (i) to fund any activities or business of or with a Sanctioned Person, or (ii) in anymanner that would be prohibited by Sanctions or would otherwise cause any Lender to be in breach of any Sanctions. The Servicer shall comply withall applicable Sanctions in all material respects, and shall maintain policies and procedures reasonably designed to ensure compliance with Sanctions.The Servicer will notify each Lender and the Administrative Agent in writing promptly after becoming aware of any breach of this Section 5.04(g).Section 5.05 Affirmative Covenants of the Collateral Agent.From the Closing Date until the Collection Date:(a) Compliance with Law. The Collateral Agent will comply in all material respects with all Applicable Law.(b) Preservation of Existence. The Collateral Agent will preserve and maintain its existence, rights, franchises and privileges in the jurisdiction ofits formation and qualify and remain qualified in good standing in each jurisdiction where failure to preserve and maintain such existence, rights,franchises, privileges and qualification could reasonably be expected to have a Material Adverse Effect.Section 5.06 Affirmative Covenants of the Collateral Custodian.From the Closing Date until the Collection Date:(a) Compliance with Law. The Collateral Custodian will comply in all material respects with all Applicable Law.(b) Preservation of Existence. The Collateral Custodian will preserve and maintain its existence, rights, franchises and privileges in thejurisdiction of its formation and qualify and remain qualified in good standing in each jurisdiction where failure to preserve and maintain suchexistence, rights, franchises, privileges and qualification could reasonably be expected to have a Material Adverse Effect. -110-(c) Location of Required Loan Documents. Subject to Article XII of this Agreement, the Required Loan Documents delivered in original formshall remain at all times in the possession of the Collateral Custodian at the address located at 1055 10th Ave S.E., Minneapolis, MN 55414 unlessnotice of a different address is given in accordance with the terms hereof or unless the Administrative Agent agrees to allow certain Required LoanDocuments to be released to the Servicer on a temporary basis in accordance with the terms hereof, except as such Required Loan Documents may bereleased pursuant to the terms of this Agreement.Section 5.07 Negative Covenants of the Collateral Custodian.From the Closing Date until the Collection Date, the Collateral Custodian will not dispose of any documents constituting the Required LoanDocuments in any manner that is inconsistent with the performance of its obligations as the Collateral Custodian pursuant to this Agreement and willnot dispose of any Collateral Portfolio except as contemplated by this Agreement.ARTICLE VI.ADMINISTRATION AND SERVICING OF CONTRACTSSection 6.01 Appointment and Designation of the Servicer.(a) Initial Servicer. The Borrower, each Lender Agent and the Administrative Agent hereby appoint Solar, pursuant to the terms and conditions ofthis Agreement, as Servicer, with the authority to service, administer and exercise rights and remedies, on behalf of the Borrower, in respect of theCollateral Portfolio. Until the Administrative Agent gives Solar a Servicer Termination Notice, Solar hereby accepts such appointment and agrees toperform the duties and responsibilities of the Servicer pursuant to the terms hereof. The Servicer and the Borrower hereby acknowledge that theAdministrative Agent and the Secured Parties are third party beneficiaries of the obligations undertaken by the Servicer hereunder.(b) Servicer Termination Notice. The Borrower, the Servicer, each Lender Agent, and the Administrative Agent hereby agree that, upon theoccurrence of a Servicer Termination Event, the Administrative Agent, by written notice to the Servicer (with a copy to the Collateral Agent) (a“Servicer Termination Notice”), may terminate all of the rights, obligations, power and authority of the Servicer under this Agreement. On and after thereceipt by the Servicer of a Servicer Termination Notice pursuant to this Section 6.01(b), the Servicer shall continue to perform all servicing functionsunder this Agreement until the date specified in the Servicer Termination Notice or otherwise specified by the Administrative Agent in writing or, if nosuch date is specified in such Servicer Termination Notice or otherwise specified by the Administrative Agent, until a date mutually agreed upon bythe Servicer and the Administrative Agent and shall be entitled to receive, to the extent of funds available therefor pursuant to Section 2.04, theServicing Fees therefor accrued until such date. After such date, the Servicer -111-agrees that it will terminate its activities as Servicer hereunder in a manner that the Administrative Agent believes will facilitate the transition of theperformance of such activities to a successor Servicer, and the successor Servicer shall assume each and all of the Servicer’s obligations to service andadminister the Collateral Portfolio, on the terms and subject to the conditions herein set forth, and the Servicer shall use its best efforts to assist thesuccessor Servicer in assuming such obligations.(c) Appointment of Replacement Servicer. At any time following the delivery of a Servicer Termination Notice, the Administrative Agent may, inits sole discretion, (i) appoint Wells Fargo (or an Affiliate thereof) as Servicer under this Agreement and, in such case, all authority, power, rights andobligations of the Servicer shall pass to and be vested in Wells Fargo (or an Affiliate thereof) or (ii) appoint a new Servicer (in each case, the“Replacement Servicer”), which appointment shall take effect upon the Replacement Servicer accepting such appointment by a written assumption in aform satisfactory to the Administrative Agent in its sole discretion. In the event that Wells Fargo (or an Affiliate thereof) or a Replacement Servicer hasnot accepted its appointment at the time when the Servicer ceases to act as Servicer, the Administrative Agent shall petition a court of competentjurisdiction to appoint any established financial institution, having a net worth of not less than $50,000,000 and whose regular business includes theservicing of assets similar to the Collateral Portfolio, as the Replacement Servicer hereunder.(d) Liabilities and Obligations of Replacement Servicer. Upon its appointment, the Replacement Servicer shall be the successor in all respects tothe Servicer with respect to servicing functions under this Agreement and shall be subject to all the responsibilities, duties and liabilities relatingthereto placed on the Servicer by the terms and provisions hereof, and all references in this Agreement to the Servicer shall be deemed to refer to theReplacement Servicer; provided that the Replacement Servicer shall have (i) no liability with respect to any action performed by the terminatedServicer prior to the date that the Replacement Servicer becomes the successor to the Servicer or any claim of a third party based on any alleged actionor inaction of the terminated Servicer, (ii) no obligation to perform any advancing obligations, if any, of the Servicer unless it elects to in its solediscretion, (iii) no obligation to pay any Taxes required to be paid by the Servicer (provided that the Replacement Servicer shall pay any income Taxesfor which it is liable), (iv) no obligation to pay any of the fees and expenses of any other party to the transactions contemplated hereby, and (v) noliability or obligation with respect to any Servicer indemnification obligations of any prior Servicer, including the original Servicer. Theindemnification obligations of the Replacement Servicer upon becoming a Replacement Servicer, are expressly limited to those arising on account ofits failure to act in good faith and with reasonable care under the circumstances. In addition, the Replacement Servicer shall have no liability relatingto the representations and warranties of the Servicer contained in Section 4.03.(e) Authority and Power. All authority and power granted to the Servicer under this Agreement shall automatically cease and terminate upontermination of this Agreement and shall pass to and be vested in the Borrower and, without limitation, the Borrower is hereby authorized andempowered to execute and deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, all documents and other instruments, and to do andaccomplish all other acts or things necessary or appropriate to effect the purposes of such transfer of servicing rights. The Servicer agrees to cooperatewith the Borrower in effecting the termination of the responsibilities and rights of the Servicer to conduct servicing of the Collateral Portfolio. -112-(f) Subcontracts. The Servicer may, with the prior written consent of the Administrative Agent, subcontract with any other Person for servicing,administering or collecting the Collateral Portfolio; provided that (i) the Servicer shall select any such Person with reasonable care and shall be solelyresponsible for the fees and expenses payable to any such Person, (ii) the Servicer shall not be relieved of, and shall remain liable for, the performanceof the duties and obligations of the Servicer pursuant to the terms hereof without regard to any subcontracting arrangement and (iii) any suchsubcontract shall be terminable upon the occurrence of a Servicer Termination Event.(g) Waiver. The Borrower acknowledges that the Administrative Agent or any of its Affiliates may act as the Collateral Agent and/or the Servicer,and the Borrower waives any and all claims against the Administrative Agent, each Lender Agent or any of their respective Affiliates, the CollateralAgent and the Servicer (other than claims relating to each such party’s gross negligence or willful misconduct) relating in any way to the custodial orcollateral administration functions having been performed by the Administrative Agent or any of its Affiliates in accordance with the terms andprovisions (including the standard of care) set forth in the Transaction Documents.Section 6.02 Duties of the Servicer.(a) Duties. The Servicer shall take or cause to be taken all such actions as may be necessary or advisable to service, administer and collect on theCollateral Portfolio from time to time, all in accordance with Applicable Law and the Servicing Standard. Prior to the occurrence of a ServicerTermination Event, but subject to the terms of this Agreement (including, without limitation, Section 6.04), the Servicer has the sole and exclusiveauthority to make any and all decisions with respect to the Collateral Portfolio and take or refrain from taking any and all actions with respect to theCollateral Portfolio. Without limiting the foregoing, the duties of the Servicer shall include the following:(i) supervising the Collateral Portfolio, including communicating with Obligors, executing amendments, providing consents and waivers,enforcing and collecting on the Collateral Portfolio and otherwise managing the Collateral Portfolio on behalf of the Borrower;(ii) maintaining all necessary servicing records with respect to the Collateral Portfolio and providing such reports to the AdministrativeAgent and each Lender Agent (with a copy to the Collateral Agent and the Collateral Custodian) in respect of the servicing of the CollateralPortfolio (including information relating to its performance under this Agreement) as may be required hereunder or as the Administrative Agentor any Lender Agent may reasonably request;(iii) maintaining and implementing administrative and operating procedures (including, without limitation, an ability to recreate servicingrecords -113-evidencing the Collateral Portfolio in the event of the destruction of the originals thereof) and keeping and maintaining all documents, books,records and other information reasonably necessary or advisable for the collection of the Collateral Portfolio;(iv) promptly delivering to the Administrative Agent, each Lender Agent, the Collateral Agent or the Collateral Custodian, from time totime, such information and servicing records (including information relating to its performance under this Agreement) as the AdministrativeAgent, each Lender Agent, Collateral Custodian or the Collateral Agent may from time to time reasonably request;(v) identifying each Loan Asset clearly and unambiguously in its servicing records to reflect that such Loan Asset is owned by theBorrower and that the Borrower is Pledging a security interest therein to the Secured Parties pursuant to this Agreement;(vi) notifying the Administrative Agent and each Lender Agent of any material action, suit, proceeding, dispute, offset, deduction, defenseor counterclaim (1) that is or is threatened to be asserted by an Obligor with respect to any Loan Asset (or portion thereof) of which it hasknowledge or has received notice; or (2) that could reasonably be expected to have a Material Adverse Effect;(vii) maintaining the perfected security interest of the Collateral Agent, for the benefit of the Secured Parties, in the Collateral Portfolio;(viii) except to the extent held by the Collateral Custodian in accordance with Section 12.02(b), maintaining the Loan Asset File withrespect to Loan Assets included as part of the Collateral Portfolio; provided that, so long as the Servicer is in possession of any Required LoanDocuments, the Servicer will hold such Required Loan Documents in a fireproof safe or fireproof file cabinet;(ix) directing the Collateral Agent to make payments pursuant to the terms of the Servicing Report in accordance with Section 2.04;(x) directing the sale or substitution of Collateral Portfolio in accordance with Section 2.07;(xi) providing assistance to the Borrower with respect to the purchase and sale of and payment for the Loan Assets;(xii) instructing the Obligors and the administrative agents on the Loan Assets to make payments directly into the Collection Accountestablished and maintained with the Collateral Agent;(xiii) delivering the Loan Asset Files and the Loan Tape to the Collateral Custodian; and -114-(xiv) complying with such other duties and responsibilities as may be required of the Servicer by this Agreement.It is acknowledged and agreed that the Borrower possesses all rights of a lender with respect to the enforcement of rights of a lender and remedieswith respect to the Loan Assets and the Underlying Collateral and under the Loan Agreements with respect to the related Loan Asset, and therefore, forall purposes under this Agreement, the Servicer shall perform its administrative and management duties hereunder only to the extent that, as a lenderunder the related Loan Agreements, it has the right to do so. Notwithstanding anything to the contrary contained herein, it is acknowledged and agreedthat the performance by the Servicer of its duties hereunder shall be limited insofar as such performance would conflict with or result in a breach of anyof the express terms of the related Loan Agreements; provided that the Servicer shall (a) provide prompt written notice to the Administrative Agent(who will provide each Lender Agent with a copy promptly upon receipt thereof) upon becoming aware of such conflict or breach, (b) have determinedthat there is no other commercially reasonable performance that it could render consistent with the express terms of the Loan Agreements which wouldresult in all or a portion of the servicing duties being performed in accordance with this Agreement, and (c) undertake all commercially reasonableefforts to mitigate the effects of such non-performance including performing as much of the servicing duties as possible and performing such othercommercially reasonable and/or similar duties consistent with the terms of the Loan Agreements.(b) Notwithstanding anything to the contrary contained herein, the exercise by the Administrative Agent, the Collateral Agent, each LenderAgent and the Secured Parties of their rights hereunder shall not release the Servicer, the Transferor or the Borrower from any of their duties orresponsibilities with respect to the Collateral Portfolio. The Secured Parties, the Administrative Agent, each Lender Agent and the Collateral Agentshall not have any obligation or liability with respect to any Collateral Portfolio, nor shall any of them be obligated to perform any of the obligationsof the Servicer hereunder.(c) Any payment by an Obligor in respect of any indebtedness owed by it to the Transferor or the Borrower shall, except as otherwise specified bysuch Obligor or otherwise required by contract or law and unless otherwise instructed by the Administrative Agent, be applied as a collection of apayment by such Obligor (starting with the oldest such outstanding payment due) to the extent of any amounts then due and payable thereunder beforebeing applied to any other receivable or other obligation of such Obligor.(d) At any time when a Replacement Servicer is appointed pursuant to Section 6.01(c), the Transferor shall, at the Collateral Agent’s, theCollateral Custodian’s or the Administrative Agent’s request, assemble all of the Loan Asset Files reasonably available to it and make the sameavailable to the Collateral Agent, the Collateral Custodian or the Administrative Agent at a place selected by the Collateral Agent, the CollateralCustodian, the Administrative Agent or their designee.(e) On and after the date that a Replacement Servicer is appointed pursuant to Section 6.01(c), the existing Servicer shall assist the ReplacementServicer in assuming each and all of the Servicer’s obligations to service and administer the Collateral Portfolio in accordance with this Agreement andcomply with reasonable instructions from the Administrative Agent with respect thereto. -115-Section 6.03 Authorization of the Servicer.(a) Each of the Borrower, the Administrative Agent, each Lender Agent and each Lender hereby authorizes the Servicer (including any successorthereto) to take any and all reasonable steps in its name and on its behalf necessary or desirable in the determination of the Servicer and notinconsistent with the sale of the Collateral Portfolio by the Transferor to the Borrower under the Purchase and Sale Agreement and, thereafter, thePledge by the Borrower to the Collateral Agent on behalf of the Secured Parties hereunder, of a security interest in the Collateral Portfolio, to collect allamounts due under any and all Collateral Portfolio, including, without limitation, endorsing any of their names on checks and other instrumentsrepresenting Interest Collections and Principal Collections, executing and delivering any and all instruments of satisfaction or cancellation, or ofpartial or full release or discharge, and all other comparable instruments, with respect to the Collateral Portfolio and, after the delinquency of anyCollateral Portfolio and to the extent permitted under and in compliance with Applicable Law, to commence proceedings with respect to enforcingpayment thereof, to the same extent as the Transferor could have done if it had continued to own such Collateral Portfolio. The Transferor, theBorrower and the Collateral Agent on behalf of the Secured Parties shall furnish the Servicer (and any successors thereto) with any powers of attorneyand other documents necessary or appropriate to enable the Servicer to carry out its servicing and administrative duties hereunder, and shall cooperatewith the Servicer to the fullest extent in order to ensure the collectability of the Collateral Portfolio. In no event shall the Servicer be entitled to makethe Secured Parties, the Administrative Agent, the Collateral Agent, any Lender or any Lender Agent a party to any litigation without such party’sexpress prior written consent, or to make the Borrower a party to any litigation (other than any routine foreclosure or similar collection procedure)without the Administrative Agent’s and each Lender Agent’s consent.(b) After the declaration of the Facility Maturity Date, at the direction of the Administrative Agent, the Servicer shall take such action as theAdministrative Agent may deem necessary or advisable to enforce collection of the Collateral Portfolio; provided that the Administrative Agent may,at any time after an Event of Default has occurred, notify any Obligor with respect to any Collateral Portfolio of the assignment of such CollateralPortfolio to the Collateral Agent on behalf of the Secured Parties and direct that payments of all amounts due or to become due be made directly to theAdministrative Agent or any servicer, collection agent or account designated by the Administrative Agent and, upon such notification and at theexpense of the Borrower, the Administrative Agent may enforce collection of any such Collateral Portfolio, and adjust, settle or compromise theamount or payment thereof.Section 6.04 Collection of Payments; Accounts.(a) Collection Efforts, Modification of Collateral Portfolio. The Servicer will use its commercially reasonable efforts to collect or cause to becollected, all payments called for under the terms and provisions of the Loan Assets included in the Collateral Portfolio as and when the same becomedue, all in accordance with the Servicing Standard. -116-(b) Taxes and other Amounts. The Servicer will use its commercially reasonable efforts to collect all payments with respect to amounts due forTaxes, assessments and insurance premiums relating to each Loan Asset to the extent required to be paid to the Borrower for such application under theapplicable Loan Agreement and remit such amounts to the appropriate Governmental Authority or insurer as required by the Loan Agreements.(c) Payments to Collection Account. On or before the applicable Cut-Off Date, the Servicer shall have instructed all Obligors (or the applicableadministrative or paying agent) to make all payments in respect of the Collateral Portfolio directly to the Collection Account; provided that theServicer is not required to so instruct any Obligor which is solely a guarantor or other surety (or an Obligor that is not designated as the “lead borrower”or another such similar term) unless and until the Servicer calls on the related guaranty or secondary obligation.(d) Controlled Accounts. Each of the parties hereto hereby agrees that (i) each Controlled Account is intended to be a “securities account” or“deposit account” within the meaning of the UCC and (ii) except as otherwise expressly provided herein and in the Control Agreement, as applicable,prior to the delivery of a Notice of Exclusive Control, the Borrower and the Servicer shall be entitled to exercise the rights that comprise each FinancialAsset held in each Controlled Account which is a securities account and have the right to direct the disposition of funds in any Controlled Accountwhich is a deposit account; provided that after the delivery of a Notice of Exclusive Control (as defined in the Control Agreement, as applicable), suchrights shall be exclusively held by the Collateral Agent (acting at the direction of the Administrative Agent). Each of the parties hereto hereby agreesto cause the securities intermediary that holds any property for the Borrower in a Controlled Account that is a securities account to agree with theparties hereto that (A) such property (subject to Section 6.04(e) below with respect to any property other than investment property, as defined inSection 9-102(a)(49) of the UCC) is to be treated as a Financial Asset under Article 8 of the UCC and (B) regardless of any provision in any otheragreement, for purposes of the UCC, with respect to the Controlled Accounts, New York shall be deemed to be the Account Bank’s jurisdiction (withinthe meaning of Section 9-304 of the UCC) and the securities intermediary’s jurisdiction (within the meaning of Section 8-110 of the UCC). Allsecurities or other property underlying any Financial Assets credited to the Controlled Accounts in the form of securities or instruments shall beregistered in the name of the Account Bank or if in the name of the Borrower or the Collateral Agent, Indorsed to the Account Bank, Indorsed in blank,or credited to another securities account maintained in the name of the Account Bank, and in no case will any Financial Asset credited to theControlled Accounts be registered in the name of the Borrower, payable to the order of the Borrower or specially Indorsed to the Borrower, except tothe extent the foregoing have been specially Indorsed to the Account Bank or Indorsed in blank.(e) Loan Agreements. Notwithstanding any term hereof (or any term of the UCC that might otherwise be construed to be applicable to a“securities intermediary” as defined in the UCC) to the contrary, none of the Collateral Agent, the Collateral Custodian nor any securities intermediaryshall be under any duty or obligation in connection with the acquisition by the Borrower, or the grant by the Borrower to the Collateral Agent, of anyLoan Asset in the nature of a loan or a participation in a loan to examine or evaluate the sufficiency of the -117-documents or instruments delivered to it by or on behalf of the Borrower under the related Loan Agreements, or otherwise to examine the LoanAgreements, in order to determine or compel compliance with any applicable requirements of or restrictions on transfer (including without limitationany necessary consents). The Collateral Custodian shall hold any Instrument delivered to it evidencing any Loan Asset granted to the Collateral Agenthereunder as custodial agent for the Collateral Agent in accordance with the terms of this Agreement.(f) Establishment of the Collection Account. The Borrower established or caused to be established, on or before the Closing Date, with theAccount Bank, and maintained in the name of the Borrower, subject to the lien of the Collateral Agent, for the benefit of the Secured Parties, asegregated corporate trust account entitled “Collection Account for SSLP 2016-1, LLC, subject to the lien of Wells Fargo Bank, National Association,as Collateral Agent for the benefit of the Secured Parties” (the “Collection Account”), and the Borrower shall further cause to be maintained twosubaccounts linked to and constituting part of the Collection Account for the purpose of segregating, within two (2) Business Days of the receipt ofany Principal Collections (the “Principal Collection Account”) and Interest Collections (the “Interest Collection Account”), respectively, over whichthe Collateral Agent, for the benefit of the Secured Parties, shall have control and from which none of the Servicer nor the Borrower shall have any rightof withdrawal except in accordance with the terms of this Agreement and the Control Agreement.(g) Adjustments. If (i) the Servicer makes a deposit into the Collection Account in respect of an Interest Collection or Principal Collection of aLoan Asset and such Interest Collection or Principal Collection was received by the Servicer in the form of a check that is not honored for any reason or(ii) the Servicer makes a mistake with respect to the amount of any Interest Collection or Principal Collection and deposits an amount that is less thanor more than the actual amount of such Interest Collection or Principal Collection, the Servicer shall appropriately adjust the amount subsequentlydeposited into the Collection Account to reflect such dishonored check or mistake. Any Scheduled Payment in respect of which a dishonored check isreceived shall be deemed not to have been paid.(h) Establishment of the Unfunded Exposure Account. The Borrower established, on or before the Closing Date, with the Account Bank, andmaintained in the name of the Borrower, subject to the lien of the Collateral Agent, for the benefit of the Secured Parties, a segregated corporate trustaccount entitled “Unfunded Exposure Account for SSLP 2016-1, LLC, subject to the lien of Wells Fargo Bank, National Association, as CollateralAgent for the benefit of the Secured Parties” (the “Unfunded Exposure Account”). Funds on deposit in the Unfunded Exposure Account as of any dateof determination may be withdrawn to fund draw requests of the relevant Obligors under any Delayed Draw Loan Assets; provided that, until the earlierto occur of the end of the Reinvestment Period or the Facility Maturity Date, the amount withdrawn to fund such draw request shall not cause aBorrowing Base Deficiency. Any such draw request made by an Obligor, along with wiring instructions for the applicable Obligor, shall be forwardedby the Borrower or the Servicer to the Administrative Agent, and the Administrative Agent shall instruct the Account Bank to fund such draw requestin accordance with the Loan Agreement pertaining to such Delayed Draw Loan Assets. As of any date of determination, any amounts on deposit in theUnfunded Exposure Account that exceed (i) the aggregate Unfunded Exposure Equity Amount prior to the earlier to occur of the end of the -118-Reinvestment Period or the Facility Maturity Date and (ii) the aggregate of all Unfunded Exposure Amounts following the earlier to occur of the end ofthe Reinvestment Period or the Facility Maturity Date, in each case shall be transferred into the Principal Collection Account as Principal Collections.Section 6.05 Realization Upon Loan Assets. The Servicer will use reasonable efforts to exercise available remedies, if any, relating to a DefaultedLoan Asset in order to maximize recoveries thereunder in accordance with the Servicing Standard. Subject to the terms of the Loan Agreements and theServicing Standard, the Servicer will comply with Applicable Law in exercising such remedies. The Servicer will remit to the Collection Account theRecoveries received in connection with the sale or disposition of Underlying Collateral relating to a Defaulted Loan Asset.Section 6.06 Servicing Compensation. As compensation for its activities hereunder and reimbursement for its expenses, the Servicer shall beentitled to be paid the Servicing Fees and reimbursed its reasonable out-of-pocket expenses as provided in Section 2.04.Section 6.07 Payment of Certain Expenses by Servicer. The Servicer will be required to pay all expenses incurred by it in connection with itsactivities under this Agreement, including fees and disbursements of its independent accountants, Taxes imposed on the Servicer, expenses incurred bythe Servicer in connection with payments and reports pursuant to this Agreement, and all other fees and expenses not expressly stated under thisAgreement for the account of the Borrower. The Servicer will pay (on behalf of the Borrower) or make a capital contribution to the Borrower to enablethe Borrower to pay all reasonable fees and expenses owing to any bank or trust company in connection with the maintenance of the ControlledAccounts. The Servicer may be reimbursed for any reasonable out-of-pocket expenses incurred hereunder (including out-of-pocket expenses paid bythe Servicer on behalf of the Borrower), subject to the availability of funds pursuant to Section 2.04; provided that, to the extent funds are not availablefor such reimbursement, the Servicer shall be required to pay such expenses for its own account and shall not be entitled to any payment therefor otherthan the Servicing Fees and except as otherwise provided in Section 2.04.Section 6.08 Reports to the Administrative Agent; Account Statements; Servicing Information.(a) Notice of Borrowing. On each Advance Date and on each reduction of Advances Outstanding pursuant to Section 2.18, the Borrower (and theServicer on its behalf) will provide a Notice of Borrowing or a Notice of Reduction, as applicable, and a Borrowing Base Certificate, each updated as ofsuch date, to the Administrative Agent and each Lender Agent (with a copy to the Collateral Agent).(b) Servicing Report. On each Reporting Date, the Servicer will provide to the Borrower, each Lender Agent, the Administrative Agent, theCollateral Agent and any Liquidity Bank, a monthly statement including (i) a Borrowing Base Certificate calculated as of the most recentDetermination Date, (ii) a summary prepared with respect to each Obligor and with respect to each Loan Asset for such Obligor prepared as of the mostrecent Determination Date -119-that will be required to set forth only (x) calculations of the Net Senior Leverage Ratio and the Interest Coverage Ratio for each such Loan Asset for themost recently ended Relevant Test Period for each such Loan Asset and (y) whether or not each such Loan Asset shall have become subject to amaterial amendment, restatement, supplement, waiver or other modification and whether such amendment, restatement, supplement, waiver or othermodification is a Material Modification, (iii) a calculation of the amounts actually available to be drawn by the Servicer under its consolidatedcommitted debt facilities pursuant to Section 7.01(t) and (iv) if such Reporting Date precedes a Payment Date, amounts to be remitted pursuant toSection 2.04 to the applicable parties (which shall include any applicable wiring instructions of the parties receiving payment) (such monthlystatement, a “Servicing Report”), with respect to related calendar month signed by a Responsible Officer of the Servicer and the Borrower andsubstantially in the form of Exhibit I.(c) Servicer’s Certificate. Together with each Servicing Report, the Servicer shall submit to the Administrative Agent, each Lender Agent, theCollateral Agent and any Liquidity Bank a certificate substantially in the form of Exhibit I (a “Servicer’s Certificate”), signed by a Responsible Officerof the Servicer, which shall include a certification by such Responsible Officer that no Event of Default or Unmatured Event of Default has occurredand is continuing.(d) Financial Statements. The Servicer will submit (or cause to be submitted) to the Administrative Agent and each Lender Agent, (i) within 60days after the end of each of the first three fiscal quarters of each fiscal year of the Servicer and the Equityholder (excluding the fiscal quarter ending onthe date specified in clause (ii)), commencing with the fiscal quarter ended September 30, 2016, consolidated unaudited financial statements of theEquityholder and the Servicer for the most recent fiscal quarter, and (ii) within 120 days after the end of each fiscal year of the Equityholder and theServicer, commencing with the fiscal year ended December 31, 2016, consolidated audited financial statements of the Equityholder and the Servicer,audited by a firm of nationally recognized independent public accountants, as of the end of such fiscal year.(e) Obligor Financial Statements; Valuation Reports; Other Reports. The Servicer will deliver to the Administrative Agent, the Lender Agents andthe Collateral Agent, with respect to each Obligor, (i) to the extent received by the Borrower and/or the Servicer pursuant to the Loan Agreement, thecomplete financial reporting package with respect to such Obligor and with respect to each Loan Asset for such Obligor provided to the Borrowerand/or the Servicer either monthly or quarterly, as the case may be, by such Obligor, which delivery shall be made within 10 Business Days afterServicer’s or Borrower’s receipt thereof and (ii) asset and portfolio level monitoring reports prepared by the Servicer with respect to the Loan Assets,which delivery shall be made within 60 days of the end of each quarter (or, in the case of last quarter of each year, 120 days of the end of such quarter)and which shall include, without limitation, covenant and financial covenant testing information. The Servicer will promptly deliver to theAdministrative Agent and any Lender Agent, upon reasonable request and to the extent received by the Borrower and/or the Servicer, all otherdocuments and information required to be delivered by the Obligors to the Borrower with respect to any Loan Asset included in the CollateralPortfolio. -120-(f) Amendments to Loan Assets. The Servicer will deliver to the Administrative Agent, the Lender Agents and the Collateral Custodian a copy ofany material amendment, restatement, supplement, waiver or other modification to the Loan Agreement of any Loan Asset (along with any materialinternal documents prepared by the Servicer and provided to its investment committee in connection with such amendment, restatement, supplement,waiver or other modification) within 10 Business Days of the effectiveness of such amendment, restatement, supplement, waiver or other modification.(g) Website Access to Information. Notwithstanding anything to the contrary contained herein, information required to be delivered or submittedto any Secured Party pursuant to Section 5.03(h) and this Article VI shall be deemed to have been delivered on the date on which such information isposted on Intralinks (or other replacement) website to which the Administrative Agent and Lender Agents have access or upon receipt of suchinformation through e-mail or another delivery method acceptable to the Administrative Agent.(h) BDC Assets. The BDC will submit to the Administrative Agent and each Lender Agent, on each BDC Reporting Date, a certification by aResponsible Officer of the BDC of the aggregate assets and commitments of the BDC and its consolidated Subsidiaries (determined in accordance withGAAP and Applicable Law) as of the end of the previous fiscal quarter. A “BDC Asset Coverage Event” shall be deemed to occur and be continuing ifthe Asset Coverage Ratio of the BDC and its consolidated Subsidiaries (determined in accordance with GAAP and Applicable Law) on any BDCReporting Date is less than the amount required under the 1940 Act (which as of the Closing Date is 2:1).Section 6.09 Annual Statement as to Compliance. The Servicer will provide to the Administrative Agent, each Lender Agent and the CollateralAgent within 120 days following the end of each fiscal year of the Servicer, commencing with the fiscal year ending on December 31, 2016, a reportsigned by a Responsible Officer of the Servicer certifying that (a) a review of the activities of the Servicer, and the Servicer’s performance pursuant tothis Agreement, for the fiscal period ending on the last day of such fiscal year has been made under such Person’s supervision and (b) the Servicer hasperformed or has caused to be performed in all material respects all of its obligations under this Agreement throughout such year and no ServicerTermination Event has occurred.Section 6.10 Annual Independent Public Accountant or Other Third Party’s Servicing Reports. The Servicer will cause a firm of nationallyrecognized independent public accountants (who may also render other services to the Servicer) or other nationally recognized independent third partyexperienced in such matters (such third party subject to the approval of the Administrative Agent in its sole discretion) to furnish to the AdministrativeAgent, each Lender Agent and the Collateral Agent within 120 days following the end of each fiscal year of the Servicer, commencing with the fiscalyear ending on December 31, 2017, a report covering such fiscal year to the effect that such accountants or other third party have applied certainagreed-upon procedures (a copy of which procedures are attached hereto as Schedule III, it being understood that the Servicer and the AdministrativeAgent will provide an updated Schedule III reflecting any further amendments to such Schedule III prior to the issuance of the first such agreed-uponprocedures report, a copy of which shall replace the then existing Schedule III) to -121-certain documents and records relating to the Collateral Portfolio under any Transaction Document, compared the information contained in theServicing Reports and the Servicer’s Certificates delivered during the period covered by such report with such documents and records and that nomatters came to the attention of such accountants or other third party that caused them to believe that such servicing was not conducted in compliancewith this Article VI, except for such exceptions as such accountants or other third party shall believe to be immaterial and such other exceptions asshall be set forth in such statement. In the event such firm of independent public accountants or other third party requires the Collateral Agent to agreeto the procedures performed by such firm (with respect to any of the reports or certificates of such firm), or sign any other agreement in connectiontherewith, the Collateral Agent shall, upon direction from the Servicer so agree to the terms and conditions requested by such firm of independentpublic accountants or other third parties as a condition to receiving documentation required by this Agreement; it being understood and agreed thatthe Collateral Agent shall deliver such letter of agreement or other agreement in conclusive reliance on such direction and shall make no inquiry orinvestigation as to, and shall have no obligation or responsibility in respect of, the terms of the engagement of such independent public accountants orother third party by the Servicer or the sufficiency, validity or correctness of the agreed upon procedures in respect of such engagement. Upon directionfrom the Servicer, the Collateral Agent shall be authorized, without liability on its part, to execute and deliver any acknowledgement or otheragreement with such firm of independent public accountants or other third party required for the receipt of the certificates, reports or instructionsprovided for herein, which acknowledgement or agreement, to the extent so directed by the Servicer, may include, amongst other things,(i) acknowledgement that the Servicer has agreed that the procedures by the independent public accountants or other third party are sufficient forrelevant purposes, (ii) releases by the Collateral Agent of any claims, liabilities and expenses arising out of or relating to such independent publicaccountant or other third party’s engagement, agreed-upon procedures or any report issued by such independent public accountants or other third partyunder any such engagement and acknowledgement of other limitations of liability in favor of the independent public accountants or other third partyand (iii) restrictions or prohibitions on the disclosure of any such certificates, reports or other information or documents provided to it by such firm ofindependent public accountants or other third party.Section 6.11 The Servicer Not to Resign. The Servicer shall not resign from the obligations and duties hereby imposed on it except upon theServicer’s determination that (i) the performance of its duties hereunder is or becomes impermissible under Applicable Law and (ii) there is noreasonable action that the Servicer could take to make the performance of its duties hereunder permissible under Applicable Law. Any suchdetermination permitting the resignation of the Servicer shall be evidenced as to clause (i) above by an Opinion of Counsel to such effect delivered tothe Administrative Agent and each Lender Agent. No such resignation shall become effective until a Replacement Servicer shall have assumed theresponsibilities and obligations of the Servicer in accordance with Section 6.02. -122-ARTICLE VII.EVENTS OF DEFAULTSection 7.01 Events of Default. If any of the following events (each, an “Event of Default”) shall occur:(a) the Borrower or the Transferor defaults in making any payment required to be made under one or more agreements for borrowed money towhich it is a party in an aggregate principal amount in excess of $500,000 with respect to each party and such default is not cured within threeBusiness Days (or if due to administrative error, three Business Days after notice or knowledge thereof by the Borrower or the Transferor, as applicable);or(b) any failure on the part of the Borrower or the Transferor duly to observe or perform to a material extent any other covenants or agreements ofthe Borrower or the Transferor set forth in this Agreement or the other Transaction Documents to which the Borrower or the Transferor is a party and thesame continues unremedied for a period of 30 days (if such failure can be remedied) after the earlier to occur of (i) the date on which written notice ofsuch failure requiring the same to be remedied shall have been given to the Borrower or the Transferor by the Administrative Agent or Collateral Agentand (ii) the date on which the Borrower or the Transferor acquires knowledge thereof; or(c) the occurrence of a Bankruptcy Event relating to the Transferor, the Equityholder or the Borrower; or(d) the occurrence of a Servicer Termination Event; or(e) (1) the rendering of one or more final judgments, decrees or orders by a court or arbitrator of competent jurisdiction for the payment of moneyin excess, individually or in the aggregate, of $500,000, against the Borrower and the Borrower shall not have either (i) discharged or provided for thedischarge of any such judgment, decree or order in accordance with its terms or (ii) perfected a timely appeal of such judgment, decree or order andcaused the execution of same to be stayed during the pendency of the appeal or (2) the Borrower shall have made payments of amounts in excess of$500,000 in the settlement of any litigation, claim or dispute; or(f) the Borrower shall fail to qualify as a bankruptcy-remote entity based upon customary criteria such that reputable counsel could no longerrender a substantive nonconsolidation opinion with respect to the Borrower and the Transferor; or(g) (1) any material provision of any Transaction Document, or any lien or security interest granted thereunder, shall (in each case, except inaccordance with its terms), in whole or in part, terminate, cease to be effective or cease to be the legally valid, binding and enforceable obligation ofthe Borrower, the Transferor, or the Servicer, -123-(2) the Borrower, the Transferor or the Servicer shall, directly or indirectly, contest in any manner the effectiveness, validity, binding natureor enforceability of any Transaction Document or any lien or security interest thereunder, or(3) any security interest securing any obligation under any Transaction Document shall, in whole or in part, cease to be a first priorityperfected security interest (subject to Permitted Liens) except as otherwise expressly permitted to be released in accordance with the applicableTransaction Document; or(h) a Borrowing Base Deficiency exists and has not been remedied in accordance with Section 2.06; provided that, during the period of time thatsuch event remains unremedied, any payments required to be made on a Payment Date shall be made under Section 2.04(c); or(i) failure on the part of the Borrower, the Transferor or the Servicer to make any payment or deposit (including, without limitation, with respectto bifurcation and remittance of Interest Collections and Principal Collections or any other payment or deposit required to be made by the terms of theTransaction Documents to any Secured Party, Affected Party or Indemnified Party) or the Borrower, the Servicer or the Transferor fails to observe orperform any covenant, agreement or obligation with respect to the management and distribution of funds received with respect to the CollateralPortfolio, in each case, required by the terms of any Transaction Document (other than Section 2.06) within three Business Days of the day suchpayment or deposit is required to be made (or if due to administrative error, three Business Days after notice or knowledge thereof by the Borrower orthe Transferor, as applicable); or(j) the Borrower shall become required to register as an “investment company” within the meaning of the 1940 Act or the Collateral Portfolioshall require registration as an “investment company” within the meaning of the 1940 Act; or(k) the Internal Revenue Service shall file notice of a lien pursuant to Section 6323 of the Code with regard to any assets of the Borrower or theTransferor and such lien shall not have been released within five Business Days, or the Pension Benefit Guaranty Corporation shall file notice of a lienpursuant to Section 4068 of ERISA with regard to any of the assets of the Borrower or the Transferor and such lien shall not have been released withinfive Business Days; or(l) any Change of Control shall occur; or(m) any representation, warranty or certification made by the Borrower or the Transferor in any Transaction Document or in any certificatedelivered pursuant to any Transaction Document shall prove to have been incorrect when made, which has a Material Adverse Effect on the SecuredParties, and continues to be unremedied for a period of 30 days after the earlier to occur of (i) the date on which written notice of such incorrectnessrequiring the same to be remedied shall have been given to the Borrower or the Transferor by the Administrative Agent or the Collateral Agent (whichshall be given at the direction of the Administrative Agent) and (ii) the date on which a Responsible Officer of the Borrower or the Transferor acquiresknowledge thereof; or -124-(n) failure of the Borrower to pay, on the Facility Maturity Date, all accrued and unpaid Obligations; or(o) without limiting the generality of Section 7.01(i) above, failure of the Borrower to pay Yield or the Non-Usage Fee within three Business Daysof any Payment Date or within three Business Days of any date otherwise due; or(p) the Borrower ceases to have a valid, perfected ownership interest in all of the Collateral Portfolio; or(q) the Transferor fails to transfer to the Borrower the applicable Loan Assets and the related Portfolio Assets set forth in a Notice of Borrowing onan Advance Date; or(r) the Borrower makes any assignment or attempted assignment of its rights or obligations under this Agreement or any other TransactionDocument without first obtaining the specific written consent of each of the Lenders and the Administrative Agent, which consent may be withheld byany Lender or the Administrative Agent in the exercise of its sole and absolute discretion; or(s) (i) failure of the Borrower to maintain at least one Independent Director, (ii) the removal of any Independent Director of the Borrower without“cause” (as such term is defined in the limited liability company agreement of the Borrower) or without giving prior written notice to theAdministrative Agent, each as required in the organizational documents of the Borrower or (iii) an Independent Director of the Borrower which is notprovided by CT Corporation, Corporation Service Company, Wilmington Trust Company, Lord Securities Corporation or Puglisi & Associates or, ifnone of those companies is then providing professional Independent Directors, another nationally recognized service reasonably acceptable to theAdministrative Agent shall be appointed without the consent of the Administrative Agent; or(t) the Servicer fails to maintain a minimum of $10,000,000 of unencumbered liquidity, which may be maintained as a combination of (i) cash orcash equivalents held by the Servicer (exclusive of any cash or cash equivalents held by the Borrower) and (ii) amounts actually available to be drawnby the Servicer on the applicable date of determination under its consolidated committed debt facilities; or(u) the occurrence of a BDC Asset Coverage Event.then the Administrative Agent (so long as the Administrative Agent is Wells Fargo Bank, National Association) or all of the Lenders may, by notice tothe Borrower, declare the Facility Maturity Date to have occurred; provided that, in the case of any event described in Section 7.01(c) above, theFacility Maturity Date shall be deemed to have occurred automatically upon the occurrence of such event. Upon any such declaration or automaticoccurrence, (i) the Borrower shall cease purchasing Loan Assets from the Transferor under the Purchase and Sale Agreement or from any other thirdparty and shall cease originating Loan Assets, (ii) the -125-Administrative Agent (so long as the Administrative Agent is Wells Fargo Bank, National Association) or all of the Lenders may declare anyObligations to be immediately due and payable, and (iii) all proceeds and distributions in respect of the Portfolio Assets shall be distributed by theCollateral Agent (at the direction of the Administrative Agent) as described in Section 2.04(c) (provided that the Borrower shall in any event remainliable to pay such Advances and all such amounts and Obligations immediately in accordance with Section 2.04(e) hereof). In addition, upon any suchdeclaration or upon any such automatic occurrence, the Collateral Agent, on behalf of the Secured Parties and at the direction of the AdministrativeAgent, shall have, in addition to all other rights and remedies under this Agreement or otherwise, all other rights and remedies provided under the UCCof the applicable jurisdiction and other Applicable Law, which rights shall be cumulative. Without limiting any obligation of the Servicer hereunder,the Borrower confirms and agrees that the Collateral Agent, on behalf of the Secured Parties and at the direction of the Administrative Agent, (or anydesignee thereof, including, without limitation, the Servicer), during the existence of an Event of Default, shall, at its option, have the sole right toenforce the Borrower’s rights and remedies under each Assigned Document, but without any obligation on the part of the Administrative Agent, theLenders, the Lender Agents or any of their respective Affiliates to perform any of the obligations of the Borrower under any such Assigned Document.If any Event of Default shall have occurred and be continuing, the Yield Rate shall be increased pursuant to the increase set forth in the definition of“Applicable Spread”, effective as of the date of the occurrence of such Event of Default, and shall apply after the occurrence of such Event of Defaultuntil such time as such Event of Default is cured or waived in writing by the Administrative Agent.Section 7.02 Additional Remedies of the Administrative Agent.(a) If, (i) upon the Administrative Agent’s or the Lenders’ declaration that the Advances made to the Borrower hereunder are immediately due andpayable pursuant to Section 7.01 upon the occurrence of an Event of Default, or (ii) on the Facility Maturity Date (other than a Facility Maturity Dateoccurring pursuant to clause (iv) of the definition thereof prior to an Event of Default), the aggregate outstanding principal amount of the Advances, allaccrued and unpaid Fees and Yield and any other Obligations are not immediately paid in full, then the Collateral Agent (acting as directed by theAdministrative Agent) or the Administrative Agent, in addition to all other rights specified hereunder, shall have the right, in its own name and asagent for the Lenders and Lender Agents, to immediately sell (at the Borrower’s expense) in a commercially reasonable manner, in a recognized market(if one exists) at such price or prices as the Administrative Agent may reasonably deem satisfactory, any or all of the Collateral Portfolio and apply theproceeds thereof to the Obligations; provided that the Borrower, or its Affiliates, may exercise its right of first refusal to repurchase the CollateralPortfolio, in whole but not in part, prior to such sale at a purchase price that is not less than the amount of the Obligations (other than contingentindemnification and reimbursement obligations which are unknown, unmatured and/or for which no claim giving rise thereto has been asserted), whichright of first refusal shall terminate not later than 5:00 p.m. on the tenth Business Day following the Facility Maturity Date.(b) The parties recognize that it may not be possible to sell all of the Collateral Portfolio on a particular Business Day, or in a transaction with thesame purchaser, or in the same manner because the market for the assets constituting the Collateral Portfolio may -126-not be liquid. Accordingly, the Administrative Agent may elect, in its sole discretion, the time and manner of liquidating any of the CollateralPortfolio, and nothing contained herein shall obligate the Administrative Agent to liquidate any of the Collateral Portfolio on the date theAdministrative Agent or all of the Lender Agents declares the Advances made to the Borrower hereunder to be immediately due and payable pursuantto Section 7.01 or to liquidate all of the Collateral Portfolio in the same manner or on the same Business Day.(c) If the Collateral Agent (acting as directed by the Administrative Agent) or the Administrative Agent proposes to sell the Collateral Portfolio orany part thereof in one or more parcels at a public or private sale, at the request of the Collateral Agent or the Administrative Agent, as applicable, theBorrower and the Servicer shall make available to (i) the Administrative Agent, on a timely basis, all information (including any information that theBorrower and the Servicer is required by contract to be kept confidential), to the extent such information can be provided without violation of anyApplicable Law; provided that (A) notwithstanding the foregoing, neither the Borrower nor the Servicer shall intentionally act or fail to act in a mannerthat causes a confidentiality restriction to exist or otherwise arise on any such information, (B) to the extent otherwise permissible under ApplicableLaw or contract, the Borrower and the Servicer shall provide the Administrative Agent written notice promptly (and in any event within one BusinessDay) after the earlier of obtaining actual knowledge or receiving written notice of the existence of a confidentiality restriction which would precludedelivery of any information with respect to the Collateral Portfolio, and (C) the Borrower and the Servicer shall undertake commercially reasonableefforts to remove any such confidentiality restrictions so that such information can be made available to the Administrative Agent) relating to theCollateral Portfolio subject to sale, including, without limitation, copies of any disclosure documents, contracts, financial statements of the applicableObligors, covenant certificates and any other materials requested by the Administrative Agent, and (ii) each prospective bidder, on a timely basis, allreasonable information relating to the Collateral Portfolio subject to sale, including, without limitation, copies of any disclosure documents, contracts,financial statements of the applicable Obligors, covenant certificates and any other materials reasonably requested by each such bidder.(d) Each of the Borrower and the Servicer agrees, to the full extent that it may lawfully so agree, that neither it nor anyone claiming through orunder it will set up, claim or seek to take advantage of any appraisement, valuation, stay, extension or redemption law now or hereafter in force in anylocality where any Collateral Portfolio may be situated in order to prevent, hinder or delay the enforcement or foreclosure of this Agreement, or theabsolute sale of any of the Collateral Portfolio or any part thereof, or the final and absolute putting into possession thereof, immediately after such sale,of the purchasers thereof, and each of the Borrower and the Servicer, for itself and all who may at any time claim through or under it, hereby waives, tothe full extent that it may be lawful so to do, the benefit of all such laws, and any and all right to have any of the properties or assets constituting theCollateral Portfolio marshaled upon any such sale, and agrees that the Collateral Agent, or the Administrative Agent on its behalf, or any court havingjurisdiction to foreclose the security interests granted in this Agreement may sell the Collateral Portfolio as an entirety or in such parcels as theCollateral Agent (acting at the direction of the Administrative Agent) or such court may determine. -127-(e) Any amounts received from any sale or liquidation of the Collateral Portfolio pursuant to this Section 7.02 in excess of the Obligations will beapplied by the Collateral Agent (as directed by the Administrative Agent) in accordance with the provisions of Section 2.04(c), or as a court ofcompetent jurisdiction may otherwise direct.(f) The Administrative Agent, the Lender Agents and the Lenders shall have, in addition to all the rights and remedies provided herein andprovided by applicable federal, state, foreign, and local laws (including, without limitation, the rights and remedies of a secured party under the UCCof any applicable state, to the extent that the UCC is applicable, and the right to offset any mutual debt and claim), all rights and remedies available tothe Lenders at law, in equity or under any other agreement between any Lender and the Borrower.(g) Except as otherwise expressly provided in this Agreement, no remedy provided for by this Agreement shall be exclusive of any other remedy,each and every remedy shall be cumulative and in addition to any other remedy, and no delay or omission to exercise any right or remedy shall impairany such right or remedy or shall be deemed to be a waiver of any Event of Default.(h) Each of the Borrower and the Servicer hereby irrevocably appoints each of the Collateral Agent and the Administrative Agent its true andlawful attorney (with full power of substitution) in its name, place and stead and at its own expense, in connection with the enforcement of the rightsand remedies after the occurrence of an Event of Default provided for in this Agreement, including without limitation the following powers: (a) to giveany necessary receipts or acquittance for amounts collected or received hereunder, (b) to make all necessary transfers of the Collateral Portfolio inconnection with any such sale or other disposition made pursuant hereto, (c) to execute and deliver for value all necessary or appropriate bills of sale,assignments and other instruments in connection with any such sale or other disposition, the Borrower and the Servicer hereby ratifying andconfirming all that such attorney (or any substitute) shall lawfully do hereunder and pursuant hereto, and (d) to sign any agreements, orders or otherdocuments in connection with or pursuant to any Transaction Document. Nevertheless, if so requested by the Collateral Agent or the AdministrativeAgent, the Borrower shall ratify and confirm any such sale or other disposition by executing and delivering to the Collateral Agent or theAdministrative Agent or all proper bills of sale, assignments, releases and other instruments as may be designated in any such request; provided that,for the avoidance of doubt, no right under any power of attorney furnished under this Section 7.02(h) may be exercised until after the occurrence of anEvent of Default.ARTICLE VIII.INDEMNIFICATIONSection 8.01 Indemnities by the Borrower.(a) Without limiting any other rights which the Affected Parties, the Secured Parties, the Administrative Agent, the Lenders, the Lender Agents,the Collateral Agent, the Account Bank, the Collateral Custodian or any of their respective Affiliates may have hereunder -128-or under Applicable Law, the Borrower hereby agrees to indemnify the Affected Parties, the Secured Parties, Administrative Agent, the Lenders, theLender Agents, the Collateral Agent, the Account Bank, the Collateral Custodian and each of their respective Affiliates, assigns, officers, directors,employees and agents (each, an “Indemnified Party” for purposes of this Agreement) from and against any and all damages, losses, claims, liabilitiesand related costs and expenses, including reasonable and documented attorneys’ fees and disbursements, but excluding Taxes, which are addressed inSection 2.11 (all of the foregoing being collectively referred to as “Indemnified Amounts”), awarded against or actually incurred by such IndemnifiedParty or other non-monetary damages of any such Indemnified Party arising out of or as a result of this Agreement or in respect of any of the CollateralPortfolio, excluding, however, Indemnified Amounts to the extent resulting solely from gross negligence or willful misconduct on the part of anIndemnified Party. Without limiting the foregoing, the Borrower shall indemnify each Indemnified Party for Indemnified Amounts relating to orresulting from any of the following:(i) any Loan Asset treated as or represented by the Borrower to be an Eligible Loan Asset which is not at the applicable time an EligibleLoan Asset, or the purchase by any party or origination of any Loan Asset which violates Applicable Law;(ii) reliance on any representation or warranty made or deemed made by the Borrower, the Servicer (if Solar or one of its Affiliates is theServicer) or any of their respective officers under or in connection with this Agreement or any Transaction Document, which shall have been falseor incorrect in any material respect when made or deemed made or delivered;(iii) the failure by the Borrower or the Servicer (if Solar or one of its Affiliates is the Servicer) to comply with any term, provision orcovenant contained in this Agreement or any agreement executed in connection with this Agreement, or with any Applicable Law with respect toany item of Collateral Portfolio, or the nonconformity of any item of Collateral Portfolio with any such Applicable Law;(iv) the failure to vest and maintain vested in the Collateral Agent, for the benefit of the Secured Parties, a first priority perfected securityinterest in the Collateral Portfolio, free and clear of any Lien, whether existing at the time of the related Advance or at any time thereafter;(v) on each Business Day prior to the Collection Date, the occurrence of a Borrowing Base Deficiency and the same has not been remediedin accordance with Section 2.06;(vi) the failure to file, or any delay in filing, financing statements, continuation statements or other similar instruments or documents underthe UCC of any applicable jurisdiction or other Applicable Law with respect to any Loan Assets included in the Collateral Portfolio or the otherPortfolio Assets related thereto, whether at the time of any Advance or at any subsequent time; -129-(vii) any dispute, claim, offset or defense (other than the discharge in bankruptcy of an Obligor) to the payment of any Loan Asset includedin the Collateral Portfolio (including, without limitation, a defense based on such Loan Asset (or the Loan Agreement evidencing such LoanAsset) not being a legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms), or any other claimresulting from the Collateral Portfolio;(viii) any failure of the Borrower or the Servicer (if Solar or one of its Affiliates is the Servicer) to perform its duties or obligations inaccordance with the provisions of the Transaction Documents to which it is a party or any failure by Solar, the Borrower or any Affiliate thereofto perform its respective duties under any Collateral Portfolio;(ix) any inability to obtain any judgment in, or utilize the court or other adjudication system of, any state in which an Obligor may belocated as a result of the failure of the Borrower or the Transferor to qualify to do business or file any notice or business activity report or anysimilar report;(x) any action taken by the Borrower or the Servicer in the enforcement or collection of the Collateral Portfolio which results in any claim,suit or action of any kind pertaining to the Collateral Portfolio or which reduces or impairs the rights of the Administrative Agent, Lender Agentor Lender with respect to any Loan Asset or the value of any such Loan Asset;(xi) any products liability claim or personal injury or property damage suit or other similar or related claim or action of whatever sortarising out of or in connection with the Underlying Collateral or services that are the subject of any Collateral Portfolio;(xii) any claim, suit or action of any kind arising out of or in connection with Environmental Laws relating to the Borrower or theCollateral Portfolio, including any vicarious liability;(xiii) the failure by the Borrower to pay when due any Taxes for which the Borrower is liable, including, without limitation, sales, excise orpersonal property Taxes payable in connection with the Collateral Portfolio;(xiv) any repayment by the Administrative Agent, the Lender Agents, the Lenders or a Secured Party of any amount previously distributedin payment of Advances or payment of Yield or Fees or any other amount due hereunder, in each case which amount the Administrative Agent,the Lender Agents, the Lenders or a Secured Party believes in good faith is required to be repaid;(xv) the commingling by the Borrower or the Servicer of payments and collections required to be remitted to the Collection Account or theUnfunded Exposure Account with other funds; -130-(xvi) any investigation, litigation or proceeding related to this Agreement (or the Transaction Documents), or the use of proceeds ofAdvances or the Collateral Portfolio, or the administration of the Loan Assets by the Borrower or the Servicer (unless such administration iscarried out by any Servicer other than Solar, if applicable);(xvii) any failure by the Borrower to give reasonably equivalent value to the Transferor or any third party seller in consideration for thetransfer by the Transferor or such third party seller to the Borrower of any item of Collateral Portfolio or any attempt by any Person to void orotherwise avoid any such transfer under any statutory provision or common law or equitable action, including, without limitation, any provisionof the Bankruptcy Code;(xviii) the use of the proceeds of any Advance in a manner other than as provided in this Agreement and the Transaction Documents;and/or(xix) any failure of the Borrower, the Servicer or any of their respective agents or representatives to remit to the Collection Account withintwo Business Days of receipt, payments and collections with respect to the Collateral Portfolio remitted to the Borrower, the Servicer or any suchagent or representative (unless such administration is carried out by any Servicer other than Solar, if applicable).(b) Any amounts subject to the indemnification provisions of this Section 8.01 shall be paid by the Borrower to the Administrative Agent onbehalf of the applicable Indemnified Party within five Business Days following the receipt by the Borrower of the Administrative Agent’s writtendemand therefor on behalf of the applicable Indemnified Party (and the Administrative Agent shall pay such amounts to the applicable IndemnifiedParty promptly after the receipt by the Administrative Agent of such amounts). The Administrative Agent, on behalf of any Indemnified Party making arequest for indemnification under this Section 8.01, shall submit to the Borrower a certificate setting forth in reasonable detail the basis for and thecomputations of the Indemnified Amounts with respect to which such indemnification is requested, which certificate shall be conclusive absentdemonstrable error.(c) If for any reason the indemnification provided above in this Section 8.01 is unavailable to the Indemnified Party or is insufficient to hold anIndemnified Party harmless in respect of any losses, claims, damages or liabilities, then the Borrower shall contribute to the amount paid or payable bysuch Indemnified Party as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect not only the relativebenefits received by such Indemnified Party on the one hand and the Borrower on the other hand but also the relative fault of such Indemnified Party aswell as any other relevant equitable considerations.(d) If the Borrower has made any payments in respect of Indemnified Amounts to the Administrative Agent on behalf of an Indemnified Partypursuant to this Section 8.01 and such Indemnified Party thereafter collects any of such amounts from others, such Indemnified Party will promptlyrepay such amounts collected to the Borrower, without interest. -131-(e) The obligations of the Borrower under this Section 8.01 shall survive the resignation or removal of the Administrative Agent, the Lenders, theLender Agents, the Servicer, the Collateral Agent, the Account Bank or the Collateral Custodian and the termination of this Agreement.Section 8.02 Indemnities by Servicer.(a) Without limiting any other rights which any Indemnified Party may have hereunder or under Applicable Law, the Servicer hereby agrees toindemnify each Indemnified Party from and against any and all Indemnified Amounts, awarded against or incurred by any Indemnified Party as aconsequence of any of the following, excluding, however, Indemnified Amounts to the extent resulting primarily from (a) gross negligence or willfulmisconduct on the part of any Indemnified Party claiming indemnification hereunder or (b) Loan Assets which are uncollectible due to the Obligor’sfinancial inability to pay:(i) the inclusion, in any computations made by it in connection with any Borrowing Base Certificate or other report prepared by ithereunder, of any Loan Assets which were not Eligible Loan Assets as of the date of any such computation;(ii) reliance on any representation or warranty made or deemed made by the Servicer or any of its officers under or in connection with thisAgreement or any other Transaction Document, any Servicing Report, Servicer’s Certificate or any other information or report delivered by or onbehalf of the Servicer pursuant hereto, which shall have been false, incorrect or misleading in any material respect when made or deemed made ordelivered;(iii) the failure by the Servicer to comply with (A) any term, provision or covenant contained in this Agreement or any other TransactionDocument, or any other agreement executed in connection with this Agreement, or (B) any Applicable Law applicable to it with respect to anyPortfolio Assets;(iv) any litigation, proceedings or investigation against the Servicer;(v) any action or inaction by the Servicer that causes the Collateral Agent, for the benefit of the Secured Parties, not to have a first priorityperfected security interest in the Collateral Portfolio, free and clear of any Lien, whether existing at the time of the related Advance or any timethereafter;(vi) except as permitted by this Agreement, the commingling by the Servicer of payments and collections required to be remitted to theCollection Account or the Unfunded Exposure Account with other funds;(vii) any failure of the Servicer or any of its agents or representatives (including, without limitation, agents, representatives and employeesof such Servicer acting pursuant to authority granted under Section 6.01 hereof) to remit to Collection Account, payments and collections withrespect to Loan Assets remitted to the Servicer or any such agent or representative within two Business Days of receipt; -132-(viii) the failure by the Servicer to perform any of its duties or obligations in accordance with the provisions of this Agreement or any otherTransaction Document or errors or omissions related to such duties;(ix) failure or unreasonable delay in assisting a successor Servicer in assuming each and all of the Servicer’s obligations to service andadminister the Collateral Portfolio, or failure or unreasonable delay in complying with instructions from the Administrative Agent with respectthereto; and/or(x) any of the events or facts giving rise to a breach of any of the Servicer’s representations, warranties, agreements and/or covenants setforth in Article IV, Article V or Article VI or this Agreement.(b) Any Indemnified Amounts subject to the indemnification provisions of this Section 8.02 shall be paid by the Servicer to the AdministrativeAgent, for the benefit of the applicable Indemnified Party, within five Business Days following receipt by the Servicer of the Administrative Agent’swritten demand therefor (and the Administrative Agent shall pay such amounts to the applicable Indemnified Party promptly after the receipt by theAdministrative Agent of such amounts). The Agent, on behalf of any Indemnified Party making a request for indemnification under this Section 8.02,shall submit to the Servicer a certificate setting forth in reasonable detail the basis for and the computations of the Indemnified Amounts with respect towhich such indemnification is requested, which certificate shall be conclusive absent demonstrable error.(c) If for any reason the indemnification provided above in this Section 8.02 is unavailable to the Indemnified Party or is insufficient to hold anIndemnified Party harmless in respect of any losses, claims, damages or liabilities, then the Servicer shall contribute to the amount paid or payable bysuch Indemnified Party as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect not only the relativebenefits received by such Indemnified Party on the one hand and the Servicer on the other hand but also the relative fault of such Indemnified Party aswell as any other relevant equitable considerations.(d) If the Servicer has made any indemnity payments to the Administrative Agent, on behalf of an Indemnified Party pursuant to this Section 8.02and such Indemnified Party thereafter collects any of such amounts from others, such Indemnified Party will promptly repay such amounts collected tothe Servicer, without interest.(e) The Servicer shall have no liability for making indemnification hereunder to the extent any such indemnification constitutes recourse foruncollectible or uncollected Loan Assets.(f) The obligations of the Servicer under this Section 8.02 shall survive the resignation or removal of the Administrative Agent, the Lenders, theLender Agents, the Collateral Agent, the Account Bank or the Collateral Custodian and the termination of this Agreement. -133-(g) Any indemnification pursuant to this Section 8.02 shall not be payable from the Collateral Portfolio.Each applicable Indemnified Party shall deliver to the Indemnifying Party under Section 8.01 and Section 8.02, within a reasonable time aftersuch Indemnified Party’s receipt thereof, copies of all notices and documents (including court papers) received by such Indemnified Party relating tothe claim giving rise to the Indemnified Amounts.Section 8.03 Legal Proceedings. In the event an Indemnified Party becomes involved in any action, claim, or legal, governmental oradministrative proceeding (an “Action”) for which it seeks indemnification hereunder, the Indemnified Party shall promptly notify the other party orparties against whom it seeks indemnification (the “Indemnifying Party”) in writing of the nature and particulars of the Action; provided that its failureto do so shall not relieve the Indemnifying Party of its obligations hereunder except to the extent such failure has a material adverse effect on theIndemnifying Party. Upon written notice to the Indemnified Party acknowledging in writing that the indemnification provided hereunder applies to theIndemnified Party in connection with the Action (subject to the exclusion in the first sentence of Section 8.01, the first sentence of Section 8.02 orSection 8.02(d), as applicable), the Indemnifying Party may assume the defense of the Action at its expense with counsel reasonably acceptable to theIndemnified Party. The Indemnified Party shall have the right to retain separate counsel in connection with the Action, and the Indemnifying Partyshall not be liable for the legal fees and expenses of the Indemnified Party after the Indemnifying Party has done so; provided that if the IndemnifiedParty determines in good faith that there may be a conflict between the positions of the Indemnified Party and the Indemnifying Party in connectionwith the Action, or that the Indemnifying Party is not conducting the defense of the Action in a manner reasonably protective of the interests of theIndemnified Party, the reasonable legal fees and expenses of the Indemnified Party shall be paid by the Indemnifying Party; provided, further, that theIndemnifying Party shall not, in connection with any one Action or separate but substantially similar or related Actions in the same jurisdiction arisingout of the same general allegations or circumstances, be liable for the fees or expenses of more than one separate firm of attorneys (and any requiredlocal counsel) for such Indemnified Party, which firm (and local counsel, if any) shall be designated in writing to the Indemnifying Party by theIndemnified Party. If the Indemnifying Party elects to assume the defense of the Action, it shall have full control over the conduct of such defense;provided that the Indemnifying Party and its counsel shall, as reasonably requested by the Indemnified Party or its counsel, consult with and keep theminformed with respect to the conduct of such defense. The Indemnifying Party shall not settle an Action without the prior written approval of theIndemnified Party unless such settlement provides for the full and unconditional release of the Indemnified Party from all liability in connection withthe Action. The Indemnified Party shall reasonably cooperate with the Indemnifying Party in connection with the defense of the Action.Section 8.04 After-Tax Basis. Indemnification under Section 8.01 and 8.02 shall be in an amount necessary to make the Indemnified Party wholeafter taking into account any Tax consequences to the Indemnified Party of the receipt of the indemnity provided hereunder, including the effect ofsuch Tax or refund on the amount of Tax measured by net income or profits that is or was payable by the Indemnified Party. -134-ARTICLE IX.THE ADMINISTRATIVE AGENT AND LENDER AGENTSSection 9.01 The Administrative Agent.(a) Appointment. Each Lender Agent and each Secured Party hereby appoints and authorizes the Administrative Agent as its agent hereunder andhereby further authorizes the Administrative Agent to appoint additional agents to act on its behalf and for the benefit of each Lender Agent and eachSecured Party. Each Lender Agent and each Secured Party further authorizes the Administrative Agent to take such action as agent on its behalf and toexercise such powers under this Agreement and the other Transaction Documents as are delegated to the Administrative Agent by the terms hereof andthereof, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in thisAgreement or in any other Transaction Document, the Administrative Agent shall not have any duties or responsibilities, except those expressly setforth in this Agreement, nor shall the Administrative Agent have or be deemed to have any fiduciary relationship with any Lender or Lender Agent, andno implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Transaction Documentor otherwise exist against the Administrative Agent. Without limiting the generality of the foregoing sentence, the use of the term “agent” in thisAgreement with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising underagency doctrine of any Applicable Law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only anadministrative relationship between independent contracting parties.(b) Delegation of Duties. The Administrative Agent may execute any of its duties under this Agreement or any other Transaction Document by orthrough agents, employees or attorneys in fact (other than any Prohibited Transferee) and shall be entitled to advice of counsel concerning all matterspertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agent or attorney in fact that itselects with reasonable care.(c) Administrative Agent’s Reliance, Etc. Neither the Administrative Agent nor any of its directors, officers, agents or employees shall be liablefor any action taken or omitted to be taken by it or them as Administrative Agent under or in connection with this Agreement or any of the otherTransaction Documents, except for its or their own gross negligence or willful misconduct. Each Lender, Lender Agent and each Secured Party herebywaives any and all claims against the Administrative Agent or any of its Affiliates for any action taken or omitted to be taken by the AdministrativeAgent or any of its Affiliates under or in connection with this Agreement or any of the other Transaction Documents, except for its or their own grossnegligence or willful misconduct. Without limiting the foregoing, the Administrative Agent: (i) may consult with legal counsel (including counsel forthe Borrower or the Transferor), independent public accountants and other experts selected by it and shall not be -135-liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (ii) makesno warranty or representation and shall not be responsible for any statements, warranties or representations made in or in connection with thisAgreement; (iii) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions ofthis Agreement or any of the other Transaction Documents on the part of the Borrower, the Transferor, or the Servicer or to inspect the property(including the books and records) of the Borrower, the Transferor, or the Servicer; (iv) shall not be responsible for the due execution, legality, validity,enforceability, genuineness, sufficiency or value of this Agreement, any of the other Transaction Documents or any other instrument or documentfurnished pursuant hereto or thereto; and (v) shall incur no liability under or in respect of this Agreement or any of the other Transaction Documents byacting upon any notice (including notice by telephone), consent, certificate or other instrument or writing (which may be by facsimile) believed by itto be genuine and signed or sent by the proper party or parties.(d) Actions by Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under thisAgreement or any other Transaction Document unless it shall first receive such advice or concurrence of the Lender Agents as it deems appropriate and,if it so requests, it shall first be indemnified to its satisfaction by the Lenders and Lender Agents against any and all liability and expense which may beincurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or inrefraining from acting, under this Agreement or any other Transaction Document in accordance with a request or consent of the Lender Agents;provided that, notwithstanding anything to the contrary herein, the Administrative Agent shall not be required to take any action hereunder if thetaking of such action, in the reasonable determination of the Administrative Agent, shall be in violation of any Applicable Law or contrary to anyprovision of this Agreement or shall expose the Administrative Agent to liability hereunder or otherwise. In the event the Administrative Agentrequests the consent of a Lender Agent pursuant to the foregoing provisions and the Administrative Agent does not receive a consent (either positive ornegative) from such Person within ten Business Days of such Person’s receipt of such request, then such Lender or Lender Agent shall be deemed tohave declined to consent to the relevant action.(e) Notice of Event of Default, Unmatured Event of Default or Servicer Termination Event. The Administrative Agent shall not be deemed to haveknowledge or notice of the occurrence of an Event of Default, Unmatured Event of Default or Servicer Termination Event, unless the AdministrativeAgent has received written notice from a Lender, Lender Agent, the Borrower or the Servicer referring to this Agreement, describing such Event ofDefault, Unmatured Event of Default or Servicer Termination Event and stating that such notice is a “Notice of Event of Default,” “Notice ofUnmatured Event of Default” or “Notice of Servicer Termination Event,” as applicable. The Administrative Agent shall (subject to Section 9.01(c))take such action with respect to such Event of Default, Unmatured Event of Default or Servicer Termination Event as may be requested by the LenderAgents acting jointly or as the Administrative Agent shall deem advisable or in the best interest of the Lender Agents.(f) Credit Decision with Respect to the Administrative Agent. Each Lender Agent and each Secured Party acknowledges that none of theAdministrative Agent or any of its -136-Affiliates has made any representation or warranty to it, and that no act by the Administrative Agent hereinafter taken, including any consent to andacceptance of any assignment or review of the affairs of the Borrower, the Servicer, the Transferor or any of their respective Affiliates or review orapproval of any of the Collateral Portfolio, shall be deemed to constitute any representation or warranty by any of the Administrative Agent or itsAffiliates to any Lender Agent as to any matter, including whether the Administrative Agent has disclosed material information in its possession. EachLender Agent and each Secured Party acknowledges that it has, independently and without reliance upon the Administrative Agent, or any of theAdministrative Agent’s Affiliates, and based upon such documents and information as it has deemed appropriate, made its own evaluation and decisionto enter into this Agreement and the other Transaction Documents to which it is a party. Each Lender Agent and each Secured Party also acknowledgesthat it will, independently and without reliance upon the Administrative Agent, or any of the Administrative Agent’s Affiliates, and based on suchdocuments and information as it shall deem appropriate at the time, continue to make its own decisions in taking or not taking action under thisAgreement and the other Transaction Documents to which it is a party. Each Lender Agent and each Secured Party hereby agrees that theAdministrative Agent shall not have any duty or responsibility to provide any Lender Agent with any credit or other information concerning thebusiness, prospects, operations, property, financial and other condition or creditworthiness of the Borrower, the Servicer, the Transferor or theirrespective Affiliates which may come into the possession of the Administrative Agent or any of its Affiliates.(g) Indemnification of the Administrative Agent. Each Lender Agent agrees to indemnify the Administrative Agent (to the extent not reimbursedby the Borrower or the Servicer), ratably in accordance with the Pro Rata Share of its related Lender, from and against any and all liabilities,obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may beimposed on, incurred by, or asserted against the Administrative Agent in any way relating to or arising out of this Agreement or any of the otherTransaction Documents, or any action taken or omitted by the Administrative Agent hereunder or thereunder; provided that the Lender Agents shallnot be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursementsresulting from the Administrative Agent’s gross negligence or willful misconduct; provided, further, that no action taken in accordance with thedirections of the Lender Agents shall be deemed to constitute gross negligence or willful misconduct for purposes of this Article IX. Without limitationof the foregoing, each Lender Agent agrees to reimburse the Administrative Agent, ratably in accordance with the Pro Rata Share of its related Lender,promptly upon demand for any out-of-pocket expenses (including counsel fees) incurred by the Administrative Agent in connection with theadministration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respectof rights or responsibilities under, this Agreement and the other Transaction Documents, to the extent that such expenses are incurred in the interests ofor otherwise in respect of the Lender Agents or Lenders hereunder and/or thereunder and to the extent that the Administrative Agent is not reimbursedfor such expenses by the Borrower or the Servicer.(h) Successor Administrative Agent. The Administrative Agent may resign at any time, effective upon the appointment and acceptance of asuccessor Administrative Agent as -137-provided below, by giving at least five days’ written notice thereof to each Lender Agent. The Administrative Agent may be removed at any time withcause by the Lender Agents and the Borrower acting jointly. Upon any such resignation or removal, the Lender Agents acting jointly shall appoint asuccessor Administrative Agent with the consent of the Borrower. Each Lender Agent agrees that it shall not unreasonably withhold or delay itsapproval of the appointment of a successor Administrative Agent. If no such successor Administrative Agent shall have been so appointed, and shallhave accepted such appointment, within 30 days after the retiring Administrative Agent’s giving of notice of resignation or the removal of the retiringAdministrative Agent, then the retiring Administrative Agent may, on behalf of the Secured Parties, appoint a successor Administrative Agent whichsuccessor Administrative Agent shall be either (i) a commercial bank organized under the laws of the United States or of any state thereof and have acombined capital and surplus of at least $50,000,000 or (ii) an Affiliate of such a bank. Upon the acceptance of any appointment as AdministrativeAgent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all therights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties andobligations under this Agreement. After any retiring Administrative Agent’s resignation or removal hereunder as Administrative Agent, the provisionsof this Article IX shall continue to inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under thisAgreement.(i) Payments by the Administrative Agent. Unless specifically allocated to a specific Lender Agent pursuant to the terms of this Agreement, allamounts received by the Administrative Agent on behalf of the Lender Agents shall be paid by the Administrative Agent to the Lender Agents inaccordance with their related Lender’s respective Pro Rata Shares in the applicable Advances Outstanding, or if there are no Advances Outstanding inaccordance with their related Lender’s most recent Commitments, on the Business Day received by the Administrative Agent, unless such amounts arereceived after 12:00 noon on such Business Day, in which case the Administrative Agent shall use its reasonable efforts to pay such amounts to eachLender Agent on such Business Day, but, in any event, shall pay such amounts to such Lender Agent not later than the following Business Day.Section 9.02 The Lender Agents.(a) Authorization and Action. Each Lender, respectively, hereby designates and appoints its applicable Lender Agent to act as its agent hereunderand under each other Transaction Document, and authorizes such Lender Agent to take such actions as agent on its behalf and to exercise such powersas are delegated to such Lender Agent by the terms of this Agreement and the other Transaction Documents, together with such powers as arereasonably incidental thereto. No Lender Agent shall have any duties or responsibilities, except those expressly set forth herein or in any otherTransaction Document, or any fiduciary relationship with its related Lender, and no implied covenants, functions, responsibilities, duties, obligationsor liabilities on the part of such Lender Agent shall be read into this Agreement or any other Transaction Document or otherwise exist for such LenderAgent. In performing its functions and duties hereunder and under the other Transaction Documents, each Lender Agent shall act solely as agent for itsrelated Lender and does not assume nor shall be deemed to have assumed any obligation or relationship of trust or agency with or for the Borrower orthe Servicer or any of the -138-Borrower’s or the Servicer’s successors or assigns. No Lender Agent shall be required to take any action that exposes such Lender Agent to personalliability or that is contrary to this Agreement, any other Transaction Document or Applicable Law. The appointment and authority of each LenderAgent hereunder shall terminate upon the indefeasible payment in full of all Obligations. Each Lender Agent hereby authorizes the AdministrativeAgent to file any UCC financing statement deemed necessary by the Administrative Agent on behalf of such Lender Agent (the terms of which shall bebinding on such Lender Agent).(b) Delegation of Duties. Each Lender Agent may execute any of its duties under this Agreement and each other Transaction Document by orthrough agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. No Lender Agent shall beresponsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care.(c) Exculpatory Provisions. Neither any Lender Agent nor any of its directors, officers, agents or employees shall be (i) liable for any actionlawfully taken or omitted to be taken by it or them under or in connection with this Agreement or any other Transaction Document (except for its, theiror such Person’s own gross negligence or willful misconduct), or (ii) responsible in any manner to its related Lender for any recitals, statements,representations or warranties made by the Borrower or the Servicer contained in Article IV, any other Transaction Document or any certificate, report,statement or other document referred to or provided for in, or received under or in connection with, this Agreement or any other Transaction Document,or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement, any other Transaction Document or any otherdocument furnished in connection herewith or therewith, or for any failure of the Borrower or the Servicer to perform its obligations hereunder orthereunder, or for the satisfaction of any condition specified in this Agreement, or for the perfection, priority, condition, value or sufficiency of anycollateral pledged in connection herewith. No Lender Agent shall be under any obligation to its related Lender to ascertain or to inquire as to theobservance or performance of any of the agreements or covenants contained in, or conditions of, this Agreement or any other Transaction Document, orto inspect the properties, books or records of the Borrower or the Servicer. No Lender Agent shall be deemed to have knowledge of any Event ofDefault or Unmatured Event of Default unless such Lender Agent has received notice from the Borrower or its related Lender.(d) Reliance by Lender Agent. Each Lender Agent shall in all cases be entitled to rely, and shall be fully protected in relying, upon any documentor conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice andstatements of legal counsel (including, without limitation, counsel to the Borrower), independent accountants and other experts selected by suchLender Agent. Each Lender Agent shall in all cases be fully justified in failing or refusing to take any action under this Agreement or any otherTransaction Document unless it shall first receive such advice or concurrence of its related Lender as it deems appropriate and it shall first beindemnified to its satisfaction by its related Lender; provided that, unless and until such Lender Agent shall have received such advice, such LenderAgent may take or refrain from taking any action, as the Lender Agent shall deem advisable and in the best interests of its related Lender. Each LenderAgent shall in all cases be fully protected in acting, or in refraining from acting, in accordance with a request of its related Lender, and such request andany action taken or failure to act pursuant thereto shall be binding upon its related Lender. -139-(e) Non-Reliance on Lender Agent. Each Lender expressly acknowledges that neither its related Lender Agent, nor any of its officers, directors,employees, agents, attorneys-in-fact or affiliates has made any representations or warranties to it and that no act by such Lender Agent hereafter taken,including, without limitation, any review of the affairs of the Borrower or the Servicer, shall be deemed to constitute any representation or warranty bysuch Lender Agent. Each Lender represents and warrants to its related Lender Agent that it has and will, independently and without reliance upon itsrelated Lender Agent, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into thebusiness, operations, property, prospects, financial and other conditions and creditworthiness of the Borrower and made its own decision to enter intothis Agreement, the other Transaction Documents and all other documents related hereto or thereto.(f) Lender Agents are in their Respective Individual Capacities. Each Lender Agent and its Affiliates may make loans to, accept deposits from andgenerally engage in any kind of business with the Borrower or any Affiliate of the Borrower as though such Lender Agent were not a Lender Agenthereunder. With respect to Advances pursuant to this Agreement, each Lender Agent shall have the same rights and powers under this Agreement in itsindividual capacity as any Lender and may exercise the same as though it were not a Lender Agent, and the terms “Lender,” and “Lenders,” shallinclude the Lender Agent in its individual capacity.(g) Successor Lender Agent. Each Lender Agent may, upon five days’ notice to the Borrower and its related Lender, and such Lender Agent will,upon the direction of its related Lender resign as the Lender Agent for such Lender. If any Lender Agent shall resign, then its related Lender duringsuch five day period shall appoint a successor agent. If for any reason no successor agent is appointed by such Lender during such five day period, theneffective upon the termination of such five day period, and the Borrower shall make all payments in respect of the Obligations due to such Lenderdirectly to such Lender, and for all purposes shall deal directly with such Lender. After any retiring Lender Agent’s resignation hereunder as a LenderAgent, the provisions of Articles VIII and IX shall inure to its benefit with respect to any actions taken or omitted to be taken by it while it was a LenderAgent under this Agreement.ARTICLE X.COLLATERAL AGENTSection 10.01 Designation of Collateral Agent.(a) Initial Collateral Agent. Each of the Borrower, the Lender Agents and the Administrative Agent hereby designate and appoint the CollateralAgent to act as its agent for the purposes of perfection of a security interest in the Collateral Portfolio and hereby authorizes the Collateral Agent totake such actions on its behalf and on behalf of each of the Secured Parties and to exercise such powers and perform such duties as are expresslygranted to the Collateral Agent by this Agreement. The Collateral Agent hereby accepts such agency appointment to act as Collateral Agent pursuantto the terms of this Agreement, until its resignation or removal as Collateral Agent pursuant to the terms hereof. -140-(b) Successor Collateral Agent. Upon the Collateral Agent’s receipt of a Collateral Agent Termination Notice from the Administrative Agent ofthe designation of a successor Collateral Agent pursuant to the provisions of Section 10.05, the Collateral Agent agrees that it will terminate itsactivities as Collateral Agent hereunder.(c) Secured Party. The Administrative Agent, the Lender Agents and the Lenders hereby appoint WFBNA, in its capacity as Collateral Agenthereunder, as their agent for the purposes of perfection of a security interest in the Collateral Portfolio. WFBNA, in its capacity as Collateral Agenthereunder, hereby accepts such appointment and agrees to perform the duties set forth in Section 10.02(b).Section 10.02 Duties of Collateral Agent.(a) Appointment. The Borrower, the Lender Agents and the Administrative Agent each hereby appoints WFBNA to act as Collateral Agent, forthe benefit of the Secured Parties. The Collateral Agent hereby accepts such appointment and agrees to perform the duties and obligations with respectthereto set forth herein.(b) Duties. On or before the initial Advance Date, and until its removal pursuant to Section 10.05, the Collateral Agent shall perform, on behalf ofthe Secured Parties, the following duties and obligations:(i) The Collateral Agent shall, promptly upon its actual receipt of a Borrowing Base Certificate from the Servicer on behalf of the Borrower,calculate the Borrowing Base and, if the Collateral Agent’s calculation does not correspond with the calculation provided by the Servicer onsuch Borrowing Base Certificate, deliver such calculation to each of the Administrative Agent, Borrower and Servicer within one (1) BusinessDay of receipt by the Collateral Agent of such Borrowing Base Certificate. The Collateral Agent shall calculate amounts to be remitted pursuantto Section 2.04 to the applicable parties and notify the Servicer and the Administrative Agent in the event of any discrepancy between theCollateral Agent’s calculations and the Servicing Report (such dispute to be resolved in accordance with Section 2.05);(ii) The Collateral Agent shall make payments pursuant to the terms of the Servicing Report or as otherwise directed in accordance withSections 2.04 or 2.05 (the “Payment Duties”).(iii) The Collateral Agent shall provide to the Servicer a copy of all written notices and communications identified as being sent to it inconnection with the Loan Assets and the other Collateral Portfolio held hereunder which it receives from the related Obligor, participating bankand/or agent bank. In no instance shall the Collateral Agent be under any duty or obligation to take any action on behalf of the Servicer inrespect of the exercise of any voting or consent -141-rights, or similar actions, unless it receives specific written instructions from the Servicer, prior to the occurrence of an Event of Default or theAdministrative Agent, after the occurrence and during the continuance of Event of Default, in which event the Collateral Agent shall vote,consent or take such other action in accordance with such instructions.(c) (i) The Administrative Agent, each Lender Agent and each Secured Party further authorizes the Collateral Agent to take such action as agenton its behalf and to exercise such powers under this Agreement and the other Transaction Documents as are expressly delegated to the Collateral Agentby the terms hereof and thereof, together with such powers as are reasonably incidental thereto. In furtherance, and without limiting the generality ofthe foregoing, each Secured Party hereby appoints the Collateral Agent (acting at the direction of the Administrative Agent) as its agent to execute anddeliver all further instruments and documents, and take all further action that the Administrative Agent deems necessary or desirable in order to perfect,protect or more fully evidence the security interests granted by the Borrower hereunder, or to enable any of them to exercise or enforce any of theirrespective rights hereunder, including, without limitation, the execution by the Collateral Agent as secured party/assignee of such financing orcontinuation statements, or amendments thereto or assignments thereof, relative to all or any of the Loan Assets now existing or hereafter arising, andsuch other instruments or notices, as may be necessary or appropriate for the purposes stated hereinabove. Nothing in this Section 10.02(c) shall bedeemed to relieve the Borrower or the Servicer of their respective obligations to protect the interest of the Collateral Agent (for the benefit of theSecured Parties) in the Collateral Portfolio, including to file financing and continuation statements in respect of the Collateral Portfolio in accordancewith Section 5.01(r).(ii) The Administrative Agent may direct the Collateral Agent to take any such incidental action hereunder. With respect to other actionswhich are incidental to the actions specifically delegated to the Collateral Agent hereunder, the Collateral Agent shall not be required to takeany such incidental action hereunder, but shall be required to act or to refrain from acting (and shall be fully protected in acting or refrainingfrom acting) upon the direction of the Administrative Agent; provided that the Collateral Agent shall not be required to take any actionhereunder at the request of the Administrative Agent, any Secured Party or otherwise if the taking of such action, in the reasonable determinationof the Collateral Agent, (x) shall be in violation of any Applicable Law or contrary to any provisions of this Agreement or (y) shall expose theCollateral Agent to liability hereunder or otherwise (unless it has received indemnity which it reasonably deems to be satisfactory with respectthereto). In the event the Collateral Agent requests the consent of the Administrative Agent and the Collateral Agent does not receive a consent(either positive or negative) from the Administrative Agent within 10 Business Days of its receipt of such request, then the Administrative Agentshall be deemed to have declined to consent to the relevant action.(iii) Except as expressly provided herein, the Collateral Agent shall not be under any duty or obligation to take any affirmative action toexercise or enforce any power, right or remedy available to it under this Agreement (x) unless -142-and until (and to the extent) expressly so directed by the Administrative Agent or (y) prior to the Facility Maturity Date (and upon suchoccurrence, the Collateral Agent shall act in accordance with the written instructions of the Administrative Agent pursuant to clause (x)). TheCollateral Agent shall not be liable for any action taken, suffered or omitted by it in accordance with the request or direction of any SecuredParty, to the extent that this Agreement provides such Secured Party the right to so direct the Collateral Agent, or the Administrative Agent. TheCollateral Agent shall not be deemed to have notice or knowledge of any matter hereunder, including an Event of Default, unless a ResponsibleOfficer of the Collateral Agent has actual knowledge of such matter or written notice thereof is received by the Collateral Agent. Notice orknowledge of any matter by Wells Fargo in its capacity as Administrative Agent or Lender and other publically available information shall notconstitute notice or knowledge of the Collateral Agent.(d) If, in performing its duties under this Agreement, the Collateral Agent is required to decide between alternative courses of action, theCollateral Agent may request written instructions from the Administrative Agent as to the course of action desired by it. If the Collateral Agent doesnot receive such instructions within two Business Days after it has requested them, the Collateral Agent may, but shall be under no duty to, take orrefrain from taking any such courses of action. The Collateral Agent shall act in accordance with instructions received after such two Business Dayperiod except to the extent it has already, in good faith, taken or committed itself to take, action inconsistent with such instructions. The CollateralAgent shall be entitled to rely on the advice of legal counsel and independent accountants in performing its duties hereunder and shall be deemed tohave acted in good faith if it acts in accordance with such advice.(e) The parties acknowledge that in accordance with the Customer Identification Program (CIP) requirements under the USA PATRIOT Act andits implementing regulations, the Collateral Agent in order to help fight the funding of terrorism and money laundering, is required to obtain, verify,and record information that identifies each person or legal entity that establishes a relationship or opens an account with the Collateral Agent. TheBorrower hereby agrees that it shall provide the Collateral Agent with such information as it may reasonably request including, but not limited to, theBorrower’s name, physical address, tax identification number and other information that will help the Collateral Agent to identify and verify theBorrower’s identity (and in certain circumstances, the beneficial owners thereof) such as organizational documents, certificate of good standing, licenseto do business, or other pertinent identifying information.(f) Concurrently herewith, the Administrative Agent directs the Collateral Agent and the Collateral Agent is hereby authorized to enter into theControl Agreement. For the avoidance of doubt, all of the Collateral Agent’s rights, protections and immunities provided herein shall apply to theCollateral Agent for any actions taken or omitted to be taken under the Control Agreement in such capacity. -143-Section 10.03 Merger or Consolidation.Any Person (i) into which the Collateral Agent may be merged or consolidated, (ii) that may result from any merger or consolidation to which theCollateral Agent shall be a party, or (iii) that may succeed to the properties and assets of the Collateral Agent substantially as a whole, which Person inany of the foregoing cases executes an agreement of assumption to perform every obligation of the Collateral Agent hereunder, shall be the successorto the Collateral Agent under this Agreement without further act of any of the parties to this Agreement; provided that such Person is organized underthe laws of the United States or any one of the States thereof or the District of Columbia (or any domestic branch of a foreign bank), and (a) has either(1) a long-term unsecured debt rating of “A” or better by S&P and “A2” or better by Moody’s or (2) a short-term unsecured debt rating or certificate ofdeposit rating of “A-1” or better by S&P or “P-1” or better by Moody’s, (b) the parent corporation which has either (1) a long-term unsecured debtrating of “A” or better by S&P and “A2” or better by Moody’s or (2) a short-term unsecured debt rating or certificate of deposit rating of “A-1” or betterby S&P and “P-1” or better by Moody’s or (c) is otherwise acceptable to the Administrative Agent.Section 10.04 Collateral Agent Compensation.As compensation for its Collateral Agent activities hereunder, the Collateral Agent shall be entitled to the Collateral Agent Fees and CollateralAgent Expenses from the Borrower as set forth in the WFBNA Fee Letter, payable to the extent of funds available therefor pursuant to the provisions ofSection 2.04. The Collateral Agent’s entitlement to receive the Collateral Agent Fees shall cease on the earlier to occur of: (i) its removal as CollateralAgent pursuant to Section 10.05 or (ii) the termination of this Agreement.Section 10.05 Collateral Agent Removal.The Collateral Agent may be removed, with or without cause, by the Administrative Agent by 30 days’ notice given in writing to the CollateralAgent and the Borrower (the “Collateral Agent Termination Notice”); provided that notwithstanding its receipt of a Collateral Agent TerminationNotice, the Collateral Agent shall continue to act in such capacity until a successor Collateral Agent has been appointed and has agreed to act asCollateral Agent hereunder; provided that the Collateral Agent shall continue to receive compensation of its fees and expenses in accordance withSection 10.04 above while so serving as the Collateral Agent prior to a successor Collateral Agent being appointed.Section 10.06 Limitation on Liability.(a) The Collateral Agent may conclusively rely on and shall be fully protected in acting upon any certificate, instrument, opinion, notice, letteror other document delivered to it and that in good faith it reasonably believes to be genuine and that has been signed by the proper party or parties.The Collateral Agent may rely conclusively on and shall be fully protected in acting upon (i) the written instructions of any designated officer of theAdministrative Agent or (ii) the verbal instructions of the Administrative Agent. -144-(b) The Collateral Agent may consult counsel satisfactory to it and the advice or opinion of such counsel shall be full and complete authorizationand protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with the advice or opinion of suchcounsel.(c) The Collateral Agent shall not be liable for any error of judgment, or for any act done or step taken or omitted by it, in good faith, or for anymistakes of fact or law, or for anything that it may do or refrain from doing in connection herewith except in the case of its willful misconduct orgrossly negligent performance or omission of its duties.(d) The Collateral Agent makes no warranty or representation and shall have no responsibility (except as expressly set forth in this Agreement) asto the content, enforceability, completeness, validity, sufficiency, value, genuineness, ownership or transferability of the Collateral Portfolio, and willnot be required to and will not make any representations as to the validity or value (except as expressly set forth in this Agreement) of any of theCollateral Portfolio. The Collateral Agent shall not be obligated to take any legal action hereunder that might in its judgment involve any expense orliability unless it has been furnished with an indemnity reasonably satisfactory to it.(e) The Collateral Agent shall have no duties or responsibilities except such duties and responsibilities as are specifically set forth in thisAgreement and no covenants or obligations shall be implied in this Agreement against the Collateral Agent. Notwithstanding any provision to thecontrary elsewhere in the Transaction Documents, the Collateral Agent shall not have any fiduciary relationship with any party hereto or any SecuredParty in its capacity as such, and no implied covenants, functions, obligations or responsibilities shall be read into this Agreement, the otherTransaction Documents or otherwise exist against the Collateral Agent. Without limiting the generality of the foregoing, it is hereby expressly agreedand stipulated by the other parties hereto that the Collateral Agent shall not be required to exercise any discretion hereunder and shall have noinvestment or management responsibility.(f) The Collateral Agent shall not be required to expend or risk its own funds in the performance of its duties hereunder.(g) It is expressly agreed and acknowledged that the Collateral Agent is not guaranteeing performance of or assuming any liability for theobligations of the other parties hereto or any parties to the Collateral Portfolio.(h) Subject in all cases to the last sentence of Section 2.05, in case any reasonable question arises as to its duties hereunder, the Collateral Agentmay, prior to the occurrence of an Event of Default or the Facility Maturity Date, request instructions from the Servicer and may, after the occurrence ofan Event of Default or the Facility Maturity Date, request instructions from the Administrative Agent, and shall be entitled at all times to refrain fromtaking any action unless it has received instructions from the Servicer or the Administrative Agent, as applicable. The Collateral Agent shall in allevents have no liability, risk or cost for any action taken pursuant to and in compliance with the instruction of the Administrative Agent. In no eventshall the Collateral Agent be liable for special, indirect or consequential loss or -145-damage of any kind whatsoever (including but not limited to lost profits), even if the Collateral Agent has been advised of the likelihood of such lossor damage and regardless of the form of action.(i) The Collateral Agent shall not be liable for the acts or omissions of the Collateral Custodian under this Agreement and shall not be required tomonitor the performance of the Collateral Custodian. Notwithstanding anything herein to the contrary, the Collateral Agent shall have no duty toperform any of the duties of the Collateral Custodian under this Agreement.(j) It is expressly acknowledged by the parties hereto that application and performance by the Collateral Agent of its various duties hereunder(including, recalculations to be performed in respect of the matters contemplated hereby) shall be based upon, and in reliance upon, data, informationand notice provided to it by the Servicer, the Administrative Agent, the Borrower and/or any related bank agent, obligor or similar party, and theCollateral Agent shall have no responsibility for the accuracy of any such information or data provided to it by such persons and shall be entitled toupdate its records (as it may deem necessary or appropriate).(k) In no event shall the Collateral Agent be liable for any failure or delay in the performance of its obligations hereunder because ofcircumstances beyond its control, including, but not limited to, acts of God, flood, war (whether declared or undeclared), terrorism, fire, riot, embargo,government action (including any laws, ordinances, regulations) or the like that delay, restrict or prohibit the providing of services by the CollateralAgent as contemplated by this Agreement.Section 10.07 Collateral Agent Resignation.The Collateral Agent may resign at any time by giving not less than 90 days written notice thereof to the Administrative Agent and with theconsent of the Administrative Agent, which consent shall not be unreasonably withheld. Upon receiving such notice of resignation, the AdministrativeAgent shall promptly appoint a successor collateral agent or collateral agents by written instrument, in duplicate, executed by the AdministrativeAgent, one copy of which shall be delivered to the Collateral Agent so resigning and one copy to the successor collateral agent or collateral agents,together with a copy to the Borrower, Servicer and Collateral Custodian. If no successor collateral agent shall have been appointed and an instrumentof acceptance by a successor Collateral Agent shall not have been delivered to the Collateral Agent within 45 days after the giving of such notice ofresignation, the resigning Collateral Agent may petition any court of competent jurisdiction for the appointment of a successor Collateral Agent.Notwithstanding anything herein to the contrary, the Collateral Agent may not resign prior to a successor Collateral Agent being appointed. -146-ARTICLE XI.MISCELLANEOUSSection 11.01 Amendments and Waivers.(a) (i) No amendment or modification of any provision of this Agreement shall be effective without the written agreement of the Borrower, theServicer, the Required Lenders, the Administrative Agent and, solely if such amendment or modification would adversely affect the rights andobligations of the Collateral Agent, the Account Bank or the Collateral Custodian, the written agreement of the Collateral Agent, the Account Bank orthe Collateral Custodian, as applicable, and (ii) no termination or waiver of any provision of this Agreement or consent to any departure therefrom bythe Borrower or the Servicer shall be effective without the written concurrence of the Administrative Agent and the Required Lenders. Any waiver orconsent shall be effective only in the specific instance and for the specific purpose for which given.(b) Notwithstanding the provisions of Section 11.01(a), the written consent of all of the Lenders shall be required for any amendment,modification or waiver (i) reducing any outstanding Advances, or the Yield thereon, (ii) postponing any date for any payment of any Advance, or theYield thereon, (iii) modifying the provisions of this Section 11.01 or (iv) extending the Stated Maturity Date or clause (i) of the definition of“Reinvestment Period”.(c) Notwithstanding the provisions of Section 11.01(a) and (b), (i) any amendment of this Agreement that is solely for the purpose of adding aLender may be effected with the consent of the Administrative Agent, but without the written consent of any Lender and (ii) the Administrative Agentand the Borrower shall be permitted to amend any provision of the Transaction Documents (and such amendment shall become effective without anyfurther action or consent of any other party to any Transaction Document) if the Administrative Agent and the Borrower shall have jointly identified anobvious error or any error or omission of a technical or immaterial nature in any such provision. For the avoidance of doubt, in the event that an Eventof Default has occurred but has been waived unconditionally and in its entirety in accordance with the terms hereof, such Event of Default shall bedeemed to have not “occurred” and references to “after the occurrence of an Event of Default” shall be inapplicable for all purposes in this Agreementor any of the Transaction Documents, except to the extent otherwise provided for in the relevant waiver; provided that any waiver which by its termsbecomes effective upon certain conditions precedent being met will not be considered a conditional waiver solely due to the existence of suchconditions precedent if all such conditions precedent to effectiveness have been satisfied. Notwithstanding anything to the contrary herein, noDefaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder, except that the Commitment of suchLender may not be increased or extended without the consent of such Lender. -147-Section 11.02 Notices, Etc. All notices and other communications hereunder shall, unless otherwise stated herein, be in writing (which shallinclude facsimile communication and communication by e-mail) and faxed, e-mailed or delivered, to each party hereto, at its address set forth below: BORROWER: SSLP 2016-1, LLC 500 Park Avenue, New York, New York 10022 Attention: Chief Financial Officer Facsimile: 212-994-8545 Phone: 212-993-1660SERVICER: Solar Capital Ltd. 500 Park Avenue, New York, New York 10022 Attention: Chief Financial Officer Facsimile: 212-994-8545 Phone: 212-993-1660TRANSFEROR: Senior Secured Unitranche Loan Program LLC c/o Solar Capital Ltd. 500 Park Avenue, New York, New York 10022 Attention: Chief Financial Officer Facsimile: 212-994-8545 Phone: 212-993-1660ADMINISTRATIVE AGENT: Wells Fargo Bank, National Association Duke Energy Center 550 South Tryon Street, 5th Floor Charlotte, North Carolina 28202 Attention: Corporate Debt Finance Facsimile No.: (704) 715-0089 Confirmation No: (704) 410-2431INSTITUTIONAL LENDER: Wells Fargo Bank, National Association Duke Energy Center 550 South Tryon Street, 5th Floor Charlotte, North Carolina 28202 Attention: Corporate Debt Finance Facsimile No.: (704) 715-0067 Confirmation No: (704) 410-2431 -148-COLLATERAL AGENT: Wells Fargo Bank, National Association Corporate Trust Services Division 9062 Old Annapolis Road Columbia, Maryland 21045 Attention: CDO Trust Services – SSLP 2016-1, LLC Facsimile: (281) 667-3933 Phone: (410) 884-2000COLLATERAL CUSTODIAN: Wells Fargo Bank, National Association Corporate Trust Services Division 9062 Old Annapolis Road Columbia, Maryland 21045 Attention: CDO Trust Services – SSLP 2016-1, LLC Facsimile: (281) 667-3933 Phone: (410) 884-2000ACCOUNT BANK: Wells Fargo Bank, National Association Corporate Trust Services Division 9062 Old Annapolis Road Columbia, Maryland 21045 Attention: CDO Trust Services – SSLP 2016-1, LLC Facsimile: (281) 667-3933 Phone: (410) 884-2000or at such other address as shall be designated by such party in a written notice to the other parties hereto. Notices and communications by facsimileand e-mail shall be effective when sent (and, upon request, shall be followed by hard copy sent by regular mail), and notices and communications sentby other means shall be effective when received.Section 11.03 No Waiver; Remedies. No failure on the part of the Administrative Agent, the Collateral Agent, any Lender or any Lender Agent toexercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunderpreclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of anyremedies provided by law.Section 11.04 Binding Effect; Assignability; Multiple Lenders.(a) This Agreement shall be binding upon and inure to the benefit of the Borrower, the Servicer, the Administrative Agent, each Lender, theLender Agents, the Collateral Agent, the Account Bank, the Collateral Custodian and their respective successors and permitted assigns. Subject to theprior consent of the Borrower (such consent not to be unreasonably withheld, delayed or conditioned), each Lender and their respective successors and -149-assigns may assign, or grant a security interest or sell a participation interest in, (i) this Agreement and such Lender’s rights and obligations hereunderand interest herein in whole or in part (including by way of the sale of participation interests therein) and/or (ii) any Advance (or portion thereof) to anyPerson other than the Borrower or an Affiliate thereof; provided that, (w) subject to the following clauses (x), (y) and (z), unless the Borrower shallotherwise consent, a Lender may only assign, grant a security interest or sell a participation in, its rights and obligations hereunder to an Affiliate or aPermitted Assignee who is not a Prohibited Transferee, (x) after an Event of Default has occurred, a Lender may assign its rights and obligationshereunder to any Person without the consent of the Borrower, but with the consent of the Administrative Agent, (y) a Lender may assign its rights andobligations hereunder to any Person without the consent of the Borrower if such Lender makes a good faith determination based on advice of counselthat such assignment is required by Applicable Law and gives prior written notice of such assignment to the Borrower identifying the reasonsnecessitating such assignment and (z) any Conduit Lender shall not need prior consent to at any time assign, or grant a security interest or sell aparticipation interest in, any Advance (or portion thereof) to a Liquidity Bank or any commercial paper conduit sponsored by a Liquidity Bank or anAffiliate of its related Lender Agent. Any such assignee shall execute and deliver to the Servicer, the Borrower and the Administrative Agent a fully-executed Joinder Supplement. The parties to any such assignment, grant or sale of a participation interest shall execute and deliver to the relatedLender Agent for its acceptance and recording in its books and records, such agreement or document as may be satisfactory to such parties and theapplicable Lender Agent. None of the Borrower, the Transferor or the Servicer may assign, or permit any Lien (other than Permitted Liens) to existupon, any of its rights or obligations hereunder or under any Transaction Document or any interest herein or in any Transaction Document without theprior written consent of each Lender Agent and the Administrative Agent, which consent may be withheld by any Lender Agent or the AdministrativeAgent in the exercise of its sole and absolute discretion. Notwithstanding anything to the contrary herein, if any Lender becomes a Defaulting Lender,unless such Lender shall have been deemed to no longer be a Defaulting Lender pursuant to Section 2.22(b), the Administrative Agent shall have theright to cause such Person to assign its entire interest in the Advances under this Agreement to a transferee (other than a Prohibited Transferee) selectedby the Administrative Agent, in an assignment that satisfies the conditions set forth in this Section 11.04.(b) Notwithstanding any other provision of this Section 11.04, any Lender may at any time pledge or grant a security interest in all or any portionof its rights (including, without limitation, rights to payment of principal and interest) under this Agreement to secure obligations of such Lender to aFederal Reserve Bank, without notice to or consent of the Borrower or the Administrative Agent; provided that no such pledge or grant of a securityinterest shall release such Lender from any of its obligations hereunder, or substitute any such pledgee or grantee for such Lender as a party hereto.(c) Each Affected Party and each Indemnified Party shall be an express third party beneficiary of this Agreement.(d) The Borrower agrees that each participant shall be entitled to the benefits of Sections 2.10 and 2.11 (subject to the requirements andlimitations therein, including the requirements under Section 2.11(g) (it being understood that the documentation required under -150-Section 2.11(g) shall be delivered to the participating Lender)) to the same extent as if it were a Lender and had acquired its interest by assignment;provided that such participant shall not be entitled to receive any greater payment under Sections 2.10 or 2.11, with respect to any participation, thanits participating Lender would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a change inApplicable Law that occurs after the participant acquired the applicable participation. Each Lender that sells a participation shall give the Borrowernotice of such participation and agrees, at the Borrower’s request and expense, to use reasonable efforts to cooperate with the Borrower to effectuate theprovisions of Section 2.11(i) with respect to any participant.(e) Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register onwhich it enters the name and address of each participant and the principal amounts (and stated interest) of each participant’s interest in the Obligationsunder the Transaction Documents (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of theParticipant Register (including the identity of any participant or any information relating to a participant’s interest in any Obligations) to any Personexcept to the Borrower as set forth in Section 11.04(d) and to the extent that such disclosure is necessary to establish that such Obligation is inregistered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absentmanifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for allpurposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity asAdministrative Agent) shall have no responsibility for maintaining a Participant Register.Section 11.05 Term of This Agreement. This Agreement, including, without limitation, the Borrower’s representations and covenants set forth inArticles IV and V and the Servicer’s representations, covenants and duties set forth in Articles IV, V and VI, shall remain in full force and effect until theCollection Date; provided that the rights and remedies with respect to any breach of any representation and warranty made or deemed made by theBorrower or the Servicer pursuant to Articles III and IV and the indemnification and payment provisions of Article VIII, IX and Article XI and theprovisions of Section 2.10, Section 2.11, Section 11.07, Section 11.08 and Section 11.09 shall be continuing and shall survive any termination of thisAgreement.Section 11.06 GOVERNING LAW; JURY WAIVER. THIS AGREEMENT SHALL, IN ACCORDANCE WITH SECTION 5-1401 OF THEGENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.EACH OF THE PARTIES HERETO WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO ATRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING DIRECTLY OR INDIRECTLY OUT OF, UNDER OR IN CONNECTIONWITH THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREUNDER. -151-Section 11.07 Costs, Expenses and Taxes.(a) In addition to the rights of indemnification granted to the Collateral Agent, the Account Bank, the Administrative Agent, the Lenders, theLender Agents, the Collateral Custodian and their respective Affiliates under Section 8.01 and Section 8.02 hereof, each of the Borrower, the Servicerand the Transferor agrees to pay on demand all reasonable and documented out-of-pocket costs and expenses of the Administrative Agent, the Lenders,the Lender Agents, the Collateral Agent, the Account Bank and the Collateral Custodian incurred in connection with the preparation, execution,delivery, administration (including periodic auditing), syndication, renewal, amendment or modification of, or any waiver or consent issued inconnection with, this Agreement, the Transaction Documents and the other documents to be delivered hereunder or in connection herewith, including,without limitation, the reasonable fees and reasonable and documented out-of-pocket expenses of counsel for the Administrative Agent, the Lenders,the Lender Agents, the Collateral Agent, the Account Bank and the Collateral Custodian with respect thereto and with respect to advising theAdministrative Agent, the Lenders, the Lender Agents, the Collateral Agent, the Account Bank and the Collateral Custodian as to their respectiverights and remedies under this Agreement and the other documents to be delivered hereunder or in connection herewith, and all invoiced out-of-pocketcosts and expenses, if any (including reasonable counsel fees and expenses), incurred by the Administrative Agent, the Lenders, the Lender Agents, theCollateral Agent, the Account Bank or the Collateral Custodian in connection with the enforcement or potential enforcement of this Agreement or anyTransaction Document by such Person and the other documents to be delivered hereunder or in connection herewith. Notwithstanding the foregoing,unless an Event of Default has occurred and is continuing, the Borrower shall only be obligated to reimburse any Lender or Lender Agent pursuant tothis Section 11.07(a) to the extent such Lender or Lender Agent is Wells Fargo or an Affiliate thereof.(b) The Borrower, the Servicer and the Transferor shall pay on demand any and all stamp, sales, excise and other Taxes and fees payable ordetermined to be payable to any Governmental Authority in connection with the execution, delivery, filing and recording of this Agreement, the otherTransaction Documents or any other document providing liquidity support, credit enhancement or other similar support to the Lenders in connectionwith this Agreement or the funding or maintenance of Advances hereunder.(c) The Servicer and the Transferor shall pay on demand all other reasonable and documented out-of-pocket costs, expenses and Taxes(excluding Taxes imposed on or measured by net income) incurred by the Administrative Agent, the Lenders, the Lender Agents, the Collateral Agent,the Collateral Custodian and the Account Bank, including, without limitation, all costs and expenses incurred by the Administrative Agent, the LenderAgents and the Lenders in connection with periodic audits of the Borrower’s, the Transferor’s or the Servicer’s books and records.Section 11.08 No Proceedings.(a) Each of the parties hereto (other than the Administrative Agent with the consent of the Lender Agents) agree that it will not institute against,or join any other Person in -152-instituting against, the Borrower any proceedings of the type referred to in the definition of “Bankruptcy Event” so long as there shall not have elapsedone year (or such longer preference period as shall then be in effect) and one day since the Collection Date.(b) Each of the parties hereto (other than any Conduit Lender) hereby agrees that it will not institute against, or join any other Person ininstituting against, any Conduit Lender, the Administrative Agent, or any Liquidity Banks any Bankruptcy Proceeding so long as any commercialpaper issued by such Conduit Lender shall be outstanding and there shall not have elapsed one year (or such longer preference period as shall then bein effect) and one day since the last day on which any such commercial paper shall have been outstanding.(c) The provisions of this Section 11.08 are a material inducement for the Administrative Agent, the Collateral Agent and the Lenders to enterinto this Agreement and the transactions contemplated hereby and are an essential term hereof. The Collateral Agent (acting as directed by theAdministrative Agent) with the consent of the Lenders may seek and obtain specific performance of such provisions (including injunctive relief),including without limitation in any bankruptcy, reorganization, arrangement, winding-up, insolvency, moratorium or liquidation proceedings, or otherproceedings under United States federal or state bankruptcy laws or any similar laws.Section 11.09 Recourse Against Certain Parties.(a) No recourse under or with respect to any obligation, covenant or agreement (including, without limitation, the payment of any fees or anyother obligations) of the Administrative Agent, the Lenders, the Lender Agents or any Secured Party as contained in this Agreement or any otheragreement, instrument or document entered into by the Administrative Agent, the Lenders, the Lender Agents or any Secured Party pursuant hereto orin connection herewith shall be had against any administrator of the Administrative Agent, the Lenders, the Lender Agents or any Secured Party or anyincorporator, affiliate, stockholder, officer, employee or director of the Administrative Agent, the Lenders, the Lender Agents or any Secured Party or ofany such administrator, as such, by the enforcement of any assessment or by any legal or equitable proceeding, by virtue of any statute or otherwise; itbeing expressly agreed and understood that the agreements of each party hereto contained in this Agreement and all of the other agreements,instruments and documents entered into by the Administrative Agent, the Lenders, the Lender Agents or any Secured Party pursuant hereto or inconnection herewith are, in each case, solely the corporate obligations of such party (and nothing in this Section 11.09 shall be construed to diminishin any way such corporate obligations of such party), and that no personal liability whatsoever shall attach to or be incurred by any administrator of theAdministrative Agent, the Lenders, the Lender Agents or any Secured Party or any incorporator, stockholder, affiliate, officer, employee or director ofthe Lenders, the Lender Agents or the Administrative Agent or of any such administrator, as such, or any of them, under or by reason of any of theobligations, covenants or agreements of the Administrative Agent, the Lenders, the Lender Agents or any Secured Party contained in this Agreement orin any other such instruments, documents or agreements, or are implied therefrom, and that any and all personal liability of every such administrator ofthe Administrative Agent, the Lenders, the Lender Agents or any Secured Party and each incorporator, stockholder, affiliate, officer, employee ordirector of the Administrative Agent, the Lenders, the Lender Agents or any Secured Party or of any such -153-administrator, or any of them, for breaches by the Administrative Agent, the Lenders, the Lender Agents or any Secured Party of any such obligations,covenants or agreements, which liability may arise either at common law or in equity, by statute or constitution, or otherwise, is hereby expresslywaived as a condition of and in consideration for the execution of this Agreement.(b) Notwithstanding any contrary provision set forth herein, no claim may be made by the Borrower, the Transferor or the Servicer or any otherPerson against the Administrative Agent, the Lenders, the Lender Agents or any Secured Party or their respective Affiliates, directors, officers,employees, attorneys or agents for any special, indirect, consequential or punitive damages in respect to any claim for breach of contract or any othertheory of liability arising out of or related to the transactions contemplated by this Agreement, or any act, omission or event occurring in connectiontherewith; and the Borrower, the Transferor and the Servicer each hereby waives, releases, and agrees not to sue upon any claim for any such damages,whether or not accrued and whether or not known or suspected.(c) No obligation or liability to any Obligor under any of the Loan Assets is intended to be assumed by the Administrative Agent, the Lenders,the Lender Agents or any Secured Party under or as a result of this Agreement and the transactions contemplated hereby.(d) Notwithstanding anything in this Agreement to the contrary, no Conduit Lender shall have any obligation to pay any amount required to bepaid by it hereunder in excess of any amount available to such Conduit Lender after paying or making provision for the payment of its CommercialPaper Notes. All payment obligations of each Conduit Lender hereunder are contingent on the availability of funds in excess of the amounts necessaryto pay its Commercial Paper Notes; and each of the other parties hereto agrees that it will not have a claim under Section 101(5) of the BankruptcyCode if and to the extent that any such payment obligation owed to it by a Conduit Lender exceeds the amount available to such Conduit Lender topay such amount after paying or making provision for the payment of its Commercial Paper Notes.(e) The provisions of this Section 11.09 shall survive the termination of this Agreement.Section 11.10 Execution in Counterparts; Severability; Integration. This Agreement may be executed in any number of counterparts and bydifferent parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when takentogether shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by e-mail in portabledocument format (.pdf) or facsimile shall be effective as delivery of a manually executed counterpart of this Agreement. In the event that any provisionin or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of theremaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.This Agreement, the other Transaction Documents and any agreements or letters (including fee letters) executed in connection herewith contains thefinal and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof and shall constitute the entireagreement among the parties hereto with respect to the subject matter hereof, superseding all prior oral or written understandings other than any feeletter delivered by the Servicer to the Administrative Agent and the Lender Agents. -154-Section 11.11 Consent to Jurisdiction; Service of Process.(a) Each party hereto hereby irrevocably submits to the non-exclusive jurisdiction of any New York State or Federal court sitting in New YorkCity in any action or proceeding arising out of or relating to the Transaction Documents, and each party hereto hereby irrevocably agrees that allclaims in respect of such action or proceeding may be heard and determined in such New York State court or, to the extent permitted by law, in suchFederal court. The parties hereto hereby irrevocably waive, to the fullest extent they may effectively do so, the defense of an inconvenient forum to themaintenance of such action or proceeding. The parties hereto agree that a final judgment in any such action or proceeding shall be conclusive and maybe enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.(b) Each of the Borrower and the Servicer agrees that service of process may be effected by mailing a copy thereof by registered or certified mail,postage prepaid, to the Borrower or the Servicer, as applicable, at its address specified in Section 11.02 or at such other address as the AdministrativeAgent shall have been notified in accordance herewith. Nothing in this Section 11.11 shall affect the right of the Lenders, the Lender Agents or theAdministrative Agent to serve legal process in any other manner permitted by law.Section 11.12 Characterization of Conveyances Pursuant to the Purchase and Sale Agreement.(a) It is the express intent of the parties hereto that the conveyance of the Eligible Loan Assets by the Transferor to the Borrower as contemplatedby the Purchase and Sale Agreement be, and be treated for all purposes (other than accounting purposes and subject to the tax characterization of theBorrower and the Advances described in Section 5.01(y) hereof) as, a sale by the Transferor of such Eligible Loan Assets. It is, further, not the intentionof the parties that such conveyance be deemed a pledge of the Eligible Loan Assets by the Transferor to the Borrower to secure a debt or otherobligation of the Transferor. However, in the event that, notwithstanding the intent of the parties, the Eligible Loan Assets are held to continue to beproperty of the Transferor, then the parties hereto agree that: (i) the Purchase and Sale Agreement shall also be deemed to be a security agreement underApplicable Law; (ii) as set forth in the Purchase and Sale Agreement, the transfer of the Eligible Loan Assets provided for in the Purchase and SaleAgreement shall be deemed to be a grant by the Transferor to the Borrower of a first priority security interest (subject only to Permitted Liens) in all ofthe Transferor’s right, title and interest in and to the Eligible Loan Assets and all amounts payable to the holders of the Eligible Loan Assets inaccordance with the terms thereof and all proceeds of the conversion, voluntary or involuntary, of the foregoing into cash, instruments, securities orother property, including, without limitation, all amounts from time to time held or invested in the Controlled Accounts, whether in the form of cash,instruments, securities or other property; (iii) the possession by the Borrower (or the Collateral Custodian on behalf of the Secured Parties) of LoanAssets and such other items of property as constitute instruments, money, negotiable documents or chattel paper shall be, subject to clause (iv), forpurposes of perfecting -155-the security interest pursuant to the UCC; and (iv) acknowledgements from Persons holding such property shall be deemed acknowledgements fromcustodians, bailees or agents (as applicable) of the Borrower for the purpose of perfecting such security interest under Applicable Law. The partiesfurther agree that any assignment of the interest of the Borrower pursuant to any provision hereof shall also be deemed to be an assignment of anysecurity interest created pursuant to the terms of the Purchase and Sale Agreement. The Borrower shall, to the extent consistent with this Agreement andthe other Transaction Documents, take such actions as may be necessary to ensure that, if the Purchase and Sale Agreement was deemed to create asecurity interest in the Eligible Loan Assets, such security interest would be deemed to be a perfected security interest of first priority (subject only toPermitted Liens) under Applicable Law and will be maintained as such throughout the term of this Agreement.(b) It is the intention of each of the parties hereto that the Eligible Loan Assets conveyed by the Transferor to the Borrower pursuant to thePurchase and Sale Agreement shall constitute assets owned by the Borrower and shall not be part of the Transferor’s estate in the event of the filing of abankruptcy petition by or against the Transferor under any bankruptcy or similar law.Section 11.13 Confidentiality.(a) Each of the Administrative Agent, the Lenders, the Lender Agents, the Servicer, the Collateral Agent, the Borrower, the Account Bank, theTransferor and the Collateral Custodian shall maintain and shall cause each of its employees and officers to maintain the confidentiality of thisAgreement, the Collateral Portfolio, the Obligors and all information with respect to the other parties, including all information regarding the businessof the Borrower, the Transferor and the Servicer hereto and their respective businesses obtained by it or them in connection with the structuring,negotiating and execution of the transactions contemplated herein, except that each such party and its officers and employees may (i) disclose suchinformation to its external accountants, investigators, auditors, attorneys or other agents, including any valuation firm engaged by such party inconnection with any due diligence or comparable activities with respect to the transactions and Loan Assets contemplated herein and the agents ofsuch Persons (“Excepted Persons”); provided that each Excepted Person shall, as a condition to any such disclosure, agree for the benefit of theAdministrative Agent, the Lenders, the Lender Agents, the Servicer, the Collateral Agent, the Borrower, the Account Bank, the Transferor and theCollateral Custodian that such information shall be used solely in connection with such Excepted Person’s evaluation of, or relationship with, theBorrower and its affiliates, (ii) disclose the existence of the Agreement, but not the financial terms thereof, (iii) disclose such information as is requiredby Applicable Law and (iv) disclose the Agreement and such information in any suit, action, proceeding or investigation (whether in law or in equityor pursuant to arbitration) involving any of the Transaction Documents for the purpose of defending itself, reducing its liability, or protecting orexercising any of its claims, rights, remedies, or interests under or in connection with any of the Transaction Documents. Notwithstanding theforegoing provisions of this Section 11.13(a), the Servicer may, subject to Applicable Law and the terms of any Loan Agreements, make availablecopies of the documents in the Servicing Files and such other documents it holds in its capacity as Servicer pursuant to the terms of this Agreement, toany of its creditors. It is understood that the financial terms that may not be disclosed except in compliance with this Section 11.13(a) include, withoutlimitation, all fees and other pricing terms, and all Events of Default, Servicer Termination Events, and priority of payment provisions. -156-(b) Anything herein to the contrary notwithstanding, the Borrower and the Servicer each hereby consents to the disclosure of any nonpublicinformation with respect to it (i) to the Administrative Agent, the Lenders, the Lender Agents, the Account Bank, the Collateral Agent or the CollateralCustodian by each other, (ii) by the Administrative Agent, the Lenders, the Lender Agents, the Account Bank, the Collateral Agent and the CollateralCustodian to any prospective or actual assignee or participant of any of them provided that (A) such Person would be permitted to be an assignee orparticipant pursuant to the terms hereof and (B) such Person agrees to hold such information confidential in accordance with the terms of thisAgreement, or (iii) by the Administrative Agent, the Lenders, the Lender Agents, the Account Bank, the Collateral Agent and the Collateral Custodianto any commercial paper dealer or provider of a surety, guaranty or credit or liquidity enhancement to any Lender or any Person providing financing to,or holding equity interests in, any Conduit Lender, as applicable, and to any officers, directors, employees, outside accountants and attorneys of any ofthe foregoing, provided each such Person is informed of the confidential nature of such information. In addition, the Lenders, the Lender Agents, theAdministrative Agent, the Collateral Agent, the Account Bank and the Collateral Custodian may disclose any such nonpublic information as requiredpursuant to any law, rule, regulation, direction, request or order of any judicial, administrative or regulatory authority or proceedings (whether or nothaving the force or effect of law).(c) Notwithstanding anything herein to the contrary, the foregoing shall not be construed to prohibit (i) disclosure of any and all information thatis or becomes publicly known; (ii) disclosure of any and all information (a) if required to do so by any applicable statute, law, rule or regulation, (b) toany government agency or regulatory body having or claiming authority to regulate or oversee any aspects of the Lenders’, the Lender Agents’, theAdministrative Agent’s, the Collateral Agent’s, the Account Bank’s or the Collateral Custodian’s business or that of their affiliates, (c) pursuant to anysubpoena, civil investigative demand or similar demand or request of any court, regulatory authority, arbitrator or arbitration to which theAdministrative Agent, any Lender, any Lender Agent, the Collateral Agent, the Collateral Custodian or the Account Bank or an officer, director,employer, shareholder or affiliate of any of the foregoing is a party, (d) in any preliminary or final offering circular, registration statement or contract orother document approved in advance by the Borrower, the Servicer or the Transferor or (e) to any affiliate, independent or internal auditor, agent,employee or attorney of the Collateral Agent or the Collateral Custodian having a need to know the same; provided that the disclosing party advisessuch recipient of the confidential nature of the information being disclosed; or (iii) any other disclosure authorized by the Borrower, Servicer or theTransferor.Section 11.14 Non-Confidentiality of Tax Treatment.All parties hereto agree that each of them and each of their employees, representatives, and other agents may disclose to any and all Persons,without limitation of any kind, the tax treatment and tax structure of the transaction and all materials of any kind (including, without limitation,opinions or other tax analyses) that are provided to any of them -157-relating to such tax treatment and tax structure. “Tax treatment” and “tax structure” shall have the same meaning as such terms have for purposes ofTreasury Regulation Section 1.6011-4; provided that with respect to any document or similar item that in either case contains information concerningthe tax treatment or tax structure of the transaction as well as other information, the provisions of this Section 11.14 shall only apply to such portionsof the document or similar item that relate to the tax treatment or tax structure of the transactions contemplated hereby.Section 11.15 Waiver of Set Off.Each of the parties hereto hereby waives any right of setoff it may have or to which it may be entitled under this Agreement from time to timeagainst the Administrative Agent, the Lenders, the Lender Agents or their respective assets.Section 11.16 Headings and Exhibits.The headings herein are for purposes of references only and shall not otherwise affect the meaning or interpretation of any provision hereof. Theschedules and exhibits attached hereto and referred to herein shall constitute a part of this Agreement and are incorporated into this Agreement for allpurposes.Section 11.17 Ratable Payments.If any Lender, whether by setoff or otherwise, shall obtain any payment (whether voluntary, involuntary, through the exercise of any right ofsetoff, or otherwise) on account of Advances owing to it (other than pursuant to Breakage Fees, Section 2.10 or Section 2.11) in excess of its ratableshare of payments on account of the Advances obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders suchparticipations in the Advances owing to them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each ofthem; provided that, if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lendershall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amountequal to such Lender’s ratable share (according to the proportion of (i) the amount of such Lender’s required repayment to (ii) the total amount sorecovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount sorecovered.Section 11.18 Failure of Borrower or Servicer to Perform Certain Obligations.If the Borrower or the Servicer, as applicable, fails to perform any of its agreements or obligations under Section 5.01(r), Section 5.02(p) orSection 5.03(e), the Administrative Agent may (but shall not be required to) itself perform, or cause performance of, such agreement or obligation, andthe documented expenses of the Administrative Agent incurred in connection therewith shall be payable by the Borrower or the Servicer (on behalf ofthe Borrower), as applicable, upon the Administrative Agent’s demand therefor.Section 11.19 Power of Attorney. The Borrower irrevocably authorizes the Administrative Agent and appoints the Administrative Agent as itsattorney-in-fact to act on -158-behalf of the Borrower (i) to file financing statements necessary or desirable in the Administrative Agent’s sole discretion to perfect and to maintain theperfection and priority of the interest of the Secured Parties in the Collateral Portfolio and (ii) to file a carbon, photographic or other reproduction ofthis Agreement or any financing statement with respect to the Collateral Portfolio as a financing statement in such offices as the Administrative Agentin its sole discretion deems necessary or desirable to perfect and to maintain the perfection and priority of the interests of the Secured Parties in theCollateral Portfolio. This appointment is coupled with an interest and is irrevocable until the Collection Date.Section 11.20 Delivery of Termination Statements, Releases, etc. Upon payment in full of all of the Obligations (other than unmaturedcontingent indemnification obligations) and the termination of this Agreement, the Administrative Agent and the Collateral Agent shall deliver to theBorrower termination statements, reconveyances, releases and other documents necessary or appropriate to evidence the termination of the Pledge andother Liens securing the Obligations, all at the expense of the Borrower.Section 11.21 Intent of the Parties. It is the intent and understanding of each party hereto that the Advances are loans from the Lenders to theBorrower and do not constitute a “security” within the meaning of Section 8-102(15) of the UCC.ARTICLE XII.COLLATERAL CUSTODIANSection 12.01 Designation of Collateral Custodian.(a) Initial Collateral Custodian. The role of Collateral Custodian with respect to the Required Loan Documents shall be conducted by the Persondesignated as Collateral Custodian hereunder from time to time in accordance with this Section 12.01. Each of the Borrower, the Lender Agents and theAdministrative Agent hereby designate and appoint the Collateral Custodian to act as agent on behalf of the Secured Parties and hereby authorizes theCollateral Custodian to take such actions on its behalf and to exercise such powers and perform such duties as are expressly granted to the CollateralCustodian by this Agreement. The Collateral Custodian hereby accepts such agency appointment to act as Collateral Custodian pursuant to the termsof this Agreement, until its resignation or removal as Collateral Custodian pursuant to the terms hereof.(b) Successor Collateral Custodian. Upon the Collateral Custodian’s receipt of a Collateral Custodian Termination Notice from theAdministrative Agent of the designation of a successor Collateral Custodian pursuant to the provisions of Section 12.05, the Collateral Custodianagrees that it will terminate its activities as Collateral Custodian hereunder.Section 12.02 Duties of Collateral Custodian.(a) Appointment. The Borrower, the Lender Agents and the Administrative Agent each hereby appoints WFBNA to act as Collateral Custodian,for the benefit of the Secured Parties. The Collateral Custodian hereby accepts such appointment and agrees to perform the duties and obligations withrespect thereto set forth herein. -159-(b) Duties. From the Closing Date until its removal pursuant to Section 12.05, the Collateral Custodian shall perform, on behalf of the SecuredParties, the following duties and obligations:(i) The Collateral Custodian shall take and retain custody of the Required Loan Documents delivered by the Borrower pursuant to Sections3.02(a) and 3.04(b) in accordance with the terms and conditions of this Agreement, all for the benefit of the Secured Parties. Within five BusinessDays of its receipt of any Required Loan Documents and the related Loan Asset Checklist, the Collateral Custodian shall review the RequiredLoan Documents to confirm that (A) the Obligor name matches the Loan Asset Checklist, (B) such Required Loan Documents have beenexecuted by each party thereto and have no missing or mutilated pages, (C) each item listed in the Loan Asset Checklist has been provided to theCollateral Custodian (D) the related original balance (based on a comparison to the note or assignment agreement, as applicable) is greater thanor equal to the loan balance listed on the related Loan Tape (such items (A) through (D) collectively, the “Review Criteria”). In order to facilitatethe foregoing review by the Collateral Custodian, in connection with each delivery of Required Loan Documents hereunder to the CollateralCustodian, the Servicer shall provide to the Collateral Custodian a hard copy (which may be preceded by an electronic copy, as applicable) ofthe related Loan Asset Checklist which contains the Loan Asset information with respect to the Required Loan Documents being delivered,identification number and the name of the Obligor with respect to such Loan Asset. Notwithstanding anything herein to the contrary, theCollateral Custodian’s obligation to review the Required Loan Documents shall be limited to reviewing such Required Loan Documents basedon the information provided on the Loan Asset Checklist. If, at the conclusion of such review, the Collateral Custodian is unable to confirmclauses (A) or (D) of the Review Criteria, the Collateral Custodian shall notify the Administrative Agent and the Servicer of such discrepancywithin one Business Day, or (ii) any other Review Criteria is not satisfied, the Collateral Custodian shall within one Business Day notify theServicer and the Administrative Agent of such determination and provide the Servicer and the Administrative Agent with a list of the non-complying Loan Assets and the applicable Review Criteria that they fail to satisfy. The Servicer shall have five Business Days after notice orknowledge thereof to correct any non-compliance with any Review Criteria. To the extent such non-compliance has not been cured within suchtime period and the Administrative Agent has provided the Servicer with written confirmation of such non-compliance, such Loan Asset shall bedeemed to be a Warranty Loan Asset and shall no longer be included in the calculation of any Borrowing Base hereunder until such deficiency iscured. In addition, if requested in writing (in the form of Exhibit J) by the Servicer and approved by the Administrative Agent within 10 BusinessDays of the Collateral Custodian’s delivery of such report, the Collateral Custodian shall return any Loan Asset which fails to satisfy a ReviewCriteria to the Borrower. Other than the foregoing, the Collateral Custodian shall not have any responsibility for reviewing any Required LoanDocuments. -160-(ii) In taking and retaining custody of the Required Loan Documents, the Collateral Custodian shall be deemed to be acting as the agent ofthe Secured Parties; provided that the Collateral Custodian makes no representations as to the existence, perfection or priority of any Lien on theRequired Loan Documents or the instruments therein; and provided, further, that, the Collateral Custodian’s duties shall be limited to thoseexpressly contemplated herein.(iii) All Required Loan Documents shall be kept in fire resistant vaults, rooms or cabinets at the locations specified in Section 5.06(c) or atsuch other office as shall be specified to the Administrative Agent and the Servicer by the Collateral Custodian in a written notice delivered atleast 30 days (or such shorter notice period as consented to by the Administrative Agent) prior to such change. All Required Loan Documentsshall be placed together with an appropriate identifying label and maintained in such a manner so as to permit retrieval and access. TheCollateral Custodian shall segregate the Required Loan Documents on its inventory system and will not commingle the physical Required LoanDocuments with any other files of the Collateral Custodian other than those, if any, relating to Solar and its Affiliates and subsidiaries; provided,however, the Collateral Custodian shall segregate any commingled files upon written request of the Administrative Agent and the Borrower.(iv) On the 12th calendar day of every month (or if such day is not a Business Day, the next succeeding Business Day), commencing in July2016, the Collateral Custodian shall provide a written report to the Administrative Agent and the Servicer (in a form mutually agreeable to theAdministrative Agent and the Collateral Custodian) identifying each Loan Asset for which it holds Required Loan Documents and the applicableReview Criteria that any Loan Asset fails to satisfy. The Servicer shall have 20 Business Days after notice or knowledge thereof to correct anynon-compliance with any Review Criteria. To the extent such non-compliance has not been cured within such time period and theAdministrative Agent has provided the Servicer with written confirmation of such non-compliance, such Loan Asset shall be deemed to be aWarranty Loan Asset and shall no longer be included in the calculation of any Borrowing Base hereunder until such deficiency is cured.(v) Notwithstanding any provision to the contrary elsewhere in the Transaction Documents, the Collateral Custodian shall not have anyfiduciary relationship with any party hereto or any Secured Party in its capacity as such, and no implied covenants, functions, obligations orresponsibilities shall be read into this Agreement, the other Transaction Documents or otherwise exist against the Collateral Custodian. Withoutlimiting the generality of the foregoing, it is hereby expressly agreed and stipulated by the other parties hereto that the Collateral Custodian shallnot be required to exercise any discretion hereunder and shall have no investment or management responsibility. -161-(c) (i) The Collateral Custodian agrees to cooperate with the Administrative Agent and the Collateral Agent and deliver any Required LoanDocuments to the Collateral Agent or Administrative Agent (pursuant to a written request in the form of Exhibit J), as applicable, as requested in orderto take any action that the Administrative Agent deems necessary or desirable in order to perfect, protect or more fully evidence the security interestsgranted by the Borrower hereunder, or to enable any of them to exercise or enforce any of their respective rights hereunder, including any rights arisingwith respect to Article VII. In the event the Collateral Custodian receives instructions from the Collateral Agent, the Servicer or the Borrower whichconflict with any instructions received by the Administrative Agent, the Collateral Custodian shall rely on and follow the instructions given by theAdministrative Agent.(ii) The Administrative Agent may direct the Collateral Custodian to take any such incidental action hereunder. With respect to otheractions which are incidental to the actions specifically delegated to the Collateral Custodian hereunder, the Collateral Custodian shall not berequired to take any such incidental action hereunder, but shall be required to act or to refrain from acting (and shall be fully protected in actingor refraining from acting) upon the direction of the Administrative Agent; provided that the Collateral Custodian shall not be required to takeany action hereunder at the request of the Administrative Agent, any Secured Party or otherwise if the taking of such action, in the reasonabledetermination of the Collateral Custodian, (x) shall be in violation of any Applicable Law or contrary to any provisions of this Agreement or(y) shall expose the Collateral Custodian to liability hereunder or otherwise (unless it has received indemnity which it reasonably deems to besatisfactory with respect thereto). In the event the Collateral Custodian requests the consent of the Administrative Agent and the CollateralCustodian does not receive a consent (either positive or negative) from the Administrative Agent within 10 Business Days of its receipt of suchrequest, then the Administrative Agent shall be deemed to have declined to consent to the relevant action.(iii) The Collateral Custodian shall not be liable for any action taken, suffered or omitted by it in accordance with the request or directionof any Secured Party, to the extent that this Agreement provides such Secured Party the right to so direct the Collateral Custodian, or theAdministrative Agent. The Collateral Custodian shall not be deemed to have notice or knowledge of any matter hereunder, including an Event ofDefault, unless a Responsible Officer of the Collateral Custodian has actual knowledge of such matter or written notice thereof is received by theCollateral Custodian. Notice or knowledge of any matter by Wells Fargo in its capacity as Administrative Agent or Lender and other publicallyavailable information shall not constitute notice or knowledge of the Collateral Custodian.(iv) The parties acknowledge that in accordance with the Customer Identification Program (CIP) requirements under the USA PATRIOT Actand its implementing regulations, the Collateral Custodian in order to help fight the funding of terrorism and money laundering, is required toobtain, verify and -162-record information that identifies each person or legal entity that establishes a relationship with the Collateral Custodian. The Borrower herebyagrees that it shall provide the Collateral Custodian with such information as it may reasonably request including, but not limited to, theBorrower’s name, physical address, tax identification number and other information that will help the Collateral Custodian to identify and verifythe Borrower’s identity (and in certain circumstances, the beneficial owners thereof) such as organizational documents, certificate of goodstanding, license to do business, or other pertinent identifying information.Section 12.03 Merger or Consolidation.Any Person (i) into which the Collateral Custodian may be merged or consolidated, (ii) that may result from any merger or consolidation to whichthe Collateral Custodian shall be a party, or (iii) that may succeed to the properties and assets of the Collateral Custodian substantially as a whole,which Person in any of the foregoing cases executes an agreement of assumption to perform every obligation of the Collateral Custodian hereunder,shall be the successor to the Collateral Custodian under this Agreement without further act of any of the parties to this Agreement.Section 12.04 Collateral Custodian Compensation.As compensation for its Collateral Custodian activities hereunder, the Collateral Custodian shall be entitled to the Collateral Custodian Feesfrom the Borrower as set forth in the WFBNA Fee Letter, payable pursuant to the extent of funds available therefor pursuant to the provisions ofSection 2.04. The Collateral Custodian’s entitlement to receive the Collateral Custodian Fees shall cease on the earlier to occur of: (i) its removal asCollateral Custodian pursuant to Section 12.05, (ii) its resignation as Collateral Custodian pursuant to Section 12.07 of this Agreement or (iii) thetermination of this Agreement.Section 12.05 Collateral Custodian Removal.The Collateral Custodian may be removed, with or without cause, by the Administrative Agent by 30 days’ notice given in writing to theCollateral Custodian (the “Collateral Custodian Termination Notice”); provided that notwithstanding its receipt of a Collateral Custodian TerminationNotice, the Collateral Custodian shall continue to act in such capacity until a successor Collateral Custodian has been appointed and has agreed to actas Collateral Custodian hereunder.Section 12.06 Limitation on Liability.(a) The Collateral Custodian may conclusively rely on and shall be fully protected in acting upon any certificate, instrument, opinion, notice,letter or other document delivered to it and that in good faith it reasonably believes to be genuine and that has been signed by the proper party orparties. The Collateral Custodian may rely conclusively on and shall be fully protected in acting upon the written instructions of the AdministrativeAgent. -163-(b) The Collateral Custodian may consult counsel satisfactory to it and the advice or opinion of such counsel shall be full and completeauthorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with the advice oropinion of such counsel.(c) The Collateral Custodian shall not be liable for any error of judgment, or for any act done or step taken or omitted by it, in good faith, or forany mistakes of fact or law, or for anything that it may do or refrain from doing in connection herewith except in the case of its willful misconduct orgrossly negligent performance or omission of its duties.(d) The Collateral Custodian makes no warranty or representation and shall have no responsibility (except as expressly set forth in thisAgreement) as to the content, enforceability, completeness, validity, sufficiency, value, genuineness, ownership or transferability of the CollateralPortfolio, and will not be required to and will not make any representations as to the validity or value (except as expressly set forth in this Agreement)of any of the Collateral Portfolio. The Collateral Custodian shall not be obligated to take any legal action hereunder that might in its judgment involveany expense or liability unless it has been furnished with an indemnity reasonably satisfactory to it.(e) The Collateral Custodian shall have no duties or responsibilities except such duties and responsibilities as are specifically set forth in thisAgreement and no covenants or obligations shall be implied in this Agreement against the Collateral Custodian.(f) The Collateral Custodian shall not be required to expend or risk its own funds in the performance of its duties hereunder.(g) It is expressly agreed and acknowledged that the Collateral Custodian is not guaranteeing performance of or assuming any liability for theobligations of the other parties hereto or any parties to the Collateral Portfolio.(h) Subject in all cases to the last sentence of Section 12.02(c)(i), in case any reasonable question arises as to its duties hereunder, the CollateralCustodian may, prior to the occurrence of an Event of Default or the Facility Maturity Date, request instructions from the Servicer and may, after theoccurrence and during the continuance of an Event of Default or the Facility Maturity Date, request instructions from the Administrative Agent, andshall be entitled at all times to refrain from taking any action unless it has received instructions from the Servicer or the Administrative Agent, asapplicable. The Collateral Custodian shall in all events have no liability, risk or cost for any action taken pursuant to and in compliance with theinstruction of the Administrative Agent. In no event shall the Collateral Custodian be liable for special, indirect or consequential loss or damage of anykind whatsoever (including but not limited to lost profits), even if the Collateral Custodian has been advised of the likelihood of such loss or damageand regardless of the form of action.(i) It is expressly acknowledged by the parties hereto that application and performance by the Collateral Custodian of its various dutieshereunder (including, recalculation to be performed in respect of the matters contemplated hereby) shall be based upon, and in -164-reliance upon, data, information and notice provided to it by the Servicer, the Administrative Agent, the Borrower and/or any related bank agent,obligor or similar party, and the Collateral Custodian shall have no responsibility for the accuracy of any such information or data provided to it bysuch persons and shall be entitled to update its records (as it may deem necessary or appropriate).(j) In no event shall the Collateral Custodian be liable for any failure or delay in the performance of its obligations hereunder because ofcircumstances beyond its control, including, but not limited to, acts of God, flood, war (whether declared or undeclared), terrorism, fire, riot, embargo,government action (including any laws, ordinances, regulations) or the like that delay, restrict or prohibit the providing of services by the CollateralCustodian as contemplated by this Agreement.Section 12.07 Collateral Custodian Resignation.Collateral Custodian may resign and be discharged from its duties or obligations hereunder, not earlier than 90 days after delivery to theAdministrative Agent and the Borrower of written notice of such resignation specifying a date when such resignation shall take effect. Upon theeffective date of such resignation, or if the Administrative Agent gives Collateral Custodian written notice of an earlier termination hereof, CollateralCustodian shall (i) be reimbursed for any costs and expenses Collateral Custodian shall incur in connection with the termination of its duties under thisAgreement and (ii) deliver all of the Required Loan Documents in the possession of Collateral Custodian to the Administrative Agent or to such Personas the Administrative Agent may designate to Collateral Custodian in writing upon the receipt of a request in the form of Exhibit J; provided that theBorrower shall consent to any successor Collateral Custodian appointed by the Administrative Agent (such consent not to be unreasonably withheld).If no successor collateral custodian shall have been appointed and an instrument of acceptance by a successor Collateral Custodian shall not have beendelivered to the Collateral Custodian within 45 days after the giving of such notice of resignation, the resigning Collateral Custodian may petition anycourt of competent jurisdiction for the appointment of a successor Collateral Custodian. Notwithstanding anything herein to the contrary, theCollateral Custodian may not resign prior to a successor Collateral Custodian being appointed.Section 12.08 Release of Documents.(a) Release for Servicing. From time to time and as appropriate for the enforcement or servicing of any of the Collateral Portfolio, the CollateralCustodian is hereby authorized (unless and until such authorization is revoked by the Administrative Agent), upon written receipt from the Servicer ofa request for release of documents and receipt in the form annexed hereto as Exhibit J, to release to the Servicer within two Business Days of receipt ofsuch request, the related Required Loan Documents or the documents set forth in such request and receipt to the Servicer. All documents so released tothe Servicer shall be held by the Servicer in trust for the benefit of the Collateral Agent, on behalf of the Secured Parties in accordance with the terms ofthis Agreement. The Servicer shall return to the Collateral Custodian the Required Loan Documents or other such documents (i) promptly upon therequest of the Administrative Agent, or (ii) when the Servicer’s need therefor in connection with such foreclosure or servicing no longer exists, unlessthe Loan Asset shall be liquidated, in which -165-case, the Servicer shall deliver an additional request for release of documents to the Collateral Custodian and receipt certifying such liquidation fromthe Servicer to the Collateral Agent, all in the form annexed hereto as Exhibit J.(b) Limitation on Release. The foregoing provision with respect to the release to the Servicer of the Required Loan Documents and documents bythe Collateral Custodian upon request by the Servicer shall be operative only to the extent that the Administrative Agent has consented to such release.Promptly after delivery to the Collateral Custodian of any request for release of documents, the Servicer shall provide notice of the same to theAdministrative Agent. Any additional Required Loan Documents or documents requested to be released by the Servicer may be released only uponwritten authorization of the Administrative Agent. The limitations of this paragraph shall not apply to the release of Required Loan Documents to theServicer pursuant to the immediately succeeding subsection.(c) Release for Payment. Upon receipt by the Collateral Custodian of the Servicer’s request for release of documents and receipt in the formannexed hereto as Exhibit J (which certification shall include a statement to the effect that all amounts received in connection with such payment orrepurchase have been credited to the Collection Account as provided in this Agreement), the Collateral Custodian shall promptly release the relatedRequired Loan Documents to the Servicer.Section 12.09 Return of Required Loan Documents.The Borrower may, with the prior written consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed), requirethat the Collateral Custodian return each Required Loan Document (a) delivered to the Collateral Custodian in error or (b) released from the Lien of theCollateral Agent hereunder pursuant to Section 2.16, in each case by submitting to the Collateral Custodian and the Administrative Agent a writtenrequest in the form of Exhibit J hereto (signed by both the Borrower and the Administrative Agent) specifying the Collateral Portfolio to be so returnedand reciting that the conditions to such release have been met (and specifying the Section or Sections of this Agreement being relied upon for suchrelease). The Collateral Custodian shall upon its receipt of each such request for return executed by the Borrower and the Administrative Agentpromptly, but in any event within five Business Days, return the Required Loan Documents so requested to the Borrower.Section 12.10 Access to Certain Documentation and Information Regarding the Collateral Portfolio; Audits of Servicer.The Collateral Custodian shall provide to the Administrative Agent and each Lender Agent access to the Required Loan Documents and all otherdocumentation regarding the Collateral Portfolio including in such cases where the Administrative Agent and each Lender Agent is required inconnection with the enforcement of the rights or interests of the Secured Parties, or by applicable statutes or regulations, to review such documentation,such access being afforded without charge but only (i) upon two Business Days prior written request, (ii) during normal business hours and (iii) subjectto the Servicer’s and the Collateral Custodian’s normal security and confidentiality procedures. Prior to the Closing Date and periodically thereafter atthe discretion of the Administrative Agent and each Lender Agent, the Administrative Agent and -166-each Lender Agent may review the Servicer’s collection and administration of the Collateral Portfolio in order to assess compliance by the Servicerwith the Servicing Standard, as well as with this Agreement and may conduct an audit of the Collateral Portfolio, and Required Loan Documents inconjunction with such a review. Such review shall be (subject to Section 5.03(d)(ii)) reasonable in scope and shall be completed in a reasonable periodof time. Without limiting the foregoing provisions of this Section 12.10, from time to time upon reasonable request of the Administrative Agent, theCollateral Custodian shall, at least twice each fiscal year of the Servicer, permit certified public accountants or other auditors acceptable to theAdministrative Agent to conduct, at the expense of the Servicer (on behalf of the Borrower), a review of the Required Loan Documents and all otherdocumentation regarding the Collateral Portfolio.Section 12.11 Bailment.The Collateral Custodian agrees that, with respect to any original promissory notes and original certificated securities at any time or times heldby the Collateral Custodian (or on its behalf) in physical form or held in its name, the Collateral Custodian shall be the agent and bailee of theCollateral Agent, for the benefit of the Secured Parties, for purposes of perfecting (to the extent not otherwise perfected) the Collateral Agent’s securityinterest in the Collateral Portfolio and for the purpose of ensuring that such security interest is entitled to first priority status under the UCC.[Signature pages to follow.] -167-IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of thedate first above written. THE BORROWER: SSLP 2016-1, LLC By: Name:Title:[SIGNATURES CONTINUE ON THE FOLLOWING PAGE] THE SERVICER: SOLAR CAPITAL LTD. By: Name:Title:[SIGNATURES CONTINUE ON THE FOLLOWING PAGE] THE TRANSFEROR: SENIOR SECURED UNITRANCHE LOAN PROGRAM LLCSOLAR CAPITAL LTD. By: Name:Title:[SIGNATURES CONTINUE ON THE FOLLOWING PAGE] THE ADMINISTRATIVE AGENT: WELLS FARGO BANK, NATIONAL ASSOCIATION By: Name:Title:[SIGNATURES CONTINUE ON THE FOLLOWING PAGE] INSTITUTIONAL LENDER: WELLS FARGO BANK, NATIONAL ASSOCIATION By: Name:Title:[SIGNATURES CONTINUE ON THE FOLLOWING PAGE] THE COLLATERAL AGENT, THE COLLATERAL CUSTODIAN AND THE ACCOUNT BANK: WELLS FARGO BANK, NATIONAL ASSOCIATION By: Name:Title:[SIGNATURES CONTINUE ON THE FOLLOWING PAGE] SCHEDULE ICONDITIONS PRECEDENT DOCUMENTSAs required by Section 3.01 of the Agreement, each of the following items must be delivered to the Administrative Agent and the LenderAgents prior to the effectiveness of the Agreement:(a) A copy of this Agreement duly executed by each of the parties hereto;(b) A certificate of the Secretary, Assistant Secretary or managing member, as applicable, of each of the Borrower, the Transferor and theServicer, dated the date of this Agreement, certifying (i) the names and true signatures of the incumbent officers of such Person authorized to signon behalf of such Person the Transaction Documents to which it is a party (on which certificate the Administrative Agent, the Lenders and theLender Agents may conclusively rely until such time as the Administrative Agent and the Lender Agents shall receive from the Borrower, theTransferor and the Servicer, as applicable, a revised certificate meeting the requirements of this paragraph (b)(i)), (ii) that the copy of thecertificate of formation or articles of incorporation of such Person, as applicable, is a complete and correct copy and that such certificate offormation or articles of incorporation have not been amended, modified or supplemented and are in full force and effect, (iii) that the copy of thelimited liability company agreement or by-laws, as applicable, of such Person are a complete and correct copy, and that such limited liabilitycompany agreement or by-laws have not been amended, modified or supplemented and are in full force and effect, and (iv) the resolutions of theboard of directors or the written consent of the members of such Person, as applicable, approving and authorizing the execution, delivery andperformance by such Person of the Transaction Documents to which it is a party;(c) A good standing certificate, dated as of a recent date for each of the Borrower, the Transferor and the Servicer, issued by the Secretary ofState of such Person’s State of formation or organization, as applicable;(d) Duly executed powers of attorney from the Borrower and the Servicer substantially in the form of Exhibit L or Exhibit M, as applicable;(e) Financing statements describing the Collateral Portfolio (or applicable subset thereof), and (i) naming the Borrower as debtor and theCollateral Agent, on behalf of the Secured Parties, as secured party, (ii) naming the Transferor as debtor, the Borrower as assignor and theCollateral Agent, on behalf of the Secured Parties, as secured party/total assignee, and (iii) other, similar instruments or documents, as may benecessary or, in the opinion of the Administrative Agent, desirable under the UCC of all appropriate jurisdictions or any comparable law toperfect the Collateral Agent’s, on behalf of the Secured Parties, interests in all of the Collateral Portfolio, in each case, in form and substanceappropriate for filing in the applicable jurisdiction in which such filing is required in order to perfect a security interest in the Collateral Portfolio(or applicable subset thereof); Sch. I-1(f) Financing statements, if any, necessary to release all security interests and other rights of any Person in the Collateral Portfoliopreviously granted by the Transferor;(g) Copies of tax and judgment lien searches in all jurisdictions reasonably requested by the Administrative Agent and requests forinformation (or a similar UCC search report certified by a party acceptable to the Administrative Agent), dated a date reasonably near to theClosing Date, and with respect to such requests for information or UCC searches, listing all effective financing statements which name theBorrower (under its present name and any previous name) and Transferor (under its present name and any previous name) as debtor(s) and whichare filed in the jurisdiction of Delaware, as applicable, together with copies of such financing statements (none of which shall cover any of theCollateral Portfolio);(h) One or more favorable Opinions of Counsel to the Borrower, acceptable to the Administrative Agent and addressed to theAdministrative Agent, the Lenders, the Lender Agents and the Collateral Agent, with respect to such matters as the Administrative Agent mayreasonably request (including an opinion, with respect to the perfected security interest of the Collateral Agent, for the benefit of the SecuredParties, in the Collateral Portfolio under the UCC laws of the State of New York);(i) One or more favorable Opinions of Counsel to the Borrower, acceptable to the Administrative Agent and addressed to the AdministrativeAgent, the Lenders, the Lender Agents and the Collateral Agent, with respect to the true sale of the Collateral Portfolio under the Purchase andSale Agreement and providing that the Borrower would not be substantively consolidated with the Transferor in a proceeding under theBankruptcy Code;(j) One or more favorable Opinions of Counsel to the Borrower, acceptable to the Administrative Agent and addressed to the AdministrativeAgent, the Lenders, the Lender Agents and the Collateral Agent, with respect to, among other things, no conflicts and the due authorization,execution and delivery of, and enforceability of, the Transaction Documents;(k) One or more favorable Opinions of Counsel to Transferor and Equityholder, acceptable to the Administrative Agent and addressed tothe Administrative Agent, the Lenders, the Lender Agents and the Collateral Agent, with respect to, among other things, no conflicts and the dueauthorization, execution and delivery of, and enforceability of, the Transaction Documents to which Transferor and Equityholder are eachis aparty;(l) One or more favorable Opinions of Counsel to Servicer, acceptable to the Administrative Agent and addressed to the AdministrativeAgent, the Lenders, the Lender Agents and the Collateral Agent, with respect to, among other things, no conflicts and the due authorization,execution and delivery of, and enforceability of, the Transaction Documents to which Servicer is a party; Sch. I-2(m) Duly completed copies of any tax documentation required under Section 2.11(g); and(n) A copy of each of the Transaction Documents duly executed by the parties thereto. Sch. I-3SCHEDULE IIPRIOR NAMES, TRADENAMES, FICTITIOUS NAMESAND “DOING BUSINESS AS” NAMESBorrower: None Sch. II-1SCHEDULE IIIAGREED-UPON PROCEDURES FORINDEPENDENT PUBLIC ACCOUNTANTS OR OTHER THIRD PARTIESIn accordance with Section 6.10 of the Agreement, the Servicer will cause a firm of nationally recognized independent public accountants or otherthird party to furnish in accordance with attestation standards established by the American Institute of Certified Public Accountants a report to theeffect that such accountants have either verified, compared, or recalculated each of the following accounts in the Servicing Report to applicable systemor records of the Servicer: • Loan Asset List: • Index, spread, PIK • Loan Asset scheduled maturity date • Industry classification • Loan Asset type • Fixed/Floating • Days delinquent • Cut-Off Date • Net Senior Leverage Ratio as of the applicable Cut-Off Date for such Loan Asset • Net Senior Leverage Ratio as of the most recent Relevant Test Period for such Loan Asset • Total Net Senior Leverage Ratio as of the applicable Cut-Off Date for such Loan Asset • Total Net Senior Leverage Ratio as of the most recent Relevant Test Period for such Loan Asset • Interest Coverage Ratio as of the applicable Cut-Off Date for such Loan Asset • Interest Coverage Ratio as of the most recent Relevant Test Period for such Loan Asset • Facility Attachment Ratio as of the applicable Cut-Off Date for such Loan Asset • Facility Attachment Ratio as of the most recent Relevant Test Period for such Loan Asset • Outstanding Balance • Par amount • Adjusted Borrowing Value • Trailing 12 month revenue for the most recent Relevant Test Period for such Loan Asset • Trailing 12 month EBITDA for the most recent Relevant Test Period for such Loan Asset • The Cut-Off Date for each of the statistics in the foregoing two bullet points • Whether such Loan Asset is a Designated Loan Asset • Borrowing Base Sch. III-1 • Weighted average Applicable Percentage • Maximum availability under the facility • Advances Outstanding • Cash reconciliation report • Discretionary Sales Calculations, Repurchase/Substitution Calculations • Compare Principal Collections and Interest Collections to the actual balances reflected by the Account BankAt the discretion of the Administrative Agent and the nationally recognized independent public accountant or other third party, three randomServicing Reports from the fiscal year will be chosen and reviewed.The report provided by the accountants may be in a format such typically utilized for a report of this nature; however, it will consist of at a minimum,(i) a list of deviations from the Servicing Report and (ii) discuss with the Servicer the reason for such deviations, and set forth the findings in suchreport. Sch. III-2SCHEDULE IVLOAN TAPEThe Borrower shall provide, with respect to each Loan Asset, as applicable, the following information:(a) Loan Asset number(b) Obligor name(c) Whether such Obligor is an Affiliate of the Servicer or Transferor(d) Loan Asset type (First Lien Loan Asset or First Lien Last-Out Loan Asset)(e) Whether such Loan Asset is a Designated Loan Asset(f) Original Loan Asset amount (par amount)(g) Purchase Price(h) Domicile(i) Initial tranche size(j) Calculation of the Net Senior Leverage Ratio as of the applicable Cut-Off Date for such Loan Asset and for the most recentRelevant Test Period(k) Calculation of the Total Net Leverage Ratio as of the applicable Cut-Off Date for such Loan Asset and for the most recentRelevant Test Period(l) Calculation of the Interest Coverage Ratio as of the applicable Cut-Off Date for such Loan Asset and for the most recent RelevantTest Period(m) Trailing twelve month EBITDA as of the applicable Cut-Off Date for such Loan Asset and for the most recent Relevant TestPeriod(n) Trailing twelve month revenue as of the applicable Cut-Off Date for such Loan Asset and for the most recent Relevant Test Period(o) Loan Asset status (whether in default or on nonaccrual status)(p) Fixed/Floating(q) Days delinquent(r) Scheduled maturity date Sch. IV-1(s) Rate of interest (and reference rate)(t) LIBOR floor (if applicable)(u) Outstanding Balance(v) Assigned Value(w) Adjusted Borrowing Value(x) Industry classification(y) Whether such Loan Asset has been subject to a Value Adjustment Event (and of what type)(z) Whether such Loan Asset has been subject to a Material Modification(aa) The Cut-Off Date for such Loan Asset(bb) PIK percentage(cc) Applicable Percentage(dd) Maintenance capital expenditure or if unavailable, a good faith approximation by the Servicer of the maintenance capitalexpenditure(ee) Cash taxes Sch. IV-2ANNEX A Conduit Lender CommitmentN/A N/AInstitutional Lender CommitmentWells Fargo Bank, National Association $200,000,000 Annex AEXHIBITSTOLOAN AND SERVICING AGREEMENTDated as of June 30, 2016(SSLP 2016-1, LLC)EXHIBITS EXHIBIT A Form of Approval NoticeEXHIBIT B Form of Borrowing Base CertificateEXHIBIT C Form of Disbursement RequestEXHIBIT D Form of Joinder SupplementEXHIBIT E Form of Notice of BorrowingEXHIBIT F Form of Notice of Reduction (Reduction of Advances Outstanding)EXHIBIT G [Reserved]EXHIBIT H Form of Certificate of Closing AttorneysEXHIBIT I Form of Servicer’s Certificate (Servicing Report)EXHIBIT J Form of Release of Required Loan DocumentsEXHIBIT K [Reserved]EXHIBIT L Form of Power of Attorney for ServicerEXHIBIT M Form of Power of Attorney for BorrowerEXHIBIT N Form of Loan Asset ChecklistEXHIBIT O Form of Notice of Lien Release DividendEXHIBIT P-1 Form of U.S. Tax Compliance Certificate (For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes)EXHIBIT P-2 Form of U.S. Tax Compliance Certificate (For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)EXHIBIT P-3 Form of U.S. Tax Compliance Certificate (For Foreign Participants That Are Partnerships For U.S. Federal Income Tax Purposes)EXHIBIT P-4 Form of U.S. Tax Compliance Certificate (For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)EXHIBIT ALOAN ASSETAPPROVAL NOTICE DATE ELIGIBLE LOAN ASSET INFORMATION Obligor Name Par Amount of Loan Asset Tranche Pricing Remaining Maturity Net Senior Leverage Ratio Interest Coverage Ratio ASSIGNED VALUE Assigned Value Applicable Percentage Purchase Price Designated Loan Asset [Yes][No] WELLS FARGO BANK, NATIONAL ASSOCIATION APPROVAL Approval Good Until Approval Conditioned Upon SUPPORTING CALCULATIONS/MISCELLANEOUS NOTES Reviewed by Telephone No. Ex. A-1EXHIBIT BFORM OF BORROWING BASE CERTIFICATE[ ][ ], 20[ ]In connection with that certain Loan and Servicing Agreement, dated as of June 30, 2016 (as amended, modified, waived, supplemented orrestated from time to time, the “Loan and Servicing Agreement”), by and among SSLP 2016-1, LLC, as the borrower (in such capacity, the “Borrower”),Senior Secured Unitranche Loan Program LLCSolar Capital Ltd., as the transferor (in such capacity, the “Transferor”), Solar Capital Ltd., as the servicer(in such capacity, the “Servicer”), Wells Fargo Bank, National Association, as the administrative agent (in such capacity, the “Administrative Agent”),each of the Conduit Lenders and Institutional Lenders from time to time party thereto (the “Lenders”), each of the Lender Agents from time to timeparty thereto (the “Lender Agents”), and Wells Fargo Bank, National Association, as the collateral agent (in such capacity, the “Collateral Agent”), asthe collateral custodian (in such capacity, the “Collateral Custodian”) and as the account bank (in such capacity, the “Account Bank”). Capitalizedterms used but not defined herein shall have the meanings provided in the Loan and Servicing Agreement.As of the date hereof, the undersigned each certify that (i) all of the information set forth in Annex I attached hereto is true, correct andcomplete in all material respects, (ii) except as otherwise disclosed to the Administrative Agent and as detailed further below, no Event of Default hasoccurred and no Unmatured Event of Default exists under the Loan and Servicing Agreement; and (iii) solely with respect to itself, each of therepresentations and warranties contained in the Loan and Servicing Agreement is true, correct and complete in all respects.EXISTING EVENT(S) OF DEFAULT [Remainder of Page Intentionally Left Blank] Ex. B-1Certified as of the date first written above. SSLP 2016-1, LLC, as the BorrowerBy: Name: Title: SOLAR CAPITAL LTD., as the ServicerBy: Name: Title:SENIOR SECURED UNITRANCHE LOANPROGRAM LLCSOLAR CAPITALLTD., as the Transferor By: Name: Title: Ex. B-2ANNEX ITo Exhibit BBORROWING BASE REPORTSEE ATTACHED Ex. B-3EXHIBIT CFORM OF DISBURSEMENT REQUEST(Disbursements from Unfunded Exposure Account and for Reinvestment of PrincipalCollections)[Date](SSLP 2016-1, LLC)Wells Fargo Bank, National Association as the Collateral Agent9062 Old Annapolis RoadColumbia, Maryland 21045Attention: CDO Trust Services – SSLP 2016-1, LLCFacsimile No: (281) 667-3933Phone No: (410) 884-2000With a copy to:Wells Fargo Bank, National Association as the Administrative AgentDuke Energy Center550 South Tryon Street, 5th FloorCharlotte, North Carolina 28202Attention: Corporate Debt FinanceFacsimile No.: (704) 715-0089Confirmation No: (704) 715-8582[Lender Agent Name and Address]Re: Loan and Servicing Agreement dated as of June 30, 2016Ladies and Gentlemen:This Disbursement Request is delivered to you pursuant to Section 2.04(d) and Section 2.20 of that certain Loan and Servicing Agreement,dated as of June 30, 2016 (as amended, modified, waived, supplemented or restated from time to time, the “Loan and Servicing Agreement”), by andamong SSLP 2016-1, LLC, as the borrower (in such capacity, the “Borrower”), Senior Secured Unitranche Loan Program LLCSolar Capital Ltd., as thetransferor (in such capacity, the “Transferor”), Solar Capital Ltd., as the servicer (in such capacity, the “Servicer”), Wells Fargo Bank, NationalAssociation, as the administrative agent (in such capacity, the “Administrative Agent”), each of the Conduit Lenders and Institutional Lenders fromtime to time party thereto (the “Lenders”), each of the Lender Agents from time to time party thereto (the “Lender Agents”), and Wells Fargo Bank,National Association, as the collateral agent (in such capacity, the “Collateral Agent”), as the collateral custodian (in such Ex. C-1capacity, the “Collateral Custodian”) and as the account bank (in such capacity, the “Account Bank”). Capitalized terms used but not defined hereinshall have the meanings provided in the Loan and Servicing Agreement.Each of the undersigned, being a duly elected Responsible Officer of the Borrower and of the Servicer, respectively, and holding the officeset forth below such officer’s name, hereby certifies as follows:[1. Pursuant to Section 2.04(d) of the Loan and Servicing Agreement, the Servicer on behalf of the Borrower hereby requests a disbursement(a “Disbursement”) from the Unfunded Exposure Account in the amount of $ to [applicable Obligor], such Disbursement to be paid asfollows:Bank Name:ABA No.:Account Name: Account No.:Reference: ][2. Pursuant to Section 2.20(a) of the Loan and Servicing Agreement, the Servicer on behalf of the Borrower hereby requests a disbursementof Principal Collections (a “Disbursement”) from the Principal Collection Account in the amount of $ to reinvest in additional Eligible LoanAssets to be Pledged under the Loan and Servicing Agreement.][3. Pursuant to Section 2.20(b) of the Loan and Servicing Agreement, the Servicer on behalf of the Borrower hereby requests a disbursementof Principal Collections (a “Disbursement”) from the Principal Collection Account in the amount of $ to make payments in respect of theAdvances Outstanding in accordance with and subject to the terms of Section 2.18 of the Loan and Servicing Agreement.]4. The Servicer on behalf of the Borrower hereby requests that such Disbursement be made on the following date: .5. In connection with a Disbursement pursuant to Section [2.20][2.04(d)] of the Loan and Servicing Agreement, attached to thisDisbursement Request is a true, correct and complete calculation of the Borrowing Base and all components thereof.6. [Other than any Disbursements from the Unfunded Exposure Account after the occurrence of an Event of Default, all] [All] of theconditions applicable to the Disbursement as set forth in the Loan and Servicing Agreement have been satisfied as of the date hereof and will remainsatisfied to the date of such Disbursement including the following:(i) The representations and warranties of each of the Servicer and the Borrower, respectively, set forth in the Loan and ServicingAgreement are true and correct in all respects on and as of such date, before and after giving effect to the Disbursement and to theapplication of the proceeds therefrom, as though made on and as of such date, except to the extent relating to an earlier date; Ex. C-2(ii) No Servicer Termination Event or Event of Default has occurred, or would result from such Disbursement or from the applicationof the proceeds therefrom, and no Unmatured Event of Default or Borrowing Base Deficiency exists or would result from suchDisbursement or from the application of the proceeds therefrom; and(iii) Each of the Servicer and the Borrower is in compliance with each of its covenants set forth in the Transaction Documents.[7. The Servicer on behalf of the Borrower hereby represents that in connection with a Disbursement pursuant to Section 2.04(d), suchDisbursement shall be used solely for the purpose of funding the Unfunded Exposure Amount(s) of one or more Delayed Draw Loan Asset included inthe Collateral Portfolio.]Each of the undersigned certify that all information contained herein and in the attached Borrowing Base Certificate, as applicable, is true, correct andcomplete in all material respects as of the date hereof.[ATTACH BORROWING BASE CERTIFICATE [AND LOAN TAPE]][Remainder of Page Intentionally Left Blank] Ex. C-3IN WITNESS WHEREOF, the undersigned have executed this Disbursement Request as of the date first written above. SSLP 2016-1, LLC, as the BorrowerBy: Name: Title: SOLAR CAPITAL LTD., as the ServicerBy: Name: Title: Ex. C-4EXHIBIT DFORM OFJOINDER SUPPLEMENTJOINDER SUPPLEMENT, dated as of the date set forth in Item 1 of Schedule I hereto, among the financial institution identified in Item 2of Schedule I hereto, SSLP 2016-1, LLC, as the borrower (the “Borrower”), the Lender Agent named in Item 5 of Schedule I hereto (the “Lender Agent”)and Wells Fargo Bank, National Association, as the administrative agent (the “Administrative Agent”).W I T N E S S E T H:WHEREAS, this Joinder Supplement is being executed and delivered under Sections 2.21 or 11.04 of the Loan and Servicing Agreement,dated as of June 30, 2016 (as amended, modified, waived, supplemented or restated from time to time, the “Loan and Servicing Agreement”), by andamong SSLP 2016-1, LLC, as the borrower (in such capacity, the “Borrower”), Senior Secured Unitranche Loan Program LLCSolar Capital Ltd., as thetransferor (in such capacity, the “Transferor”), Solar Capital Ltd., as the servicer (in such capacity, the “Servicer”), Wells Fargo Bank, NationalAssociation, as the administrative agent (in such capacity, the “Administrative Agent”), each of the Conduit Lenders and Institutional Lenders fromtime to time party thereto (the “Lenders”), each of the Lender Agents from time to time party thereto (the “Lender Agents”), Wells Fargo Bank, NationalAssociation as the collateral agent (in such capacity, the “Collateral Agent”), as the collateral custodian (in such capacity, the “Collateral Custodian”)and as the account bank (in such capacity, the “Account Bank”). Capitalized terms used but not defined herein shall have the meanings provided in theLoan and Servicing Agreement; andWHEREAS, the party set forth in Item 2 of Schedule I hereto (the “Proposed Lender”) wishes to become a Lender designated as a[n][Conduit Lender] [Institutional Lender] party to the Loan and Servicing Agreement;NOW, THEREFORE, the parties hereto hereby agree as follows:(a) Upon receipt by the Administrative Agent of an executed counterpart of this Joinder Supplement, to which is attached a fully completedSchedule I and Schedule II, each of which has been executed by the Proposed Lender, the Borrower, the Lender Agent, the Administrative Agentand the Collateral Agent, the Administrative Agent will transmit to the Proposed Lender, the Borrower, the Collateral Agent and the LenderAgent, a Joinder Effective Notice, substantially in the form of Schedule III to this Joinder Supplement (a “Joinder Effective Notice”). SuchJoinder Effective Notice shall be executed by the Administrative Agent and shall set forth, inter alia, the date on which the joinder effected bythis Joinder Supplement shall become effective (the “Joinder Effective Date”). From and after the Joinder Effective Date, the Proposed Lendershall be a Lender designated as a[n] [Conduit Lender][Institutional Lender] party to the Loan and Servicing Agreement for all purposes thereof. Ex. D-1(b) Each of the parties to this Joinder Supplement agrees and acknowledges that at any time and from time to time upon the written requestof any other party, it will execute and deliver such further documents and do such further acts and things as such other party may reasonablyrequest in order to effect the purposes of this Joinder Supplement.(c) By executing and delivering this Joinder Supplement, the Proposed Lender confirms to and agrees with the Administrative Agent, theCollateral Agent, the Lender Agents and the other Lender(s) as follows: (i) none of the Administrative Agent, the Collateral Agent, the LenderAgents and the other Lender(s) makes any representation or warranty or assumes any responsibility with respect to any statements, warranties orrepresentations made in or in connection with the Loan and Servicing Agreement or the execution, legality, validity, enforceability, genuineness,sufficiency or value of the Loan and Servicing Agreement or any other instrument or document furnished pursuant thereto or the CollateralPortfolio or the financial condition of the Transferor, the Servicer or the Borrower, or the performance or observance by the Transferor, theServicer or the Borrower of any of their respective obligations under the Loan and Servicing Agreement, any other Transaction Document or anyother instrument or document furnished pursuant thereto; (ii) the Proposed Lender confirms that it has received a copy of such documents andinformation as it has deemed appropriate to make its own credit analysis and decision to enter into this Joinder Supplement; (iii) the ProposedLender will, independently and without reliance upon the Administrative Agent, the Collateral Agent, the Lender Agents or any other Lenderand based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or nottaking action under the Loan and Servicing Agreement; (iv) the Proposed Lender appoints and authorizes the Lender Agent to take such actionas agent on its behalf and to exercise such powers under the Loan and Servicing Agreement as are delegated to the Lender Agent by the termsthereof, together with such powers as are reasonably incidental thereto, all in accordance with Article IX of the Loan and Servicing Agreement;(v) the Proposed Lender appoints and authorizes the Administrative Agent, the Collateral Custodian and the Collateral Agent, as applicable, totake such action as agent on its behalf and to exercise such powers under the Loan and Servicing Agreement as are delegated to theAdministrative Agent, the Collateral Custodian and Collateral Agent, as applicable, by the terms thereof, together with such powers as arereasonably incidental thereto, all in accordance with the Loan and Servicing Agreement; and (vi) the Proposed Lender agrees (for the benefit ofthe parties hereto and the other Lender(s)) that it will perform in accordance with their terms all of the obligations which by the terms of the Loanand Servicing Agreement are required to be performed by it as a Lender designated as a[n] [Conduit Lender][Institutional Lender].(d) By executing and delivering this Joinder Supplement, the Proposed Lender certifies that we are a “qualified purchaser” under the 1940Act, and have such knowledge and experience in financial and business matters that we are capable of evaluating the merits and risks ofinvestments herein. Ex. D-2(e) Schedule II hereto sets forth administrative information with respect to the Proposed Lender.(f) This Joinder Supplement shall be governed by, and construed in accordance with, the laws of the State of New York.IN WITNESS WHEREOF, the parties hereto have caused this Joinder Supplement to be executed by their respective duly authorizedofficers on Schedule I hereto as of the date set forth in Item 1 of Schedule I hereto. Ex. D-3SCHEDULE I TOJOINDER SUPPLEMENTCOMPLETION OF INFORMATION ANDSIGNATURES FOR JOINDER SUPPLEMENT Re:Loan and Servicing Agreement, dated as of June 30, 2016, among SSLP 2016-1, LLC, as Borrower, the other parties thereto and WellsFargo Bank, National Association, as Administrative Agent. Item 1:   Date of Joinder Supplement: Item 2:   Proposed Lender: Item 3:   Type of Lender: Conduit Lender Institutional LenderItem 4:   Commitment:      Commitment Termination Date: Item 5:   Name of Lender Agent (if a Conduit Lender): Item 6:   Signatures of Parties to Agreement: ,as Proposed Lender By: Name: Title: ,as Proposed Lender Agent By: Name: Title: Ex. D-4SSLP 2016-1, LLC,as BorrowerBy: Name: Title: WELLS FARGO BANK, NATIONALASSOCIATION,as Administrative AgentBy: Name: Title: WELLS FARGO BANK, NATIONALASSOCIATION,as Collateral AgentBy: Name: Title: [NAME OF LENDER AGENT][NAME OFINSTITUTIONAL LENDER],as [Lender Agent][Institutional Lender]By: Name: Title: Ex. D-5[NAME OF CONDUIT LENDER], as[Conduit Lender]By: Name: Title: Ex. D-6SCHEDULE II TOJOINDER SUPPLEMENTADDRESS FOR NOTICESANDWIRE INSTRUCTIONS Address for Notices: Telephone: Facsimile: email: With a copy to: Telephone: Facsimile: email: Wire Instructions: Name of Bank: A/C No.: ABA No.: Reference: Ex. D-7SCHEDULE III TOJOINDER SUPPLEMENTFORM OFJOINDER EFFECTIVE NOTICE To:[Name and address of the Borrower, Collateral Agent, Lender Agent and Proposed Lender]The undersigned, as Administrative Agent under the Loan and Servicing Agreement, dated as of June 30, 2016 (as amended, modified,waived, supplemented or restated from time to time, the “Loan and Servicing Agreement”), by and among SSLP 2016-1, LLC, as the borrower (in suchcapacity, the “Borrower”), Senior Secured Unitranche Loan Program LLCSolar Capital Ltd., as the transferor (in such capacity, the “Transferor”), SolarCapital Ltd., as the servicer (in such capacity, the “Servicer”), Wells Fargo Bank, National Association, as the administrative agent (in such capacity,the “Administrative Agent”), each of the Conduit Lenders and Institutional Lenders from time to time party thereto (the “Lenders”), each of the LenderAgents from time to time party thereto (the “Lender Agents”), Wells Fargo Bank, National Association, as the collateral agent (in such capacity, the“Collateral Agent”), the collateral custodian (in such capacity, the “Collateral Custodian”) and as the account bank (in such capacity, the “AccountBank”). [Note: attach copies of Schedules I and II from such Joinder Supplement.] Terms defined in such Joinder Supplement are used herein as thereindefined.Pursuant to such Joinder Supplement, you are advised that the Joinder Effective Date for [Name of Proposed Lender] willbe and such Proposed Lender will be a Lender designated as a[n] [Conduit Lender] [Institutional Lender] with a Commitment of . Very truly yours,WELLS FARGO BANK, NATIONAL ASSOCIATION, asAdministrative AgentBy: Name: Title: Ex. D-8EXHIBIT EFORM OF NOTICE OF BORROWINGNOTICE OF BORROWING[Date](SSLP 2016-1, LLC) To:Wells Fargo Bank, National Associationas the Administrative Agent Wells Fargo Bank, National Associationas the Collateral CustodianDuke Energy Center550 South Tryon Street, 5th FloorCharlotte, North Carolina 28202Attention: Corporate Debt FinanceFacsimile No: (704) 715-0089Confirmation No: (704) 715-8582 9062 Old Annapolis RoadColumbia, Maryland 21045Attention: CDO Trust Services –SSLP 2016-1, LLCFacsimile No: (281) 667-3933Phone No: (410) 884-2000[Lender Agent Name and Address] With a copy to: With a copy to:Wells Fargo Bank, National Associationas the Collateral Agent Wells Fargo Bank, National Association as theAccount Bank9062 Old Annapolis RoadColumbia, Maryland 21045Attention: CDO Trust Services –SSLP 2016-1, LLCFacsimile No: (281) 667-3933Phone No: (410) 884-2000 9062 Old Annapolis RoadColumbia, Maryland 21045Attention: CDO Trust Services –SSLP 2016-1, LLCFacsimile No: (281) 667-3933Phone No: (410) 884-2000Re: Loan and Servicing Agreement, dated as of June 30, 2016Ladies and Gentlemen:This Notice of Borrowing is delivered to you pursuant to Sections 2.02 and 3.02 of that certain Loan and Servicing Agreement,dated as of June 30, 2016 (as amended, modified, Ex. E-1waived, supplemented or restated from time to time, the “Loan and Servicing Agreement”), by and among SSLP 2016-1, LLC, as the borrower (in suchcapacity, the “Borrower”), Senior Secured Unitranche Loan Program LLCSolar Capital Ltd., as the transferor (in such capacity, the “Transferor”), SolarCapital Ltd., as the servicer (in such capacity, the “Servicer”), Wells Fargo Bank, National Association, as the administrative agent (in such capacity,the “Administrative Agent”), each of the Conduit Lenders and Institutional Lenders from time to time party thereto (the “Lenders”), each of the LenderAgents from time to time party thereto (the “Lender Agents”), Wells Fargo Bank, National Association, as the collateral agent (in such capacity, the“Collateral Agent”), as the collateral custodian (in such capacity, the “Collateral Custodian”) and as the account bank (in such capacity, the “AccountBank”). Capitalized terms used but not defined herein shall have the meanings provided in the Loan and Servicing Agreement.Each of the undersigned, being a duly elected Responsible Officer of the Borrower and of the Servicer, respectively, and holding the office setforth below such officer’s name, hereby certifies as follows:1. [The Borrower hereby requests an Advance in the principal amount of $ to purchase Eligible Loan Assets.(i) Wells Fargo’s Pro Rata Share of such requested Advance is .(ii) [Conduit/Institutional Lender’s] Pro Rata Share of such requested Advance is $ .]2. [The Borrower hereby requests an Advance in the principal amount of $ (such amount not to exceed the limits noted in Section 2.04(d) ofthe Loan and Servicing Agreement) to deposit in the Unfunded Exposure Account. Such Advance shall be deposited in the Unfunded ExposureAccount as follows:Bank Name:ABA No.:Account Name:Account No.: Reference:(i) Wells Fargo’s Pro Rata Share of such requested Advance is $ .(ii) [Conduit/Institutional Lender’s] Pro Rata Share of such requested Advance is $ .]3. [Pursuant to Section 2.02(f) of the Loan and Servicing Agreement, the Borrower hereby requests an Advance in the principal amount of$ (such amount, the “Unfunded Exposure Amount Shortfall”). The Unfunded Exposure Amount Shortfall shall be deposited in the UnfundedExposure Account as follows: Ex. E-2Bank Name:ABA No.:Account Name:Account No.: Reference:(i) Wells Fargo’s Pro Rata Share of such requested Advance is $ .(ii) [Conduit/Institutional Lender’s] Pro Rata Share of such requested Advance is $ .]4. The Borrower hereby requests that such Advance be made on the following date: .5. Attached to this Notice of Borrowing is a true, correct and complete calculation of the Borrowing Base and all components thereof.6. Attached to this Notice of Borrowing is a true, correct and complete list of all Loan Assets which will become part of the CollateralPortfolio on the date hereof, each Loan Asset reflected thereon being an Eligible Loan Asset.[7. In connection with such Advance, the Transferor shall deposit $ into the Unfunded Exposure Account in connection with anyDelayed Draw Loan Asset funded by such Advance.]8. All of the conditions applicable to the Advance requested herein as set forth in the Loan and Servicing Agreement have been satisfied asof the date hereof and will remain satisfied to the date of such Advance, including those set forth in Article III of the Loan and Servicing Agreement,and the following:(i) The representations and warranties of each of the Servicer and the Borrower, respectively, set forth in the Loan and ServicingAgreement are true and correct in all respects on and as of such date, before and after giving effect to such Advance and to theapplication of the proceeds therefrom, as though made on and as of such date (other than any representation or warranty that ismade as of a specific date);(ii) No Event of Default has occurred, or would result from such Advance, and no Unmatured Event of Default or Borrowing BaseDeficiency exists or would result from such Advance;(iii) No event has occurred and is continuing, or would result from such Advance, which constitutes a Servicer Termination Eventor any event Ex. E-3which, if it continues uncured, will, with notice or lapse of time, constitute a Servicer Termination Event; and(iv) Each of the Servicer and the Borrower, respectively, is in compliance with each of its covenants set forth in the TransactionDocuments.(v) No Liens (other than Permitted Liens) exist in respect of Taxes which are prior to the lien of the Collateral Agent on the EligibleLoan Assets to be Pledged on such Advance Date.9. Each of the undersigned certify that all information contained herein and in the attached Borrowing Base Certificate is true, correct andcomplete as of the date hereof.[ATTACH BORROWING BASE CERTIFICATE AND LOAN TAPE] Ex. E-4IN WITNESS WHEREOF, the undersigned have executed this Notice of Borrowing as of the date first written above. SSLP 2016-1, LLC, as the BorrowerBy: Name: Title: SOLAR CAPITAL LTD., as the ServicerBy: Name:Title: Ex. E-5EXHIBIT FFORM OF NOTICE OF REDUCTION(Reduction of Advances Outstanding)[Date](SSLP 2016-1, LLC)Wells Fargo Bank, National Association,as the Administrative AgentDuke Energy Center550 South Tryon Street, 5th FloorCharlotte, North Carolina 28202Attention: Corporate Debt FinanceFacsimile No.: (704) 715-0089Confirmation No: (704) 715-8582[Lender Agent Name and Address]Wells Fargo Bank, National Association,as the Collateral Agent9062 Old Annapolis RoadColumbia, Maryland 21045Attention: CDO Trust Services – SSLP 2016-1, LLCFacsimile No: (281) 667-3933Phone No: (410) 884-2000Re: Loan and Servicing Agreement, dated as of June 30, 2016Ladies and Gentlemen:This Notice of Reduction is delivered to you pursuant to Section 2.18 of that certain Loan and Servicing Agreement, dated as of June 30, 2016(as amended, modified, waived, supplemented or restated from time to time, the “Loan and Servicing Agreement”), by and among SSLP 2016-1, LLC,as the borrower (in such capacity, the “Borrower”), Senior Secured Unitranche Loan Program LLCSolar Capital Ltd., as the transferor (in such capacity,the “Transferor”), Solar Capital Ltd., as the servicer (in such capacity, the “Servicer”), Wells Fargo Bank, National Association, as the administrativeagent (in such capacity, the “Administrative Agent”), each of the Conduit Lenders and Institutional Lenders from time to time party thereto (the“Lenders”), each of the Lender Agents from time to time party thereto (the “Lender Agents”), Wells Fargo Bank, National Association, as the collateralagent (in such capacity, the “Collateral Agent”), as the collateral custodian (in such capacity, the “Collateral Custodian”) and as the account bank (insuch capacity, the “Account Bank”). Capitalized terms used but not defined herein shall have the meanings provided in the Loan and ServicingAgreement. EX.F-1Each of the undersigned, being a duly elected Responsible Officer of the Borrower and of the Servicer, respectively, and holding the officeset forth below such officer’s name, hereby certifies as follows:1[(a)]. [Pursuant to Section 2.18(a) of the Loan and Servicing Agreement, the Servicer on behalf of the Borrower desires to reduce theAdvances Outstanding (an “Advance Reduction”) by the amount of $ as follows:(i) Wells Fargo’s portion (reduction is pro rata based on Advances Outstanding) of such requested Advance Reduction is $ .(ii) [Conduit/Institutional Lender’s] portion (reduction is pro rata based on Advances Outstanding) of such requested AdvanceReduction is $ .][[(b)]. Pursuant to Section 2.18(b) of the Loan and Servicing Agreement, the Servicer on behalf of the Borrower desires to reduce theMaximum Facility Amount (a “Facility Reduction”) by the amount of $ as follows:(i) Wells Fargo’s portion (reduction is pro rata based on Maximum Facility Amount) of such requested Facility Reduction is$ .(ii) [Conduit/Institutional Lender’s] portion (reduction is pro rata based on Maximum Facility Amount) of such requested FacilityReduction is $ .]2. The Servicer on behalf of the Borrower hereby requests that [such Advance Reduction] [and] [such Facility Reduction] be made on thefollowing date: 3. Attached to this Notice of Reduction is a true, correct and complete calculation of the Borrowing Base and all components thereof.4. The Servicer, on behalf of the Borrower, hereby represents that no event would result from [such Advance Reduction] [and] [suchFacility Reduction], which constitutes an Event of Default or Unmatured Event of Default.Each of the undersigned certify that all information contained herein and in the attached Borrowing Base Certificate is true and correct asof the date hereof.[ATTACH BORROWING BASE CERTIFICATE][Remainder of Page Intentionally Left Blank] EX.F-2IN WITNESS WHEREOF, the undersigned have executed this Notice of Reduction as of the date first written above. SSLP 2016-1, LLC, as the BorrowerBy: Name:Title: SOLAR CAPITAL LTD., as the ServicerBy: Name:Title: Ex. F-3EXHIBIT G[RESERVED] Ex. G-1EXHIBIT HFORM OF CERTIFICATE OF CLOSING ATTORNEYS[ ][ ], 20[ ]Wells Fargo Bank, National Associationas the Collateral Custodian9062 Old Annapolis RoadColumbia, Maryland 21045Attention: CDO Trust Services – SSLP 2016-1, LLCFacsimile No: (281) 667-3933Phone No: (410) 884-2000With a copy to:Wells Fargo Bank, National Associationas the Administrative AgentDuke Energy Center550 South Tryon Street, 5th FloorCharlotte, North Carolina 28202Attention: Corporate Debt FinanceFacsimile No.: (704) 715-0089Confirmation No: (704) 715-8582 Re:Loan Assets in the aggregate principal amount of $ (collectively, the “Loan Assets”) made to [Name of Obligor] (the “Obligor”)To Whom It May Concern:In connection with the Loan Assets, the undersigned (i) acknowledges that SSLP 2016-1, LLC, has granted a security interest to Wells FargoBank, National Association (the “Collateral Agent”), for the benefit of the Secured Parties, in each of the items indicated on the closing checklistattached hereto (the “Checklist”), and (ii) certifies to you as of the day of funding the Loan Assets as to the matters set forth below. Reference is madeherein to the Loan and Servicing Agreement, dated as of June 30, 2016 (as amended, modified, waived, supplemented or restated from time to time, the“Loan and Servicing Agreement”), by and among SSLP 2016-1, LLC, as the borrower (in such capacity, the “Borrower”), Senior Secured UnitrancheLoan Program LLCSolar Capital Ltd., as the transferor (in such capacity, the “Transferor”), Solar Capital Ltd., as the servicer (in such capacity, the“Servicer”), Wells Fargo Bank, National Association, as the administrative agent (in such capacity, the “Administrative Agent”), each of the ConduitLenders and Institutional Lenders from time to time party thereto (the “Lenders”), each of the Lender Agents from time to time party thereto (the“Lender Agents”), Wells Fargo Bank, National Association, as the collateral agent (in such capacity, the “Collateral Agent”), as the collateral custodian(in such capacity, the “Collateral Custodian”) and Ex. H-1as the account bank (in such capacity, the “Account Bank”). Capitalized terms used but not defined herein shall have the meanings provided in theLoan and Servicing Agreement.A. It has received and reviewed the Checklist items, in the form and subject to those exceptions or matters indicated on the Checklist inconnection with acting as closing counsel for the Loan Assets;B. If a promissory note was executed in connection with the Loan Asset, a copy of the executed promissory note has been faxed to the CollateralCustodian. The original promissory note(s) is/are in our possession and will be forwarded to the Collateral Custodian or as otherwise directed in writingto (hereinafter referred to as “Outside Counsel”) by the Collateral Custodian or the Administrative Agent on its behalf, for receipt within fiveBusiness Days after the funding date of the transaction;C. Within five Business Days after the closing, all remaining Required Loan Documents (under and as defined in the Loan and ServicingAgreement) which are in our possession and are indicated on Schedule 1 attached hereto, will be forwarded to the Collateral Custodian; andD. Notwithstanding any contrary instruction from [the Transferor][,] [insert other applicable assignor(s)] or the Borrower, in the event the LoanAsset is funded, it will follow the written direction of the Collateral Custodian or the Administrative Agent on its behalf, with regard to the originalpromissory note(s) in its possession, provided that in the event it reasonably believes that a dispute exists as to custody of any Required LoanDocuments, it may deposit them with a court of competent jurisdiction and be relieved of its obligations hereunder with respect to any and alldocuments so deposited.The Collateral Custodian, the Collateral Agent, the Administrative Agent, [the Transferor][,] [insert other applicable assignor(s)], the Borrowerand Outside Counsel acknowledge and agree that:1. The security interest and the rights in the Required Loan Documents granted to the Collateral Agent, for the benefit of the Secured Parties, areparamount and superior to the rights of [the Transferor][,] [insert other applicable assignor(s)] and the Borrower.2. Outside Counsel shall not be required to perform any duties other than the duties expressly set forth in this letter. No implied obligations orduties shall be inferred by any other agreement, written or verbal, or any representation made by any party.3. Outside Counsel is authorized to comply with and obey laws, orders, judgments, decrees and regulations of any governmental authority, court,tribunal or arbitrator. If Outside Counsel complies with any such law, order, judgment, decree or regulation Outside Counsel shall not be liable to theCollateral Custodian, the Collateral Agent, the Administrative Agent, [the Transferor][,] [insert other applicable assignor(s)] or the Borrower or to anyother person even if such law, order, judgment, decree or regulation is subsequently reversed, Ex. H-2modified, annulled, set aside, vacated, found to have been entered without jurisdiction, or found to be in violation or beyond the scope of the law.4. Outside Counsel shall be responsible hereunder solely to hold the original promissory note(s) for the account of the Collateral Agent, onbehalf of the Secured Parties and to deliver the original promissory note(s) and the other relevant documents to the Collateral Custodian in accordancewith the terms of this letter.5. Outside Counsel may act relative hereto upon the advice of counsel in reference to any matter in connection herewith and shall not be liablefor any mistakes of fact or errors of judgment, or for any acts or omissions of any kind unless caused by its own willful misconduct or gross negligence.6. Outside Counsel shall be entitled to rely or act upon any notice, direction, instrument or document believed by Outside Counsel to be genuineand to be executed and delivered by the proper person and shall have no obligation to verify any statements contained in any notice, instrument ordocument or the accuracy or due authorization of the execution of any notice, instrument or document.7. Outside Counsel shall not be responsible or liable in any manner whatsoever for (a) the sufficiency, correctness, genuineness or validity of anydocument, agreement or instrument delivered to it, (b) the form of execution of any such document, agreement or instrument, (c) the identity, authorityor rights of any person executing or delivering any such document, agreement or instrument, or (d) the terms and conditions of any instrument pursuantto which the parties may act.8. Outside Counsel may serve and shall continue to serve as counsel to [the Transferor][,] [insert other applicable assignor(s)] in connection withthe transactions contemplated by the Collateral Portfolio and other matters, and notwithstanding anything herein to the contrary, may represent [theTransferor][,] [insert other applicable assignor(s)] (or any affiliate) as its counsel in any action, suit or other proceeding in which the CollateralCustodian, the Collateral Agent, the Administrative Agent or [the Transferor][,] [insert other applicable assignor(s)] (or any affiliate) may be involved.9. Outside Counsel shall be deemed to have satisfied any delivery requirement set forth herein if it shall have deposited the relevant documentsfor uninsured overnight delivery (properly addressed) with FedEx, UPS or other overnight courier of national standing. Very truly yours, By: Name:Title: Ex. H-3 ACCEPTED AND AGREED: SOLAR CAPITAL LTD., as the Servicer By: Name:Title: SENIOR SECURED UNITRANCHE LOAN PROGRAM LLCSOLAR CAPITAL LTD., as the Transferor By: Name:Title: WELLS FARGO BANK, NATIONAL ASSOCIATION, as the Collateral Agent, the Collateral Custodian and as the Account Bank By: Name:Title: WELLS FARGO BANK, NATIONAL ASSOCIATION, as the Administrative AgentBy: Name:Title: Ex. H-4 SSLP 2016-1, LLC, as the Borrower By: Name:Title: [insert other applicable assignor(s)], as an assignor By: Name:Title: Ex. H-5SCHEDULE 1to Certificateof Closing AttorneysLIST OF REQUIRED LOAN DOCUMENTS Ex. H-6EXHIBIT IFORM OF SERVICER’S CERTIFICATE(SERVICING REPORT)SERVICER’S CERTIFICATE(SERVICING REPORT)[ ][ ], 20[ ]This Servicer’s Certificate is delivered pursuant to the provisions of Section 6.08(c) of the Loan and Servicing Agreement, dated as of June 30,2016 (as amended, modified, waived, supplemented or restated from time to time, the “Loan and Servicing Agreement”), by and among SSLP 2016-1,LLC, as the borrower (in such capacity, the “Borrower”), Senior Secured Unitranche Loan Program LLCSolar Capital Ltd., as the transferor (in suchcapacity, the “Transferor”), Solar Capital Ltd., as the servicer (in such capacity, the “Servicer”), Wells Fargo Bank, National Association, as theadministrative agent (in such capacity, the “Administrative Agent”), each of the Conduit Lenders and Institutional Lenders from time to time partythereto (the “Lenders”), each of the Lender Agents from time to time party thereto (the “Lender Agents”), Wells Fargo Bank, National Association, asthe collateral agent (in such capacity, the “Collateral Agent”), as the collateral custodian (in such capacity, the “Collateral Custodian”) and as theaccount bank (in such capacity, the “Account Bank”). Capitalized terms used and not otherwise defined herein shall have the meanings provided in theLoan and Servicing Agreement. This Servicer’s Certificate relates to the Servicing Report set forth on the attached Schedule A.A. Solar Capital Ltd. is the Servicer under the Loan and Servicing Agreement.B. The undersigned hereby certifies to the Administrative Agent, the Collateral Agent, the Lenders, the Lender Agents and the otherSecured Parties that, as of the date hereof, no Event of Default has occurred and no Unmatured Event of Default exists (other than any Event ofDefault or Unmatured Event of Default which has been previously disclosed to the Administrative Agent as such).C. The undersigned hereby certifies to the Administrative Agent, the Collateral Agent, the Lenders, the Lender Agents and the otherSecured Parties that, as of the date hereof, each of the representations and warranties by the Servicer contained in the Loan and ServicingAgreement is true, correct and complete in all respects (other than any representation or warranty that is made as of a specific date).D. The undersigned hereby certifies to the Administrative Agent, the Collateral Agent, the Lenders, the Lender Agents and the otherSecured Parties that all of the foregoing information and all of the information set forth on the attached Schedule A is accurate, true and correct inall material respects as of the date hereof; provided that, solely with respect to information provided to the Servicer from an Obligor with respectto a Loan Asset, such information is accurate, true and correct in all material respects to Ex. I-1the knowledge of the Servicer; provided further that the foregoing proviso shall not apply except to the extent the information is derived frominformation provided to the Servicer from an Obligor with respect to a Loan Asset.[Remainder of Page Left Intentionally Blank] Ex. I-2IN WITNESS WHEREOF, the undersigned has caused this Servicer’s Certificate to be duly executed as of the date first written above. SOLAR CAPITAL LTD., as the ServicerBy: Name:Title: Ex. I-3SCHEDULE Ato Exhibit ISERVICING REPORT(See attached) Ex. I-4EXHIBIT JFORM OF RELEASE OF REQUIRED LOAN DOCUMENTS[Delivery Date]Wells Fargo Bank, National Associationas the Collateral Custodian9062 Old Annapolis RoadColumbia, Maryland 21045Attention: CDO Trust Services – SSLP 2016-1, LLCFacsimile No: (281) 667-3933Phone No: (410) 884-2000With a copy to:Wells Fargo Bank, National Associationas the Administrative AgentDuke Energy Center550 South Tryon Street, 5th FloorCharlotte, North Carolina 28202Attention: Corporate Debt FinanceFacsimile No.: (704) 715-0089Confirmation No: (704) 715-8582 Re:Loan and Servicing Agreement, dated as of June 30, 2016 (as amended, modified, waived, supplemented or restated from time to time, the“Loan and Servicing Agreement”), by and among SSLP 2016-1, LLC, as the borrower (in such capacity, the “Borrower”), Senior SecuredUnitranche Loan Program LLCSolar Capital Ltd., as the transferor (in such capacity, the “Transferor”), Solar Capital Ltd., as the servicer (insuch capacity, the “Servicer”), Wells Fargo Bank, National Association, as the administrative agent (in such capacity, the “AdministrativeAgent”), each of the Conduit Lenders and Institutional Lenders from time to time party thereto (the “Lenders”), each of the Lender Agentsfrom time to time party thereto (the “Lender Agents”), Wells Fargo Bank, National Association, as the collateral agent (in such capacity, the“Collateral Agent”), as the collateral custodian (in such capacity, the “Collateral Custodian”) and as the account bank (in such capacity,the “Account Bank”).Ladies and Gentlemen:In connection with the administration of the Required Loan Documents held by Wells Fargo Bank, National Association as the CollateralCustodian, for the benefit of the Secured Parties, under the Loan and Servicing Agreement, we request the release of the Required Loan Documents (orsuch documents as specified below) for the Loan Assets described Ex. J-5below, for the reason indicated. All capitalized terms used but not defined herein shall have the meaning provided in the Loan and ServicingAgreement.Obligor’s Name, Address & Zip Code:Loan Asset Number:Loan Asset File:Reason for Requesting Documents (check one) 1. Loan Asset paid in full. (The Servicer hereby certifies that all amounts received in connection with such Loan Asset have been credited tothe Collection Account.) 2. Loan Asset liquidated by . (The Servicer hereby certifies that all proceeds of foreclosure, insurance, condemnation orother liquidation have been finally received and credited to the Collection Account.) 3. Loan Asset in foreclosure. 4. Loan Asset released pursuant to a Lien Release Dividend or sold or substituted in accordance with the applicable provisions of Section 2.07. 5. Loan Asset returned due to a failure to satisfy the Review Criteria pursuant to Section 12.02(b)(i). 6. Other (explain).If box 1 or 2 above is checked, and if all or part of the Required Loan Documents were previously released to us, please release to us the Required LoanDocuments, requested in our previous request and receipt on file with you, as well as any additional documents in your possession relating to thespecified Loan Asset.[Remainder of Page Left Intentionally Blank] Ex. J-6 SOLAR CAPITAL LTD., as the ServicerBy: Name:Title:Date: Ex. J-7EXHIBIT K[RESERVED] Ex. K-1EXHIBIT LFORM OF POWER OF ATTORNEYSOLAR CAPITAL LTD.This Power of Attorney (the “Power of Attorney”) is executed and delivered by Solar Capital Ltd., as the Transferor and as the Servicer under theLoan and Servicing Agreement (each as defined below), to Wells Fargo Bank, National Association, as the [Collateral Agent]/[Administrative Agent]under the Loan and Servicing Agreement (in such capacity, the “Attorney”), pursuant to that certain Loan and Servicing Agreement, dated as ofJune 30, 2016 (as amended, modified, waived, supplemented or restated from time to time, the “Loan and Servicing Agreement”), by and among SSLP2016-1, LLC, as the borrower (in such capacity, the “Borrower”), Senior Secured Unitranche Loan Program LLCSolar Capital Ltd., as the transferor (insuch capacity, the “Transferor”), Solar Capital Ltd., as the servicer (in such capacity, the “Servicer”), Wells Fargo Bank, National Association, as theadministrative agent (in such capacity, the “Administrative Agent”), each of the Conduit Lenders and Institutional Lenders from time to time partythereto (the “Lenders”), each of the Lender Agents from time to time party thereto (the “Lender Agents”), Wells Fargo Bank, National Association, asthe collateral agent (in such capacity, the “Collateral Agent”), as the collateral custodian (in such capacity, the “Collateral Custodian”) and as theaccount bank (in such capacity, the “Account Bank”). Capitalized terms used but not defined herein shall have the meanings provided in the Loan andServicing Agreement.No person to whom this Power of Attorney is presented, as authority for Attorney to take any action or actions contemplated hereby, shall inquireinto or seek confirmation from Servicer as to the authority of Attorney to take any action described below, or as to the existence of or fulfillment of anycondition to this Power of Attorney, which is intended to grant to Attorney unconditionally the authority to take and perform the actions contemplatedherein, and Servicer irrevocably waives any right to commence any suit or action, in law or equity, against any person or entity that acts in relianceupon or acknowledges the authority granted under this Power of Attorney. The power of attorney granted hereby is coupled with an interest and maynot be revoked or canceled by Servicer until all obligations of the Borrower under the Transaction Documents have been indefeasibly paid in full andAttorney has provided its written consent thereto (which consent shall not be unreasonably withheld or delayed).Solar Capital Ltd., as the Servicer, hereby irrevocably constitutes and appoints Attorney (and all officers, employees or agents designated byAttorney), solely in connection with the enforcement of the rights and remedies of the Administrative Agent, the Collateral Agent, the Lenders, theLender Agents and the other Secured Parties under the Loan and Servicing Agreement and in connection with notifying Obligors of the SecuredParties’ interest in the Collateral Portfolio pursuant to Section 5.01(aa) of the Loan and Servicing Agreement, with full power of substitution, as its trueand lawful attorney-in-fact with full irrevocable power and authority in the Servicer’s place and stead and at the Servicer’s expense and in theServicer’s name or in Attorney’s own name, from time to time in Attorney’s discretion, to take any and all appropriate action and to execute and deliverany and all documents and instruments that may be EX L-1necessary or desirable to exercise the rights of the Servicer under the Loan and Servicing Agreement and the other Transaction Documents, and,without limiting the generality of the foregoing, hereby grants to Attorney the power and right, on its behalf, without notice to or assent by it, to do thefollowing in connection with exercising the rights of the Servicer under the Loan and Servicing Agreement: (a) open mail for Servicer, and ask,demand, collect, give acquittances and receipts for, take possession of, or endorse and receive payment of, any checks, drafts, notes, acceptances, orother instruments for the payment of moneys due, and sign and endorse any invoices, freight or express bills, bills of lading, storage or warehousereceipts, drafts against debtors, assignments, verifications, and notices, in each case in connection with the Collateral Portfolio; (b) effect any repairs toany of the Collateral Portfolio, or continue or obtain any insurance with respect to the Collateral Portfolio and pay all or any part of the premiumstherefor and costs thereof, and make, settle and adjust all claims under such policies of insurance, and make all determinations and decisions withrespect to such policies; (c) pay or discharge any taxes, Liens, or other encumbrances levied or placed on or threatened against the Collateral Portfolio;(d) to the extent related to the Collateral Portfolio and the transactions contemplated by the Transaction Documents, defend any suit, action orproceeding brought against Servicer with respect to the Collateral Portfolio if Servicer does not defend such suit, action or proceeding or if Attorneyreasonably believes that it is not pursuing such defense in a manner that will maximize the recovery to Attorney with respect to the Collateral Portfolio,and settle, compromise or adjust any suit, action, or proceeding described above and, in connection therewith, give such discharges or releases asAttorney may deem appropriate; (e) file or prosecute any claim, litigation, suit or proceeding in any court of competent jurisdiction or before anyarbitrator, or take any other action otherwise deemed appropriate by Attorney for the purpose of collecting any and all such moneys due to Servicerwith respect to the Collateral Portfolio whenever payable and to enforce any other right in respect of the Collateral Portfolio; (f) sell, transfer, pledge,make any agreement with respect to, or otherwise deal with the Collateral Portfolio, and execute, in connection with such sale or action, anyendorsements, assignments or other instruments of conveyance or transfer in connection therewith; (g) to give any necessary receipts or acquittance foramounts collected or received under the Loan and Servicing Agreement; (h) to make all necessary transfers of the Collateral Portfolio in connectionwith any such sale or other disposition made pursuant to the Loan and Servicing Agreement; (i) to execute and deliver for value all necessary orappropriate bills of sale, assignments and other instruments in connection with any such sale or other disposition of the Collateral Portfolio, theServicer hereby ratifying and confirming all that such Attorney (or any substitute) shall lawfully do or cause to be done hereunder and pursuant hereto;(j) to send such notification forms as the Attorney deems appropriate to give notice to Obligors of the Secured Parties’ interest in the CollateralPortfolio; (k) to sign any agreements, orders or other documents in connection with or pursuant to any Transaction Document; and (l) to cause thecertified public accountants then engaged by the Servicer to prepare and deliver to the Attorney at any time and from time to time, promptly uponAttorney’s request, any reports required to be prepared by or on behalf of the Servicer or Borrower under the Transaction Documents, all as thoughAttorney were the absolute owner of the Collateral Portfolio for all purposes, and to do, at Attorney’s option and Servicer’s expense, at any time or fromtime to time, all acts and other things that Attorney reasonably deems necessary to perfect, preserve or realize upon the Collateral Portfolio and theLiens of the Collateral Agent, for benefit of the Secured Parties, thereon (including without limitation the execution and filing of UCC financingstatements and continuation EX L-2statements), all as fully and effectively as Servicer might do. Servicer hereby ratifies, to the extent permitted by law, all that said attorneys shalllawfully do or cause to be done by virtue hereof.[Remainder of Page Left Intentionally Blank] EX L-3IN WITNESS WHEREOF, this Power of Attorney is executed by the Servicer, and the Servicer has caused its seal to be affixed pursuant to theauthority of its managers and/or members as of the date first written above. SOLAR CAPITAL LTD.By: Name: Title: Sworn to and subscribed beforeme this June 30, 2016: Notary Public EX L-4EXHIBIT MFORM OF POWER OF ATTORNEYSSLP 2016-1, LLCThis Power of Attorney (the “Power of Attorney”) is executed and delivered by SSLP 2016-1, LLC, as the Borrower under the Loan and ServicingAgreement (each as defined below), to Wells Fargo Bank, National Association, as the [Collateral Agent]/[Administrative Agent] under the Loan andServicing Agreement (in such capacity, the “Attorney”), pursuant to that certain Loan and Servicing Agreement, dated as of June 30, 2016 (asamended, modified, waived, supplemented or restated from time to time, the “Loan and Servicing Agreement”), by and among SSLP 2016-1, LLC, asthe borrower (in such capacity, the “Borrower”), Senior Secured Unitranche Loan Program LLCSolar Capital Ltd., as the transferor (in such capacity,the “Transferor”), Solar Capital Ltd., as the servicer (in such capacity, the “Servicer”), Wells Fargo Bank, National Association, as the administrativeagent (in such capacity, the “Administrative Agent”), each of the Conduit Lenders and Institutional Lenders from time to time party thereto (the“Lenders”), each of the Lender Agents from time to time party thereto (the “Lender Agents”), Wells Fargo Bank, National Association, as the collateralagent (in such capacity, the “Collateral Agent”), as the collateral custodian (in such capacity, the “Collateral Custodian”) and as the account bank (insuch capacity, the “Account Bank”). Capitalized terms used but not defined herein shall have the meanings provided in the Loan and ServicingAgreement.No person to whom this Power of Attorney is presented, as authority for Attorney to take any action or actions contemplated hereby, shall inquireinto or seek confirmation from Borrower as to the authority of Attorney to take any action described below, or as to the existence of or fulfillment ofany condition to this Power of Attorney, which is intended to grant to Attorney unconditionally the authority to take and perform the actionscontemplated herein, and Borrower irrevocably waives any right to commence any suit or action, in law or equity, against any person or entity that actsin reliance upon or acknowledges the authority granted under this Power of Attorney. The power of attorney granted hereby is coupled with an interestand may not be revoked or canceled by Borrower until all obligations of the Borrower under the Transaction Documents have been indefeasibly paidin full and Attorney has provided its written consent thereto (which consent shall not be unreasonably withheld or delayed).SSLP 2016-1, LLC hereby irrevocably constitutes and appoints Attorney (and all officers, employees or agents designated by Attorney), solely inconnection with the enforcement of the rights and remedies of the Administrative Agent, the Collateral Agent, the Lenders, the Lender Agents and theother Secured Parties under the Loan and Servicing Agreement and in connection with notifying Obligors of the Secured Parties’ interest in theCollateral Portfolio pursuant to Section 5.01(y) of the Loan and Servicing Agreement, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the Borrower’s place and stead and at the Borrower’s expense and in the Borrower’s name or inAttorney’s own name, from time to time in Attorney’s discretion, to take any and all appropriate action and to execute and deliver any and alldocuments and instruments that may be necessary or desirable to accomplish the purposes of the Loan and Servicing Agreement and the other EX M-1Transaction Documents, and, without limiting the generality of the foregoing, hereby grants to Attorney the power and right, on its behalf, withoutnotice to or assent by it, to do the following: (a) open mail for Borrower, and ask, demand, collect, give acquittances and receipts for, take possessionof, or endorse and receive payment of, any checks, drafts, notes, acceptances, or other instruments for the payment of moneys due, and sign and endorseany invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications, and notices;(b) effect any repairs to any of the Borrower’s assets, or continue or obtain any insurance and pay all or any part of the premiums therefor and coststhereof, and make, settle and adjust all claims under such policies of insurance, and make all determinations and decisions with respect to suchpolicies; (c) pay or discharge any taxes, Liens, or other encumbrances levied or placed on or threatened against the Borrower or the Borrower’sproperty; (d) to the extent related to the Collateral Portfolio and the transactions contemplated by the Transaction Documents, defend any suit, actionor proceeding brought against Borrower if Borrower does not defend such suit, action or proceeding or if Attorney reasonably believes that it is notpursuing such defense in a manner that will maximize the recovery to Attorney, and settle, compromise or adjust any suit, action, or proceedingdescribed above and, in connection therewith, give such discharges or releases as Attorney may deem appropriate; (e) file or prosecute any claim,litigation, suit or proceeding in any court of competent jurisdiction or before any arbitrator, or take any other action otherwise deemed appropriate byAttorney for the purpose of collecting any and all such moneys due to Borrower whenever payable and to enforce any other right in respect of theBorrower’s property; (f) sell, transfer, pledge, make any agreement with respect to, or otherwise deal with, any of the Borrower’s property, and execute,in connection with such sale or action, any endorsements, assignments or other instruments of conveyance or transfer in connection therewith; (g) togive any necessary receipts or acquittance for amounts collected or received under the Loan and Servicing Agreement; (h) to make all necessarytransfers of the Collateral Portfolio in connection with any such sale or other disposition made pursuant to the Loan and Servicing Agreement; (i) toexecute and deliver for value all necessary or appropriate bills of sale, assignments and other instruments in connection with any such sale or otherdisposition of the Collateral Portfolio, the Borrower hereby ratifying and confirming all that such Attorney (or any substitute) shall lawfully do orcause to be done hereunder and pursuant hereto; (j) to send such notification forms as the Attorney deems appropriate to give notice to Obligors of theSecured Parties’ interest in the Collateral Portfolio; (k) to sign any agreements, orders or other documents in connection with or pursuant to anyTransaction Document; and (l) to cause the certified public accountants then engaged by the Borrower to prepare and deliver to the Attorney at anytime and from time to time, promptly upon Attorney’s request, any reports required to be prepared by or on behalf of the Borrower under theTransaction Documents, all as though Attorney were the absolute owner of the Borrower’s property for all purposes, and to do, at Attorney’s option andBorrower’s expense, at any time or from time to time, all acts and other things that Attorney reasonably deems necessary to perfect, preserve or realizeupon the Collateral Portfolio and the Liens of the Collateral Agent, for the benefit of the Secured Parties, thereon (including without limitation theexecution and filing of UCC financing statements and continuation statements), all as fully and effectively as Borrower might do. Borrower herebyratifies, to the extent permitted by law, all that said attorneys shall lawfully do or cause to be done by virtue hereof.[Remainder of Page Left Intentionally Blank] EX M-2IN WITNESS WHEREOF, this Power of Attorney is executed by the Borrower, and the Borrower has caused its seal to be affixed pursuant to theauthority of its managers and/or members as of the date first written above. SSLP 2016-1, LLCBy: Name: Title: Sworn to and subscribed beforeme this June 30, 2016: Notary Public EX M-3EXHIBIT NFORM OF LOAN ASSET CHECKLISTTo be Attached EX N-1EXHIBIT OFORM OF NOTICE OF LIEN RELEASE DIVIDEND[ ][ ], 20[ ]SSLP 2016-1, LLCTo: Administrative Agent, with a copy to the Collateral Agent and the Collateral CustodianRe: Loan and Servicing Agreement dated as of June 30, 2016Ladies and Gentlemen:This Notice of Lien Release Dividend (this “Notice”) is delivered to you under Section 2.07(g) of that certain Loan and Servicing Agreement,dated as of June 30, 2016 (as amended, modified, waived, supplemented or restated from time to time, the “Loan and Servicing Agreement”), by andamong SSLP 2016-1, LLC, as the borrower (in such capacity, the “Borrower”), Senior Secured Unitranche Loan Program LLCSolar Capital Ltd., as thetransferor (in such capacity, the “Transferor”), Solar Capital Ltd., as the servicer (in such capacity, the “Servicer”), Wells Fargo Bank, NationalAssociation, as the administrative agent (in such capacity, the “Administrative Agent”), each of the Conduit Lenders and Institutional Lenders fromtime to time party thereto (the “Lenders”), each of the Lender Agents from time to time party thereto (the “Lender Agents”), Wells Fargo Bank, NationalAssociation, as the collateral agent (in such capacity, the “Collateral Agent”), as the collateral custodian (in such capacity, the “Collateral Custodian”)and as the account bank (in such capacity, the “Account Bank”). Capitalized terms used but not defined herein shall have the meanings provided in theLoan and Servicing Agreement.Each of the undersigned, each being a duly elected Responsible Officer of the Borrower and the SellerTransferor, respectively, holding the officeset forth below such officer’s name, hereby certifies as follows:1. Pursuant to Section 2.07(g) of the Loan and Servicing Agreement, the Borrower and the SellerTransferor request that (i) the Collateral Agent,on behalf of the Secured Parties, releases the lien on the Loan Assets or portions thereof set forth on Annex 1 (together with, in the case of a transfer ofthe Loan Assets but not portions thereof, any related Portfolio Assets) and distributes such Loan Assets and portions thereof as a dividend from theBorrower to the Transferor and (ii) the Collateral Custodian releases the Required Loan Documents related thereto.2. Pursuant to Section 2.07(g) of the Loan and Servicing Agreement, the Borrower and the Transferor hereby request that such Lien ReleaseDividend be made on the following date: [ ] (the “Lien Release Dividend Date”) which date is at least five Business Days after this Notice isreceived by the Administrative Agent, the Collateral Agent and the Collateral Custodian. EX O-13. The Borrower and the Transferor represent and warrant, as of the date hereof and as of the requested Lien Release Dividend Date, as follows:(a) On any Lien Release Dividend Date, no more than four Lien Release Dividends shall have been made during the 12-month periodimmediately preceding the proposed Lien Release Dividend Date;(b) After giving effect to the Lien Release Dividend on the Lien Release Dividend Date, (i) no Borrowing Base Deficiency, Event of Defaultor Unmatured Event of Default shall exist, (ii) the representations and warranties contained in Sections 4.01, 4.02 and 4.03 of the Loan andServicing Agreement shall continue to be correct in all respects, except to the extent relating to an earlier date, (iii) the eligibility of any LoanAsset remaining as part of the Collateral Portfolio after the Lien Release Dividend will be redetermined as of the Lien Release Dividend Date,(iv) no claim shall have been asserted or proceeding commenced challenging the enforceability or validity of any of the Required LoanDocuments and (v) there shall have been no material adverse change as to the Servicer or the Borrower;(c) Such Lien Release Dividend must be in compliance with Applicable Law and may not (i) be made with the intent to hinder, delay ordefraud any creditor of the Borrower or (ii) leave the Borrower, immediately after giving effect to the Lien Release Dividend, (A) insolvent,(B) with insufficient funds to pay its obligations as and when they become due or (C) with inadequate capital for its present and anticipatedbusiness and transactions;(d) On or prior to the Lien Release Dividend Date, the Borrower shall have delivered to the Administrative Agent, with a copy to theCollateral Agent and the Collateral Custodian, a list specifying all Loan Assets or portions thereof to be transferred pursuant to such Lien ReleaseDividend;(e) A portion of a Loan Asset may be transferred pursuant to a Lien Release Dividend; provided that (i) such transfer does not have anadverse effect on the portion of such Loan Asset remaining as a part of the Collateral Portfolio, any other aspect of the Collateral Portfolio, theLenders, the Lender Agents, the Administrative Agent or any other Secured Party and (ii) a new promissory note (other than with respect to aNoteless Loan Asset) for the portion of the Loan Asset remaining as a part of the Collateral Portfolio has been executed, and the original thereofhas been endorsed to the Collateral Agent and delivered to the Collateral Custodian;(f) Each Loan Asset, or portion thereof, as applicable, shall be transferred at a value equal to, or greater than, the Adjusted Borrowing Valuethereof; EX O-2(g) The Borrower shall deliver a Borrowing Base Certificate (including a calculation of the Borrowing Base after giving effect to such LienRelease Dividend) to the Administrative Agent;(h) The Borrower shall have paid in full an aggregate amount equal to the sum of all amounts due and owing to the Administrative Agent,the Lenders, the Collateral Agent or the Collateral Custodian, as applicable, under this Agreement and the other Transaction Documents, if any,to the extent accrued to such date (including, without limitation, Breakage Fees) with respect to the Loan Assets to be transferred pursuant tosuch Lien Release Dividend and incurred in connection with the transfer of such Loan Assets pursuant to such Lien Release Dividend; and(i) The Borrower and the Servicer (on behalf of the Borrower) shall pay the reasonable and documented legal fees and expenses of theAdministrative Agent, the Collateral Agent and the Collateral Custodian in connection with any Lien Release Dividend (including, but notlimited to, reasonable and documented expenses incurred in connection with the release of the Lien of the Collateral Agent, on behalf of theSecured Parties, and any other party having an interest in the Loan Asset in connection with such Lien Release Dividend).4. Attached to this Notice is a Borrowing Base Certificate, including a calculation of the Borrowing Base after giving effect to such Lien ReleaseDividend.This Notice shall not be effective unless all of the conditions applicable to the Lien Release Dividend requested herein set forth in the Loan andServicing Agreement have been satisfied within the time periods set forth in Section 2.07(g) of the Loan and Servicing Agreement.[ATTACH BORROWING BASE CERTIFICATE][The Remainder Of This Page Is Intentionally Left Blank] EX O-3IN WITNESS WHEREOF, the undersigned has executed the Notice of Lien Release Dividend as of the date first written above. SSLP 2016-1, LLC, as the BorrowerBy: Name: Title:SENIOR SECURED UNITRANCHE LOAN PROGRAM LLCSOLAR CAPITAL LTD., as the TransferorBy: Name: Title: EX O-4ANNEX 1To NoticeLoan Assets to be Released by Collateral Agent and Transferred by Borrower to Transferor EX O-5EXHIBIT P-1FORM OF U.S. TAX COMPLIANCE CERTIFICATE(For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes)Reference is hereby made to the Loan and Servicing Agreement, dated as of June 30, 2016 (as amended, modified, waived, supplemented orrestated from time to time, the “Loan and Servicing Agreement”), by and among SSLP 2016-1, LLC, as the borrower (in such capacity, the “Borrower”),Senior Secured Unitranche Loan Program LLCSolar Capital Ltd., as the transferor (in such capacity, the “Transferor”), Solar Capital Ltd., as the servicer(in such capacity, the “Servicer”), Wells Fargo Bank, National Association, as the administrative agent (in such capacity, the “Administrative Agent”),each of the Conduit Lenders and Institutional Lenders from time to time party thereto (the “Lenders”), each of the Lender Agents from time to timeparty thereto (the “Lender Agents”), and Wells Fargo Bank, National Association, as the collateral agent (in such capacity, the “Collateral Agent”), asthe collateral custodian (in such capacity, the “Collateral Custodian”) and as the account bank (in such capacity, the “Account Bank”).Pursuant to the provisions of Section 2.11 of the Loan and Servicing Agreement, the undersigned hereby certifies that (i) it is the sole record andbeneficial owner of the Obligations (as well as any Note(s) evidencing such Obligations) in respect of which it is providing this certificate, (ii) it is nota bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of the Borrower within the meaning ofSection 871(h)(3)(B) of the Code and (iv) it is not a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of theCode.The undersigned has furnished the Administrative Agent and the Borrower with a certificate of its non-U.S. Person status on IRS Form W-8BENor IRS Form W-8BEN-E, as applicable. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificatechanges, the undersigned shall promptly so inform the Borrower and the Administrative Agent, and (2) the undersigned shall have at all timesfurnished the Borrower and the Administrative Agent with a properly completed and currently effective certificate in either the calendar year in whicheach payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.Unless otherwise defined herein, terms defined in the Loan and Servicing Agreement and used herein shall have the meanings given to them inthe Loan and Servicing Agreement. EX P-2-1[NAME OF LENDER]By: Name: Title:Date: , 20[ ] EX P-1-2EXHIBIT P-2FORM OF U.S. TAX COMPLIANCE CERTIFICATE(For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)Reference is hereby made to the Loan and Servicing Agreement, dated as of June 30, 2016 (as amended, modified, waived, supplemented orrestated from time to time, the “Loan and Servicing Agreement”), by and among SSLP 2016-1, LLC, as the borrower (in such capacity, the “Borrower”),Senior Secured Unitranche Loan Program LLCSolar Capital Ltd., as the transferor (in such capacity, the “Transferor”), Solar Capital Ltd., as the servicer(in such capacity, the “Servicer”), Wells Fargo Bank, National Association, as the administrative agent (in such capacity, the “Administrative Agent”),each of the Conduit Lenders and Institutional Lenders from time to time party thereto (the “Lenders”), each of the Lender Agents from time to timeparty thereto (the “Lender Agents”), Wells Fargo Bank, National Association, as the collateral agent (in such capacity, the “Collateral Agent”), as thecollateral custodian (in such capacity, the “Collateral Custodian”) and as the account bank (in such capacity, the “Account Bank”).Pursuant to the provisions of Section 2.11 of the Loan and Servicing Agreement, the undersigned hereby certifies that (i) it is the sole record andbeneficial owner of the participation in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A)of the Code, (iii) it is not a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code, and (iv) it is not acontrolled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.The undersigned has furnished its participating Lender with a certificate of its non-U.S. Person status on IRS Form W-8BEN or IRS Form W-8BEN-E (as applicable). By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, theundersigned shall promptly so inform such Lender in writing, and (2) the undersigned shall have at all times furnished such Lender with a properlycompleted and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the twocalendar years preceding such payments.Unless otherwise defined herein, terms defined in the Loan and Servicing Agreement and used herein shall have the meanings given to them inthe Loan and Servicing Agreement. EX P-2-1[NAME OF PARTICIPANT]By: Name: Title:Date: , 20[ ] EX P-2-2EXHIBIT P-3FORM OF U.S. TAX COMPLIANCE CERTIFICATE(For Foreign Participants That Are Partnerships For U.S. Federal Income Tax Purposes)Reference is hereby made to the Loan and Servicing Agreement, dated as of June 30, 2016 (as amended, modified, waived, supplemented orrestated from time to time, the “Loan and Servicing Agreement”), by and among SSLP 2016-1, LLC, as the borrower (in such capacity, the “Borrower”),Senior Secured Unitranche Loan Program LLCSolar Capital Ltd., as the transferor (in such capacity, the “Transferor”), Solar Capital Ltd., as the servicer(in such capacity, the “Servicer”), Wells Fargo Bank, National Association, as the administrative agent (in such capacity, the “Administrative Agent”),each of the Conduit Lenders and Institutional Lenders from time to time party thereto (the “Lenders”), each of the Lender Agents from time to timeparty thereto (the “Lender Agents”), Wells Fargo Bank, National Association, as the collateral agent (in such capacity, the “Collateral Agent”), as thecollateral custodian (in such capacity, the “Collateral Custodian”) and as the account bank (in such capacity, the “Account Bank”).Pursuant to the provisions of Section 2.11 of the Loan and Servicing Agreement, the undersigned hereby certifies that (i) it is the sole recordowner of the participation in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners ofsuch participation, (iii) with respect such participation, neither the undersigned nor any of its direct or indirect partners/members is a bank extendingcredit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code,(iv) none of its direct or indirect partners/members is a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Codeand (v) none of its direct or indirect partners/members is a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) ofthe Code.The undersigned has furnished its participating Lender with IRS Form W-8IMY accompanied by one of the following forms from each of itspartners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or IRS Form W-8BEN-E (as applicable) or (ii) an IRS FormW-8IMY accompanied by an IRS Form W-8BEN or IRS Form W-8BEN-E (as applicable) from each of such partner’s/member’s beneficial owners that isclaiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificatechanges, the undersigned shall promptly so inform such Lender and (2) the undersigned shall have at all times furnished such Lender with a properlycompleted and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the twocalendar years preceding such payments.Unless otherwise defined herein, terms defined in the Loan and Servicing Agreement and used herein shall have the meanings given to them inthe Loan and Servicing Agreement. EX P-3-1[NAME OF PARTICIPANT]By: Name: Title:Date: , 20[ ] EX P-3-2EXHIBIT P-4FORM OF U.S. TAX COMPLIANCE CERTIFICATE(For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)Reference is hereby made to the Loan and Servicing Agreement, dated as of June 30, 2016 (as amended, modified, waived, supplemented orrestated from time to time, the “Loan and Servicing Agreement”), by and among SSLP 2016-1, LLC, as the borrower (in such capacity, the “Borrower”),Senior Secured Unitranche Loan Program LLCSolar Capital Ltd., as the transferor (in such capacity, the “Transferor”), Solar Capital Ltd., as the servicer(in such capacity, the “Servicer”), Wells Fargo Bank, National Association, as the administrative agent (in such capacity, the “Administrative Agent”),each of the Conduit Lenders and Institutional Lenders from time to time party thereto (the “Lenders”), each of the Lender Agents from time to timeparty thereto (the “Lender Agents”), Wells Fargo Bank, National Association, as the collateral agent (in such capacity, the “Collateral Agent”), as thecollateral custodian (in such capacity, the “Collateral Custodian”) and as the account bank (in such capacity, the “Account Bank”).Pursuant to the provisions of Section 2.11 of the Loan and Servicing Agreement, the undersigned hereby certifies that (i) it is the sole recordowner of the Obligations (as well as any Note(s) evidencing such Obligations) in respect of which it is providing this certificate, (ii) its direct or indirectpartners/members are the sole beneficial owners of such Obligations (as well as any Note(s) evidencing such Obligations), (iii) with respect to theextension of credit pursuant to this Loan and Servicing Agreement or any other Transaction Documents, neither the undersigned nor any of its direct orindirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within themeaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a ten percent shareholder of the Borrower within themeaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a controlled foreign corporation related to theBorrower as described in Section 881(c)(3)(C) of the Code.The undersigned has furnished the Administrative Agent and the Borrower with IRS Form W-8IMY accompanied by one of the following formsfrom each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or IRS Form W-8BEN-E (as applicable) or(ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN or IRS Form W-8BEN-E (as applicable) from each of such partner’s/member’sbeneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the informationprovided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Administrative Agent, and (2) the undersignedshall have at all times furnished the Borrower and the Administrative Agent with a properly completed and currently effective certificate in either thecalendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments. EX P-4-1Unless otherwise defined herein, terms defined in the Loan and Servicing Agreement and used herein shall have the meanings given to them inthe Loan and Servicing Agreement. [NAME OF LENDER]By: Name: Title:Date: , 20[ ] EX P-4-2Exhibit 21.1Subsidiaries of Solar Capital Ltd.The following list sets forth our consolidated subsidiaries, the state or country under whose laws the subsidiaries are organized, and thepercentage of voting securities or membership interests owned by us in each such subsidiary:NEFCORP LLC (Delaware) – 100%NEFPASS LLC (Delaware) – 100%SLRC ADI Corp. (Delaware) – 100%SSLP 2016-1, LLC (Delaware) – 100%The subsidiaries listed above are consolidated for financial reporting purposes. We may also be deemed to control certain portfolio companies. Exhibit 31.1Certification Pursuant to Section 302Certification of Chief Executive OfficerI, Michael S. Gross, Chief Executive Officer of Solar Capital Ltd., certify that:1. I have reviewed this annual report on Form 10-K of Solar Capital Ltd.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to makethe statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respectsthe financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as definedin Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and15d-15(f)) for the registrant and have:(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by otherswithin those entities, particularly during the period in which this report is being prepared;(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed underour supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting,to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting.Dated this 21st day of February 2019. By: /S/ MICHAEL S. GROSS Michael S. GrossChief Executive OfficerExhibit 31.2Certification Pursuant to Section 302Certification of Chief Financial OfficerI, Richard L. Peteka, Chief Financial Officer of Solar Capital Ltd., certify that:1. I have reviewed this annual report on Form 10-K of Solar Capital Ltd.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to makethe statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respectsthe financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as definedin Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and15d-15(f)) for the registrant and have:(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by otherswithin those entities, particularly during the period in which this report is being prepared;(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed underour supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting,to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting.Dated this 21st day of February 2019. By: /S/ RICHARD L. PETEKA Richard L. PetekaChief Financial OfficerExhibit 32.1Certification of Chief Executive OfficerPursuant toSection 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)In connection with the Annual Report on Form 10-K for the year ended December 31, 2018 (the “Report”) of Solar Capital Ltd. (the“Registrant”), as filed with the Securities and Exchange Commission on the date hereof, I, Michael S. Gross, the Chief Executive Officer of theRegistrant, hereby certify, to the best of my knowledge, that:(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theRegistrant. /S/ MICHAEL S. GROSSName: Michael S. GrossDate: February 21, 2019Exhibit 32.2Certification of Chief Financial OfficerPursuant toSection 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)In connection with the Annual Report on Form 10-K for the year ended December 31, 2018 (the “Report”) of Solar Capital Ltd. (the“Registrant”), as filed with the Securities and Exchange Commission on the date hereof, I, Richard L. Peteka, the Chief Financial Officer of theRegistrant, hereby certify, to the best of my knowledge, that:(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theRegistrant. /S/ RICHARD L. PETEKAName: Richard L. PetekaDate: February 21, 2019Exhibit 99.1Crystal Financial LLC(A Delaware Limited Liability Company)Consolidated Financial StatementsYears Ended December 31, 2018 and December 31, 2017 Crystal Financial LLC(A Delaware Limited Liability Company)IndexYears Ended December 31, 2018 and December 31, 2017 Page(s) Independent Auditor’s Report 1 Consolidated Financial Statements Consolidated Balance Sheets 2 Consolidated Statements of Operations 3 Consolidated Statements of Changes in Redeemable Ownership Units and Member’s Equity 4 Consolidated Statements of Cash Flows 5 Notes to Consolidated Financial Statements 6–19  Independent Auditor’s Report To the Board of Directors and Member ofCrystal Financial LLC Report on the Financial StatementsWe have audited the accompanying consolidated financial statements of Crystal Financial LLC and its subsidiary (the “Company”) which comprisethe consolidated balance sheets as of December 31, 2018 and 2017, and the related consolidated statements of operations, changes in member’s equity,and cash flows for the years then ended, and the related notes to the consolidated financial statements, (collectively, the financial statements).Management’s Responsibility for the Financial StatementsManagement is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generallyaccepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation andfair presentation of financial statements that are free from material misstatement, whether due to fraud or error.Auditor’s ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditingstandards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The proceduresselected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due tofraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of thefinancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion onthe effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness ofaccounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overallpresentation of the financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.OpinionIn our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as ofDecember 31, 2018 and 2017, and the results of its operations and its cash flows for the years then ended in accordance with accounting principlesgenerally accepted in the United States of America. /s/ RSM US LLPBoston, MassachusettsFebruary 13, 2019 RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Visit rsmus.com/aboutusfor more information regarding RSM US LLP and RSM International. 1Crystal Financial LLC(A Delaware Limited Liability Company)Consolidated Balance SheetsYears Ended December 31, 2018 and December 31, 2017 2018 2017 Assets: Cash and cash equivalents $20,506,906 $109,133,330 Restricted cash 9,967,576 3,014,347 Loan interest and fees receivable 2,939,698 1,801,045 Loans 413,918,584 300,594,941 Less: Unearned fee income (6,359,566) (4,775,168) Allowance for loan losses (7,783,068) (5,664,442) Total loans, net 399,775,950 290,155,331 Investment in equity securities 8,984,205 — Fixed assets, net 48,316 70,138 Tradename 3,700,000 3,700,000 Goodwill 5,156,542 5,156,542 Investment in Crystal Financial SBIC LP 32,139,735 31,308,731 Loan to Crystal Financial SBIC LP — 1,025,000 Other assets 3,200,659 3,100,558 Total assets $486,419,587 $448,465,022 Liabilities: Revolving credit facility $205,990,202 $176,454,049 Accrued expenses 12,288,608 11,061,381 Distributions payable 7,500,000 7,900,000 Other liabilities 3,099,787 1,444,227 Collateral held for borrower obligations 4,273,937 1,144,186 Total liabilities 233,152,534 198,003,843 Commitments and Contingencies (Note 6) Member’s equity: Class A units 279,191,400 279,191,400 Accumulated deficit (25,924,347) (28,730,221) Total member’s equity 253,267,053 250,461,179 Total liabilities and member’s equity $486,419,587 $448,465,022 The accompanying notes are an integral part of these consolidated financial statements. 2Crystal Financial LLC(A Delaware Limited Liability Company)Consolidated Statements of OperationsYears Ended December 31, 2018 and December 31, 2017 2018 2017 Net interest income: Interest income $48,521,345 $50,886,443 Interest expense 10,144,031 9,348,138 Net interest income 38,377,314 41,538,305 Provision (credit) for loan losses 2,438,767 (1,712,817) Net interest income after provision for loan losses 35,938,547 43,251,122 Operating expenses: Compensation and benefits 10,657,015 11,040,654 Occupancy and equipment 901,541 872,372 General and administrative expenses 1,577,534 2,042,947 Total operating expenses 13,136,090 13,955,973 Other income (expense): Interest in earnings of equity method investee 6,458,627 1,859,739 Unrealized gain on investment in equity securities 3,777,593 — Tradename impairment — (10,820,000) Total other income (expense), net 10,236,220 (8,960,261) Realized gain (loss) from foreign currency transactions, net 90,395 (2,789,448) Realized loss from hedging, net — (534,582) Unrealized gain (loss) from foreign currency translations, net (103,198) 3,740,410 Unrealized loss from hedging, net — (360,313) Net income $33,025,874 $20,390,955 The accompanying notes are an integral part of these consolidated financial statements. 3Crystal Financial LLC(A Delaware Limited Liability Company)Consolidated Statements of Changes in Member’s EquityYears Ended December 31, 2018 and December 31, 2017 Class A Units AccumulatedDeficit Total Member’sEquity Balance, December 31, 2016 $279,191,400 $(17,521,176) $261,670,224 Distributions — (31,600,000) (31,600,000) Net income — 20,390,955 20,390,955 Balance, December 31, 2017 279,191,400 (28,730,221) 250,461,179 Distributions — (30,220,000) (30,220,000) Net income — 33,025,874 33,025,874 Balance, December 31, 2018 $279,191,400 $(25,924,347) $253,267,053 The accompanying notes are an integral part of these consolidated financial statements. 4Crystal Financial LLC(A Delaware Limited Liability Company)Consolidated Statements of Cash FlowsYears Ended December 31, 2018 and December 31, 2017 2018 2017 Cash flows from operating activities: Net income $33,025,874 $20,390,955 Adjustments to reconcile net income to net cash provided by operating activities: Provision (credit) for loan losses 2,438,767 (1,712,817) Accretion of original issue discount (797,509) (92,084) Amortization of deferred financing costs 627,157 611,883 Tradename impairment — 10,820,000 Depreciation and amortization 66,112 104,489 Paid-in-kind interest and fee income (81,913) (339,053) Interest in earnings of equity method investee (6,458,627) (1,859,739) Unrealized (gain) loss on foreign currency transactions 103,198 (3,739,805) Realized (gain) loss on foreign currency transactions (1,255) 4,111,180 Unrealized loss on hedging transactions — 360,313 Realized loss on hedging transactions — 534,582 Unrealized gain on investment in equity securities (3,777,593) — Proceeds received at termination of hedge contracts — 471,574 Payments made at settlement of hedge contracts — (1,006,156) Net change in loan interest and fees receivable (1,120,078) 985,328 Net change in other assets 984,204 1,229,786 Net change in unearned fees 1,613,372 (2,134,188) Net change in accrued expenses 1,227,227 731,912 Net change in other liabilities 1,375,154 (1,628,420) Net cash provided by operating activities 29,224,090 27,839,740 Cash flows from investing activities: Purchases of fixed assets (28,848) (26,131) Investment in term loans (309,542,296) (178,482,853) Repayment of term loans 191,405,834 255,427,731 Investment in equity securities (5,206,612) — Lending on revolving lines of credit, net 3,318,373 (5,996,458) Repayment of (lending on) loan to Crystal Financial SBIC LP, net 1,025,000 (405,000) Investment in Crystal Financial SBIC LP — (7,447,344) Distributions received from Crystal Financial SBIC LP 5,627,623 3,979,195 Net change in collateral held for borrower obligations 3,129,751 (891,739) Net cash (used in) provided by investing activities (110,271,175) 66,157,401 Cash flows from financing activities: Net borrowings (paydowns) on revolving credit facility 31,750,718 (2,764,265) Distributions to members (30,620,000) (31,600,000) Payment of debt issue costs (1,751,020) (7,527) Payment of capital lease obligations (5,808) (5,614) Net cash used in financing activities (626,110) (34,377,406) Net change in cash, cash equivalents, and restricted cash (81,673,195) 59,619,735 Cash, cash equivalents, and restricted cash at beginning of year 112,147,677 52,527,942 Cash, cash equivalents and restricted cash at end of year $30,474,482 $112,147,677 Supplemental disclosure of cash flow information: Cash paid for interest $9,388,441 $8,651,493 The accompanying notes are an integral part of these consolidated financial statements. 5Crystal Financial LLCNotes to Consolidated Financial StatementsYears Ended December 31, 2018 and December 31, 2017 1.OrganizationCrystal Financial LLC (“Crystal Financial” or the “Company”), along with its wholly owned subsidiary, Crystal Financial SPV LLC (“CrystalFinancial SPV”), is a commercial finance company that primarily originates, underwrites, and manages secured debt to middle market companieswithin various industries. The Company was formed in the state of Delaware on March 18, 2010.At December 31, 2018 and December 31, 2017, Solar Capital Ltd. (“Solar”) owns 100% of the outstanding ownership units of the Company.The Company is based in Boston, Massachusetts with an office and employees in Atlanta, Georgia. 2.Summary of Significant Accounting PoliciesThe following is a summary of significant accounting policies adopted by the Company:Basis of AccountingThe accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in theUnited States of America (“U.S. GAAP”).Principles of ConsolidationThe consolidated financial statements include the accounts of Crystal Financial and its wholly-owned subsidiary Crystal Financial SPV. Allinter-company investments, accounts and transactions have been eliminated in these consolidated financial statements.Use of EstimatesThe preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect thereported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as thereported amounts of revenues and expenses during the reporting period. Estimates most susceptible to change include the allowance for loanlosses, the valuation of the Company’s investment in equity securities, and the valuation of intangible assets as determined during impairmenttesting. Actual results could differ materially from those estimates.ReclassificationCertain prior period amounts may have been reclassified to conform to the current period presentation.Cash, Cash Equivalents, and Restricted CashThe Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. TheCompany held no cash equivalents at December 31, 2018 or December 31, 2017. Cash includes all deposits held at banks. Deposits in excess ofamounts insured by the Federal Deposit Insurance Corporation (“FDIC”) are exposed to loss in the event of nonperformance by the institution.The Company has had cash deposits in excess of the FDIC insurance coverage and has not experienced any losses on such accounts.Restricted cash consists of interest and fees collected on those loans held within Crystal Financial SPV that serve as collateral against theCompany’s outstanding line of credit. Upon receipt, these funds are restricted from the Company’s access until the fifteenth of the followingmonth. Also included in restricted cash may be funds that serve as collateral against loans outstanding to certain borrowers as well as funds thatserve as collateral to outstanding letters of credit.The Company adopted ASU 2016-18, Statement of Cash Flows (Topic 230) effective December 31, 2018. The guidance requires the statement ofcash flows to explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash.Accordingly, amounts generally described as restricted cash will be included with cash and cash equivalents when reconciling thebeginning-of-period and end-of-period total amounts shown on the statement of cash 6Crystal Financial LLCNotes to Consolidated Financial StatementsYears Ended December 31, 2018 and December 31, 2017 2.Summary of Significant Accounting Policies…continued Cash, Cash Equivalents, and Restricted Cash…continued flows. ASU 2016-18 must be applied using a retrospective transition method. Upon adoption of ASU 2016-18, for the year ended December 31,2017, the Company recorded an increase of $1,322,337 in Net cash provided by operating activities and a decrease of $4,431,921 in Net cashprovided by investing activities related to reclassifying the changes in the restricted cash balance and its impact on foreign currency gain/lossfrom operating and investing activities to the cash and cash equivalent balances within the Consolidated Statement of Cash Flows.The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheet thatsum to the total of the same such amounts shown in the consolidated statement of cash flows. December 31, 2018 2017 Cash and cash equivalents $20,506,906 $109,133,330 Restricted cash 9,967,576 3,014,347 Total cash, cash equivalents, and restricted cash shown in the statement ofcash flows $30,474,482 $112,147,677 LoansThe Company typically classifies all loans as held to maturity. Loans funded by the Company are recorded at the amount of unpaid principal, netof unearned fees, discounts and the allowance for loan losses in the Company’s consolidated balance sheets.Interest income is recorded on the accrual basis in accordance with the terms of the respective loan. Generally, interest is not accrued on loanswith interest or principal payments 90 days or greater past due or on other loans when management believes collection is doubtful. Loansconsidered impaired, as defined below, are non-accruing. When a loan is placed on nonaccrual status, all interest previously accrued, but notcollected, is reversed against current interest income and all future proceeds received will generally be applied against principal or interest, in thejudgment of management. Interest on loans classified as nonaccrual is accounted for on the cash basis or cost-recovery method, until qualifyingfor return to accrual status. Loans are generally returned to accrual status when all of the principal and interest amounts contractually due arebrought current and future payments are reasonably assured. At December 31, 2018 and December 31, 2017, there are two loans on nonaccrualstatus. The two loans on nonaccrual status are the same two loans classified as Criticized in the “Allowance for Loan Losses” note below. AtDecember 31, 2018 and December 31, 2017, there are no interest or principal payments considered to be past due.Allowance for Loan LossesThe allowance for loan losses is maintained at the amount estimated to be sufficient to absorb probable losses, net of recoveries, inherent in theloan portfolio at year end. Internal credit ratings assigned to the loans are periodically evaluated and adjusted to reflect the current credit risk ofthe loan. In accordance with applicable guidance, for loans not deemed to be impaired, management assigns a general loan allowance based onthe borrower’s overall risk rating. All loans in the Company’s portfolio are individually evaluated when determining the overall risk rating. Therisk ratings are derived upon consideration of a number of factors related to both the borrower and the borrower’s facility, with those factorsrelated to the borrower’s facility being the key determinant of the overall risk rating. Risk factors of the borrower that are considered include assetand earnings quality, historical and projected financial performance, borrowing liquidity and/or access to capital. Risk factors of the facility thatare considered include collateral coverage and the facility’s position within the overall capital structure. Upon consideration of each of theaforementioned factors, among others, the Company assigns each loan a 7Crystal Financial LLCNotes to Consolidated Financial StatementsYears Ended December 31, 2018 and December 31, 2017 2.Summary of Significant Accounting Policies…continued Allowance for Loan Losses…continued borrower risk rating and a facility risk rating, which are then collectively used in developing the overall risk rating. The overall risk ratingcorresponds with an applicable reserve percentage which is applied to the face value of the loan in order to determine the Company’s allowancefor loan losses. In establishing the applicable reserve percentages, the Company considers various factors including historical industry lossexperience, the credit profile of the Company’s borrowers, as well as economic trends and conditions. Specific allowances for loan losses are generally applied to impaired loans and are typically measured based on a comparison of the recordedcarrying value of the loan to the present value of the loan’s expected cash flow using the loan’s effective interest rate, the loan’s estimated marketprice, or the estimated fair value of the underlying collateral, if the loan is collateral-dependent. Loans are charged off against the allowance atthe earlier of either the substantial completion of the liquidation of assets securing the loan, or when senior management deems the loan to bepermanently impaired.A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect allamounts due in accordance with the contractual terms of the loan agreement. All loans are individually evaluated for impairment according tothe Company’s normal loan review process, including overall credit evaluation, nonaccrual status and payment experience. Loans identified asimpaired are further evaluated to determine the estimated extent of impairment.At December 31, 2018, two loans, with aggregate principal balances outstanding of $4,671,278, are deemed to be impaired. Reserves totaling$374,094 have been applied against these loans at December 31, 2018. As one of the borrowers continues to pay contractual cash-pay interestwhen due, interest payments totaling $193,801 were applied against the outstanding loan balance during the year. The other loan outstandingonly had paid-in-kind interest obligations during the year, so no cash interest payments were applied against the outstanding principal balance.At December 31, 2017, management deemed two loans, with aggregate principal balances outstanding of $4,997,842, to be impaired. Reservestotaling $404,230 were applied against these two loans during 2017, of which $6,966 relates to the unfunded commitment on one of theimpaired loans. Both borrowers continued to pay contractual interest payments when due throughout 2017. Accordingly, $193,519 of interestpayments received during the year were applied against the outstanding loan balances.The Company’s average recorded investment in the impaired loans totaled $4,817,589 and $5,093,983 during the year ended December 31, 2018and December 31, 2017, respectively.Depending on the assigned internal risk rating, loans are classified as either Pass or Criticized. Generally, once a loan is classified as Criticized, aspecific reserve analysis is required. Two loans, totaling $4,671,278 and $4,997,842 at December 31, 2018 and December 31, 2017, respectively,are classified as Criticized.The Company also maintains an allowance on unfunded revolver and delayed draw term loan commitments. At December 31, 2018 andDecember 31, 2017, an allowance of $406,669 and $139,949, respectively, was recorded relating to these commitments. This amount is recordedas a component of other liabilities on the Company’s consolidated balance sheets with changes recorded in the provision for loan losses on theCompany’s consolidated statements of operations. The methodology for determining the allowance for unfunded revolver and delayed draw termloan commitments is consistent with the methodology used for determining the allowance for loan losses, with the exception that only theportion of the outstanding commitment expected to be drawn is applied against the unfunded commitments. 8Crystal Financial LLCNotes to Consolidated Financial StatementsYears Ended December 31, 2018 and December 31, 2017 2.Summary of Significant Accounting Policies…continued Allowance for Loan Losses…continued The summary of changes in the allowance for loan losses relating to funded commitments for the years ended December 31, 2018 andDecember 31, 2017 is as follows: Year Ended December 31, 2018 Revolvers Term Loans Total Balance, beginning of period $192,188 $5,472,254 $5,664,442 Provision (credit) for loan losses-general (98,594) 2,293,811 2,195,217 Provision for loan losses-specific 1,348 (24,518) (23,170) Charge- offs, net of recoveries — (53,421) (53,421) Balance, end of period $94,942 $7,688,126 $7,783,068 Balance, end of period- general $52,018 $7,356,956 $7,408,974 Balance, end of period- specific $42,924 $331,170 $374,094 Loans Loans collectively evaluated with general allowance $2,747,228 $406,500,078 $409,247,306 Loans individually evaluated with specific allowance 858,479 3,812,799 4,671,278 Total loans $3,605,707 $410,312,877 $413,918,584 Year Ended December 31, 2017 Revolvers Term Loans Total Balance, beginning of period $29,599 $7,243,257 $7,272,856 Provision (credit) for loan losses-general 121,013 (2,126,691) (2,005,678) Provision for loan losses-specific 41,576 355,688 397,264 Charge- offs, net of recoveries — — — Balance, end of period $192,188 $5,472,254 $5,664,442 Balance, end of period-general $150,612 $5,116,566 $5,267,178 Balance, end of period-specific $41,576 $355,688 $397,264 Loans Loans collectively evaluated with general allowance $6,092,215 $289,504,884 $295,597,099 Loans individually evaluated with specific allowance 831,525 4,166,317 4,997,842 Total loans $6,923,740 $293,671,201 $300,594,941 Deferred Financing FeesDeferred financing fees represent fees and other direct incremental costs incurred in connection with the Company’s borrowings against itsrevolving credit facility (see Note 3). These amounts are amortized using the straight-line method into earnings as interest expense ratably overthe contractual term of the facility. Net deferred financing fees totaled $2,652,654 and $1,509,299 at December 31, 2018 and December 31, 2017and are included as a component of other assets on the accompanying consolidated balance sheets. 9Crystal Financial LLCNotes to Consolidated Financial StatementsYears Ended December 31, 2018 and December 31, 2017 2.Summary of Significant Accounting Policies…continued Tradename Intangible AssetThe Company was purchased by Solar and various employees of the Company on December 28, 2012 (the “Acquisition Date”). On theAcquisition Date, identified intangible assets included $14,520,000 related to the Crystal Financial tradename. The tradename has an indefinitelife and therefore is not amortized. The Company reviews its intangible assets for impairment on an annual basis, at the end of the third quarter, orwhenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. When considering whether or notthe tradename is impaired, the Company utilizes both qualitative and quantitative factors. The qualitative assessment involves determiningwhether events or circumstances exist that indicate that it is more likely than not that the intangible asset is impaired. If the qualitativeassessment indicates that it is more likely than not that the intangible asset is impaired, or if the Company elects to not perform a qualitativeassessment, then a quantitative assessment is performed, in which the Company is required to perform a recoverability test. An intangible asset isconsidered impaired if the carrying value of the asset exceeds the estimated fair value of the asset.To estimate fair value, management primarily utilizes the relief from royalty method, which is an income approach. The income approach statesthat the value of an intangible asset is the present value of the future economic benefits that are generated by its ownership. Based on factors suchas the projected revenue stream associated with the tradename, the estimated royalty rate, estimated long term growth rates, and discount rates,the fair value of the tradename is estimated to be $3,700,000 at December 31, 2017. Accordingly, an impairment charge totaling $10,820,000was recorded during 2017. No further impairment was recorded during the year ended December 31, 2018 as the fair value was determined to bein excess of the carrying value.GoodwillIn connection with the acquisition, the Company recorded goodwill equal to the excess of the purchase price over the fair value of assetsacquired and liabilities assumed. Goodwill recognized on the Acquisition Date totaled $5,156,542. The Company assesses the realizability ofgoodwill annually at the end of the third quarter, or more frequently if events or circumstances indicate that impairment may exist.The Company adopted ASU 2017-04, Intangibles- Goodwill and Other (Topic 350) (“ASU 2017-04”), during the year ended December 31, 2017.ASU 2017-04 eliminates the requirement of a Company to perform a two-step impairment test when determining the amount, if any, of goodwillimpairment. In accordance with ASU 2017-04, the Company performed step one of the goodwill impairment test during both the years endedDecember 31, 2018 and December 31, 2017, which indicated that the fair value of the reporting entity was in excess of its carrying value. Assuch, no impairment was recorded.As part of the step one testing for goodwill impairment, the fair value of the reporting unit is estimated by applying weighted percentages to thecalculated fair values of the Company derived using both the income and market approaches. Under the income approach, the fair value isdetermined using a discounted cash flow analysis, which involves significant estimates and assumptions, including market conditions, discountrates, and projections of future cash flows. Using the market approach, the fair value is estimated by using comparable publicly traded companies,whose values are known, as a benchmark to establish an estimate of a multiple that is then applied to the Company. In accordance with ASU2017-04, if it is determined during step one testing that the carrying value of the reporting entity exceeds the fair value, the Company wouldrecord an impairment charge equal to the amount by which the carrying value exceeds its fair value.In accordance with the updated guidance, the Company continues to have the option to perform a qualitative goodwill impairment assessmentbefore determining whether to proceed to step one of the impairment test. Further, the requirement for a reporting unit with a zero or negativecarrying amount to perform a qualitative assessment is eliminated. 10Crystal Financial LLCNotes to Consolidated Financial StatementsYears Ended December 31, 2018 and December 31, 2017 2.Summary of Significant Accounting Policies…continued Interest IncomeInterest income is recorded on the accrual basis to the extent that such amounts are expected to be collected. In accordance with the Company’spolicy, accrued interest is evaluated periodically for collectability. The Company stops accruing interest on loans when it is determined that allamounts contractually owed to the Company are unlikely to be collected. The Company stopped accruing interest on two loans in the portfolioat both December 31, 2018 and December 31, 2017. All other accrued interest recognized is deemed to be collectible at both December 31, 2018and December 31, 2017.Fee Income RecognitionCertain loans in the Company’s portfolio have been issued at a discount. Others have been issued with equity securities, such as warrants, whichrequire the Company to allocate a portion of the cost of the loan to the initial value of the warrants, as discussed further in the Investment inEquity Securities Section of this footnote. This allocation of value to the warrants creates a discount on the loan. Both the discounts on issuanceand the discounts created as a result of allocating value to the Company’s warrants are accreted into income and added to the value of therespective loan over its contractual life using the effective interest method. Income related to the accretion of these discounts totals $797,509 and$92,084 during 2018 and 2017, respectively.Nonrefundable loan fees and costs associated with the origination or purchase of loans are deferred and included in loans, net, in theconsolidated balance sheets. These commitment fees, as well as certain other fees charged to borrowers, such as amendment and prepayment fees,are recorded in interest income, after receipt, over the remaining life of the loan using a method which approximates the interest method. Unusedline fees are recorded in interest income when received. Unamortized fees totaling $6,359,566 and $4,775,168 are recorded as a component ofunearned fee income on the accompanying consolidated balance sheets at December 31, 2018 and December 31, 2017.Property and EquipmentProperty and equipment includes furniture and fixtures, computer equipment and software, which are carried at cost. Such items are depreciatedor amortized on a straight-line basis over the following useful lives: Furniture and fixtures 5-7 yearsComputer equipment 3-5 yearsComputer software 3 yearsLeasehold improvements shorter of remaining lease term or the asset’sestimated useful life 11Crystal Financial LLCNotes to Consolidated Financial StatementsYears Ended December 31, 2018 and December 31, 2017 2.Summary of Significant Accounting Policies…continued Property and Equipment…continued The cost basis of the Company’s property and equipment as well as the accumulated depreciation at December 31, 2018 and December 31, 2017,is as follows: December 31, 2018 2017 Capital leases $21,989 $21,989 Furniture and fixtures 26,954 26,954 Computer equipment 185,746 156,900 Computer software 42,499 42,499 Leasehold improvements 145,080 145,080 $422,268 $393,422 Less: Accumulated depreciation (373,952) (323,284) $48,316 $70,138 Depreciation expense of $50,668 and $88,772 was recognized during the years ended December 31, 2018 and December 31, 2017, and isincluded as a component of occupancy and equipment expenses on the accompanying consolidated statements of operations.Investment in Equity SecuritiesAt times, the Company may receive equity securities such as warrants in conjunction with a loan funding. Upon the receipt of such securities, theCompany allocates a value to the securities equal to their fair value on the date of issuance, which creates an original issue discount on thecorresponding loan. This discount is accreted into interest income over the life of the loan using the effective interest method. The initial valueof warrants obtained during the year ended December 31, 2018 totaled $5,206,612. The Company did not obtain any equity securities during2017 and did not have any outstanding equity securities at December 31, 2017.The Company accounts for equity securities in accordance with the guidance set forth in FASB ASC 825, Financial Instruments. AtDecember 31, 2018, the Company has equity securities outstanding from two different borrowers, neither of which have readily determinable fairvalues, as defined in the applicable guidance. During the year ended December 31, 2018, the Company adopted the guidance set forth in ASUNo. 2016-01, Financial Instruments- Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities(ASU 2016-01). In accordance with ASU 2016-01, the Company has elected to account for the securities issued from one of the borrowers at fairvalue, with changes in fair value being recorded in earnings. The initial value of these securities totaled $5,154,407. During the year endedDecember 31, 2018, unrealized gains totaling $3,777,593 have been recorded on these securities and are recorded as a component of unrealizedgain on investment in equity securities in the accompanying consolidated statement of operations.The Company elected the measurement alternative, as set forth in the guidance, on those equity securities issued by the second borrower, therebymaintaining the securities at cost, less impairment, until an observable price change occurs. The total value of securities for which themeasurement alternative was elected equals $52,205. No observable price changes have occurred, and therefore these securities continue to becarried at their initial value in the consolidated balance sheet at December 31, 2018. 12Crystal Financial LLCNotes to Consolidated Financial StatementsYears Ended December 31, 2018 and December 31, 2017 2.Summary of Significant Accounting Policies…continued Foreign CurrencyThe functional currency of the Company is the US Dollar. At December 31, 2018, the Company had three loans denominated in foreigncurrencies in its portfolio. At December 31, 2017, the Company had one loan in its portfolio denominated in a foreign currency. The Companyalso has the ability to borrow foreign currency denominated funds under its revolving line of credit (see Note 3). Gains and losses arising fromexchange rate fluctuations on transactions denominated in currencies other than the US Dollar are included in earnings as incurred. TheCompany recorded unrealized losses on foreign currency translations totaling $103,198 and realized gains of $90,395 during the year endedDecember 31, 2018. Unrealized gains on foreign currency translations totaling $3,740,410 and realized losses of $2,789,448 were recognizedduring the year ended December 31, 2017.DistributionsDistributions to members are recorded as of the date of declaration and are approved by the Company’s Board of Managers. Distributions totaling$7,500,000 and $7,900,000 have been declared by the Company at December 31, 2018 and December 31, 2017, respectively, but were not paiduntil the following year.Income TaxesThe Company is a single member LLC treated as a disregarded entity for tax purposes. The sole member of Crystal Financial is individuallyliable for the taxes, if any, on its share of Crystal Financial’s income and expenses.The Company applies the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standard Codification 740-10 (“ASC740-10”), Accounting for Uncertainty in Income Taxes, an interpretation of FASB Accounting Standard Codification 740. ASC 740-10 providesa comprehensive model for the recognition, measurement and disclosure of uncertain income tax positions. The Company recognizes the taxeffect of certain tax positions when it is more likely than not that the tax position will sustain upon examination, based solely on the technicalmerits of the tax position. As of December 31, 2018 and December 31, 2017, the Company does not have any uncertain tax positions that meetthe recognition or measurement criteria of ASC 740-10.As a disregarded entity, the Company has no obligation to file a U.S. federal return for tax periods beginning after July 28, 2016, the date theCompany became a disregarded entity for tax purposes. The Company does however continue to file certain state tax returns. As of December 31,2018, the Company is subject to examination by various state tax authorities for tax years beginning after December 31, 2015 and by the InternalRevenue Service for tax years beginning after December 31, 2015 and through July 28, 2016. The return filed for the period ended December 31,2014 is also subject to examination by one state tax authority.Recently Issued Accounting PronouncementsIn May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 provides a framework thatreplaces existing revenue recognition guidance and became effective for the Company during the fiscal year ended December 31, 2018. The coreprinciple of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in anamount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides afive-step process to achieve this core principle. The majority of the Company’s revenue streams, including interest and fee income associatedwith the origination or purchase of loans, are outside the scope of the new guidance and will therefore not be impacted with the implementationof the new standard. Agency fees, which are annual fees earned by the Company in exchange for providing administrative and collateralmonitoring services, and unused line fees are within the scope of ASU 2014-09. The Company recognizes income on agency fees ratably over theone-year period as administrative and monitoring services are performed, in accordance with the updated guidance. The Company recognizesincome on unused line fees ratably over the period that the unfunded commitment exists, which is also in accordance with the updated guidance.As such, the adoption of ASU 2014-09 did not have a material impact on the Company’s consolidated financial statements. 13Crystal Financial LLCNotes to Consolidated Financial StatementsYears Ended December 31, 2018 and December 31, 2017 2.Summary of Significant Accounting Policies…continued Recently Issued Accounting Pronouncements…continued In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 amends existing guidance related to the accounting forleases. The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principleof whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognizedbased on an effective interest method or on a straight line basis over the term of the lease, respectively. A lessee is also required to record aright-of-use asset and a lease liability for all leases with a term greater than twelve months, regardless of their classification. Leases with a term oftwelve months or less will be accounted for in a manner similar to existing guidance for operating leases today. ASU 2016-02 will be effective forthe Company for its fiscal year beginning after December 15, 2019. The Company is currently evaluating the impact of the adoption of thisstandard on its consolidated financial statements.In June 2016, the FASB issued ASU 2016-13, Financial Instruments- Credit Losses (Topic 326). ASU 2016-13 sets forth a current expected creditloss (“CECL”) model which requires the Company to measure all expected credit losses for financial instruments held at the reporting date basedon historical experience, current conditions and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicableto the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. ASU2016-13 will be effective for the Company for its fiscal year beginning after December 15, 2020. The Company is currently evaluating the impactof the adoption of this standard on its consolidated financial statements.In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework- Changes to the DisclosureRequirements for Fair Value Measurement. ASU 2018-13 improves the effectiveness of disclosure requirements on fair value measurement byeliminating certain disclosure requirements for fair value measurements for all entities, requiring public entities to disclose certain newinformation and modifying some of the existing disclosure requirements. The amendments in this ASU are effective for fiscal years beginningafter December 15, 2019. Early adoption is permitted. The Company is currently evaluating the impact of the new guidance on the Company’sconsolidated financial statements. 3.Debt Obligations and FinancingsRevolving Credit FacilityOn May 12, 2011, the Company entered into a Loan Financing and Servicing Agreement (the “Credit Agreement”) with Deutsche Bank AG (the“Lender”) in the form of a revolving credit facility. After various amendments, the lender group was expanded and includes both Citibank, N.A.and Citizens Business Capital (together with Deutsche Bank AG, the “Lenders”) at December 31, 2018.The Company has the ability to borrow funds denominated in certain foreign currencies under the facility. The maximum amount available to beborrowed in foreign denominated currencies is the USD equivalent of $99,000,000. During 2018 and 2017, the Company incurred fees andexpenses totaling $1,770,514 and $7,527 in connection with certain amendments to the credit facility.At December 31, 2018, the amount available to be borrowed under the facility is the lesser of (a) $330,000,000 or (b) the amount calculated andavailable per the Borrowing Base, as defined in the amended Credit Agreement. Borrowings on the facility bear interest at a rate of 2.85% plusthe Lenders’ cost of funds, as defined in the Credit Agreement. The applicable cost of funds varies depending on the currency in which the fundsare borrowed. At December 31, 2018, the effective rates were between 2.85% and 5.53%. The Company also pays an undrawn fee on unfundedcommitments and an administrative agent fee. At December 31, 2018 and December 31, 2017, the USD equivalent of all borrowings outstandingunder the facility totaled $205,990,202 and $176,454,049, respectively. 14Crystal Financial LLCNotes to Consolidated Financial StatementsYears Ended December 31, 2018 and December 31, 2017 3.Debt Obligations and Financings…continued Revolving Credit Facility…continued The remaining capacity under the facility at December 31, 2018, subject to borrowing base constraints, totals $124,009,798. The facilityterminates on the earlier of September 20, 2022 or upon the occurrence of a Facility Termination Event, as defined in the amended CreditAgreement.Commencing on March 20, 2021 and continuing every three months until the facility’s termination date, the Company may be required to makeprincipal pay-downs on certain amounts outstanding. The amount to be paid down is contingent upon the future amount outstanding as well asthe amount of future non-mandatory prepayments made on the credit facility.Cash, as well as those of the Company’s loans that are held within Crystal Financial SPV, serve as collateral against the facility. At December 31,2018 and 2017, the amount of cash and the face value of loans pledged as collateral were $25,541,882 and $407,253,844, and $52,541,818 and$291,157,396, respectively. The Company has made certain customary representations and warranties under the facility, and is required tocomply with various covenants, reporting requirements, and other customary requirements for similar credit facilities. The Credit Agreementincludes usual and customary events of default for credit facilities of this nature. The Company is in compliance with all covenants atDecember 31, 2018 and December 31, 2017.Operating and Capital LeasesThe Company leases office space and equipment under various operating and capital lease agreements. Future minimum lease commitmentsunder these leases are as follows: OperatingLeases CapitalLeases 2019 $814,970 2,500 2020 468,212 — $1,283,182 2,500 Less: Amount representing interest 21 Present value of minimum capital lease payments Including current maturities of $2,479 $2,479 4.Related Party ActivityOn March 15, 2013, Crystal Financial committed $50,750,000 of capital to Crystal Financial SBIC LP (the “Fund”) in exchange for a 65.91%limited partner interest. Crystal Financial SBIC LP was established to operate as a small business investment company under the Small BusinessInvestment Company (“SBIC”) Act. Of the total amount committed, $21,883,314 remains unfunded at both December 31, 2018 andDecember 31, 2017.Certain of the managing members of the Fund’s general partner, Crystal SBIC GP LLC (the “General Partner”), are also members of CrystalFinancial’s management team. Crystal Financial and the General Partner have entered into a Services Agreement whereby Crystal Financialprovides certain administrative services to the General Partner in exchange for a waiver of the quarterly management fee that it owes to theGeneral Partner. Crystal Financial has also entered into a Loan Agreement with the Fund in order to meet short term capital needs. The totalcommitment of the Loan Agreement is $30,000,000 at both December 31, 2018 and December 31, 2017. There are no amounts outstanding underthe Loan Agreement at December 31, 2018. At December 31, 2017, $1,025,000 remained outstanding under the Loan Agreement. Amountsoutstanding on the Loan Agreement accrue interest at Prime plus 0.50%, unless such amount is less than 4.00%, in which case interest accrues atLibor plus 4.00%, up to a maximum of 5.00%. At December 31, 2018, borrowings on the facility accrue interest at 5.00%. Crystal Financialearned interest income on this facility totaling $48,304 and $114,130 during 2018 and 2017, respectively. The Loan Agreement, which wasrenewed during 2018, expires on June 18, 2019 and may be extended or renewed at the sole discretion of the Company. 15Crystal Financial LLCNotes to Consolidated Financial StatementsYears Ended December 31, 2018 and December 31, 2017 4.Related Party Activity…continued The Company accounts for its limited partner interest in the Fund as an equity method investment in the accompanying consolidated financialstatements (see Note 7). Crystal Financial did not make any contributions to the Fund during 2018 and contributed $7,447,344 to the Fundduring 2017. Cash distributions from the Fund totaled $5,627,623 and $3,979,195 during 2018 and 2017, respectively. In accordance with theequity method of accounting, the Company was allocated net income from the Fund totaling $6,458,627 and $1,859,739 for the years endedDecember 31, 2018 and December 31, 2017. These amounts represent the Company’s allocation of the Fund’s net income in accordance with theFund’s Limited Partnership Agreement. Crystal Financial’s investment in the Fund is recorded as Investment in Crystal Financial SBIC LP in theaccompanying consolidated balance sheets and its share of earnings and losses are recorded as Interest in earnings of equity method investee onthe consolidated statements of operations. 5.Member’s CapitalCrystal Financial has issued limited liability company interests, referred to as Class A Units. Each unit entitles its holder to one vote on allmatters submitted to a vote of the members. At December 31, 2018 and December 31, 2017, the Company has 280,303 outstanding Class A Units,all of which are owned by Solar. 6.Commitments and ContingenciesThe Company is party to financial instruments with off-balance sheet risk including unfunded revolver and delayed draw term loan commitmentsto certain borrowers.Under the revolving credit and delayed draw term loans, aggregate unfunded commitments total $61,357,090 and $16,460,726 at December 31,2018 and December 31, 2017. These agreements have fixed expiration dates. The revolving credit agreements typically require payment of amonthly fee equal to a certain percentage times the unused portion of the revolving line of credit. As the unfunded commitments may expirewithout being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The amount of credit that can beextended under each of the revolving credit agreements and delayed draw term loan agreements is typically limited to the borrower’s availablecollateral, which is used in calculating the borrower’s borrowing base at the time of a respective draw.Effective January 1, 2013, certain employees of Crystal Financial, including members of management, entered into a long- term incentive planagreement (“LTIP Agreement”). In accordance with the terms of the LTIP Agreement, a bonus pool is calculated each calendar year, beginningwith the amount calculated in 2014 with respect to results for the year ended December 31, 2013 and is based upon the achievement of certainoperating results during the year. The bonus pool calculated and earned for each calendar year will be paid out two years after the year in whichthe bonus pool is calculated and earned. The calculated bonus pool is subject to a look-back calculation which could cause the amount that isultimately paid out to be less than the amount originally calculated. Amounts recorded pursuant to the LTIP Agreement during the years endedDecember 31, 2018 and December 31, 2017, are included as a component of accrued expenses on the accompanying consolidated balance sheetsand as a component of compensation and benefits expense on the accompanying consolidated statements of operations. 16Crystal Financial LLCNotes to Consolidated Financial StatementsYears Ended December 31, 2018 and December 31, 2017 7.Variable Interest EntityIn accordance with the consolidation guidance, the Company evaluates (a) whether it holds a variable interest in an entity, (b) whether the entityis a variable interest entity (“VIE”) and (c) whether the Company is the primary beneficiary of the VIE. The granting of substantive kick-outrights is a key consideration in determining whether a limited partnership is a VIE and whether or not that entity should be consolidated. Inevaluating whether or not Crystal Financial SBIC LP is a VIE of the Company, it is noted that the Limited Partnership Agreement of CrystalFinancial SBIC LP does not permit a simple majority of the limited partners to exercise kick-out rights, and therefore these rights are deemed tonot be substantive. Accordingly, Crystal Financial SBIC LP is deemed to be a VIE. In assessing whether or not the VIE should be consolidated, itwas determined that substantially all of the VIE’s activities are not conducted on behalf of Crystal Financial or its de facto agents. Accordingly,the Company does not consolidate Crystal Financial SBIC LP in the accompanying financial statements.The following table sets forth the information with respect to the unconsolidated variable interest entity in which the Company holds a variableinterest as of December 31, 2018 and December 31, 2017. December 31, 2018 December 31, 2017 Bridge loan with the VIE included on the ConsolidatedBalance Sheets $— $1,025,000 Equity interest included on the Consolidated BalanceSheets 32,139,735 31,308,731 Maximum risk of loss (1) 54,023,049 54,217,045 (1)includes the equity investment the Company has made, or could be required to make, and amounts outstanding under the Loan Agreement withCrystal Financial SBIC LP. 8.Fair Value of Financial InstrumentsASC 820, Fair Value Measurements (“ASC 820”) establishes a three-level hierarchy for disclosure of fair value measurements. The valuationhierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are definedas follows:Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that areobservable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrumentLevel 3 - inputs to the valuation methodology are unobservable and significant to the fair value measurement.A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair valuemeasurement.The following tables present recorded amounts of financial assets measured at fair value on a recurring basis at December 31, 2018. There were nofinancial assets or liabilities measured at fair value on a recurring basis outstanding at December 31, 2017. December 31, 2018: Active Markets forIdentical Assets(Level 1) Significant OtherObservable Inputs(Level 2) SignificantUnobservable Inputs(Level 3) Value inConsolidatedBalance Sheet Assets: Investment in equity securities $— $— $8,932,000 $8,932,000 Total assets recorded at fair value on arecurring basis $— $— $8,932,000 $8,932,000 17Crystal Financial LLCNotes to Consolidated Financial StatementsYears Ended December 31, 2018 and December 31, 2017 8.Fair Value of Financial Instruments…continued The fair values of the Company’s investments in equity securities are determined using widely accepted valuation techniques. The initial valuesof the Company’s equity securities were determined using the market approach combined with the option-pricing model. Both observable andunobservable inputs, including expected term and implied volatilities were utilized in the valuation of these securities. At December 31, 2018,the Company adjusted the fair value of the equity securities obtained from one of its borrowers as a result of a recent transaction. Accordingly, anunrealized gain totaling $3,777,593 was recorded to the accompanying consolidated statement of operations.The table below illustrates the change in balance sheet amounts during the years ended December 31, 2018 and December 31, 2017, for financialinstruments measured on a recurring basis and classified by the Company as level 3 in the valuation hierarchy. When a determination is made toclassify a financial instrument as level 3, the determination is based upon the significance of the unobservable parameters to the overall fair valuemeasurement. Level 3 financial instruments typically include, in addition to the unobservable or level 3 components, observable components. Asthe fair value of the Company’s investment in equity securities is based on a recent transaction price, the fair value calculation at December 31,2018 did not use significant unobservable inputs developed by the Company. Forwardcontracts Investment inEquity Securities Fair value, December 31, 2016 $360,313 $— Total gains or losses included in earnings: Net realized loss (534,582) — Net change in unrealized loss (360,313) — Net proceeds paid at settlement (471,574) — Net payments made at settlement 1,006,156 — Transfers into Level 3 — — Transfers out of Level 3 — — Fair value, December 31, 2017 — — Investment in equity securities 5,154,407 Total gains or losses included in earnings: Net change in unrealized gain — 3,777,593 Transfers into Level 3 — — Transfers out of Level 3 — — Fair value, December 31, 2018 $— $8,932,000 Financial instruments that are not recorded at fair value on a recurring basis consist of cash, restricted cash, interest receivable, loans receivable,its investment in Crystal Financial SBIC LP, derivative instruments, collateral held for borrower obligations and the revolving credit facility. Dueto the short-term nature of the Company’s cash, restricted cash, interest receivable, and collateral held for borrower obligations, the carryingvalue approximates fair value.The Company’s loans receivable are recorded at outstanding principal, net of any deferred fees and costs, unamortized purchase discounts andthe allowance for loan losses. If the Company elected the fair value option, the estimated fair value of the Company’s loans receivable would bederived using among other things, a discounted cash flow methodology, that considers various factors including the type of loan and relatedcollateral, current market yields for similar debt investments, estimated cash flows, as well as a discount rate that reflects the Company’sassessment of risk inherent in the cash flow estimates. 18Crystal Financial LLCNotes to Consolidated Financial StatementsYears Ended December 31, 2018 and December 31, 2017 8.Fair Value of Financial Instruments…continued If the Company elected the fair value option, the estimated fair value of the Company’s revolving credit facility at December 31, 2018 andDecember 31, 2017, would approximate the carrying value. The fair value is estimated based on consideration of current market interest rates forsimilar debt instruments.The following table presents the carrying amounts, estimated fair values, and placement in the fair value hierarchy of the Company’s long-termfinancial instruments, at December 31, 2018 and December 31, 2017. December 31, 2018 Fair Value Measurements CarryingAmount Estimated FairValue Level 1 Level 2 Level 3 Financial assets: Loans receivable $ 413,918,584 $ 413,587,414 $— $— $413,587,414 Investment in Crystal Financial SBIC LP 32,139,735 32,139,735 — — 32,139,735 Financial liabilities: Revolving credit facility 205,990,202 205,990,202 — — 205,990,202 December 31, 2017 Fair Value Measurements CarryingAmount EstimatedFair Value Level 1 Level 2 Level 3 Financial assets: Loans receivable $300,594,941 $300,239,240 $— $— $300,239,240 Investment in Crystal Financial SBIC LP 31,308,731 $31,308,731 — — 31,308,731 Financial liabilities: Revolving credit facility 176,454,049 176,454,049 — — 176,454,049 9.Subsequent EventsThe Company has evaluated subsequent events through February 13, 2019, the date which the financial statements were available to be issued.Other than those described in the preceding notes, no material subsequent events have occurred through this date. 19Exhibit 99.2 CONSOLIDATED FINANCIAL STATEMENTS NEF Holdings, LLC and Subsidiaries(A Limited Liability Company)Year ended December 31, 2018 andperiod from August 1, 2017 to December 31, 2017 (the “Period”)With Independent Auditors’ Report NEF Holdings, LLC and SubsidiariesConsolidated Financial StatementsYear Ended December 31, 2018 and Period Ended December 31, 2017Contents Independent Auditors’ Report 1 Consolidated Balance Sheets 2 Consolidated Statements of Operations 3 Consolidated Statements of Comprehensive Income 4 Consolidated Statements of Changes in Members’ Capital 5 Consolidated Statements of Cash Flows 6 Notes to the Consolidated Financial Statements 7 Independent Auditors’ ReportBoard of ManagersNEF Holdings, LLC and SubsidiariesWe have audited the accompanying consolidated financial statements of NEF Holdings, LLC and Subsidiaries, which comprise the consolidatedbalance sheets as of December 31, 2018 and 2017, and the related consolidated statements of operations, comprehensive income, changes in members’capital, and cash flows for the year ended December 31, 2018 and the period from August 1, 2017 to December 31, 2017, and the related notes to theconsolidated financial statements.Management’s Responsibility for the Consolidated Financial StatementsManagement is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accountingprinciples generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevantto the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.Auditors’ ResponsibilityOur responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance withauditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. Theprocedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financialstatements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparationand fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not forthe purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit alsoincludes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management,as well as evaluating the overall presentation of the consolidated financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.OpinionIn our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of NEF Holdings,LLC and Subsidiaries as of December 31, 2018 and 2017, and the results of their operations and their cash flows for the year ended December 31, 2018and the period from August 1, 2017 to December 31, 2017 in accordance with accounting principles generally accepted in the United States ofAmerica. Philadelphia, PennsylvaniaFebruary 15, 2019Baker Tilly Virchow Krause, LLP trading as Baker Tilly is a member of the global network of Baker Tilly International Ltd., the members of which areseparate and independent legal entities. © 2018 Baker Tilly Virchow Krause, LLP 1NEF Holdings, LLC and SubsidiariesConsolidated Balance SheetsAt December 31, 2018 and December 31, 2017(In Thousands) 2018 2017 Assets Cash $6,411 $15,128 Restricted cash 120 5,627 Financing receivables: Net investment in direct finance leases 196,883 173,403 Secured loans, net 45,783 56,712 Total financing receivables, gross 242,666 230,115 Allowance for losses on financing receivables (5,445) (7,143) Total financing receivables, net 237,221 222,972 Equipment on lease, net 4,584 5,031 Fixed assets, net 3,030 227 Equipment off lease - held-for-sale 572 1,816 Goodwill 29,832 29,832 Other assets 11,415 8,850 Total assets $293,185 $289,483 Liabilities and Members’ Capital Liabilities: Senior secured credit facility $118,823 $69,852 Notes payable — 69,962 Loan from affiliate 32,968 — Accrued expenses 2,871 4,870 Good faith deposits 1,043 1,071 Accounts payable 236 407 Other liabilities 3,970 5,134 Total liabilities 159,911 151,296 Members’ capital: Members’ capital 133,274 138,187 Total members’ capital 133,274 138,187 Total liabilities & members’ capital $293,185 $289,483 See accompanying notes to the consolidated financial statements. 2NEF Holdings, LLC and SubsidiariesConsolidated Statements of OperationsFor the Year Ended December 31, 2018 andthe Period Ended December 31, 2017(In Thousands) 2018 2017 Income: Interest income from direct finance leases $19,025 $8,374 Interest income from secured loans 5,367 2,868 Operating lease income 1,395 599 Other income 4,281 3,727 Total income 30,068 15,568 Expenses: Interest expense 9,971 3,243 Compensation and benefits 8,273 3,600 Provision for losses 2,979 1,678 Occupancy and office expenses 1,114 464 Lease and loan restructuring costs 992 547 Professional fees 602 594 Unrealized loss on equity investment 568 — Depreciation 540 208 Impairments of equipment off lease 489 183 Other expenses 1,114 348 Total expenses 26,642 10,865 Net income $3,426 $4,703 See accompanying notes to the consolidated financial statements. 3NEF Holdings, LLC and SubsidiariesConsolidated Statements of Comprehensive IncomeFor the Year Ended December 31, 2018 and the Period Ended December 31, 2017(In Thousands) 2018 2017 Net income $3,426 $4,703 Other comprehensive loss: Derivative instruments designated and qualifying as cash flow hedges: Change in unrealized holding losses arising during the year — (7) Total other comprehensive loss — (7) Total comprehensive income $3,426 $4,696 See accompanying notes to the consolidated financial statements. 4NEF Holdings, LLC and SubsidiariesConsolidated Statements of Changes in Members’ CapitalFor the Year Ended December 31, 2018 and the Period Ended December 31, 2017(In Thousands) Members’ capital at August 1, 2017 $139,572 Capital distributions (6,081) Other comprehensive loss (7) Net income 4,703 Members’ capital at December 31, 2017 138,187 Capital distributions (8,339) Net income 3,426 Members’ capital at December 31, 2018 $133,274 See accompanying notes to the consolidated financial statements. 5NEF Holdings, LLC and SubsidiariesConsolidated Statements of Cash FlowsFor the Year Ended December 31, 2018 and the Period Ended December 31, 2017(In Thousands) 2018 2017 Cash flows from operating activities Net income $3,426 $4,703 Adjustments to reconcile net income to net cash provided by operating activities: Impairment of equipment off lease 489 183 Provision for losses 2,979 1,678 Amortization of deferred financing costs 994 533 Amortization of upfront fees received and initial direct costs paid 716 65 Depreciation 540 208 Amortization of notes payable discounts 1,174 81 Unrealized loss on equity investment 568 — Changes in operating assets and liabilities: (Increase)/Decrease in other assets 1,734 (4,008) (Increase)/Decrease in interest receivable (242) (54) Increase/(Decrease) in interest payable 276 210 Increase/(Decrease) in accrued expenses (1,999) 3,061 Increase/(Decrease) in good faith deposits (28) 29 Increase/(Decrease) in accounts payable (171) 241 Increase/(Decrease) in other liabilities (1,164) 3,489 Net cash provided by operating activities 9,292 10,419 Cash flows from investing activities Sales of secured loans and direct finance leases to an affiliate 26,417 64,456 Investments in secured loans and direct finance leases (139,752) (11,041) Collections of principal on secured loans and direct finance leases 88,264 38,387 Non-refundable upfront fees received 201 19 Initial direct costs paid (666) (108) Proceeds from sales of equipment on lease 51 — Proceeds from sales of equipment off lease 1,127 2,219 (Purchases)/Proceeds from sales of fixed assets (134) (42) Cash paid for acquisition, net (218) — Net cash provided by/(used in) investing activities (24,710) 93,890 Cash flows from financing activities Borrowings on credit facility 134,394 35,192 Repayments on credit facility (86,086) (103,075) Repayments of notes principal (71,657) (24,185) Borrowings on loan from affiliate 34,511 — Repayment on loan from affiliate (1,629) — Capital distributions (8,339) (6,081) Net cash provided by/(used in) financing activities 1,194 (98,149) Net increase/(decrease) in cash and restricted cash (14,224) 6,160 Cash and restricted cash at the beginning of period 20,755 14,595 Cash and restricted cash at the end of period $6,531 $20,755 Supplemental disclosures of cash flow information Interest paid $7,568 $2,476 Non-cash consideration paid for acquisition $6,832 $— See accompanying notes to the consolidated financial statements 6NEF Holdings, LLC and SubsidiariesNotes to the Consolidated Financial StatementsFor the Year Ended December 31, 2018 and the Period Ended December 31, 2017(In Thousands)1. Organization and BusinessNEF Holdings, Inc. was organized on June 7, 2013 as a Delaware corporation and commenced its operations in June 2013. Effective January 1, 2014,NEF Holdings, Inc. converted from a corporation to a limited liability company (“LLC”), NEF Holdings, LLC (“NEF Holdings”), pursuant toSection 18-214 of the Limited Liability Act in the State of Delaware. Subsequent to the close of business on July 31, 2017, NEF Holdings was acquiredby Solar Capital Ltd. (“Solar”) (see note 4).As of December 31, 2018, NEF Holdings had five wholly-owned subsidiaries: Nations Fund I, LLC (“Fund I”), Nations Equipment Finance Funding III,LLC (“Issuer III”), Nations Equipment Finance, LLC (“NEF”), Equipment Operating Leases, LLC (“EOL”), formerly NEF Investments, LLC (“NEFInvestments”) and NEF Auto Transport, LLC (“NEF Auto Transport”) (collectively, the “Company”). The Company is headquartered in Norwalk,Connecticut.Nations Fund I, Inc. was organized on September 17, 2010 as a Delaware corporation. Effective January 1, 2014, Nations Fund I, Inc. converted from acorporation to a LLC, Nations Fund I, LLC, pursuant to Section 18-214 of the Limited Liability Act in the State of Delaware. Fund I is a commercialequipment finance company that provides term loans and leases primarily to middle market and privately held companies. Fund I focuses on directorigination of loans and equipment leases secured by equipment collateral, such as trailers, trucks, transportation and construction equipment.NEF was organized as a LLC under the laws of the State of Delaware and commenced operations on August 24, 2010. NEF was formed for the purposesof serving as the investment manager for Fund I and later as the servicer for the Company’s securitization entities. Services provided by NEF include,among other things, identifying, structuring and negotiating transactions, monitoring, advising and managing investments, exercising control rights,options or warrants, liquidating investments, cash management, accounting, tax, compliance and legal services.NEF Investments, a wholly owned subsidiary of NEF Holdings, was organized as a Delaware LLC on January 22, 2018. On April 18, 2018, NEFInvestments’ LLC agreement was amended which changed the company’s name from NEF Investments, LLC to Equipment Operating Leases, LLC.EOL is a commercial equipment finance company that provides term loans and leases primarily to middle market and privately held companies.NEF Auto Transport was organized as a LLC under the laws of the State of Delaware and commenced operations in December 2018 through theacquisition of a former customer (see note 4). NEF Auto Transport is an auto transport carrier providing direct auto-hauling services.During August 2014, NEF Holdings formed Nations Equipment Finance Funding II, LLC (“Issuer II”) as a Delaware LLC. Issuer II, formerly a whollyowned subsidiary of NEF Holdings, was formed as a bankruptcy remote vehicle with the intention to acquire net financing receivables from NEFHoldings in order to leverage these assets through a term securitization and take advantage of a low interest rate market environment. In 2018, Issuer IIexecuted the clean-up call provisions associated with the outstanding notes payable, and on November 5, 2018 was dissolved. 7NEF Holdings, LLC and SubsidiariesNotes to the Consolidated Financial Statements (continued)(In Thousands) 1. Organization and Business (continued) During November 2015, NEF Holdings formed Issuer III as a Delaware LLC. Issuer III, a wholly owned subsidiary of NEF Holdings, was formed as abankruptcy remote vehicle with the intention to acquire net financing receivables from NEF Holdings in order to leverage these assets through a termsecuritization and take advantage of a lower interest rate market environment. In 2018, Issuer III executed the clean-up call provisions associated withthe outstanding notes payable and ceased operations.Nations Tioga, LLC (“Nations Tioga”), a wholly owned subsidiary of NEF Holdings, was organized as a Delaware LLC in December 2016. OnNovember 1, 2018, Nations Tioga executed a certificate of cancellation and was dissolved.2. Summary of Significant Accounting PoliciesBasis of PresentationThe consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“U.S.GAAP”). These consolidated financial statements include the accounts of NEF Holdings and its wholly owned subsidiaries, Fund I, Issuer II, Issuer III,NEF, EOL, Nations Tioga and NEF Auto Transport. All significant intercompany balances and transactions are eliminated in consolidation. Certainamounts in the prior period financial statements have been reclassified to conform to the current year’s presentation.Use of EstimatesThe presentation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions thatimpact the amounts reported in the consolidated financial statements and accompanying notes. Such estimates and assumptions are subject to changein the future as additional information becomes available or as circumstances are modified. Actual results could differ materially from these estimates.Management’s estimates and assumptions are used in estimating an allowance for losses on financing receivables, impairments of equipment off lease,useful lives of leasing equipment and fixed assets, fair values of unguaranteed residual values, intangible assets and fair values of assets acquired andliabilities assumed.CashAt December 31, 2018 and December 31, 2017, the Company’s cash balance totaled $6,531, and $20,755, of which $120 and $5,627, respectively, wasrestricted. The restricted cash balance as of December 31, 2018 is maintained in connection with the lease of the Company’s office space in Norwalk,Connecticut. A substantial portion of the restricted cash balance as of December 31, 2017 was maintained for the benefit of the note holders inconnection with the Company’s securitizations.Secured LoansSecured loans, net are reported at the principal amount outstanding, net of non-refundable fees, initial direct costs and accrued interest. Interest incomeon secured loans is recorded on the accrual basis in accordance with the terms of the respective loan.Non-refundable loan fees and initial direct costs associated with the origination of loans are deferred and included in secured loans, net in theconsolidated balance sheets. These fees are recognized as an adjustment to interest income over the contractual life of the loans using the interestmethod. 8NEF Holdings, LLC and SubsidiariesNotes to the Consolidated Financial Statements (continued)(In Thousands) 2. Summary of Significant Accounting Policies (continued) Direct Finance LeasesNet investment in direct finance leases is reported net of unearned income, deferred non-refundable fees and initial direct costs associated with theirorigination, and inclusive of guaranteed and unguaranteed residual values. Direct finance leases are usually long-term in nature, typically ranging for aperiod of three to seven years and include either a nominal or fair market value purchase option at the end of the lease term.Non-refundable fees received and initial direct costs incurred associated with the origination of direct finance leases are deferred and are recognized asan adjustment to interest income over the contractual life of the direct finance leases using the interest method.Recognition of Earned Income on Direct Finance LeasesThe difference between the cost of the equipment and the total finance lease receivable plus, where applicable, the unguaranteed or guaranteed residualvalue is recorded as unearned income. Unearned income is amortized as earned income over the term of the transaction using the interest method.Fixed AssetsFixed assets consist of furniture and fixtures, software, computers, leasehold improvements, automobiles, telephone and office equipment and autohauling trucks, and are stated at cost less accumulated depreciation and amortization. Expenditures for repairs and maintenance are expensed asincurred and are included in other expenses in the Company’s consolidated statement of operations.Depreciation and amortization of fixed assets are calculated using the straight-line method over their respective useful lives as follows, and recorded indepreciation and amortization in the consolidated statements of operations: Useful Life (Years)Furniture and fixtures 7Telephone 7Computers 5Office equipment 5Software 5Automobile 5Auto Hauling Trucks 5Leasehold improvements Lesser of the life of the asset or the life of theleaseGood Faith DepositsGood faith deposits represent cash received from the Company’s customers, when the proposal for a potential transaction is signed. These deposits areused to pay expenses such as third party appraisals, document fees and travel and related costs incurred by the Company in connection with theorigination of the transaction. If the deposit exceeds the expenses incurred by the Company, the excess amount is refundable to the customer. If theexpenses incurred exceed the deposits received, the Company’s customers are liable for the overage. Such overages are included in other assets on theconsolidated balance sheets. In the event the Company approves a transaction with a customer and the customer elects not to pursue the transaction,the Company recognizes any remaining good faith deposit into income, as allowed by the agreed upon terms of the signed proposal. Such amounts areincluded in other income in the consolidated statements of operations. 9NEF Holdings, LLC and SubsidiariesNotes to the Consolidated Financial Statements (continued)(In Thousands) 2. Summary of Significant Accounting Policies (continued) Other IncomeAmounts in other income in the consolidated statements of operations primarily include gains on sales of equipment, fees charged for earlyterminations of financing arrangements, other miscellaneous fees earned in connection with the administration of such financing arrangements andforeign currency translation gains.Other ExpensesIncluded in other expenses in the consolidated statements of operations are losses on sales of equipment, foreign currency translation losses and otherexpenses incurred in connection with the administration of financing arrangements. Also included in other expenses in 2018 is the net loss (excludingdepreciation expense) of $166 from the operations of NEF Auto Transport (see note 4).Allowance for Losses on Financing ReceivablesThe Company maintains an allowance for losses on financing receivables at a level sufficient to absorb probable losses related to its financingreceivables as of the date of the consolidated financial statements. In determining its allowance for losses on financing receivables, the Companyconsiders the creditworthiness of the receivables in the portfolio based on internal customer risk ratings, collateral coverage and remaining term tomaturity, which are reviewed and updated, as appropriate, on an ongoing basis.Individually identified non-performing secured loans and direct finance leases are measured based on the specific circumstances of the transaction anda specific allowance is established, if necessary. Amounts determined to be uncollectible are charged directly to provision for losses in theconsolidated statements of operations. During the year ended December 31, 2018 and the Period ended December 31, 2017, charge-offs of financingreceivables totaled $2,421 and $300 respectively.The Company classifies a financing receivable as past due when it is overdue by more than 60 days. As of December 31, 2018, financing receivableswith an outstanding balance of $4,921, $20,790, and $6,412 were between 61-90 days past due, 91-120 days past due and greater than 120 days pastdue, respectively. As of December 31, 2017, financing receivables with an outstanding balance of $951, $5,756 and $7,671 were between 61-90 dayspast due, 91-120 days past due and greater than 120 days past due, respectively.Non-Accrual Financing ReceivablesIncome recognition is generally suspended for financing receivables after 90 days of non-payment, or if full recovery becomes doubtful based on theassessment by the Company. Income recognition is resumed when financing receivables are less than 90 days past due. At December 31, 2018 andDecember 31, 2017, financing receivables with an outstanding balance of $15,030 and $18,637, respectively, were on non-accrual of income.Equipment on LeaseLeasing equipment is comprised of equipment under operating leases. Leasing equipment is recorded at cost and depreciated on a straight-line basisover the estimated useful life of the equipment. Income is recorded on a straight-line basis over the term of the lease as operating lease income in theconsolidated statement of operations. 10NEF Holdings, LLC and SubsidiariesNotes to the Consolidated Financial Statements (continued)(In Thousands) 2. Summary of Significant Accounting Policies (continued) Equipment on Lease (continued)The estimated useful lives and residual values of the Company’s leasing equipment are based on independent third party appraisals and management’sjudgment. The Company reviews its depreciation policies on a regular basis to determine whether changes have taken place that would suggest that achange in its depreciation policies, useful lives of its equipment or the assigned residual values is warranted. The estimated useful lives of theCompany’s leasing equipment at December 31, 2018 and December 31, 2017 are as follows: Useful Lives(Years)Truck cranes 11Drill units 15Rail cars 30Leasing equipment is tested for impairment whenever events or changes in circumstances indicate that its carrying amount may not be recovered. Keyindicators of impairment on leasing equipment include, among other factors, a sustained decrease in operating profitability, a sustained decrease inutilization, or indications of technological obsolescence.Equipment off LeaseEquipment off lease arises when the Company repossesses collateral that secured a financing receivable in a customer default scenario. A write-down ofthe financing receivable is recorded as a charge-off when the carrying amount exceeds the fair value and the difference relates to credit quality. At thetime of repossession, the financing receivable is transferred to equipment off lease at the lower of cost or fair value. During the year endedDecember 31, 2018 and the Period ended December 31, 2017, the Company recorded $579 and $5, respectively, in charge offs, which are included inprovisions for losses in the consolidated statements of operations.A review for impairment of equipment off lease is performed at least annually or when events or changes in circumstances indicate that the carryingamount of the asset may not be recoverable. During the year ended December 31, 2018 and the Period ended December 31, 2017, the Companyrecorded impairment charges of $489 and $183, respectively.At December 31, 2018 and December 31, 2017, equipment off lease totaled $572 and $1,816, respectively, in the consolidated balance sheets. TheCompany intends to sell such assets, and has classified these assets as held for sale, in accordance with the provisions of Financial AccountingStandards Board (“FASB”) Accounting Standards Codification (“ASC”) 360, Property, Plant & Equipment.Other AssetsIncluded in other assets in the consolidated balance sheets at December 31, 2018 is an equity investment in a customer’s parent company stock,obtained to improve collateral coverage on an existing financing receivable. The Company values equity investments that are traded on a publicsecurities exchange at the reported value at year end. Included in the consolidated statements of operations is a $568 charge which represents the fairvalue decline for the year ended December 31, 2018. 11NEF Holdings, LLC and SubsidiariesNotes to the Consolidated Financial Statements (continued)(In Thousands) 2. Summary of Significant Accounting Policies (continued) Derivative InstrumentsThe Company manages exposure to interest rate through the use of interest rate caps traded in the over-the-counter markets with other financialinstitutions. The Company does not enter into derivative financial instruments for speculative purposes. Derivative instruments are recognized at fairvalue and included in other assets in the consolidated balance sheets.Interest rate caps are used to manage the Company’s interest rate exposure on its senior secured credit facility. At December 31, 2018 and December 31,2017, such derivatives had a notional amount of $85,000 and $65,000, respectively, and a fair value of $185 and $199, respectively, which areincluded in other assets in the consolidated balance sheets. For the year ended December 31, 2018 and the Period ended December 31, 2017, increasesin fair value of the interest rate caps totaled $41 and $57, respectively, and are included in interest expense in the consolidated statements ofoperations.During the Period ended December 31, 2017, the Company held foreign currency derivative instruments, specifically cross-currency swaps, as a hedgeof the variability of forecasted cash flows associated with certain financing receivables financed with US dollars. On the date the derivative contract isentered into, the Company formally documents all relationships between the hedging instrument and the hedged item, as well as its risk managementobjective and strategy for undertaking various hedge transactions. Hedge effectiveness is measured at the hedge’s inception and, on an on-going basis,to determine whether the derivatives are highly effective in offsetting the changes in cash flows of the hedged item. Changes in fair value of foreigncurrency derivatives that are designated and qualify as cash flow hedges, which are highly effective, are recorded in the consolidated statements ofcomprehensive income until earnings are affected by the variability in cash flows of the designated hedged item.At December 31, 2018 and December 31, 2017, the Company did not hold any cross currency swaps. Changes in unrealized holding losses of crosscurrency swaps, which were deemed highly effective, totaled $0 and ($7) during the year ended December 31, 2018 and Period ended December 31,2017, respectively, and are included in other comprehensive loss in the consolidated statements of comprehensive income.Deferred Financing CostsDeferred financing costs represent fees and other incremental costs incurred in connection with the financing of the Company’s senior secured creditfacility and notes payable. Deferred financing costs for its senior secured credit facility are amortized using the straight-line method into earnings overthe contractual term of the facility. Deferred financing costs for notes payable are amortized into earnings using the effective interest rate method overthe contractual terms of the respective notes. In 2018, $609 of deferred financing costs associated with the notes payable were fully amortized duringthe year as a result of the Issuer II and Issuer II notes being fully repaid.DebtSenior secured credit facility represents the Company’s borrowings under its long-term revolver, which are carried at amortized cost, along with therelated accrued interest payable and unamortized deferred financing costs.Notes payable represent the Company’s unpaid secured note balance, which are carried at amortized cost, net of discounts, along with the relatedaccrued interest payable and unamortized deferred financing costs. 12NEF Holdings, LLC and SubsidiariesNotes to the Consolidated Financial Statements (continued)(In Thousands) 2. Summary of Significant Accounting Policies (continued) Debt (continued)Certain secured notes were originally issued at discounts. These discounts are amortized using the straight-line method over the lives of the securednotes. The secured notes were fully repaid during 2018 and, as such, $1,174 of unamortized discounts were fully expensed during the year andincluded in interest expense in the consolidated statements of operations.Financial Asset TransfersThe Company accounts for transfers of financial assets under FASB ASC 860, Transfers and Servicing, utilizing a control oriented, financialcomponents approach to financial asset transfer transactions whereby the Company: (1) recognizes the financial and servicing assets it controls and theliabilities it has incurred; (2) derecognizes financial assets when control has been surrendered; and (3) derecognizes liabilities once they areextinguished. Control is considered to have been surrendered only if: (i) the transferred assets have been isolated from the Company and its creditors,even in the event of bankruptcy or other receivership; (ii) the purchaser has the right to pledge or exchange the transferred assets, or, is a qualifyingspecial purpose entity (as defined) and the holders of beneficial interests in that entity have the right to pledge or exchange those interests; and (iii) theCompany does not maintain effective control over the transferred assets through an agreement which both entitles and obligates it to repurchase orredeem those assets prior to maturity, or through an agreement which both entitles or obligates it to repurchase or redeem those assets if they were notreadily obtainable elsewhere. If any of these conditions are not met, the Company accounts for the transfer as a secured borrowing.Foreign CurrenciesAssets and liabilities recorded in foreign currencies are translated at the exchange rate on the date of the consolidated balance sheets. Income andexpenses are translated at average rates of exchange prevailing during the year. Translation adjustments resulting from this process, which totaled ($18)and ($6) for the year ended December 31, 2018 and the Period ended December 31, 2017, respectively, are recorded in other expenses in theconsolidated statements of operations. At December 31, 2018 and December 31, 2017, the Company had cash, financing receivables and debtdenominated in the Canadian dollar.Income TaxesThe Company is a LLC and has elected to be taxed as a partnership. Accordingly, the Company is not subject to federal or state income taxes. Taxableincome, losses and deductions flow through to the Company’s members.Contingencies and CommitmentsThe Company may be subject to various legal proceedings, claims, and litigation, either asserted or unasserted that arise in the ordinary course ofbusiness. Professional legal fees are expensed as incurred. The Company records accruals for contingent losses when such losses are probable andreasonably estimable. In the event that estimates or assumptions prove to differ from actual results, adjustments are made in subsequent periods toreflect more current information. 13NEF Holdings, LLC and SubsidiariesNotes to the Consolidated Financial Statements (continued)(In Thousands) 2. Summary of Significant Accounting Policies (continued) Fair Value MeasurementFair value is defined as the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’slength transaction at the measurement date. In determining fair value of financial instruments and intangibles, the Company uses various valuationapproaches, which often utilize certain assumptions that market participants would use in pricing the asset or liability, including assumptions aboutrisk and/or the risks inherent in the inputs to the valuation technique. The inputs can be readily observable, market corroborated or generallyunobservable internal inputs. The Company utilizes valuation techniques that rely primarily on observable inputs.Goodwill and Intangible AssetGoodwill, which represents the excess of consideration paid for the Company over the fair value of the related assets acquired, liabilities assumed andcontractual rights arising from the acquisition of the Company on July 31, 2017 as discussed in note 1. As discussed in note 4, in connection with theacquisition of one of its former customers, the Company acquired an intangible asset related to customer relationships with a five year useful life. Theintangible asset was acquired in December of 2018 and therefore no amortization expense was recorded for the year ended December 31, 2018.Estimated future amortization expense is $790 for each of the years from 2019 through 2023.The Company assesses goodwill and intangible assets for impairment, annually or more frequently if events or changes in circumstance occur, bycomparing the carrying value to its fair value. If the fair value is less than the carrying value, an impairment charge is recorded in that period. TheCompany adopted FASB Accounting Standards Update (“ASU”) 2017-04 – Intangibles—Goodwill and Other (Topic 350), which simplifies how anentity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. As part of the step one testing for goodwillimpairment, the fair value of the reporting unit is estimated by applying the weighted percentages to the calculated fair values of the Company derivedusing both the income and market approaches. Under the income approach, the fair value is determined using a discounted cash flow analysis, whichinvolves significant estimates and assumptions, including market conditions, discount rates, and projections of future cash flows. Using the marketapproach, the fair value is estimated by using comparable publicly traded companies, whose values are known, as a benchmark to establish an estimateof a multiple that is then applied to the Company. In accordance with ASU 2017-04, the Company performed step one of the goodwill impairment test,which indicated no impairment charge was warranted on either goodwill or its intangible asset.3. New Accounting PronouncementsIn May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. This guidance provides a single comprehensive revenuerecognition framework and supersedes existing revenue recognition guidance. Included in the new principles-based revenue recognition model arechanges to the basis for deciding on the timing for revenue recognition. In addition, the standard expands and improves revenue disclosures. In August2015, the FASB subsequently issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, whichdeferred the effective date of ASU 2014-09. After the deferral, ASU 2014-09 is effective retroactively for annual or interim reporting periods beginningafter December 15, 2017. In accordance with the new revenue recognition standard, the Company must identify the contract with the customer, identifythe performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in thecontract, and recognize revenue when (or as) the Company satisfies a performance obligation.The Company adopted this guidance in 2018. The majority of the Company’s revenue streams, including interest and fee income associated with theorigination of leases and loans are outside the scope of the new guidance and as such had no impact on the Company’s consolidated financialstatements. Income earned by the Company for providing administrative and collateral monitoring services, which are in the scope of the ASU, areearned ratably over the period in which the services are provided, which is consistent with the updated guidance. 14NEF Holdings, LLC and SubsidiariesNotes to the Consolidated Financial Statements (continued)(In Thousands) 3. New Accounting Pronouncements (continued) The Company has evaluated the nature of its contracts with customers and determined that further disaggregation of revenue from contracts withcustomers into more granular categories beyond what is presented in the consolidated statements of operations was not necessary. Accordingly, theadoption of ASU 2014-09 did not have a material impact on the Company’s consolidated financial statements.In January 2016, the FASB issued ASU 2016-01, Financial Instruments–Overall: Recognition and Measurement of Financial Assets and FinancialLiabilities. This guidance is intended to enhance the reporting model for financial instruments to provide users of financial statements with moredecision-useful information. Among other things, this guidance requires entities to measure equity investments (except those accounted for under theequity method) at fair value and recognize any changes in fair value in net income. The Company adopted this guidance during the year endedDecember 31, 2018. Included in other assets is an equity investment, which is recorded at fair value based on an observable market price, and changesin its fair value for the year ended December 31, 2018 were recorded as a charge to income in the consolidated statement of operations.In February 2016, the FASB issued ASU 2016-02 – Leases. This amendment will require companies that lease assets to recognize on the consolidatedstatement of financial condition the assets and liabilities for the rights and obligations created by those leases. This amendment is effective for theCompany for the fiscal year beginning after December 15, 2018. The Company is currently evaluating the potential impact the new standard will haveon its consolidated financial statements.In June 2016, the FASB issued ASU 2016-13 – Financial Instruments – Credit Losses. This amendment will require companies to broaden theinformation considered in developing its expected credit loss estimates on financing receivables measured either individually or collectively. Thisamendment is effective for the Company for the fiscal year beginning after December 15, 2019. The Company is currently evaluating the potentialimpact the new standard will have on its consolidated financial statements.In November 2016, the FASB issued ASU 2016-18 – Statement of Cash Flows (Restricted Cash). This amendment requires the statement of cash flowsexplain the change in the total of cash, cash equivalents and restricted cash. The Company early adopted this guidance during the Period endedDecember 31, 2017, as permitted, and has made the required disclosures in these consolidated financial statements.4. Business CombinationsAs discussed in Note 1, immediately following the close of business on July 31, 2017, Solar, through its wholly owned subsidiaries, NEFCORP, LLC(“NEFCORP”) and NEFPASS, LLC (“NEFPASS”), acquired all the equity interests in the Company. The assets acquired and liabilities assumed in theacquisition were recorded at their respective fair values. The excess of the purchase price over the fair value of the net assets acquired was recorded asgoodwill. 15NEF Holdings, LLC and SubsidiariesNotes to the Consolidated Financial Statements (continued)(In Thousands) 4. Business Combinations (continued) The allocation of the purchase price to the assets acquired and liabilities assumed at the date of acquisition is as follows: Total consideration $139,565 Recognized amounts of identifiable assets acquired and liabilities assumed: Cash 14,595 Financing receivables 252,695 Financing receivables – held for sale 64,456 Equipment on lease 5,196 Equipment off lease 3,189 Fixed assets 228 Prepaid assets 112 Other assets 4,982 Account payable and accrued expenses (1,975) Senior secured debt facility (137,350) Notes payable (93,708) Other liabilities (2,687) Total identifiable net assets 109,733 Goodwill $29,832 In accordance with the provisions of FASB Topic 805, Business Combinations, the fair value of financing receivables and other assets, was determinedbased on an independent valuation that considered industry risk, as well as interest rate, liquidity, credit and event risks. The fair value of tangibleproperty, including equipment on lease and equipment off lease, was also based on an independent valuation, which utilized a combination of desktopvaluations as well a market approach, given a portion of the assets were sold subsequent to acquisition date. The total fair value discount on allidentifiable net assets totaled $8,157. As a result of the acquisition, goodwill of $29,832 was recorded in the consolidated balance sheets.Immediately following the acquisition of the equity interest of the Company by two wholly owned subsidiaries of Solar on July 31, 2017, theCompany entered into a purchase and sale agreement with NEFPASS to sell financing receivables of $64,456, which represented the July 31, 2017 fairvalue of these assets. The financing receivables were sold, without recourse, at their fair value and there was no gain or loss recorded as a result of thesale.On December 11, 2018, the Company, through its wholly owned subsidiary NEF Auto Transport, acquired a privately held auto transport hauler. Theentity, which was one of the Company’s former customers, was acquired out of bankruptcy in satisfaction of all of the amounts due the Company. Totalconsideration of $7,082 (of which $250 was in the form of cash) was allocated to the fair value of the identifiable assets acquired and liabilitiesassumed, which included cash of $32, receivables of $287, fixed assets of $2,813 and a customer relationship related intangible asset of $3,950, whichis included in other assets in the consolidated balance sheet at December 31, 2018. Given the proximity of the acquisition to December 31, 2018, thefair value of the intangible asset associated with customer relationships has been measured provisionally, pending completion of an independentvaluation. As permitted under the provisions of FASB Topic 805, if new information obtained within one year of the date of acquisition about facts andcircumstances that existed at the date of acquisition identifies adjustments to the fair value of intangible asset, then the accounting for the acquisitionwill be adjusted. 16NEF Holdings, LLC and SubsidiariesNotes to the Consolidated Financial Statements (continued)(In Thousands) 5. Financing ReceivablesNet investment in direct finance leases consists of the following at December 31, 2018 and December 31, 2017: 2018 2017 Gross finance lease receivables $173,819 $172,200 Guaranteed residuals 36,258 21,281 Unguaranteed residuals 33,109 23,279 Unearned Income (46,710) (40,224) Deferred non-refundable fees collected (171) (341) Deferred initial direct costs paid 2,097 757 198,402 176,952 Purchase accounting valuation discount (see note 4) (1,519) (3,549) Total net investment in direct finance leases $196,883 $173,403 Secured loans, net, consist of the following at December 31, 2018 and December 31, 2017: 2018 2017 Secured loans, principal $48,175 $59,640 Accrued interest receivable 993 751 Total secured loans, gross 49,168 60,391 Deferred non-refundable fees collected (467) (736) Deferred initial direct costs paid 199 413 48,900 60,068 Purchase accounting valuation discount (see note 4) (3,117) (3,356) Total secured loans, net $45,783 $56,712 Aggregate scheduled payments, contractual maturities including guaranteed residuals and unguaranteed residuals by year on the fixed and floating-rate secured loans and direct finance leases, are as follows: 2019 2020 2021 2022 2023 Thereafter Total Secured loans: Fixed rate $13,003 $6,651 $3,941 $4,251 $1,161 $— $29,007 Floating rate 14,094 5,074 — — — — 19,168 Direct finance leases 69,155 48,083 45,844 35,287 22,037 22,780 243,186 Total $96,252 $59,808 $49,785 $39,538 $23,198 $22,780 $291,361 6. Allowance for Losses on Financing ReceivablesA financing receivable is considered impaired when it is probable that the Company will be unable to collect all amounts due according to thecontractual terms of the agreement. As of December 31, 2018 and December 31, 2017, the Company maintained a specific allowance for losses of$2,514 and $4,169 on financing receivables of $3,667 and $13,329, respectively, and a general allowance for losses of $2,931 and $2,974,respectively, on the remaining portfolio of financing receivables. 17NEF Holdings, LLC and SubsidiariesNotes to the Consolidated Financial Statements (continued)(In Thousands) 6. Allowance for Losses on Financing Receivables (continued) The Company monitors the internal risk rating of each customer. The internal risk rating was developed by the Company and is fully described in theCompany’s credit policies and procedures. The internal risk rating gives heavy weighting to collateral coverage and fixed charge coverage of thecustomer. It also takes into account the customer’s leverage as well as subjective factors including industry cyclicality, quality of management andliquidity. The internal risk ratings range from 1 to 8, with 1 being the best and 8 being the worst.Customer’s risk ratings are computed quarterly during a quarterly portfolio review process. If during the life of a transaction, a customer’s risk rating isdowngraded to a risk rating of 4 or beyond, the Company’s credit team follows more stringent procedures for monitoring the credit, as specified in theCompany’s credit policies and procedures.7. Equipment on Lease, netAt December 31, 2018, equipment under operating leases consists of a cost basis of $5,736, net of accumulated depreciation of $558 and a purchaseaccounting valuation discount of $594 for a net balance of $4,584. At December 31, 2017, equipment under operating leases consists of a cost basis of$5,790, net of accumulated depreciation of $165 and a purchase accounting valuation discount of $594 for a net balance of $5,031. Total depreciationexpense relating to equipment under operating leases for the year ended December 31, 2018 and the Period ended December 31, 2017 was $396 and$165, respectively, and recorded as depreciation expense on the consolidated statement of operations.Aggregate scheduled contractual payments to be received by year on equipment under operating leases are as follows: Year Total RentalPayments 2019 $620 2020 155 $775 8. Fixed Assets, netAt December 31, 2018 and December 31, 2017, fixed assets, net consists of the following: 2018 2017 Auto hauling trucks $2,776 $— Leasehold improvements 112 59 Furniture and fixtures 97 94 Computers 77 59 Automobiles 96 21 Office equipment 14 17 Software 12 11 Telephone 6 9 Fixed assets, gross 3,190 270 Accumulated depreciation (160) (43) Fixed assets, net $3,030 $227 Depreciation and amortization expense related to fixed assets totaled $144 and $43 for the year ended December 31, 2018 and for the Period endedDecember 31, 2017, respectively. For the years ending 2019, 2020 and thereafter, the Company will recognize annual amortization expense related tosoftware of $3, $1 and $1, respectively. 18NEF Holdings, LLC and SubsidiariesNotes to the Consolidated Financial Statements (continued)(In Thousands) 9. Senior Secured Credit Facility Senior secured credit facility consists of the following at December 31, 2018 and December 31, 2017: 2018 2017 Senior secured credit facility, principal $119,316 $71,010 Accrued interest payable 503 224 Unamortized deferred financing costs (996) (1,382) Total senior secured credit facility $118,823 $69,852 At December 31, 2018 and December 31, 2017, Fund I maintains a revolving credit facility (the “Facility”) with total availability of $150,000. Interestis based on the London Interbank Offering Rate (“LIBOR”), plus an applicable margin. The applicable margin ranges from 2.50% to 2.75% based onFund I’s leverage ratio. The leverage ratio represents the ratio of the outstanding balance of the Facility to Fund I’s total member’s capital, as describedin the Facility agreement. All assets of Fund I are pledged as collateral under the Facility. Fund I is also required to pay a 0.375% per annum unusedline fee. Included in the total availability is a sublimit of $50,000 that is reserved to fund transactions in Canadian dollars (“CAD”). The Companyprovides a limited guaranty to the Facility for all interest, fees and expenses that cannot otherwise be charged to Fund I. The Facility is set to mature onJuly 31, 2021, with the principal payable in full at maturity.The Facility requires Fund I and the Company to maintain certain periodic financial covenants surrounding capitalization, cash flow and default,delinquency and charge-off ratios. As of December 31, 2018 and December 31, 2017, Fund I and the Company were in full compliance with all therequirements of the Facility.10. Notes PayableNotes payable at December 31, 2018 were fully paid off. Notes payable at December 31, 2017 were as follows: Total Class A note principal $29,080 Class B note principal 23,062 Class C note principal 19,514 Unamortized discount on Class B notes (307) Unamortized discount on Class C notes (866) Unamortized deferred financing costs (609) Accrued interest payable 88 Total notes payable $69,962 Issuer II and Issuer III issued two equipment contract backed notes on October 10, 2014 and February 19, 2016, respectively. Each issuance ofequipment contract backed notes entered into indentures with US Bank National Association, as Trustee and Custodian (collectively, the“Indentures”), and issued Class A, Class B and Class C notes (collectively “Notes Payable”). The Indentures define the terms of the transaction wherebyequipment backed term loans and leases were pledged as collateral to secure the note holders. NEF was engaged to act as servicer (the “Servicer”) of theNotes Payable based on servicing agreements executed at issuance of the Notes Payable. 19NEF Holdings, LLC and SubsidiariesNotes to the Consolidated Financial Statements (continued)(In Thousands) 10. Notes Payable (continued) Upon issuance, the Notes Payable of Issuer II and Issuer III were rated by DBRS and Moody’s. As of December 31, 2017, Moody’s ratings for Issuer IIClass A, Class B and Class C notes were A2, Baa1 and Ba2, respectively, while Class A was rated AAA by DBRS. As of December 31, 2017, Moody’sratings for Issuer III Class A, Class B and Class C notes were A3, Baa3 and Ba2, respectively, while the Class A was rated AA by DBRS. Interest on the Issuer II Notes Payable was fixed at 1.558%, 3.276% and 5.227% on the Class A, Class B and Class C notes, respectively. Interest on theIssuer III Notes Payable was fixed at 3.61%, 4.75% and 5.00% on the Class A, Class B and Class C notes, respectively. All contractual payments,excluding residuals, on leases and all principal and interest payments on loans are pledged as collateral. Issuer II Class A Notes Payable were set tomature in July 2018, the Class B notes in January 2019 and the Class C notes in September 2019. Issuer III Class A Notes Payable were set to mature inFebruary 2021, and the Class B and Class C notes in January 2025.Under the terms of indentures, the Issuers were required to maintain certain financial covenants surrounding net losses and delinquencies. As ofDecember 31, 2017, and throughout 2018, while the notes were outstanding, both Issuer II and Issuer III were in full compliance with all covenants.During 2018, Issuer II and Issuer III elected to redeem all of the then outstanding Notes Payable pursuant to the clean up call provisions of theIndentures. Accordingly, the lien on the underlying collateral was then released by the trustee.11. Financial Asset Transfers and SecuritizationsIn connection with the repayment of the Issuer II and Issuer III notes discussed above, the Company entered into an assignment agreement withNEFPASS to transfer, convey and assign the net investment of certain financing receivables as of February 28, 2018 for Issuer II and July 31, 2018 forIssuer III. The purchase price for the Issuer II and Issuer III financing receivables was $12,440 and $13,977, respectively, which was paid in cash. Thepurchase price was equivalent to the net investment of the financing receivables at the time of purchase; therefore, no gain or loss was recorded on thetransaction.12. Employee Compensation and Benefit PlansAs of December 31, 2018, the Company employed personnel at its headquarters in Norwalk, Connecticut and its sales offices in Florida, Ohio, Texas,and California. Employee compensation and benefits are comprised of base salaries, discretionary bonuses, health care benefits, employer 401(k)contributions and payroll taxes. As a part of their employment agreements, certain members of senior management are eligible for an annual bonusamount, which is calculated as a percentage of their annual salaries, based on the performance of NEF Holdings, as described in their employmentagreements.Effective August 1, 2017, the Company formed a Long Term Incentive Plan (“LTIP”) that provides for an annual bonus pool to certain members ofsenior management based on the Company achieving certain performance criteria. For the year ended December 31, 2018 and the Period endedDecember 31, 2017, the Company has not accrued or expensed any amount for the LTIP.The Company sponsors a 401(k) plan, where the Company contributes 3% of employees’ annual earnings up to the maximum annual contributionamount as determined by the Internal Revenue Service. 20NEF Holdings, LLC and SubsidiariesNotes to the Consolidated Financial Statements (continued)(In Thousands) 13. Fair Value of Financial InstrumentsFASB ASC 820, Fair Value Measurements (“ASC 820”), establishes a hierarchy of valuation techniques based on whether the inputs to those valuationtechniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflectmanagement’s market assumptions.These two types of inputs create the following fair value hierarchy:Level 1 – Quoted prices for identical instruments in active markets.Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, such as interest rates and foreignexchange rates that are observable at commonly quoted intervals. Financial assets utilizing Level 2 inputs include currency swaps and interestrate caps.Level 3 – Unobservable inputs.As of December 31, 2018 and December 31, 2017, the Company measured its interest rate caps, at fair value on a recurring basis. Total fair value ofsuch derivative instruments as of December 31, 2018 and December 31, 2017 was $185 and $199, respectively, which was classified as Level 2 in thefair value hierarchy by the Company. The fair value of interest rate caps are measured using discounted cash flow calculations based on observableinputs from the relevant interest/exchange rate curves in effect at December 31, 2018 and December 31, 2017.ASC 820 also requires that the Company disclose estimated fair values for its financial instruments. No quoted market exists for the Company’sfinancial instruments. Therefore, fair market estimates are based on judgments, risk characteristics of various financial instruments and other factors.Changes in these assumptions could significantly affect the estimates.The Company estimates the carrying amounts of cash approximated its fair values as of December 31, 2018 and December 31, 2017. Since there is noliquid secondary market for the Company’s financing receivables, the Company estimates the fair value of its secured loans and net investment indirect finance leases by comparing the average yield of the portfolio to recent issuances of similar loans and leases. Based on the Company’s review ofthe Facility and valuation from its lender, management determined that the carrying value of its senior secured credit facility approximated fair value.The Company examined the pricing of notes payable at December 31, 2017 and determined that current market conditions would slightly impact thefair value of the existing Notes.The carrying amount and estimated fair values of the Company’s financial instruments at December 31, 2018 and December 31, 2017 were as follows: 2018 2017 CarryingAmount EstimatedFair Value CarryingAmount EstimatedFair Value Financial assets: Cash $6,531 $6,531 $20,755 $20,755 Net investment in direct finance leases 192,537 192,520 168,353 172,366 Secured loans, net 44,684 44,590 54,619 55,057 Total financing receivables, net of allowances 237,221 237,110 222,972 227,423 Financial liabilities: Senior secured credit facility $ 118,823 $ 118,823 $69,852 $69,852 Notes Payable — — 69,962 70,223 21NEF Holdings, LLC and SubsidiariesNotes to the Consolidated Financial Statements (continued)(In Thousands) 14. Concentration of Credit RiskFinancing receivables subject the Company to credit risk. The Company monitors its portfolios by evaluating each of the customer’s financialcondition and collateral. The Company’s maximum exposure to credit risk at December 31, 2018 and December 31, 2017, without considering theunderlying collateral, is represented by the carrying value of the financing receivables in the consolidated balance sheets. The Company monitors itsfinancing receivables for geographic concentrations. The following table reflects such concentrations as of December 31, 2018 and December 31,2017:Geographic Concentration 2018 2017 Texas $48,348 Texas $51,272 Washington 28,816 Kansas 22,298 Kansas 17,352 Alberta (Canada) 18,248 Colorado 17,233 California 15,140 Alberta (Canada) 12,455 Colorado 9,878 Pennsylvania 12,332 Ohio 9,626 Ohio 8,388 Tennessee 9,512 Oregon 8,002 Connecticut 8,115 Indiana 7,792 Florida 7,616 Quebec (Canada) 6,933 North Carolina 7,126 Florida 6,356 Pennsylvania 6,733 Tennessee 5,714 Maine 6,313 Maine 5,659 New York 5,396 Michigan 5,514 Nevada 5,341 Connecticut 4,919 Louisiana 5,188 Louisiana 4,294 Kentucky 4,609 Other U.S. states / Canada 42,559 Other U.S. states / Canada 37,704 Total financing receivables, gross $242,666 Total financing receivables, gross $230,115 The amount and type of collateral required depends on an assessment of the credit risk of the counterparty. Guidelines are implemented regarding theacceptability of types of collateral and valuation parameters. Typically, the Company obtains access to collateral either through direct ownership or bya first lien security interest.The Company also monitors its financing receivables for collateral concentrations. The following tables reflects such concentrations as ofDecember 31, 2018 and December 31, 2017:Collateral Concentrations 2018 2017 Tow boats $36,350 Aircraft $27,813 Tractors 30,026 Tractors 25,293 Aircrafts 19,612 Barge Rigs 16,116 Cranes 17,979 Trailers 15,892 Barge rigs 16,487 Trucks 14,033 Trailers 16,026 Busses 13,235 Trucks 13,025 Construction equipment 12,444 All other 93,161 All other 105,289 Total financing receivables, gross $242,666 Total financing receivables, gross $230,115 At December 31, 2018, the Company had financing receivables outstanding to one customer that approximated 12% of total financing receivables. 22NEF Holdings, LLC and SubsidiariesNotes to the Consolidated Financial Statements (continued)(In Thousands) 15. Contingencies and CommitmentsAs of December 31, 2018, the Company had one U.S. and one Canadian revolver financing arrangements with a total outstanding balance of $2,548and CAD$2,497 respectively, which are included in secured loans, net in the consolidated balance sheets. As of December 31, 2017, the Company hadthree U.S. and one Canadian revolver financing arrangements with a total outstanding balance of $9,122 and CAD$2,221 respectively, which areincluded in secured loans, net in the consolidated balance sheets. The Company’s maximum commitments under the U.S. and Canadian revolvers were$3,500 and CAD$4,000, respectively, as of December 31, 2018. The Company’s maximum commitments under the U.S. and Canadian revolvers were$10,000 and CAD$3,000, respectively, as of December 31, 2017.16. Member’s CapitalAt December 31, 2018 and December 31, 2017, NEFCORP owns 100 Class A units and NEFPASS owns 100 Class B units, which represent the entirecapital of the Company.17. Subsequent EventsThe Company has evaluated subsequent events through February 15, 2019, the issuing date of the consolidated financial statements.On January 17, 2019, NEF Auto Transport acquired a privately owned auto transport carrier based in Enumclaw, Washington for $975. 23

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